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EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
by and among
INSpire INSURANCE SOLUTIONS, INC.,
ARROW CLAIMS MANAGEMENT, INC.
and
ALL THE SHAREHOLDERS OF
ARROW CLAIMS MANAGEMENT, INC.
regarding the sale of 100% of the outstanding capital stock of Arrow Claims
Management, Inc.
dated as of October 29, 1998
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TABLE OF CONTENTS
Page
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[to be completed only after the agreement
is substantially finalized]
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SCHEDULES AND EXHIBITS
Schedule Description
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Schedule 1.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ownership of the Shares
Schedule 4.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jurisdictions of Incorporation
Schedule 4.5(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalization
Schedule 4.5(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptions to Capitalization
Schedule 4.5(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subsidiaries
Schedule 4.6(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year-End Financial Statements
Schedule 4.6(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interim Financial Statements
Schedule 4.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptions to Certain Changes
Schedule 4.12(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Real Property
Schedule 4.12(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased Real Property
Schedule 4.13(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Personal Property
Schedule 4.13(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased Personal Property
Schedule 4.15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance
Schedule 4.16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Material Contracts
Schedule 4.17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Litigation; Orders
Schedule 4.17(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptions to Litigation; Orders
Schedule 4.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permits
Schedule 4.20(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Intangible Assets
Schedule 4.20(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Licensed Intangible Assets
Schedule 4.21(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees
Schedule 4.21(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employment and Labor Contracts
Schedule 4.22(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Welfare Benefit Plans
Schedule 4.22(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension Benefit Plans
Schedule 4.22(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee Arrangements
Schedule 4.24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank Accounts and Powers of Attorney
Schedule 4.26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptions to Affiliate Transactions
Schedule 6.3(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptions to Prohibited Transactions
Schedule 6.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transferred Assets
Schedule 8.2(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Required Consents
Schedule 8.3(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Required Permits
Schedule 9.1(m) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted Software
Schedule 12.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notice Information
Exhibit Description
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Exhibit 2.2(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Guaranty
Exhibit 2.3(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Opinion of Company's Counsel
Exhibit 2.4(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Opinion of Purchaser's Counsel
Exhibit 9.1(l)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Claims Administration Services Agreement
Exhibit 9.1(l)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Policy Administration Services Agreement
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of October
29, 1998 (the "SIGNING DATE"), is made by and among INSpire Insurance
Solutions, Inc., a Texas corporation ("PURCHASER"), Arrow Claims Management,
Inc., a Delaware corporation ("COMPANY"), and the Persons listed on the
signature pages hereto (collectively, the "SELLERS," and individually, a
"SELLER"). Purchaser, Company and Sellers are sometimes collectively referred
to as the "PARTIES," and individually referred to as a "PARTY."
PRELIMINARY STATEMENTS
A. Company is engaged in the administration of policies and
claims for certain insurance companies (such business being herein referred to
as the "BUSINESS").
X. Xxxxxxx own all the issued and outstanding shares of Company's
common stock, par value $.01 per share (the "COMMON STOCK"), which shares
constitute all the issued and outstanding equity securities of Company.
C. Each Seller desires to sell, and Purchaser desires to
purchase, the Shares, in each case on the terms and subject to the conditions
set forth in this Agreement.
D. Capitalized terms used in this Agreement are defined or
indexed in Appendix A for the convenience of the reader and in order to
eliminate the need for cross-references. Appendix A is incorporated herein by
this reference.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties set forth in this
Agreement and for other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I.
TERMS OF THE PURCHASE AND SALE
Section 1.1 Sale of Shares. Subject to the terms and conditions
and in reliance upon the representations and warranties set forth in this
Agreement, at the Closing each Seller will sell and assign to Purchaser, and
Purchaser will purchase and acquire from each Seller, the number of shares of
Common Stock listed on Schedule 1.1 opposite the name of such Seller
(collectively, the "SHARES"), in each case free and clear of all Encumbrances.
Section 1.2 Purchase Price. The total consideration for the
Shares will be the difference of $13,500,000 (the "BASE PURCHASE PRICE") minus
the Adjustment Amount calculated pursuant to Section 1.5 (the Base Purchase
Price minus the Adjustment Amount, the "FINAL PURCHASE PRICE").
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Section 1.3 Payment of Base Purchase Price. On the Signing Date,
Purchaser will cause a duly authorized officer of Purchaser to provide Company
with written documentation of a deposit by Purchaser of the Base Purchase Price
into a segregated bank account that is under the exclusive control of Purchaser
(the "SEGREGATED ACCOUNT"). At the Closing, Purchaser will pay to Sellers from
such segregated account an aggregate amount equal to the Base Purchase Price
(or the Final Purchase Price if the Adjustment Amount is deemed final in
accordance with Section 1.5(d)) (the "CLOSING CASH PAYMENT") by wire transfer
of immediately available funds to the bank accounts and in the amounts set
forth on a notice given by Sellers to Purchaser not later than three business
days prior to the Closing Date.
Section 1.4 Allocation of the Purchase Price. As soon as
practicable, but not later than 120 days after the Closing Date, the Parties
will agree upon the allocation of the Base Purchase Price and Company's
liabilities (and all other capitalizable costs) among Company's assets,
liabilities and agreements set forth in Section 6.7, and will set forth such
allocation on a statement (the "ALLOCATION STATEMENT"). The Allocation
Statement will be revised to reflect any changes in the Direct Written Premiums
shown on the Final Closing Premium Statement from the Direct Written Premiums
shown on the Closing Premium Statement, whether or not such changes result in
an adjustment to the Base Purchase Price. If the Parties fail to agree on the
allocation of the Base Purchase Price within 120 days after the Closing Date,
then the disagreement will be resolved as soon as practicable thereafter, but
not later than 180 days after the Closing Date, by one of the largest four
national accounting firms, which accounting firm will be jointly selected by
Purchaser on the one hand and Sellers on the other hand. The Parties
acknowledge that the scope of such accounting firm's work will be limited to
resolving only those items to which the Parties do not agree regarding the
allocation of the Base Purchase Price. The decision of the accounting firm
will be final and binding upon the Parties. The fees, costs and expenses of
the accounting firm selected to resolve any disagreements regarding the
Allocation Statement will be borne equally by Purchaser on the one hand and
Sellers on the other hand. Each Party will file all Tax returns, and execute
such other documents as may be required by any taxing authority, in a manner
consistent with the Allocation Statement.
Section 1.5 Purchase Price Adjustment.
(a) Closing Premium Statement. As soon as reasonably
practicable, but not later than the later to occur of the Signing Date or
November 13, 1998, Company will delivery to Purchaser a statement detailing the
amount of Direct Written Premiums recognized by Company in the calendar months
August 1998, September 1998 and October 1998 (such statement, together with the
supporting workpapers, the "CLOSING PREMIUM STATEMENT"). The amount set forth
on the Closing Premium Statement will be calculated in accordance with GAAP;
provided, however, that the Closing Premium Statement will not be required to
have any of the notes to the financial statements as required by GAAP. Company
will give Purchaser and its Representatives reasonable access to Company's
facilities and the Books and Records so as to enable Purchaser to verify the
amounts set forth on the Closing Premium Statement.
(b) Review of Closing Premium Statement. As soon as
practicable, but not later than 30 days after the delivery of the Closing
Premium Statement, Purchaser will inform
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Sellers and Company in writing of any objection to the Closing Premium
Statement, which objection, if any, will set forth in reasonable detail
Purchaser's objections and the basis for those objections (the "OBJECTION
NOTICE"). If Purchaser so objects and the Parties do not resolve such
objections on a mutually agreeable basis within 45 days after the delivery of
the Closing Premium Statement, then the disagreement will be resolved as soon
as practicable thereafter, but not later than 75 days after the delivery of the
Closing Premium Statement, by one of the largest four national accounting
firms, which accounting firm will be selected jointly by Purchaser on the one
hand and Sellers on the other hand. The Parties acknowledge that the scope of
such accounting firm's work will be limited to resolving the objections set
forth in the Objection Notice. The decision of such accounting firm will be
final and binding upon the Parties. The Closing Premium Statement (as
adjusted, if applicable, by the agreement of the Parties or the decision of the
accounting firm, the "FINAL CLOSING PREMIUM STATEMENT") and the amount of
Direct Written Premiums recognized by Company in the calendar months August
1998, September 1998 and October 1998 (the "WRITTEN PREMIUM AMOUNT") will be
deemed final upon the earlier to occur of (i) the agreement of the Parties,
(ii) the decision of the accounting firm, or (iii) the failure of Purchaser to
deliver an Objection Notice to Sellers and Company within 30 days after the
delivery of the Closing Premium Statement. Each Party will bear the fees,
costs and expenses of its own accountants, will share equally (between
Purchaser on the one hand and Sellers on the other hand) the fees, costs and
expenses of the accounting firm selected by the Parties to resolve any
disagreements regarding the Objection Notice and will permit each other and
each other's Representatives reasonable access to the books and records
necessary to perform the analysis contemplated by this Section.
(c) Purchase Price Adjustment; Procedure. Upon the Final
Closing Premium Statement being deemed final in accordance with Section 1.5(b),
the Base Purchase Price will be adjusted, if at all, as follows: if the product
of the Written Premium Amount multiplied by four is less than $200,000,000,
then the Base Purchase Price will be reduced by an amount equal to the product
of (i) the Base Purchase Price multiplied by (ii) a fraction consisting of (A)
a numerator equal to the difference of $200,000,000 minus the product of the
Written Premium Amount multiplied by four and (B) a denominator equal to
$200,000,000 (such amount, together with interest thereon calculated at a rate
equal to eight percent (8.0%) compounded daily from the Closing Date to the
date the Final Closing Premium Statement is deemed final in accordance with
Section 1.5(b), the "ADJUSTMENT AMOUNT").
(d) Adjustment Procedure. Purchaser must first seek
payment of the Adjustment Amount pursuant to the right of set-off under the
Option Agreement and thereafter severally and directly from Sellers. Such
payment from Sellers, if any, will be made within five business days after the
final determination of the number of Option Shares (as defined in the Option
Agreement) that vest pursuant to Section 2.4 of the Option Agreement.
Section 1.6 Delivery of Schedules. The Parties acknowledge that
the Schedules to be delivered pursuant to this Agreement will not be delivered
on the Signing Date. The Parties agree that all Schedules will be delivered no
later than November 6, 1998. If the Party to whom a particular Schedule is
delivered does not object in writing to the contents of such Schedule by
November 11, 1998, then that particular Schedule will be deemed final and the
disclosures made
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thereon will be deemed made as of the Signing Date. Any Schedule to which a
written objection is raised will be deemed final upon the mutual agreement of
the Parties as to the content of such Schedule and the disclosures made thereon
will be deemed made as of the Signing Date.
ARTICLE II.
CLOSING
Section 2.1 Closing. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") will take place at the offices
of Akin, Gump, Strauss, Xxxxx and Xxxx, 0000 Xxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxx 00000 on the first business day following the date on which all
of the conditions set forth in Article IX, to the extent not waived, are
satisfied. The Closing may be postponed to such other date as the Parties may
mutually agree. The date on which the Closing actually occurs is hereinafter
referred to as the "CLOSING DATE." The Parties anticipate that the Closing
will occur within 35 days of the filing of the initial notification required
under the HSR Act.
Section 2.2 Deliveries by Sellers. At the Closing, Sellers or
each Seller, as the case may be, will deliver, or cause to be delivered, the
following:
(a) the closing certificates referred to in Sections
9.1(e);
(b) a certificate or certificates representing the number
of Shares listed on Schedule 1.1 opposite the name of such Seller, in each case
endorsed in blank or together with duly executed stock transfer powers in favor
of Purchaser;
(c) a receipt for the payment of that portion of the
Closing Cash Payment received by such Seller;
(d) an executed Guaranty, in substantially the form
attached hereto as Exhibit 2.2(d) (the "GUARANTY"); and
(e) all other previously undelivered documents,
instruments and writings required to be delivered by Sellers to Purchaser at or
prior to the Closing pursuant to this Agreement and such other documents,
instruments and certificates as Purchaser may reasonably request in connection
with the transactions contemplated by this Agreement.
Section 2.3 Deliveries by Company. At the Closing, Company will
deliver, or cause to be delivered, the following:
(a) the closing and secretary's certificates referred to
in Sections 9.1(e), 9.1(f) and 9.1(g);
(b) the recorded Charter Document of each Acquired
Company, recently certified by the Secretary of State (or other proper state
official) of the state of such Acquired Company's jurisdiction of
incorporation;
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(c) a certificate of existence and good standing (or the
functional equivalents) for each Acquired Company dated within ten business
days of the Closing Date issued by the Secretary of State (or other proper
state official) of the state of such Acquired Company's jurisdiction of
incorporation;
(d) all Books and Records of each Acquired Company;
(e) an opinion of counsel addressed to Purchaser from
counsel for Company in substantially the form of Exhibit 2.3(e) attached
hereto;
(f) a title insurance policy (in an amount equal to the
fair market value of the insured parcel) naming Purchaser as the insured for
each parcel of Real Property;
(g) executed counterparts of all Required Consents and
Required Permits; and
(h) all other previously undelivered documents,
instruments and writings required to be delivered by any Acquired Company to
Purchaser at or prior to the Closing pursuant to this Agreement and such other
documents, instruments and certificates as Purchaser may reasonably request in
connection with the transactions contemplated by this Agreement.
Section 2.4 Deliveries by Purchaser. At the Closing, Purchaser
will deliver, or cause to be delivered, the following:
(a) the Closing Cash Payment to Sellers in federal or
other immediately available funds by wire transfer in accordance with Section
1.3(a);
(b) the closing and secretary's certificates referred to
in Sections 9.2(c) and 9.2(d);
(c) the recorded Charter Document of Purchaser, recently
certified by the Secretary of State (or other proper state official) of the
State of Texas;
(d) a certificate of existence and good standing (or the
functional equivalents) for Purchaser dated within ten business days of the
Closing Date issued by the Secretary of State (or other proper state official)
of the State of Texas;
(e) an opinion of counsel for Purchaser addressed to
Sellers in substantially the form of Exhibit 2.4(e) attached hereto;
(f) a certificate dated within ten business days of the
Closing from the Secretary of State of Texas (or other proper state official)
certifying as to Purchaser's good standing in such state;
(g) a receipt to each Seller for the delivery of the
number of Shares listed on Schedule 1.1 opposite the name of such Seller;
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(h) all other previously undelivered documents,
instruments and writings required to be delivered by Purchaser to any Acquired
Company at or prior to the Closing pursuant to this Agreement and such other
documents, instruments and certificates as any Acquired Company may reasonably
request in connection with the transactions contemplated by this Agreement.
