EXHIBIT 1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is entered into
as of January 20, 1998, by and among The Somerset Group, Inc., an Indiana
corporation ("Somerset"), Xxxxxxx & Company Professional Corporation, an Indiana
professional corporation ("Xxxxxxx"), and Xxxxxxx X. Early, Xxxxxx X. Xxxxxxxx,
Xxxxxx X. Xxxxxx, Xxxxxxx X. XxXxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxx, and Xxxxxx X. Xxxx (sometimes individually and
collectively referred to as a "Xxxxxxx Principal" and the "Xxxxxxx Principals").
RECITALS
WHEREAS, the Boards of Directors of Somerset and Xxxxxxx believe that it
is in the best interests of their respective companies and the shareholders of
their respective companies that Somerset and Xxxxxxx combine into a single
company through the statutory merger of Xxxxxxx with and into Somerset (the
"Merger");
WHEREAS, the Xxxxxxx Principals own in the aggregate all issued and
outstanding shares of the common stock of Xxxxxxx (the "Xxxxxxx Common Stock");
WHEREAS, pursuant to the Merger, all outstanding shares of Xxxxxxx Common
Stock are being converted into shares of the no par value common stock of
Somerset ("Somerset Common Stock") as provided in this Agreement;
WHEREAS, Xxxxxxx, the Xxxxxxx Principals, and Somerset desire to make
certain representations and warranties and other agreements in connection with
the Merger; and
WHEREAS, the parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) of the Code;
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
MERGER
1.1 The Merger. At the Effective Time (as hereinafter defined) on the
date hereof, and subject to and upon the terms and conditions of this Agreement,
the Agreement of Merger attached hereto as Exhibit A (the "Agreement of Merger")
and the applicable provisions of the Indiana Business Corporation Law and
IC 23-1.5 (collectively, "State Law"), Xxxxxxx shall be merged with and into
Somerset, the separate corporate existence of Xxxxxxx shall cease, and Somerset
shall continue as the surviving corporation.
(a) Effect of the Merger. The effect of the Merger shall be
as provided in this Agreement, the Agreement of Merger and the applicable
provisions of State Law. Without limiting the generality of the foregoing, and
except as specifically provided in this Agreement, all the property, rights,
privileges, powers and franchises of Xxxxxxx shall vest in Somerset, and all
debts, liabilities and duties of Xxxxxxx shall become the debts, liabilities and
duties of Somerset.
(b) Articles of Incorporation; Code of By-Laws.
(i) At the Effective Time, the Amended Articles of
Incorporation of Somerset, as in effect immediately prior to the Effective Time,
shall continue to be the Amended Articles of Incorporation of Somerset until
thereafter amended as provided by the Indiana Business Corporation Law and such
Amended Articles of Incorporation.
(ii) At the Effective Time, the Amended and Restated
Code of By-Laws of Somerset, as in effect immediately prior to the Effective
Time, shall continue to be the Amended and Restated Code of By-Laws of Somerset
until thereafter amended.
(c) Directors and Officers. At the Effective Time, the
directors of Somerset, as in effect immediately prior to the Effective Time,
shall continue to be the directors of Somerset, until their respective
successors are duly elected or appointed and qualified. The officers of
Somerset, as in effect immediately prior to the Effective Time, shall continue
to be the officers of Somerset, until their respective successors are duly
elected or appointed and qualified.
(d) Effect on Capital Stock. Subject to the terms and
conditions of this Agreement and the Agreement of Merger, by virtue of the
Merger and without any action on the part of the holder of any shares of
Xxxxxxx Common Stock, at the Effective Time the following shall occur:
(i) Conversion of Xxxxxxx Common Stock. Each of the
shares of Xxxxxxx Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive 860.224 shares of
Somerset Common Stock (the "Conversion Ratio"). If as a result of the
application of the Conversion Ratio, the aggregate number of shares of Somerset
Common Stock to be delivered to any Xxxxxxx Principal shall include any
fractional shares of Somerset Common Stock, no such fractional shares shall be
issued, but in lieu thereof the total number of shares of Somerset Common Stock
to be issued to such Xxxxxxx Principal shall be rounded to the next highest
whole number of shaares of Somerset Common Stock. BAsed on the foregoing, the
Aggregate number of shares of Somerset Common Stock to be issued to each
Xxxxxxx Principal is listed in attached Schedule 1.1.
(ii) Basis of Conversion Ratio. The Conversion Ratio
provided in Section 1.1(d)(i) is based on a total value of shares of Somerset
Common Stock to be exchanged of $7,000,000 (subject to rounding as provided in
Section 1.1[d][i] above) at $21 per share of Somerset Common Stock.
(iii) Cancellation of Xxxxxxx Common Stock Owned by
Xxxxxxx. At the Effective Time, all shares of Xxxxxxx Common Stock, if any,
that are owned by Xxxxxxx as treasury stock immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof.
(iv) No Further Ownership Rights in Xxxxxxx Common
Stock. The shares of Somerset Common Stock to be issued upon the exchange of
shares of Xxxxxxx Common Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Xxxxxxx Common Stock, and there shall be no further registration of
transfers on the records of Somerset of shares of Xxxxxxx Common Stock which
were outstanding immediately prior to the Effective Time.
(e) Tax Consequences of Merger. The parties hereto intend
that the Merger shall constitute a tax-free reorganization within the meaning of
Section 368 of the Code.
(f) Accounting Treatment of Merger. The combination of
Somerset and Xxxxxxx effected by the Merger will be accounted for under the
pooling-of-interests method of accounting.
