Exhibit 2.1
Execution Copy
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April
4, 2005, is entered into by and among Xxxx X. Xxxxxxx Company, a Georgia
corporation ("Buyer"), Justice Acquisition Corporation, a Minnesota corporation
and wholly-owned subsidiary of Buyer ("Sub"), Liberty Enterprises, Inc., a
Minnesota corporation (the "Company"), the shareholders of the Company listed on
the signature page hereto (the "Controlling Shareholders") and Xxxxx X. Xxxxxx
solely in the capacity as the shareholder representative as set forth in this
Agreement (the "Shareholders' Representative").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Buyer, Sub and the Company deem it
advisable and in the best interests of each respective corporation and its
shareholders that Buyer and the Company combine their businesses upon the terms
and conditions set forth herein;
WHEREAS, the combination of Buyer and the Company shall be effected by
the terms of this Agreement through a transaction in which Sub will merge with
and into the Company, the Company will become a wholly-owned subsidiary of Buyer
and the shareholders of the Company (the "Company Shareholders") will receive
cash (the "Merger"); and
WHEREAS, the parties intend and acknowledge that the Merger will be
treated in accordance with the election under Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained in this
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1. Effective Time of the Merger.
(a) Subject to the provisions of this Agreement, articles of merger (the
"Articles of Merger") in substantially the form attached hereto as Exhibit A and
as required by the Minnesota Business Corporation Act ("Minnesota Law") shall be
executed by Sub and the Company and filed with the Secretary of State of the
State of Minnesota on the Closing Date.
(b) The Merger shall become effective upon the filing of the Articles
of Merger with the Minnesota Secretary of State (the "Effective Time").
Section 1.2. Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m., Central time, on the date which is as soon as
reasonably practicable after the satisfaction or waiver of the conditions to
Closing set forth in Article VI, but in no event more than 10 days after such
satisfaction or waiver (the "Closing Date"), at the offices of Xxxxxx Xxxxxxx
Xxxxxx & Brand, LLP or at such other place and time as may be mutually agreed
by the Company and Buyer.
Section 1.3. Effects of the Merger.
(a) At the Effective Time Sub shall merge with and into the Company,
the separate existence of Sub shall cease, and the Company shall continue as the
surviving corporation and shall become a wholly-owned subsidiary of Buyer (the
Company following consummation of the Merger is sometimes referred to herein as
the "Surviving Corporation"). In addition, the Articles of Incorporation of the
Sub in effect immediately prior to the Effective Time shall become the Articles
of Incorporation of the Surviving Corporation and the Bylaws of the Sub in
effect immediately prior to the Effective Time shall become the Bylaws of the
Surviving Corporation.
(b) At the Effective Time, the effect of the Merger shall be as
provided by the applicable provisions of Minnesota Law.
Section 1.4. Directors and Officers. The directors of Sub immediately
prior to the Effective Time shall become the directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of Sub
immediately prior to the Effective Time shall become the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
Section 1.5. Section 338(h)(10) Election; Purchase Price Allocation.
(a) Election. Buyer and all Company Shareholders shall join in the
making of a timely election under Section 338(h)(10) of the Code, Treasury
Regulations 1.338(h)(10)-1T, and similar provisions of state law with respect
to the purchase and sale of the Common Stock, $.01 par value ("Company Shares"),
of the Company (the "Section 338(h)(10) Election").
(b) Forms. Buyer (at its sole cost and expense) shall prepare, execute
and deliver to the Shareholders' Representative, who shall arrange for all
Company Shareholders (with respect to the Company and any Purchased Entity that
will become a C corporation as a result of the consummation of the Merger), to
execute and deliver to Buyer, IRS form 8023, which form shall be prepared,
executed and delivered by Buyer to the Shareholders' Representative as soon as
practical after the execution of this Agreement. In addition, Buyer (at its sole
cost and expense) shall prepare, execute and deliver to the Shareholders'
Representative, who shall arrange for all Company Shareholders to execute and
deliver to Buyer, such other documents and forms as Buyer shall reasonably
request or as are required by applicable law for an effective Section 338(h)(10)
Election, including, without limitation, IRS form 8883 (together with any
schedules or attachments thereto) or any successor form required pursuant to
applicable Treasury regulations. The content of any IRS form 8883 to be filed by
the Buyer shall be subject to the terms of Section 1.5(c) hereof. The content of
any document or form contemplated by this Section 1.5(b), other than IRS form
8023 or IRS form 8883, shall be subject to the Company Shareholders' consent,
which consent will not be unreasonably withheld or delayed.
(c) Purchase Price Allocation. Within 90 days after the Closing Date,
Buyer shall provide the Shareholders' Representative with an interim proposed
schedule (the "Allocation Schedule") allocating the Aggregate Merger
Consideration, as defined in Section 2.1(d), plus any assumed liabilities and
all other items comprising the "Aggregate Deemed Sale Price" of the Company's
assets ("ADSP"), in each case that are apportioned to the purchase of the
Company Shares (the "Section 338(h)(10) Allocable Amount"), among the assets
deemed to be sold as a result of the making of the Section 338(h)(10) Election.
Such ADSP and Allocation Schedule shall comply with the rules of Section 338 of
the Code and the Treasury Regulations promulgated thereunder; provided, however,
that the parties agree that the fair market value of both the Company's tangible
personal property (other than inventory) and the Company's other personal
property acquired by the Company prior to the Effective Time (other than cash,
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accounts receivable, prepaid expenses and the Company's investment in Cavion LLC
("Cavion")), does not exceed $13,000,000. The Shareholders' Representative must
either accept or reject the ADSP and the Allocation Schedule within 30 days of
receipt thereof. If the Shareholders' Representative accepts the ADSP and the
Allocation Schedule, it shall become final and binding on the parties hereto. If
the Shareholders' Representative rejects the ADSP and the Allocation Schedule,
the parties shall in good faith attempt to resolve the dispute within 15 days
after written notice to Buyer of that rejection. Any such resolution shall be
final and binding on all of the parties hereto. Any unresolved disputes shall be
promptly submitted to Ernst & Young LLP or such other independent accounting
firm of national reputation as may be mutually acceptable to the Shareholders'
Representative and Buyer (the "Independent Accountants") for resolution, with
such resolution being final and binding on the parties hereto. Buyer, on the one
hand, and the Shareholders' Representative (from the Escrow Fund), on the other
hand, will each pay one-half of the fees and expenses of the Independent
Accountants. The parties shall cooperate with each other and the Independent
Accountants in connection with the matters contemplated by this Section 1.5(c),
including, without limitation, by furnishing such information and access to
books, records (including, without limitation, accountants work papers),
personnel and properties as may be reasonably requested.
(d) Revisions. The parties hereto will revise the Allocation Schedule
to the extent necessary to reflect any indemnification payment made under
Article VIII hereof or any other post-Closing payment made pursuant to or in
connection with this Agreement. In the case of any such payment, Buyer shall
propose a revised Allocation Schedule, and the parties hereto shall follow the
procedures outlined above with respect to review, dispute and resolution in
respect of such revision.
(e) Consistent Treatment. Each of the parties hereto agrees to (a)
prepare and timely file all Tax Returns, as defined in Section 3.9, including,
without limitation, form 8023 (and all supplements thereto) in a manner
consistent with the Allocation Schedule as finalized and (b) act in accordance
with the Allocation Schedule for all Tax (as such term is defined in Section
3.9) purposes.
(f) Taxes Resulting from Election. All Company Shareholders shall
include any income, gain, loss, deduction or other Tax item resulting from the
Section 338(h)(10) Election on their Tax Returns to the extent required by
applicable law. Notwithstanding any other provision to the contrary in this
Agreement, each Company Shareholder shall be responsible for and shall pay all
Taxes imposed on such respective Company Shareholder resulting from the Section
338(h)(10) Election (the "Section 338(h)(10) Election Taxes").
(g) Expenses of Election. The Company Shareholders, on a pro-rata
basis, shall reimburse Buyer for all Taxes, costs and expenses associated with
or resulting from the Section 338(h)(10) Election applicable to the Company or
any of the Purchased Entities, including but not limited to any transfer Taxes,
deed Taxes, filing fees, sales Taxes, personal property Taxes, real estate Taxes
and income Taxes (the "Shareholder Entity Taxes"), other than any Taxes payable
by the Company Shareholders pursuant to the obligation set forth in Section
1.5(f) above. The Shareholder Entity Tax obligations will be satisfied pursuant
to Section 2.1(d).
ARTICLE II
CONVERSION OF STOCK
Section 2.1. Conversion of Common Stock; Merger Consideration.
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At the Effective Time, by virtue of the Merger and without any further approval
of the holders of any shares of capital stock of the Company or Sub:
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(a) Common Stock of Sub. Each outstanding share of common
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stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Certain Shares. Any Company Shares that are owned
immediately prior to the Effective Time by Buyer, Sub, the Company or any
subsidiary thereof shall be canceled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Company Shares. Each Company Share outstanding
immediately prior to the Effective Time (other than any Dissenting Shares, as
defined below) shall be converted, without any action on the part of the holder
thereof, into the right to receive in cash an amount equal to the final
computation of the Aggregate Merger Consideration (as defined below) divided by
the number of Company Shares outstanding immediately prior to the Effective Time
(including the Dissenting Shares) (the "Per Share Merger Consideration"),
without interest, and each Dissenting Share shall be converted into the right to
receive payment from the Surviving Corporation with respect thereto in
accordance with the provisions of Minnesota Law. No Company Share shall be
deemed to be outstanding or to have any rights other than those set forth above
in this Section 2.1(c) after the Effective Time. At and after the Effective
Time, each Company Shareholder shall cease to have any rights as a shareholder
of the Company and, until surrendered in accordance with the provisions of
Section 2.4 below, each certificate representing Company Shares
("Certificates"), other than Certificates representing Dissenting Shares, shall
represent for all purposes only the right to receive the Per Share Merger
Consideration for each Company Share represented thereby.
(d) Merger Consideration. The total consideration payable for the
Company Shares in the Merger (the "Aggregate Merger Consideration") shall equal
$160,000,000, plus all cash and cash equivalents held by the Company as of the
Closing Date, minus: (1) all Indebtedness for Borrowed Money (as defined below),
(2) the amounts owed by the Company, unless paid prior to the Closing, as a
result of the Merger pursuant to (i) the engagement agreement between the
Company and Duff & Xxxxxx, LLC (formerly, Valuemetrics Capital, L.L.C.) dated
September 2, 2004 and amended on October 25, 2004; (ii) the Liberty Enterprises,
Inc. Directors' Equity Share Incentive Plan, effective January 1, 2005; (iii)
any executive transaction success bonuses due to the Company's Chief Executive
Officer, Chief Financial Officer, Executive Vice President - Sales and Executive
Vice President - Marketing as determined by the Company's Board of Directors
("Success Bonuses") and the project bonuses due two employees in the aggregate
amount of $40,000; (iv) all fees and expenses payable by the Company to its
legal, accounting, tax and other professional advisors and, to the extent
applicable, the amounts payable by the Company to the trustee, financial advisor
and legal advisor of the Company ESOP (as defined in Section 3.2), all in
connection with the transactions contemplated by this Agreement incurred prior
to the Closing Date ("Professional Fees"); (v) the Change of Control,
Confidentiality and Noncompete Agreement between the Company and Xxxxx Xxxxxx
dated December 15, 2004 if such agreement is in effect on the Closing Date; and
(vi) the cost and expense of the Tax Insurance (as defined in Section 8.1(b)),
and (3) the estimated Shareholder Entity Taxes. To the extent the Tax Insurance
is paid for by any person other than the Company, the Company shall reimburse
such person on the Closing Date. The Professional Fees and the Shareholder
Entity Taxes will be estimated by the Company on the Closing Date. Within 30
days after the Closing Date the Shareholders' Representative and Buyer will
determine the final amount of the Professional Fees (the "Final Expenses"). If
the Final Expenses are less than the Closing estimate, Buyer shall promptly pay
the difference to the Shareholders' Representative for distribution to the
Controlling Shareholders. If the Final Expenses are more than the Closing
estimate, Buyer shall have the right to obtain reimbursement for the difference
from the Escrow Fund, without giving effect to the Threshold set forth in
Section 8.1(b). As soon as the Shareholder Entity Taxes are ascertained and
agreed to by Buyer and the Shareholders' Representative, then if the final
Shareholder Entity Taxes are less than the Closing estimate, Buyer will refund
the over-estimate to the Shareholders' Representative for distribution to the
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Controlling Shareholders and if the final Shareholder Entity Taxes are more than
the Closing estimate, the Shareholders' Representative will pay to Buyer the
under-estimate from the Escrow Fund. "Indebtedness for Borrowed Money" shall
mean (i) the amount owed to Bank One, NA (successor by merger to Bank One,
Wisconsin) as of the Closing Date pursuant to that certain Credit and Term Loan
Agreement dated as of August 28, 2000, as amended, between Bank One, NA and the
Company, and (ii) any other indebtedness for borrowed money of the Company as of
the Closing Date all of which is set forth on Schedule 2.1(d).