Section 2.5 Simultaneous Deliveries. The delivery of the
documents required to be delivered at the Closing pursuant to this Agreement
will be deemed to occur simultaneously. No delivery will be effective until
each Party has received or waived receipt of all the documents that this
Agreement entitles such Party to receive.
Section 2.6 Sales and Transfer Taxes. Any Taxes and any
transfer, recording or similar fees and charges arising out of or in connection
with the transactions contemplated by this Agreement will be borne by Sellers.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby represents and warrants to Purchaser, with respect
to itself and not with respect to any other Seller, that the statements made in
this Article III are true, correct and complete.
Section 3.1 Title to Shares. Seller is the record and beneficial
owner of the number of Shares listed on Schedule 1.1 opposite the name of such
Seller, free and clear of all Encumbrances. At the Closing, Seller will
transfer to Purchaser its entire right, title and interest in and to the
Shares.
Section 3.2 Power, Authority, Right and Capacity. Seller has the
requisite power, authority, right and capacity, as the case may be, to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby, including the execution,
delivery and performance of all the Transaction Document to which such Seller
is a party.
Section 3.3 Authorization; Execution and Validity. Each of the
Transaction Documents, when executed by Seller and delivered to Purchaser, will
be duly authorized (where appropriate), executed and delivered, and will
constitute a valid, legal and binding obligation of Seller, enforceable against
Seller in accordance with the terms of such Transaction Document, subject to
any Law Affecting Creditors' Rights.
Section 3.4 No Conflict; Consents. The execution, delivery and
performance by Seller of each Transaction Document will not (a) violate any
Law, (b) violate any Charter Document of such Seller (if applicable), (c)
violate any Order to which Seller is a party or by which Seller or its assets
is bound, (d) result in the creation of any Encumbrance on any of the Shares,
or (e) require any Consent from any Person.
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Section 3.5 Brokers. No Person is or will become entitled to
receive any brokerage or finder's fee, advisory fee or other similar payment
for the transactions contemplated by this Agreement by virtue of having been
engaged by or acted on behalf of Seller.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND COMPANY
Each Seller and, until the Closing, Company, jointly and severally,
hereby represents and warrants to Purchaser that the statements made in this
Article IV are true, correct and complete:
Section 4.1 Organization; Good Standing; Delivery of Charter
Documents. Each Acquired Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction listed
opposite such Acquired Company on Schedule 4.1. Each Acquired Company is duly
qualified or licensed as a foreign corporation in each jurisdiction in which
the nature of such Acquired Company's business makes qualification or licensing
necessary, except those jurisdictions wherein the failure to so qualify could
not have a Material Adverse Effect on Company. Prior to the Signing Date,
Company has delivered, or caused to be delivered, to Purchaser true and
complete copies of the Charter Documents of each Acquired Company as in effect
on the Signing Date.
Section 4.2 Power and Authority. Company has all requisite
corporate power and authority necessary to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby, including the execution, delivery and performance of all
the Transaction Documents to which Company is a party. Each Acquired Company
has all requisite corporate power and authority necessary to own, operate and
lease its assets and to carry on its business as and where conducted.
Section 4.3 Authorization; Execution and Validity. Each of the
Transaction Documents, when executed by Company and delivered to Purchaser,
will be duly authorized, executed and delivered, and will constitute a valid,
legal and binding obligation of Company, enforceable against Company in
accordance with the terms of such Transaction Document, subject to any Law
Affecting Creditors' Rights.
Section 4.4 No Conflict; Consents. The execution, delivery and
performance by Company of each Transaction Document will not (a) violate any
Law, (b) violate any Charter Document of any Acquired Company, (c) violate any
Order to which any Acquired Company is a party or by which any Acquired Company
or its Assets is bound, (d) breach any Material Contract, Real Property Lease
or Personal Property Lease, (e) result in the creation of any Encumbrance on
any Assets of any Acquired Company, other than Permitted Encumbrances, or (f)
require any Consent from any Person.
Section 4.5 Capitalization.
(a) Company. Schedule 4.5(a)(1) lists the total number
of authorized, issued and outstanding shares of capital stock of Company. All
the Shares have been duly authorized and validly issued and are fully paid and
non-assessable. There are no issued and outstanding
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shares of capital stock of Company other than the Shares. Except as listed on
Schedule 4.5(a)(2), there is no authorized or outstanding option, subscription,
warrant, call, right, commitment or other agreement ("SUBSCRIPTION RIGHT")
obligating Company to issue or sell any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock.
None of the Shares were issued or will be transferred pursuant to this
Agreement in violation of any preemptive or preferential rights of any Person.
Other than the capital stock of the Subsidiaries, Company does not own any
shares of capital stock, partnership interests or other beneficial ownership
interests in any other Person.
(b) Subsidiaries. Schedule 4.5(b) lists the name of each
Person whose capital stock, equity securities or Subscription Right that
Company owns, either beneficially or of record (collectively, the
"SUBSIDIARIES"), and the total number of authorized, issued and outstanding
shares of such capital stock, equity securities or Subscription Right of each
Subsidiary. All the shares of capital stock of each Subsidiary have been duly
authorized and validly issued and are fully paid and non-assessable. Company
owns all issued and outstanding shares of capital stock of each Subsidiary.
There is no authorized or outstanding Subscription Rights obligating any
Subsidiary to issue or sell any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock. None of
the shares of any Subsidiary were issued or will be transferred pursuant to
this Agreement in violation of any preemptive or preferential rights of any
Person. No Subsidiary owns any shares of capital stock, partnership interests
or other beneficial ownership interests in any other Person.
Section 4.6 Financial Statements.
(a) Year-End Financial Statements. Attached hereto as
Schedule 4.6(a) are the balance sheets of the Acquired Companies as of December
31, 1997 (the "YEAR-END BALANCE SHEET" and such date the "BALANCE SHEET DATE"),
and December 31, 1996, with the related statements of operations and cash flows
for the fiscal years ended on such dates and the accompanying notes
(collectively, the "YEAR-END FINANCIAL STATEMENTS"). The Year-End Financial
Statements have been prepared in accordance with GAAP (except as noted
therein), and present fairly, in all material respects, the financial position
of the Acquired Companies as of the dates indicated and the results of their
operations and cash flows for the periods then ended.
(b) Interim Financial Statements. Attached hereto as
Schedule 4.6(b) are the balance sheet of the Acquired Companies as of September
30, 1998 (the "INTERIM BALANCE SHEET") and the related statement of operations
and cash flows for the eight month period ended on such date (collectively, the
"INTERIM FINANCIAL STATEMENTS"). The Interim Financial Statements have been
prepared in accordance with the Books and Records and with GAAP (except as
noted therein and the absence of detailed notes to such statements), and
present fairly, in all material respects, the financial position of the
Acquired Companies as of the date indicated and the results of its operations
and cash flows for the period then ended, subject to normal year-end
adjustments.
Section 4.7 No Undisclosed Liabilities. Except as described in
the Year-End Balance Sheet, none of the Assets or the business of any Acquired
Company is subject to any Claim
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of any nature, absolute or contingent, and no events have occurred or
circumstances exist that could give rise to any future Claim that could have a
Material Adverse Effect on the assets or the business of any Acquired Company,
other than Claims incurred since the Balance Sheet Date in the ordinary course
of such Acquired Company's business consistent with past practices.
Section 4.8 Absence of Certain Changes. Since the Balance Sheet
Date, each Acquired Company has conducted its business only in the ordinary
course of business consistent with past practices and, without limiting the
generality of the foregoing and except as listed on Schedule 4.8, there has
been no (a) event or occurrence that has caused or will cause a Material
Adverse Change with respect to any Acquired Company, (b) amendment to the
Charter Documents of any Acquired Company, (c) payment of any dividend or
distribution made with respect to any Acquired Company's capital stock, (d)
redemption or purchase of any of any Acquired Company's capital stock, (e)
amendment, termination or receipt of notice of termination of or entry into any
contract, lease or license involving a total commitment by or to any Acquired
Company of $10,000, (f) incurrence or guarantee of any debt by any Acquired
Company, other than trade and accounts payable incurred in the ordinary course
of business consistent with past practices, (g) loan to or transaction with any
officer, director or shareholder of any Acquired Company, other than in the
ordinary course of business consistent with past practices, (h) waiver of any
material right or release of any debt or claim by any Acquired Company, other
than waivers or releases given in the ordinary course of business consistent
with past practices, (i) amendment or termination of any Permit of any Acquired
Company, (j) destruction, damage or other loss to any material asset of any
Acquired Company other than destruction, damage or other loss that is fully
covered by insurance, (k) adoption of or increase in the payments to or
benefits under any Employee Benefit Plan of any Acquired Company, (l) sale,
lease, or other disposition of any assets used in the business of any Acquired
Company, other than the Transferred Assets and assets sold, leased or otherwise
disposed of in the ordinary course of business consistent with past practices,
(m) imposition of any Encumbrance on any of the assets of any Acquired Company,
other than Permitted Encumbrances, (n) purchase or lease any assets used in the
business of any Acquired Company, other than assets purchased or leased in the
ordinary course of business consistent with past practice, (o) payment of any
bonus or an increase in the salary, bonus or other compensation payable to any
employee of any Acquired Company, other than payments or increases consistent
with past practice, (p) change in any accounting method used by any Acquired
Company, (q) acceleration related to the collection of accounts receivable of
any Acquired Company or delay related to the payment of accounts payable of any
Acquired Company, or (r) agreement or commitment to take any action described
in this Section.
Section 4.9 Sufficiency and Condition of and Title to the Assets.
(a) Sufficiency of the Assets. Except for the
Transferred Assets, the assets reflected on the Books and Records of the
Company (the "ASSETS") constitute all the assets, properties, licenses and
other arrangements which are presently being used or are reasonably related to
the Business, and are sufficient to operate the Business in a manner consistent
with past practice and historic capacity.
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(b) Condition of the Assets Each of the Assets complies
with Law and is in good and normal operating condition and repair, structurally
sound with no known defects (ordinary wear and tear excepted), and suitable for
its intended use.
(c) Title to the Assets. At the Closing, one of the
Acquired Companies will hold good, valid and indefeasible title to, or a valid
leasehold interest in, each of the Assets, free and clear of all Encumbrances,
other than Permitted Encumbrances.
Section 4.10 Accounts Receivable. All accounts receivable of the
Acquired Companies reflected on the Interim Balance Sheet (the "ACCOUNTS
RECEIVABLE") represent or will represent valid obligations arising from sales
made, commissions earned or services performed in the ordinary course of
business. Unless paid prior to the Closing Date, the Accounts Receivable are
current and collectible net of the respective reserves shown on the Interim
Balance Sheet (which reserves are adequate and calculated consistent with past
practice). Subject to such reserves, each of the Accounts Receivable either
has been or will be collected in full, without any set-off, within ninety days
after the day on which it first becomes due and payable. There is no contest,
claim, or right of set-off under any contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Section 4.11 Intentionally Omitted.
Section 4.12 Real Property.
(a) Owned Real Property. Schedule 4.12(a) lists as of
the Signing Date each parcel of real property owned by any of the Acquired
Companies, including the street address of each property and a summary
description of the buildings and improvements thereon. Each parcel of real
property listed on Schedule 4.12(a) and any parcel of real property purchased
after the Signing Date in accordance with Section 6.3 (collectively, the "OWNED
REAL PROPERTY") is (i) in compliance with all Laws, including the Americans
with Disabilities Act and any building, fire, land use, occupancy, safety,
set-back, or zoning Law, (ii) not burdened by any covenant, easement,
encroachment, restrictive covenant, right-of-way, or servitude, other than
those specifically referenced in the title insurance policies delivered
pursuant to Section 2.3(f), and (iii) not subject to any condemnation, eminent
domain or similar Action.
(b) Leased Real Property. Schedule 4.12(b) lists all the
leases of real property to which any Acquired Company is a party and which are
in effect as of the Signing Date. All of the leases on Schedule 4.12(b) and
any leases of real property entered into after the Signing Date in accordance
with Section 6.3 (collectively, the "REAL PROPERTY LEASES") are valid, binding
and in full force and effect. No Acquired Company nor, to Sellers' Knowledge,
any other Person is in default under any Real Property Lease, nor is there any
event which with notice or lapse of time, or both, would constitute a default
thereunder by any Acquired Company or any other Person. The appropriate
Acquired Company has received a nondisturbance agreement from any lessor's
lender under each of the Real Property Leases. True and complete copies of all
the Real Property Leases, any amendments thereto and the nondisturbance
agreements have been provided to Purchaser prior to the Signing Date.
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Section 4.13 Personal Property.
(a) Owned Personal Property. Schedule 4.13(a) lists as
of the Signing Date all of the personal property (including all machinery,
equipment, vehicles, structures, fixtures and furniture) owned by any Acquired
Company and used in the Business, located on its premises or shown on the
Interim Balance Sheet or acquired after the date thereof (except for assets
subsequently sold in the ordinary course of business and consistent with past
practice).
(b) Leased Personal Property. Schedule 4.13(b) lists as
of the Signing Date all the leases of personal property to which any Acquired
Company is a party. All of the leases on Schedule 4.13(b) and any leases of
personal property entered into after the Signing Date in accordance with
Section 6.3 (collectively, the "PERSONAL PROPERTY LEASES") are valid, binding
and in full force and effect. No Acquired Company nor, to Sellers' Knowledge,
any other Person is in default under any Personal Property Lease, nor is there
any event which with notice or lapse of time, or both, would constitute a
default thereunder by Company or any other Person. True and complete copies of
all the Personal Property Leases and any amendments thereto have been provided
to Purchaser prior to the Signing Date.
Section 4.14 Compliance with Laws. To Sellers' Knowledge, each
Acquired Company has complied with all Laws in the conduct of the Business. No
Acquired Company has received any notice from any Governmental Authority or
other Person asserting that Acquired Company has violated any Law.
