EXHIBIT 2.10
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MERGER AGREEMENT
BY AND AMONG
CENTERPOINT ADVISORS, INC.,
XXXXXXX MERGERSUB INC.,
RA MERGERSUB LLC,
VERASOURCE MERGERSUB INC.,
THE XXXXXXX COMPANY, INC.,
XXXXXXX ADMINISTRATORS, L.L.C. AND
VERASOURCE EXCESS RISK LTD.
AND
XXX X. XXXXXXX, XXXXXXX XXXXXXX,
XXXXX X. XXXXXXXX AND XXXXX X. XXXXX
MARCH 31, 1999
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF STOCK.................................................................. 2
1.1 Merger................................................................................... 2
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1.2 Effects of the Merger.................................................................... 3
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1.3 Directors and Officers of the Surviving Corporation...................................... 3
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ARTICLE II CONSIDERATION AND MANNER OF PAYMENT......................................................... 3
2.1 Merger Consideration..................................................................... 3
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2.1.1 Basic Purchase Consideration................................................... 3
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2.1.2 Cancellation of Company Stock.................................................. 4
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2.1.3 Dissenting Shares.............................................................. 4
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2.1.4 Conversion of Mergersub Stock.................................................. 4
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2.2 Exchange of Certificates for Consideration............................................... 4
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2.3 Purchase Price Adjustment................................................................ 5
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2.4 Earnout Payments......................................................................... 5
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2.4.1 Net Value Contingent Payment................................................... 5
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2.4.2 Example........................................................................ 7
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2.4.3 Calculation of Earn-Out Contingent Payments.................................... 7
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2.4.4 Definitions.................................................................... 8
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2.4.5 Example........................................................................ 10
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2.5 Collection of Accounts Receivable........................................................ 11
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2.6 Litigation............................................................................... 11
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ARTICLE III THE CLOSING AND CONSUMMATION DATE........................................................... 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EACH OF THE COMPANIES..................................... 11
4.1 Organization and Qualification........................................................... 12
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4.2 Company Subsidiaries..................................................................... 12
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4.3 Authority; Non-Contravention; Approvals.................................................. 12
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4.4 Capitalization........................................................................... 14
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4.5 Year 2000................................................................................ 14
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4.6 Financial Statements..................................................................... 14
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4.7 Absence of Undisclosed Liabilities....................................................... 15
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4.8 Accounts Receivable...................................................................... 15
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4.9 Absence of Certain Changes or Events..................................................... 15
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4.10 Litigation............................................................................... 18
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4.11 Compliance with Applicable Laws.......................................................... 18
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4.12 Licenses................................................................................. 19
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(i)
4.13 Material Contracts....................................................................... 19
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4.14 Properties............................................................................... 22
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4.15 Intellectual Property.................................................................... 23
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4.16 Taxes.................................................................................... 24
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4.17 Employee Benefit Plans; ERISA............................................................ 25
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4.18 Labor Matters............................................................................ 27
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4.19 Environmental Matters.................................................................... 27
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4.20 Insurance................................................................................ 28
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4.21 Interest in Customers and Suppliers; Affiliate Transactions.............................. 28
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4.22 Business Relationships................................................................... 29
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4.23 Compensation............................................................................. 29
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4.24 Bank Accounts............................................................................ 29
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4.25 Disclosure; No Misrepresentation......................................................... 29
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4.26 Title to and Transfer of Insurance Expirations........................................... 30
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.......................................... 30
5.1 Joint and Several Representations and Warranties......................................... 30
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5.1.1 Capitalization................................................................. 30
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5.1.2 Authority...................................................................... 30
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5.1.3 Non-Contravention.............................................................. 30
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5.1.4 Approvals...................................................................... 31
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5.1.5 Litigation..................................................................... 31
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5.1.6 No Transfer.................................................................... 31
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5.1.7 Disclosure..................................................................... 31
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5.1.8 Representations and Warranties of each of the Companies........................ 32
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5.2 Additional Joint and Several Representations and Warranties.............................. 32
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ARTICLE VI REPRESENTATIONS AND WARRANTIES OF CENTERPOINT............................................... 32
6.1 Organization And Qualification........................................................... 32
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6.2 Capitalization........................................................................... 33
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6.3 No Subsidiaries.......................................................................... 33
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6.4 Authority; Non-Contravention; Approvals.................................................. 34
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6.5 Absence of Undisclosed Liabilities....................................................... 35
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6.6 Litigation............................................................................... 35
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6.7 Compliance with Applicable Laws.......................................................... 35
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6.8 No Misrepresentation..................................................................... 35
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ARTICLE VII CERTAIN COVENANTS AND OTHER TERMS........................................................... 36
7.1 Conduct of Business by the Companies Prior to the Effective Time......................... 36
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7.2 No-Shop.................................................................................. 38
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7.3 Schedules................................................................................ 38
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7.4 Company Stockholder Meeting.............................................................. 39
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(ii)
ARTICLE VIII ADDITIONAL AGREEMENTS...................................................................... 39
8.1 Access to Information.................................................................... 39
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8.2 Registration Statements.................................................................. 40
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8.3 Expenses and Fees........................................................................ 41
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8.4 Agreement to Cooperate................................................................... 42
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8.5 Public Statements........................................................................ 42
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8.6 Registration Rights...................................................................... 42
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8.7 CenterPoint Covenants.................................................................... 44
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8.8 Release of Guarantees.................................................................... 44
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8.9 Lock-Up Agreement........................................................................ 44
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8.10 Preparation and Filing of Tax Returns.................................................... 45
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8.11 Insurance................................................................................ 45
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8.12 Management by Xxxxxx X. Driver Co., Inc.................................................. 45
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8.13 Name of Companies........................................................................ 45
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ARTICLE IX INDEMNIFICATION............................................................................ 45
9.1 Indemnification by the Stockholders...................................................... 46
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9.2 Indemnification by CenterPoint........................................................... 47
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9.3 Indemnification Procedure for Third Party Claims......................................... 48
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9.4 Direct Claims............................................................................ 50
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9.5 Failure to Give Timely Notice............................................................ 50
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9.6 Reduction of Loss........................................................................ 50
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9.7 Limitation on Indemnities................................................................ 51
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9.7.1 Threshold for the Stockholders................................................. 51
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9.7.2 Threshold for CenterPoint...................................................... 51
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9.7.3 Limitations on Claims Against the Stockholders................................. 51
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9.7.4 Limitation on Claims Against CenterPoint....................................... 52
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9.8 Survival of Representations, Warranties and Covenants of the Stockholders and the
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Companies; Time Limits on Indemnification Obligations.................................... 52
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9.9 Survival of Representations, Warranties and Covenants of CenterPoint; Time Limits on
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Indemnification Obligations.............................................................. 52
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9.10 Defense of Claims; Control of Proceedings................................................ 53
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9.11 Fraud; Exclusive Remedy.................................................................. 53
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9.12 Manner of Satisfying Indemnification Obligations......................................... 53
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9.13 Stockholders' Representative............................................................. 53
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ARTICLE X CLOSING CONDITIONS......................................................................... 54
10.1 Conditions to Each Party's Obligation to Effect the Merger............................... 54
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10.2 Conditions to Obligation of the Stockholders and the Companies to Effect the Merger...... 55
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10.3 Conditions to Obligation of CenterPoint to Effect the Merger............................. 56
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(iii)
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER......................................................... 58
11.1 Termination............................................................................. 58
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11.2 Effect of Termination................................................................... 59
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11.3 Amendment............................................................................... 60
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11.4 Waiver.................................................................................. 60
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ARTICLE XII TRANSFER RESTRICTIONS..................................................................... 60
12.1 Transfer Restrictions, Generally........................................................ 60
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12.2 Released Restrictions................................................................... 60
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12.3 Legend.................................................................................. 61
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ARTICLE XIII NONCOMPETITION............................................................................ 61
13.1 Stockholder Prohibited Activities....................................................... 61
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13.2 CenterPoint Non-Solicitation............................................................ 63
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13.3 Damages................................................................................. 63
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13.4 Reasonable Restraint.................................................................... 63
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13.5 Severability; Reformation............................................................... 64
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13.6 Independent Covenant.................................................................... 64
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13.7 Materiality............................................................................. 64
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ARTICLE XIV NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................................. 64
14.1 Stockholders' Covenant.................................................................. 64
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14.2 Damages................................................................................. 65
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14.3 Survival................................................................................ 65
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ARTICLE XV GENERAL PROVISIONS........................................................................ 65
15.1 Brokers................................................................................. 65
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15.2 Notices................................................................................. 66
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15.3 Interpretation.......................................................................... 67
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15.4 Certain Definitions..................................................................... 67
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15.5 Entire Agreement; Assignment............................................................ 67
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15.6 Applicable Law.......................................................................... 68
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15.7 Counterparts............................................................................ 68
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15.8 Parties in Interest..................................................................... 68
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(iv)
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(v)
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(vi)
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(vii)
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(viii)
LIST OF SCHEDULES
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Schedule 2.1 Consideration
Schedule 2.3 Purchase Price Adjustment
Schedule 2.4 Earnout Payments
Schedule 4.2 Investments
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.5 Year 2000
Schedule 4.6 Financial Statements
Schedule 4.7 Liabilities
Schedule 4.8 Accounts Receivable
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
(ix)
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
Schedule 4.18 Labor Matters
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 4.26 Title to and Transfer of Insurance Expirations
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Liabilities
Schedule 7.1 Conduct of Business
Schedule 7.1.3 Terminated Agreements
Schedule 8.8 Stockholders' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Stockholders and Their Counsel
(x)
LIST OF EXHIBITS
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Exhibit A List of Stockholders of The Xxxxxxx Company, Inc.
Exhibit B List of Stockholders of VeraSource Excess Risk Ltd.
Exhibit C List of Members of Xxxxxxx Administrators, L.L.C.
Exhibit 2.1(i)(a) Form of Xxxxxxx Note
Exhibit 2.1(i)(b) Form of Verasource Note
Exhibit 2.1(i)(c) Form of RA Note
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Employment Agreement
Exhibit 10.2(f) Form of Stockholders' Agreement
Exhibit 10.2(i) Form of Letter Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Companies and Stockholders
Exhibit 10.3(i) Form of Stockholders' Release
Exhibit 10.3(n) Form of Voting Agreement
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(xi)
DEFINED TERMS
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Actions........................................................ Section 4.10.1
Acquisition Transaction........................................ Section 13.1
Affiliate...................................................... Section 15.4
Affiliate Transactions......................................... Section 4.2
Agreement...................................................... Introduction
Business....................................................... Introduction
CenterPoint.................................................... Introduction
CenterPoint Common Stock....................................... Section 2.1
CenterPoint Indemnified Party(ies)............................. Section 9.1
CenterPoint Material Adverse Effect............................ Section 6.4.3
CenterPoint Representatives.................................... Section 8.1.1
CenterPoint Required Statutory Approvals....................... Section 6.4.3
Closing........................................................ Article III
Closing Date................................................... Article III
Code........................................................... Introduction
Companies...................................................... Introduction
Company........................................................ Introduction
Company Equity................................................. Section 2.1
Company Material Adverse Effect................................ Section 4.3.3
Company Representatives........................................ Section 8.1.1
(xii)
Contracts..................................................... Section 4.13
Copyrights.................................................... Section 4.15
Defense Notice................................................ Section 9.31
DGCL.......................................................... Section 1.1
Direct Claim.................................................. Section 9.4
Dissenting Shares............................................. Section 2.1.3
Driver........................................................ Introduction
Earn-Out Contingent Payment................................... Section 2.4.3
Effective Time................................................ Section 1.1
Employee Plan................................................. Section 4.17.5(a)
Environmental and Safety Requirements......................... Section 4.19
ERISA......................................................... Section 4.17.5(b)
Excluded Receivables.......................................... Section 2.5
Financial Statements.......................................... Section 4.6
First Person.................................................. Section 4.17.5(c)
Form S-1...................................................... Section 4.3.3
Form S-4...................................................... Section 4.3.3
Founding Companies............................................ Introduction
GAAP.......................................................... Section 4.6.1
general increase.............................................. Section 4.23
Governmental Authority........................................ Section 4.3.2
(xiii)
Hazardous Materials............................................ Section 4.19
HSR Act........................................................ Section 4.3.3
Indemnified Party.............................................. Section 9.3.1
Indemnifying Party............................................. Section 9.3.1
Intellectual Property.......................................... Section 4.15
Intellectual Property Licenses................................. Section 4.15
IPO............................................................ Introduction
Knowledge...................................................... Section 15.4
Latest Balance Sheet........................................... Section 4.6
Laws........................................................... Section 4.11
Leased Property................................................ Section 4.14.1
Licenses....................................................... Section 4.12
Liens.......................................................... Section 4.3.2
Liquidated Damages Amount...................................... Section 7.3
Losses......................................................... Section 9.1
Market Price................................................... Section 9.12
Marks.......................................................... Section 4.15
Material Contracts............................................. Section 4.13
Merger......................................................... Introduction
Mergersub...................................................... Introduction
Mergersub Stock................................................ Section 6.2.1
(xiv)
Merger Documents.............................................. Section 1.1
Net Amounts................................................... Section 2.5
Net Value Contingent Payment.................................. Section 2.4.1
1933 Act...................................................... Section 4.3.3
1934 Act...................................................... Section 8.7(b)
Notes......................................................... Section 2.1.1
Organizational Documents...................................... Section 4.1
Other Agreements.............................................. Introduction
Other Mergers................................................. Introduction
Owned Property................................................ Section 4.14.1
Patents....................................................... Section 4.15
Person........................................................ Section 15.4
Plan Affiliate................................................ Section 4.17.5(c)
Policyholder.................................................. Section 13.1
Prospective Policyholder...................................... Section 13.1
RA............................................................ Introduction
RA Mergersub.................................................. Introduction
RA Note....................................................... Section 2.1
Real Property................................................. Section 4.14.1
Registration Statements....................................... Section 4.3.3
Xxxxxxx....................................................... Introduction
(xv)
Xxxxxxx Mergersub............................................... Introduction
Xxxxxxx Note.................................................... Section 2.1
Restricted Shares............................................... Section 12.2
Returns......................................................... Section 4.16
Schedules....................................................... Section 7.3
SEC............................................................. Section 4.3.3
Securities Act.................................................. Section 4.3.3
Stockholder Indemnified Party................................... Section 9.2
Stockholders.................................................... Introduction
Stockholders Agreement.......................................... Section 10.2(f)
Stockholders Earn-out........................................... Section 2.1.1
Stockholder's Note and Stock Purchase Consideration............. Section 2.1
Stockholder Representative...................................... Section 9.13
Surviving Corporation........................................... Section 1.2
Taxes........................................................... Section 4.16.2
Third Party Claim............................................... Section 9.3.1
Trade Secrets................................................... Section 4.15
Underwriters.................................................... Section 8.1.1
Verasource...................................................... Introduction
VeraSource Mergersub............................................ Introduction
VeraSource Note................................................. Section 2.1
Voting Agreement................................................ Introduction
(xvi)
MERGER AGREEMENT
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THIS MERGER AGREEMENT (this "AGREEMENT") is made as of March 31, 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CENTERPOINT"),
Xxxxxxx Mergersub Inc., a Delaware corporation and wholly-owned subsidiary of
CenterPoint ("XXXXXXX MERGERSUB"), RA Mergersub LLC, a Delaware limited
liability company and wholly-owned subsidiary of CenterPoint ("RA MERGERSUB"),
Verasource Mergersub Inc., a Delaware corporation and wholly-owned subsidiary of
CenterPoint ("VERASOURCE MERGERSUB") (Xxxxxxx Mergersub, RA Mergersub and
Verasource Mergersub, each, as the context requires, "MERGERSUB" and
collectively, the "MERGERSUBS"), The Xxxxxxx Company, Inc., a Washington
corporation ("XXXXXXX"), Xxxxxxx Administrators, L.L.C., a Washington limited
liability company ("RA"), VeraSource Excess Risk Ltd., a Washington
corporation ("VERASOURCE"), (Xxxxxxx, XX and Verasource, each individually, a
"COMPANY," and collectively, the "COMPANIES"), and the stockholders and
members of the Companies identified on Exhibit A, Exhibit B and Exhibit C to
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this Agreement (each referred to herein as a "STOCKHOLDER" and, collectively,
the "STOCKHOLDERS").
WITNESSETH:
WHEREAS, (i) Xxxxxxx is engaged in the marketing of employee benefits
insurance, primarily group medical and dental insurance; (ii) RA provides COBRA,
IRC Section 125, single billing and direct dental reimbursement administration
services; and (iii) Verasource primarily markets stop loss insurance to brokers
and third party administration (the business provided, as it pertains to each
Company, the "BUSINESS" and collectively the "BUSINESSES");
WHEREAS, the Boards of Directors of the Companies, CenterPoint and
Mergersubs deem it advisable and in the best interests of their respective
shareholders to approve and consummate the business combination transaction
provided for herein in which RA Mergersub would merge with RA, Xxxxxxx Mergersub
would merge with Xxxxxxx and Verasource Mergersub would merge with Verasource,
with RA, Xxxxxxx and Verasource being the surviving corporations or limited
liability company, as the case may be, in the mergers (each, a "MERGER,"
collectively, the "MERGERS");
WHEREAS, certain Stockholders have entered into a Voting Agreement dated
the date hereof (the "VOTING AGREEMENT") pursuant to which among other things
such Stockholders have agreed to vote the shares of capital stock of the Company
that such Stockholders own or control, directly or indirectly, to approve the
Merger and the transactions contemplated by this Agreement;
WHEREAS, CenterPoint is entering into other agreements (the "OTHER
AGREEMENTS") similar to this Agreement with each of Xxxxxxx Xxxxxx & Xxxxxxxxx,
P.C., Xxxxxx X. Driver Co., Inc. ("DRIVER"), Xxxx Frankfort Xxxxx & Xxxx, P.C.,
Berry, Dunn, XxXxxx & Xxxxxx, Chartered,
Xxxxxx Xxxx & Xxxxxx PC, Self Funded Benefits, Inc. d/b/a Insurance Design
Administrators, Grace & Company, P.C., Simione, Scillia, Xxxxxx & Xxxxxxx LLC,
Xxxxxxx Rudzewicz & Co., P.C., and Xxxxxxxxx, Xxxxxx & Van Trigt (which
companies together with the Companies are collectively referred to herein as the
"FOUNDING COMPANIES"), which agreements provide for the merger of a wholly-
owned subsidiary of CenterPoint with each such Founding Company (the "OTHER
MERGER") simultaneously with the Merger.
WHEREAS, simultaneously with the consummation of the Merger, CenterPoint
will close an initial public offering (the "IPO") of CenterPoint Common Stock
(as defined in Section 2.1); and
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WHEREAS, the parties intend the acquisition of CenterPoint Common Stock
pursuant to the terms hereof to be tax-free to the Stockholders under the
provisions of Section 351 of the Internal Revenue Code of 1986, as amended (the
"CODE").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
2
ARTICLE I
PURCHASE AND SALE OF STOCK
I.1 Merger. Upon the terms and subject to the conditions set forth in this
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Agreement and in reliance upon the representations and warranties set forth
herein, (i) RA Mergersub shall be merged with and into RA, the result of which
will cause the separate corporate existence of RA Mergersub to cease and RA to
continue under the laws of the State of Washington, (ii) Xxxxxxx Mergersub shall
be merged with and into Xxxxxxx, the result of which will cause the separate
corporate existence of Xxxxxxx Mergersub to cease and Xxxxxxx to continue under
the laws of the State of Washington, (iii) Verasource Mergersub shall be merged
with and into Verasource, the result of which will cause the separate corporate
existence of Verasource Mergersub to cease and Verasource to continue under the
laws of the State of Washington. As promptly as possible on the Closing Date,
the parties shall cause the Mergers to be completed by filing articles of merger
and certificates of merger, as applicable (the "MERGER DOCUMENTS"), with the
Secretary of State of the State of Washington, as provided in the Washington
Business Corporation Act, as amended and the Washington Limited Liability
Company Act, as amended and with the Secretary of State of the State of
Delaware, as provided in the General Corporation Law of the State of Delaware,
as amended (the "DGCL"). The Mergers shall become effective (the "EFFECTIVE
TIME") upon the filing of the Merger Documents with the Secretary of State of
the State of Washington and the Secretary of State of the State of Delaware or
at such later time, contemporaneously with the closing sale of the IPO, as
agreed by CenterPoint and the Companies and specified in the Merger Documents.
I.2 Effects of the Merger. At the Effective Time (a) the separate
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existence of Mergersubs shall cease and (i) RA Mergersub shall be merged with
and into RA, with RA being the surviving entity, (ii) Xxxxxxx Mergersub shall be
merged with and into Xxxxxxx, with Xxxxxxx being the surviving corporation,
(iii) Verasource Mergersub shall be merged with and into Verasource, with
Verasource being the surviving corporation, (the surviving Company is sometimes
referred to herein as the "SURVIVING CORPORATION"), (b) the Certificates of
Incorporation and By-laws of the Surviving Corporation shall be amended in form
and substance acceptable to CenterPoint and as specified in the Merger
Documents, (c) the Mergers shall have all the effects provided by applicable
law, and (d) the Company shall be a wholly-owned subsidiary of CenterPoint.