Section 2.2. Escrow Fund. Notwithstanding any provision of Section
2.1, at the Effective Time, Buyer shall deliver to SunTrust Bank (the "Escrow
Agent") $8,000,000 in cash (the "Escrow Fund") by wire transfer, to be held and
distributed by the Escrow Agent pursuant to the terms of the Escrow Agreement
substantially in the form attached as Exhibit B hereto (the "Escrow Agreement").
The Escrow Fund shall be withheld pro rata from the Per Share Merger
Consideration otherwise deliverable to the Controlling Shareholders in respect
of their Company Shares. The parties agree that the Controlling Shareholders
are, and shall be treated as, the owners of the Escrow Fund, together with any
earnings thereon, for federal and state income tax purposes and that the
Controlling Shareholders shall, except as may otherwise be provided in the
Escrow Agreement, include in taxable income any earnings on the Escrow Fund on a
pro-rata basis in accordance with their ownership of Company Shares prior to the
Effective Time. Each of the parties hereto which is a party to the Escrow
Agreement agrees to execute and deliver the Escrow Agreement on the Closing
Date, and Buyer agrees to cause the Escrow Agent to execute and deliver the
Escrow Agreement on the Closing Date.
Section 2.3. Dissenting Shares.
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(a) Notwithstanding any provision of this Agreement to the contrary,
any Company Shares held by a Company Shareholder who has exercised such holder's
dissenting rights in accordance with Minnesota Law and who, as of the Effective
Time, has not effectively withdrawn or lost such dissenting rights ("Dissenting
Shares"), shall not be converted into or represent the right to receive any
consideration under this Agreement, and such holder shall only be entitled to
such rights as are granted by Minnesota Law.
(b) Notwithstanding the provisions of Section 2.3(a), if any holder of
Dissenting Shares, after the Effective Time, withdraws such holder's demand for
dissenting rights for such Dissenting Shares or waives or loses dissenting
rights, in either case pursuant to Minnesota Law, such holder's Dissenting
Shares shall thereupon be deemed to have been converted, as of the Effective
Time, into the right to receive the Per Share Merger Consideration with respect
to such Dissenting Shares in accordance with Section 2.1(c), without interest,
which amount shall be paid by Buyer, subject to Section 2.4, upon the later of
the Closing or five (5) days after such dissenting rights lapse.
(c) The Company shall give Buyer (i) prompt notice of any written
demands for dissenting rights pursuant to Minnesota Law, withdrawals of such
demands, and any other instruments that relate to such demands received by the
Company and (ii) subject to Minnesota Law, the opportunity to participate at its
own expense in all negotiations and proceedings with respect to demands for
dissenting rights. The Company shall not voluntarily make any payment with
respect to any demands for dissenting rights or offer to settle or compromise
any such demands without Buyer's consent.
Section 2.4. Exchange of Certificates.
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(a) The Company shall use its best efforts to cause each holder of
Company Shares to deliver to Buyer at the Closing such shareholder's
Certificate. At the Closing, Buyer or the Surviving Corporation shall deliver to
each Company Shareholder who has previously delivered a Certificate the Per
Share Merger Consideration issuable in respect of such shareholder's
Certificate, less, with respect to the Controlling Shareholders only, such
shareholder's pro-rata share of the Escrow Fund (the "Closing Per Share Merger
Consideration"), by wire transfer of immediately available funds to an account
designated in writing by such shareholder to Buyer.
(b) If any Company Shareholder does not deliver his or her Certificate
at or prior to the Closing, then from and after the Effective Time, each holder
of an outstanding Certificate shall have the right to surrender such Certificate
to Buyer and receive promptly (and in any event within 10 days) in exchange
therefor the Closing Per Share Merger Consideration payable in respect of such
Certificate. Until surrendered, each outstanding Certificate that prior to the
Effective Time represented Company Shares shall be deemed for all corporate
purposes to evidence ownership of the Per Share Merger Consideration
attributable to the surrendered Company Shares, but shall, subject to applicable
dissenting rights under Minnesota Law and Section 2.3, have no other rights.
From and after the Effective Time, there shall be no further registration of
transfers on the records of the Company of any Company Shares.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an appropriate affidavit of that fact, Buyer
shall pay in exchange for such Certificate the Closing Per Share Merger
Consideration upon receipt of such affidavit and such shareholder will be
entitled to the Per Share Merger Consideration for each such Company Share,
subject to the terms of this Agreement and the Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer that:
Section 3.1. Organization and Standing.
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(a) The Company and each of its subsidiaries (i) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, (ii) has all corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted, (iii) is qualified as a foreign corporation to do business and is in
good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership or leasing of its properties or assets requires such
qualification, except for such jurisdictions where the failure to be so
qualified does not have a Material Adverse Effect (as defined below), and (iv)
has all necessary government approvals to own, lease and operate its properties
and assets and to carry on its business as presently conducted, except where the
failure to have such approvals does not have a Material Adverse Effect. Schedule
3.1 sets forth a complete and accurate list of each of the Company's
subsidiaries and the jurisdictions in which they are qualified to do business.
For purposes of this Agreement, a "Material Adverse Effect" shall mean a
material adverse effect on the financial condition, operations, assets or
liabilities of the Company or such subsidiary or the ability of the Company to
consummate the transactions contemplated by this Agreement; provided, however,
that in no event shall either of the following be deemed to constitute, nor
shall they be taken into account in determining whether there has been or will
be a Material Adverse Effect: (i) any changes affecting the industry in which
the Company operates or any changes in general economic conditions that do not
disproportionately impact in any material respect the Company, or (ii) any
action required by this Agreement or to which Buyer has given its prior written
consent.
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(b) The Company has made available for Buyer's review complete and
correct copies of its Articles of Incorporation (the "Company Articles of
Incorporation") and Bylaws (the "Company Bylaws"), each as amended to date. The
Company Articles of Incorporation and the Company Bylaws are in full force and
effect, and the Company is not in violation of any material provision of either
thereof.
(c) The minutes of the meetings of the directors and shareholders and
the stock records of the Company previously made available for review by Buyer
are complete and accurate records of such meetings, through the date hereof.
Section 3.2. Capitalization. The capital stock of the Company consists
of 10,000,000 authorized shares of capital stock, $.01 par value, of which
2,300,644 voting and 2,213,775 non-voting common shares are issued and
outstanding. As of immediately prior to the Effective Time, (i) the issued and
outstanding Company Shares will be held of record by the Controlling
Shareholders and by the Employee Stock Ownership Plan component of the Liberty
Shares Freedom Plan (the "Company ESOP") as set forth in Schedule 3.2, (ii) such
shares will constitute all of the issued and outstanding capital stock of the
Company, and (iii) all of such shares will be validly issued, fully paid and
nonassessable and free of preemptive rights. The Company does not have any
outstanding options, warrants, convertible securities, subscriptions, stock
appreciation rights, phantom stock rights or other agreements or commitments
obligating the Company to issue or sell any shares of capital stock of the
Company. All issuances, transfers, purchases or redemptions of the capital stock
of the Company have been in compliance in all material respects with all
applicable agreements and United States federal, state or local statutes, laws,
rules, regulations, ordinances, codes, orders, decrees or other requirements or
rules of law ("Laws"). Except as set forth in Schedule 3.2, there are no
outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any Company Shares or to pay any dividend or make any other distribution
in respect thereof.
Section 3.3. Authority for Agreement.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement, and subject to the approval of the Merger
by the holders of the Company Shares, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution, delivery and
performance by the Company of this Agreement, and the consummation by the
Company of the transactions contemplated hereby, have been duly authorized by
all necessary corporate action, other than the approval of the Merger and the
adoption of this Agreement by the holders of the Company Shares and the approval
of the Articles of Merger as contemplated by Section 1.1. This Agreement has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights or remedies in general as from time to time in
effect or (ii) the exercise by courts of equity powers.
(b) The Controlling Shareholders have the right, power and capacity to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Controlling Shareholders and constitutes a valid and binding obligation of the
Controlling Shareholders enforceable against each of them in accordance with its
terms.
Section 3.4. No Conflict.
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(a) Except as disclosed on Schedule 3.4, the execution and delivery of
this Agreement by the Company do not, and, subject to the terms of this
Agreement, the performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby will not, (i) conflict with or violate
the Company Articles of Incorporation or Company Bylaws, (ii) conflict with or
violate in any material respect any Law applicable to the Company or by which
any property or asset of the Company is bound or affected, or (iii) result in a
breach of or constitute a default under any agreement to which the Company is a
party or by which it is bound, except for any such breaches or defaults which in
the aggregate would not reasonably be expected to have a Material Adverse Effect
on the Company.
(b) Except as disclosed on Schedule 3.4, the execution and delivery of
this Agreement by the Controlling Shareholders do not, and the performance by
the Controlling Shareholders of their obligations under this Agreement and the
consummation of the transactions contemplated hereby will not, (i) violate in
any material respect any provision of any Law applicable to the Controlling
Shareholders, or (ii) violate or conflict with in any material respect, or
result in a material breach or default under, any term or condition of any court
order, agreement, document or other instrument to which any Controlling
Shareholder is a party or by which any Company Shares held by a Controlling
Shareholder are bound.
Section 3.5. Required Filings and Consents. The execution
and delivery of this Agreement by the Controlling Shareholders and the Company
do not, and the performance of this Agreement by the Controlling Shareholders
and the Company will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any United States federal, state or local
or any foreign government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), except for (i) the filing of the Articles of Merger with
the Minnesota Secretary of State, (ii) those required by the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (iii) such
other consents, approvals, authorizations, permits, filings or notifications by
or with any Governmental Entity, which in the aggregate, if not obtained or
made, would not reasonably be expected to have a Material Adverse Effect on the
Company.
Section 3.6. Compliance. The Company (i) has been operated in
compliance in all material respects with all Laws applicable to the Company or
by which any property or asset of the Company is bound or affected, and (ii)
is not in default or violation in any material respect of any note, mortgage,
indenture, contract, lease, license, permit, franchise or other agreement to
which the Company is a party or by which any property or asset of the Company
is bound, except for any noncompliance, defaults or violations which in the
aggregate would not reasonably be expected to have a Material Adverse Effect on
the Company.
Section 3.7. Financial Statements; Absence of Undisclosed Liabilities.
Schedule 3.7 sets forth (i) the audited consolidated balance sheet of the
Company as of December 31, 2004, the related consolidated statements of income
and cash flows for the year then ended and the footnotes related thereto,
together with the audit report of Xxxxx Xxxxxxxx LLP, and (ii) the audited
consolidated balance sheet of the Company as of December 31, 2003, the related
consolidated statements of income and cash flows for the year then ended and the
footnotes related thereto, together with the audit report of
PricewaterhouseCoopers LLP (collectively, the "Financial Statements"). The
Financial Statements (i) have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied throughout the
periods indicated, (ii) have been prepared from, and are in accordance with,
the books and records of the Company, and (iii) present fairly, in all material
respects, the financial position of the Company as of each balance sheet date
and the results of its operations for the periods indicated. To the Company's
Knowledge (as defined in Section 3.9), the Company has not incurred any material
debt, Indebtedness for Borrowed Money, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, that would reasonably be
xpected to have a Material Adverse Effect, except (i) as reflected or reserved
against in the Financial Statements, (ii) those arising in the ordinary course
of business of the Company, or (iii) as reflected on any Schedule to this
Agreement.