Section 4.15 Insurance. Schedule 4.15 lists as of the Signing
Date all insurance policies to which any Acquired Company is a party or which
insure the Business or any of the Assets against loss (collectively, the
"INSURANCE POLICIES"), including each insurer's name, coverage deductible and
limit, expiration date and current premium. Each Insurance Policy is in full
force and effect, all premiums with respect thereto have been paid to the
extent due, and no notice of cancellation or termination has been received with
respect to any such policy, other than any policy that will be replaced or is
intended to be replaced prior to the expiration thereof by policies providing
substantially the same coverage from an insurer that is financially sound and
reputable. The Insurance Policies provide the Acquired Companies with adequate
insurance coverage against the risks involved in the conduct of the Business
and ownership of the Assets. The coverage provided by the Insurance Policies
is not less than the coverage customary in the Acquired Companies' industry and
will not in any way be affected by or terminate or lapse by reason of the
consummation of the transactions contemplated by this Agreement. True and
complete copies of all Insurance Policies have been provided to Purchaser.
Section 4.16 Contracts. Schedule 4.16 lists as of the Signing
Date all the contracts relating to the Business, Assets or Assumed Liabilities
or by which any of the Assets is bound, pursuant to which the obligations of
any party thereto are, or are contemplated to be, with respect to any such
contract (a) in excess of $10,000 during any twelve month period the term
thereof, (b) not terminable prior to three month from the Signing Date, or (c)
otherwise material to the Business. All of the contracts listed on Schedule
4.16 and any contracts entered into after the Signing Date in accordance with
Section 6.3 (collectively, the "MATERIAL CONTRACTS") are valid
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and binding and in full force and effect, subject to Laws Affecting Creditors'
Rights. No Acquired Company nor, to Sellers' Knowledge, any other Person is in
default under any Material Contract, nor is there any event which with notice
or lapse of time, or both, would constitute a default thereunder by an Acquired
Company or any other Person. Other than the Material Contracts, no Acquired
Company is a party to any contract which (x) requires the Consent of any Person
in order to consummate the transactions contemplated by this Agreement, (y) is
in excess of the normal, ordinary and usual requirements of the Business, or
(z) is excessive in price or quantity. True and complete copies of all the
Material Contracts have been provided to Purchaser.
Section 4.17 Litigation; Orders. Schedule 4.17 lists and
describes all Actions pending, or to Sellers' Knowledge, threatened against or
affecting any Acquired Company, the Business or any of the Assets. There is no
Action pending or, to Sellers' Knowledge, threatened in writing affecting any
Acquired Company, the Business or any of the Assets which, if adversely
determined, would have, individually or in the aggregate, a Material Adverse
Effect. Except as listed on Schedule 4.17(1), no Acquired Company is subject
to any Order. True and complete copies of all material pleadings in the
Actions listed on Schedule 4.17 have been provided to Purchaser.
Section 4.18 Environmental Matters.
(a) Compliance with Environmental Laws. The Business has
been and is operated in compliance with all Environmental Laws and all Permits
related to Environmental Laws.
(b) Hazardous Materials. To Sellers' Knowledge, no
Acquired Company has caused or allowed the generation, treatment, manufacture,
processing, distribution, use, storage, discharge, release, disposal, transport
or handling of any Hazardous Materials at any of the properties or facilities
used in connection with the Business, including the Owned Real Property and the
premises subject to the Real Property Leases, except in compliance with all
Environmental Laws. To Sellers' Knowledge, no generation, treatment,
manufacture, processing, distribution, use, storage, discharge, release,
disposal, transport or handling of any Hazardous Materials has occurred at any
of the properties or facilities used in connection with the Business, including
the Owned Real Property and the premises subject to the Real Property Leases,
except in compliance with all Environmental Laws.
(c) Existence of an Action. No Acquired Company has
received any notice from any Governmental Authority or other Person alleging or
concerning any Claim against an Acquired Company under any Environmental Law,
whether for personal injuries or property damages. There is no Action pending
or, to Sellers' Knowledge, threatened affecting any Acquired Company with
respect to the Businesses alleging or concerning any Claim under any
Environmental Law, whether for personal injuries or property damages, nor do
Sellers have any knowledge of any fact or condition that could give rise to
such a Claim.
(d) Environmental Permits. To Sellers' Knowledge, the
Acquired Companies are in possession of and in compliance with all Permits
required under the Environmental Laws
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with respect to the operation of the Business. There are no Actions pending
or, to Sellers' Knowledge, threatened which seek to modify, revoke or deny
renewal of any of such Permit. Sellers have no knowledge of any fact or
condition that is reasonably likely to give rise to any Action to modify,
revoke or deny renewal of any of such Permit. No Consent from any Person is
necessary for the transfer of any such Permit, and the consummation of the
transactions contemplated by this Agreement will not violate, alter, impair or
invalidate, in any respect, any such Permit.
(e) Miscellaneous. Without in any way limiting the
generality of the foregoing, to Sellers' Knowledge, (i) none of the off-site
locations where any Acquired Company has transported, released, discharged,
stored, disposed or arranged for the disposal of Hazardous Materials has been
identified as a facility that is subject to an existing Claim under any
Environmental Law or is the subject of any threatened Claim by any Person, (ii)
no underground improvement regulated by any Environmental Law, including any
storage or treatment tank, is located on the Owned Real Property or the
premises subject to the Real Property Leases, (iii) there is no asbestos
contained in or forming part of any Assets, and (iv) no polychlorinated
biphenyls or polychlorinated biphenyls-containing items are used or stored at
the Owned Real Property or the premises subject to the Real Property Leases.
Section 4.19 Permits. Schedule 4.19 lists all the Permits related
to the Assets or operation of the Business, and indicates those Permits for
which the Consent of any Person is required to assign such Permit. Each
Acquired Company has obtained, maintains in effect, and complies with the terms
and conditions of all Permits required by Law. There is no Action pending or,
to Sellers' Knowledge, threatened in writing to revoke or limit any Permit
listed on Schedule 4.19.
Section 4.20 Intangible Assets.
(a) Owned Intangible Assets. Schedule 4.20(a) lists all
the Intangible Assets owned by any Acquired Company as of the Signing Date.
With respect to the Intangible Assets listed on Schedule 4.20(a) and all the
Intangible Assets obtained or developed prior to the Closing, (i) the Acquired
Company owns all right, title and interest in and to such Intangible Assets
free and clear of all Encumbrances, (ii) the Acquired Company has not sold,
transferred, licensed, sub-licensed or conveyed any interest in any of such
Intangible Assets, and (iii) no Person has infringed upon or misappropriated
any of such Intangible Assets.
(b) Licensed Intangible Assets. Schedule 4.20(b) lists
all licenses and contracts related to any Intangible Asset used by any Acquired
Company as of the Signing Date. Each license or contract listed on Schedule
4.20(b) and each license or contract related to an Intangible Asset which is
entered into after the Signing Date in accordance with Section 6.3 is valid,
binding and in full force and effect. No Acquired Company has infringed upon
or misappropriated any Intangible Asset owned by another Person.
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Section 4.21 Employees.
(a) Employees. Schedule 4.21(a) lists the name, job
title, date of employment and current annual compensation (salary, bonus and
all amounts paid pursuant to an Employee Benefit Plan) for each employee of the
Acquired Companies employed as of the Signing Date (collectively, the
"EMPLOYEES"). All Employees are either United States citizens or resident
aliens specifically authorized to engage in employment in the United States in
accordance with all Laws. All sums due for employee compensation and benefits
and all vacation time owing to any employee of the Acquired Companies
(including all persons whose employment by any Acquired Company terminated
prior to the Signing Date) have been duly and adequately accrued on the
accounting Books and Records.
(b) Contracts. Schedule 4.21(b) lists each (i) contract
between any Acquired Company and an Employee, and (ii) collective bargaining
agreement and other contract to or with any labor union, employee
representative or group of employees. Other than the contracts listed on
Schedule 4.21(b), each Acquired Company's employment of each Employee is
terminable at will without any penalty or severance obligation of any kind on
the part of such Acquired Company.
(c) Compliance with Labor Laws. Each Acquired Company
has complied and is presently complying with all Laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor practice or unlawful employment
practice.
(d) Labor Actions and Relations. There is no unfair
labor practice charge or complaint against any Acquired Company pending or
threatened before the National Labor Relations Board nor is there any grievance
nor any arbitration proceeding arising out of or under any collective
bargaining agreement pending and, to Sellers' Knowledge, no basis for any such
charge, complaint or grievance exists. There is no labor strike, slowdown or
work stoppage pending or threatened against any Acquired Company. No Acquired
Company has experienced any significant work stoppages or been a party to any
Action before the National Labor Relations Board involving any issue for the
past three years nor been a party to any arbitration proceeding arising out of
or under any collective bargaining agreement for the past three years. There
is no charge or complaint pending or threatened against any Acquired Company
before the Equal Employment Opportunity Commission or the Department of Labor
or any state or local agency of similar jurisdiction.
(e) WARN Act. No Acquired Company nor any Person with
whom any Acquired Company would be treated as an "employer" for purposes of the
Worker Adjustment and Retraining Notification Act or any similar state law has
incurred any liability or obligation under such laws.
Section 4.22 Employee Benefits.
(a) Welfare Benefit Plan. Schedule 4.22(a) lists, as of
the Signing Date, each Welfare Benefit Plan maintained by any Acquired Company
or to which any Acquired Company
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contributes or is required to contribute with respect to any Person. True,
correct and complete copies of the plan documents for each of the Acquired
Company's Welfare Benefit Plans and all related summary plan descriptions have
been provided to Purchaser. No Acquired Company has any liability for
contributions or payments more than 30 days past due with respect to any of its
Welfare Benefit Plans or for any retiree benefits under any such Welfare
Benefit Plan to current or retired employees of any Acquired Company (other
than as required by Section 601 of ERISA).
(b) Pension Benefit Plans. Schedule 4.22(b) lists, as of
the Signing Date, each Pension Benefit Plan maintained by any Acquired Company
or to which any Acquired Company contributes or is required to contribute with
respect to any Person. True, correct and complete copies of the plan and
related trust documents for each of the Acquired Companies' Pension Benefit
Plan and all related summary plan descriptions have been provided to Purchaser.
No Acquired Company presently maintains and has never maintained, nor has had
any obligation of any nature (whether contingent or otherwise) to contribute
to, a "defined benefit plan" (as defined in Section 414(j) of the Code),
without regard to whether such defined benefit plan met the requirements of
section 401(a) of the Code. No Acquired Company has any liability for
contributions due with respect to its Pension Benefit Plans, including any
"individual account plan" (as defined in Section 3(34) of ERISA).
(c) Employee Arrangements. Schedule 4.22(c) lists each
Employee Benefit Plan not otherwise disclosed in Schedules 4.22(a) or 4.22(b)
maintained by any Acquired Company with respect to any past or present employee
of any Acquired Company. True, correct and complete copies of each Employee
Benefit Plan listed on Schedule 4.22(c) (and any related documents) have been
provided to Purchaser. No Acquired Company has any liability for contributions
or payments more than 30 days past due with respect to any of its Employee
Benefit Plans listed on Schedule 4.22(c).
(d) Benefit Plan Compliance. All of the Acquired
Companies' Employee Benefit Plans and any related trust agreements or annuity
contracts (or any other funding instruments) currently comply in all respects,
and have so complied in the past, both as to form and operation, with all
applicable Laws, including ERISA and the Code. No assets of any Acquired
Company Employee Benefit Plans include any "employer securities" or "employer
real property" as such terms are defined in Section 407 of ERISA. No debt has
been incurred by any Acquired Company Benefit Plans, other than liabilities for
the payment of benefits or insurance premiums.
(e) No Liability. No liability under Title IV of ERISA
has been or will be incurred by any Acquired Company on or prior to the Closing
Date. No Acquired Company has made any commitment, whether formal or informal,
and whether legally binding or not, to create or have liability under any
additional Employee Benefit Plan, policy or arrangement, or to modify any
existing Acquired Company Employee Benefit Plan.
(f) Effect of Consummation. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee of any Acquired Company or any other individual to a bonus,
severance pay, unemployment
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compensation or similar payment, (ii) otherwise accelerate the time of payment
or vesting, or increase the amount of any compensation due to any current or
former employee of any Acquired Company, (iii) result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available or (iv) in any way result in any additional
liability with respect to any Acquired Company Employee Benefit Plan.
(g) No Penalties. No Acquired Company Employee Benefit
Plans or any trusts relating thereto have engaged in any transaction in
connection with which any Acquired Company or any fiduciaries of such Employee
Benefit Plans or related trusts is or could be subject either to a civil
penalty or other liability under Sections 502(i), 406 or 409 of ERISA or a tax
imposed by Section 4975 of the Code, and no event has occurred and no condition
exists with respect to Acquired Company Employee Benefit Plans that could
subject any Acquired Company to any other tax or penalty under the Code or
civil penalty or other liability under ERISA or other Laws.
(h) No Actions. No Action is pending or, to Sellers'
Knowledge, threatened involving any Acquired Company Employee Benefit Plan.
Section 4.23 Taxes.
(a) Tax Returns. All Tax returns, reports, and
declarations of estimated Tax (collectively, "RETURNS") which were required to
be filed by any Acquired Company with any Governmental Authority have been
timely filed. All Returns are true and correct and accurately reflect the Tax
liabilities of each Acquired Company. All Taxes shown to be due pursuant to
such Returns, other than Taxes being contested in good faith and for which
adequate reserves are reflected on the Interim Balance Sheet, have been paid.
(b) Statute of Limitations and Tax Actions. No Acquired
Company has executed any presently effective waiver or extension of any statute
of limitations against assessments and collection of Taxes. There are no
pending or, to Sellers' Knowledge, threatened Claims, assessments, notices,
proposals to assess, deficiencies or audits with respect to Taxes.
(c) Miscellaneous Tax Representations. Proper and
accurate amounts have been withheld and remitted by each Acquired Company from
and with respect to all Persons from whom it is required by applicable law to
withhold for all periods in compliance with the tax withholding provisions of
all Laws. No Acquired Company nor, to Sellers' Knowledge, any other
corporation has filed an election under Section 341(f) of Code that is
applicable to any Acquired Company or any of the Assets. No Acquired Company
is a party to any tax sharing agreement. There is no contract, plan or
arrangement covering any Person that, individually or collectively, would give
rise to the payment of any amount that would not be deductible by any Acquired
Company by reason of Section 280G of the Code. No Acquired Company is a
"foreign person" within the meaning of Section 1445(f)(3) of the Code. No
Acquired Company has ever been a member of any group that filed a consolidated
federal income tax return.