I.3 Directors and Officers of the Surviving Corporation. From and after
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the Effective Time, the directors and officers of each Mergersub shall be the
directors and officers of the Surviving Corporation until their successors are
duly elected and qualified.
3
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
II.1 Merger Consideration.
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II.1.1 Basic Purchase Consideration. At the Closing, by virtue of
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the Mergers and without any action on the part of the holders thereof:
(a) the outstanding shares of capital stock of Xxxxxxx,
consisting of 500 shares of common stock, par value $1.00 per share, shall be
converted into the right to receive (i) that number of shares of common stock,
par value $.01 per share, of CenterPoint ("CENTERPOINT COMMON STOCK") determined
in accordance with the formula set forth in Schedule 2.1(a); (ii) a promissory
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note (the "XXXXXXX NOTE") in the form of Exhibit 2.1(i)(a) and (iii) the right
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to the contingent payment described in Section 2.4 (the "NET VALUE CONTINGENT
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PAYMENT") for Xxxxxxx;
(b) the outstanding shares of capital stock of Verasource,
consisting of 250 shares of common stock, par value $1.00 per share, shall be
converted into the right to receive (i) that number of shares of CenterPoint
Common Stock determined in accordance with the formula set forth in Schedule
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2.1(b); (ii) a promissory note (the "VERASOURCE NOTE") in the form of Exhibit
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2.1(i)(b) and (iii) the right to the Net Value Contingent Payment for
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Verasource;
(c) the outstanding equity of RA, consisting of 500 units of
ownership interest in RA (the outstanding shares of capital stock of Xxxxxxx and
Verasource and the outstanding equity of RA, collectively, the "COMPANY
EQUITY"), shall be converted into the right to receive (i) that number of shares
of CenterPoint Common Stock determined in accordance with the formula set forth
in Schedule 2.1(c); (ii) a promissory note (the "RA NOTE", along with the
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Verasource Note and the Xxxxxxx Note, the "NOTES") in the form of Exhibit
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2.1(i)(c) and (iii) the right to the Net Value Contingent Payment for RA;
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(d) in addition to the Stockholder's Note and Stock Purchase
Consideration (as hereinafter defined) and in consideration of the Merger, Xxx
Xxxxxxx will receive the right to the Earn-out Contingent Payments set forth in
Section 2.4.3.
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The sum of (i) the value of the shares of CenterPoint Common Stock and
(ii) the value of the Notes (determined as set forth on Schedule 2.1(d)) to be
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issued to each Stockholder in respect of each Company is herein referred to as
"STOCKHOLDER'S NOTE AND STOCK PURCHASE CONSIDERATION." Schedule 2.1(d) sets
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forth the value of the Stockholder's Note and Stock Purchase Consideration for
each Stockholder in respect of each Company.
4
II.1.2 Cancellation of Company Stock. Each share of capital stock of
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Xxxxxxx and Verasource held in treasury shall be canceled and retired and no
payment shall be made in respect thereof.
II.1.3 Dissenting Shares. Each outstanding share of capital stock of
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Xxxxxxx and Verasource, the holder of which has perfected his right to dissent
under applicable law and has not effectively withdrawn or lost such right as of
the Effective Time (the "DISSENTING SHARES") shall not be converted into the
right to receive the consideration set forth in Section 2.1.1, and the holder
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thereof shall be entitled only to such rights as are granted by applicable law.
Xxxxxxx and Verasource shall give CenterPoint prompt notice upon receipt by
Xxxxxxx and Verasource of any such written demands for payment of fair value of
shares of capital stock of Xxxxxxx and Verasource and any other instruments
provided pursuant to applicable law. Any payments made in respect of Dissenting
Shares shall be made by the applicable Surviving Corporation.
II.1.4 Conversion of Mergersub Stock. At the Effective Time, each
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share of Mergersub Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Mergers and without any action on the
part of the holder thereof, be converted into and become one validly issued,
fully paid and non-assessable share of the applicable Surviving Corporation.
Such newly issued shares shall thereafter constitute all of the issued and
outstanding capital stock of the applicable Surviving Corporation.
II.2 Exchange of Certificates for Consideration. At the Closing, the
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Stockholders shall deliver to CenterPoint the original certificates representing
the Company Equity or other evidence of ownership in a form and substance
acceptable to CenterPoint, duly endorsed in blank by the Stockholders or
accompanied by blank stock powers, in exchange for (i) issuance and delivery by
CenterPoint to the Stockholders of certificates representing the number of
shares of CenterPoint Common Stock determined in accordance with Section 2.1,
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and (ii) delivery by CenterPoint of the Notes. The Stockholders agree promptly
to cure any deficiencies with respect to the endorsement of the certificates or
other documents of conveyance with respect to such Company Equity. The
certificates representing CenterPoint Common Stock to be delivered pursuant to
this Article II shall bear legends as provided in Section 12.3 below. At the
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Closing, all shares or membership interests of Company Equity shall be
transferred and delivered to CenterPoint, and each of the Stockholders holding a
certificate or other evidence of ownership representing any such shares or
membership interests of Company Equity shall cease to have any rights with
respect thereto, except the right to receive the Stockholder's Note and Stock
Purchase Consideration, the Net Value Contingent Payment and the Earn-out
Contingent Payments.
II.3 Purchase Price Adjustment. At Closing, the amount of capital
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expenditures, not to exceed $600,000, made by the Companies for computer
hardware and software database and programming upgrades as well as tenant
improvement costs, new furniture and equipment costs, and relocation costs
associated with the expansion into the office space currently held by
ProBusiness Services, Inc. will be treated as working capital of the Companies
and to the extent
5
that the working capital of the Companies at Closing is in excess of $400,000, a
cash payment equal to such excess amount shall be paid to the Stockholders at
Closing. The principal amount of the Notes may be adjusted at the Closing in
accordance with Schedule 7.1.3(a) and after the Closing in accordance with the
-----------------
formula set forth in Schedule 2.3.
------------
II.4 Earnout Payments.
----------------
II.4.I Net Value Contingent Payment. In addition to the CenterPoint
----------------------------
Common Stock and the Notes, the Stockholders shall be entitled to receive from
CenterPoint the Net Value Contingent Payment, if any, for the Calculation Period
(as defined below) based on the formula set forth below which payment shall be
allocated among the Stockholders in accordance with their ownership interest in
each Company.
(a) Calculation of Net Value Contingent Payment. The Net Value
-------------------------------------------
Contingent Payment, if any, shall be equal to the sum of (i) 25% x Target I Net
Value, (ii) 15% x Target II Net Value, and (iii) 10% x Target III Net Value.
(b) Definitions. For purpose of Section 2.4.1, the following
-----------
terms shall have the following meanings:
(i) "Baseline EBITDA" shall be equal to $4,705,000.
(ii) "Calculation Period" means the twelve month period
ending on the fourth anniversary of the last day of the month in which the
Closing falls.
(iii) "Driver" means The Xxxxxx X. Driver Co., Inc.
(iv) Driver EBITDA Percentage" means the ratio of the Driver
EBITDA compared to the Driver revenue for the Calculation Period (which amounts
shall include any portion of the Companies' EBITDA or Companies' revenue to the
extent any of the Companies are not part of Driver's operations in the
Calculation Period).
(v) "EBITDA" means earnings before interest, taxes,
depreciation and amortization, calculated in accordance with GAAP on a
consistent basis.
(vi) "EB Acquisition" means each entity or portion of such
entity acquired as part of CenterPoint's employee benefits business after
December 9, 1998 (other than Driver, the Companies or Self-Funded Benefits,
Inc., d/b/a Insurance Design Administrators); provided that no such acquired
entity will be deemed to be an "EB Acquisition" if Xxx Xxxxxxx shall have
objected in writing to its inclusion in such calculation on or prior to the
acquisition closing for such EB Acquisition.
6
(vii) "EB Operations" means CenterPoint's employee benefits
business, which shall consist of the current operations of the Companies and of
Driver (excluding Self-Funded Benefits, Inc., dba Insurance Design
Administrators) plus any EB Acquisition.
(viii) "EB Operations Revenue" means the revenue of the EB
Operations during the Calculation Period.
(ix) "EB Operations EBITDA" means EB Operations Revenue
multiplied by the Driver EBITDA Percentage.
(x) "EB Acquisitions Pro Forma EBITDA" means (a) the pro
forma annual EBITDA upon which the valuation was made for each EB Acquisition
(inclusive of a 7% compounded annual growth rate from the date of each EB
Acquisition closing through the end of the Calculation Period; provided that if
there is a Termination, only EB Acquisition closings occurring prior to the
Termination shall be included) less (b) the pro forma annual EBITDA upon which
the valuation was made for any portion of the EB Operations that was sold by
CenterPoint or its affiliates prior to the end of the Calculation Period;
provided that if there is a Termination, only sales prior to the Termination
shall be included. In the case of any EB Acquisition occurring during the
Calculation Period, the pro forma annual EBITDA of that EB Acquisition for
purposes of clause (a) above shall be multiplied by a fraction, the numerator of
which is the number of days from the EB Acquisition closing through the end of
the Calculation Period and the denominator of which is 365.
(xi) "Net EBITDA" means the result obtained by the
following formula:
EB Operations EBITDA - Baseline EBITDA - EB Acquisitions Pro
Forma EBITDA
(xii) "Net Value" means the result obtained by multiplying
7.0 times Net EBITDA. In the event of a sale of the entire EB Operations, the
Net Value Contingent Payment shall be payable as of the last day of the third
month following such sale.
(xiii) "Target I Net Value" shall mean all Net Value, if
any, between $2,400,000 and including $5,000,000.
(xiv) "Target II Net Value" shall mean all Net Value, if
any, between $5,001,000 and including $10,000,000.
(xv) "Target III Net Value" shall mean all Net Value, if
any, greater than $10,000,000.
(xvi) "Termination" shall mean the termination of Xxx
Xxxxxxx without Cause or upon Constructive Termination pursuant to the
Employment Agreement between Xxx Xxxxxxx and Xxxxxxx dated as of the Closing
Date.
7
II.4.2 Example
-------
Net Value Contingent Payment
EB Operations EBITDA $ 6,105,000
Less: Baseline EBITDA ($ 4,705,000)
Less: EB Acquisitions Pro Forma EBITDA:
EB Acquisitions Pro Forma EBITDA $ 250,000
Compounded Growth Rate @ 7% for 3 years 1.225
----------
Compounded EB Acquisition Pro Forma EBITDA $ 306,250
Pro Forma EBITDA of EB Acquisition sold ($ 41,429)
----------
$ 264,821 ($ 264,821)
========== ------------
Net EBITDA $ 1,135,179
Fixed EBITDA Multiple 7.0
------------
Net Value $ 7,946,253
============
Amount between $2,400,000 and $5,000,000 (25% x $2,600,000) $ 650,000
Amount between $5,000,001 and $10,000,000 (15% x $2,946,253) $ 441,938
Amount in excess of $10,000,000 $ 0
------------
Amount of Net Value Contingent Payment $ 1,091,938
II.4.3 Calculation of Earn-Out Contingent Payments. Xxx Xxxxxxx
-------------------------------------------
shall be entitled to receive from CenterPoint, contingent payments, if any, for
each of the twelve month periods ending on the first anniversary of the Closing
through the fifth anniversary of the Closing (each, an "Earn-Out Contingent
Payment").
(a) The Earn-Out Contingent Payment for the twelve months ending
on the first anniversary of the Closing shall be equal to the result obtained by
the following formula:
50% X (COMPANIES' EBITDA 2000 - $1,894,000 - REQUIRED RETURN) - XXXXX
XXXXX'X 2000 BONUS
(b) The Earn-Out Contingent Payment for the twelve months ending
on the second anniversary of the Closing shall be equal to the result obtained
by the following formula:
50% X (COMPANIES' EBITDA 2001 - $2,026,000 - REQUIRED RETURN) - XXXXX
XXXXX'X 2001 BONUS
(c) The Earn-Out Contingent Payment for the twelve months ending
on the third anniversary of the Closing shall be equal to the result obtained by
the following formula:
50% X (COMPANIES' EBITDA 2002 - $2,168,000 - REQUIRED RETURN) - XXXXX
XXXXX'X 2002 BONUS
8
(d) The Earn-Out Contingent Payment for the twelve months ending
on the fourth anniversary of the Closing shall be equal to the result obtained
by the following formula:
50% X (COMPANIES' EBITDA 2003 - $2,320,000 - REQUIRED RETURN) - XXXXX
XXXXX'X 2003 BONUS
(e) The Earn-Out Contingent Payment for the twelve months ending
on the fifth anniversary of the Closing shall be equal to the result obtained by
the following formula:
50% X (COMPANIES' EBITDA 2004 - $2,483,000 - REQUIRED RETURN) - XXXXX
XXXXX'X 2004 BONUS
(f) If there is a Termination at any time prior to the end of the
fifth anniversary of the Closing, Xxxxxxx shall continue to receive on each date
when any unpaid future Earn-Out Contingent Payment is due the amount of the
Earn-Out Contingent Payment then due in the manner calculated herein, except
that Xxxxxxx may elect, by written notice delivered to CenterPoint within 30
days of such Termination, to instead receive on each date when any unpaid future
Earn-Out Contingent Payment is due, an amount equal to the most recent Earn-Out
Contingent Payment received by Xxxxxxx.
II.4.4 Definitions. For purpose of Section 2.4.3, the following
----------- -------------
terms shall have the following meanings:
(a) "Acquisition Overhead XXXX" means the expense allocated to
Overhead by each PNW Acquisition for the twelve months ending on the anniversary
date of the Closing in the applicable period, where "XXXX" is the applicable
year.
(b) "Companies' EBITDA XXXX" means the Companies' EBITDA,
including any PNW Acquisition EBITDA, for the twelve months ending on the
anniversary date of the Closing, in the applicable period, where "XXXX" is the
applicable year, as calculated in accordance with GAAP and consistent with past
practices. For purposes of calculating the Companies' EBITDA, the maximum
corporate overhead to be charged will be the lesser of (x) the Maximum Overhead
or (y) the Overhead for the Companies and the PNW Acquisitions for the relevant
period.
(c) "Companies' Overhead XXXX" means the expenses of the
Companies allocated to overhead for the twelve months ending on the anniversary
date of the Closing in the applicable year, where "XXXX" is the applicable year.
(d) "Companies' Pro Forma EBITDA XXXX" means the Companies'
EBITDA for the twelve months ending on the date of the Closing, as calculated in
accordance with GAAP and consistent with past practices, inclusive of a 7%
compounded annual growth rate from the date of the Closing through the
anniversary date of the Closing in the applicable year, where "XXXX" is the
applicable year.
9
(e) "Companies' Revenue XXXX" means the revenue of the Companies
for the twelve months ending on the anniversary date of the Closing in the
applicable year, where "XXXX" is the applicable year.
(f) "Driver EBITDA XXXX" means the Driver EBITDA for the twelve
months ending on the anniversary date of the Closing in the applicable year,
where "XXXX" is the applicable year.
(g) "Driver Revenue XXXX" means the Driver revenue for the year
ending on the anniversary date of the Closing in the applicable year, where
"XXXX" is the applicable year.
(h) "Earn-Out Base" shall mean the difference between "Companies'
EBITDA XXXX" and "Companies' Pro Forma EBITDA XXXX." Such amount shall be
reduced by the "Required Return", if any.
(i) "EBITDA" means earnings before interest, taxes, depreciation
and amortization, calculated in accordance with GAAP on a consistent basis.
(j) "Maximum Overhead" shall be calculated based upon the
following formula: (Companies' Revenue XXXX + PNW Acquisition Revenue XXXX) x
(Companies' Overhead XXXX + Acquisition Overhead XXXX) / (Companies' Revenue
1999 + PNW Acquisition Pro Forma Revenue XXXX).
(k) "Overhead" means the dollar amount of overhead mutually
agreed to by CenterPoint and the Stockholders' Representative which shall
consist of information technology, human resources, accounting and finance,
corporate management, facilities, risk management and marketing. "Overhead"
shall include expenses incurred directly by the relevant companies and indirect
expenses reasonably allocated to the relevant companies.
(l) "PNW Acquisition" means each entity in the business of
insurance brokerage and related services within Driver's business, including
property and casualty, worker's compensation, employee benefits, surety,
personal lines and financial services (including 401(k) plans, life insurance
and annuity production) located in Washington, Montana, Idaho, Alaska and
northern Oregon that was acquired as part of CenterPoint's business during the
applicable period.
(m) "PNW Acquisition EBITDA XXXX" means the EBITDA earned by each
PNW Acquisition for the twelve months ending on the anniversary date of the
Closing in the applicable year, where "XXXX" is the applicable year.
(n) "PNW Acquisition Pro Forma Revenue XXXX" means the pro forma
revenue for valuation purposes allocable to each PNW Acquisition for the twelve
months ending
10
on the anniversary date of the Closing in the applicable year, where "XXXX" is
the applicable year.
(o) "PNW Acquisition Revenue XXXX" means the revenue earned by
each PNW Acquisition for the twelve months ending on the anniversary date of the
Closing in the applicable year, where "XXXX" is the applicable year.
(p) "Purchase Price" means the sum of the purchase prices,
including contingent consideration, for each PNW Acquisition, if any, acquired
by CenterPoint in or prior to the relevant twelve month period and not sold
prior to the end of such period.
(q) "Required Rate of Return" means 15% per annum. Pro rata
reductions in the percentage will be made for acquisitions made in the relevant
period.
(r) "Required Return" means the product of the "Required Rate of
Return" times the "Purchase Price". In no case shall the "Required Return"
exceed "PNW Acquisition Revenue".
(s) "Xxxxx Xxxxx'x XXXX Bonus" means any "Bonus" payable to Xxxxx
Xxxxx by Verasource pursuant to Section 2.2 of his employment agreement with
-----------
Verasource dated the Closing Date with respect to the twelve month period ending
in the applicable year, where "XXXX" is the applicable year.
In the event of a sale of entire Companies' operations prior
to the fifth anniversary of the Closing, the required payment, if any, shall be
due in sixty days from the date of such sale. Such payment shall represent the
final payment due pursuant to Section 2.4.4.
-------------
II.4.5 Example. Earn Out Contingent Payment 2000 (assuming a PNW
-------
Acquisition of $1,000,000 in the eighth month of the twelve month period ending
in 2000):
Companies' EBITDA 2000 $ 2,100,000
Less: Companies' Pro Forma EBITDA 2000 ($ 1,894,000)
Required Return (.15 x $1,000,000 x 4/12) ($ 50,000)
------------
Earn-Out Base $ 156,000
Fixed Earn-Out Percentage 50%
------------
Amount of Earn-Out Contingent Payment 2000 $ 78,000
Before Xxxxx Xxxxx'x 2000 Bonus
Xxxxx Xxxxx'x 2000 Bonus $ 18,000
Amount of Earn-Out Contingent Payment 2000 $ 60,000
11
II.4.6 Procedure. The procedure for determining each Contingent
---------
Payment is set forth in Schedule 2.4.
------------
II.5 Collection of Accounts Receivable. The Stockholders shall be entitled
---------------------------------
to receive any amounts collected by the Companies with respect to any accounts
receivable due to the Companies from any insurance companies, which amounts are
more than 45 days past due as of December 9, 1998 (the "EXCLUDED RECEIVABLES"),
net of any commissions or taxes owed on the Excluded Receivables or money spent
on the collection of the Excluded Receivables (the "NET AMOUNTS"). To the extent
such Excluded Receivables are collected on or prior to the Closing, the Net
Amounts shall be first used as a setoff against any reduction that would
otherwise be made in the principal amount of the Notes pursuant to Section 2.3,
-----------
and any remaining amount shall be used to increase the principal amount of the
Notes. If any Excluded Receivables are collected after the Closing, the Net
Amounts shall be paid by CenterPoint to the Stockholders on a quarterly basis.
CenterPoint covenants that after the Closing it will use reasonable commercial
efforts to collect any Excluded Receivables.
II.6 Litigation. The Stockholders of Xxxxxxx shall be entitled to the
----------
proceeds, if any, received as a result of the resolution of the matter entitled
The Xxxxxxx Company, Inc. v. Xxxx X. Xxxxx, et al. (reflected on Schedule 4.10
-------------------------------------------------- -------------
attached hereto), net of all attorneys' fees and other costs incurred after the
Closing. Nothing in this Section 2.6 shall require Xxxxxxx to prosecute this
-----------
matter; any and all decisions regarding the matter and the resolution thereof
shall be in the discretion of Driver in consultation with management of Xxxxxxx.
ARTICLE III
THE CLOSING AND CONSUMMATION DATE
The consummation of the Merger and the other transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Xxxxxx
Xxxxxx & Xxxxx, Chicago, Illinois, contemporaneously with the closing of the
IPO, or at such other time and date as the parties hereto may mutually agree
(the "CLOSING DATE").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH OF THE COMPANIES
Each Company hereby represents and warrants to CenterPoint, severally but
not jointly, as to itself, as of the date hereof and, subject to Section 7.3, as
-----------
of the date on which CenterPoint and the lead Underwriter (as defined in Section
-------
8.1.1) execute and deliver the Underwriting Agreement related to the IPO and as
-----
of the Closing Date, as follows:
12
IV.1 Organization and Qualification. Each of Xxxxxxx and Verasource is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington. RA is a limited liability company organized under
the laws of the State of Washington. The Company has the requisite power and
authority under state and federal law to own, lease and operate its assets and
properties and to carry on its business (or Business) as it is now being
conducted and is licensed or otherwise authorized to transact or engage in the
Business and is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification, license or
authorization necessary. True, accurate and complete copies of the Company's
Organizational Documents, in each case as in effect on the date hereof, have
heretofore been delivered to CenterPoint or its representatives. "ORGANIZATIONAL
DOCUMENTS" means (a) the articles or certificate of incorporation and the bylaws
of a corporation (professional or otherwise), (b) the partnership agreement and
any statement of partnership of a general partnership, (c) the limited
partnership agreement and the certificate of limited partnership of any limited
partnership, (d) the operating or limited liability company agreement and
certificate of formation of any limited liability company, (e) any charter or
similar document adopted and filed in connection with the creation, formation,
organization or governance (as applicable) of any Person and (f) any amendment
to any of the foregoing.