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Section 3.8. Absence of Certain Changes or Events. Except as
contemplated by this Agreement or disclosed on Schedule 3.8, since December 31,
2004 the Company has conducted its business only in the ordinary course and
consistent with prior practice, and there has not been (i) any event that has
had or would reasonably be expected to have a Material Adverse Effect, (ii) any
declaration or payment of any dividend or other distribution with respect to the
capital stock of the Company other than tax dividends in the ordinary course of
business, (iii) any material change in accounting methods, principles or
practices employed by the Company, or (iv) any action of the type described in
Sections 5.1(b) or 5.1(c) which if taken after the date of this Agreement would
be in violation of either such Section.
Section 3.9. Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of the Company
or any of its direct or indirect, partly or wholly-owned subsidiaries, including
interests in partnerships, trusts and limited liability companies (collectively
with the Company referred to as "Purchased Entities") have been duly and timely
filed with the appropriate Governmental Entity in all jurisdictions in which
such Tax Returns are required to be filed (after giving effect to any valid
extensions of time in which to make such filings), and all such Tax Returns are
true, complete and correct in all material respects. All Taxes (whether or not
shown on any Tax Return) payable by or on behalf of any Purchased Entity have
been timely paid. With respect to any period for which Tax Returns of or
relating to any Purchased Entity have not yet been filed or for which Taxes are
not yet due or owing as of December 31, 2004, the relevant Purchased Entity has
made adequate accruals for such Taxes on the face of the December 31, 2004
balance sheet included in the Financial Statements and on its books and records.
(b) Each Purchased Entity has complied in all material respects with
all applicable Laws relating to the payment and withholding of Taxes and has
duly and timely withheld and paid over to the appropriate Governmental Entity
all amounts required to be so withheld and paid under all applicable Laws.
(c) Buyer has been given the opportunity to review complete copies of
all federal, state, local and foreign income or franchise Tax Returns of each
Purchased Entity that have been filed for the taxable periods ended December 31,
2001 and thereafter.
(d) Except as disclosed on Schedule 3.9(d), there have been no audits
or notice of pending audits or inquiries by the IRS or any other Governmental
Entity within the last four years relating to any Taxes due from or with respect
to any Purchased Entity. No issue has been raised by a Governmental Entity in
any prior examination of any Purchased Entity that, by application of the same
or similar principles, could reasonably be expected to result in a proposed
deficiency for any subsequent taxable period. No claim has been made or, to the
Knowledge of the Company, threatened by a Governmental Entity in a jurisdiction
where any Purchased Entity does not file Tax Returns that a Purchased Entity is
or may be subject to taxation by that jurisdiction. Except as set forth on
Schedule 3.9(d), none of the Purchased Entities has consented to extend the
statute of limitations with respect to any Tax.
9
(e) None of the Controlling Shareholders or the Company ESOP, the
Purchased Entities or any other person on their behalf has filed a consent
pursuant to Section 341(f) of the Code (as in effect prior to the repeal under
the Jobs and Growth Tax Reconciliation Act of 2003) or agreed to have Section
341(f)(2) of the Code (as in effect prior to the repeal under the Jobs and
Growth Tax Reconciliation Act of 2003) apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by
any Purchased Entity.
(f) None of the Controlling Shareholders, the Company ESOP, the
Purchased Entities or any other person on their behalf: (i) is required to make
any adjustments pursuant to Section 481(a) of the Code or any similar provision
of Law or has any Knowledge that any Governmental Entity has proposed any such
adjustment, or has any application pending with any Governmental Entity
requesting permission for any changes in accounting methods that relate to any
Purchased Entity, (ii) has executed or entered into a closing agreement pursuant
to Section 7121 of the Code or any similar provision of Law with respect to any
Purchased Entity, or (iii) has granted to any Person any power of attorney that
is currently in force with respect to any Tax matter.
(g) The Company has not been a U.S. real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code.
(h) None of the Purchased Entities is a party to any tax sharing, allocation,
indemnity or similar agreement or arrangement (whether or not written) pursuant
to which it will have any obligation to make any payments after the Closing.
Except as disclosed on Schedule 3.9(h), none of the Purchased Entities has ever
been a member of any consolidated, combined, affiliated or unitary group of
corporations for any Tax purposes. None of the Purchased Entities is subject to
any private letter ruling of the IRS or comparable rulings of any foreign, state
or local Governmental Entity that has been directed specifically to the
Purchased Entity.
(i) There are no Liens (as defined below), other than Permitted Liens (as
defined below), as a result of any unpaid Taxes upon any of the assets of any
Purchased Entity.
(j) Schedule 3.9(j) sets forth each corporation in which the Company either
currently or previously has held shares, directly or indirectly. Except as set
forth in Schedule 3.9(j), each of the entities set forth on Schedule 3.9(j)
(each, a "Schedule 3.9(j) Entity") is or was (prior to its sale or dissolution),
as appropriate, a qualified subchapter S subsidiary within the meaning of
Section 1361(b)(3)(B) of the Code. Except as set forth on Schedule 3.9(j), each
Schedule 3.9(j) Entity is or was (prior to its sale or dissolution), as
appropriate, a qualified subchapter S subsidiary in all states (including the
District of Columbia) that follow Federal income Tax laws concerning qualified
subchapter S subsidiaries and in which the Company is required to file a Tax
Return.
(k) Schedule 3.9(k) sets forth each partnership, limited liability company or
other entity, foreign or domestic, in which the Company has owned any equity
interest (other than marketable securities) since December 31, 1997. Except as
noted on Schedule 3.9(k), each entity set forth therein is or was (prior to its
sale or dissolution), as appropriate, either (i) properly treated as a
disregarded entity under Treasury Regulations Section 301.7701-3 and under
similar provisions of state or local law in each jurisdiction where such entity
is or was required to file a Tax Return, or (ii) properly treated as a
partnership under Subchapter K of the Code and in each jurisdiction where such
entity is or was required to file a Tax Return.
(l) The Company has been a validly electing S corporation within the meaning of
Sections 1361 and 1362 of the Code at all times from December 31, 1997 through
the Closing Date. Except as set forth on Schedule 3.9(l), at all times from
December 31, 1997 through the Closing Date the Company has been a valid S
corporation in all states (including the District of Columbia) that follow
Federal income Tax laws concerning S corporation elections and in which the
Company is required to file a Tax Return.
10
(m) Schedule 3.9(m) sets forth each trust, estate or any other person who is not
an individual that has owned any capital stock in the Company and the period for
which the stock was owned. Each trust listed on Schedule 3.9(m) is a trust
described in Section 1361(c)(2)(A)(i) or Section 1361(c)(6) of the Code. All of
the Company Shareholders are permitted shareholders of an S corporation within
the purview of Section 1361(b)(1)(B) and (C) of the Code.
(n) The Company does not have more than one class of stock within the meaning of
Section 1361(b)(1)(D) of the Code.
(o) The Company has not, since January 1, 1998, acquired assets from another
corporation in a transaction in which the Company's Tax basis for the acquired
assets was determined, in whole or in part, by reference to the Tax basis of the
acquired assets in the hands of the transferor.
(p) No Purchased Entity has constituted either a "distributing corporation" or a
"controlled corporation" (within the meaning of Section 355(a)(1)(A) of the
Code) during a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code (A) in the two years prior to the date of this Agreement
or (B) in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the transactions contemplated by this Agreement.
(q) There is no taxable income of any Purchased Entity that will be required
under applicable Tax Law to be reported by any Purchased Entity for a taxable
period beginning after the Closing Date which taxable income was realized prior
to the Closing Date.
(r) None of the Purchased Entities has participated in any reportable
transaction, as defined in Treasury Regulation Section 1.6011-4(b)(1), or a
transaction substantially similar to a reportable transaction.
(s) None of the Purchased Entities has, or has ever had, a permanent
establishment in any country other than the United States, or has engaged in a
trade or business in any country other than the United States that subjected it
to Tax in such country.
(t) The Company is not subject to the tax imposed under Section 1374(a) of the
Code or under similar provisions of state or local law on recognized built-in
gains arising from its S election effective December 31, 1997.
(u) The Company
has not made and is not required to make any payment that would constitute an
"excess parachute payment" within the meaning of Section 280G of the Code.
(v) For purposes of this Agreement:
(i) "Tax" means any applicable federal, state, local or
foreign income, sales, use, gross receipts, license, payroll,
employment, excise, capital stock, franchise, withholding, social
security, disability, real or personal property, escheat, unclaimed
property, value added or other tax or claim of any kind whatsoever,
including any interest, penalty or addition thereto, as required by
applicable law.
11
(ii) "Tax Return" means any report, return, declaration or
other information required to be supplied to a Governmental Entity by
applicable law in connection with Taxes, including estimated returns,
tax shelter disclosure and reportable transactions regulations and
reports of every kind with respect to Taxes, as required by applicable
law.
(iii) "Knowledge" means when used with respect to a natural
person, the actual knowledge of such person. "Knowledge" means when
used with respect to an entity that is not a natural person, the actual
knowledge of the executive officers of such entity. With respect to the
Company, its executive officers for purposes of this definition of
Knowledge shall mean the Shareholders' Representative and the current
Chief Executive Officer, Chief Financial Officer, Executive Vice
President - Sales and Executive Vice President - Marketing.
Section 3.10. Title to Properties.
(a) The Company does not own any real property. Schedule 3.10(a) sets forth a
complete and accurate list of all individual items of property with a current
book value in excess of $100,000 that the Company owns or leases (the "Personal
Property").
(b) The Company has title to, or a valid leasehold interest in, the Personal
Property, in each case free and clear of all mortgages, liens, pledges, security
interests, charges, and encumbrances on title of any nature ("Liens"), except
for Liens for Taxes accrued but not yet payable, purchase money security
interests and those mortgages, liens, pledges, security interests, charges, and
encumbrances on title set forth on Schedule 3.10(b) (collectively, "Permitted
Liens"). Section 3.11. Change of Control Agreements. Except as set forth on
Schedule 3.11, or as otherwise contemplated by this Agreement, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in, cause the accelerated vesting
or increase the amount of any payment or benefit to any director, officer or
employee of the Company.
Section 3.12. Litigation. Except as set forth on Schedule 3.12, (a)
there are no claims, suits, actions, arbitration or other material proceedings
("Litigation") pending or, to the Knowledge of the Company, material Litigation
threatened against the Company, and (b) there are no outstanding judgments,
orders, injunctions or awards against or relating to the Company.
Section 3.13. Material Contracts. Schedule 3.13 sets forth a complete
and accurate list of all executory contracts or contractual arrangements to
which the Company is a party involving annual payments by the Company after
January 1, 2005 in excess of $100,000 ("Material Contracts"), including: (i)
agreements for the purchase or sale of any assets, (ii) agreements relating to
indebtedness for borrowed money, (iii) contracts or licenses with customers,
independent contractors, joint venture partners, suppliers, software developers,
host providers, resellers or others, including all sales and open purchase
orders, and (iv) leases of any real property or Personal Property. Schedule 3.13
sets forth a complete and accurate list of all executory contracts or
contractual arrangements (without reference to the actual customer) to which the
Company is a party which resulted in xxxxxxxx by the Company to any of the
Company's current customers in calendar year 2004 in excess of $250,000
("Customer Contracts"). Except as disclosed on Schedule 3.13, neither the
Company nor, to the Knowledge of the Company, any other party thereto is in
default in any material respect under any Material Contract or Customer
Contract, nor to the Knowledge of the Company has any event occurred that could
result in any such default. The Company has no "side agreement" or other
understanding that would give any person the right to modify or amend any
Material Contract or Customer Contract. Schedule 3.13 identifies with an
asterisk each Material Contract or Customer Contract set forth therein that
requires the consent of the other party thereto to avoid any breach, default or
violation thereof in connection with the transactions contemplated hereby.
12
Section 3.14. Employee Benefit Plans.
----------------------
(a) Schedule 3.14(a) sets forth all plans, funds, programs, agreements
or arrangements (whether written or oral) pursuant to which the Company or any
of its subsidiaries provides benefits or remuneration (other than salaries and
wages) to its employees, former employees, directors, independent contractors or
contingent or leased employees or the dependents of any of them, including any
bonus, incentive compensation, stock option, deferred compensation, severance or
other compensation plan or employment agreement, any employee welfare plan or
any defined benefit, profit sharing or savings or other employee pension benefit
plan (collectively, "Current Benefit Plans").