Section 4.24 Bank Accounts; Powers of Attorney. Schedule 4.24
lists the names of (a) each bank, trust company and stock or other broker with
which any Acquired Company has an
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account, credit line or safe deposit box or vault, or otherwise maintains
relations (the "BANK ACCOUNTS"), (b) all Persons authorized to draw on, or to
have access to, each of the Accounts, and (c) all Persons authorized by
proxies, powers of attorney or other like instrument to act on behalf of any
Acquired Company in any matter concerning the Business. Each of the Bank
Accounts has a positive cash balance. No proxies, powers of attorney or other
like instruments are irrevocable.
Section 4.25 Suppliers and Customers. The relationships of each
Acquired Company with its suppliers and customers are satisfactory. No such
material customer or supplier has canceled or otherwise terminated, or
threatened to cancel or otherwise terminate, its relationship with any Acquired
Company, or to materially decrease its services to any Acquired Company or its
usage of the services of any Acquired Company.
Section 4.26 Affiliated Transactions. Since the Year-End Balance
Sheet Date, except as listed on Schedule 4.26 no Acquired Company has paid,
loaned or advanced any amount to, or sold, transferred or leased any properties
or assets (tangible or intangible) to, or entered into any agreement or
arrangement with, any of the officers, directors or stockholders of any
Acquired Company or any of its affiliates, except for compensation to officers
at rates not exceeding the rates of compensation paid during the fiscal year
ended on the Year-End Balance Sheet Date and routine travel advances to
officers and employees.
Section 4.27 Books and Records. The Books and Records of each
Acquired Company, all of which have been made available to Purchaser, are
complete and correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal
controls.
Section 4.28 Full Disclosure. No representation or warranty of
any Seller and, until the Closing, Company made in this Agreement, nor any
written statement furnished to Purchaser pursuant hereto or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact which affects the Business or financial condition
of any Acquired Company, or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading.
Section 4.29 Brokers. No Person is or will become entitled to
receive any brokerage or finder's fee, advisory fee or other similar payment
for the transactions contemplated by this Agreement by virtue of having been
engaged by or acted on behalf of Seller or any Acquired Company.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers that the
statements set forth in this Article V are correct and complete.
Section 5.1 Organization; Good Standing; Delivery of Charter
Documents. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State
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of Texas. Purchaser is duly qualified or licensed as a foreign corporation in
each jurisdiction in which its assets are owned or leased, or the nature of its
business makes such qualification or licensing necessary, except those
jurisdictions wherein the failure to so qualify could not have a Material
Adverse Effect on Purchaser. Prior to the Signing Date, Purchaser has
delivered to Company and Sellers true and complete copies of Purchaser's
Charter Documents as in effect on the Signing Date.
Section 5.2 Power and Authority. Purchaser has all requisite
corporate power and authority necessary to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby, including the execution, delivery and performance of all
the other Transaction Documents to which Purchaser is a party. Purchaser has
all requisite corporate power and authority necessary to own, operate and lease
its assets and to carry on its business as and where conducted.
Section 5.3 Authorization; Execution and Validity. Each of the
Transaction Documents, when executed and delivered by Purchaser, will be duly
authorized, executed and delivered, and will constitute a valid, legal and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with the terms of such Transaction Document, subject to any Law Affecting
Creditors' Rights.
Section 5.4 No Conflict; Purchaser Consents. The execution,
delivery and performance by Purchaser of each Transaction Document to which it
is a party will not (a) violate any Law, (b) violate any Charter Document of
Purchaser, (c) violate any Order to which Purchaser is a party or by which
Purchaser or its assets is bound, or (d) require any Consent from any Person.
Section 5.5 Full Disclosure. No representation or warranty of
Purchaser made in this Agreement, nor any written statement furnished to
Sellers pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact which
affects the business or financial condition of Purchaser, or omits or will omit
to state a material fact necessary to make the statements or facts contained
herein or therein not misleading.
Section 5.6 Brokers. No Person is or will become entitled to
receive any brokerage or finder's fee, advisory fee or other similar payment
for the transactions contemplated by this Agreement by virtue of having been
engaged by or acted on behalf of Purchaser.
ARTICLE VI.
COVENANTS OF COMPANY AND SELLERS
Section 6.1 Cooperation of Company and Sellers. From the Signing
Date through the Closing Date, Company and each Seller will use all reasonable
efforts (a) to take all actions and to do all things necessary or advisable to
consummate the transactions contemplated by this Agreement, (b) to cooperate
with Purchaser in connection with the foregoing, including using reasonable
efforts to obtain all of the Consents, and (c) subject to the other terms and
conditions
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of this Agreement, to cause all the conditions set forth in Section 9.1, the
satisfaction of which is in the reasonable control of Company or any Seller, to
be satisfied on or prior to Closing.
Section 6.2 Pre-Closing Access to Information. From the Signing
Date through the Closing Date, Company and each Seller will afford to Purchaser
its Representatives access to the properties and the Books and Records of the
Acquired Companies.
Section 6.3 Conduct of Business.
(a) Ordinary Course. From the Signing Date through the
Closing Date, Company and each Seller, in connection with the conduct of the
Business, will use all reasonable efforts to (i) preserve substantially the
relationships with its Representatives, suppliers and customers, (ii) perform
its obligations under all contracts, leases and Permits in all material
respects, (iii) comply with all Laws, (iv) confer with Purchaser regarding
operational matters of a material nature, (v) report periodically to Purchaser
regarding the status of the Businesses and the results of operations of the
Acquired Companies, and (vi) conduct the Businesses in the ordinary course and
consistent with past practices.
(b) Prohibited Actions. Except as otherwise required or
permitted by this Agreement or listed on Schedule 6.3(b), from the Signing Date
through the Closing Date Company and each Seller will not, and Company will
cause each Subsidiary not to, without the prior written consent of Purchaser,
take or fail to take any action as a result of which any of the changes or
events listed in Section 4.8 occur or become likely to occur.
Section 6.4 Supplements to Schedules. If, between the Signing
Date and the Closing Date, Company or any Seller becomes aware that any of its
representations and warranties in this Agreement or the schedules to this
Agreement was inaccurate when made or if during such period any event occurs or
condition changes that causes any of such representations and warranties to be
inaccurate, then such Party will notify Purchaser thereof in writing and
supplement the schedules hereto to account for any such inaccuracy, event or
change. Any such supplement to the schedules will not be deemed to have been
disclosed as of the Signing Date or to have cured any breach of a
representations and warranties made in this Agreement, unless so agreed to in
writing by Purchaser.
Section 6.5 Standstill. Until the earlier to occur of the
Closing or the termination of this Agreement pursuant to Article X, Company and
each Seller will not, nor will Company and each Seller permit any of its
Representatives to, (a) directly or indirectly, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any information or
assistance to, any Person (other than Purchaser and its Representatives)
concerning any merger, sale of securities, sale of substantial assets,
investment proposals or similar transaction involving any Acquired Company, (b)
entertain or discuss any acquisition or investment proposals whatsoever, (c)
disclose to any third party any non-published information concerning any
Acquired Company, the Business or any Acquired Company's financial condition,
or (d) withdraw Seller's intention to sell the Shares to Purchaser.
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Section 6.6 Discharge of Encumbrances. Company and each Seller
will take, and Company will cause each Subsidiary to take, all actions and do
all things necessary to cause all Encumbrances other than Permitted
Encumbrances on any Assets to be terminated or otherwise discharged at or prior
to the Closing.
Section 6.7 Non-Disclosure; Non-Competition; Non-Solicitation.
(a) Non-Disclosure Agreement. Each Seller acknowledges,
for itself and each of its Affiliates, that it has and may have access to
Confidential Information and that such Confidential Information does and will
constitute valuable, special and unique property of Purchaser. At no time will
Seller, and at no time will Seller allow its Affiliates or its Representatives
to, (i) use any Confidential Information in any manner adverse to the business
interests of Purchaser, or (ii) disclose any such Confidential Information to
any Person for any reason or purpose whatsoever. Upon the request of
Purchaser, each Seller will, and will cause its Affiliates and Representatives
to, deliver to Purchaser all letters, notes, computer disks, software,
notebooks, reports and other materials which contain Confidential Information
and which are in the possession or under the control of such Seller, Affiliate
or Representative.
(b) Non-Competition Agreement. Each Seller agrees, and
will cause each of its Affiliates, not to provide, either directly or
indirectly, any of the Restricted Services within the United States of America
for so long as Purchaser provides services to any Affiliate of a Seller (such
time period, the "RESTRICTION PERIOD").
(c) Non-Solicitation Agreement. For a period equal to
the Restriction Period, each Seller will not, and will cause each of its
Affiliates not to, either on its own behalf or on behalf of any entity
providing Restricted Services, directly or indirectly to the extent that such
Seller is prohibited in engaging in such Restricted Services pursuant to this
Section, (i) solicit or induce, or in any manner attempt to solicit or induce
any person employed by, or an agent of, any Acquired Company or Purchaser to
terminate such person's employment or agency, as the case may be, with such
entity, or (ii) solicit, divert, or attempt to solicit or divert, or otherwise
accept as a supplier or customer, any Person which sells any products and
services of any Acquired Company, furnishes products or services to, or
receives products and services from, Purchaser, nor will such Seller attempt to
induce any such supplier or customer to cease being (or any prospective
supplier or customer not to become) a supplier or customer of any Acquired
Company or Purchaser.
(d) Independent Covenants. The covenants set forth in
this Section are independent and separate, and in the event that any provision
contained herein is declared invalid or illegal, the other provisions hereof
will not be affected or impaired thereby and will remain valid and enforceable.
(e) Injunctive Relief. In the event of a breach or
threatened breach by any Seller of any provision of this Section, each Acquired
Company and Purchaser will be entitled to an injunction to prevent irreparable
injury to such entity. Nothing herein will be construed as prohibiting any
Acquired Company or Purchaser from pursuing any other remedies available to
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such entity for such breach or threatened breach, including the recovery of
damages from such Seller.
(f) Acknowledgments of Seller. Each Seller acknowledges
that (i) any public disclosure of the Confidential Information will have an
adverse effect on the Acquired Companies, Purchaser and the Business, (ii) the
Acquired Companies and Purchaser would suffer irreparable injury if Seller
breaches any of the terms of this Section, (iii) the Acquired Companies and
Purchaser will be at a substantial competitive disadvantage if such entity
fails to acquire and maintain exclusive ownership of the Confidential
Information or to abide by the restrictions provided for in this Section, (iv)
the scope of the protective restrictions provided for in this Section are
reasonable when taking into account (A) the negotiations between the Parties
and (B) that Seller is the direct beneficiary of the Purchase Price paid
pursuant to this Agreement, (v) the consideration being paid to Seller pursuant
to this Agreement is sufficient inducement for Seller to agree to the terms
hereof, (vi) the provisions of this Section are reasonable and necessary to
protect the Business, to prevent the improper use or disclosure of the
Confidential Information and to provide the Acquired Companies and Purchaser
with exclusive ownership of all such Confidential Information and (vii) the
terms of this Section preclude Seller from providing the Restricted Services.
Without limiting the foregoing, in the event that a court of competent
jurisdiction determines that the Restriction Period exceeds the maximum
reasonable and enforceable time period or that the designated area exceeds the
maximum reasonable and enforceable area, the Restriction Period or designated
area shall be deemed to become and thereafter shall be the maximum time period
or area which such court deems reasonable and enforceable.
Section 6.8 Transfer of Certain Assets. On or prior to the
Closing Date, Company will transfer to an Affiliate acceptable to Purchaser the
claims contracts and assets specified on Schedule 6.8 (the "TRANSFERRED
ASSETS").
ARTICLE VII.
COVENANTS OF PURCHASER
Section 7.1 Cooperation by Purchaser. From the Signing Date
through the Closing Date, Purchaser will use all reasonable efforts (a) to take
all actions and to do all things necessary or advisable to consummate the
transactions contemplated by this Agreement, (b) to cooperate with Company and
Sellers in connection with the foregoing, including using reasonable efforts to
obtain all of the Consents and the Releases, and (c) subject to the other terms
and conditions of this Agreement, to cause all the conditions set forth in
Section 9.2, the satisfaction of which is in the reasonable control of
Purchaser, to be satisfied on or prior to Closing.
Section 7.2 Pre-Closing Access to Information. Purchaser will
refrain from imposing any undue burden upon the Acquired Companies and Sellers
and from interfering with the operations and conduct of the Business.
Section 7.3 Purchasers' Consent. If any Acquired Company gives
written notice to Purchaser that such Acquired Company proposes to take any
action for which Purchaser's
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consent is required under Section 6.3 and if Purchaser has not delivered to
Company a written objection to such proposed action within 10 business days of
such Acquired Company's notice, then Purchaser will be deemed to have consented
to such proposed action. Purchaser's consent to any such proposed action will
not be unreasonably withheld.
Section 7.4 Maintenance of the Segregated Account. Until the
earlier to occur of the Closing or the termination of this Agreement pursuant
to Article X, Purchaser will maintain in the Segregated Account a balance equal
to the lesser of the Base Purchase Price or the Final Purchase Price.
ARTICLE VIII.
MUTUAL COVENANTS
Section 8.1 Governmental Consents.
(a) HSR Filing. Within five business days after the
Signing Date, each Party will take all actions and do all things necessary to
file the notification required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"). The Parties will use all
reasonable efforts to comply as promptly as practicable with any request made
pursuant to the HSR Act for additional information. Purchaser will pay the
statutory filing fees required by the HSR Act. The Parties anticipate all
applicable waiting periods under the HSR Act to be expired or terminated within
30 days of the filing of the initial notification required under the HSR Act.
(b) Other Governmental Consents. Promptly after the
Signing Date, each Party will take all actions and do all things necessary to
obtain all Consents required by any Governmental Authority to consummate the
transactions contemplated hereby. Each Party will reasonably cooperate with
the other Parties in obtaining the Consents specified in this Section.
Section 8.2 Consents to Assign Leases and Contracts.
(a) Cooperation and Reasonable Efforts. Each Party
hereby agrees to use reasonable efforts, to take reasonable actions (including
Purchaser's delivery to third parties of its financial statements) and to
cooperate with each other as may be necessary to obtain Consents to transfer
and assign the Encumbered Instruments. Except as expressly provided herein, no
Party will be required to pay any sum, to incur any obligation or to agree to
any amendment of any Encumbered Instrument in order to obtain any such Consent
to transfer and assign the Encumbered Instrument.