IV.2 Company Subsidiaries. The Company does not own, directly or
--------------------
indirectly, securities or other interests having the power to elect a majority
of any such Person's board of directors or similar governing body, or otherwise
having the power to direct the business and policies of such Person. Except as
set forth in Schedule 4.2, the Company does not, directly or indirectly, own, of
------------
record or beneficially, or control any capital stock, securities convertible
into capital stock or any other equity interest in any Person.
IV.3 Authority; Non-Contravention; Approvals.
---------------------------------------
IV.3.1 The Company has full right, power and authority to enter into
this Agreement and, subject to the approval of the Merger and the transactions
contemplated hereby by the Company's stockholders, to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company has been duly authorized by all necessary
corporate action on the part of the Company, subject to the approval of the
Merger and the transactions contemplated hereby by the Company's stockholders.
This Agreement has been duly executed and delivered by the Company, and,
assuming the due authorization, execution and delivery hereof by CenterPoint,
constitutes a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that such enforcement
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
13
IV.3.2 The execution and delivery of this Agreement by the Company
does not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any claim, lien, privilege,
mortgage, charge, hypothecation, assessment, security interest, pledge or other
encumbrance, conditional sales contract, equity charge, restriction, or adverse
claim of interest of any kind or nature whatsoever (each a "LIEN" and
collectively, the "LIENS") upon the Business or any of the properties or assets
of the Company under, any of the terms, conditions or provisions of (i) the
Organizational Documents of the Company , (ii) any statute, law, ordinance,
rule, regulation, state or federal regulatory agency bulletin, state attorney
general opinion, judgment, decree, order, injunction, writ, permit or license of
any court or federal, state, provincial, local or foreign government, or any
subdivision, agency or authority of any thereof, including any state's
department of insurance ("GOVERNMENTAL AUTHORITY") applicable to the Company,
the Business, or properties or assets of each of the Companies, or (iii) any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which the Company is a party or by which the Company or any of the
properties or assets of the Company may be bound or affected. The consummation
by the Company of the transactions contemplated hereby will not result in a
violation, conflict, breach, right of termination, or creation or acceleration
of Liens under the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the immediately preceding sentence, subject, in the
case of the terms, conditions or provisions of the items described in clauses
(ii) or (iii) above, to obtaining (prior to the Closing Date) such consents
required from third parties set forth on Schedule 4.3.2.
--------------
IV.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 (the "FORM S-1") and the filing of a
registration statement on Form S-4 (the "FORM S-4") (Form S-1 and Form S-4 are
collectively the "REGISTRATION STATEMENTS") with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the
"SECURITIES ACT"or the "1933 ACT"), the declaration of the effectiveness thereof
by the SEC and filings, if required, with various state securities or "blue sky"
authorities, (ii) any filing which may be required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvement Act of 1976, as amended (the "HSR Act"), and (iii) the
Washington Office of the Insurance Commissioner, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
Governmental Authority is necessary for the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, other than such declarations, filings, registrations,
notices, authorizations, consents or approvals which, if not made or obtained,
as the case may be, would not, individually or in the aggregate, have a "COMPANY
MATERIAL ADVERSE EFFECT," which, for purposes of this Agreement means a material
adverse effect on the operations, assets, condition (financial or other),
operating results, employee or client relations, or prospects of the Company.
14
IV.4 Capitalization.
--------------
IV.4.1 The authorized capital stock of Xxxxxxx consists of 50,000
shares of common stock, of which 500 shares are issued and outstanding. The
authorized ownership interest of RA consists of 500 units of ownership interest,
of which 500 units are issued and outstanding. The authorized capital stock of
Verasource consists of 50,000 shares of common stock of which 250 shares are
issued and outstanding. All of the issued and outstanding shares of the Company
are validly issued and are fully paid, nonassessable and free of preemptive
rights. The Stockholders are all of the holders of equity of their respective
Company and own beneficially and of record all of the issued and outstanding
shares or membership interests, as the case may be, of the Company Equity as set
forth in Schedule 4.4, which shares constitute all of the outstanding shares or
------------
membership interests, as the case may be, of capital stock or equity of the
Company.
IV.4.2 Except as set forth on Schedule 4.4, there are no outstanding
------------
subscriptions, options, calls, contracts, commitments, undertakings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock or membership interests of the Company or
obligating the Company to grant, extend or enter into any such agreement or
commitment or obligating the Company to convey or transfer any Company Equity.
As of the Closing Date, there will be no voting trusts, proxies or other
agreements or understandings to which the Company is a party or is bound with
respect to the voting of any shares of capital stock or other equity interests
of the Company.
IV.5 Year 2000. Except as set forth on Schedule 4.5, to the Knowledge of
--------- ------------
the Company, all of the computer software, computer firmware, computer hardware
(whether general or special purpose), and other similar or related items of
automated, computerized, and/or software system(s) that are used or relied on by
the Company in the conduct of the Business will not malfunction, will not cease
to function, will not generate incorrect data, and will not produce incorrect
results when processing, providing, and/or receiving (i) date-related data into
and between the twentieth (20/th/) and twenty-first (21/st/) centuries and (ii)
date-related data in connection with any valid date in the twentieth (20/th/)
and twenty-first (21/st/) centuries, except for any malfunctions or generations
of incorrect data or results that would not individually or in the aggregate
have a Company Material Adverse Effect. Nothing in this Section 4.5 is intended
-----------
or shall be construed as a representation or warranty with respect to embedded
systems.
IV.6 Financial Statements. The Company has previously furnished to
--------------------
CenterPoint copies of the unaudited balance sheet of the Company as of December
31, 1997 and the audited combined balance sheet of the Companies as of December
31, 1998 (the "LATEST BALANCE SHEET"), and the related unaudited statements of
income, shareholders' equity and cash flow of the Company for each of the years
in the three (3) year period ended December 31, 1997 and the related audited
combined statements of income, shareholders' equity and cash flow of the
Companies for the one
15
year period ended December 31, 1998, including all notes thereto (collectively,
the "FINANCIAL STATEMENTS"). Except as set forth in Schedule 4.6, the
------------
Financial Statements relating to the Company are accurate and complete in all
material respects, consistent with the books and records of the Company, and
fairly presents in all material respects the financial condition, assets and
liabilities of the Company as of its date and the results of operations and cash
flows for the periods related thereto, in each case in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP").
IV.7 Absence of Undisclosed Liabilities. Except as disclosed on Schedule
---------------------------------- --------
4.7, the Company has not, as of the date of the Latest Balance Sheet, nor has it
---
incurred since that date, any liabilities or obligations of any nature (whether
known or unknown, absolute, contingent, accrued, direct, indirect, perfected,
inchoate, unliquidated or otherwise), except (i) to the extent clearly and
accurately reflected or accrued or fully reserved against in the Financial
Statements or (ii) liabilities and obligations which have arisen after the date
of the Latest Balance Sheet in the ordinary course of business and consistent
with past custom and practices (none of which is a liability resulting from a
breach of contract, breach of warranty, tort, infringement claim, legal
violation or lawsuit). Such liabilities include, but are not limited to, any
claim or potential claim against the Company by any employee benefit plan,
client or government agency (including, but not limited to, the IRS or
Department of Labor) related to the Company's alleged failure to properly
administer or advise any employee benefit plan or related to the sale or
brokerage of any products or services relating to any employee benefit plans of
current or former clients of the Company.
IV.8 Accounts Receivable. Except as set forth on Schedule 4.8, all of the
------------------- ------------
accounts receivable reflected in the Latest Balance Sheet or arising from the
date thereof until the Closing Date have arisen or will arise in the ordinary
course of the Company's Business, are not and will not be subject to any
defense, counterclaim or setoff, subject to insureds' rights to cancel insurance
coverage and have been collected or are and will be collectible in the ordinary
course of business using normal collection practices and policies employed by
the Company as of the date of this Agreement, in each case subject to any
allowance for doubtful accounts determined in accordance with the Company's past
custom and practices.
IV.9 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
4.9, since the date of the Latest Balance Sheet, the Company has conducted its
---
business only in the ordinary course consistent with past custom and practices.
Except as set forth on Schedule 4.9, since the date of the Latest Balance Sheet,
------------
there has not been any:
(a) material adverse change in the operations, condition (financial or
otherwise), operating results, assets, liabilities, employee, client or
policyholder relations or prospects of the Company;
16
(b) damage, destruction or loss of any property owned by the Company ,
or used in the operation of the Business, whether or not covered by
insurance, having a replacement cost or fair market value in excess of five
percent (5%) of the amount of net property, plant and equipment shown on
the Latest Balance Sheet, in the aggregate;
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandonment, waiver, release or other disposition of any kind by the
Company of any right, power, claim or debt, except the collection of
accounts in the ordinary course of business consistent with past custom and
practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect the Company or the Business;
(e) loan or advance by the Company to any Person, other than as a
result of services performed for, or expenses properly and reasonably
advanced for the benefit of, customers in the ordinary course of business
consistent with past custom and practices;
(f) notice (formal or otherwise) of any liability, potential liability
or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or other
distribution in respect of the Company's capital stock or other equity
interests or any direct or indirect redemption, purchase, or other
acquisition of the Company's capital stock or other equity interests, or
the payment of principal or interest on any note, bond, debt instrument or
debt to any Affiliate (as defined in Section 15.4) of the Company, except
------------
bonuses and distributions to employees and Stockholders disclosed to
CenterPoint in writing that are consistent with the Company's past custom
and practices or as otherwise contemplated by this Agreement;
(h) incurrence by the Company of debts, liabilities or obligations
except (i) current liabilities incurred in connection with or for services
rendered or goods supplied in the ordinary course of business consistent
with past custom and practices, (ii) liabilities on account of taxes and
governmental charges (but not penalties, interest or fines in respect
thereof), and (iii) obligations or liabilities incurred by virtue of the
execution of this Agreement;
(i) issuance by the Company of any notes, bonds, or other debt
securities or any equity securities or securities convertible into or
exchangeable for any equity securities;
17
(j) entry by the Company into, or amendment or termination of, any
material commitment, contract, agreement, or transaction, other than in the
ordinary course of business and other than expiration of contracts in
accordance with their terms, except the Company may amend any such material
commitment, contract, agreement or transaction necessary to prevent the
relevant commitment, contract, agreement or transaction from terminating
due to the transactions contemplated herein, provided that all material
terms of such commitment, contract, agreement or transaction shall remain
the same;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the Company
that accounted for revenues during the last twelve months in excess of five
percent (5%) of the consolidated net revenues of the Company, or change in
the relationship of the Company with any client or Governmental Authority
that is reasonably expected to adversely affect the Company or the
Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by the Company;
(m) discharge or satisfaction by the Company of any material liability
or encumbrance or payment by the Company of any material obligation or
liability, other than current liabilities paid in the ordinary course of
its business consistent with past custom and practices;
(n) sale, lease or other disposition by the Company of any tangible
assets having an aggregate replacement cost or fair market value in excess
of five percent (5%) of the amount of net property, plant and equipment
shown on the Latest Balance Sheet other than in the ordinary course of
business, or the sale, assignment or transfer by the Company of any
trademarks, service marks, trade names, corporate names, copyright
registrations, trade secrets, lists of past and present customers, lists of
potential customers, insurance policy expiration data or rights, research
sales data, analyses, sales and marketing materials, scheduling and service
methods, sales and service manuals, or other intangible assets or
disclosure of any proprietary or confidential information of the Company
relating to or used in connection with the Business to any Person other
than an employee, agent, attorney, accountant or other representative of
the Company that has agreed in writing to maintain the confidentiality of
any such proprietary confidential information;
(o) capital expenditures or commitments therefor by the Company in
excess of $50,000 individually or $100,000 in the aggregate;
18
(p) mortgage, pledge or other encumbrance of any asset of the
Company or creation of any easements, Liens or other interests against or
on any of the Real Property (as defined in Section 4.14.1);
--------------
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
-----------------
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through (q)
that has resulted or, based on information of which the Company has
Knowledge, is reasonably expected to result in a Company Material Adverse
Effect.
IV.10 Litigation. Except as set forth on Schedule 4.10 (which shall
---------- -------------
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
--------------
IV.10.1 There is no suit, action, proceeding, investigation, claim or
order pending or, to the Knowledge of the Company, threatened against the
Company, or with respect to the Merger, or with respect to any Employee Plan,
any fiduciary of any such plan (or pending or, to the Knowledge of the Company,
threatened against any of the officers, directors, members, partners or
employees of the Company with respect to its business or proposed business
activities), or to which the Company is otherwise a party, or that is reasonably
expected to have a Company Material Adverse Effect, before any court, or before
any Governmental Authority (each an "ACTION" and collectively, the "ACTIONS");
nor, to the Knowledge of the Company, is there any basis for any such Action.
IV.10.2 The Company is not subject to any unsatisfied or continuing
judgment, order or decree of any court or Governmental Authority. The Company is
not, to its knowledge, exposed, from a legal standpoint, to any liability or
disadvantage that is reasonably expected to result in a Company Material Adverse
Effect, and the Company is not a party to any legal action to recover monies
due it or for damages sustained by it, other than collection of past due charges
for services rendered or expenses incurred by the Company.
IV.10.3 Schedule 4.10 lists the insurer for each Action covered by
-------------
insurance or designates such Action, or a portion of such Action, as uninsured
and lists the individual and aggregate policy limits for the insurance covering
each insured Action and the applicable policy deductibles for each insured
Action.
IV.10.4 Schedule 4.10 sets forth all material closed litigation
-------------
matters to which the Company was a party during the five (5) year period
preceding the Closing Date, the date such litigation was commenced and
concluded, and the nature of the resolution thereof (including amounts paid in
settlement or judgment).
19
IV.11 Compliance with Applicable Laws. Except as set forth on Schedules
------------------------------- ---------
4.11 and 4.19, the Company and every person acting on behalf of the Company has
---- ----
complied in all material respects with all laws, rules, regulations, regulatory
agency bulletins, attorney general opinions, writs, injunctions, decrees, and
orders (collectively, "LAWS") applicable to the Company, and every person
acting on behalf of the Company in relation to the operation of the Business,
and has not received any notice of any alleged claim or threatened claim,
violation of, citation for non-compliance with, or liability or potential
responsibility under, any such Law which has not heretofore been cured and for
which there is no remaining liability and, to the Knowledge of the Company, no
event has occurred or circumstances exist that (with or without notice or lapse
of time) is reasonably expected to constitute or result in a violation by the
Company or any Person acting on behalf of the Company of any Law or that gives
rise to any liability on the part of the Company under any Law. The Company has
not received notice of potential claims, allegations, grievances or complaints
against or pertaining to the Business, including any consumer complaints from
any state departments of insurance.
IV.12 Licenses. Schedule 4.12 lists all Licenses maintained by the Company
-------- -------------
and each Licensed Person that are material to the conduct of the Business.
"LICENSES" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, qualifications, registrations and other
similar documents and authorizations, and applications therefor held by the
Company and each Person acting on behalf of the Company whose activities require
Licenses ("LICENSED PERSON") and issued or submitted to the Company or any
Licensed Persons by any Governmental Authority or other Person. All such
Licenses are valid, binding and in full force and effect. Except as described on
Schedule 4.12, the execution, delivery and performance of this Agreement and the
-------------
consummation of the transactions contemplated hereby will not adversely affect
any such Licenses. To the Knowledge of the Company, the Company has taken all
necessary action to maintain such Licenses. Except as set forth in Schedule
--------
4.12, no loss or expiration of any such License is pending or, to the Company's
----
Knowledge, threatened or reasonably foreseeable. Except as set forth in Schedule
--------
4.12, no Person engages in or transacts the Business on behalf of the Company or
----
Licensed Person in any State without a License, nor does the Company engage in
or transact the Business in any State without a License.
IV.13 Material Contracts. Except as listed or described on Schedule 4.13
------------------ -------------
(such contracts, or those which should have been listed on Schedule 4.13, are
-------------
herein referred to as the "MATERIAL CONTRACTS"), as of or on the date hereof,
the Company is not a party to or bound by, any written or oral leases,
agreements or other contracts or legally binding contractual rights or
contractual obligations or contractual commitments (each a "CONTRACT" and
collectively, the "CONTRACTS") relating to or in any way affecting the
operation or ownership of the Business that are of a type described below and no
such agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which the Company is to
receive consulting services (other than consulting agreements that may be
terminated by the
20
Company on not more than 30 days notice without penalty), employment
agreement, change-in-control agreement, or collective bargaining
arrangement with any labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000);
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness, other than any contract with an insurance
carrier under which the Company is responsible for the payment of insurance
premiums whether or not such premiums are first collected by the Company;
(e) any Contract granting any Person a Lien on all or any part of the
assets of the Company;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
------------
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of the Company;
(h) any Contract with any agent, distributor or representative which
is not terminable by the Company upon ninety (90) calendar days or less
notice without penalty;
(i) any Contract under which such Company is (A) a lessee or
sublessee of any machinery, equipment, vehicle or other tangible personal
property, or (B) a lessor of any tangible personal property owned by such
Company, in either case having an original purchase price or requiring
aggregate lease payments in excess of $50,000;
(j) any Contract under which the Company has granted or received a
license or sublicense or under which it is obligated to pay or has the
right to receive a royalty, license fee or similar payment, in either case
which provides for payments over the life of such Contract in excess of
$25,000, except such Contracts with insurance companies
21
whereby the Company is acting as an insurance producer and has the right to
receive any commission payments;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
------------
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company of any real
property on which the Company conducts any aspect of the Business, (B)
granting any options to lease or purchase all or any portion of the Real
Property, or (C) providing for labor, services or materials to the Real
Property (including, without limitation, brokerage or management services)
involving aggregate future payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the Company from
conducting business anywhere in the United States or elsewhere in the
world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
--------------
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of the Company, which, if
amended, modified or terminated as a result of, relating to or in
connection with a failure to provide prior notice, or gain such consent or
approval, would result in a Company Material Adverse Effect;
(r) any Contract under which the Company would be considered an
employee benefit plan "administrator" as such term is defined in Section
3(16) of ERISA or a "fiduciary" as such term is defined in Section 3(21) of
ERISA; or
(s) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by the Company in excess of
$25,000.
The Company has provided CenterPoint or its counsel with a true and
complete copy of each written Material Contract and a true and complete summary
of each oral Material Contract, in each case including all amendments or other
modifications thereto. Except as set forth on Schedule 4.13, each Material
-------------
Contract is a valid and binding obligation of, and enforceable in accordance
with its terms against the Company and, to the Knowledge of the Company, the
other parties thereto, and is in full force and effect, subject only to
bankruptcy, reorganization,
22
receivership and other laws affecting creditors' rights generally and equitable
principles. Except as set forth on Schedule 4.13, the Company has performed in
-------------
all material respects all obligations required to be performed by it as of the
date hereof and will have performed in all material respects all obligations
required to be performed by it as of the Closing Date under each Material
Contract and the Company has not, nor, to the Knowledge of the Company, no other
party to any Material Contract is in breach or default thereunder, and, to the
Knowledge of the Company, there exists no condition which would, with or without
the lapse of time or the giving of notice, or both, constitute a breach or
default thereunder. The Company has not been notified that any party to any
Material Contract intends to cancel, terminate, not renew, or exercise an option
under any Material Contract, whether in connection with the transactions
contemplated hereby or otherwise.
IV.14 Properties.
----------
IV.14.1 Schedule 4.14.1-1 is a correct and complete list, and a
-----------------
brief description of, all real estate in which the Company has an ownership
interest (the "OWNED PROPERTY") and all real property leased by the Company
(the "LEASED PROPERTY"). Except as lessee of Leased Property, the Company is
not a lessee under or otherwise a party to any lease, sublease, license,
concession or other agreement, whether written or oral, pursuant to which
another Person has granted to the Company the right to use or occupy all or any
portion of any real property.
The Company has good and marketable fee simple title to the Owned Property
and, assuming good title in the Landlord, a valid leasehold interest in the
Leased Property (the Owned Property and the Leased Property being sometimes
referred to herein as "REAL PROPERTY"), in each case free and clear of all
Liens, assessments or restrictions (including, without limitation, inchoate
liens arising out of the provision of labor, services or materials to any such
real estate) other than (a) mortgages shown on the Financial Statements as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) Liens for current taxes not yet due, (c) (i) minor
imperfections of title, including utility and access easements depicted on
subdivision plats for platted lots that do not impair the intended use of the
property, if any, none of which materially impairs the current operations of the
Company or the Business, and (ii) zoning laws and other land use restrictions or
restrictive covenants that do not materially impair the present use of the
property subject thereto, and (d) Liens, assessments, and restrictions pursuant
to and by virtue of the terms of the lease of the Leased Property. The Real
Property constitutes all real properties reflected on the Financial Statements
or used or occupied by the Company in connection with the Business or otherwise.
