EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ENERGY SERVICES ACQUISITION CORP.
AND
C. J. HUGHES CONSTRUCTION COMPANY, INC.
DATED AS OF FEBRUARY 21, 2008
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TABLE OF CONTENTS
Page
ARTICLE I. CERTAIN
DEFINITIONS................................................1
Section 1.01 Certain
Definitions................................1
ARTICLE II. THE
MERGER........................................................5
Section 2.01 Structure
of the Merger............................5
Section 2.02 Effect on
Outstanding Shares.......................5
Section 2.03 Exchange
Procedures................................6
Section 2.04
Dissenters' Rights.................................7
Section 2.05 Closing;
Effective Time............................7
Section 2.06 Additional
Transaction.............................7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
SELLER.........................7
Section 3.01 Disclosure
Letter..................................7
Section 3.02
Organization.......................................7
Section 3.03
Capitalization.....................................8
Section 3.04 Authority;
No Violation............................8
Section 3.05
Consents...........................................9
Section 3.06 Absence of
Certain Changes or Events...............9
Section 3.07
Taxes..............................................9
Section 3.08 Material
Contracts; Leases; Defaults..............11
Section 3.09 Ownership
of Property; Insurance Coverage.........12
Section 3.10
Intellectual Property.............................13
Section 3.11 Labor
Matters.....................................14
Section 3.12 Legal
Proceedings.................................14
Section 3.13 Compliance
With Applicable Law/Permits............14
Section 3.14 Employee
Benefit Plans............................14
Section 3.15 Brokers,
Finders and Financial Advisors...........16
Section 3.16
Environmental Matters.............................16
Section 3.17 Related
Party Transactions........................17
Section 3.18
Antitakeover Provisions Inapplicable..............17
Section 3.19 Customers
and Suppliers...........................17
Section 3.20
Inventory.........................................18
Section 3.21 Accounts
Receivable; Bank Accounts................18
Section 3.22
Offers............................................18
Section 3.23
Warranties........................................18
Section 3.24 Proxy
Statement...................................18
Section 3.25 No
Misstatements..................................19
Section 3.26 Investment
Intent.................................19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF
PURCHASER......................19
Section 4.01
Organization......................................19
Section 4.02 Authority;
No Violation...........................20
Section 4.03
Consents..........................................20
Section 4.04 Access to
Funds/Merger Consideration..............20
Section 4.05 Legal
Proceedings.................................20
Section 4.06 Operations
of Merger Sub..........................20
Section 4.07 Board
Approval....................................21
Section 4.08 Proxy
Statement...................................21
Section 4.09
Offers............................................21
Section 4.10 Related
Party.....................................21
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ARTICLE V. CONDUCT PENDING
ACQUISITION.......................................21
Section 5.01 Conduct of
Business Prior to the Effective Time...21
Section 5.02
Forbearances of Seller............................22
Section 5.03
Maintenance of Insurance..........................24
Section 5.04 All
Reasonable Efforts............................24
ARTICLE VI.
COVENANTS........................................................24
Section 6.01 Current
Information...............................24
Section
6.02 Access to
Properties and Records..................24
Section 6.03 Financial
and Other Statements....................25
Section 6.04 Disclosure
Letter Supplements.....................25
Section 6.05 Consents
and Approvals of Third Parties...........25
Section 6.06 Failure to
Fulfill Conditions.....................25
Section 6.07 Employee
Benefits.................................25
Section 6.08 Tax
Periods Ending On or Before the Closing Date..25
Section 6.09
Cooperation on Tax Matters........................26
Section 6.10
Acquisition of Contractors Rental Corporation.....26
ARTICLE VII. REGULATORY AND OTHER
MATTERS....................................26
Section 7.01 Meeting of
Stockholders...........................26
Section 7.02 Proxy
Statement...................................27
Section 7.03 Regulatory
Approvals..............................27
ARTICLE VIII. CLOSING
CONDITIONS.............................................27
Section 8.01 Conditions
to Each Party's Obligations under
this Agreement...................................27
Section 8.02
Conditions
to the Obligations of Purchaser
under this Agreement.............................28
Section 8.03 Conditions
to the Obligations of Seller under
this Agreement...................................29
ARTICLE IX. THE
CLOSING......................................................29
Section 9.01 Time and
Place....................................29
Section 9.02 Deliveries
at the Pre-Closing and the Closing.....30
ARTICLE X. TERMINATION, AMENDMENT AND
WAIVER.................................30
Section 10.01
Termination.......................................30
Section 10.02 Effect of
Termination.............................31
Section 10.03 Amendment,
Extension and Waiver...................31
ARTICLE XI.
MISCELLANEOUS....................................................32
Section 11.01 Public
Announcements..............................32
Section 11.02
Survival..........................................32
Section 11.03
Notices...........................................32
Section 11.04 Parties in
Interest...............................33
Section 11.05 Complete
Agreement................................33
Section 11.06
Counterparts......................................33
Section 11.07
Severability......................................33
Section 11.08 Governing
Law.....................................33
Section 11.09
Interpretation....................................33
Section 11.10 Specific
Performance..............................34
Exhibit A
Form of Plan of Merger
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AGREEMENT AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
February 21, 2008, by and between Energy Services Acquisition Corp., a Delaware
corporation (the
"Purchaser"), Energy
Services Merger Sub II ("Merger Sub"), a
to-be-formed West
Virginia corporation and a wholly-owned subsidiary of
Purchaser, and C.
J. Hughes Construction Company, Inc., a West Virginia
corporation (the "Seller").