(b) Pre-Closing; Required Consents. Schedule 8.2(b)
lists the Encumbered Instruments to which a Consent to transfer and assign must
be obtained from the appropriate third party prior to Closing (collectively,
the "REQUIRED CONSENTS"). Except for the Required Consents, the obtaining of
any Consents related to the Encumbered Instruments will not be a condition to
Closing, and Closing will occur irrespective of whether any such Consent has
been obtained.
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Section 8.3 Permits.
(a) Cooperation and Reasonable Efforts. Each Party
hereby agrees to use reasonable efforts, to take reasonable actions (including
Purchaser's delivery to any Governmental Authority of its financial statements)
and to cooperate with each other as may be necessary to transfer to Purchaser,
or assist Purchaser in obtaining, all Permits required to conduct the Business.
On or as soon as practicable after the Signing Date, each Party will file,
separately or jointly with any other Party, as the case may be, all
applications necessary to transfer or obtain the Permits. Each Party will use
reasonable efforts to resolve such objections, if any, as may be asserted by
any Governmental Authority with respect to the applications contemplated
hereby. Sellers, as a group, and Purchaser will each pay one-half of the fees
and expenses incurred in connection with transferring or obtaining all Permits.
(b) Pre-Closing; Required Permits. Schedule 8.3(b) lists
the Permits which must be transferred to or obtained by Purchaser prior to
Closing (the "REQUIRED PERMITS"). Except for the Required Permits, the
transfer or issuance to Purchaser of any Permit will not be a condition to
Closing, and Closing will occur irrespective of whether any such Permit has
been transferred or obtained.
Section 8.4 Books and Records.
(a) Access. For a period of six years after Closing,
each Party will provide the other Parties with reasonable access during normal
business hours to its Books and Records relating to the Business (other than
books and records protected by the attorney-client privilege) to the extent
that they relate to the condition or operation of the Business prior to Closing
and are requested by such Party to prepare its Returns, to respond to third
party Claims or for any other legitimate purpose specified in writing. Each
Party will have the right, at its own expense, to make copies of any such Books
and Records.
(b) Destruction. For a period of six years after Closing
(unless otherwise required by Law), no Party will dispose of or destroy any
Books and Records relating to the Business to the extent that they relate to
the condition or operation of the Business prior to the Closing without first
offering to turn over possession thereof to the other Parties by written notice
at least 30 days prior to the proposed date of disposition or destruction.
(c) Confidentiality. Each Party may take such action as
it deems reasonably appropriate to separate or redact information unrelated to
the Business from documents and other materials requested and made available
pursuant to this Section and may condition the other Parties' access to
documents and other materials that it deems confidential to the execution and
delivery of an agreement by the other Parties not to disclose or misuse such
information.
(d) Assistance. Each Party will, upon written request
and at the requesting Party's expense, make personnel available to assist in
locating and obtaining any Books and Records relating to the Business to the
extent that they relate to the condition or operation of the Business prior to
Closing and make personnel available whose assistance, participation or
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testimony is reasonably required in anticipation of, preparation for or the
prosecution or defense of any third party Claim in which the other Parties do
not have any adverse interest.
(e) Further Assurances. Subject to the other terms and
conditions of this Agreement, at any time and from time to time, whether before
or after Closing, each Party will execute and deliver all instruments and
documents and take all other action that the other Parties may reasonably
request to consummate or to evidence the consummation of the transactions
contemplated by this Agreement.
Section 8.5 Tax Matters.
(a) Apportionment of Income and Loss. For purposes of
apportioning taxable income or loss relating to any taxable period that ends on
the Closing Date ("SHORT TAX PERIOD") and for that portion of any taxable year
that includes (but that does not end on) the Closing Date (a "PARTIAL TAX
PERIOD"), such taxable income or loss will be determined by reference to the
operations of the Acquired Companies through the Closing Date as though it were
the last day of a taxable year. If required, appropriate elections will be
made with applicable taxable authorities to accomplish such result.
(b) Liability For Short Period Tax. Any taxable income
or loss with respect to a Short Tax Period will be included in the Acquired
Companies federal income Tax Return, and, if applicable, consolidated, unitary
or combined state income Tax Returns filed on behalf of the Acquired Companies
in all jurisdictions to which the Acquired Companies are subject to income Tax
(together with the United States federal Return, the "SUBJECT JURISDICTIONS").
Any income tax payable with respect to such Short Tax Period will be borne by
Sellers, as a group, and Purchaser as hereinafter provided; provided, however,
that any tax liability arising from an election made under Section 338 of the
Code will be borne solely by Purchaser.
(c) Liability For Partial Period Tax. With respect to
income Tax Returns filed in Subject Jurisdictions that include a Partial Tax
Period, income taxes attributable to such Partial Tax Periods will be computed
according to the apportionment rule of subsection (a) above. Any income tax
payable with respect to any such Partial Tax Period will be borne by the
Sellers, as a group, and Purchaser as hereinafter provided; provided, however,
that any tax liability arising from an election made under Section 338 of the
Code will be borne solely by Purchaser.
(d) Payment of Short Period Taxes. With respect to each
Tax Return covering a Short Tax Period that is required to be filed in a
Subject Jurisdiction after the Closing Date for, by or with respect to Company
or any Subsidiary, Sellers will cause such Tax Return to be prepared, will
cause to be included in such Tax Return all items of income, gain, loss,
deduction and credit or other items (collectively "TAX ITEMS") required to be
included therein, and will deliver the original of such Tax Return to
Purchaser, with copies of work papers that will permit Purchaser to review and
substantiate the accuracy of such Tax Return, at least 45 days prior to the due
date (including extensions) of such Tax Return. Sellers, severally, will pay
to Purchaser not less than 10 days prior to the due date (including extensions)
of a Tax Return to be filed in a Subject Jurisdiction for a Short Tax Period
the amount of tax shown to be due on such Tax
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Return (except any tax liability arising from an election made under Section
338 of the Code will be borne solely by Purchaser) less any amount reflected on
the Interim Financial Statement as a current tax liability.
(e) Payment of Partial Period Tax. With respect to each
Tax Return to be filed in a Subject Jurisdiction covering a Partial Tax Period
by or with respect to the Acquired Companies, Purchaser will cause such Tax
Return to be prepared and will cause to be included in such Tax Return all Tax
Items required to be included therein. Purchaser will determine (by an interim
closing of the books as of the Closing Date, except for ad valorem Taxes and
franchise Taxes based on capital which will be prorated on a daily basis) the
portion, if any, of the Tax due with respect to the period covered by such Tax
Return to be filed in a Subject Jurisdiction which is attributable to the
Acquired Companies with respect to the Partial Tax Period after giving effect
to (i) any credits for the amount of such Tax, if any, paid on or prior to the
Closing Date and (ii) any amount reflected on the Final Closing Premium
Statement as a current tax liability which remains unused as of the due date
for a particular Return. At least 45 days prior to the due date (including
extensions) of such Tax Return, Purchaser will deliver to each Seller a copy of
such Tax Return with copies of work papers which will permit Sellers to review
and substantiate the accuracy of such Returns. Sellers, severally, will pay to
Purchaser the amount of Tax due in the Subject Jurisdictions determined to be
attributable to the Partial Tax Period (except any tax liability arising from
an election made under Section 338 of the Code will be borne solely by
Purchaser) not less than 10 days prior to the due date (including extensions)
of such Tax Return.
(f) Appointment of Independent Person. If Purchaser and
Sellers' fail to agree by the day which is 30 days prior to the due date
(including extensions) of a Tax Return due pursuant to this Section, the
matters in dispute (but no other matters) will be submitted to a firm of
independent certified accountants mutually acceptable to Purchaser and Sellers,
as a group (the "INDEPENDENT PERSON"), which firm will make a final and binding
determination as to the matters in dispute within 15 days after its
appointment. The Independent Person will send its written determination, at
which point the determination of the Independent Person will be binding on
Purchaser and Sellers, absent fraud or manifest error. The fees and expenses
of the Independent Person will be borne equally by the Purchaser, on the one
hand, and the Sellers, on the other hand.
(g) Consistency. Any Tax Return to be prepared pursuant
to the provisions of this Section will be prepared in a manner consistent with
practices followed in prior years with respect to similar Tax Returns, except
for changes required by applicable law.
ARTICLE IX.
CONDITIONS PRECEDENT TO CLOSING
Section 9.1 Conditions Precedent to Purchaser's Obligations. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement will be subject to the satisfaction of the following conditions, any
of which may be waived in writing by Purchaser.
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(a) Accuracy of Representations and Warranties. The
representations and warranties made by each Seller and, until the Closing,
Company in this Agreement will have been true and complete as of the Signing
Date and as of the Closing Date as though made as of the Closing Date, except
to the extent such representations or warranties made as of a specific date
will have been correct and complete as of the specified date.
(b) Performance of Covenants. Company and each Seller
will have performed and complied with all agreements, covenants and obligations
required by this Agreement to be performed by such party prior to or at the
Closing.
(c) No Material Adverse Change. No Acquired Company has
undergone any Material Adverse Change since the Signing Date.
(d) Consents. Company and each Seller, as the case may
be, will have received and delivered to Purchaser all the Required Consents and
the Required Permits, each in form and substance satisfactory to Purchaser, and
will have given all notices required to be given to any Persons prior to the
consummation of the transactions contemplated by this Agreement.
(e) Closing Certificate. An executive officer of Company
and each Seller will have delivered to Purchaser a certificate confirming (i)
the satisfaction of the conditions set forth in Sections 9.1(a), 9.1(b) and
9.1(c) and (ii) the continuing force and effect of the Required Consents and
Required Permits.
(f) Secretary's Certificate--Company. Company will have
delivered to Purchaser a certificate executed by the secretary or an assistant
secretary of Company certifying as to Company's Charter Documents, Company's
good standing, (iii) the resolutions in which Company's board of directors
approved this Agreement and the transactions contemplated hereby, and the
incumbency of Company's officers who execute any documents on behalf of Company
in connection with this Agreement.
(g) Secretary's Certificate--Acquired Companies. Company
will have caused each Acquired Company to deliver to Purchaser a certificate
executed by the secretary or an assistant secretary of such Acquired Company
certifying as to (i) such Acquired Company's Charter Documents, (ii) such
Acquired Company's good standing and (iii) the incumbency of such Acquired
Company's officers who execute any documents on behalf of such Acquired Company
in connection with this Agreement.
(h) Deliveries. Company and each Seller, as the case may
be, will have delivered the documents required by Sections 2.3 and 2.2,
respectively, and such other documents as Purchaser may reasonably require.
(i) Compliance with HSR Act. All applicable waiting
periods under the HSR Act will have expired or been terminated.
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(j) Consummation of Asset Purchase. The consummation of
the transactions set forth in that certain Asset Purchase Agreement, dated the
Signing Date, between Purchaser and Arrowhead General Insurance Agency, Inc.
(k) Transfer of the Transferred Assets. Company will
have consummated the transfer of the Transferred Assets.
(l) Claims and Policy Administration Services Agreements.
The execution and delivery by each of Arrowhead Management Company, Inc.,
Arrowhead General Insurance Agency, Inc. and the transferee of the Transferred
Assets of (i) a Claims Administration Services Agreement in substantially the
form attached hereto as Exhibit 9.1(l)(1) and (ii) a Policy Administration
Services Agreement in substantially the form attached hereto as Exhibit
9.1(l)(2).
(m) Establishment of a Ethical Wall. Company and each of
Arrowhead Management Company, Inc. and Arrowhead General Insurance Agency, Inc.
will have agreed to the establishment of written procedures related to the use
by Company of the software applications listed on Schedule 9.1(m).
(n) No Order or Action. No Order will be in effect
forbidding or enjoining the consummation of the transactions contemplated
hereby. No Action will be pending or threatened before any court or other
Governmental Authority seeking to enjoin the Closing or seeking damages against
Purchaser or any of its Representatives as a result of any of the transactions
contemplated by this Agreement, provided that neither Purchaser nor any of its
affiliates instituted such Action.
Section 9.2 Conditions Precedent to Company and Sellers'
Obligations. The obligation of Company and each Seller to consummate the
transactions contemplated by this Agreement will be subject to the satisfaction
of the following conditions, any of which may be waived in writing by Company
or Sellers, as the case may be.
(a) Accuracy of Representations and Warranties. The
representations and warranties made by Purchaser in this Agreement will have
been true and complete as of the Signing Date and as of the Closing Date as
though made as of the Closing Date, except to the extent such representations
or warranties made as of a specific date will have been correct and complete as
of the specified date.
(b) Performance of Covenants. Purchaser will have
performed and complied with all agreements, covenants and obligations required
by this Agreement to be performed by Purchaser prior to or at the Closing.
(c) Closing Certificate. An executive officer of
Purchaser will have delivered to Company and each Seller a certificate
confirming the satisfaction of the conditions set forth in Sections 9.2(a) and
9.2(b).
(d) Secretary's Certificate. Purchaser will have
delivered to Company and each Seller a certificate executed by the secretary or
an assistant secretary of Purchaser certifying
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as to (i) Purchaser's Charter Documents, (ii) Purchaser's good standing, (iii)
the resolutions in which Purchaser's board of directors approved this Agreement
and the transactions contemplated hereby, and (iv) the incumbency of
Purchaser's officers who execute any documents on behalf of Purchaser in
connection with this Agreement.
(e) Deliveries. Purchaser will have delivered the
documents required by Section 2.4 and such other documents as Sellers may
reasonably require.
(f) Compliance with HSR Act. All applicable waiting
periods under the HSR Act will have expired or been terminated.
(g) Consummation of the Asset Purchase. The consummation
of the transactions set forth in that certain Asset Purchase Agreement, dated
the Signing Date, between Purchaser and Arrowhead General Insurance Agency,
Inc.
(h) No Order or Action. No Order will be in effect
forbidding or enjoining the consummation of the transactions contemplated
hereby. No Action will be pending or threatened before any court or other
Governmental Authority seeking to enjoin the Closing or seeking damages against
Company or any Seller or any of their Representatives as a result of any of the
transactions contemplated by this Agreement, provided that neither Company nor
any Seller nor any of their affiliates instituted such Action.
Section 9.3 If Conditions Not Satisfied. In the event that any
of the conditions set forth in this Article IX are not satisfied, and the
Parties nevertheless consummate the transactions contemplated by this Agreement
to take place at the Closing, the Parties will not be deemed to have waived any
Claim for damages or other relief arising from or in connection with such
non-satisfaction.
ARTICLE X.