With respect to the Owned Property, except as reflected on Schedule 4.14.1-
---------------
2(a):
----
(a) the Company is in exclusive possession thereof and no easements,
licenses or rights are necessary to conduct the Business thereon in
addition to those which exist as of the date hereof;
23
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of the Company, there
is no threatened condemnation or proceeding with respect thereto;
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
--------
4.14.1-2(b):
-----------
(i) the Company is in exclusive, peaceful and undisturbed
possession thereof and, to the Knowledge of each of the Companies, no
easements, licenses or rights are necessary to conduct the Business thereon
in addition to those which exist as of the date hereof; and
(ii) to the Knowledge of the Company, no portion thereof is
subject to any pending condemnation proceeding or proceeding by any public
or quasi-public authority materially adverse to the Leased Property and
there is no threatened condemnation or proceeding with respect thereto.
IV.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
---------------
material tangible personal property owned by each of the Companies, except as
sold or otherwise disposed of or acquired in the ordinary course of business.
Except as set forth on Schedule 4.14.2, the Company has good and marketable
---------------
title to, or a valid leasehold interest in, or valid license of, such personal
property (including, without limitation, machinery, equipment and computers), in
each case free and clear of any Liens (other than Liens that are part of such
leasehold or license), and each such asset is in working order and has been
maintained in a commercially reasonable manner and does not contain, to the
Knowledge of the Company, any material defect. Except as set forth on Schedule
--------
4.14.2, no personal property (including, without limitation, software and
------
databases maintained on off-premises computers) used by the Company in
connection with the Business is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement or
is located other than on the Real Property.
24
IV.15 Intellectual Property. The (i) patents, patent applications,
---------------------
inventions and discoveries that may be patentable (collectively, the "PATENTS"),
(ii) registered and unregistered trademarks, trade names, company names, assumed
business names and service marks (collectively, the "MARKS"), (iii) copyrights
(the "COPYRIGHTS"), and (iv) know how, trade secrets, confidential information,
software, technical information, data, process technology, plans and drawings,
lists of past and present customers, lists of potential customers, insurance
expiration data and rights, business plans, performance standards, catalogues,
research sales data, analyses, and programs, sales and marketing materials,
scheduling and service methods, sales and service manuals and all other
proprietary, confidential and other similar information (in whatever form or
medium) relating to or used in connection with the Business (collectively, the
"TRADE SECRETS"), and the business and goodwill of the Company as a going
concern owned, used or licensed by the Company (collectively, the "INTELLECTUAL
PROPERTY") are all those necessary to enable the Company to conduct and to
continue to conduct the Business substantially as it is currently conducted.
Schedule 4.15 contains a complete and accurate list of all material Patents,
-------------
Marks and Copyrights and a brief description of all material Trade Secrets
owned, used by or directly licensed to the Company, and a list of all material
license agreements and arrangements with respect to any of the Intellectual
Property to which the Company is a party, whether as licensee, licensor or
otherwise (collectively, the "INTELLECTUAL PROPERTY LICENSES"). Except as set
forth on Schedule 4.15, (i) all of the Intellectual Property is owned, or
-------------
to the Knowledge of the Company used under a valid Intellectual Property
License, by the Company and is free and clear of all Liens and other adverse
claims; (ii) the Company has not received any written notice that it is or has
infringed on, misappropriated or otherwise conflicted with, and otherwise has no
Knowledge that it is infringing on, misappropriating, or otherwise conflicting
with the intellectual property rights of any third parties; (iii) there is no
claim pending or, to the Knowledge of the Company, threatened against the
Company with respect to the alleged infringement or misappropriation by the
Company of, or a conflict with, any intellectual property rights of others; (iv)
the operation of any aspect of the Business in the manner in which it has
heretofore been operated or is presently operated does not give rise to any such
infringement or misappropriation; and (v) there is no infringement or
misappropriation of the Intellectual Property by a third party or claim, pending
or, to the Knowledge of the Company, threatened against any third party with
respect to the alleged infringement or misappropriation of the Intellectual
Property.
IV.16 Taxes.
-----
25
IV.16.1 Except as set forth on Schedule 4.16.1-1, the Company has
-----------------
timely and accurately prepared and filed or will timely and accurately prepare
and file all federal, state (including any state premium filings), local and
foreign returns, declarations and reports, information returns and statements
(collectively, the "RETURNS") for Taxes (as defined in Section 4.16.2) required
--------------
to be filed by or with respect to the Company before the Closing Date, and has
paid or caused to be paid, or has made adequate provision or set up an adequate
accrual or reserve for the payment of, all Taxes required to be paid in respect
of the periods for which Returns are due on or prior to the Closing Date, and
will establish an adequate accrual or reserve for the payment of all Taxes
payable in respect of the period, including portions thereof, subsequent to the
last of said periods required to be so accrued or reserved, in each case in
accordance with GAAP up to and including the Closing Date. All such Returns are
or will be true and correct in all material respects. The Company has delivered
to CenterPoint true and complete copies of all Returns referred to in the first
sentence of this Section 4.16.1 (including any amendments thereof) for the five
--------------
(5) most recent taxable years. The Company is not delinquent in the payment of
any Tax, and no material deficiencies for any Tax, assessment or governmental
charge have been threatened, claimed, proposed or assessed. No waiver or
extension of time to assess any Taxes has been given or requested. No written
claim, or any other claim, by any taxing authority in any jurisdiction where the
Company does not file Tax returns is pending pursuant to which the Company is or
may be subject to taxation by that jurisdiction. The Company's Returns were last
audited by the Internal Revenue Service or comparable state, local or foreign
agencies on the dates set forth on Schedule 4.16.1-2.
-----------------
IV.16.2 For purposes of this Agreement, the term "TAXES" shall mean
all taxes, charges, withholdings, fees, levies, penalties, additions, interest
or other assessments, including, without limitation, income, gross receipts,
excise, property, sales, employment, withholding, social security, occupation,
use, service, service use, license, payroll, franchise, transfer and recording
taxes, fees and charges, windfall profits, severance, customs, import, export,
employment or similar taxes, charges, fees, levies or other assessments, imposed
by the United States, or any state (including any state premium tax filings),
local, foreign or provincial government or subdivision or any agency thereof,
whether computed on a separate, consolidated, unitary, combined or any other
basis.
IV.17 Employee Benefit Plans; ERISA.
-----------------------------
IV.17.1 Other than any liability for payment of benefits in the
ordinary course of plan operation under any plan or policy listed on Schedule
--------
4.17.1 or as otherwise described on Schedule 4.17.1, the Company has not and
------ ---------------
is not reasonably expected to have any liability (including contingent
liability) whether direct or indirect (and regardless of whether it would be
derived from a current or former Plan Affiliate as defined in Section 4.17.5(c))
-----------------
with respect to any of the following (whether written, unwritten or terminated):
(i) any employee welfare benefit plan, as defined in Section 3(1) of "ERISA,"
including, but not limited to, any medical plan, life insurance plan, short-term
or long-term disability plan or dental plan; (ii) any "employee pension
26
benefit plan," as defined in Section 3(2) of ERISA (as defined in Section
-------
4.17.5(b)), including, but not limited to, any excess benefit plan, top hat plan
---------
or deferred compensation plan or arrangement, nonqualified retirement plan or
arrangement, qualified defined contribution or defined benefit arrangement; or
(iii) any other benefit plan, policy, program, arrangement or agreement,
including, but not limited to, any material fringe benefit plan or program,
personnel policy, bonus or incentive plan, stock option, restricted stock, stock
bonus, holiday pay, vacation pay, sick pay, bonus program, service award, moving
expense, reimbursement program, tool allowance, safety equipment allowance,
deferred bonus plan, salary reduction agreement, change-of-control agreement,
employment agreement or consulting agreement.
IV.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited financial
-----------------
statements, if any, for the three (3) most recent plan years; a copy of each
trust agreement or other funding vehicle with respect to each such plan; a copy
of any and all determination letters, rulings or notices issued by a
Governmental Authority with respect to such plan; a copy of the Form 5500 Annual
Report for the three (3) most recent plan years; and a copy of each and any
general explanation or communication which was required to be distributed or
otherwise provided to participants in such plan and which describes all or any
relevant aspect of each plan, including summary plan descriptions and/or summary
of material modifications, have been delivered or made available to CenterPoint.
A description of each unwritten Employee Plan, including a description of
eligibility, participation, benefits, funding arrangements and assets or other
relevant aspects of the obligation, is set forth on Schedule 4.17.2.
---------------
IV.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to the
Company, each Employee Plan (i) has been and is operated and administered in
compliance with its terms; (ii) has been and is operated, administered,
maintained and funded in compliance with the applicable requirements of the Code
in such a manner as to qualify, where appropriate and intended, for both Federal
and state purposes, for income tax exclusions, tax-exempt status, and the
allowance of deductions and credits with respect to contributions thereto; (iii)
where appropriate, has received a favorable determination letter from the
Internal Revenue Service upon which the sponsor of the plan may currently rely;
(iv) has been and currently complies in form and in operation in all respects
with all applicable requirements of ERISA and the Code and any applicable
reporting and disclosure requirements of Federal and state laws, including but
not limited to the requirement of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code. With respect to each Employee Plan, no Person has:
(i) entered into any nonexempt "prohibited transaction," as such terms are
defined in ERISA or the Code; (ii) breached a fiduciary obligation or (iii) any
liability for any failure to act or comply in connection with the administration
or investment of the assets of such plan; and no Employee Plan has any liability
and there is no liability in connection with any Employee Plan, other than a
liability (i) which is expressly and adequately reflected in the Latest Balance
Sheets, (ii) which is discretionary or terminable at will by the Company without
incurring any such liability, or (iii) which is adequately funded under a
funding arrangement separate from
27
the assets of the Company or a Plan Affiliate (and only to the extent of such
funding). Any contribution made or accrued with respect to any Employee Plan is
fully deductible by the Company or a Plan Affiliate.
IV.17.4 Neither the Company nor a Plan Affiliate has ever sponsored,
maintained, contributed to or been required to contribute to, or has any
liability, whether direct or indirect, with respect to any Employee Plan which
is or has ever been (i) a "multiemployer plan" as defined in Section 4001 of
ERISA, (ii) a "multiemployer plan" within the meaning of Section 3(37) of ERISA,
(iii) a "multiple employer plan" within the meaning of Code Section 413(c), (iv)
a "multiple employer welfare arrangement" within the meaning of Section 3(40) of
ERISA, (v) subject to the funding requirements of Section 412 of the Code or to
Title IV of ERISA, or (vi) provides for post-retirement medical, life insurance
or other welfare-type benefits other than any benefits required under Section
4980B of the Code.
IV.17.5 As used in this Agreement, the following terms shall have
the following respective meanings:
(a) the term "EMPLOYEE PLAN" shall mean any plan, policy, program,
arrangement or agreement described in Section 4.17.1, whether or not
--------------
scheduled;
(b) the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; and
(c) with respect to any Person ("FIRST PERSON"), the term "PLAN
AFFILIATE" shall mean any other Person with whom the First Person
constitutes or has constituted all or part of a controlled group, or which
would be treated or have been treated with the First Person as under common
control or whose employees would be or have been treated as employed by the
First Person, under Section 414 of the Code or Section 4001(b) of ERISA and
any regulations, administrative rulings and case law interpreting the
foregoing.
IV.18 Labor Matters. Except as set forth on Schedule 4.18, there is no, and
------------- -------------
within the last three (3) years the Company has not experienced any, strike,
picketing, boycott, work stoppage or slowdown or other similar labor dispute,
union organizational activity, allegation, charge or complaint of unfair labor
practice, employment discrimination or other matters relating to the employment
of labor pending or, to the Knowledge of the Company, threatened against the
Company, or which might affect the Company; nor, to the Knowledge of the
Company, is there any basis for any such allegation, charge, or complaint. There
is no request for representation pending and, to the Knowledge of the Company,
no question concerning representation has been raised. There is no grievance
pending that is reasonably expected to result in a Company Material Adverse
Effect nor any arbitration proceeding arising out of a union agreement. To the
Knowledge of the Company, no key employee and no group of employees has
announced or otherwise indicated any plans to terminate employment with the
Company. The Company has complied with all applicable laws relating to the
employment of labor, including provisions thereof
28
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes. The Company is not liable for any
arrears of wages or any taxes or penalties for failure to comply with any such
laws, ordinances or regulations.
IV.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
--------------------- -------------
the Company is operating and has operated its business in compliance with all
applicable Environmental and Safety Requirements (as defined later in this
Section); (ii) to the actual knowledge of the senior officers of the Company,
without any duty to inquire (notwithstanding the definition of "Knowledge" in
Section 15.4), there are no Hazardous Materials (as defined later in this
------------
Section) present at, on or under any real property currently or formerly owned,
leased or used by the Company (other than those present in office supplies and
cleaning/maintenance materials) for which the Company is or is reasonably
expected to be responsible, or otherwise have any liability, for response costs
under any Environmental and Safety Requirements; (iii) the Company has disposed
of all waste materials generated by the Company at any real property currently
or formerly owned, leased or used by the Company in compliance with applicable
Environmental and Safety Requirements; and (iv) there are and have been no
facts, events, occurrences or conditions at or related to any real property
currently or formerly owned, leased or used by the Company that is reasonably
expected to cause or give rise to liabilities or response obligations of the
Company under any Environmental and Safety Requirements. The term "ENVIRONMENTAL
AND SAFETY REQUIREMENTS" means any federal, state and local laws, statutes,
regulations or other requirements relating to the protection, preservation or
conservation of the environment or worker health and safety, all as amended or
reauthorized. The term "HAZARDOUS MATERIALS" means "hazardous substances," as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. (S) 9601 et seq., "hazardous wastes," as defined by the Resource
Conservation Recovery Act, 42 U.S.C. (S) 6901 et seq., asbestos in any form or
condition, polychlorinated biphenyls and any other material, substance or waste
to which liability or standards of conduct may be imposed under any
Environmental and Safety Requirement.
IV.20 Insurance. The Company has in full force and effect commercially
---------
reasonable amounts of insurance (including, but not limited to, errors and
omissions insurance up to $1,000,000 in the aggregate for each of RA and
Verasource and up to $1,250,000 in the aggregate for Xxxxxxx) to protect the
Company's ownership or interest in, and operation of, its assets against the
types of liabilities, customarily insured against in connection with operations
similar to the Business, and all premiums due on such policies have been paid.
To the Company's Knowledge, the Company has complied with the provisions of all
such policies and is not in default under any of such policies. Schedule 4.20
-------------
contains a complete and correct list of all such insurance policies. The Company
has not received any notice of cancellation or nonrenewal, or intent to cancel
or nonrenew, or increase premiums with respect to such insurance policies.
Schedule 4.20 also contains a list of all claims or asserted claims reported to
-------------
insurers under such policies relating to the ownership or interest in the
Company's assets, or operation of the Business, including all errors and
omissions claims and similar types of claims, actions or proceedings
29
asserted against the Company arising out of the Business at any time within the
past three (3) years.
IV.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
-----------------------------------------------------------
as described on Schedule 4.21, and except for ownership as an investment of not
-------------
more than one percent (1%) of any class of capital stock of any publicly-traded
company, no Stockholder, Affiliate of a Stockholder or Affiliate of the Company
(i) possesses, directly or indirectly, any financial interest in, or is a
director, officer, employee or affiliate of any Person that is a client,
supplier, customer, lessor, lessee or competitor of the Company, (ii) owns,
directly or indirectly, in whole or in part, or has any interest in any tangible
or intangible property used in the conduct of the Business, or (iii) is a party
to an agreement or relationship, that involves the receipt by such Person of
compensation or property from the Company other than through a customary
employment relationship or through distributions made with respect to the
Company Equity (provided such distributions have been made consistent with the
Company's past custom and practices). Schedule 4.21 sets forth the parties to
-------------
and the date, nature and amount of each transaction during the last five years
involving the transfer of any cash, property or rights to or from the Company
from, to or for the benefit of any Affiliates (other than customary employment
relationships or distributions made with respect to the Company Equity)
("AFFILIATE TRANSACTIONS"), and any existing commitments of the Company to
engage in the future in any Affiliate Transactions. Except as disclosed, each
Affiliate Transaction and each transaction with former Affiliates of the Company
was effected on terms equivalent to those that have been established in an
arm's-length transaction.
IV.22 Business Relationships. Schedule 4.22 lists all clients of the
---------------------- -------------
Company representing one percent (1%) or more of the Company's revenues for the
twelve (12) months ended December 31, 1998. Except as set forth on Schedule
--------
4.22, since December, 31, 1998, none of such clients has canceled or
substantially reduced its business with the Company nor are any of such clients
threatening to do so. To the Knowledge of the Company, no policyholders,
current clients or customers, retail producers, licensed agents and brokers,
bona-fide associations and/or groups, or insurance carriers that accounts for
one percent (1%) or more of the Company's consolidated net revenue or supplier
of the Company, will cease to do business with, or substantially reduce its
business with, the Company after the consummation of the transactions
contemplated hereby.
IV.23 Compensation. Schedule 4.23 is a complete list setting forth the
------------ -------------
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners, of each Person who earned from the Company in 1998 total
compensation in excess of $100,000. Except as set forth in Schedule 4.23, no
-------------
Person listed thereon has received any bonus or increase in compensation and
there has been no "general increase" in the compensation or rate of compensation
payable to any employees, partners, members or owners of the Company since the
date of the Latest Balance Sheet, other than in the Company's ordinary course of
business, consistent with past custom and practices nor since that date has
there been any oral or written promise to employees, partners, members or
30
owners of any bonus or increase in compensation, other than in the Company's
ordinary course of business, consistent with past custom and practices. The term
"GENERAL INCREASE" as used herein means any increase generally applicable to a
class or group, but does not include increases granted to individuals for merit,
length of service or change in position or responsibility made on the basis of
the custom and past practices of the Company. Schedule 4.23 includes the date
-------------
and amount of the last bonus or similar distribution or increase in compensation
for each listed individual.
IV.24 Bank Accounts. Schedule 4.24 is a true and complete list of each bank
------------- -------------
in which the Company has an account or safe deposit box, the number of each such
account or box, and the names of all Persons authorized to draw thereon or to
have access thereto.
IV.25 Disclosure; No Misrepresentation. No representation or warranty of
--------------------------------
the Company contained in this Agreement or in any of the certification,
schedules, lists, documents, exhibits, or other instruments delivered or to be
delivered to CenterPoint as contemplated by any provision hereof contains any
untrue statement regarding a material fact or omits to state a material fact
necessary in order to make the statements made herein or therein not misleading.
To the Knowledge of the Company, there is no fact or circumstance that has not
been disclosed to CenterPoint herein that has or is reasonably expected to have
a Company Material Adverse Effect.
IV.26 Title to and Transfer of Insurance Expirations. Except as set forth
----------------------------------------------
on Schedule 4.26, as of the effective date of this Agreement, the Company has
-------------
good and valid rights, free and clear of any known restrictions, to Insurance
Expirations (as hereinafter defined). For the purpose of this Section 4.26,
------------
"INSURANCE EXPIRATIONS" is defined as the right to service, continue and renew,
and collect all commissions and other amounts on, all insurance policies of
every type and description produced or placed by or through the Company,
including all of (i) the expiration data relating to such policies of insurance
produced or placed by or through the Company, (ii) all books, records and files
pertaining to all insurance policies, including, without limitation, all
computerized data records and all other records and files regardless of the
media in or on which such data, records or files are maintains, and (iii) the
customer and prospective customer lists used by the Company.
31
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
V.1 Joint and Several Representations and Warranties. Each Stockholder of
------------------------------------------------
a Company, jointly and severally with the other stockholders or members of such
Company, hereby represents and warrants to CenterPoint as of the date hereof
and, subject to Section 7.3, as of the date on which CenterPoint and the lead
-----------
Underwriter execute and deliver the Underwriting Agreement related to the IPO
and as of the Closing Date as follows:
V.1.1 Capitalization. Such Stockholder owns beneficially and of
--------------
record all of the issued and outstanding shares or other equity interest in the
Company Equity as set forth opposite the name of such Stockholder in Schedule
--------
4.4. Such Company Equity is free and clear of all Liens, and such Stockholder
---
has good and marketable title to such Company Equity. At the Closing as provided
in this Agreement, CenterPoint will acquire good and valid title to such Company
Equity, free and clear of any Lien other than any Lien created by CenterPoint.
V.1.2 Authority. Such Stockholder has full right, capacity, power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Stockholder, and, assuming the due authorization, execution and delivery hereof
by CenterPoint, constitutes a valid and legally binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
V.1.3 Non-Contravention. The execution and delivery of this Agreement
-----------------
by such Stockholder does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Lien upon
any of the properties or assets of any Company under, any of the terms,
conditions or provisions of (i) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any Governmental
Authority applicable to such Stockholder or (ii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which such
Stockholder is a party or by which such Stockholder may be bound or affected
other than those licenses, franchises, permits, concessions or instruments of
any Governmental Authority. The consummation by such Stockholder of the
transactions contemplated hereby will not result in a violation, conflict,
breach, right of termination, creation or acceleration of Liens under the of the
terms, conditions or provisions of the items described in clauses (i) and (ii)
of the immediately preceding sentence subject to obtaining (prior to the Closing
Date) the consents set forth on Schedule 4.3.2.