WHEREAS, the Board of
Directors of each of
Purchaser and Seller has (i)
determined that
this Agreement and the business combination and related
transactions
contemplated hereby
are in the best interests of their respective
companies and stockholders, and (ii) has approved this
Agreement at meetings of
each of such Boards of Directors;
WHEREAS, in accordance
with the terms of this
Agreement, Merger Sub
will
merge with and into Seller;
WHEREAS, the parties desire to make certain representations,
warranties and
agreements in
connection
with the business transactions described in this
Agreement and to prescribe certain conditions thereto.
NOW,
THEREFORE in
consideration of the mutual covenants, representations,
warranties and
agreements
herein contained and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the
parties hereto agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
Section 1.01 Certain
Definitions.
As
used in this Agreement the following terms have the following
meanings
(unless the context
otherwise requires,
references
to Articles
and Sections
refer to Articles and Sections of this Agreement).
"Agreement" means this agreement, and any written amendment
hereto.
"Certificate" shall
mean a certificate
evidencing shares of Seller Common
Stock.
"Closing" shall have the meaning set forth in Section 2.05.
"Closing Date" shall have the meaning set forth in Section
2.05.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Compensation and
Benefit Plans" shall have the meaning set forth in
Section 3.16(a).
"Confidentiality
Agreements" shall
mean the confidentiality agreements
referred to in Section 10.01 of this Agreement.
"Continuing Employees" shall have the meaning set forth in Section
6.08(c).
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"DGCL" shall mean the Delaware General Corporation Law.
"Disclosure Letter" shall have the meaning set forth in Section
3.01.
"Effective Time" shall mean the date and time specified pursuant to
Section
2.05 hereof as the effective time of the Merger.
"Environmental Laws"
means any applicable Federal, state or local law,
statute, ordinance,
rule, regulation,
code, license,
permit, authorization,
approval, consent,
order, judgment,
decree, injunction or agreement with
any
governmental entity relating to (1) the protection, preservation or restoration
of the environment
(including, without
limitation, air, water
vapor, surface
water, groundwater,
drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (2) the exposure to, or
the use, storage, recycling, treatment, generation, transportation,
processing,
handling,
labeling,
production,
release or
disposal of Materials of
Environmental Concern.
The term Environmental Law includes without
limitation
(a) the Comprehensive Environmental Response, Compensation and
Liability Act, as
amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act,
as amended, 42 U.S.C.
ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C.
ss.7401, et seq; the
Federal Water Pollution Control Act, as amended, 33 U.S.C.
ss.1251, et seq;
the Toxic Substances Control Act, as amended, 15 U.S.C.
ss.2601, et seq; the
Emergency Planning and Community Right to Know Act, 42
U.S.C. ss.11001, et seq; the Safe Drinking Water Act, 42 U.S.C.
ss.300f, et seq;
the Comprehensive Environmental Responses Compensation and
Liability Information
System List and all
comparable
state and local
laws, and (b) any common law
(including without
limitation common law that may impose strict liability) that
may impose liability
or obligations for injuries or damages due to the presence
of or exposure to any Materials of Environmental Concern.
"EPA" shall mean the Environmental Protection Agency.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as
amended.
"ERISA Affiliate" shall have the meaning set forth in Section
3.16(c).
"ERISA Affiliate Plan" shall have the meaning set forth in Section
3.16(c).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"GAAP" shall mean accounting principles generally accepted in the United
States of America.
"Governmental Entity"
shall mean any federal, state, local or other
government,
governmental,
regulatory or
administrative
authority, agency
or
commission (including,
but not limited to, the SEC, NASDAQ, or EPA) or any
court, tribunal or judicial or arbitral body.
"HIPAA" shall mean the Health Insurance Portability and Accountability
Act
of 1996, as amended.
"Intellectual Property" shall mean all (i) trademarks, service
marks, brand
names, d/b/a/'s,
Internet domain names,
logos, symbols, trade dress, trade
names, and other indicia of origin, all applications and registrations for the
foregoing, and
all goodwill associated therewith and symbolized thereby,
including all
renewals of same, (ii) inventions and discoveries, whether
patentable or not, and all patents, registrations, invention disclosures and
applications therefor, including divisions, continuations,
continuations-in-part
and renewal applications, and including renewals, extensions and
reissues, (iii)
Trade Secrets, (iv)
published and
unpublished
works of authorship, whether
copyrightable or
not (including without limitation databases and other
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compilations of information), copyrights therein and thereto,
and registrations
and applications
therefor, and all renewals, extensions, restorations and
reversions thereof,
and (v) all other
intellectual
property or proprietary
rights.
"IRS" shall mean the United States Internal Revenue Service.
"IT
Assets" shall mean Seller's computers, computer software, firmware,
middleware, servers, workstations, routers, hubs, switches, data
communications
lines, and all
other information technology equipment, and all associated
documentation.
"Knowledge" as used with respect to a Person (including
references to such
Person being aware of a particular matter) means those facts that are known
by
any officer with the title ranking not less than vice president or
a director of
such Person, or a consultant, or full-time or part-time
employee of Seller
and
includes any facts,
matters or
circumstances set
forth in any written
notice
from any regulatory
agency or any other material written notice received by an
officer with the title
ranking not less than
vice president
or a director of
that Person. For
purposes of this
definition, an officer
or director will
be
deemed to have
"Knowledge" of a
particular
fact or other matter
if a prudent
individual could be
expected to discover or otherwise become aware of such fact
or other matter in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other
matter.
"Licensed Intellectual
Property" means
Intellectual Property
that Seller
has licensed or otherwise is permitted by other Persons to use.