TERMINATION PRIOR TO CLOSING
Section 10.1 Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual agreement of the Parties;
(b) by Purchaser at any time after the occurrence of a
Material Adverse Change in any Acquired Company; or
(c) by Purchaser or Company or any Seller at any time on
or after December 31, 1998 if any of the conditions provided for in Section 9.1
or 9.2, respectively, will not have been met or waived in writing prior to such
date.
Section 10.2 Procedure Upon Termination. In the event of
termination pursuant to Section 10.1, written notice thereof will be
immediately given to the other Parties and the
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transactions contemplated by this Agreement will be terminated, without any
further action by any Party. If the transactions contemplated by this
Agreement are terminated as provided herein:
(a) each Party will return all documents, work papers and
other materials of the other parties, whether obtained before or after the
execution hereof, to the party furnishing the same; and
(b) such termination will not in any way limit, restrict
or relieve any Party of liability for any breach of this Agreement.
ARTICLE XI.
INDEMNIFICATION
Section 11.1 Indemnification of Purchaser.
(a) Several Indemnification Obligation. Each Seller
will, severally but not jointly, indemnify, defend, and hold Purchaser harmless
from any and all Claims directly or indirectly related or arising with respect
to:
(i) Any inaccuracy in any representation or
warranty of Seller made in Article III or in the certificate delivered by such
Seller pursuant to Section 2.2(a) (as such certificates relate to the
representations and warranties set forth in Article III); and
(ii) Any failure by Seller to perform or observe
the covenant or agreement set forth in Section 6.7.
(b) Joint and Several Indemnification Obligation. Each
Seller and, until the Closing, Company will, joint and severally, indemnify,
defend, and hold Purchaser harmless from any and all Claims directly or
indirectly related or arising with respect to:
(i) Any inaccuracy in any representation or
warranty made in Article IV or in the certificates delivered pursuant to
Sections 2.2(a) (as such certificates relate to the representations and
warranties set forth in Article IV) and 2.3(a);
(ii) Any failure to perform or observe (A) in the
case of any covenant or agreement of Company which by its terms relates to the
time period prior to the Closing, any covenant or agreement of Company set
forth in this Agreement or in any agreement delivered pursuant to this
Agreement, (B) any covenant or agreement of Sellers set forth in this Agreement
(other than the covenant or agreement set forth in Section 6.7) or in any
agreement delivered pursuant to this Agreement;
(iii) The Transferred Assets;
(iv) Any Claim related to an Action arising out of
or in connection with the conduct of the Business on or prior to the Closing
Date, whether asserted before or after the Closing Date; and
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(v) Any failure of Seller to comply with all Laws
in the conduct of the Business on or prior to the Closing Date.
Section 11.2 Indemnification of Sellers. Purchaser will
indemnify, defend, and hold Sellers and, until the Closing, Company harmless
from any and all Claims directly or indirectly related or arising with respect
to:
(a) Breaches of Representations and Warranties. Any
inaccuracy in any representation or warranty of Purchaser made in Article V or
in the certificates delivered by Purchaser pursuant to Section 2.4(d); or
(b) Breaches of Covenants. Any failure to perform or
observe (A) in the case of any covenant or agreement of Company which by its
terms relates to the time period after the Closing, any covenant or agreement
of Company set forth in this Agreement or in any agreement delivered pursuant
to this Agreement, (B) any covenant or agreement of Purchaser set forth in this
Agreement or in any agreement delivered pursuant to this Agreement.
Section 11.3 Indemnification Procedure. The indemnification
obligations under this Agreement will be subject to the following procedures:
(a) Defense of Claim. Within five days after a Party
entitled to indemnification (an "INDEMNITEE") receives a notice of any Claim
that may give rise to an indemnification obligation under this Agreement, the
Indemnitee will give the Party responsible for providing indemnification with
respect to such Claim (the "INDEMNITOR") notice of such Claim, together with a
copy of all documents relating to such Claim that the Indemnitee possesses.
The Indemnitor will then immediately undertake the defense of such Claim by
representatives of its own choosing, provided that the Indemnitee will have the
right to control and undertake such defense by representatives of its own
choosing if the Claim could have a continuing effect upon the Indemnitee or
involves any Environmental Law or Hazardous Material. The Indemnitor will
notify the Indemnitee of the Indemnitor's undertaking of the defense of a Claim
promptly after receiving the notice of the Claim. Similarly, the Indemnitee
will notify promptly the Indemnitor of the Indemnitee's election of its right
to control such defense under the circumstances described above. The failure
to give notice of a Claim within the period described above will not affect the
Indemnitee's rights to indemnification under this Agreement unless such delay
prejudices the Indemnitor.
(b) Participation of the Indemnitee. If ten days after
delivering notice of a Claim to the Indemnitor or such shorter period necessary
to prevent judgment by default in favor of the Person asserting the Claim, the
Indemnitor has not begun to defend against such Claim, the Indemnitee will have
the right to defend or settle such Claim on behalf of the Indemnitor.
Notwithstanding whether the Indemnitor commences at any time to defend against
a Claim, the Indemnitee will have the right to participate in such defense by
representatives of its own choosing. The Indemnitee will bear any expense of
such participation if the Indemnitor is defending against the Claim unless
defenses exist to the Indemnitee that are unavailable to the Indemnitor or the
Indemnitor otherwise possesses a conflict of interest with respect to the
Indemnitee. Under such circumstances, the Indemnitor will reimburse the
Indemnitee for the
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Indemnitee's reasonable attorneys' fees and expenses. In addition, the
Indemnitor will reimburse the Indemnitee for the Indemnitee's reasonable
attorneys' fees and expenses incurred during the period when the Indemnitor did
not defend against the Claim and in connection with Claims that Purchaser
possesses the right to defend. Notwithstanding whether the Claim involves a
purported breach of the Indemnitor's representations and warranties, the
Indemnitor's obligation to reimburse such fees and expenses will not be subject
to the Indemnitor's Basket or Maximum Liability. The Indemnitor will make such
reimbursement payments to the Indemnitee upon the Indemnitee's submission of
periodic invoices describing such fees and expenses in reasonable detail.
(c) Settlement of Claims. The Indemnitor may settle any
Claim at its own expense, provided that the Indemnitor will not settle any
Claim or consent to the entry of any judgment without the consent of the
Indemnitee if such settlement or judgment (i) includes any admission of
wrongdoing by the Indemnitee or any of the Indemnitee's Representatives, (ii)
includes any consent to any type of injunctive relief affecting the Indemnitee
or any of the Indemnitee's Representatives, (iii) excludes an unconditional
release by the Person asserting the Claim of the Indemnitee and the
Indemnitee's Representatives from all liability with respect to such Claim, or
requires the Indemnitee or any of the Indemnitee's Representatives.
(d) Reimbursement. If an Indemnitor undertakes the
defense of any Claim or settles any Claim and such Claim was not within the
scope of the Indemnitor's indemnification obligations under this Agreement, the
Indemnitee will promptly reimburse the Indemnitor for all expenses with respect
to such defense or settlement, including the Indemnitor's reasonable attorneys'
fees and expenses.
(e) Cooperation. In connection with any indemnity
obligation, the Indemnitee will cooperate with all reasonable requests of the
Indemnitor.
(f) Payment--Net of Insurance Proceeds. The amount of
any damage or indemnification payable pursuant to this Article will be net of
any insurance proceeds actually received by the Indemnitee in connection with
the circumstances giving rise to the Claim. The calculation of net insurance
proceeds will give effect to all costs incurred by the Indemnitee for such
insurance recovery, including all costs associated with retrospective premium
adjustments, experienced-based premium adjustments, and indemnification
obligations. Nothing in this Section will be construed or interpreted as a
guaranty of any level or amount of insurance recovery with respect to any Claim
hereunder.
(g) Payment--Net of Tax Benefit and Detriment. The
Parties will treat any payment or receipt of damages or indemnification
hereunder as an adjustment to the Final Purchase Price on all Tax Returns,
except for the interest component of any such payment, which the Parties will
treat as interest income or expense, as the case may be. To the extent that
any damage or indemnification payment exclusive of the interest component
constitutes taxable income to the Indemnitee, the amount of such damage or
indemnification payment will be increased by the amount of any income Tax
attributable to such payment and the reimbursement of any related income Taxes.
To the extent that any damage or indemnification payment
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exclusive of the interest component constitutes a reduction of taxable income
to the Indemnitee, the amount of such damage or indemnification payment will be
decreased by the amount of any income Tax attributable to such reduction of
taxable income.
Section 11.4 Meritless Third Party Claims, If a third party makes
a Claim against the Indemnitee that ultimately proves to be meritless, the
Indemnitee may nevertheless require the Indemnitor to defend such Claim and
reimburse the Indemnitee for its reasonable attorneys' fees and expenses in
connection with such Claim if such Claim was within the scope of the
Indemnitor's indemnification obligations under this Agreement.
Section 11.5 Assignment of Claims. If any amounts for which the
Indemnitor is responsible are recoverable from a third party, the Indemnitee
will assign any rights that it may have to recover such amounts to the
Indemnitor.
Section 11.6 Other Indemnitees. Upon Purchaser's request, Sellers
will indemnify any of Purchaser's Representatives to the same extent as
Purchaser. Conversely, upon any Seller's request Purchaser will indemnify any
of Seller's Representatives to the same extent as such Seller. No
Representative of any Party, however, will be a third party beneficiary of the
indemnification provisions set forth in this Agreement. In addition, a Party
may release or waive any Claim to which such Party previously requested another
Party to indemnify such Party's Representatives, and such Representatives will
have no recourse against the Party releasing or waiving such Claim. To the
extent that a Party requests another Party to indemnify such Party's
Representatives, such Party will cause its Representatives to comply with the
indemnification provisions and abide by the indemnification limitations set
forth in this Agreement.
Section 11.7 Contribution. If the indemnity obligations provided
for in this Agreement are held unenforceable in whole or in part for any
reason, each Party will perform such indemnity obligations to the extent
enforceable. To the extent that such indemnity obligations are unenforceable,
the Party that would have been the Indemnitor with respect to a Claim except
for such unenforceability will contribute to such Claim in such proportion as
appropriate to reflect the relative fault of such Party as opposed to the
relative fault of the Person who would have been the Indemnitee, as well as any
other relevant equitable considerations.
Section 11.8 Damages Without Indemnification. A Party may assert
a Claim for damages against another Party for a breach of this Agreement even
though the Party seeking such damages has not incurred a liability or made a
payment to another Person.
Section 11.9 Basket. The Parties acknowledge that all the
representations and warranties set forth in this Agreement are without
qualification as to materiality and that the provisions of this Section
regarding the Basket are intended to serve as the exclusive standard of
materiality for purposes of this Agreement. Sellers and Company, on the one
hand, and Purchaser, on the other hand, will not be liable for any Claim for
damages or indemnification with respect to a breach of representations and
warranties under this Agreement until the aggregate amount of such Claims for
damages and indemnification concerning breaches of representations and
warranties exceeds $10,000 (as the case may be, the "BASKET"); provided,
however, that the Basket will not apply to any breach of the representations
and warranties set
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forth in Sections 3.1 or 4.5. If the aggregate amount of such Claims for which
Sellers and Company, on the one hand, and Purchaser, on the other hand, is
responsible exceeds the Basket, the Indemnitor will then only be responsible
for the amount of such excess.
Section 11.10 Liability Not Limited to Set-Off Under the Option
Agreement. Each Party acknowledges and agrees that (a) the value of the Option
Shares (as defined in the Option Agreement) is not intended to be, nor will
that amount be construed as, Sellers' or Company's maximum amount of damages or
indemnification with respect to any Claim for a breach of such Party's
representations and warranties under this Agreement and (b) Purchaser may
pursue any rights or remedies available at law or in equity in connection with
this Agreement notwithstanding the availability of the right of set-off under
the Option Agreement.
Section 11.11 Liabilities for Special Indemnities and Breaches of
Covenants. Sellers' Basket will be inapplicable with respect to any Claim for
damages or indemnification concerning Sellers' breach of any representation and
warranty that the indemnities pursuant to Sections 11.1(b)(iii), 11.1(b)(iv)
and 11.1(b)(v) cover. Any damages or indemnification with respect to any such
Claims will not count toward Sellers' Basket. A Party's Basket will be
inapplicable with respect to any Claim for damages or indemnification
concerning such Party's breach of any of its covenants under this Agreement or
any other terms of this Agreement applicable to such Party, other than the
representations and warranties to which such Party's Basket apply.
Section 11.12 Consequential Damages. A Party will be (a) liable
for any consequential, incidental, punitive, or special damages with respect to
any breach of this Agreement, and (b) responsible for indemnifying an
Indemnitee for any consequential, incidental, punitive, or special damages that
such Indemnitee incurs if within the scope of such Party's indemnification
obligation.
Section 11.13 Interest. A Party will pay interest computed at the
then current prime rate on (a) any Claim for damages with respect to such
Party's breach of this Agreement from the date of the breach through the date
that the Party pays such damages, and (b) any Claim for indemnification under
this Agreement for which such Party is the Indemnitor from the date of the
Indemnitee's indemnifiable out-of-pocket expenditure through the date that the
Party pays such Claim.
Section 11.14 Notice of Breach Prior to Closing. If before the
Closing a Party notifies another Party of its breach of this Agreement, such
notification will neither prevent such other Party from seeking damages for
such breach nor decrease or mitigate such damages if such other Party still
closes the transactions contemplated by this Agreement.
Section 11.15 Discovery of Breach Prior to Closing. If before the
Closing a Party discovers that another Party has breached this Agreement, such
discovery will neither prevent such Party from seeking damages for such breach
nor decrease or mitigate such damages if such Party still closes the
transactions contemplated by this Agreement.
Section 11.16 Survival of Terms. The agreements, covenants,
indemnity obligations, representations and warranties, and other terms of this
Agreement, Purchaser's closing
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certificate, each Seller's closing certificate, Company's closing certificate
and any other documents contemplated under this Agreement will survive the
Closing and any investigation or notice by any Party, provided that the
representations and warranties of each Party under this Agreement will expire
30 days after the expiration of the applicable statute of limitations, as such
statutory period may be extended from time to time. Notwithstanding the
general expiration of each Party's representations and warranties described
above, the representations and warranties set forth in Article III, Sections
4.2 (Power and Authority), 4.3 (Authorization; Execution and Validity), 4.4 (No
Conflict), 4.5 (Capitalization), 4.9(c) (Title to Assets), 4.28 (Full
Disclosure) and 4.29 (Brokers) will survive forever, subject to all defenses
available under Law, including the expiration of any applicable statute of
limitations. A Party will not be responsible with respect to any Claim for
damages or indemnification with respect to any inaccuracy in any of such
Party's representations or warranties unless such Party receives notice of the
Claim with respect to such inaccuracy before such representation and warranty
expires. With respect to any such Claim received before the expiration of a
particular representation or warranty, the Party responsible for such
representation or warranty will remain responsible for any damage or
indemnification amounts claimed notwithstanding the subsequent expiration of
such representation or warranty.