--------------
32
V.1.4 Approvals. To the Knowledge of such Stockholder, and except
---------
with respect to (i) the filing of the Registration Statements with the SEC
pursuant to the 1933 Act, the declaration of the effectiveness of the
Registration Statements by the SEC and filings, if required, with various state
securities or "blue sky" authorities, (ii) any filing which may be required
under the HSR Act, and (iii) The Washington Office of the Insurance
Commissioner, no declaration, filing, or registration with, or notice to, or
authorization, consent or approval of, any Governmental Authority is necessary
for the execution and delivery of this Agreement by such Stockholder or the
consummation by such Stockholder of the transactions contemplated hereby.
V.1.5 Litigation. There is no action, claim, suit, proceeding
----------
(disciplinary or otherwise), arbitration or investigation pending, or to the
Knowledge of such Stockholder, threatened against such Stockholder relating to
(i) the transactions contemplated by this Agreement, or (ii) any action taken by
such Stockholder or contemplated by such Stockholder in connection with the
consummation by such Stockholder of the transactions contemplated hereby.
V.1.6 No Transfer. There are no outstanding subscriptions, options,
-----------
calls, contracts, commitments, undertakings, restrictions, arrangements, rights
or warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement to deliver or sell, or cause to be
delivered or sold, shares or other equity interests of the Company Equity owned
by such Stockholder or obligating such Stockholder to grant, extend or enter
into any such agreement or commitment or obligating such Stockholder to convey
or transfer any Company Equity. As of the Closing Date, there will be no voting
trusts, proxies or other agreements or understandings to which such Stockholder
is a party or is bound with respect to the voting of any shares of capital stock
or other equity interests of the Company other than the Voting Agreement.
V.1.7 Disclosure. No representation or warranty by or on behalf of
----------
such Stockholder contained in this Agreement or any of the written statements or
certificates furnished at or prior to the Closing by or on behalf of such
Stockholder to CenterPoint or its representatives in connection herewith or
pursuant hereto, contains any untrue statement of a material fact, or omits or
will omit to state any material fact required to make the statements contained
herein or therein not misleading.
V.1.8 Representations and Warranties of each of the Companies. To
-------------------------------------------------------
such Stockholder's actual knowledge, the representations and warranties of the
Company in which it holds an equity interest set forth in Article IV of this
----------
Agreement are true and correct.
V.2 Additional Joint and Several Representations and Warranties.
-----------------------------------------------------------
V.2.1 Each of the Stockholders of Xxxxxxx jointly and severally
represents and warrants to CenterPoint that the authorized capital stock of
Xxxxxxx consists of 50,000 shares of
33
common stock, of which 500 shares are issued and outstanding all of which are
validly issued and are fully paid, nonassessable and free of preemptive rights.
V.2.2 Each of the members of RA jointly and severally represents and
warrants to CenterPoint that the authorized ownership interests of RA consists
of 500 units of ownership interest, of which 500 units are issued and
outstanding all of which are validly issued and are fully paid, nonassessable
and free of preemptive rights.
V.2.3 Each of the Stockholders of Verasource jointly and severally
represents and warrants to CenterPoint that the authorized capital stock of
Verasource consists of 50,000 shares of common stock, of which 250 shares are
issued and outstanding all of which are validly issued and are fully paid,
nonassessable and free of preemptive rights.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to each of the Companies and the
Stockholders as of the date hereof and, subject to Section 7.3, as of the date
-----------
on which CenterPoint and the lead Underwriter execute and deliver the
Underwriting Agreement related to the IPO and as of the Closing Date as follows:
VI.1 Organization And Qualification. Each of CenterPoint and each Mergersub
------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. True, accurate and complete copies of each of
CenterPoint's and Mergersub's Certificate of Incorporation and By-laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to each of the Companies.
34
VI.2 Capitalization.
--------------
VI.2.1 The authorized capital stock of CenterPoint consists of 20,000
shares of CenterPoint Common Stock, of which 17,500 shares were outstanding as
of the date hereof. All of the issued and outstanding shares of CenterPoint
Common Stock are validly issued and are fully paid, nonassessable and free of
preemptive rights. Immediately prior to the Closing Date, the authorized
capital stock of CenterPoint will consist of 50,000,000 shares of CenterPoint
Common Stock, of which the number of shares set forth in the Form S-1 will be
issued and outstanding, and 10,000 shares of Preferred Stock, par value $0.01
per share, none of which will be issued and outstanding. Other than (i) shares
of CenterPoint Common Stock issued pursuant to a split of the shares outstanding
as of the date of this Agreement, (ii) shares of CenterPoint Common Stock issued
in accordance with the Merger and the Other Mergers, and (iii) shares of
CenterPoint Common Stock that may be issued to new members of management in lieu
of shares previously issued to current members of management, but which will not
increase the number of shares of outstanding CenterPoint Common Stock, no shares
of CenterPoint Common Stock will be issued prior to the consummation of the IPO.
Each Mergersub's authorized capital stock consists solely of 100 shares of
common stock, par value $.01 per share (the "MERGERSUB STOCK"), all of which are
issued and outstanding, are owned free and clear of any Liens by CenterPoint ,
and are fully paid, nonassessable and free of pre-emptive rights.
VI.2.2 Except as set forth on Schedule 6.2, as of the date hereof,
------------
there are no outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement obligating CenterPoint to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock of CenterPoint
or obligating CenterPoint to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which CenterPoint is a party or is bound with respect to the
voting of any shares of capital stock of CenterPoint. The shares of CenterPoint
Common Stock issued to the Stockholders in the Merger will at the Closing Date
be duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights and issued pursuant to an effective registration statement as
required by the 1933 Act or an exemption thereof.
VI.2.3 The Notes have been duly authorized and when duly executed,
authenticated, issues and delivered will be duly and validly issued and
outstanding and will constitute the valid and legally binding obligations of
CenterPoint enforceable in accordance with their terms.
VI.3 No Subsidiaries. Except for CenterPoint's ownership of 100% of the
---------------
capital stock of Professional Service Group, Inc., a Delaware corporation and
Mergersubs (and similar entries created for similar purposes with respect to
other Agreements), CenterPoint has no subsidiaries
35
and it does not own any capital stock of any corporation or any equity or other
interest of any nature whatsoever in any Person.
VI.4 Authority; Non-Contravention; Approvals.
---------------------------------------
VI.4.1 Each of CenterPoint and each Mergersub has all requisite right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the Board
of Directors of CenterPoint and each Mergersub, and no other corporate
proceedings on the part of CenterPoint or each Mergersub are necessary to
authorize the execution and delivery of this Agreement or the consummation by
CenterPoint and each Mergersub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by CenterPoint and each Mergersub
and, assuming the due authorization, execution and delivery hereof by each of
the Companies and the Stockholders, constitutes a valid and legally binding
agreement of CenterPoint and each Mergersub, enforceable against each of them in
accordance with its terms, except that such enforcement may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
VI.4.2 The execution and delivery of this Agreement by CenterPoint and
each Mergersub do not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Lien upon
any of the properties or assets of CenterPoint or any Mergersub under any of the
terms, conditions or provisions of (i) the Certificate of Incorporation or By-
laws of CenterPoint or any Mergersub, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court or Governmental Authority applicable to CenterPoint or any Mergersub or
any of their respective properties or assets, or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which
CenterPoint or any Mergersub is now a party or by which CenterPoint, each
Mergersub or any of their respective properties or assets, may be bound or
affected. The consummation by CenterPoint or any Mergersub of the transactions
contemplated hereby will not result in any violation, conflict, breach, right of
termination or acceleration or creation of Liens under any of the terms,
conditions or provisions of the items described in clauses (i) through (iii) of
the immediately preceding sentence, subject, in the case of the terms,
conditions or provisions of the items described in clause (ii) above, to
obtaining (prior to the Closing Date) CenterPoint Required Statutory Approvals
(as defined in Section 6.4.3) and, in the case of the terms, conditions or
-------------
provisions of the items described in clause (iii) above, to obtaining (prior to
the Closing Date) consents required from commercial lenders, lessors or other
third parties.
VI.4.3 Except with respect to (i) the filing of the Registration
Statements with the SEC pursuant to the 1933 Act, the declaration of the
effectiveness of the Registration Statements
36
by the SEC and filings, if required, with various state securities or blue sky
authorities, and (ii) any filing which may be required under the HSR Act (the
filings and approvals referred to in clauses (i) through (iii) are collectively
referred to as the "CENTERPOINT REQUIRED STATUTORY APPROVALS") no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by CenterPoint or any Mergersub or the
consummation by CenterPoint or any Mergersub of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as the
case may be, are not reasonably expected to, in the aggregate, have a material
adverse effect on the business operations, properties, assets, condition
(financial or other), results of operations or prospects of CenterPoint and its
subsidiaries, taken as a whole (a "CENTERPOINT MATERIAL ADVERSE EFFECT").
VI.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
6.5, neither CenterPoint nor any Mergersub has incurred any liabilities or
---
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither CenterPoint nor any Mergersub has engaged in any
------------
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
VI.6 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the Knowledge of CenterPoint or Mergersub, threatened against,
relating to or affecting CenterPoint, before any court, Governmental Authority
or any arbitrator that seek to restrain or enjoin the consummation of the Merger
or the IPO or which could reasonably be expected, either alone or in the
aggregate with all such claims, actions or proceedings, to have a CenterPoint
Material Adverse Effect. CenterPoint is not subject to any unsatisfied or
continuing judgment, order or decree of any court or Governmental Authority.
CenterPoint is not a party to any legal action to recover monies due it or for
damages sustained by it.
VI.7 Compliance with Applicable Laws. Each of CenterPoint and each
-------------------------------
Mergersub has complied in all material respects with all Laws applicable to it,
and has not received any notice of any alleged claim or threatened claim,
violation of or liability or potential responsibility under any such Law which
has not heretofore been cured and for which there is no remaining liability and,
to the Knowledge of CenterPoint, no event has occurred or circumstances exist
that (with or without notice or lapse of time) may constitute or result in a
violation by CenterPoint or each Mergersub of any Law or may give rise to any
liability on the part of the CenterPoint or any Mergersub under any Law.
VI.8 No Misrepresentation. None of the representations and warranties of
--------------------
CenterPoint set forth in this Agreement or in any of the certificates,
schedules, lists, documents, exhibits, or other instruments delivered or to be
delivered to the Stockholders or any of the Companies as contemplated by any
provision hereof contains any untrue statement of a material fact or omits to
37
state a material fact necessary to make the statements contained herein or
therein not misleading. To the Knowledge of CenterPoint, there is no fact or
circumstance that has not been disclosed to the Companies herein that has or is
reasonably expected to have a CenterPoint Material Adverse Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
VII.1 Conduct of Business by the Companies Prior to the Effective Time.
----------------------------------------------------------------
VII.1 Except as otherwise contemplated by this Agreement and
Schedule 7.1, after the date hereof and prior to the Closing Date or earlier
------------
termination of this Agreement, unless CenterPoint shall otherwise agree in
writing, each of the Companies shall:
(a) in all material respects conduct its businesses in the ordinary
and usual course and consistent with past customs and practices;
(b) not (i) amend its Organizational Documents, (ii) split, combine
or reclassify its outstanding capital stock or (iii) declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise except dividends or distributions which (A) are consistent with
past customs and practices and (B) do not result in a Company Material
Adverse Effect;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of (i) any additional shares of, or any options, warrants
or rights of any kind to acquire any shares of, its capital stock or equity
interests of any class, (ii) any debt with voting rights or (iii) any debt
or equity securities convertible into or exchangeable for, or any rights,
warrants, calls, subscriptions, or options to acquire, any such capital
stock, debt with voting rights or convertible securities;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business in a manner consistent with past customs and practices,
(B) borrowings to refinance existing indebtedness on commercially
reasonable terms, or (C) liability related to placing insurance with
insurance companies and collecting premiums therefor in the ordinary course
of business, (ii) redeem, purchase, acquire or offer to purchase or acquire
any shares of its capital stock or equity interests or any options,
warrants or rights to acquire any of its capital stock or equity interests
or any security convertible into or exchangeable for its capital stock or
equity interests, (iii) sell, pledge, dispose of or encumber any assets or
businesses other than dispositions in the ordinary course of business in a
manner consistent
38
with past customs and practices or (iv) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(e) use commercially reasonable efforts to (i) preserve intact its
business organizations and goodwill, (ii) keep available the services of
its present officers and key employees, and (iii) preserve the goodwill and
business relationships with clients and others having business
relationships with it and not engage in any action, directly or indirectly,
with the intent to adversely impact the transactions contemplated by this
Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of materiality
and the general status of ongoing operations;
(g) not (i) increase in any manner the base compensation of, or enter
into any new bonus or incentive agreement or arrangement with, any of its
employees, partners, members or owners, except in the ordinary course of
business in a manner consistent with past customs and practices of such
Company, as applicable, (ii) pay or agree to pay any additional pension,
retirement allowance or other employee benefit under any Employee Plan to
any such Person, whether past or present, (iii) enter into any new
employment, severance, consulting, or other compensation agreement with any
of its existing employees, partners, members or owners, (iv) amend or enter
into a new Employee Plan (except as required by Law) or amend or enter into
a new collective bargaining agreement, or (v) engage in any new Affiliate
Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or indirectly,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any businesses or any Person or division
thereof or otherwise acquire or agree to acquire any assets in each case
which are material to it other than in the ordinary course of business in a
manner consistent with past customs and practices;
(j) not sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose of, any of its
assets;
(k) maintain with financially responsible insurance companies the
insurance described in Section 4.20 herein;
------------
(l) except as may be permitted by Section 7.1.1(b), maintain a level
----------------
of working capital consistent with historic levels and past customs and
practices; and
39
(m) collect and xxxx receivables in the ordinary and usual course and
consistent with past custom and practices.
VII.1.2 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Stockholders or the Companies
shall take any action that would or is reasonably likely to result in any of the
representations or warranties of the Stockholders or the Companies set forth in
this Agreement being untrue or in any of the conditions to the consummation of
the transactions contemplated hereunder set forth in Article X (other than
---------
Section 10.1(i)) not being satisfied.
---------------
VII.1.3 Prior to the Closing, the Companies, shall terminate,
without any liability to the Companies, all agreements relating to the voting of
the Companies' capital stock, and all agreements and obligations of the
Companies relating to borrowed money and/or involving payments to or for the
benefit of a Stockholder or former stockholder of the Companies, or an Affiliate
or family member of a Stockholder or former stockholder of the Company,
including without limitation those set forth on Schedule 7.13(a), but excluding
----------------
(A) those listed on Schedule 7.1.3(b), and (B) items approved by CenterPoint in
-----------------
writing.
VII.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or earlier
termination of this Agreement, each of the Companies and the Stockholders
shall (i) not, and each of the Companies shall use its diligent efforts to
cause any officer, director or employee of, or any attorney, accountant,
investment banker, financial advisor or other agent retained by any Company
not to, initiate, solicit, negotiate, encourage, or provide non-public or
confidential information to facilitate, any proposal or offer to acquire
all or any substantial part of the business and properties of any Company,
or any capital stock or other equity interest of any Company, whether by
merger, purchase of assets or otherwise, whether for cash, securities or
any other consideration or combination thereof, or enter into any joint
venture or partnership or similar arrangement, and (ii) promptly advise
CenterPoint of the terms of any communications any Company or the
Stockholders may receive or become aware of relating to any bid for part or
all of any Company.
(b) The Company and the Stockholders (i) acknowledge that a breach of
any of their covenants contained in this Section 7.2 will result in
-----------
irreparable harm to CenterPoint which will not be compensable in money
damages; and (ii) agree that such covenant shall be specifically
enforceable and that specific performance and injunctive relief shall be a
remedy properly available to the other party for a breach of such covenant.
VII.3 Schedules. Each party hereto agrees that with respect to the
---------
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all
40
the schedules to this Agreement (the "SCHEDULES") to correct any matter which
would constitute a breach of any such party's representations and warranties
herein; provided, however, that no amendment or supplement to a Schedule that
--------
constitutes or reflects a Company Material Adverse Effect or affects Schedule
--------
4.2, Schedule 4.4 or Schedule 8.8 may be made unless CenterPoint and a majority
--- ------------ ------------
of the Founding Companies consent to such amendment or supplement. No amendment
or supplement to a Schedule shall be made later than three (3) business days
prior to the anticipated effectiveness of the Form S-1. For all purposes of this
Agreement, including, without limitation, for purposes of determining whether
the conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
------------- ----
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) any Company seeks to amend
-----------
or supplement a Schedule pursuant to this Section 7.3, (ii) such amendment or
-----------
supplement constitutes or reflects a Company Material Adverse Effect or affects
Schedule 4.2, Schedule 4.4 or Schedule 8.8, and (iii) CenterPoint and a majority
------------ ------------ ------------
of the Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
-----------
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to a breach of a representation or warranty as
of the date of this Agreement in which case the Companies shall pay to
CenterPoint as an exclusive remedy (notwithstanding anything to the contrary)
and as liquidated damages, and not as a penalty, an amount equal to $2,000,000
(the "LIQUIDATED DAMAGES AMOUNT"). Each of the Companies agrees that in the case
of such termination, CenterPoint and the Founding Companies will sustain
immediate and irreparable economic harm and loss of goodwill and that actual
losses suffered by such parties will be difficult, if not impossible, to
ascertain, but the Liquidated Damages Amount set forth herein is reasonable and
has been arrived at after a good faith effort to estimate such losses. Payment
of the Liquidated Damages Amount shall be made in cash to CenterPoint within
thirty (30) days of a termination pursuant to this Section 7.3 in connection
-----------
with an amendment of or supplement to a Schedule relating to a breach of a
representation or warranty as of the date of this Agreement.
VIII.4 Company Stockholder Meeting. The Company shall take all action in
---------------------------
accordance with applicable laws and its Organizational Documents necessary to
duly call, give notice of, convene and hold a meeting of the Stockholders to be
held on the earliest practicable date determined in consultation with
CenterPoint to consider and vote upon approval of the Merger, this Agreement and
the transactions contemplated hereby by the Stockholders, and the Company's
Board of Directors or Managers shall recommend approval of the Merger, this
Agreement and the transactions contemplated hereby by the Stockholders.
ARTICLE VII
ADDITIONAL AGREEMENTS
41
VIII.1 Access to Information.
---------------------
VIII.1.1 Each of the Companies shall afford to CenterPoint and its
accountants, counsel, financial advisors and other representatives, including
without limitation the underwriters engaged in connection with the IPO (each an
"UNDERWRITER" and collectively, the "UNDERWRITERS") and their counsel
(collectively, the "CENTERPOINT REPRESENTATIVES"), and to the Founding
Companies and their accountants, counsel, financial advisors and other
representatives, and CenterPoint shall afford to the Stockholders and each of
the Companies and their accountants, counsel, financial advisors and other
representatives (the "COMPANY REPRESENTATIVES"), upon reasonable notice, full
access during normal business hours throughout the period prior to the Closing
Date to all of its respective properties, books, contracts, commitments and
records (including, but not limited to, financial statements and Tax Returns)
and, during such period, shall furnish promptly to one another all due diligence
information requested by the other party. CenterPoint shall hold and shall use
its best efforts to cause the CenterPoint Representatives to hold, and the
Stockholders and each of the Companies shall hold and shall use their best
efforts to cause the Company Representatives to hold, in strict confidence all
non-public information furnished to it in connection with the transactions
contemplated by this Agreement, except that each of CenterPoint, the
Stockholders and each of the Companies may disclose any information that it is
required by law or judicial or administrative order to disclose. In addition,
CenterPoint will cause each of the other Founding Companies and their members
and stockholders to enter into a provision similar to this Section 8.1 requiring
-----------
each such Founding Company to keep confidential any information obtained by such
Founding Company in connection with the transactions contemplated by this
Agreement.
VIII.1.2 In the event that this Agreement is terminated in
accordance with its terms, each party shall promptly return to the disclosing
party all non-public written material provided pursuant to this Section 8.1 or
-----------
pursuant to the Other Agreements and shall not retain any copies, extracts or
other reproductions of such written material. In the event of such termination,
all documents, memoranda, notes and other writings prepared by CenterPoint or
any Company based on the information in such material shall be destroyed (and
CenterPoint and each of the Companies shall use their respective reasonable best
efforts to cause their advisors and representatives to similarly destroy such
documents, memoranda and notes), and such destruction (and reasonable best
efforts) shall be certified in writing by an authorized officer supervising such
destruction.
VIII.2 Registration Statements.