(b) For purposes of this Agreement, the term "Benefit Plan" includes
each of the Current Benefit Plans and the Past Benefit Plans; and the term "Past
Benefit Plan" means any plan, fund, program, agreement or arrangement that would
be a Current Benefit Plan if it were now in effect, and was at any earlier time
within the past six years sponsored or maintained or required to be sponsored or
maintained by the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries has made, or had an obligation to make, contributions
providing for employee benefits or for the remuneration (other than salaries or
wages), direct or indirect, of their employees, former employees, directors,
independent contractors, contingent or leased employees, the spouses or the
dependents of any of them. To the extent applicable, to the Knowledge of the
Company, the Current Benefit Plans now comply, and the Past Benefit Plans did
comply when they were in effect, in all material respects with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the Code. Any
Current Benefit Plan intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter or is an approved prototype plan
with an opinion letter upon which the Company or a subsidiary is entitled to
rely, and continues to satisfy in all material respects the requirements for
such qualification. Neither the Company nor any affiliate of the Company that
would be considered a single employer with the Company or any subsidiary under
Section 414 of the Code has maintained or contributed in the past six years to
any Benefit Plan that is or was then covered by Title IV of ERISA or Section 412
of the Code that could reasonably be expected to result in a material penalty to
the Company. Neither the Company, any subsidiary nor any Benefit Plan has
incurred any material liability or penalty under Section 4975 of the Code or
Section 502(i) of ERISA, or engaged in any transaction that is reasonably likely
to result in any such liability or penalty. To the Knowledge of the Company, the
Company has complied in all material respects with the notice and continuation
requirements of Section 4980B of the Code and the regulations thereunder
("COBRA"), and with the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996. To the Knowledge of the Company,
except as described in Schedule 3.14(b), each Benefit Plan has been maintained
and administered during the past six years in material compliance with its terms
and with all applicable law, including ERISA, the Code and federal and state
securities laws.
(c) There is no pending or, to the Knowledge of the Company, threatened
Litigation involving any Benefit Plan (excluding routine claims for benefits
incurred in the ordinary course of Benefit Plan activities). All contributions
required to be made as of the date hereof to the Benefit Plans have been made or
provided for.
13
(d) Except as required under COBRA and similar state laws, and
except as set forth in Schedule 3.14(d), the Company has no plan or arrangement
which provides life insurance, medical or other employee welfare benefits to any
employee or former employee upon retirement or termination of employment, and
the Company has never represented or contracted (whether in oral or written
form) to any employee or former employee that such benefits would be provided.
(e) With respect to any Benefit Plan that is intended to be an employee
stock ownership plan (within the meaning of Section 4975(e)(7) of the Code and
Section 407(d)(6) of ERISA) ("ESOP"), the ESOP has at all times been maintained
and administered in all material respects in accordance with the applicable
requirements of Section 4975(e)(7), Section 409(h), (o), (n), and (p), and
Section 664(g) of the Code, Section 407(d)(6) of ERISA and all applicable
federal and state securities laws; any Company Shares or the stock of any
subsidiaries of the Company held by the ESOP are and have at all times been in
all material respects qualifying employer securities within the meaning of
Section 4975(e)(8) of the Code and Section 407(d)(5) of the Code; any loans made
to the ESOP or guaranteed by a "disqualified person" (within the meaning of
Section 4975(e)(2) of the Code or a "party in interest" within the meaning of
Section 3(14) of ERISA) are and have at all times been exempt in all material
respects from the application of Section 4975(a) and (b) of the Code and Section
406 of ERISA; the ESOP has at all times complied in all material respects with
the diversification requirements of Section 401(a)(28)(B) of the Code; and all
valuations of qualifying employer securities held by the ESOP with respect to
activities carried on by the ESOP have been made by an "independent appraiser"
within the meaning of Section 401(a)(28)(C) of the Code. No ESOP participant is
a "disqualified person" within the meaning of Section 409(p) of the Code with
respect to the 2005 plan year. Except as set forth in Schedule 3.14(e), no
person who has had an account under the ESOP in 2005 has "synthetic equity
shares" (within the meaning of Section 409(p) of the Code), including (i) any
stock option, warrant, restricted stock, deferred issuance stock right, stock
appreciation right payable in stock of the Company or similar interest or right
that gives the holder the right to acquire or receive stock of the Company in
the future; (ii) any right to a future payment (payable in cash or any other
form other than stock of the Company) from the Company that is based on the
value of the Company's stock; (iii) any rights to acquire stock or similar
interests in any entity in which the Company holds an interest and which is a
partnership, a trust, an eligible entity that is disregarded as an entity that
is separate from its owner under Treasury Regulation Section 301.7701-3 or a
"qualified subchapter S subsidiary" under Section 1361(b)(3) of the Code (a
"related entity"); (iv) any rights to acquire assets of the Company or a related
entity (other than the right to acquire goods, services or property at fair
market value in the ordinary course of business or fringe benefits excluded from
gross income under Section 132 of the Code); or (v) any of the following with
respect to the Company or a related entity: (A) any remuneration to which
Section 404(a)(5) of the Code applies, (B) any remuneration for which a
deduction would be permitted under Section 404(a)(5) of the Code if separate
accounts were maintained; any right to receive property to which Section 83 of
the Code applies (including a payment to a trust described in Section 402(b) of
the Code or to an annuity described in Section 403(c) of the Code) in a future
year for the performance of services; (C) any transfer of property (to which
Section 83 of the Code applies) in connection with the performance of services
to the extent that the property is not substantially vested within the meaning
of Treasury Regulation Section 1.83-3(i) by the end of the plan year in which
transferred; (D) a split-dollar life insurance arrangement under Treasury
Regulation Section 1.61-22(b) entered into in connection with the performance of
services (other than one under which, at all times, the only economic benefit
that will be provided under the arrangement is current life insurance protection
as described in Treasury Regulation Section 1.61-22(d)(3); and (E) any other
remuneration for services under a plan, or method or arrangement, deferring the
receipt of compensation to a date that is after the fifteenth (15th) day of the
third (3rd) calendar month after the end of the entity's taxable year in which
the related services are rendered.
14
(f) The Company has furnished or made available to Buyer complete and
accurate copies of each Current Benefit Plan and its related trust agreement as
in effect on the date hereof (if any), complete and accurate documentation of
any loans made to a Current Benefit Plan that is an ESOP (including loan
agreements, pledge agreements and notes), current summary plan description (if
such plan is required to have a summary plan description under ERISA), the
annual reports under the Form 5500 series, including all schedules thereto,
filed with the Department of Labor or the Internal Revenue Service (if such plan
is required to file annual reports under ERISA), with respect to each year for
which the statute of limitations has not expired.
Section 3.15. Labor and Employment Matters.
----------------------------
(a) Except as set forth on Schedule 3.15, there are no agreements or
arrangements on behalf of any officer, director or employee of the Company
providing for payment or other benefits to such person or the establishment,
increase, acceleration, vesting or enhancement of any benefit contingent upon
the execution of this Agreement, the Closing or a transaction involving a change
of control of the Company, other than any arrangements contemplated under this
Agreement.
(b) The Company is not a party to any collective bargaining agreement
or other arrangement with a labor union or labor organization.
(c) The Company has paid when due all material wages, bonuses,
commissions, benefits, taxes, penalties or assessments owed to any officer,
director, employee, sales representative, contractor, consultant or other agent.
There are no investigations, proceedings or complaints of violations of any
federal or state wage and hour laws pending or, to the Knowledge of the Company,
threatened before the Department of Labor or any other Governmental Entity
involving the Company.
(d) The Company is in compliance in all material respects with all
immigration laws, and there are no proceedings pending or, to the Knowledge of
the Company, threatened before the Immigration and Naturalization Service or any
other Governmental Entity which has responsibility for enforcing immigration
laws involving the Company.
(e) Except as set forth on Schedule 3.15, there are
no investigations, proceedings, charges or complaints of discrimination based
upon sex, age, marital status, race, national origin, sexual preference,
disability, handicap or veteran status pending or, to the Knowledge of the
Company, threatened before the Equal Employment Opportunity Commission or any
other Governmental Entity which has responsibility for enforcing employment laws
involving the Company. Except as set forth on Schedule 3.15, no discrimination,
retaliation or other claim is pending or, to the Knowledge of the Company,
threatened against the Company under any federal law or any comparable state or
local fair employment practices act regulating discrimination in the workplace.
(f) The Company is not a federal or state contractor or subcontractor
obligated to develop and maintain an affirmative action plan, and no claim or
proceeding involving the Company is pending or, to the Knowledge of the Company,
threatened with the Office of Federal Contract Compliance Programs or any other
Governmental Entity.
(g) No citation has been issued by the Occupational Safety and Health
Administration ("OSHA") against the Company and no claim or proceeding is
pending or, to the Knowledge of the Company, threatened against the Company
under OSHA or any other applicable Law relating to occupational safety and
health.
15
Section 3.16. Environmental Compliance and Disclosure.
---------------------------------------
(a) To the Knowledge of the Company, the Company possesses, and is in
compliance in all material respects with, all permits, licenses and government
authorizations and has filed all notices that are required under Laws relating
to protection of the environment, pollution control and hazardous materials
("Environmental Laws") applicable to the Company.
(b) To the Knowledge of the
Company, the Company has not received any notice of liability under the Federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or any similar state or local Law.
(c) The Company is in compliance in all
material respects with and, to the Knowledge of the Company, is not subject to
any liability under applicable Environmental Laws.
(d) To the Knowledge of the Company, neither the Company nor any other
person has released hazardous materials in any amount that could reasonably be
required to be remediated under applicable Environmental Laws on any real
property owned or leased by the Company.
Section 3.17. Intellectual Property.
---------------------
(a) Schedule 3.17 sets forth a complete and accurate list of all of the
following items (the "Intellectual Property Rights") which the Company owns
and/or has a valid claim of ownership, excluding any ownership rights provided
pursuant to Third Party License Agreements (as defined below): (i) United States
and foreign patents and applications therefor, (ii) United States and foreign
trademark, trade name, service xxxx and certification xxxx registrations and
applications therefor at the federal, state or local level, and (iii) United
States and foreign copyright registrations and applications therefor. Schedule
3.17 also sets forth a complete and accurate list of all items described in the
previous sentence in which the Company holds a license from a third party,
except licenses that involve the payment by the Company of less than $50,000 per
year (the "Third Party License Agreements").
(b) The Intellectual Property Rights are free and clear of any Liens,
other than Permitted Liens, and are not subject to any license or other
arrangement requiring payment to any third person with respect to the ownership
thereof or the obligation to grant rights to any third person in exchange
therefor. To the Knowledge of the Company, the Company has valid rights under
the Third Party License Agreements. The Intellectual Property Rights and the
rights underlying the Third Party License Agreements are all those material
intellectual property rights of the type described in the first sentence of
Section 3.17(a) used by the Company in its business as presently conducted.
(c) To the Knowledge of the Company, the validity of the Intellectual
Property Rights and title thereto and the validity of the rights underlying the
Third Party License Agreements have not been questioned in any Litigation. To
the Knowledge of the Company, the business of the Company does not infringe and
has not been alleged to infringe any patents, trademarks, trade names, service
marks, copyrights or other intellectual property rights of others.
(d) Except as set forth on Schedule 3.17, the consummation of the
transactions contemplated by this Agreement will not result in the loss or
impairment of any of the Intellectual Property Rights or the rights under any
Third Party License Agreements. Except as expressly authorized by the Company,
to the Knowledge of the Company there are no third parties using any of the
Intellectual Property Rights material to the business of the Company as
presently conducted.
16
Section 3.18. Company Software.
----------------
(a) Schedule 3.18 contains a complete and accurate list of all material
software products, other than shrink-wrap licenses, click-through licenses or
other similar end-user agreements for generally commercially available software,
owned, marketed or licensed by the Company and currently in use by the Company
(collectively, the "Company Software").
(b) The Company owns, or possesses valid rights to, all Computer
Software. There are no infringement proceedings pending or, to the Knowledge of
the Company, threatened against the Company with respect to any Computer
Software.