"Listed Intellectual
Property" shall have the meaning set forth in Section
3.10(a).
"Material Adverse Effect" shall mean an effect which (A) is
material and
adverse to the assets, business, financial condition, results of operations or
prospects of Seller or Purchaser, as the context may dictate,
or (B) adversely
affects the ability of Seller or Purchaser, as the context may dictate, to
perform its material
obligations hereunder
or (C) materially and adversely
affects the timely consummation of the transactions contemplated
hereby.
"Materials of
Environmental
Concern" means pollutants, contaminants,
wastes, toxic
substances,
petroleum and petroleum products, and any other
materials regulated
under Environmental
Laws, including,
but not limited
to,
radon, radioactive
material, asbestos, asbestos-containing
material, urea
formaldehyde foam insulation, lead, polychlorinated biphenyl, flammables and
explosives.
"Merger" shall mean
the merger of Seller with and into Merger Sub pursuant
to the terms hereof.
"Merger Consideration" shall mean the cash and Purchaser common
stock in an
aggregate per share
amount to be paid by
Purchaser for each share of Seller
Stock, as set forth in Section 2.02(a).
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"Paying Agent" shall mean such bank or trust company or other agent
designated by
Purchaser,
which shall act as
agent for Purchaser in connection
with the exchange procedures for exchanging Certificates for the Merger
Consideration. Purchaser may act as its own Paying Agent.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor
thereto.
"Person" shall
mean any individual, consultant (including part-time
employee) corporation, partnership, joint venture, association,
trust or "group"
(as that term is defined under the Exchange Act).
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"Pre-Effective Time
Tax Period" means any taxable period (or the allocable
portion of a Straddle
Period) ending on or
before the close of business on the
date the Effective Time occurs.
"Proxy Statement" shall have the meaning set forth in Section
7.02.
"Purchaser" shall
mean Energy Services Acquisition Corp., a Delaware
corporation, with its
principal executive offices located at 2450 First Avenue,
Huntington, West Virginia 25703.
"Rights" shall mean
warrants, options,
rights, convertible securities,
stock appreciation
rights and other
arrangements or commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity
appreciation of
its capital stock.
"SEC" shall mean the
Securities and
Exchange Commission or
any successor
thereto.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securities Laws"
shall mean the
Securities Act; the
Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers
Act of 1940,
as amended; the Trust
Indenture Act of 1939, as amended; and the rules and
regulations of the SEC promulgated thereunder.
"Seller" shall have the meaning set forth in the preamble.
"Seller Group"
means any combined, unitary, consolidated or other
affiliated group within the meaning of Section 1504 of the Code or
otherwise, of
which Seller has been a member for Tax purposes.
"Seller Stock" shall
mean the shares of issued and outstanding shares of
Class A voting common stock and Class B non-voting common stock of
the Seller.
"Seller Stockholders
Meeting" shall have
the meaning set forth in Section
7.01.
"Stockholder Approval" shall have the meaning set forth in Section
8.01(a).
"Straddle Period"
means any taxable period that includes (but does not end
on) the Closing Date.
"Superior Proposal" shall mean an Acquisition Proposal,
which the Board of
Directors of Seller reasonably determines (after consultation with a financial
advisor of nationally
recognized reputation)
to be (i) more
favorable to the
stockholders of Seller
from a financial point
of view than the Merger (taking
into account all the terms and conditions of such proposal and this Agreement
(including any changes
to the financial
terms of this
Agreement proposed by
Purchaser in response to such offer or otherwise)) and (ii)
reasonably
capable
of being completed,
taking into account
all financial, legal,
regulatory and
other aspects of such proposal.
"Surviving Corporation" shall have the meaning set forth in Section
2.01.
"Tax" means any and all (a) federal, state, local or foreign tax, fee or
other like assessment or charge of any kind, including,
without limitation,
any
net income,
alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value-added, transfer, franchise, profits, license,
payroll, employment,
social security (or
similar),
unemployment,
disability,
registration,
estimated, excise,
severance, stamp,
capital stock, occupation,
property,
environmental or
windfall tax, premium,
customs duty or other
tax,
together with any interest, penalty or additions thereto, whether disputed or
not; (b) liability
for the payment of Tax
as the result of
membership in the
Seller Group; and (c)
transferee or
secondary liability in
respect of any Tax
(whether imposed by law or contractual arrangement).
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"Tax
Return" means any return (including estimated returns), declaration,
report, claim for
refund, or information
return or statement or
any amendment
thereto relating
to Taxes, including any such document prepared on an
affiliated,
consolidated, combined
or unitary group basis
and any schedule or
attachment thereto.
"Taxing Authority" means any governmental or regulatory authority,
body or
instrumentality
exercising any authority to impose, regulate or administer the
imposition of Taxes.
"Termination Date" shall mean August 30, 2008.
"Trade Secrets" means confidential information, trade secrets and
know-how,
including confidential
processes,
schematics,
business methods, formulae,
drawings, prototypes, models, designs, customer lists and supplier
lists.
"Treasury Stock"
means all shares of
Seller Stock held in the treasury of
Seller (other than
shares held in a fiduciary capacity or in connection with
debts previously contracted).
"WVBCA" shall mean the West Virginia Business Corporation Act.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II.
THE MERGER
Section 2.01 Structure
of the Merger.