-----------------------
42
VIII.2.1 Subject to the reasonable discretion of CenterPoint as
advised by the lead Underwriter, CenterPoint shall file with the SEC as soon as
is reasonably practicable after the date hereof the Registration Statements and
shall use all reasonable efforts to have the Registration Statements declared
effective by the SEC as promptly as practicable. CenterPoint shall also take any
action required to be taken under applicable state "blue sky" or securities laws
in connection with the issuance of CenterPoint Common Stock. CenterPoint, each
of the Companies and the Stockholders shall promptly furnish to each other all
information, and take such other actions, as may reasonably be requested in
connection with making such filings. All information provided and to be provided
by CenterPoint and each of the Companies, respectively, for use in the
Registration Statements shall be true and correct in all material respects
without omission of any material fact which is required to make such information
not false or misleading as of the date thereof and in light of the circumstances
under which given or made. Each of the Companies and the Stockholders agrees
promptly to advise CenterPoint if at any time during the period in which a
prospectus relating to the offering of the Merger is required to be delivered
under the Securities Act, any information contained in the prospectus concerning
each of the Companies, or the Stockholders becomes incorrect or incomplete in
any material respect, and to provide the information needed to correct such
inaccuracy or remedy such incompletion.
VIII.2.2 CenterPoint agrees that it will provide to the Companies and
its counsel copies of drafts of the Registration Statements (and any amendments
thereto) containing material changes to the information therein as they are
prepared and will not (i) file with the SEC, (ii) request the acceleration of
the effectiveness of or (iii) circulate any prospectus forming a part of, the
Registration Statements (or any amendment thereto) unless the Companies and
their counsel (x) have had at least two days to review the revised information
contained therein (which changes shall be highlighted by computer generated
marks indicating the additions and deletions made from the prior draft reviewed
by the Companies' counsel) and (y) have not objected to the substance of the
information contained therein. Any objections posed by the Companies or their
counsel shall be in writing and state with specificity the material in question,
the reason for the objection, and the Companies' proposed alternative. If the
objection is founded upon a rule promulgated under the Securities Act, the
objection shall cite the rule. Notwithstanding the foregoing, during the five
(5) business days immediately preceding the date scheduled for the filing of the
Registration Statements and any amendment thereto, the Companies and their
counsel shall be obligated to respond to proposed changes electronically
transmitted to them within two (2) hours from the time the proposed changes (in
the case of the initial filing of the Registration Statements, from the last
circulated draft of the Registration Statements; and, in the case of any
subsequent filing of the Registration Statements or any amendment thereof, from
the most recently filed Registration Statements or amendment thereof) are
transmitted to the Companies' counsel; provided, that, CenterPoint has provided
to the Companies or their counsel reasonable advance notice of such proposed
changes; provided, further, that such changes are highlighted by computer
generated marks indicating the additions and deletions made from the prior draft
reviewed by the Companies' counsel.
43
VIII.2.3 CenterPoint will advise the Stockholder Representative of
the effectiveness of the Registration Statements, advise the Stockholder
Representative of the entry of any stop order suspending the effectiveness of
the Registration Statements or the initiation of any proceeding for that
purpose, and, if such stop order shall be entered, use its best efforts promptly
to obtain the lifting or removal thereof. Upon the written request of any
Stockholder, Cornerstone will furnish to such Stockholder a reasonable number of
copies of the final prospectus associated with the IPO.
VIII.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of
-----------------
the independent public accountants and legal counsel to CenterPoint and all
filing, printing and other reasonable, documented fees and expenses associated
with the IPO and Form S-4. Neither the Companies nor the Stockholders will be
liable for any portion of the above expenses in the event the IPO is not
completed. CenterPoint shall also pay the underwriting discounts and commissions
payable in connection with the sale of CenterPoint Common Stock in the IPO.
Subject to Sections 8.11 and 11.2, all other costs and expenses incurred in
-------------
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses; provided, however, that CenterPoint
shall pay the fees and expenses of Xxxxx Capital Advisors, LLC described in
Schedule 15.1 in connection with the Merger.
-------------
VIII.4 Agreement to Cooperate. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
VIII.5 Public Statements. Except as may be required by law, no party
-----------------
hereto nor any Affiliate of any party hereto shall issue any press release or
any written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of CenterPoint and each of the Companies.
44
VIII.6 Registration Rights.
-------------------
VIII.6.1 At any time after the second anniversary but prior to the
fourth anniversary of the Closing Date, whenever CenterPoint proposes to
register any CenterPoint Common Stock for its own account or the account of
others under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions, CenterPoint
will give each of the Stockholders prompt written notice of its intent to do so.
Upon the written request of any of the Stockholders given within thirty (30)
days, CenterPoint will use its best efforts to cause to be included in such
registration all of the CenterPoint Common Stock which any such Stockholder
requests, provided that CenterPoint shall have the right to reduce the number of
shares included in such registration, if CenterPoint is advised in writing in
good faith by any managing underwriter of the securities being offered pursuant
to any registration statement under this Section 8.6 that the number of shares
-----------
to be sold by Persons other than CenterPoint is greater than the number of such
shares which can be offered without adversely affecting the offering; in such
case, CenterPoint may reduce the number of shares offered for the accounts of
such Persons to a number deemed satisfactory by such managing underwriter. Any
such reduction shall occur first by eliminating from such registration any
shares held by Persons other than Persons holding CenterPoint Common Stock
directly or indirectly immediately following the Closing and then reducing pro
rata (based upon the number of shares requested to be registered) the number of
shares offered for the account of such Person. CenterPoint shall not be
obligated to register any shares of CenterPoint Common Stock held by any
Stockholder at any time when such shares are not then transferable in accordance
with Section 12.2. Registration rights under this Section 8.6 may be transferred
------------ -----------
in whole or in part in connection with the transfer of any shares of CenterPoint
Common Stock received pursuant to this Agreement other than the transfer of the
kind described in clause (x) of Section 12.2 hereof.
-------------
VIII.6.2 Except for underwriting commissions and discounts, all
expenses incurred in connection with the registrations under this Section 8.6
-----------
(including all registration, filing, qualification, legal, printer and
accounting fees) shall be paid by CenterPoint. In connection with registrations
under this Section 8.6, CenterPoint shall
-----------
(a) use its best efforts to prepare and file with the SEC as soon
as reasonably practicable, a registration statement with respect to the
CenterPoint Common Stock (and such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be required by applicable law) and use its best efforts to cause such
registration to promptly become and remain effective for a period of at
least one hundred twenty (120) days (or such shorter period during which
holders shall have sold all CenterPoint Common Stock which they requested
to be registered);
(b) upon the written request of a Stockholder whose CenterPoint
Common Stock is to be covered by any such registrations, furnish to such
Stockholder a reasonable number of copies of the prospectus covering the
offering and sale by the Stockholder of the shares to be covered thereby;
45
(c) use its best efforts to register and qualify the CenterPoint
Common Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the
distribution for the CenterPoint Common Stock;
(d) take such other actions as are reasonable and necessary to
comply with the requirements of the 1933 Act and the regulations
thereunder;
(e) advise each Stockholder whose CenterPoint Common Stock is to
be covered by such registration of the effectiveness of such registration
statement, advise each such Stockholder of the entry of any stop order
suspending the effectiveness of such registration statement or of the
initiation of any proceeding for that purpose, and, if such stop order
shall be entered, use its best efforts promptly to obtain the lifting or
removal thereof; and
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify each
Stockholder whose CenterPoint Common Stock is to be covered by such
registration of the happening of any event as a result of which the
registration statement, the prospectus or any document incorporated
therein by reference includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary
to make the statements made therein not misleading and, at the request of
such Stockholder, prepare and furnish to such Stockholder a post-effective
amendment or supplement to the registration statement or the related
prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers
of such shares, such prospectus shall not include any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein not misleading.
VIII.6.3 In connection with each registration pursuant to this
Section 8.6 covering an underwritten registration public offering, CenterPoint
-----------
and each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of CenterPoint's size and investment
stature, including indemnification.
VIII.6.4 In consideration of the granting to the Stockholders of
the registration rights under this Section 8.6, the Stockholders agree, and
-----------
agree to enter into an agreement with the underwriters in connection with an
underwritten registration to the effect, that they will not sell, transfer or
otherwise dispose of, including, without limitation, through put or short sale
arrangements, shares of CenterPoint Common Stock in the ten (10) days prior to
the effectiveness of any registration of CenterPoint Common Stock for sale to
the public and for up to ninety (90) days following the effectiveness of such
registration, provided that all directors,
46
executive officers and holders of more than five percent (5%) of the outstanding
CenterPoint Common Stock agree to the same restrictions; and further provided
that, with respect to the first public offering of shares of the CenterPoint
Common Stock within three (3) years following the IPO, the Stockholders shall
have been afforded a meaningful opportunity to include shares in such
registration after any reduction by reason of underwriters' written advice.
VIII.7 CenterPoint Covenants. After the date hereof and prior to the
---------------------
Closing Date or earlier termination of this Agreement in accordance with its
terms, CenterPoint shall comply in all material requests with all applicable
laws. CenterPoint shall not take any action that would or is reasonably likely
to result in any of the representations or warranties of CenterPoint set forth
in this Agreement being untrue or in any of the conditions to the consummation
of the transactions contemplated hereunder set forth in Article X not being
---------
satisfied.
VIII.8 Release of Guarantees. CenterPoint shall use all commercially
---------------------
reasonable efforts and good faith to have the Stockholders released from any and
all guarantees on any indebtedness and leases that they personally guaranteed
for the benefit of the Company as set forth on Schedule 8.8, with all such
------------
guarantees on indebtedness and leases being assumed by CenterPoint, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full with
proceeds from the IPO and the Stockholders' guarantees thereafter shall have no
further force and effect, then CenterPoint shall not be obligated to use any
efforts to obtain release of such guarantee. In the event that CenterPoint
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, CenterPoint agrees to indemnify, defend and
hold harmless the Stockholders against any and all claims made by lenders or
landlords under such guarantees.
VIII.9 Lock-Up Agreement. Each Stockholder agrees, and agrees to enter
-----------------
into an agreement with the Underwriter on or prior to the date on which
preliminary Prospectuses are delivered to the effect that, the Stockholder will
not offer, sell, contract to sell or otherwise dispose of any shares of
CenterPoint Common Stock, or any securities convertible into or exercisable or
exchangeable for CenterPoint Common Stock, for a period of 180 days after the
date of the final Prospectus for the IPO without the prior written consent of
the Underwriter except for shares of CenterPoint Common Stock disposed of as
bona fide gifts, subject to any remaining portion of the 180-day period applying
to any shares so disposed of.
VIII.10 Preparation and Filing of Tax Returns.
-------------------------------------
VIII.10.1 Each Company shall be responsible for causing the timely
filing of the final pre-Closing Returns for such Company; provided however, that
CenterPoint and its advisors shall have the right to review and approve such
returns prior to filing, which approval shall not be unreasonably withheld.
CenterPoint shall, and shall cause its Affiliates to, provide to each Company
such cooperation and information as any of them reasonably requested in filing
any return, amended return or claim for refund, determining a liability for
Taxes or a right to refund
47
of Taxes or in conducting any audit or other proceeding in respect of Taxes.
Each Company shall bear all costs of filing such returns.
VIII.10.2 Each of the Company, CenterPoint and the Stockholders
shall comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and shall treat the transaction
as subject to the provisions of Section 351 of the Code.
VIII.11 Insurance. Each Company covenants and agrees that all insurance
---------
policies listed, or required to be listed, on Schedule 4.20 will be maintained
-------------
in full force and effect through the Closing Date. Each Company will purchase
directors' and officers' liability and errors and omissions insurance (or
maintain its existing insurance) for the Company and its Stockholders for a
period of five (5) years after the Closing Date or provide comparable coverage
providing at least the same benefits as those coverage amounts and deductibles
for other agencies similarly situated in the insurance industry. CenterPoint
shall cause Xxxxxx X. Driver Co., Inc. to bear one-half of the expense of such
insurance.
VIII.12 Management by Xxxxxx X. Driver Co., Inc. Each of the Companies
----------------------------------------
acknowledges that its day-to-day management and operations shall be governed and
supervised by Xxxxxx X. Driver Co., Inc. or as otherwise provided by
CenterPoint.
VIII.13 Name of Companies. CenterPoint shall cause the Companies to be
-----------------
operated under a name in which "Xxxxxxx" is equally as prominent or more
prominent than "Driver" if the name "Driver" is used to describe the Company.
ARTICLE IX
INDEMNIFICATION
IX.1 Indemnification by the Stockholders. Subject to Sections 9.7 and 9.8,
----------------------------------- ------------ ---
each Stockholder jointly and severally (with respect to the Company in which it
formerly held an equity interest) agrees to indemnify, defend and save the
CenterPoint Indemnified Parties (hereinafter defined), forever harmless from and
against, and to promptly pay to a CenterPoint Indemnified Party or reimburse a
CenterPoint Indemnified Party for, any and all Losses (hereinafter defined)
sustained or incurred by any CenterPoint Indemnified Party resulting from,
arising out of, in connection with or otherwise by virtue of:
(a) any misrepresentation or breach of a representation or warranty
made by such Stockholder in Article V herein or in any certificate,
---------
schedule, document, exhibit or other instrument delivered hereunder by such
Stockholder or any action, demand or claim
48
by any third party against or affecting any CenterPoint Indemnified Party
which, if successful, would give rise to a breach of any such
representation or warranty;
(b) any failure by such Company or such Stockholder to observe or
perform any of their covenants and agreements set forth herein related to
the period prior to the Closing period, except that the obligation of the
Stockholders to indemnify, defend and hold harmless for any failure to
observe or perform any covenant or agreement shall not be joint and
several, but such obligation shall be several only and limited to the
several Stockholder(s) failing to observe or perform such covenant or
agreement;
(c) any liability under the 1933 Act, the 1934 Act or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to such Company, contained in any preliminary prospectus
relating to the IPO, the Registration Statements or any proxy statement or
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission to state therein a
material fact relating to such Company required to be stated therein or
necessary to make the statements therein not misleading, and not provided
to CenterPoint or its counsel by any Company; provided, however, that such
indemnity shall not inure to the benefit of any CenterPoint Indemnified
Party to the extent that such untrue statement (or alleged untrue
statement) was made in, or omission (or alleged omission) occurred in, any
preliminary prospectus and (i) any Company provided, in writing, corrected
information to CenterPoint or its counsel for inclusion in the final
prospectus prior to distributing such prospectus, and such information was
not so included, or (ii) CenterPoint did not provide the Companies and
their counsel with the information required to be provided pursuant to
Section 8.2.2, and such information is the basis for the untrue statement
-------------
or omission (or alleged untrue statement or omission) giving rise to the
liability under this Section 9.1(c); or
--------------
(d) (i) any arrangements made by or on behalf of such Stockholder or
such Company in connection with the Merger or the transactions contemplated
by this Agreement with respect to brokerage, finders and other fees or
commissions except as set forth in Section 8.3, (ii) any Loss relating to,
-----------
resulting from, arising out of or otherwise by virtue of any matter which
is or should be listed on Schedule 4.10 hereto and (iii) any payment with
-------------
respect to Dissenting Shares.
As used herein, the "CENTERPOINT INDEMNIFIED PARTIES" shall mean
CenterPoint, its Subsidiaries and Affiliates, the Founding Companies (excluding
the Companies), and their respective officers, directors, employees, agents,
employee plans and plan fiduciaries, plan administrators or other Person dealing
with any such plans; provided, however, that the Founding Companies, and each of
their respective officers, directors, employees, agents, employee plans and plan
fiduciaries, plan administrators or other Persons dealing with any such plans,
shall cease to be a "CENTERPOINT INDEMNIFIED PARTY" for all purposes hereunder
as of the Closing, and thereafter such Persons shall have no further rights and
remedies under this Article IX (except to
----------
49
the extent a Person is an officer, director, employee or agent of CenterPoint as
a result of the consummation of the transactions contemplated under the Other
Agreements); provided, further that the subsidiaries of CenterPoint shall
include the Companies and the Founding Companies from and after the Closing.
Accordingly, for purposes of this Article IX and subject to the limitations set
----------
forth in this Article IX, the Founding Companies, and each of their respective
----------
officers, directors, employees, agents, employee plans and plan fiduciaries,
plan administrators or other Persons dealing with any such plans, shall be
deemed to be third party beneficiaries of this Agreement.
As used in this Agreement, "LOSSES" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
------------
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interests, fines, penalties, actual or punitive damages or
costs or expenses of any and all investigations, proceedings, judgments, orders,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of the attorneys, accountants and other experts).
IX.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
------------------------------
defend and save each of the Stockholders, the Companies and their respective
Affiliates, and their Affiliates respective officers, directors, employees and
agents (each, a "STOCKHOLDER INDEMNIFIED PARTY") forever harmless from and
against, and to promptly pay to a Stockholder Indemnified Party or reimburse a
Stockholder Indemnified Party for, any and all Losses sustained or incurred by
any Stockholder Indemnified Party relating to, resulting from, arising out of or
otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in any document or other instrument delivered hereunder by
CenterPoint or any action, demand or claim by any third party against or
affecting any Stockholder Indemnified Party which, if successful, would
give rise to a breach of any such representation or warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder;
(c) any liability under the 1933 Act, the 1934 Act or other Federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to CenterPoint or any of the Founding Companies contained in
any preliminary prospectus relating to the IPO, the Registration Statements
or any proxy statement or prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon
any
50
omission or alleged omission to state therein a material fact relating to
CenterPoint or any of the Other Founding Companies required to be stated
therein or necessary to make the statements therein not misleading; or
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to any of the Companies or the Stockholders, contained in any
preliminary prospectus relating to the IPO, the Registration Statements or
any proxy statement or prospectus forming a part thereof, or any amendment
thereof or supplement thereto, or arising out of or based upon any omission
to state therein a material fact relating to any of the Companies or the
Stockholders required to be stated therein or necessary to make the
statements therein not misleading, to the extent such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and (i) the Companies or
Stockholders provided, in writing, corrected information to CenterPoint or
its counsel for inclusion in the final prospectus prior to distributing
such prospectus, and such information was not so included, or (ii)
CenterPoint did not provide the Companies and their counsel with the
information required to be provided pursuant to Section 8.2.2, and such
-------------
information is the basis for the untrue statement or omission (or alleged
untrue statement or omission) giving rise to the liability under this
Section 9.2(d).
-------------
IX.3 Indemnification Procedure for Third Party Claims.
------------------------------------------------
51
IX.3.1 In the event that subsequent to the Closing any Person entitled
to indemnification under this Agreement (an "INDEMNIFIED PARTY") receives
notice of the assertion of any claim, issuance of any order or the commencement
of any action or proceeding by any Person who is not a party to this Agreement
or an Affiliate of a party, including, without limitation, any domestic or
foreign court or Governmental Authority (a "THIRD PARTY CLAIM"), against such
Indemnified Party, against which a party to this Agreement is required to
provide indemnification under this Agreement (an "INDEMNIFYING PARTY"), the
Indemnified Party shall give written notice thereof together with a statement of
any available information regarding such claim to the Indemnifying Party within
thirty (30) days after learning of such claim (or within such shorter time as
may be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to the
Indemnified Party (the "DEFENSE NOTICE") within ten days (10) after receipt
from the Indemnified Party of notice of such claim, to conduct at its expense
the defense against such claim in its own name, or if necessary in the name of
the Indemnified Party; provided, however, that the Indemnified Party shall have
the right to approve the defense counsel selected by the Indemnifying Party,
which approval shall not be unreasonably withheld, and in the event the
Indemnifying Party and the Indemnified Party cannot agree upon such counsel
within ten (10) days after the Defense Notice is provided, then the Indemnifying
Party shall propose an alternate defense counsel, who shall be subject again to
the Indemnified Party's approval.
IX.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct the
defense of the subject claim, and in such event the Indemnified Party shall have
the right to conduct such defense in good faith at the cost and expense of the
Indemnifying Party and the Indemnifying Party shall reimburse the Indemnified
Party for all costs, expenses and settlement amounts actually paid in connection
therewith provided, however, that under no circumstances shall the Indemnified
-------- -------
Party compromise or settle any Third Party Claim without the prior written
consent of the Indemnifying Party (which, in the case of the Stockholders, may
be granted by the Stockholder Representative (as defined in Section 9.13)),
------------
which consent shall not be unreasonably withheld or delayed.
IX.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with and
make available to the Indemnifying Party such assistance and materials as may be
reasonably requested by it, all at the expense of the Indemnifying Party, and
the Indemnified Party shall have the right at its expense to participate in the
defense assisted by counsel of its own choosing, provided that the Indemnified
Party shall have the right to compromise and settle the claim only with the
prior written consent of the Indemnifying Party (which, in the case of the
Stockholders, may be granted by the Stockholder Representative (as defined in
Section 9.13)), which consent shall not be unreasonably withheld or delayed.
------------
Without the prior written consent of the Indemnified Party, the Indemnifying
Party will not enter into any settlement of any Third Party Claim or cease to
defend against such claim, if pursuant to or as a result of such settlement or
cessation, (i) injunctive or other equitable
52
relief would be imposed against the Indemnified Party, or (ii) such settlement
or cessation would lead to liability or create any financial or other obligation
on the part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder, or (iii) such settlement includes a
written admission of guilt. The Indemnifying Party shall not be entitled to
control, and the Indemnified Party shall be entitled to have sole control over,
the defense or settlement of any claim (A) to the extent that claim seeks an
order, injunction or other equitable relief against the Indemnified Party which,
if successful, could materially interfere with the business, operations, assets,
condition (financial or otherwise) or prospects of the Indemnified Party or (B)
in a proceeding to which the Indemnifying Party is also a party and the
Indemnified Party determines in good faith that joint representation would be
inappropriate (and in each case the cost of such defense shall constitute an
amount for which the Indemnified Party is entitled to indemnification
hereunder). If an offer is made to settle a Third Party Claim which all parties
to such Third Party Claim (including the Indemnifying Party) are prepared to
settle and which offer the Indemnifying Party is permitted to settle under this
Section 9.3.3 only upon the prior written consent of the Indemnified Party, the
-------------
Indemnifying Party will give prompt written notice to the Indemnified Party to
that effect. If the Indemnified Party fails to consent to such firm offer within
thirty (30) calendar days after its receipt of such notice, the Indemnified
Party may continue to contest or defend such Third Party Claim and, in such
event, the maximum liability of the Indemnifying Party as to such Third Party
Claim will not exceed the amount of such settlement offer, plus costs and
expenses paid or incurred by the Indemnified Party through the end of such
thirty (30) day period.