Section 3.19. Brokers. No broker, finder or investment banker, other
than Duff & Xxxxxx, LLC (formerly, Valuemetrics Capital, L.L.C.) and Xxxxx
Xxxxxx Xxxx, Inc., is entitled to any fee or commission in connection with this
Agreement or the transactions contemplated hereby, based upon arrangements made
by or on behalf of the Company or the Controlling Shareholders.
Section 3.20. Notes and Accounts Receivable.
-----------------------------
(a) Except as disclosed on Schedule 3.20, there are no notes receivable
held by the Company owing by any director, officer, employee or shareholder of
the Company.
(b) Schedule 3.20 sets forth a complete and accurate schedule of the
accounts receivable of the Company at February 28, 2005, showing the amount of
each receivable and an aging of amounts due thereunder. All such receivables
(net of any reserves shown thereon which are reflected on the balance sheet at
December 31, 2004), and all receivables generated since that date subject to
such reserve, (i) are valid and incurred in the ordinary course of business in a
manner consistent with the Company's past practices, (ii) represent monies due
for goods sold and delivered or services rendered in the ordinary course of
business and (iii) are, to the Knowledge of the Company, not subject to any
refund, adjustment, setoff or dispute.
Section 3.21. Transactions with Affiliates. Except for compensation and
benefits received in the ordinary course of business; contracts, agreements,
instruments or understandings which will have no force or effect with respect to
the Company at any time after the Closing Date; and except as set forth in
Schedule 3.21: no director, officer or employee of the Company or any affiliate
of any such person has any interest in (i) any material contract, agreement or
understanding relating to the business of the Company, (ii) any loan,
understanding, agreement or contract relating to indebtedness for borrowed money
of the Company, or (iii) any property, tangible or intangible, used in the
business of the Company.
Other than the specific representations and warranties set forth in
Article III with respect to the Company, neither the Company nor any of the
Controlling Shareholders makes, and each further disclaims, any other
representations and warranties.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
Section 4.1. Organization and Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Georgia and
has full corporate power and authority and all necessary government approvals
to own and operate it properties and assets and to conduct its business as
presently conducted. Sub is a corporation duly organized and validly existing
under the laws of the State of Minnesota and has full corporate power and
authority to conduct its business as presently conducted.
17
Section 4.2. Authority for Agreement. Buyer and Sub have all necessary
corporate power and authority to execute and deliver this Agreement, to perform
their respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Buyer and Sub
of this Agreement, and the consummation by Buyer and Sub of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
action. No approval of the equity holders of Buyer or Sub (other than approval,
which has already been given prior to the date of this Agreement, of this
Agreement and the Articles of Merger by Buyer as the sole shareholder of Sub) is
necessary for Buyer and Sub to consummate the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered by Buyer and Sub
and constitutes the legal, valid and binding obligation of Buyer and Sub
enforceable against Buyer and Sub in accordance with its terms, except as
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights or remedies in general as from time to time in effect or (ii)
the exercise by courts of equity powers.
Section 4.3. No Conflict. The execution and delivery of this Agreement
by Buyer and Sub do not, and the performance of this Agreement by Buyer and Sub
and the consummation of the transactions contemplated hereby will not, (i)
conflict with or violate the articles of incorporation or bylaws of Buyer or
Sub, (ii) conflict with or violate in any material respect any Law applicable to
Buyer or Sub or by which any property or asset of Buyer or Sub is bound or
affected, or (iii) result in any breach of or constitute a default under any
agreement to which Buyer or Sub is a party or by which Buyer or Sub is bound,
except for any such breaches or defaults which in the aggregate would not
reasonably be expected to have a Material Adverse Effect on Buyer or Sub.
Section 4.4. Required Filings and Consents. The execution and delivery
of this Agreement by Buyer and Sub do not, and the performance of this Agreement
by Buyer and Sub will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity, other
than those required by the HSR Act.
Section 4.5. Brokers. No broker, finder or investment
banker, other than Lane, Xxxxx & Co. International, LLC and Wachovia Capital
Markets, LLC, is entitled to any fee or commission in connection with this
Agreement or the transactions contemplated hereby based upon arrangements made
by or on behalf of Buyer or Sub.
Section 4.6. Merger Consideration. Buyer has sufficient, non-contingent
financial resources to pay the full Aggregate Merger Consideration at Closing.
ARTICLE V
COVENANTS
Section 5.1. Conduct of the Business Pending the Closing. The Company
covenants and agrees that between the date of this Agreement and the Closing
Date, unless Buyer shall otherwise consent in writing, which consent shall not
be unreasonably withheld or delayed:
(a) The business of the Company shall be conducted in all material
respects only in the ordinary course of business in a manner consistent with
prior practice. The Company shall use all commercially reasonable efforts,
consistent with past practices, to preserve substantially intact its business
organization, to keep available the services of its current employees and to
preserve the current relationships of the Company with customers, dealers,
suppliers and other persons with which the Company has significant business
relations, other than acts or omissions in the ordinary course of business
consistent with past practices.
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(b) The Company shall not (i) declare or pay (other than the
previously-approved April 2005 tax distribution to the Company Shareholders
in the amount of approximately $3,900,000 and other tax distributions in the
ordinary course) any dividends on or make other distributions in respect of its
capital stock; (ii) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any shares of capital stock or any other
securities; or (iii) repurchase or otherwise acquire any shares of its capital
stock except in
accordance with existing agreements. The parties acknowledge that the Company
will be making its 2004 401(k) matching contribution to the Company ESOP in an
amount which approximates $1,474,670, which will be made within the time frame
required by applicable law (the "401(k) Match").
(c) The Company shall not (i)
amend the Company Articles of Incorporation or the Company Bylaws; (ii) other
than related to its Indebtedness for Borrowed Money, incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person; (iii) make
any loans or advances to any other person except for normal travel advances or
other business expenses of employees; (iv) sell or agree to sell any line of
business or assets, other than sales of products and services and non-material
assets in the ordinary course of business; (v) change in any significant way its
accounting methods or policies for either financial accounting purposes (except
as required by GAAP) or Tax purposes; (vi) make any change in employment terms
for any of its directors, officers or employees, other than customary salary
changes and adjustments in benefits in the ordinary course of business
consistent with past practice; (vii) create any new obligations with respect to
compensation, severance, benefits, change of control payments or any other
payments to employees, officers, directors or affiliates of the Company other
than those made in the ordinary course of business consistent with past
practice; or (viii) other than in the ordinary course of business, incur any
unbudgeted obligation, liability or capital expenditure in excess of $100,000,
individually. The parties acknowledge that the Company may terminate the split
dollar insurance agreements described in Schedule 3.14 prior to Closing in
accordance with their terms.
(d) The Company will continue to collect accounts receivable and pay
accounts payable and similar obligations in the ordinary course of business
consistent with past practice, and will not accelerate the collection of
accounts receivable or stretch out the payment of accounts payable in a manner
inconsistent with past practice.
Section 5.2. Access to Information. From the
date hereof to the Closing Date, the Company shall cause the officers,
directors, employees, auditors, attorneys and other agents (collectively, the
"Representatives") of the Company to afford the Representatives of Buyer
reasonable access at all reasonable times to the officers, agents, properties,
offices and other facilities, books and records of the Company, and shall
furnish Buyer with all financial, operating and other data and information as
Buyer, through its Representatives, may reasonably request, all subject to the
Non-Disclosure Agreements dated October 19, 2004 and January 17, 2005, as
updated from time to time, between Buyer and the Company.
Section 5.3. Further Assurances.
Each of the parties hereto shall use all commercially reasonable
efforts to take all necessary or appropriate action to consummate the
transactions contemplated hereby. If at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers of each party to this Agreement shall use all
commercially reasonable efforts to take all such action.
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Section 5.4. Public Announcements.
Neither Buyer nor the Company shall issue any press release or
make any public statement regarding the transactions contemplated hereby without
the prior written approval of the other party, except as required by applicable
Law. Buyer shall provide the Company with at least three days' advance notice of
any press release or public statement relating to the Merger and will allow
Company to review and comment thereon.
Section 5.5. No Shop. Neither the Controlling Shareholders nor the
Company shall solicit, initiate or encourage the submission of any Acquisition
Proposal or participate in or encourage any discussion regarding any
Acquisition Proposal. The Controlling Shareholders and
the Company shall provide immediate notice to Buyer of their receipt of any
Acquisition Proposal. For purposes of this Agreement, "Acquisition Proposal"
means any bona fide proposal with respect to a merger, consolidation, tender
offer or similar transaction involving the Company, or any purchase or other
acquisition of all or any significant portion of the assets of the Company or
any equity interest in the Company.
Section 5.6 Regulatory Matters and Approvals. Buyer and the Company
will file as soon as practicable after the date hereof any notification and
report forms and other materials that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice (collectively, "HSR Authority") under the HSR Act, will
use their reasonable efforts to obtain an early termination of the applicable
waiting period, and will make any further filings pursuant thereto that may be
necessary or advisable, and will take all reasonable actions requested by any
HSR Authority to ensure approval or non-objection under the HSR Act.
Section 5.7. Tax Matters.
(a) Responsibility for Filing Tax Returns.
(i) Buyer shall prepare and file (applying Tax accounting
methods and entity classifications in a manner consistent with the
Company's past filings), or cause to be prepared and filed, at the
Surviving Company's cost and expense, all Tax Returns for any taxable
period ending on or before the Closing Date ("Pre-Closing Tax Period")
that are to be filed after the Closing Date; provided, however, that
Buyer shall permit the Shareholders' Representative to review, comment
and approve (such approval not to be unreasonably withheld or unduly
delayed) each such Tax Return prior to filing. The Surviving Company
shall pay, on a timely basis (taking into account all extension of due
dates), any Taxes of the Company with respect to such Tax Returns.
(ii) In the event of any disagreement between Buyer and the
Shareholders' Representative regarding items set forth on the Tax
Returns described in this Section 5.7(a), Buyer and the Shareholders'
Representative shall, in good faith, use their best efforts to agree on
such items. If such efforts fail, the parties shall resolve such
disagreement using Independent Accountants pursuant to the procedures
set forth in Section 1.5(c) of this Agreement.
(b) Audits and Other Tax Proceedings.
(i) Notice of Tax Disputes. If any Tax authority disputes any
item on a Tax Return of the Company for any Pre-Closing Tax Period,
the person receiving notice of the dispute shall promptly notify each
other party. If any Tax authority disputes any item on a Tax Return of
the Company for any Tax period ending after the Closing Date (a
"Post-Closing Tax Period"), and that item is reasonably likely to
affect any Tax liability of the Company Shareholders, is reasonably
likely to result in a claim against the Escrow Fund or is reasonably
likely to cause the Controlling Shareholders to have an indemnification
obligation under Section 8.1, the person receiving notice of the
dispute shall promptly notify each other party.
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(ii) Pre-Closing Tax Periods. The Shareholders' Representative
shall control the conduct, subject to reimbursement from the Escrow
Fund, of all stages of any Tax audit or other administrative or
judicial Tax proceeding (a "Tax Proceeding") with respect to any of the
Purchased Entities for any Pre-Closing Tax Period; provided, however,
that the Shareholders' Representative shall allow Buyer to participate
in any such Tax Proceeding, and the Shareholders' Representative shall
not with respect to any such Tax Proceeding controlled by him accept
any proposed adjustment or enter into any settlement or agreement that
would create additional Tax liabilities of the Company or Buyer (unless
they would be fully indemnified by the Escrow Fund and/or the
Controlling Shareholders), without the express written consent of
Buyer, which consent shall not be unreasonably withheld or unduly
delayed; and provided further that if such Tax Proceeding relates
primarily to material Taxes for which the Company or any of the
Purchased Entities may be potentially liable and for which the
Controlling Shareholders are not required to fully indemnify Buyer
under Section 8.1, then Buyer shall have the right to control the Tax
Proceeding. The Shareholders' Representative shall have the right to
participate in any such Tax Proceeding controlled by Buyer and in which
the Controlling Shareholders are reasonably likely to have an
indemnification obligation under Section 8.1 (by a claim against the
Escrow Fund or otherwise) or in which the Controlling Shareholders may
be potentially liable for any Tax; and Buyer shall not with respect to
any such Tax Proceeding accept any proposed adjustment or enter into
any settlement or agreement that would materially increase such
indemnification obligation or would create additional Tax liabilities
of the Company Shareholders with respect to the Section 338(h)(10)
Election Taxes under Section 1.5(f), or otherwise, without the express
written consent of the Shareholders' Representative, which consent
shall not be unreasonably withheld or unduly delayed.