Section 11.17 Negligence and Strict Liability. THE PROVISIONS OF
THIS AGREEMENT CONCERNING CLAIMS FOR DAMAGES AND INDEMNIFICATION WILL APPLY
WHETHER OR NOT THE PARTY OR OTHER PERSON CLAIMING SUCH DAMAGES OR
INDEMNIFICATION WAS NEGLIGENT, GROSSLY NEGLIGENT, OR STRICTLY LIABLE IN
CONNECTION WITH THE EVENTS GIVING RISE TO SUCH CLAIM.
ARTICLE XII.
MISCELLANEOUS
Section 12.1 Amendment. No amendment of this Agreement will be
effective unless in a writing signed by the Parties.
Section 12.2 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original
agreement, but all of which will constitute one and the same agreement. Any
Party may execute and deliver this Agreement by an executed signature page
transmitted by a facsimile machine. If a Party transmits its signature page by
a facsimile machine, such Party will promptly thereafter deliver an originally
executed signature page to the other Parties, provided that any failure to
deliver such an originally executed signature page will not affect the
validity, legality, or enforceability of this Agreement.
Section 12.3 Entire Agreement. This Agreement constitutes the
entire agreement and understanding between the Parties and supersedes all prior
agreements and understandings, both written and oral, with respect to the
subject matter of this Agreement.
Section 12.4 Expenses. Each Party will bear its own expenses with
respect to the negotiation and preparation of this Agreement and the Closing,
including any fees and expenses
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of its Representatives, provided that if a Party terminates this Agreement
because of another Party's breach of this Agreement, the non-breaching Party
will be entitled to seek reimbursement of its expenses as part of its damages
with respect to such breach. Sellers, as a group, will bear any Tax imposed in
connection with the transfer of the Assets to Purchaser pursuant to this
Agreement.
Section 12.5 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.
Section 12.6 No Assignment. No Party may assign its benefits or
delegate its duties under this Agreement without the prior consent of the other
Parties. Any attempted assignment or delegation without such prior consent
will be void. Notwithstanding the foregoing, after the Closing Purchaser may
assign its rights under this Agreement to a purchaser of all of the assets or
equity of Purchaser without Sellers' consent, and any such purchaser and any
subsequent purchasers of all of the assets or equity of Purchaser may similarly
assign such rights.
Section 12.7 No Third Party Beneficiaries. This Agreement is
solely for the benefit of the Parties and no other Person will have any right,
interest, or claim under this Agreement.
Section 12.8 Notices. All claims, consents, designations,
notices, waivers, and other communications in connection with this Agreement
will be in writing. Such claims, consents, designations, notices, waivers, and
other communications will be considered received (a) on the day of actual
transmittal when transmitted by facsimile with written confirmation of such
transmittal, (b) on the next business day following actual transmittal when
transmitted by a nationally recognized overnight courier, or (c) on the third
business day following actual transmittal when transmitted by certified mail,
postage prepaid, return receipt requested; in each case when transmitted to a
Party at the address or location set forth on Schedule 12.8 (or to such other
address to which such Party has notified the other Parties in accordance with
this Section to send such claims, consents, designations, notices, waivers, and
other communications).
Section 12.9 Public Announcements. The Parties will agree on the
terms of any press releases or other public announcements related to this
Agreement, and will consult with each other before issuing any press releases
or other public announcements related to this Agreement; provided, however,
that any Party may make a public disclosure if in the opinion of such party's
counsel it is required by Law or the rules of the New York Stock Exchange or
the Nasdaq National Market to make such disclosure. The parties agree, to the
extent practicable, to consult with each other regarding any such public
announcement in advance thereof.
Section 12.10 Representation by Legal Counsel. Each Party is a
sophisticated Person that was advised by experienced legal counsel and other
advisors in the negotiation and preparation of this Agreement.
Section 12.11 Schedules. All references in this Agreement to
schedules will mean the schedules identified in this Agreement, which are
incorporated into this Agreement and will be
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deemed a part of this Agreement for all purposes. Each Section of this
Agreement that refers to a schedule will have a separate schedule. In
addition, any disclosure under a particular section's schedule will be made
under the heading of any relevant subsection of such section. A disclosure of
an item in a schedule for a particular section or under a heading in a schedule
corresponding to a particular subsection will not be a disclosure under any
other section's schedule or any other subsection, unless so noted specifically
on such schedule. Sellers have delivered to Purchaser a correct and complete
copy of each document described on each schedule to this Agreement and a
correct and complete written description of each unwritten arrangement or other
item described on each such schedule.
Section 12.12 Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction will not invalidate the
remaining provisions of this Agreement or affect the validity or enforceability
of such provision in any other jurisdiction. In addition, any such prohibited
or unenforceable provision will be given effect to the extent possible in the
jurisdiction where such provision is prohibited or unenforceable.
Section 12.13 Successors. This Agreement will be binding upon and
will inure to the benefit of each Party and its heirs, legal representatives,
permitted assigns, and successors, provided that this Section will not permit
the assignment or other transfer of this Agreement, whether by operation of law
or otherwise, if such assignment of other transfer is not otherwise permitted
under this Agreement.
Section 12.14 Time of the Essence. Time is of the essence in the
performance of this Agreement and all dates and periods specified in this
Agreement.
Section 12.15 Waiver. No provision of this Agreement will be
considered waived unless such waiver is in writing and signed by the Party that
benefits from the enforcement of such provision. No waiver of any provision in
this Agreement, however, will be deemed a waiver of a subsequent breach of such
provision or a waiver of a similar provision. In addition, a waiver of any
breach or a failure to enforce any term or condition of this Agreement will not
in any way affect, limit, or waive a Party's rights under this Agreement at any
time to enforce strict compliance thereafter with every term and condition of
this Agreement.
Section 12.16 Attorney's Fees. In the event of any Action among
the Parties seeking enforcement of any of the terms and conditions of this
Agreement, the prevailing party in such Action will be awarded its reasonable
costs and expenses, including its court costs and reasonable attorneys' fees.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each Party executed, or has caused a duly
authorized officer to execute, this Agreement as of the Signing Date.
PURCHASER: INSpire INSURANCE SOLUTIONS, INC.
By:
---------------------------------------
Xxxxxxx X. Xxxxx, III, President
COMPANY: ARROW CLAIMS MANAGEMENT, INC.
By:
-------------------------------------
Xxxxx XxXxxxxx, President
SELLERS:
----------------------------------------
Xxxx X. Xxxx, as Trustee of [insert name of
trust] fbo Xxxxxxx Xxxxxxxx
----------------------------------------
Xxxxxxxx Xxxxxx, in her individual capacity
----------------------------------------
Xxxxx Xxxx, in his individual capacity
----------------------------------------
Xxxx Xxxxxx, in his individual capacity
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APPENDIX A
DEFINITIONS AND RULES OF INTERPRETATION
Definitions. Unless the context otherwise requires, the terms defined
in this Appendix will have the meanings specified below for all purposes of
this Agreement:
(a) "ACCOUNTS RECEIVABLE" will have the meaning set forth
in Section 4.10.
(b) "ACQUIRED COMPANIES" means Company and the
Subsidiaries.
(c) "ACTION" means any action, arbitration proceeding,
cause of action, charge, counterclaim, cross claim, inquiry, investigation,
legal action, litigation, Order, proceeding, or suit.
(d) "ADJUSTMENT AMOUNT" will have the meaning set forth
in Section 1.5(c).
(e) "AFFILIATE" means with respect to a Person means any
other Person that directly or indirectly controls, is controlled by, or is
under common control with such Person. For the purposes of this definition,
control means the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise. Control shall be presumed by an individual that is a
director, executive officer, general partner, manager, or similar functionary
of a Person, or a Person that beneficially owns more than 10% of any class of
securities of such Person having general voting rights. For purpose of this
Agreement, each of Arrowhead Management Company, Inc., Arrowhead General
Insurance Agency, Inc. and each Affiliate of such Person shall be considered an
Affiliate of each Seller.
(f) "AGREEMENT" will have the meaning set forth in the
first paragraph.
(g) "ALLOCATION STATEMENT" will have the meaning set
forth in Section 1.4.
(h) "ASSETS" will have the meaning set forth in Section
4.9(a).
(i) "BALANCE SHEET DATE" will have the meaning set forth
in Section 4.6(a).
(j) "BANK ACCOUNTS" will have the meaning set forth in
Section 4.24.
(k) "BASE PURCHASE PRICE" will have the meaning set
forth in Section 1.2.
(l) "BASKET" will have the meaning set forth in Section
11.9.
(m) "BOOKS AND RECORDS" will mean all the books and
records maintained by or for any Acquired Company, including all accounting
records, minute books, stock records, computerized records and storage media
and the software used in connection therewith.
(n) "BUSINESS" will have the meaning set forth in
Recital A.
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(o) "CHARTER DOCUMENTS" will mean (i) in the case of a
corporation, its articles or certificate of incorporation and its bylaws, (ii)
in the case of a partnership, its partnership certificate and its partnership
agreement, and (iii) in the case of any other Person, its organic and governing
documents; in each case as such document has been amended or supplemented from
time to time prior to the Signing Date.
(p) "CLAIM" will mean any arbitration award, assessment,
charge, citation, claim, damage, demand, directive, expense, fine, interest,
joint or several liability, Lawsuit, notice, obligation, payment, penalty, or
summons of any kind or nature whatsoever, including any damages incurred
because of the claimant's negligence or gross negligence or any strict
liability imposed upon the claimant, any consequential or punitive damages, and
any reasonable attorneys' fees and expenses. A Claim will be considered to
exist even though it may be conditional, contingent, indirect, potential,
secondary, unaccrued, unasserted, unknown, unliquidated, or unmatured.
(q) "CLOSING" will have the meaning set forth in Section
2.1.
(r) "CLOSING CASH PAYMENT" will have the meaning set
forth in Section 1.3.
(s) "CLOSING DATE" will have the meaning set forth in
Section 2.1.
(t) "CLOSING PREMIUM STATEMENT" will have the meaning set
forth in Section 1.5(a).
(u) "CODE" will mean the Internal Revenue Code of 1986,
as amended.
(v) "COMMON STOCK" will have the meaning set forth in
Recital B.
(w) "COMPANY" will have the meaning set forth in the
first paragraph.
(x) "CONFIDENTIAL INFORMATION" means any proprietary
information, and any information which Purchaser reasonably considers to be
proprietary, pertaining to each of the Acquired Company's and Purchaser's past,
present or prospective business secrets, methods or policies, earnings,
finances, security holders, lenders, key employees, nature of services
performed by such entity's sales personnel, procedures, standards and methods,
information relating to arrangements with suppliers, the identity and
requirements of arrangements with customers, the type, volume or profitability
of services or products for customers, drawings, records, reports, documents,
manuals, techniques, ratings, information, data, statistics, trade secrets and
all other information of any kind or character relating to each of the Parties,
whether or not reduced to writing.
(y) "CONSENT" will mean a consent, approval, order,
authorization or waiver from, notice to or declaration, registration or filing
with any Person.
(z) "DIRECT WRITTEN PREMIUMS" means the aggregate amount
of premiums paid to Arrowhead by insureds. For purposes of calculating Direct
Written Premiums, a lump-
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sum premium payment will be prorated equally over the term of the policy
pursuant to which such premium payment was made.
(aa) "EMPLOYEE BENEFIT PLAN" will mean any (i) Pension
Benefit Plan, (ii) Welfare Benefit Plan, (iii) accident, dental, disability,
health, life, medical, or vision plan or insurance policy, (iv) bonus,
executive, incentive or deferred compensation plan, (v) change in control plan,
(vi) fringe benefits and perquisites, (vii) holiday, sick pay, leave, vacation,
moving or tuition reimbursement or other similar policy, (viii) stock option,
stock purchase, phantom stock, restricted stock or stock appreciation plan,
(ix) severance plan, or (x) other employee arrangement, commitment, custom,
policy or practice.
(bb) "EMPLOYEES" will have the meaning set forth in
Section 4.21(a).
(cc) "ENCUMBERED INSTRUMENT" will mean any contract and
lease that by its terms requires Consent from a third party in order to
transfer the rights and obligations thereunder.
(dd) "ENCUMBRANCE" will mean any title defect or
objection, mortgage, lien, deed of trust, equity, judgment, claim, restrictive
covenant, use restriction, charge, pledge, security interest or other
encumbrance of any nature whatsoever, including all leases, chattel mortgages,
conditional sales contracts, collateral security arrangements and other title
or interest retention arrangements.
(ee) "ENVIRONMENTAL LAW" will mean (i) the Clean Air Act
(42 U.S.C. Section 7401 et seq.), (ii) the Clean Water Act (33 U.S.C. Section
1251 et seq.), (iii) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act
of 1986 (42 U.S.C. Section 9601 et seq.), (iv) the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), (v) the Hazardous Materials
Transportation Act (49 U.S.C. Section 5101 et seq.), (vi) the National
Environmental Policy Act (42 U.S.C. Section 4321 et seq.), (vii) the Oil
Pollution Act of 1990 (33 U.S.C. Section 2701 et seq.), (viii) the Resource
Conservation and Recovery Act, as amended by the Hazardous and Solid Waste
Amendments of 1984 (42 U.S.C. Section 6901 et seq.), (ix) the Safe Drinking
Water Act (42 U.S.C. Section 300f et seq.), (x) the Toxic Substances Control
Act (15 U.S.C. Section 2601 et seq.), (xi) any state, local, tribal, or foreign
law, ordinance, regulation, or statute analogous to any of the foregoing
statutes, or (xii) any other federal, state, local, tribal, or foreign law,
ordinance, regulation, or statute prohibiting, regulating, or restricting the
disposal, generation, handling, placement, recycling, release, storage, or
treatment of any contaminant, liquid, mass, material, matter, pollutant, solid,
substance, or waste classified or considered to be hazardous or toxic to human
health or the environment or otherwise related to environmental protection or
health and safety.