IX.3.4 Any judgment entered, order issued or settlement agreed upon
in the manner provided herein shall be binding upon the Indemnifying Party, and
shall conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
IX.4 Direct Claims. It is the intent of the parties hereto that all direct
-------------
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this Article IX.
----------
Any claim under this Article IX by an Indemnified Party for indemnification
----------
other than indemnification against a Third Party Claim, (a "DIRECT CLAIM")
will be asserted by giving the Indemnifying Party reasonably prompt written
notice thereof, together with a statement of any available information regarding
such claim, and the Indemnifying Party will have a period of thirty (30)
calendar days within which to satisfy such Direct Claim. If the Indemnifying
Party does not so respond within such thirty (30) calendar day period, the
Indemnifying Party will be deemed to have rejected such claim, in which event
the Indemnified Party will be free to pursue such remedies as may be available
to the Indemnified Party under this Article IX.
----------
IX.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
-----------------------------
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
----------- ---
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure,
53
any party entitled to receive such notice was deprived of its right to recover
any payment under any applicable insurance coverage, or deprived of its right to
assert any claim because of expiration of the applicable statute of limitations,
or was otherwise directly and materially damaged as a result of such failure to
give timely notice.
IX.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
-----------------
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment), (ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the extent of amounts theretofore paid by the
Indemnifying Party on account of such Loss) shall be promptly paid over to the
Indemnifying Party.
IX.7 Limitation on Indemnities.
-------------------------
IX.7.1 Threshold for the Stockholders. With respect to
------------------------------
representations and warranties, the Stockholders of any Company shall not have
any liability pursuant to Section 9.1(a) hereof unless and until and only to the
--------------
extent that the aggregate amount of Losses accrued pursuant to Section 9.1(a)
-------------
exceeds 1% of the aggregate of the Stockholder's Note and Stock Purchase
Consideration for all stockholders or members of such Company; provided,
however, that this threshold shall not apply to Losses arising out of breaches
of representations or warranties contained in Sections 5.1.1, 5.1.2, 5.2 and
-------------- ----- ---
5.1.8 as it relates to the representation and warranty of the Companies set
-----
forth in Sections 4.8(b) and 4.16, and the Stockholders shall indemnify the
--------------- ----
CenterPoint Indemnified Parties for any Losses accruing thereunder in accordance
with this Article IX without regard to such threshold.
----------
IX.7.2 Threshold for CenterPoint. With respect to representations
-------------------------
and warranties, CenterPoint shall not have any liability to the stockholders or
members of any Company pursuant to Section 9.2(a) hereof unless and until and
--------------
only to the extent that the aggregate amount of the Losses accrued pursuant to
Section 9.2(a) exceeds 1% of the aggregate of the Stockholder's Note and Stock
-------------
Purchase Consideration for all stockholders or members of such Company;
provided, however, that this threshold shall not apply to Losses arising out of
-------- -------
the breach of representations
54
or warranties contained in Section 6.2 and CenterPoint shall indemnify the
-----------
Stockholder Indemnified Parties from any Losses occurring thereunder in
accordance with this Article IX without regard to such threshold.
----------
IX.7.3 Limitations on Claims Against the Stockholders. Each
----------------------------------------------
Stockholder's liability for misrepresentations and breaches of representations
and warranties under Section 9.1(a) with respect to itself and any Company in
-------------
which it owns an equity interest shall be limited to 100% of the Stockholder's
Note and Stock Purchase Consideration with respect to such Company; provided,
--------
however, that such limitations shall not apply to Losses arising out of breaches
-------
of representations or warranties contained in Sections 5.1.1, 5.1.2, 5.2, and
-------------- ----- ---
5.1.8 as it relates to the representation and warranty of the Companies set
-----
forth in Section 4.16, and any Losses accruing thereunder shall not count
------------
towards such limitations.
IX.7.4 Limitation on Claims Against CenterPoint. The liability of
----------------------------------------
CenterPoint to any Stockholder under Section 9.2(a) shall be limited to 100% of
--------------
the Stockholder's Note and Stock Purchase Consideration payable to all of the
stockholders or members of the Company in which such Stockholder previously held
an equity interest; provided, however, that this limitation shall not apply to
-------- -------
Losses arising out of breaches of representations or warranties in Section 6.2
-----------
and any Losses accruing thereunder shall not count towards such limitation.
IX.8 Survival of Representations, Warranties and Covenants of the
------------------------------------------------------------
Stockholders and the Companies; Time Limits on Indemnification Obligations.
--------------------------------------------------------------------------
Notwithstanding any right of CenterPoint to fully investigate the affairs of any
of the Companies or the Businesses, and notwithstanding any Knowledge of facts
determined or determinable by CenterPoint pursuant to such investigation or
right of investigation, CenterPoint has the right to rely fully upon the
representations, warranties, covenants and agreements of the Companies and the
Stockholders contained in this Agreement or in any certificate delivered
pursuant to any of the foregoing. All such representations, warranties,
covenants and agreements of the Stockholders and each of the Companies shall
survive the execution and delivery of this Agreement and the Closing hereunder;
provided, however, (i) that the Stockholders' obligations pursuant to Section
-------
9.1, other than those relating to covenants and agreements to be performed by
---
the Stockholders after the Closing, shall expire one (1) year after the Closing,
except with respect to obligations arising under or relating to Section 4.16
------------
hereof as it relates to federal, state, local and foreign income taxation, which
shall survive until the earlier of (A) the expiration of the applicable periods
(including any extensions) of the respective statutes of limitation applicable
to the payment of the Taxes or (B) the completion of the final audit and
determinations by the applicable taxing authority and final disposition of any
deficiency resulting therefrom; and (ii) solely to the extent that CenterPoint
actually incurs liability under the 1933 Act or the 1934 Act, the obligations
under Sections 9.1(c) or (d) above shall survive until the expiration of any
-------------- ---
applicable statute of limitations with respect to such claims.
IX.9 Survival of Representations, Warranties and Covenants of CenterPoint;
---------------------------------------------------------------------
Time Limits on Indemnification Obligations. Notwithstanding any right of the
------------------------------------------
Companies or the
55
Stockholders to fully investigate the affairs of CenterPoint, and
notwithstanding any Knowledge of facts determined or determinable by the
Companies or the Stockholders pursuant to such investigation or right of
investigation, the Companies and the Stockholders have the right to rely fully
upon the representations, warranties, covenants and agreements of CenterPoint
contained in this Agreement or in any certificate delivered pursuant to any of
the foregoing. All representations, warranties, covenants and agreements of
CenterPoint shall survive the execution and delivery of this Agreement and the
Closing hereunder; provided, however, that CenterPoint' obligations under
-------- -------
Section 9.2, other than those relating to covenants and agreements to be
-----------
performed by CenterPoint after the Closing, shall expire one year after Closing,
except that, solely to the extent that the Stockholders or Stockholder
Indemnified Party actually incur liability under the 1933 Act or the 1934 Act,
the obligations under Sections 9.2(c) or (d) above shall survive until the
-------------- ---
expiration of any applicable statute of limitations with respect to such claims.
IX.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
-----------------------------------------
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would exceed the Indemnifying Party's indemnity
obligations under this Agreement, the Indemnified Party shall be entitled to
control the defense of such claim or management of such proceeding with respect
to such excess Loss.
IX.11 Fraud; Exclusive Remedy. The limitations set forth in this Article
----------------------- -------
IX shall not apply to fraud by any party. In the absence of fraud and
--
notwithstanding any law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
----------
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Stockholders and of the Stockholder
Indemnified Parties following the Closing against CenterPoint and its affiliates
with respect to any claim for relief resulting from, arising out of or otherwise
by virtue of this Agreement and the transactions contemplated hereby.
IX.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
------------------------------------------------
Closing, the Stockholders may satisfy their respective obligations, if any,
under this Article IX by (i) agreeing to reduce the principal to be paid under
----------
the Notes, or (ii) tendering to the CenterPoint Indemnified Parties cash or
shares of CenterPoint Common Stock that are then transferable in accordance with
Section 12.2, such shares to be valued at the Market Price. "MARKET PRICE" shall
------------
mean the average closing (last) price for a share of CenterPoint Common Stock
(as reported on the exchange or market on which such shares are then listed or
traded) for the most recent twenty (20) days that such shares have traded ending
on the date two (2) days prior to the date tendered pursuant to clause (ii) of
the preceding sentence, or, if such shares are not then listed or traded on an
exchange or other market, the fair market value of such shares as determined by
an appraiser reasonably agreed to by the parties.
IX.13 Stockholders' Representative. Each Stockholder appoints Xxx Xxxxxxx
----------------------------
(the "STOCKHOLDER REPRESENTATIVE") as its agent and representative with full
power and authority to agree, contest or settle any claim or dispute affecting
any Stockholder made under Articles II or
-----------
56
IX and to otherwise act on behalf of the Stockholders in accordance with the
--
terms of this Agreement including, without limitation, to direct the amount and
manner of the payment of the Stockholder's Note and Stock Purchase
Consideration; provided, that the Stockholder Representative may be removed and
a successor to the Person originally serving as the Stockholder Representative
may be designated in a writing signed by a majority in interest of the
Stockholders and delivered to CenterPoint in accordance with Section 15.2.
------------
ARTICLE X
CLOSING CONDITIONS
X.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
-----------
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending or issued by any federal or state court which seeks to
prevent or prevents the consummation of the IPO, the Merger or any of the
Other Mergers shall have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1(d) shall
---------------
have been satisfied.
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Merger or any of the Other Mergers or make the
consummation of the Merger or any of the Other Mergers illegal;
57
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Merger or any of the Other
Mergers and the transactions contemplated hereby and by the Other
Agreements (including, without limitation, any consents listed on Schedules
---------
4.3.2 or 4.12) shall have been obtained and be in effect;
----- ----
(h) No action, suit or proceeding with respect to the Merger has been
filed or threatened by a third party and remains threatened or remains
pending before any court, Governmental Authority or regulatory Person;
(i) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Stockholders in the
manner required by any applicable Law and the Company's Organizational
Documents; and
(j) CenterPoint shall have entered into one or more credit facilities
providing for aggregate commitments of not less than $75 million.
X.2 Conditions to Obligation of the Stockholders and the Companies to
-----------------------------------------------------------------
Effect the Merger. Unless waived by the Companies, the obligation of the
-----------------
Stockholders and the Companies to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
(a) CenterPoint, Mergersub and each of the Founding Companies shall
have performed in all material respects their agreements contained in this
Agreement and each Other Agreement required to be performed on or prior to
the Closing Date and the representations and warranties of CenterPoint
contained in this Agreement and each Other Agreement shall be true and
correct in all material respects on and as of the date made and on and as
of the Closing Date as if made at and as of such date, and the Companies
shall have received a certificate of the Chief Executive Officer or
President of CenterPoint to that effect;
(b) no Governmental Authority shall have promulgated or formally
proposed any statute, rule or regulation which, when taken together with
all such promulgations, would materially impair the value to the
Stockholders of the Merger;
(c) the Companies shall have received an opinion from Xxxxxx Xxxxxx &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
---------------
and substance reasonably acceptable to the Companies and Stockholders;
(d) Each of Xxx Xxxxxxx, Xxxxx Xxxxxxxx and Xxxxx Xxxxx shall have
been afforded the opportunity to enter into an employment agreement (the "
EMPLOYMENT
58
AGREEMENT") with one of the Companies substantially in the form attached
hereto as Exhibit 10.2(d);
---------------
(e) CenterPoint shall have delivered to the Companies and the
Stockholders a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the Delaware Secretary of State,
showing that CenterPoint is in good standing;
(f) each of the Stockholders, the partners, the members and the
stockholders, partners and members of the Founding Companies who are to
receive shares of CenterPoint Common Stock pursuant to the Other
Agreements, and the other stockholders of CenterPoint other than those
acquiring stock in the IPO shall have entered into an agreement (the "
STOCKHOLDERS AGREEMENT") substantially in the form attached hereto as
Exhibit 10.2(f);
---------------
(g) all conditions to the Mergers of the Founding Companies, on
substantially the same terms as provided herein, shall have been satisfied
or waived by the applicable party and the Companies; and
(h) the Companies shall have received an opinion of Xxxxxx Xxxxxx &
Zavis, dated as of the Closing Date and based upon certain factual
representations and assumptions that for federal income tax purposes there
will be no gain or loss recognized with respect to the CenterPoint Common
Stock received for their Company Equity in the Merger pursuant to Section
351 of the Code, the final form of such opinion to be in form and substance
reasonably acceptable to the Companies and the Stockholders.
(i) Driver shall have signed and delivered to the Stockholders the
Letter Agreement between the Stockholders and Driver substantially in the
form attached hereto as Exhibit 10.2(i).
---------------
X.3 Conditions to Obligation of CenterPoint to Effect the Merger. Unless
------------------------------------------------------------
waived by CenterPoint, the obligation of CenterPoint and Mergersub to effect the
Merger shall be subject to the fulfillment at or prior to the Closing of the
additional following conditions:
(a) each of the Companies shall have performed in all material
respects its agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of each of the Companies contained in this Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and
CenterPoint and the Underwriters shall have received a Certificate of the
Chief Executive Officer or President of each of the Companies to that
effect;
59
(b) the Stockholders shall have performed in all material respects
their agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of the
Stockholders contained in this Agreement shall be true and correct in all
material respects on and as of the date made and on and as of the Closing
Date as if made at and as of such date, and CenterPoint and the
Underwriters shall have received a Certificate of each Stockholder to that
effect;
(c) CenterPoint and the Underwriters shall have received an opinion
from Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx, LLP and/or Xxxx Xxxxxxx, counsel to
each of the Companies, dated the Closing Date, in the form attached hereto
as Exhibit 10.3(c), the final form of such opinion to be in form and
---------------
substance reasonably acceptable to the Underwriters and CenterPoint;
(d) each of Xxx Xxxxxxx, Xxxxx Xxxxxxxx and Xxxxx Xxxxx shall have
executed and delivered the Employment Agreement referred to in Section
-------
10.2(d);
-------
(e) CenterPoint and the Underwriters shall have received "Comfort"
letters in customary form from each of the Companies' independent public
accountants, dated the effective date of the Form S-1 and the Closing Date
(or such other date reasonably acceptable to CenterPoint), with respect to
certain financial statements and other financial information included in
the Form S-1 and any subsequent changes in specified balance sheet and
income statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
(f) each of the Companies shall have delivered to CenterPoint and the
Underwriters a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the appropriate Governmental Authority
in the state of organization of each Company, unless waived by CenterPoint,
in each state in which each Company is authorized to do business, showing
such Company (as applicable) is in good standing, authorized to do business
and/or in compliance with all laws and regulations, whichever is
applicable;
(g) no Governmental Authority shall have promulgated or formally
proposed any statute, rule, regulation or bulletin, or otherwise
promulgated a policy pursuant to its authority under any statute, which,
when taken together with all such promulgations, would materially impair
the value to CenterPoint of the Merger;
(h) the Stockholders shall have executed the Stockholders Agreement;
(i) the Stockholders shall have delivered to CenterPoint an instrument
in the form attached hereto as Exhibit 10.3(i), dated the Closing Date,
---------------
releasing their respective
60
Companies from any and all claims of the Stockholders against the Companies
and obligations of the Companies to the Stockholders;
(j) Reserved;
(k) each of the Companies and the Stockholders, as applicable, shall
have terminated or have caused the termination of any voting trusts,
proxies or other agreements or understandings to which any such Company or
any Stockholder is a party or is bound with respect to any shares of
capital stock or other equity interests of such Company and shall have
provided CenterPoint evidence of such termination that is acceptable to
CenterPoint's counsel;
(l) to the extent any of the Companies' contracts and agreements with
insurance carriers, referring agents and insurance producers (collectively
referred to as "INSURANCE ENTITIES") will be terminated as a result of this
Agreement or the transactions contemplated herein, each of the Companies
shall have: (i) entered into new contracts with each of the Insurance
Entities under the same material terms and conditions as the previous
contracts and agreements terminated as a result of this Agreement or the
transactions contemplated herein; or (ii) obtained amendments or waivers of
the contracts and agreement with each of Insurance Entities such that the
contracts and agreements will not terminate as a result of this Agreement
or the transactions contemplated herein, provided that such amendments or
waivers do not modify the material terms of such contracts or agreements,
except where the failure to have entered into such contracts or to have
obtained such amendments or waiver would not have a Company Material
Adverse Effect;
(m) each of the Companies has provided to CenterPoint certified copies
of all licenses and registrations necessary for such Company to conduct
their Business, and each of the Companies has modified or amended the
information given the relevant Government Authorities in obtaining such
licenses and registrations necessary to prevent this Agreement or the
transactions contemplated herein from canceling or terminating such
licenses and registrations;
(n) the Company shall have presented evidence satisfactory to
CenterPoint of its compliance with the provisions of Section 7.1.3 hereof;
-------------
(o) the Stockholders and/or the Companies shall have delivered to
CenterPoint a payoff letter including a statement of per diem interest
amounts and other applicable release documents from all such lenders or
creditors regarding the payment in full of such indebtedness (which will be
paid in accordance with Schedule 7.1.3(a) at Closing) in each case in form
-----------------
and substance satisfactory to CenterPoint (including, without limitation,
applicable UCC-3 termination statements); and
61
(p) the secretary of the Companies shall have delivered certified
copies of the resolutions of the board of directors and shareholders of the
Company approving execution and delivery of this Agreement, the Merger and
the other actions, agreements and documents necessary or desirable to
complete the transactions contemplated herein.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
XI.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) pursuant to Section 7.3;
-----------
(b) by all of the Companies,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of any of the
Companies or the Stockholders or any of their affiliates or
associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of each of the
Companies or any of the Stockholders or any of their affiliates or
associates;
(iii) if CenterPoint (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30)
days after written notice of such default is given to CenterPoint; or
(c) CenterPoint,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of CenterPoint or any
of its stockholders or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of CenterPoint or
any of its stockholders or any of their affiliates or associates;
(iii) if any Company (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all
62
material respects within thirty (30) days after written notice of such
default is given to such Company by CenterPoint;
(iv) if any Stockholder (A) fails to perform in any material
respect any of such Stockholder's material covenants in this Agreement
and (B) do not cure such default in all material respects within
thirty (30) days after written notice of such default is given to the
Stockholder Representative by CenterPoint; or
(d) by mutual consent of all of the Boards of Directors of the
Companies and CenterPoint.
XI.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either CenterPoint or the Companies, as provided in Section 11.1,
------------
this Agreement shall forthwith become void and there shall be no further
obligation on the part of the Companies, the Stockholders, CenterPoint,
Mergersub or their respective officers or directors (except the obligations set
forth in this Section 11.2 and in Sections 8.1, 8.3, 8.5 and Article IX, all of
------------ ------------ --- --- ----------
which shall survive the termination). Nothing in this Section 11.2 shall relieve
------------
any party from liability for any breach of this Agreement.
XI.3 Amendment. This Agreement may not be amended except by action taken
---------
by the Boards of Directors of CenterPoint and the Company or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law; provided that
no waiver of any restriction set forth in Article XII shall be of any effect
-----------
unless consented to by a majority of the members of CenterPoint's Board of
Directors who do not at the time of such proposed waiver hold Restricted Shares
within the meaning of this Agreement, any Other Agreement or the Stockholder
Agreement.
XI.4 Waiver. At any time prior to the Closing Date, the parties hereto
------
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
63
ARTICLE XII
TRANSFER RESTRICTIONS
XII.1 Transfer Restrictions, Generally. Except as provided in Section
-------------------------------- -------
12.2, for a period of forty-two (42) months from the Closing, the Stockholders
----
shall not (a) sell, assign, exchange, transfer, distribute or otherwise dispose
of, in whole or in part, (i) any shares of CenterPoint Common Stock received by
the Stockholders in the Merger (the "RESTRICTED SHARES"), or (ii) any interest
(including, without limitation, an option to buy or sell) in any Restricted
Shares; or (b) engage in any transaction, whether or not with respect to any
Restricted Shares or any interest therein, the intent or effect of which is to
reduce the risk of owning Restricted Shares (including, without limitation,
engaging in put, call, short-sale, derivative, straddle or similar market
transactions).