(iii) Post-Closing Tax Periods. Buyer shall control the
conduct of all stages of any Tax Proceeding with respect to the
Purchased Entities for any Post-Closing Tax Period; provided, however,
that if any such Tax Proceeding is reasonably likely to affect any Tax
liability of the Company Shareholders, is reasonably likely to result
in a claim against the Escrow Fund or is reasonably likely to cause the
Controlling Shareholders to have an indemnification obligation under
Section 8.1, Buyer shall allow the Shareholders' Representative to
participate in the Tax Proceeding; and Buyer shall not with respect to
any such Tax Proceeding accept any proposed adjustment or enter into
any settlement or agreement that would materially increase such
indemnification obligation or would create additional Tax liabilities
of the Company Shareholders with respect to the Section 338(h)(10)
Election Taxes under Section 1.5(f), or otherwise, without the express
written consent of the Shareholders' Representative, which consent
shall not be unreasonably withheld or unduly delayed; and provided
further that if such Tax Proceeding relates solely to Taxes for which
the Controlling Shareholders are required to fully indemnify Buyer
under Section 8.1 (by a claim against the Escrow Fund or otherwise) or
for which any of the Controlling Shareholders would be liable, the
Shareholders' Representative shall have the right to control, subject
to reimbursement from the Escrow Fund, the conduct of all stages of the
Tax Proceeding, and shall allow Buyer to participate in the Tax
Proceeding; and the Shareholders' Representative shall not with respect
to any such Tax Proceeding controlled by him accept any proposed
adjustment or enter into any settlement or agreement that would create
additional Tax liabilities of the Company or Buyer (unless they would
be fully indemnified by the Escrow Fund and/or the Controlling
Shareholders), without the express written consent of Buyer, which
consent shall not be unreasonably withheld or unduly delayed.
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(c) Cooperation on Tax Matters.
(i) Buyer, the Purchased Entities, the Controlling
Shareholders and the Shareholders" Representative shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section 5.7
and any Tax Proceeding. Such cooperation shall include the retention
and (upon another party's reasonable request) the provision of records
and information which are reasonably relevant to any such Tax
Proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. Buyer, the Company, the other Purchased Entities,
the Controlling Shareholders and the Shareholders' Representative agree
(A) to retain all books and records with respect to Tax matters
pertinent to the Purchased Entities relating to any Pre-Closing Tax
Period ended on or before the Closing Date until the expiration of the
statute of limitations (with due regard for any extensions thereof) of
the respective taxable periods, and (B) after such expiration to give
the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other
party so requests, the party in possession of such records shall allow
the other party to take possession of such books and records.
(ii) The parties further agree, upon request, to use
reasonable commercial efforts (at the expense of the requesting party)
to obtain any certificate or other document from any Governmental
Entity or any other person as may be reasonably necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(iii) The parties further agree, upon reasonable request, to
provide any other party with all information that such other party may
be required to report pursuant to Section 6043 of the Code and all
Treasury Regulations promulgated thereunder.
(d) Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving the Purchased Entities shall be
terminated as of the Closing Date and, after the Closing Date, the Purchased
Entities shall not be bound thereby or have any liability thereunder.
(e) Payment of Surviving Company Debt. If the Surviving Company has any
debts that are subject to the deduction timing rules of Code Section 404 and
they are due within the payment period specified in such section following the
Closing Date, the Surviving Company will pay them in a timely manner pursuant to
such Code section in order to ensure an allowable tax deduction to the Company
as of the Closing Date. If the Surviving Company elects to exercise the
prepayment option pursuant to the Company's 2002 Long Term Executive
Compensation Plan, such payment(s) will be subject to the previous sentence.
(f) Allocation for the Final S Corporation Return of the Company. The
parties understand that Code Sections 1362(e)(6)(C) and 1362(e)(6)(D) will
require the Company's final S corporation return to reflect the Code Section
338(h)(10) gain or loss and taxable income or loss from January 1, 2005 through
the Closing Date by closing the books as of the Closing Date and using normal
tax accounting rules for determining the taxable income and loss for the period.
The parties agree that, if necessary, they will cooperate in an election under
Code Section 1362(e)(3) not to apply the pro rata income allocation rules for
the Company's final S corporation return.
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Section 5.8. Controlling Shareholders' Release. Effective as of the
Closing Date and conditioned upon the Closing, each of the Controlling
Shareholders (for itself, himself or herself and all of its, his or her
successors and assigns) does hereby knowingly and voluntarily irrevocably
release and forever discharge the Company and all of its successors and assigns,
from any and all claims, demands and causes of action of any kind, either now
accrued or hereafter maturing, which the Controlling Shareholders now have or
hereafter may have arising on or prior to the date of this Agreement, whether
known or unknown (the "Released Claims"), but expressly excluding (a) claims
under any Benefit Plan, (b) any rights to indemnity under the Company's existing
Bylaws and Company Articles of Incorporation or any other rights to indemnity
under any applicable Law, (c) any claims under this Agreement, including any
rights to indemnity or the Per Share Merger Consideration, or (d) any claims
pursuant to agreements disclosed in any of the Schedules. The Controlling
Shareholders further agree never to commence any suit or other proceeding
against the Company with respect to any such Released Claims.
Section 5.9. Employee Benefits.
(a) Liberty Shares Freedom and Cavion 401(k) Plans. On and after the
date of this Agreement and until the Closing Date: (i) the Company shall
continue tosponsor, maintain and administer the Liberty Shares Freedom Plan
(the "Freedom Plan") and shall cause its affiliate, Cavion, to continue to
sponsor and maintain the Cavion 401(k) Plan (the "Cavion Plan") in accordance
with their respective terms and conditions, as set forth in their respective
plan and trust documents as of the date of this Agreement, and in accordance
with applicable law; (ii) the Company shall continue to fund and shall cause
Cavion to continue to fund all employee contributions to the 401(k) components
of the Freedom Plan and the Cavion Plans (the "401(k) Plan Components") which
are required during this time period, and may continue to fund, or cause Cavion
to fund, under the 401(k) Plan Components, any discretionary employer
contributions in amounts not in excess of the discretionary employer
contributions previously made by the Company and the affiliate to the Freedom
and Cavion Plans; (iii) neither the Company nor Cavion shall amend,
or cause an amendment of, the Freedom or Cavion
Plans without the prior written consent of Buyer, except for any amendment (as
to which Buyer will be given the opportunity to review and comment) which is
necessary to maintain the tax-qualification of the Freedom or Cavion Plan and
their related employee benefit trusts for favorable income tax treatment under
Sections 401(a) and 501(a) of the Code, respectively, and to implement the
amendments referred to in subsections (b) through (e), and to provide that each
participant's Freedom Plan and Cavion Plan account will become 100 percent
vested and non-forfeitable as of the Closing Date; (iv) neither the Company nor
Cavion shall terminate the appointment of any fiduciary as defined in ERISA with
respect to the Freedom Plan or Cavion Plan without the prior written consent of
Buyer, except for any termination attributable to a breach by such fiduciary of
any fiduciary duty imposed on the fiduciary under ERISA; and (v) neither the
Company nor Cavion shall terminate, or cause the termination of, any agreement
with any service provider providing services to the Freedom Plan or Cavion
401(k) Plan as of the date of this Agreement without the prior written consent
of Buyer, except for any termination attributable to a breach by such service
provider of its duties.
(b) Termination of Plans. Immediately prior to the Closing, the Board
of Directors of the Company shall adopt resolutions (which include appropriate
amendments to the Freedom Plan) that terminate the Freedom Plan effective
immediately prior to the Closing, and the Company shall cause the Board of
Directors of Cavion to adopt resolutions (which include appropriate amendments
to the Cavion Plan) that terminate the Cavion Plan, effective immediately prior
to the Closing. As soon as practical following the Closing, Buyer shall file
applications with the IRS for determination letters to the effect that the
termination of the Freedom Plan and Cavion Plan will not affect their tax
qualified status. As soon as practicable after the receipt of a favorable IRS
determination letter with respect to each such plan that considers the effect of
the termination, the assets of that plan shall be distributed in a lump sum to
participants or transferred in a direct rollover to Buyer's 401(k) Plan (as
defined below).
23
(c) Status of Trustee Under and Disposition of Company ESOP. Buyer and
the Company shall take such actions as may be necessary to maintain GreatBanc
Trust Company ("GreatBanc"), or a trustee with experience and capabilities
which are comparable to those of GreatBanc, as the discretionary trustee of the
Company ESOP until the first date as of which the Company ESOP's entire interest
in the Aggregate Merger Consideration has been paid to the ESOP trustee and such
interest, and all other assets under the ESOP, have been allocated and
transferred to the 401(k) Component accounts of eligible participants in
accordance with the terms of the ESOP.
(d) Participation in Buyer 401(k) Plans. Effective as soon as
practicable after the Closing, the employees of Company and Cavion shall be
eligible to participate in the tax-qualified 401(k) plan sponsored by Buyer
(the "Buyer 401(k) Plan") under the same provisions that are generally
applicable to similarly situated employees of Buyer. The employees of the
Company, the other Purchased Entities and Cavion shall receive credit for
service with the Company, the other Purchased Entities and Cavion prior to the
Closing Date, for purposes of participation and vesting under the Buyer 401(k)
Plan.
(e) Plan Administration. Except as otherwise provided in subsections
(a) through (e), on and after the Closing Date, Buyer shall be responsible for
administering the Company's Benefit Plans whose sponsorship is assumed or
continued by the Surviving Corporation ("Assumed Plans"). In addition, Buyer
shall be responsible for providing all notices and continuation coverage
required under COBRA with respect to the Assumed Plans after the Closing Date.
Section 5.10. Officers and Directors Insurance Coverage. Buyer shall
cause to be maintained in effect an extended reporting period ("Tail Coverage")
for the current directors' and officers', fiduciary and outside directorship
liability insurance policies maintained by the Company that will cover claims of
the Shareholders' Representative and current and former directors, officers,
members of the Company's Freedom Plan and Internal Management Committees and the
trustee of the Company ESOP, arising from facts or events that occurred prior to
the Effective Time (including the transactions contemplated by this Agreement)
but for which no circumstances were reported to the insurer until after the
Effective Time. Subject to market availability and/or existing policy language,
such coverage shall have an effective date beginning upon the date of policy
cancellation and lasting for six years from the Effective Time (the "Tail
Coverage Period"). The Tail Coverage shall be non-cancelable upon payment of
premium. Should the insurance company providing such coverage become insolvent
during the Tail Coverage Period, Buyer shall cause to be obtained for the
remainder of such Tail Coverage Period directors' and officers' liability
insurance with coverage limits of not less than such limits currently in effect,
and providing for coverage no less comprehensive than the coverage currently in
effect. Notwithstanding any other provision of this Agreement, in no event shall
Buyer be required to expend pursuant to this Section 5.10 during the Tail
Coverage Period more than an aggregate amount equal to 400% (the "Tail Coverage
Cap") of the current annual premium paid by the Company for such insurance. In
the event that Buyer would be required to expend more than the Tail Coverage Cap
to maintain such coverage, Buyer shall pay up to the Tail Coverage Cap and the
Shareholders' Representative will be authorized to instruct the Escrow Agent to
pay any remaining amounts necessary to cover the remaining shortfall from the
Escrow Fund.
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ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1. Conditions to the Obligation of Each Party. The respective
obligations of Buyer, Sub, the Company, the Controlling Shareholders and the
Shareholders' Representative to consummate the transactions contemplated by this
Agreement are subject to the satisfaction of the following conditions, unless
waived in writing by all parties:
(a) No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction preventing the consummation of the transactions
contemplated by this Agreement shall be in effect.
(b) No suit, investigation,
action or other proceeding brought by a Governmental Entity shall be pending
against Buyer, Sub or the Company which, in the reasonable opinion of counsel
for the Company or Buyer, would be likely to restrain or prohibit any such party
from consummating the transactions contemplated hereby or result in damages or
other relief being obtained from such party, except where such suit,
investigation, action or other proceeding is not likely to result in a Material
Adverse Effect.