Subject to the terms and conditions of this Agreement, Purchaser
will cause
a West Virginia
corporation to be
organized as a wholly owned special purpose
Subsidiary of Purchaser ("Merger Sub"). At the Effective
Time, Merger Sub
will
merge with and into
Seller, with Seller being the surviving entity (the
"Surviving
Corporation"),
pursuant to the
provisions of, and
with the effect
provided in, the WVBCA and pursuant to the terms and conditions of an agreement
and plan of merger ("Plan of Merger") to be entered into between
Merger Sub and
Seller in the
form attached hereto as Exhibit A. The separate corporate
existence of Merger Sub shall thereupon cease. The Surviving
Corporation
shall
be governed by the laws of the State of West Virginia and its
separate corporate
existence with all of its rights, privileges, immunities, powers and
franchises
shall continue
unaffected by the Merger. At the Effective Time, the
certificate
of incorporation
and bylaws of Seller
shall be amended in
their entirety
to
conform to the certificate of incorporation and bylaws of Merger Sub in
effect
immediately prior to
the Effective
Time and shall become
the certificate
of
incorporation and
bylaws of the Surviving Corporation. At the Effective Time,
the directors and officers of Merger Sub shall become the directors
and officers
of the Surviving Corporation. As part of the Merger, each share of
Seller Common
Stock will be
converted into the right to receive
the Merger Consideration
pursuant to the terms of Section 2.03. Seller acknowledges that the structure
may change in the
event Purchaser
enters into an agreement to engage in an
"Additional
Transaction" as
defined in Section 4.09. Notwithstanding the
foregoing, Purchaser
may, at its own
discretion, alter the
means by which the
Merger is affected
provided that such
alteration does not
change the (i) form
and amount of the Merger Consideration or (ii) tax consequences of
the Merger to
Seller's shareholders.
Section 2.02
Effect on
Outstanding Shares.
(a)
By virtue of the
Merger, automatically
and without any action
on the
part of the holder thereof, each share of Seller Stock,
issued and
outstanding
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at the Effective
Time shall become and
be converted into the
right to receive
(i) $36,896 in cash and (ii) 6,434.70 shares of Purchaser Common Stock (the
"Merger
Consideration"). The
total Merger Consideration shall be approximately
50% cash and 50% common stock with a total value of $34.0 million
at the date of
this Agreement.
Fractional shares of
Purchaser Common Stock will not be issued
in the merger.
Fractional shares shall be cashed out in an amount determined
by
multiplying the fractional share interest to which such holder
would be entitled
by $36,896.
(b)
As of the Effective Time, all shares of Seller Stock shall no
longer be
outstanding and shall be automatically cancelled and retired and shall
cease to
exist, and each holder of a Certificate formerly representing any such share of
Seller Stock shall
cease to have any rights with respect thereto, except the
right to receive the Merger Consideration. After the Effective
Time, there shall
be no transfers on the stock transfer books of Seller.
(c)
The Shares of Purchaser common stock to be issued to Seller
Stockholders as contemplated in Section 2.02(a) will not be
registered under the
Securities Act or
registered or
qualified for sale under any state securities
Law and cannot
be resold without registration or an exemption under the
Securities Act. Such shares will therefore be "restricted
securities" as defined
in Rule 144
under the Securities Act. Each certificate representing the
Purchaser common
stock shall bear a restrictive legend referencing the
Securities Act. Purchaser agrees that in the event Purchaser
registers with the
Securities and Exchange Commission any shares held by its
stockholders it
will
include as
part of the registration statement shares issued to Seller
Stockholders.
(d)
Notwithstanding
the foregoing, Purchaser and Seller agree that the
number of shares of Purchaser Common Stock issued as Merger
Consideration may be
increased in
order to ensure that the Merger qualifies as a tax free
reorganization at the corporate level. In this regard, Purchaser shall increase
the Purchaser
Common Stock component to cause the aggregate value of the
Purchaser Common Stock
component to equal at
least forty percent
(40%) of the
Merger Consideration
(which determination
shall be based upon the high and low
trading price of Purchaser Common Stock on the five trading
days preceding the
date of the Effective Time.
Section 2.03 Exchange
Procedures.
(a)
Immediately prior to
the Effective Time, each Certificate previously
representing shares of
Seller Stock shall
represent only the
right to receive
the Merger Consideration.
(b)
As of the Effective Time, Purchaser shall deposit, or shall cause
to be
deposited with the
Paying Agent
pursuant to the terms of an agreement (the
"Paying Agent
Agreement") in form
and substance
reasonably
satisfactory
to
Purchaser, for the
benefit of the holders of shares of Seller Stock, for
exchange in accordance with this Section 2.03, an amount of cash
and a number of
shares sufficient to pay the aggregate Merger Consideration to be paid
pursuant
to Section 2.02(a) and
a number of shares.
Purchaser may act as its own paying
agent.
(c)
At the Effective Time, each Seller shall present their stock
certificate to Purchaser for payment of the Merger Consideration as
described at
Section 2.02.
(d)
From and after the Effective Time, there shall be no transfers on
the
stock transfer
records of Seller of any shares of Seller Stock that were
outstanding immediately prior to the Effective Time. If after the
Effective Time
Certificates are presented to Purchaser or the Surviving
Corporation, they shall
be canceled and exchanged for the Merger Consideration deliverable in respect
thereof pursuant to
this Agreement in accordance with the procedures set forth
in this Section 2.03.
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Section 2.04
Dissenters' Rights.
Holders of Seller Stock shall be entitled to seek appraisal of dissenters'
rights of appraisal under the WVBCA.
Section 2.05 Closing;
Effective Time.