XII.2 Released Restrictions. Effective eighteen (18) months following the
---------------------
Closing and every six (6) months thereafter, until all of such Stockholder's
Restricted Shares shall have been released from such restrictions, 20% of the
original number of Restricted Shares of each Stockholder shall no longer be
subject to the restrictions set forth in Section 12.1 and shall no longer be
------------
deemed Restricted Shares for any purposes of this Agreement; provided that if a
Stockholder's employment with CenterPoint or its subsidiaries is terminated
within thirty (30) months of the Closing other than through death, disability,
retirement, without Cause or within sixty (60) days of a Constructive
Termination (as defined in such Stockholder's employment agreement with the
relevant Company dated the Closing Date) or due to circumstances approved by the
Board of Directors or Managers, as the case may be, of the relevant Company or
approved by CenterPoint's Chief Executive Officer, the Restricted Shares held by
such Stockholder shall remain subject to the restrictions set forth in Section
-------
12.1 until the fifth anniversary of the Closing Date. Notwithstanding the
----
foregoing, a Stockholder may (x) at any time pledge or encumber all or part of
such Stockholder's Restricted Shares, provided that the pledgee or secured party
agrees in writing to be bound by the provisions contained in Article XII, (y) at
-----------
any time transfer all or part of such Stockholder's Restricted Shares to another
Stockholder or to an immediately family member (or trust or other estate
planning Person), provided that any such Stockholder, family member or other
Person agrees in writing to be bound by the provisions contained in Article XII,
-----------
and (z) transfer or cause to be transferred such Stockholder's Restricted Shares
upon such Stockholder's disability or death. As used in this Section 12.2, the
------------
terms "disability" and "retirement" shall have the meaning ascribed to them in
CenterPoint's Employee Incentive Compensation Plan. No attempted transfer of
any nature whatsoever that is in violation of this Section shall be treated as
effective for any purpose.
XII.3 Legend. The certificates evidencing the CenterPoint Common Stock
------
delivered to the Stockholders pursuant to Article II of this Agreement shall
----------
bear a legend substantially in the form set forth below and containing such
other information as CenterPoint may deem necessary or appropriate:
64
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
DISPOSITION THEREOF ARE SUBJECT TO THE TERMS OF A MERGER
AGREEMENT DATED MARCH 31, 1999. A COPY OF SUCH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND MAY
BE INSPECTED BY THE REGISTERED OWNER OF THIS CERTIFICATE OR
A DULY AUTHORIZED REPRESENTATIVE OF SUCH OWNER UPON REQUEST
DURING NORMAL BUSINESS HOURS.
Upon request from any Stockholder (or a permitted transferee) following the
expiration of either all or a part of the restrictions on the transfer of
CenterPoint Common Stock set forth in this Article XII, CenterPoint shall
-----------
immediately notify its transfer agent that the applicable shares of CenterPoint
Common Stock are no longer restricted shares and shall direct the transfer agent
to reissue certificates of CenterPoint Common Stock which do not contain a
restrictive legend in place of the applicable restricted share certificates. In
the event a Stockholder's request to remove the restrictive legend coincides
with his request to sell the CenterPoint Common Stock, CenterPoint shall take
such actions as are required by its transfer agent to allow the transfer agent
to transfer the unrestricted CenterPoint Common Stock free of any restrictive
legend.
ARTICLE XII
NONCOMPETITION
XIII.1 Stockholder Prohibited Activities. Each Stockholder agrees severally
---------------------------------
and not jointly, that such Stockholder will not, for a period of three (3) years
following the Closing Date, for any reason whatsoever, directly or indirectly,
for themselves or on behalf of or in conjunction with any other Person:
(a) engage, directly or indirectly, as an officer, director,
shareholder, owner, partner, joint venturer, or in a managerial capacity,
whether as an employee, independent contractor, consultant or advisor, or
as a sales representative in, or otherwise own, operate, manage, control,
engage in, participate in, act as a representative, agent, consultant or
advisor to, or render services for (alone or in association with any
person, firm corporation or other entity, including through agents, brokers
or surplus line brokers), any business selling or providing insurance or
other related services in direct competition with the Companies, within any
business market where the Companies conducted or conducts business at any
time prior to termination.
65
(b) sell or provide, directly or indirectly, any insurance or other
related services of a type or nature similar to those sold or provided by
any of the Companies, or solicit for the purpose of selling or providing
any such services to, or otherwise accept commissions from, any Person that
was a customer of the Companies or any affiliate thereof (including any
agents or brokers that produce insurance through any of the Companies or
any affiliate or subsidiary thereof) at any time during the preceding one-
year period or that was known by the Stockholder to have been actively
solicited by any of the Companies to become a customer at any time during
such period;
(c) call upon any Person who is, at that time within the Territory
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person;
(d) enter into, or call upon or request non-public information for
the purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one-year period; and
(e) disclose the identity of (i) any agents, brokers or surplus
lines brokers that produce insurance through any of the Companies or a
subsidiary or affiliate thereof or (ii) any Policyholder or Prospective
Policyholder, to any person, firm, corporation, association or other
entity, for any reason or purpose whatsoever.
For purposes of this Agreement, an "ACQUISITION TRANSACTION" means a
merger, consolidation, purchase of material assets, purchase of a material
equity interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit any Stockholder from
acquiring as an investment not more than one percent (1%) of the capital stock
of a competing business whose stock is traded on a national securities exchange
or over-the-counter so long as the Stockholder does not consult with or is not
employed by such competitor. For the purpose of this Agreement, "POLICYHOLDER"
means any person, firm, corporation or entity that was issued any insurance
policy by CenterPoint or the Companies, or an agent, broker, or surplus line
broker which or who placed such insurance coverage through CenterPoint or any
subsidiary or affiliate thereof. For the purpose of this Agreement,
"Prospective Policyholder" means any person, firm, corporation or entity
contacted or solicited by CenterPoint or any subsidiary or affiliate thereof, or
an agent, broker or surplus line broker which or who places insurance through
CenterPoint or any subsidiary or affiliate thereof (whether directly or
66
indirectly) or who contacted CenterPoint or any subsidiary or affiliate thereof,
or an agent or broker which places insurance through CenterPoint or any
subsidiary or affiliate thereof (whether directly or indirectly) for the purpose
of having such persons, firms, corporations or entities become policyholders of
CenterPoint or any subsidiary or affiliate thereof.
XIII.2 CenterPoint Non-Solicitation. CenterPoint will not, for a period of
----------------------------
two (2) years following the date hereof, for any reason whatsoever, directly or
indirectly, for themselves or on behalf of or in conjunction with any other
Person, solicit to employ any Person who is an employee of any of the Companies
(and with whom CenterPoint had contact or with which such employee was
specifically identified to CenterPoint during its due diligence investigation of
the Companies) for the purpose or with the intent of enticing such employee away
from or out of the employee of any of the Companies or hire such Person.
XIII.3 Damages. Because of the difficulty of measuring economic losses to
-------
CenterPoint or the Companies as a result of a breach of the covenants in Section
-------
13.1 or 13.2, and because of the immediate and irreparable damage that could be
---- ----
caused to CenterPoint or the Companies, respectively, for which it would have no
other adequate remedy, each party agrees that the foregoing covenants may be
enforced by CenterPoint or the applicable Company, as the case may be, in the
event of breach by the other party, by injunctions and restraining orders.
XIII.4 Reasonable Restraint. It is agreed by the parties hereto that the
--------------------
foregoing covenants in Section 13.1 impose a reasonable restraint on the
------------
Stockholders in light of the activities and business of CenterPoint (including
the subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Stockholders that such covenants be construed and enforced in accordance with
the changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Stockholder who has entered into an employment agreement, incentive compensation
agreement or other similar agreement with CenterPoint and/or any subsidiary
thereof as set forth herein shall thereafter cease to be employed thereunder,
and such Stockholder shall enter into a business or pursue other activities not
in violation of Section 13.1 or of such Stockholder's obligations under Section
------------ -------
13.1, such Stockholder shall not be chargeable with a violation of Section 13.1
---- ------------
if CenterPoint and/or any subsidiary thereof shall thereafter enter the same,
similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
XIII.5 Severability; Reformation. The covenants in Section 13.1 are
------------------------- ------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
67
XIII.6 Independent Covenant. All of the covenants in this Article XIII
-------------------- ------------
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against CenterPoint (including the subsidiaries thereof or of CenterPoint
against any Company), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by CenterPoint or such Company of
such covenants. It is specifically agreed that the period of three (3) years
stated at the beginning of this Article XIII, during which the agreements and
------------
covenants of each Stockholder made in this Article XIII shall be effective,
------------
shall be computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Article XIII. In all events
------------
CenterPoint shall initiate proceedings to enforce this Article XIII within four
------------
(4) years of the Closing Date. The covenants contained in this Article XIII
------------
shall not be affected by any breach of any other provision hereof by any party
hereto and shall have no effect if the transactions contemplated by this
Agreement are not consummated.
XIII.7 Materiality. Each of the Companies and the Stockholders hereby
-----------
agree that this covenant is a material and substantial part of this transaction.
ARTICLE XIV
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
XIV.1 Stockholders' Covenant. The Stockholders recognize and
----------------------
acknowledge that they had in the past, currently have, and in the future may
possibly have, access to certain confidential information of the Companies, the
Founding Companies and/or CenterPoint, such as strategic plans, systems,
operational policies, marketing plans, relationships with policyholders, sales
and marketing techniques, customer lists and potential customer lists,
expiration data and pricing and cost policies that are valuable, special and
unique assets of each of the Companies', the Founding Companies' and/or
CenterPoint's respective businesses. The Stockholders agree that they will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
(a) to authorized representatives of CenterPoint,
(b) following the Closing, such information may be disclosed by
the Stockholders as is required in the course of performing their duties to
CenterPoint, and
(c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this
Section 14.1, unless
------------
(i) such information becomes known to the public generally
through no fault of the Stockholders,
68
(ii) disclosure is required by law or the order of any
governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), the
Stockholder shall, if possible, give prior written notice thereof to
CenterPoint and provide CenterPoint with the opportunity to contest
such disclosure, or
(iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit
against the disclosing party.
In the event of a breach or threatened breach by any of the Stockholders of the
provisions of this Section 14.1, CenterPoint shall be entitled to an injunction
------------
restraining such Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
CenterPoint from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
XIV.2 Damages. Because of the difficulty of measuring economic losses
-------
as a result of the breach of the foregoing covenants in Section 14.1, and
------------
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunction and restraining orders.
XIV.3 Survival. The obligations of the parties under this Article XIV
-------- -----------
shall survive the termination of this Agreement.
ARTICLE XV
GENERAL PROVISIONS
XV.1 Brokers. Each of the Companies and the Stockholders represents
-------
and warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee (except for any fee described in Schedule 15.1)
-------------
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
CenterPoint represents and warrants that no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CenterPoint or its stockholders (other than
underwriting discounts and commission to be paid in connection with the IPO).
XV.2 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery
69
service, mailed by registered or certified mail (return receipt requested) or
sent via facsimile to the parties at the following addresses (or at such other
address for a party as shall be specified by notice given in accordance with
this Section):
XV.2.1. If to CenterPoint or Mergersub, to:
CenterPoint Advisors, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
with a copy to:
Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
XV.2.2 If to the Companies, to:
The Xxxxxxx Company, Inc.
00000 Xxxxxxxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, XX 00000
Attn: Xxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
XV.2.3 If to the Stockholder Representative or the
Stockholders, as applicable, addressed to the addresses set forth on Schedule
--------
15.2.3, with copies to such counsel as set forth with respect to each
------
Stockholder on such Schedule 15.2.3, as applicable.
---------------
70
XV.3. Interpretation. The table of contents and headings contained in
--------------
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "1 herein," "1 hereof" and "1
hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision and (ii)
reference to any Article or Section means such Article or Section hereof. No
provision of this Agreement shall be interpreted or construed against any party
hereto solely because such party or its legal representative drafted such
provision.
XV.4 Certain Definitions. As used in this Agreement, (i) the term "
-------------------
PERSON" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity, firm,
association, organization or other business in any form whatsoever or government
(whether Federal, state, county, city or otherwise, including, without
limitation, any instrumentality, division, agency or department thereof), (ii)
the term "AFFILIATE" shall have the meaning given for that term in Rule 405
under the Securities Act, and shall include each past and present Affiliate of a
Person and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "KNOWLEDGE" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if any Person who is a partner,
member or shareholder of such Person or who is otherwise serving, or who has
served, as a director, officer or trustee (or any capacity) of such Person has,
or at any time had, knowledge of such fact or other matter.
XV.5 Entire Agreement; Assignment. This Agreement (including the
----------------------------
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof including, without limitation, the Letter of Intent dated December
28, 1998 and (b) shall not be assigned by operation of law or otherwise, except
that CenterPoint may assign this Agreement to any wholly-owned subsidiary of
CenterPoint.
XV.6 Applicable Law. This Agreement shall be governed in all respects,
--------------
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
XV.7 Counterparts. This Agreement may be executed via facsimile or
------------
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
71
XV.8 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
---------------------
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72
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
CENTERPOINT ADVISORS, INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxx
---------------------------------------
Its: President and Chief Executive Officer
---------------------------------------
XXXXXXX MERGERSUB INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxx
--------------------------------------
Its: President
---------------------------------------
RA MERGERSUB LLC
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
---------------------------------------
Its: President
---------------------------------------
VERASOURCE MERGERSUB INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
---------------------------------------
Its: President
---------------------------------------
THE XXXXXXX COMPANY, INC.
By: /s/ Xxx X. Xxxxxxx
--------------------------------------
Name: Xxx X. Xxxxxxx
------------------------------------
Its: President
------------------------------------
XXXXXXX ADMINISTRATORS, L.L.C.
By: /s/ Xxx X. Xxxxxxx
--------------------------------------
Name: Xxx X. Xxxxxxx
-----------------------------------
Its: Member
------------------------------------
VERASOURCE EXCESS RISK LTD.
By: /s/ Xxx X. Xxxxxxx
--------------------------------------
Name: Xxx X. Xxxxxxx
-----------------------------------
Its: President
-----------------------------------
STOCKHOLDERS
/s/ Xxx X. Xxxxxxx
--------------------------------------
Xxx X. Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
--------------------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxxx
/s/ Xxxxx X. Xxxxx
--------------------------------------
Xxxxx X. Xxxxx
SCHEDULE 2.3
------------
REDUCTIONS IN THE NOTES
-----------------------
If the Companies' average annual EBITDA (as calculated in accordance with
Section 2.4. 1, for the three years ending on the third anniversary of the last
--------------
day of the month in which the Closing falls is less than $1,770,000 (the "Pro
Forma EBITDA"), a reduction shall be made in the aggregate principal balance of
the Notes on a dollar for dollar basis in an amount equal to six times the
amount of the shortfall. As it relates to the contents of this Schedule 2.3, in
------------
no event shall the reduction of the principal amount of the Notes exceed
$1,000,000 in the aggregate for the Notes.
If Xxx Xxxxxxx is terminated from his employment with Xxxxxxx within one year
after the Closing, there will be no reduction in the principal balance of the
Notes. If Xxx Xxxxxxx is terminated from his employment with Xxxxxxx more than
one year after the Closing but before the third anniversary of the Closing, Pro
Forma EBITDA will be calculated for the period beginning after the Closing and
ending upon the termination date.
75
SCHEDULE 2.4
PROCEDURES FOR DETERMINATION OF CONTINGENT PAYMENT
--------------------------------------------------
1. Financial Statements and Contingent Payment Report. As promptly as
--------------------------------------------------
practicable, but no later than the Annual Determination Date (as hereafter
defined), CenterPoint shall prepare and deliver to the Stockholder
Representative, as representative for the former holders of the Company Equity,
(i) a copy of the financial statements for the EB Operations and the Companies
for the applicable twelve month period (the "Financial Statements"), and (ii) a
contingent payment report (the "Contingent Payment Report"), together with
supporting documentation with respect thereto, for the purpose of determining
the amount of the Net Value Contingent Payment or the Earn-Out Contingent
Payments, if any. The Financial Statements and the Contingent Payment Report
shall be prepared by the independent certified public accountants of CenterPoint
in accordance with GAAP. As used herein, the "Annual Determination Date" shall
be on or before the date that is 60 days after the end of the applicable period,
with respect to each Contingent Payment Report.
2. Dispute Notice. The Stockholder Representative shall have 30 days from the
--------------
date on which the Financial Statements and Contingent Payment Report are
delivered to it to review such documents (the "Review Period"). The
Stockholder Representative and its auditors shall be provided with full access
to the work papers of the CenterPoint auditor and reasonable access to the
accounting personnel of CenterPoint and its subsidiaries in connection with such
review. If the Stockholder Representative shall have any objections to the
Contingent Payment Report, on or prior to the last day of the Review Period, it
will deliver a written notice to CenterPoint describing in reasonable detail its
objections and the basis for such objections (the "Dispute Notice"). The
Dispute Notice shall set forth the Stockholder Representative's position as to
the disputed items on the Contingent Payment Report. The Stockholder
Representative may deliver to CenterPoint at any time a notice accepting the
Contingent Payment Report without objection.
3. Resolution by Independent Accountant. The Stockholder Representative and
------------------------------------
CenterPoint will use their reasonable best efforts to resolve any objection
raised in a Dispute Notice and agree upon the resolution of such objections. If
a final resolution is not obtained within 14 days after CenterPoint has received
the Dispute Notice, then the dispute shall be submitted to an independent
accounting firm to be agreed between the parties (hereinafter referred to as the
"Independent Accountant") to resolve any remaining such objections. The
Independent Accountant shall conduct such review of the Financial Statements,
the Contingent Payment Report, the Dispute Notice, any related work papers of
the CenterPoint auditors and any supporting documentations as CenterPoint or the
Stockholder Representative request or the Independent Accountant in its sole
discretion deems
necessary, and the Independent Accountant shall conduct such hearings, receive
such written briefs or hear such presentations by the parties as the Independent
Accountant in its sole discretion deems necessary. CenterPoint on the one hand,
and the Stockholder (from the proceeds of the Net Value Contingent Payment or
the Earn-Out Contingent Payment, as applicable), on the other hand, shall share
equally in the payment of all fees of the Independent Accountant incurred in the
resolution of such objections.
4. The Adjustment Report. The Independent Accountant shall, as promptly as
---------------------
practicable and in no event later than 30 days following the completions of
testimony and submission of evidence, deliver to CenterPoint and the Stockholder
Representative a report (the "Adjustment Report"), in which the Independent
Accountant shall, after considering all matters set forth in the Dispute Notice
and consideration of any objections thereto, determine what adjustments, if any,
should be made to the Contingent Payment Report and the amounts to be paid in
respect of a Contingent Payment. The Adjustment Report shall set forth, in
reasonable detail, the Independent Accountant's determination with respect to
each of the disputed items or amounts specified in the Dispute Notice, and the
revisions, if any, to be made to the Contingent Payment Report, together with
supporting calculations. The Adjustment Report shall be final and binding upon
CenterPoint, the Companies and the Stockholders, and shall be deemed a final
arbitration award that is enforceable pursuant to the terms of the Federal
Arbitration Act, 9 U.S.C. (S)(S)1 et seq.
-- ---
5. Resolution by the Parties. If Centerpoint and the Stockholder
-------------------------
Representative resolve all objections raised by the Stockholder Representative
in the Dispute Notice without resort to the Independent Accountant, CenterPoint
and the Stockholder Representative will, within five days of such resolution,
mutually cause the Contingent Payment Report to be revised as appropriate to
reflect such resolution, mutually cause the Contingent Payment Report to be
revised as appropriate to reflect such resolution. Such revised Contingent
Payment Report (or the draft Contingent Payment Report prepared by the
CenterPoint, if the Stockholder Representative does not object thereto) shall
constitute the final Contingent Payment Report and shall be final and binding
upon CenterPoint, the Company and the Former Stockholders.
6. Contingent Payment Report.
-------------------------
6.1 Operations of the Company; Adjustment. "Net Value" calculated pursuant
-------------------------------------
to Section 2.4.1 and the Earn-Out Contingent Payments calculated pursuant
-------------
to Section 2.4.3(a) through (e) shall be reduced by the amount of
---------------- ---
interest income that could have been earned on monies either distributed to
CenterPoint or transferred from the EB Operations or the Companies to
another entity. Such distributions and transfers should be accounted for
and shall bear interest at the rate of 7% compounded annually from the date
of such distribution or transfer.
7. Payment. The Net Value Contingent Payment, if any, will be in the form of
-------
cash and will be payable on the date that is 15 months after the end of the
Calculation Period (the "Payment Date"), with interest accruing at 7.0% per
annum from the date that is 12 months prior to the Payment Date. The Earn-out
Contingent Payments shall be payable within three months after the end of the
relevant twelve month period for the prior year. Notwithstanding the foregoing,
if payment of the Net Value Contingent Payment or the Earn-Out Contingent
Payment has not occurred by the applicable date (as specified above) based on an
unresolved dispute, then the Net Value Contingent Payment or the Earn-Out
Contingent Payment, as applicable, shall be paid in cash no later than two
business days after the earliest occurrence of one of the following events: (1)
acceptance by the Stockholder Representative of the Contingent Payment Report;
(2) the expiration of the Review Period without the filing of any Dispute
Notice; (3) the resolution of the Dispute Notice or (4) the delivery of the
Adjustment Report.
8. No Negative Payments. If the amount calculated under Section 2.4.1 or 2.4.3
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is negative, the payment under such Section shall be zero and the Stockholders
shall have no obligation to refund to CenterPoint the amount of such negative
calculation expressed as a positive number and such negative number will not be
carried forward into subsequent periods.
3