(c) All applicable waiting periods (including any extensions thereof)
under the HSR Act shall have expired or otherwise been terminated and the
parties shall have received any other required authorizations, consents and
approvals of any Governmental Entity, except where the failure to receive such
other required authorization, consent and approval is not likely to result in a
Material Adverse Effect.
(d) This Agreement and the Merger shall have been duly approved by the
Company Shareholders as required by Minnesota Law.
Section 6.2. Conditions to Obligations of Buyer and Sub. The
obligations of Buyer and Sub to consummate the transactions contemplated by this
Agreement are further subject to satisfaction of the following conditions:
(a) The representations and warranties set forth in Article III shall
be true and correct in all material respects as of the date of this Agreement
and as of the Closing Date, other than such representations and warranties which
speak only as to a specific date.
(b) The Company shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing.
(c) No Company Material Adverse Effect shall have occurred since the
date of this Agreement which is not adequately covered by insurance.
(d) The Company shall have delivered to Buyer a certificate (in form
reasonably satisfactory to Buyer) of the Shareholders' Representative to the
effect that each of the conditions specified in (a) through (c) above is
satisfied in all respects.
(e) Buyer shall have received from counsel to the Company an opinion,
dated as of the Closing Date, in substantially the form attached hereto as
Exhibit C.
(f) The Company and Shareholders' Representative shall have executed
and delivered to Buyer the Escrow Agreement.
25
(g) The Company shall have furnished Buyer with financial statements
for 2003, together with the audit report of Xxxxx Xxxxxxxx LLP, which report
will not indicate any event or condition which could result in or constitute a
Material Adverse Effect.
(h) Subject to Buyer fulfilling its preparation, execution and
delivery obligations under Section 1.5(b) hereof, each of the Company
Shareholders shall have executed and delivered to Buyer a form(s) 8023 (and any
necessary state forms) as prepared by Buyer and agreed to by the Company
Shareholders pursuant to Section 1.5(b) consenting to the making of a timely
election under Section 338(h)(10) of the Code.
Buyer may waive any condition specified in this Section 6.2 if it
executes a writing so stating at or prior to the Closing.
Section 6.3. Conditions to Obligation of the Company. The obligation of
the Company to consummate the transactions contemplated by this Agreement is
further subject to satisfaction of the following conditions:
(a) The representations and warranties set forth in Article IV shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date.
(b) Buyer and Sub shall have performed and complied with all of their
respective covenants hereunder in all material respects through the Closing.
(c) Buyer shall have delivered to the Company a certificate (in form
reasonably satisfactory to the Company) of a Vice President of Buyer to the
effect that each of the conditions specified in (a) and (b) above is satisfied
in all respects.
(d) The Company shall have received from counsel to Buyer an opinion,
dated as of the Closing Date, in form and substance reasonably acceptable to the
Company, covering the matters set forth in Sections 4.1 through 4.4.
(e) Buyer shall have executed and delivered to Company the Escrow
Agreement, which agreement shall also have been executed by the Escrow Agent.
(f) No Company Shareholder shall have exercised dissenter's rights
under Minnesota law, and there shall be no Dissenting Shares as of the Closing
Date.
(g) All actions to be taken by Buyer in connection with consummation of
the transactions contemplated hereby and all certificates, opinions and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Company.
The Company may waive any condition specified in this Section 6.3 if it
executes a writing so stating at or prior to the Closing.
ARTICLE VII
TERMINATION
Section 7.1. Termination. This Agreement may be terminated at any time
prior to the Closing Date:
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(a) By written consent of the Company and Buyer.
(b) By either Buyer or the Company if any court of competent
jurisdiction or other Governmental Entity shall have issued an order, decree,
ruling or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and non-appealable;
provided however, that the party terminating this Agreement pursuant to this
Section 7.1(b) shall use all commercially reasonable efforts to have such order,
decree, ruling or action vacated prior to such termination.
(c) By either Buyer or the Company in the
event that the other party shall breach in any material respect any of its
respective representations, warranties, covenants or other obligations hereunder
and, within 10 business days (up to 30 business days if the party subject to
such cure is making good faith efforts to cure such breach) after written notice
of such breach to the breaching party, such breach shall not have been cured.
(d) By either Buyer or the Company if the Closing shall not have
occurred on or before December 31, 2005 by reason of the Merger's failure to
comply with the HSR Act; provided, however, that the right to terminate this
Agreement under this Section 7.1(d) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the primary
cause of, or resulted in, the failure of the Closing to have occurred on or
before such date.
Section 7.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1 hereof, this Agreement shall forthwith
be terminated and have no further effect except as specifically provided herein,
provided, however, each party shall have the right to make any claims under
this Agreement for breach or default.
ARTICLE VIII
OBLIGATIONS AFTER CLOSING
Section 8.1. Indemnification Obligations.
(a) The representations and warranties of the Company contained in
Article III shall survive until such date as is 18 months from the Closing Date,
at which time such representations and warranties shall expire together with
the Buyer Indemnified Parties' right to assert any claim for indemnification or
recovery under this Agreement or otherwise; provided, however, that the
representations and warranties of the Company contained in Section 3.9 with
respect to Taxes shall survive until such date which is 60 months from the
Closing Date ("Tax Indemnification Period"), at which time such representations
and warranties shall expire and any and all indemnifications obligations with
respect thereto shall terminate.
(b) From and after the Closing Date, Buyer and the Surviving
Corporation, and their respective officers, directors, employees, agents and
representatives (collectively, the "Buyer Indemnified Parties") shall be held
harmless and indemnified from the Escrow Fund from and against any and all
claims, liabilities, obligations, losses, costs, expenses, penalties, fines,
judgments and damages whenever arising or incurred, including, without
limitation, amounts paid in settlement and reasonable outside accountant, tax
consultant and attorney fees and expenses (collectively, "Losses") which any of
them may incur by reason of (i) any breach of any representation, warranty,
covenant or agreement made by the Company or any Controlling Shareholder in this
Agreement (with respect to the Company, only those covenants and agreements
which are to occur prior to the Closing Date), (ii) any amounts paid to holders
27
of Dissenting Shares in excess of the Per Share Merger Consideration that
otherwise would have been paid to such holders had they not dissented (clauses
(i) and (ii) collectively, the "Buyer Losses"). The aggregate amount of all
Buyer Losses and Tax Losses (as defined below) for which the Buyer Indemnified
Parties shall be entitled to be indemnified shall not exceed $8,000,000 and the
Escrow Fund shall be the sole source of recourse for all such Losses. In
addition, following the earlier of the expiration of the Escrow Claims Period
or the date the Escrow Fund is fully depleted, the Buyer Indemnified Parties
shall be entitled to additional indemnification in an amount of up to
$40,000,000 (which amount will be reduced dollar for dollar with respect to 338
Losses (as defined below) to the extent the Escrow Fund has been applied
against or reserved for 338 Losses)(the "Tax Limit") with respect to Losses
arising solely out of breaches of the
representations and warranties set forth in Section 3.9 ("Section 3.9 Losses")
or a determination that the Section 338(h)(10) Election is not valid under
applicable law solely as a result of (x) the Company's failure to be treated as
an S corporation under the Code for all Pre-Closing Tax Periods in which the
Company existed, (y) acts of the Company or the Company Shareholders prior to
the Closing Date, or (z) a breach by the Shareholders' Representative of his
express obligations set forth in Section 1.5(b) of this Agreement related to the
Section 338(h)(10) Election ("338 Losses", and together with the Section 3.9
Losses, collectively, "Tax Losses"). Notwithstanding any other provision in this
Agreement, the Buyer Indemnified Parties shall not be entitled to be indemnified
(x) for any Buyer Losses (other than Tax Losses) unless and until the aggregate
amount of Buyer Losses exceeds $250,000 (the "Threshold"), or (y) for any Tax
Losses unless and until the aggregate amount of Tax Losses exceeds $50,000 (the
"Tax Threshold"), in either of which case the amount of Buyer Losses in excess
of the Threshold, or Tax Losses in excess of the Tax Threshold, subject to the
limits of the Escrow Fund (except as discussed in the proviso below), shall then
be subject to indemnity. Upon the release of the Escrow Fund, all amounts shall
be allocated among the Controlling Shareholders as set forth in the Escrow
Agreement. Except as set forth below, the Escrow Fund shall be the exclusive
source of indemnification and recovery for Losses by the Buyer Indemnified
Parties; provided, however, upon termination of the Escrow Fund, the Buyer
Indemnified Parties may seek recourse against the Controlling Shareholders
directly with respect to any Tax Losses not paid from the Escrow Fund until the
expiration of the Tax Indemnification Period, as set forth in Section 8.1(a) and
only up to the Tax Limit. Buyer agrees that the Company or the Controlling
Shareholders (or any of them) may procure insurance to cover all or a portion of
the Tax Losses in an amount determined by the Controlling Shareholders ("Tax
Insurance") and Buyer will cooperate with the Company and the Controlling
Shareholders to procure the Tax Insurance. Buyer agrees that the Shareholders'
Representative will have exclusive control of and the right to make all
decisions with respect to the Tax Insurance regardless of who is the owner of
the Tax Insurance policy. If the Tax Insurance is so procured, then Buyer will
make all of its Tax Loss claims against the Tax Insurance and will only make
direct claims against the Controlling Shareholders (subject to the limitations
in this Agreement) if the Tax Insurance does not satisfy such Tax Losses or the
Tax Insurance underwriter refuses or fails to pay such Tax Losses for any
reason.
(c) From and after the Closing Date, the Shareholders' Representative,
as the agent and on behalf of the Controlling Shareholders, the Company ESOP and
its fiduciaries, participants and beneficiaries, and each of their respective
officers, directors, employees, agents and representatives, as applicable
(collectively, the "Shareholder Indemnified Parties"), shall be held harmless
and indemnified by Buyer from and against any and all Losses which any of them
may incur by reason of any breach of any representation, warranty, covenant,
agreement or undertaking made by Buyer, Sub or the Surviving Company in this
Agreement or the Escrow Agreement (the "Shareholder Losses").
(d) All indemnified parties under this Section 8.1 ("Indemnitees")
shall use their reasonable efforts to mitigate any Losses in connection with an
indemnity claim made pursuant to Article VIII, including, without limitation, by
using reasonable efforts to submit and obtain payment on insurance claims where
there are third-party insurance policies covering such Losses and secure
28
insurance benefits (if any). If the amount of Losses, at any time prior to or
subsequent to the payment thereof by an indemnitor to an Indemnitee pursuant to
this Article VIII is reduced pursuant to any insurance coverage, the amount of
such reduction (net of (i) any out-of-pocket expenses, (ii) increases in
premiums or (iii) any deductible incurred in obtaining such reduction) shall
promptly be repaid by the Indemnitee to the applicable indemnitor. Furthermore,
all indemnification obligations under this Article VIII shall be reduced by the
then present value of any net Tax benefit (including as a result of any basis
adjustment) to the indemnified party arising from or relating to any such
indemnified Loss.
Section 8.2. Indemnification Procedure.
(a) Promptly after receipt by a Buyer Indemnified Party or a
Shareholder Indemnified Party, as applicable (referred to herein as an
"Indemnified Party"), of notice by a third party of any complaint or the
commencement of any action or proceeding with respect to which such Indemnified
Party may be entitled to receive payment from the other party for any Losses,
such Indemnified Party shall notify the Shareholders' Representative or Buyer,
as applicable (referred to herein as the "Indemnifying Party"), within 20 days
of such complaint or of the commencement of such action or proceeding; provided,
however, that the failure to so notify the Indemnifying Party shall not relieve
the Indemnifying Party from liability for such claim arising otherwise than
under this Agreement, and such failure shall relieve the Indemnifying Party from
liability under this Agreement with respect to such claim only if, and only to
the extent that, such failure to notify the Indemnifying Party results in the
forfeiture by the Indemnifying Party of rights and defenses otherwise available
to the Indemnifying Party with respect to such claim. The Indemnifying Party
shall have the right, upon written notice delivered to the Indemnified Party
within 30 days thereafter, to assume the defense of such action or proceeding,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of the fees and disbursements of such counsel. In the
event, however, that the Indemnifying Party declines or fails to assume the
defense of the action or proceeding or to employ counsel reasonably satisfactory
to the Indemnified Party, in either case within such 30-day period, then the
Indemnified Party may employ counsel to represent or defend it in any such
action or proceeding and the Indemnifying Party shall pay the reasonable fees
and disbursements of such counsel as incurred; provided, however, that the
Indemnifying Party shall not be required to pay the fees and disbursements of
more than one counsel for all Indemnified Parties in any jurisdiction in any
single action or proceeding. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such action, shall
have the right to participate in such action or proceeding and to retain its own
counsel at such party's own expense. The Indemnifying Party or the Indemnified
Party, as the case may be, shall at all times use reasonable efforts to keep the
other party reasonably apprised of the status of the defense of any action and
to cooperate in good faith with each other with respect to the defense of any
such action.