Subject to the
satisfaction
or waiver of all conditions to closing
contained in Article VIII hereof, the Closing shall occur (i) no
later than five
business days
following the latest
to occur of (a) the receipt of all required
regulatory approvals
and the expiration of any applicable waiting periods, or
(b) the approval of the Merger by the stockholders of Seller and
Purchaser, or
(ii) at such other date or time upon which Purchaser and Seller mutually agree
(the "Closing"). The
Merger shall be effected by the filing of a certificate of
merger with the West Virginia Secretary of State on the day of
the Closing (the
"Closing Date"),
in accordance with the
WVBCA. The "Effective
Time" means the
date and time upon which the certificate of merger is filed with the
Delaware
and the West Virginia Office of the Secretary of State,
or as otherwise
stated
in the certificate of merger, in accordance with the WVBCA.
Section 2.06 Additional
Transaction.
Notwithstanding
anything
contained in
this Agreement, the parties
acknowledge that in
order to consummate
the Merger, the
Purchaser must
enter
into a business
combination or
combinations in which
the fair market value of
the business
or businesses acquired simultaneously with the transaction
contemplated by this
Agreement is equal to at least 80% of Purchaser's net
assets (excluding
any deferred compensation held by Ferris Baker Watts,
Incorporated)
when combined
with the transactions contemplated by this
Agreement. The
Seller acknowledges that the Merger must be completed
simultaneously with such other business combination or
combinations,
referenced
to in this Section.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and
warrants to Purchaser that the statements contained
in this Article III
are true and correct as of the date of this Agreement and
will be true and
correct as of the
Closing Date (as
though made then and as
though the
Closing Date were substituted for the date of this Agreement
throughout this Article III), except as set forth in the
Disclosure Letter
(as
defined below)
delivered by Seller to Purchaser prior to the execution of this
Agreement.
Section 3.01 Disclosure
Letter.
On
or prior to the date hereof, Seller has delivered to Purchaser
a letter
(the "Disclosure
Letter")
setting
forth, among other things, facts,
circumstances and
events the disclosure of which are required or appropriate in
relation to any or all of its covenants, representations and warranties (and
making specific reference to the section of this Agreement to which
such section
of the Disclosure Letter relates); provided, that the mere inclusion
of a fact,
circumstance or event in the Disclosure Letter shall not be deemed an
admission
by a party that such item represents a material exception or that such item is
reasonably likely to result in a Material Adverse Effect.
The Disclosure
Letter
is true, correct and complete in all material respects.
Section 3.02
Organization.
(a)
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of West Virginia. Seller has all requisite
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corporate power and authority to own, lease and operate its
properties and carry
on its business as now
conducted.
Seller is duly
licensed or qualified
to do
business in each jurisdiction where its ownership or leasing of
property or the
conduct of its business requires such qualification.
(b)
Seller has one wholly owned Subsidiary, Nitro Electric Company LLC and
one related entity, Contractors Rental Corporation which is not
owned by Seller,
but which has related
ownership with Seller and consequently whose operations
are consolidated with Seller for financial reporting purposes. The Disclosure
Letter sets forth all entities (whether corporations, partnerships, or similar
organizations), including the corresponding percentage ownership in
which Seller
owns, directly or
indirectly, 5% or more
of the ownership
interests as of the
date of this
Agreement, indicates
its jurisdiction
of organization and the
jurisdiction wherein it is qualified to do business.
(c)
Prior to the date of
this Agreement,
Seller has made available to
Purchaser true and correct copies of the certificate of
incorporation or charter
and bylaws of Seller.
Section 3.03
Capitalization.
(a)
The authorized
capital stock of Seller consists of 5,000 shares of
Seller Stock,
consisting
of 1,000 shares of Class A voting
common stock and
4,000 shares
of Class B non-voting common stock. As of the date of this
Agreement there were
issued and
outstanding
8.2625 shares of Class A voting
stock and 452.485
shares of Class B non-voting common stock. All outstanding
shares of Seller Stock are validly issued, fully paid and nonassessable and
not
subject to any
preemptive rights and,
with respect to shares held by Seller in
its treasury,
are free and clear of all liens, claims, encumbrances or
restrictions and there are no agreements or understandings with respect to the
voting or disposition of any such shares.
(b)
No bonds, debentures,
notes or other
indebtedness having the right to
vote on any matters
on which stockholders of Seller may vote are issued or
outstanding. Set forth
in the Disclosure
Letter is a listing of all the seller
debt outstanding including interest rate and payment terms.
(c)
As of the date of this Agreement and, except for this Agreement,
Seller
does not have or is bound by any Rights obligating Seller to issue, deliver or
sell, or cause to be issued, delivered or sold, any additional
shares of capital
stock of Seller or
obligating Seller to
grant, extend or enter
into any such
Right. As of the date hereof, there are no outstanding contractual obligations
of Seller to repurchase, redeem or otherwise acquire any shares of
capital stock
of Seller.
Section 3.04 Authority;
No Violation.
(a)
Seller has full
corporate power and
authority to execute
and deliver
this Agreement, the
Plan of Merger and,
subject to the receipt of any required
regulatory
approvals and
the approval of this Agreement by Seller's
stockholders, to
consummate the transactions contemplated hereby. The execution
and delivery of this
Agreement by Seller
and the completion
by Seller of the
transactions
contemplated hereby
have been duly and
validly approved by the
Board of Directors of Seller. This Agreement has been duly and
validly executed
and delivered by Seller, and subject to approval by the
stockholders of
Seller
and receipt of any required approvals or consents, constitutes the valid and
binding obligation of Seller, enforceable against Seller in
accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws
affecting
creditors' rights
generally,
and subject,
as to enforceability, to general
principles of equity, whether applied in a court of law or a court
of equity.