(ff) "ERISA" will mean the Employee Retirement Income
Security Act of 1974, as amended.
(gg) "FINAL CLOSING PREMIUM STATEMENT" will have the
meaning set forth in Section 1.5(b).
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(hh) "FINAL PURCHASE PRICE" will have the meaning set forth
in Section 1.2.
(ii) "GAAP" will mean generally accepted accounting
principles in effect in the United States of America as of the Signing Date.
(jj) "GOVERNMENTAL AUTHORITY" will mean any federal,
state, local, tribal, foreign or other governmental agency, department, branch,
commission, board, bureau, court, instrumentality or body.
(kk) "HAZARDOUS MATERIAL" will mean (i) any contaminant,
liquid, mass, material, matter, pollutant, solid, substance, or waste for which
any Environmental Law limits, prohibits, or regulates its disposal, generation,
handling, placement, recycling, release, storage, or treatment, (ii) any
carcinogenic, corrosive, explosive, flammable, infectious, mutagenic,
radioactive, or toxic substance, (iii) any diesel fuel, gasoline, or other
petroleum product in an unconfined manner, (iv) any substance that contains
polychlorinated biphenyls, (v) any substance that contains asbestos, (vi) any
substance that contains urea formaldehyde foam installation, (vii) any
substance that constitutes a nuisance upon any property, or (viii) any
substance that imposes a hazard to the health or safety of any individual.
(ll) "HSR ACT" will have the meaning set forth in
Section 8.1.
(mm) "INDEMNITEE" will have the meaning set forth in
Section 11.3(a).
(nn) "INDEMNITOR" will have the meaning set forth in
Section 11.3(a).
(oo) "INDEPENDENT PERSON" will have the meaning set forth
in Section 8.6(f).
(pp) "INSURANCE POLICIES" will have the meaning set forth
in Section 4.15.
(qq) "INTANGIBLE ASSET" will mean any patent, trademark,
trademark license, computer software, trade name, masthead, brand name, slogan,
copyright, reprint right, franchise, license, process, authorization,
invention, know-how, formula, trade secret and other intangible asset, together
with any pending application, continuation-in-part or extension therefor.
(rr) "INTERIM BALANCE SHEET" will have the meaning set
forth in Section 4.6(b).
(ss) "INTERIM FINANCIAL STATEMENTS" will have the meaning
set forth in Section 4.6(b).
(tt) "LAW" will mean any applicable code, statute, law,
common law, rule, regulation, order, ordinance, judgment, decree, order, writ
or injunction of any Governmental Authority.
(uu) "LAW AFFECTING CREDITORS' RIGHTS" will mean any
bankruptcy, fraudulent conveyance or transfer, insolvency, moratorium,
reorganization, or other law affecting the enforcement of creditors' rights
generally, and any general principles of equity.
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(vv) "MATERIAL ADVERSE CHANGE" will mean, with respect to
a Person, that such Person has (i) breached a Material Contract, (ii) incurred
a Claim or become a party to an Action that could have a significant and
detrimental effect upon it, (iii) suffered a Material Adverse Effect, or (iv)
violated any Law or Order to which it or any of its assets is subject or bound.
(ww) "MATERIAL ADVERSE EFFECT" will mean, with respect to
a Person, the occurrence of an event or the existence of a circumstance that
has a material adverse effect on such Person's assets, business, cash flows,
financial condition, liabilities, operations, prospects, or relationships,
including the occurrence of any event or the existence of any circumstance that
could cause such an effect in the future.
(xx) "MATERIAL CONTRACTS" will have the meaning set forth
in Section 4.16.
(yy) "MAXIMUM LIABILITY" will have the meaning set forth
in Section 11.10.
(zz) "OBJECTION NOTICE" will have the meaning set forth
in Section 1.5(b).
(aaa) "OPTION AGREEMENT" means that certain Option
Agreement, dated as of the Closing Date, between Purchaser and Arrowhead
General Insurance Agency, Inc.
(bbb) "ORDER" will mean any consent decree, decree,
determination, injunction, judgment, order, or writ of any arbitrator or
Governmental Authority.
(ccc) "OWNED REAL PROPERTY" will have the meaning set
forth in Section 4.12(a).
(ddd) "PARTIAL TAX PERIOD" will have the meaning set forth
in Section 8.6(a).
(eee) "PARTY" will have the meaning set forth in the first
paragraph.
(fff) "PENSION BENEFIT PLAN" will mean (i) an "employee
pension benefit plan" as defined in Section 3(2) of ERISA, and (ii) a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
(ggg) "PERMIT" will mean any license, approval,
certificate, franchise, registration, permit or authorization issuable by any
Governmental Authority.
(hhh) "PERMITTED ENCUMBRANCE" will mean any Encumbrance
directly related to (i) Taxes that are not yet due and payable or Taxes that
are being contested in good faith by an appropriate proceeding, and in each
case as to which adequate reserves have been established in accordance with
GAAP, (ii) Encumbrances shown on the Interim Balance Sheet as securing
specified Claims with respect to which no breach or default exists, (iii)
workers', repairmen's and similar Encumbrances imposed by Law that have been
incurred in the ordinary course of business, (iv) retention of title agreements
with suppliers entered into in the ordinary course of business, and (v) the
rights of others to customer deposits.
(iii) "PERSON" will mean any association, bank, business
trust, corporation, estate, general partnership, Governmental Authority,
individual, joint stock company, joint
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venture, labor union, limited liability company, limited partnership,
non-profit corporation, professional association, professional corporation,
trust, or any other organization or entity.
(jjj) "PERSONAL PROPERTY LEASES" will have the meaning set
forth in Section 4.13(b).
(kkk) "PLAN" will mean any bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance,
hospitalization or other medical, life or other insurance, supplemental
unemployment benefit, profit sharing, pension, or retirement plan, program,
agreement or arrangement.
(lll) "PURCHASER" will have the meaning set forth in first
paragraph.
(mmm) "REAL PROPERTY LEASES" will have the meaning set forth
in Section 4.12(a).
(nnn) "REPRESENTATIVES" will mean, with respect to a
Person, such Person's directors, employees, officers, agents, accountants,
affiliates, consultants, investment bankers, attorneys, lenders,
representatives and shareholders.
(ooo) "REQUIRED CONSENT" will have the meaning set forth
in Section 8.2(b).
(ppp) "REQUIRED PERMIT" will have the meaning set forth in
Section 8.3(b).
(qqq) "RESTRICTED SERVICES" means any actions directly or
indirectly related to providing or soliciting third party administrator
services in connection with property and casualty insurance lines.
(rrr) "RESTRICTION PERIOD" will have the meaning set forth
in Section 6.7(b).
(sss) "RETURNS" will have the meaning set forth in Section
4.23(a).
(ttt) "SEGREGATED ACCOUNT" will have the meaning set forth
in Section 1.3.
(uuu) "SELLER" will have the meaning set forth in the first
paragraph.
(vvv) "SELLERS' KNOWLEDGE" will mean the actual knowledge
as of the date that a specific representation or warranty is made or deemed
made, after reasonable inquiry, of each Seller, Xxxxxxx Xxxxxxxx, Xxx Xxxxx,
and Xxxxx XxXxxxxx.
(www) "SHARES" will have the meaning set forth in Section
1.1.
(xxx) "SHORT TAX PERIOD" will have the meaning set forth
in Section 8.6(a).
(yyy) "SIGNING DATE" will have the meaning set forth in
the first paragraph.
(zzz) "SUBJECT JURISDICTIONS" will have the meaning set
forth in Section 8.6(b).
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(aaaa) "SUBSCRIPTION RIGHT" will have the meaning set forth
in Section 4.5(a).
(bbbb) "SUBSIDIARY" will have the meaning set forth in
Section 4.5(b).
(cccc) "TAX" will mean any assessment, charge, duty, fee,
impost, levy, tariff, or tax of any nature whatsoever imposed by any
Governmental Authority or payable pursuant to any tax sharing agreement,
including any income, payroll, withholding, excise, gift, alternative minimum,
capital gain, added value, social security, sales, use, real and personal
property, use and occupancy, business and occupation, mercantile, real estate,
capital stock, and franchise tax or charge, together with any related interest,
penalties or additions thereon.
(dddd) "TAX ITEMS" will have the meaning set forth in
Section 8.6(d).
(eeee) "TRANSACTION DOCUMENTS" will mean the Agreement and
all other documents and instruments executed and delivered pursuant to or in
furtherance of this Agreement.
(ffff) "TRANSFERRED ASSETS" will have the meaning set forth
in Section 6.8.
(gggg) "WELFARE BENEFIT PLAN" will mean an "employee welfare
benefit plan" as defined in Section 3(1) of ERISA, including an employee
welfare benefit plan which is a "multiemployer welfare plan" as defined in
Section 3(37) of ERISA and a "multiple employer welfare arrangement" as defined
in Section 3(40) of ERISA.
(hhhh) "WRITTEN PREMIUM AMOUNT will have the meaning set
forth in Section 1.5(b).
(iiii) "YEAR-END BALANCE SHEET" will have the meaning set
forth in Section 4.6(a).
(jjjj) "YEAR-END FINANCIAL STATEMENTS" will have the meaning
set forth in Section 4.6(a). Accounting Terms. Except as otherwise provided
in this Agreement, all accounting terms defined in this Agreement, whether
defined in this Article or otherwise, will be construed in accordance with
GAAP on a consolidated basis.
Articles, Sections, Exhibits and Schedules. Except as specifically
stated otherwise, references to Articles, Sections, Exhibits and Schedules
refer to the Articles, Sections, Exhibits and Schedules of this Agreement.
Attorneys' Fees. Whenever this Agreement refers to a Person's
"attorneys' fees and expenses," such reference also will include any fees and
expenses of accountants, experts, investigators, and other professional
advisors whose services such Person's attorney considered advisable in
connection with the prosecution or defense of the particular matter.
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48
Breach. The term "breach" with respect to any contract or instrument
means any breach or violation of, or default under, such contract or
instrument, any conflict with another contract or instrument or any emergence
of a right of another party to such contract or instrument to accelerate,
cancel, modify or terminate such contract or instrument, including any such
breach, violation, default, conflict, or right that will arise after notice or
lapse of time.
Disclosure Thresholds. The establishment of any monetary thresholds
for the disclosure of particular items will not create a materiality standard
under this Agreement.
Drafting. Neither this Agreement nor any provision set forth in this
Agreement will be interpreted in favor of or against any Party because such
Party or its legal counsel drafted this Agreement or such provision. No prior
draft of this Agreement or any provision set forth in this Agreement will be
used when interpreting this Agreement or its provisions.
Headings. Article and section headings are used in this Agreement
only as a matter of convenience and will not have any effect upon the
construction or interpretation of this Agreement.
Include. The term "include" or any derivative of such term does not
mean that the items following such term are the only types of such items.
Or. The term "or" will not be interpreted as excluding any of the
items described.
Plural and Singular Words. Whenever the plural form of a word is used
in this Agreement, that word will include the singular form of that word.
Whenever the singular form of a word is used in this Agreement, that word will
include the plural form of that word.
Predecessors. Any of Sellers' representations and warranties
concerning any Claim against an Acquired Company, any liability or obligation
of an Acquired Company, or any violation of Law by an Acquired Company will
include any Claims with respect to each predecessor of the Acquired Companies,
including all direct and indirect predecessors of any such predecessor.
Pronouns. Whenever a pronoun of a particular gender is used in this
Agreement, if appropriate that pronoun also will refer to the other gender and
the neuter. Whenever a neuter pronoun is used in this Agreement, if
appropriate that pronoun also will refer to the masculine and feminine gender.
Representations and Warranties. Sellers' representations and
warranties under this Agreement will mean the representations and warranties
set forth in Articles III and IV and the reaffirmation of Sellers'
representations and warranties in certificates delivered pursuant to Sections
2.2(a) and 2.3(a). Purchaser's representations and warranties under this
Agreement will mean the representations and warranties set forth in Article V
and the reaffirmation of those representations and warranties in the
certificates delivered pursuant to Section 2.4(d).
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49
Statutes. Any reference to Law or any specific statute will include
any changes to such law or statute after the Signing Date, any successor law or
statute, and any regulations and rules promulgated under such law or statute
and any successor law or statute, whether promulgated before or after the
Signing Date.
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50
The following list sets forth the schedules to the Stock Purchase Agreement that
have been omitted from this Exhibit 2.1. The Company agrees to furnish
supplementally a copy of any omitted schedule to the Securities and Exchange
Commission upon request
Schedule Description
-------- -----------
Schedule 1.2........................................................................................Excluded Assets
Schedule 4.5(a)(1)...................................................................................Capitalization
Schedule 4.5(a)(2).....................................................................Exceptions to Capitalization
Schedule 4.5(b)........................................................................................Subsidiaries
Schedule 4.6(a).......................................................................Year-End Financial Statements
Schedule 4.6(b)........................................................................Interim Financial Statements
Schedule 4.8..........................................................................Exceptions to Certain Changes
Schedule 4.12(a)................................................................................Owned Real Property
Schedule 4.12(b)...............................................................................Leased Real Property
Schedule 4.13(a)............................................................................Owned Personal Property
Schedule 4.13(b)...........................................................................Leased Personal Property
Schedule 4.15.............................................................................................Insurance
Schedule 4.16....................................................................................Material Contracts
Schedule 4.17....................................................................................Litigation; Orders
Schedule 4.19...............................................................................................Permits
Schedule 4.20(a)............................................................................Owned Intangible Assets
Schedule 4.20(b).........................................................................Licensed Intangible Assets
Schedule 4.21(a)..........................................................................................Employees
Schedule 4.21(b).....................................................................Employment and Labor Contracts
Schedule 4.22(a)..............................................................................Welfare Benefit Plans
Schedule 4.22(b)..............................................................................Pension Benefit Plans
Schedule 4.22(c)..............................................................................Employee Arrangements
Schedule 4.24..................................................................Bank Accounts and Powers of Attorney
Schedule 4.26..................................................................Exceptions to Affiliate Transactions
Schedule 6.3(b)...............................................................Exceptions to Prohibited Transactions
Schedule 8.2(b)...................................................................................Required Consents
Schedule 8.3(b)....................................................................................Required Permits
Schedule 9.1(l).................................................................................Restricted Software
Schedule 11.1....................................................................................Retained Employees
Schedule 13.8....................................................................................Notice Information