(b) No Indemnified Party may settle or compromise any claim or consent
to the entry of any judgment with respect to which indemnification is being
sought hereunder, unless the Indemnifying Party fails to assume and maintain the
defense of such claim pursuant to Section 8.2(a); provided, however, that such
claim shall not be settled or compromised without the prior written consent of
the Indemnifying Party, which shall not be unreasonably withheld or delayed. An
Indemnifying Party may not, without the prior written consent of any Indemnified
Party, settle or compromise any claim or consent to the entry of any judgment
with respect to which indemnification is being sought hereunder unless (i)
simultaneously with the effectiveness of such settlement, compromise or consent,
the Indemnifying Party pays in full any obligation imposed on the Indemnified
Party by such settlement, compromise or consent and (ii) such settlement,
compromise or consent does not contain any equitable order, judgment or term
which in any manner affects, restrains or interferes with the business of the
Indemnified Party or any of the Indemnified Party's affiliates.
29
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written notice of
such claim to the appropriate Indemnifying Party in accordance with the Escrow
Agreement and such claim shall be handled in accordance with the Escrow
Agreement.
(d) The Shareholders' Representative shall have the right to pay all
costs and expenses incurred in investigating, defending (including reasonable
fees and disbursements of counsel), settling, compromising and paying third
party claims as described and authorized in Sections 8.2(a) and 8.2(b) out of
the Escrow Fund. The Escrow Agreement shall direct the Escrow Agent to pay such
amounts out of the Escrow Fund to and for the benefit of the Shareholders'
Representative upon his demand.
(e) If any provisions of this Section 8.2 conflict with the procedures
and administration set forth in Section 5.7, the applicable provisions of
Section 5.7 shall control.
Section 8.3. Sole Remedy. From and after the Closing Date, the
indemnities provided for in this Article VIII shall be the exclusive remedies of
the Buyer Indemnified Parties and Shareholder Indemnified Parties for any breach
of any representation, warranty, covenant, agreement or undertaking by the
Company, the Controlling Shareholders or Buyer. In furtherance of the foregoing,
except for claims for Losses permitted by this Article VIII, Buyer and Sub
hereby waive on behalf of themselves and all Buyer Indemnified Parties, from and
after the Closing, to the fullest extent permitted under applicable law, any and
all rights, claims and causes of action arising out of or related to this
Agreement or the Merger (other than claims of, or causes of actions arising
from, fraud or intentional misrepresentation) which the Buyer Indemnified
Parties may have against the Company Shareholders or the Company.
Section 8.4. Shareholders' Representative.
(a) The Shareholders' Representative shall act as the exclusive
representative of each Controlling Shareholder for the purpose of settling on
their behalf claims made by any Buyer Indemnified Party under Section 8.1(b) or
asserting on their behalf claims against Buyer under Section 8.1(c),
representing them in any indemnification proceedings under Section 8.2, and
representing them in connection with any other claim by any Buyer Indemnified
Party. The Shareholders' Representative shall also act as the exclusive
representative of each Controlling Shareholder for the purpose of instructing
the Escrow Agent as to distributions from the Escrow Fund. Each Controlling
Shareholder shall be bound by any action taken by the Shareholders'
Representative on their behalf.
(b) The Buyer Indemnified Parties and the Escrow Agent shall be
entitled to rely exclusively upon any notice or communication given by the
Shareholders' Representative with respect to the Controlling Shareholders and
shall not be liable in any manner whatsoever for any action taken or not taken
in reliance upon such notice or communication. The Buyer Indemnified Parties and
the Escrow Agent shall be entitled to disregard any notice or communication from
any Controlling Shareholder with respect to the matters described in this
Section 8.4 unless given or made through the Shareholders' Representative.
(c) In the event of the inability of the Shareholders' Representative
to perform its functions hereunder, a majority of the Controlling Shareholders,
voting in proportion to the number of Company Shares owned by them on the
Closing Date, shall appoint a substitute Shareholders' Representative.
30
(d) The Shareholders' Representative shall not be liable to any
Controlling Shareholder for any action taken or omitted to be taken by it as the
Shareholders' Representative unless it is proved by clear and convincing
evidence that its action or failure to act was undertaken with willful or
deliberate intent to cause injury to the Controlling Shareholders. Without
limiting the foregoing, the Shareholders' Representative shall not be liable to
any Controlling Shareholder for any action taken or omitted to be taken by it as
the Shareholders' Representative in good faith in reliance upon any advice,
opinion, report or other information prepared by legal counsel, public
accountants or other professionals. The Shareholders' Representative shall be
indemnified and held harmless out of the Escrow Fund prior to any such
distribution being made, from and against any Loss or expense of any nature
incurred by the Shareholders' Representative arising out of its duties as
Shareholders' Representative, including reasonable legal fees and other costs
and expenses of defending against any claim arising out of such duties, unless
such Loss or expense shall be caused by the willful or deliberate misconduct of
the Shareholders' Representative.
Section 8.5. Company ESOP. Section 8.4 shall not apply to the Company
ESOP, which the parties acknowledge to be represented by GreatBanc, as trustee
(or any duly appointed successor).
Section 8.6 Escrow Claims Period.
(a) For purposes of this Agreement, the "Escrow Claims Period" shall be
the time period during which a claim for indemnification may be asserted against
the Escrow Fund under this Agreement and the Escrow Agreement by a Buyer
Indemnified Party. The Escrow Claims Period shall commence on the Closing Date
and shall terminate on such date which is 18 months from the Closing Date, at
which time any remaining funds in the Escrow Fund shall be released and
distributed to the Controlling Shareholders, subject to the provisions of the
Escrow Agreement. Thereafter, the Controlling Shareholders shall have no further
indemnification or other obligations to the Buyer Indemnified Parties under this
Article VIII, other than indemnification obligations specifically set forth in
this Article VIII with respect to Tax Losses, subject to the Tax Indemnification
Period and the Tax Limit.
(b) If the Buyer Indemnified Parties fail to give written notice to the
Shareholders' Representative of a claim for any Buyer Losses prior to the close
of business on the last day of the Escrow Claims Period, then such claim will be
barred. If the Buyer Indemnified Parties fail to give written notice to the
Shareholders' Representative of a claim for any Tax Losses prior to the close of
business on the last day of the Tax Indemnification Period, then such claim will
be barred. Notwithstanding the foregoing and the provisions of Section 8.6(a),
if prior to the close of business on the last day of the Escrow Claims Period or
the Tax Indemnification Period, as applicable, the Shareholders' Representative
shall have been properly notified of a claim for indemnity hereunder and such
claim shall not have been finally resolved or disposed of at such date, such
claim shall continue to survive and shall remain a basis for indemnity hereunder
until such claim is finally resolved or disposed of in accordance with the terms
hereof. All undisputed portions of the Escrow Fund shall be distributed pursuant
to this Article VIII and the Escrow Agreement.
31
ARTICLE IX
MISCELLANEOUS
Section 9.1. Notices. All notices or other communications required or
permitted hereunder shall be in writing, and shall be personally delivered
(including by means of professional messenger service), sent by registered or
certified mail, overnight courier or confirmed telecopy transmission, and shall
be deemed received upon the date of receipt thereof.
If to Buyer or Sub: Xxxx X. Xxxxxxx Company
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Facsimile: 000-000-0000
If to the Company or the Xxxxx X. Xxxxxx
Controlling Shareholders: 00000 Xxxxxxxxx Xxxxx Xxxxx
Xx. Xxxxx, XX 00000
Facsimile: 000-000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxxx XxXxxxx
Facsimile: 000-000-0000
Notice of change of address shall be given in the manner detailed in
this Section 9.1.
Section 9.2. Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. No party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other parties; provided, however, that Buyer and Sub may freely assign their
rights to another subsidiary of Buyer without such prior written approval but no
such assignment shall relieve Buyer or Sub of any of its obligations hereunder.
Section 9.3. Partial Invalidity. If any provision of this Agreement
shall be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby, and each such term and provision of this Agreement shall be
valid and be enforced to the fullest extent permitted by Law.
Section 9.4. Waivers. No waiver of any breach of any provision herein
shall be deemed a waiver of any preceding or succeeding breach thereof and all
waivers must be in writing. No extension of time for performance of any
obligation or act shall be deemed an extension of the time for performance of
any other obligation or act.
Section 9.5. Expenses. Each party shall bear its own professional fees
and other out-of-pocket expenses relating to the transactions contemplated by
this Agreement except as provided in this Agreement.
Section 9.6. Legal and Accounting Fees. In the event any action or
proceeding is instituted by a party hereto by reason of any breach on the part
of the other party arising out of this Agreement, the prevailing party shall be
entitled to recover all costs and expenses of the action or proceeding,
including reasonable attorneys' and accounting fees.
32
Section 9.7. Entire Agreement. Except for the Non-Disclosure Agreements
described in Section 5.2 hereof, this Agreement (including each Exhibit and
Schedule) constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior and contemporaneous
understandings with respect thereto. This Agreement may not be amended or
modified except by written instrument signed by the parties hereto.
Section 9.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, without regard
to its conflicts of law principles. Each party hereto, for itself and its
successors and assigns, irrevocably agrees that any legal proceeding arising out
of or relating to this Agreement shall be instituted only in the federal courts
located in Hennepin County, Minnesota, and generally and unconditionally accepts
and irrevocably submits to the exclusive jurisdiction of the aforesaid courts
and irrevocably agrees to be bound by any final judgment rendered thereby from
which no appeal has been taken or is available in connection with this
Agreement. Each party, for itself and its successors and assigns, irrevocably
waives any objection it may have now or hereafter to the laying of the venue of
any such legal proceeding, including, without limitation, any objection based on
the grounds of forum non conveniens, in the aforesaid courts.
Section 9.9. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
-33-
IN WITNESS WHEREOF, Buyer, Sub, the Company, the Controlling
Shareholders and the Shareholders' Representative have caused this Agreement to
be executed as of the date first written above.
XXXX X. XXXXXXX COMPANY
By:
------------------------------------------------------
Xxxx X. Xxxxxxx, Senior Vice President
JUSTICE ACQUISITION CORPORATION
By:
------------------------------------------------------
Xxxx X. Xxxxxxx, Vice President
LIBERTY ENTERPRISES, INC.
By:
------------------------------------------------------
Xxxxxxx X. Xxxxxx, Chief Executive Officer
CONTROLLING SHAREHOLDERS:
Xxxxx X. Xxxxxx Florida Intangible Tax Trust u/a/d
12/9/03
By:
------------------------------------------------------
Xxxxxx X. Xxxxxx, Trustee
Xxxxxx X. Xxxxxx Revocable Trust u/a/d 10/12/99,
as amended
By:
------------------------------------------------------
Xxxxx X. Xxxxxx, as Co-Trustee
By:
------------------------------------------------------
Xxxxxx X. Xxxxxx, as Co-Trustee
Xxxxxx X. Xxxxxx Grantor Retained Annuity Trust
u/a/d 4/19/04
By:
------------------------------------------------------
Xxxxxx X. Xxxxxx, Trustee
Xxxxx X. Xxxxxx Family Trust u/a/d 5/31/95
By:
------------------------------------------------------
Xxx Xxxxxxx, Trustee
Xxxxxxx X. Xxxxxx Revocable Trust u/a/d 10/29/03
By:
------------------------------------------------------
Xxxxxxx X. Xxxxxx, Trustee
-----------------------------------------
Xxxx X. Xxxxxx
SHAREHOLDERS' REPRESENTATIVE
By:
------------------------------------------------------
Xxxxx X. Xxxxxx