(b)
Subject to receipt of any required approvals and consents and receipt
of the approval of the stockholders of Seller, the consummation of the
transactions
contemplated hereby and compliance by Seller with any of the
terms
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or provisions
hereof will not: (i) conflict with or result in a breach or
violation of
or a default under any provision of the Certificate of
Incorporation or Bylaws of Seller; (ii) violate any statute,
code, ordinance,
rule, regulation,
judgment, order, writ, decree, governmental permit or license
or injunction
applicable
to Seller or any of
their respective
properties or
assets or enable any
person to enjoin the Merger or the other transactions
contemplated hereby; or (iii) violate, conflict with, result in a breach
of any
provisions of,
constitute a default (or an event which, with notice or lapse
of
time, or both, would constitute a default) under, result in the termination of,
accelerate the
performance required
by, or result in a right of termination or
acceleration or the
creation of any lien,
security interest,
charge or other
encumbrance upon any
of the properties
or assets of Seller under any of the
terms, conditions or provisions of any material note, bond,
mortgage, indenture,
deed of trust,
license, lease,
agreement or other
instrument or obligation to
which Seller is a party, or by which they or any of their
respective
properties
or assets may be bound or affected.
Section 3.05
Consents.
Except for any required vote of the stockholders of Seller and Purchaser,
no consents,
waivers
or approvals of, or filings, registrations or
authorizations with,
any Governmental Entity is necessary, and no consents,
waivers or approvals of, or filings, registrations or authorizations
with, any
other third parties
are necessary,
in connection with (a) the execution and
delivery of this
Agreement by Seller, and the completion by Seller of the
Merger. Seller has no reason to believe that (i) any required
approvals or other
required consents or
approvals will not be
received, or that (ii) any public
body or authority, the
consent or approval of which is not required or to which
a filing is not
required, will object
to the completion
of the transactions
contemplated by this
Agreement.
Seller is not
subject to
regulation
of its
business or operations
under any Federal law
(to the extent Seller is required
to register
or file reports with any Government Entity) or state public
utilities laws.
Section 3.06 Absence of
Certain Changes or Events.
Since December 31, 2005 (i) Seller has not incurred any
liability,
except
in the ordinary
course of its business
consistent
with past practice; (ii)
Seller has conducted
its business only in the ordinary and usual course of such
business; and
(iii) there has not been any condition, event, change or
occurrence that,
individually
or in the aggregate,
has had, or is
reasonably
likely to have, a Material Adverse Effect.
Section 3.07 Taxes.
(a)
(i) Seller
has filed or caused to
be filed, and with
respect to Tax
Returns due between the date of this Agreement and the date the
Effective Time
occurs, will timely
file (including any applicable extensions) all Tax Returns
required to be filed,
(ii) all such Tax Returns are, or in the case of such Tax
Returns not yet filed,
will be, true,
complete and correct in all material
respects and such Tax Returns correctly reflected (or in the case of such Tax
Returns not yet filed,
will correctly
reflect) the facts regarding the income,
business, assets, operations, activities, status and other matters
of Seller and
any other information required to be shown thereon, and (iii) all Taxes of
Seller (whether or not
reflected on any such Tax Returns)
attributable
to a
Pre-Effective Time Tax
Period have been,
or in the case of
Taxes the due date
for payment of which
is between
the date of this
Agreement and the date the
Effective Time occurs, timely paid in full, including, without limitation, all
Taxes which
Seller is obligated to withhold for amounts paid or owing to
employees, independent
contractors,
stockholders
creditors and other third
parties other than Taxes that have been reserved or accrued and
which the Seller
is contesting in good faith.
(b)
The most recent
financial statements
for Seller
reflect an
adequate
reserve for all Taxes
payable by Seller for
all taxable periods
and portions
thereof through the date of such financial statements, and, in the
case of Taxes
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owed as of the date
hereof, an
adequate reserve is (and until the date the
Effective Time occurs
will continue to be)
reflected in the accruals for Taxes
payable, other than
accruals established
to reflect
timing differences and
accruals reflected only in the notes thereto.
(c)
There are no liens for Taxes, except for statutory liens not yet due
with respect to any of the assets or properties of Seller.
(d)
(i) No Tax Return of
Seller has
within the past ten (10) years been
examined by the Internal Revenue Service or state taxing authority,
(ii) no Tax
Return of Seller is under audit or examination by any other Taxing Authority,
and (iii) no notice of such an audit or examination has been
received by Seller.
(e)
Each deficiency, if any, resulting from any audit or examination
relating to Taxes by
any Taxing
Authority has been timely paid. No issues
relating to Taxes were raised by the relevant Taxing Authority in any completed
audit or examination that can reasonably be expected to recur in a
later taxable
period. The relevant
statute of
limitations is closed
with respect to the Tax
Returns of Seller for all years through 2001. Seller has made available to
Purchaser documents
setting forth the dates of the most recent audits or
examinations of the
Seller by any Taxing
Authority in respect of Taxes for all
taxable periods for which the statute of limitations has not yet
expired.
(f)
Seller is not a party to or is bound by any Tax sharing agreement,
Tax
indemnity obligation or similar agreement, arrangement or practice with
respect
to Taxes (including,
without limitation, any advance pricing agreement, closing
agreement or other agreement relating to Taxes with any Taxing
Authority).
(g)
Seller will not be required to include in a taxable period ending
after
the date of the Effective Time any taxable income
attributable
to income that
accrued, but was not
recognized,
in a Pre-Effective Time Tax Period (or the
portion of a Straddle Period allocable to the Pre-Effective
Time Tax Period)
as
a result of an adjustment under Section 481 of the Code, the
installment method
of accounting, the
long-term contract method of accounting, the cash method of
accounting, any comparable provision of state, local, or foreign
Tax law, or for
any other reason.
(h)
There are no outstanding agreements or waivers extending, or having
the
effect of extending,
the statutory period
of limitation
applicable to any Tax
Returns required
to be filed
with respect to Seller, and Seller has not
requested any
extension of time within which to file any Tax Return, which
return has not yet been filed. No power of attorney with respect to any Taxes
has been executed or filed with any Taxing Authority by or on
behalf of Seller.
(i)
Seller has complied in all respects with all applicable laws relating
to the payment and withholding of Taxes (including withholding of
Taxes pursuant
to Sections 1441, 1442, 3121 and 3402 of the Code or any comparable
provision of
any state, local or
foreign laws) and
have, within the time
and in the manner
prescribed by applicable law, withheld from and paid over to the
proper Taxing
Authorities all
amounts required
to be so withheld and paid over under such
laws.
(j)
Seller has not been a party to any distribution occurring during the
last five years in which the parties to such distribution treated the
distribution as one to which Section 355 of the Code applied.
(k) Seller is not a party to any "listed transaction" as defined in
Treasury Regulation Section 1.6011-4(b)(2).
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(l)
The Tax Returns filed
by Seller do not contain a disclosure statement
under former
Section 6661 of the Code or Section 6662 of the Code (or any
similar provision of state, local or foreign Tax law).
(m)
Seller has not been, at any time during the applicable time period set
forth in Section
897(c)(1) of the Code, a United States real property holding
company within the meaning of Section 897(c)(2) of the Code.
(n)
Seller has made
available to Purchaser for inspection (i) complete and
correct copies of all
material Tax Returns of Seller relating to Taxes for all
taxable periods for
which the applicable
statute of
limitations
has not yet
expired, and (ii)
complete and correct
copies of all private
letter rulings,
revenue agent
reports, information document requests, notices of proposed
deficiencies,
deficiency notices,
protests, petitions, closing agreements,
settlement agreements,
pending ruling requests, and any similar documents,
submitted by,
received by or agreed to by or on behalf of Seller
or, to the
extent related to the income, business, assets, operations,
activities or status
of Seller and relating to Taxes for all taxable periods for which
the statute of
limitations has not yet expired.
(o)
The Disclosure Letter sets forth each state, county, local, municipal
or foreign
jurisdiction in which
Seller files,
or is or has been
required to
file, a Tax Return
relating to state and local income, franchise, license,
excise, net worth,
property or sales and use taxes or is or has been liable for
any Taxes on a "nexus"
basis at any time for
a taxable period for which the
relevant statutes of limitation have not expired. Seller has not
received notice
of any claim by a Taxing Authority in a jurisdiction where Seller does not file
Tax Returns that Seller is or may be subject to taxation by such
jurisdiction.
(p)
Seller has made a valid election under Section 1362 of the Code to
be
treated as an S corporation for federal income tax purposes,
and made a similar
election under comparable provisions of state, local or
foreign Tax law. At all
times since making its
election to be treated
as an S Corporation
Seller has
been treated as an S
Corporation
or a QSub (as defined
below) for income
tax
purposes. Seller is in compliance with requirements for maintaining
its election
as an S Corporation.
(q)
Each stockholder
of Seller has been, as of the date they acquired
Seller Stock,
and continue to be "eligible shareholders" as defined under
Section 1361 of the Code.
(r)
Each controlled
corporation that had
or has any of its stock owned by
Seller was,
is, and will be
properly treated as a qualified S Corporation
Subsidiary (QSubs),
as defined under
Section 1361 of the Code, of Seller. All
QSub elections
required to be made to
satisfy the condition
expressed in the
previous sentence were properly made on a timely basis.
(s)
Seller has no liability or potential liability for any tax under Code
Section 1374.
Seller has not in the
past 10 years, (A)
acquired assets from
another corporation
in a transaction in which Seller's tax basis for the
acquired assets was
determined,
in whole or in part,
by reference to the
tax
basis of the
acquired assets (or any other property) in the hands of the
transferor or (B) acquired the controlling stock of any corporation that is
not
a qualified Corporation Subsidiary.
Section 3.08 Material
Contracts; Leases; Defaults.
(a)
Except as set forth in the Disclosure Letter, Seller is not a party to
or subject to: (i) any
employment, consulting
or severance
contract with any
past or present
officer, director or
employee of Seller,
except for "at will"
arrangements; (ii)
any plan or contract providing for bonuses, pensions,
options, or other
equity deferred
compensation,
retirement payments,
profit
sharing, insurance
benefits, death benefits, health, medical or disability
benefits or
similar material arrangements for or with any past or present
11
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officers, directors
or employees of
Seller; (iii) any
collective
bargaining
agreement with any
labor union
relating to employees of Seller; (iv) any
agreement which by its terms limits the payment of Dividends by
Seller; (v) any
instrument evidencing
or related to
indebtedness
for borrowed
money whether
directly or indirectly, by way of purchase money
obligation,
conditional sale,
lease purchase,
guaranty or otherwise;
(vi) any other
agreement,
written or
oral, not terminable on 60 days' notice, that obligates Seller for the payment
of more than
$100,000 annually; or (vii) any agreement (other than this
Agreement), contract, arrangement, commitment or understanding
(whether written
or oral) that restricts or limits in any material way the conduct
of business by
Seller (it being
understood that any non-compete or similar provision shall be
deemed material).
(b)
Subject to any consents that may be required as a result of the
transactions contemplated by this Agreement, Seller is not in default under
any
material contract, agreement, commitment, arrangement, lease, insurance
policy
or other instrument to
which it is a party, by which its assets, business, or
operations may be bound or affected, or under which it or its
assets, business,
or operations receive benefits, and there has not occurred any
event that, with
the lapse of time or
the giving of notice
or both, would constitute such a
default.
(c)
True and correct copies of agreements, contracts, leases,
arrangements
and instruments referred to in Sections 3.08(a) and (b) have been
made available
to Purchaser on or before the date hereof, are listed on the Disclosure
Letter
and are in full force and effect on the date hereof and enforceable
against the
counterparty to which it relates.
(d)
The Disclosure Letter
provides a complete and accurate description of
all debt and
guaranties of debt of
Seller outstanding
as of the date of
this
Agreement.
Section 3.09 Ownership
of Property; Insurance Coverage.
(a)
Except as set forth in the Disclosure Letter, Seller has good and, as
to real property,
marketable title to all assets and properties owned by Seller
in the conduct of its businesses, whether such assets and
properties are real or
personal, tangible or intangible, including assets and property
reflected in the
balance sheet
contained in the most recent Seller financial statements or
acquired subsequent
thereto (except to the extent that such assets and
properties have been disposed of in the ordinary course of business, since the
date of such balance
sheet and except to
the extent that the
failure to have
good title to any personal property would not reasonably be expected
to have a
Material Adverse Effect), subject to no encumbrances, liens,
mortgages, security
interests or pledges. All existing leases and commitments to lease
constitute or
will constitute
operating leases for both tax and financial accounting purposes
and the lease expense and minimum rental commitments with respect
to such leases
and lease commitments
are as disclosed in all respects in the notes to the
Seller financial
statements.
Each real estate lease that will require the
consent of the lessor or its agent to consummate the effects intended by the
Merger or otherwise as a result of the Merger by virtue of the
terms of any such
lease is listed in the Disclosure Letter identifying the section of the lease
that contains such prohibition or restriction.
(b)
With respect to all
agreements pursuant to
which Seller has purchased
securities subject to
an agreement to resell, if any, Seller, as the case may
be, has a lien or security interest (which to Seller's Knowledge is a valid,
perfected first
lien) in the
securities
or other collateral securing the
repurchase agreement,
and the value of such
collateral
equals or exceeds
the
amount of the debt secured thereby.
(c)
Seller currently
maintains insurance for reasonable amounts with
financially sound and
reputable insurance companies, against such risks as
companies engaged in a
similar business would, in accordance with good business
practice, customarily
be insured. Seller has not received notice from any
insurance carrier
that (i) such
insurance will be canceled or that
coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect
to
12
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such policies of insurance will be substantially increased.
There are
presently
no material claims
pending under such policies of insurance and no notices have
been given by Seller
under such policies. All such insurance is valid and
enforceable and
in full force and effect. The Seller Disclosure Letter
identifies all
policies of insurance
maintained by Seller as well as the other
matters required to be disclosed under this Section.
Section 3.10
Intellectual Property.
(a)
The Disclosure
Letter sets forth a
true and complete list
of all (i)
registered and/or material Intellectual Property owned by
Seller indicating for
each registered item the registration or application
number and the
applicable
filing jurisdiction (collectively, the "Listed Intellectual
Property"). Seller
exclusively owns
(beneficially,
and of record
where applicable) all Listed
Intellectual Property,
free and clear of all
encumbrances,
exclusive licenses
and non-exclusive
licenses not granted in the ordinary course of business.
The
Listed Intellectual
Property is valid,
subsisting and enforceable, and is not
subject to any
outstanding
order, judgment, decree or agreement adversely
affecting the Seller's use thereof or its rights thereto.
Seller has
sufficient
rights to use all
Intellectual
Property used in its business as currently
conducted. To Seller's
Knowledge, Seller does
not and has not in the past five
years infringed or otherwise violated the Intellectual Property rights of any
third party.
There is no material litigation, opposition, cancellation,
proceeding, objection
or claim pending, asserted or threatened against the
Seller concerning the
ownership,
validity, registerability, enforceability,
infringement or use of, or licensed right to use, any Intellectual
Property. To
the Seller's Knowledge, (x) no valid basis for any such litigation,
opposition,
cancellation,
proceeding, objection or claim exists, (y) no Person is
violating
any Listed Intellectual Property or other Intellectual
Property right owned
or
held exclusively by Seller, and (z) the Licensed Intellectual
Property is valid,
subsisting and
enforceable
and is not subject to any outstanding order,
judgment, decree or
agreement adversely
affecting the Seller's
use thereof or
its rights
thereto. Consummation of the transactions contemplated by this
Agreement will not
terminate or alter the terms pursuant to which the Seller is
permitted to use any
Licensed Intellectual Property and will not create any
rights by third parties to use any Intellectual Property owned by the
Purchaser
(other than any
termination,
alteration or creation of any rights that results
from action of the Purchaser and its Affiliates).
(b)
The Seller has taken
commercially
reasonable measures to
protect the
confidentiality of all Trade Secrets that are owned, used or held
by Seller, and
to the Seller's Knowledge, such Trade Secrets have not been
used, disclosed to
or discovered
by any Person except pursuant to valid and appropriate
non-disclosu