(g) Restricted Securities. The shares of Somerset Common
Stock issued in connection with the Merger will be "restricted securities" under
the Securities Act of 1933, as amended (the "Act") and Rules 144 and/or 145
promulgated thereunder and may only be sold or otherwise transferred pursuant to
an effective registration statement under the Act or an exemption from the
registration requirements of the Act. The parties hereto understand and agree
that the shares of Somerset Common Stock issued in connection with the Merger,
and any securities issued in respect thereof or exchange therefor, will bear one
or more appropriate legends regarding restrictions on transfer imposed by state
and federal securities laws and other restrictions on transfer set forth in this
Agreement or any exhibit hereto.
1.2 Closing.
(a) Closing. The closing of the Merger (the "Closing") is
taking place on the date hereof immediately subsequent to the Effective Time
(the "Closing Date'). The Closing is taking place at the offices of Bose,
XxXxxxxx & Xxxxx, 2700 First Indiana Plaza, 000 Xxxxx Xxxxxxxxxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxx.
(b) Actions at the Closing. At the Closing, Somerset,
Xxxxxxx, and the Xxxxxxx Principals are taking such actions and executing and
delivering such agreements and other instruments and documents as necessary or
appropriate to effect the transactions contemplated by this Agreement in
accordance with its terms, including, without limitation, the following:
(i) The parties hereto are causing the Merger to be
consummated by filing on the date hereof Articles of Merger with the Office of
the Secretary of the State of Indiana, in accordance with the relevant
provisions of State Law (the time of such filing being the "Effective Time");
(ii) The Xxxxxxx Principals are executing or causing to
be executed (as applicable) and delivering to Somerset:
(1) the Agreement of Merger;
(2) the resignations described in Section 4.2;
(3) the Employment Agreements of the Xxxxxxx
Principals described in Section 4.1;
(4) the Noncompetition and Nondisclosure Agreements
of the Xxxxxxx Principals and Xxxxxxx & Company, PC described in Section 4.3;
(5) the Employment Agreements of all Xxxxxxx Key
Personnel described in Section 4.4;
(6) the Management Services Agreement between
Somerset and Xxxxxxx & Company, PC described in Section 4.14;
(7) the assignment by Xxxxxxx to Somerset of the
right, title, and interest of Xxxxxxx in and to all employment agreements
between Xxxxxxx and personnel of Xxxxxxx other than the Xxxxxxx Principals and
Xxxxxxx Key Personnel;
(8) stock certificates representing all the
outstanding Xxxxxxx Common Stock, endorsed in blank by the Xxxxxxx Principals;
and
(9) a legal opinion of counsel for Xxxxxxx and the
Xxxxxxx Principals in a form reasonably satisfactory to Somerset.
(iii) Somerset is executing (as applicable) and
delivering to the Xxxxxxx Principals:
(1) the Agreement of Merger;
(2) the Employment Agreements of the Xxxxxxx
Principals described in Section 4.1;
(3) the Noncompetition and Nondisclosure Agreements
of the Xxxxxxx Principals and Xxxxxxx & Company, PC described in Section 4.3.
(4) the Employment Agreements of the Xxxxxxx Key
Personnel described in Section 4.4;
(5) the assignment by Xxxxxxx to Somerset of the
right, title, and interest of Xxxxxxx in and to all employment agreements
between Xxxxxxx and any personnel of Xxxxxxx other than the Xxxxxxx Principals
and Xxxxxxx Key Personnel;
(6) the Management Services Agreement between
Somerset and Xxxxxxx & Company, PC described in Section 4.14;
(7) stock certificates representing the Somerset
Common Stock to be exchanged for the Xxxxxxx Common Stock; and
(8) a legal opinion of counsel for Somerset in a form
reasonably satisfactory to the Xxxxxxx Principals.
(c) Taking of Necessary Action; Further Action. If at any
time after the Effective Time, any further action of Xxxxxxx, Somerset, or the
Xxxxxxx Principals is necessary or desirable to carry out the purposes of this
Agreement and to vest Somerset with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of Xxxxxxx, the
officers and directors of Xxxxxxx and Somerset are fully authorized in the name
of their respective corporations or otherwise to take, and Somerset, Xxxxxxx,
and the Xxxxxxx Principals will take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF XXXXXXX AND THE XXXXXXX PRINCIPALS
Each representation and warranty set forth below is qualified by any
exceptions or disclosures set forth in the Xxxxxxx Disclosure Schedule attached
hereto as Exhibit B, and the Schedules to this Agreement. Any disclosure in the
Xxxxxxx Disclosure Schedule or in any Schedule which refers to or relates to a
particular Section in this Article II shall be deemed to be a disclosure or
exception, to the extent relevant, with respect to representations and
warranties included in other Sections of this Article II. In all other
respects, and representation and warranty set out in this Article II is not
limited or qualified in any way whatsoever, will not merge on Closing or by
reason of the execution and delivery of any agreement, document or instrument on
on Closing will remain in force on and after the Closing Date subject to the
terms of this Agreement, is given with the intention that liability is not
confined to breaches discovered before Closing, is separate and independent and
is not limited by reference to any other representation or warranty or any other
provision of this Agreement, and is made and given with the intention of
inducing Somerset to enter into this Agreement. Any reference in this Article
to Xxxxxxx (other than in Sections 2.1, 2.2, 2.4, 2.6, and 2.8 hereof) shall,
except as otherwise specifically provided, be deemed also to include and refer
to Xxxxxxx Financial Advisors, LLC and to Woodfield Marketing, Inc. (sometimes
referred to herein as the "Ancillary Entities") and to their respective
businesses, the assets and businesses of which have been acquired by Xxxxxxx
prior to the date hereof. Xxxxxxx and the Xxxxxxx Principals jointly and
severally represent and warrant to Somerset as follows:
2.1 Organization, Standing, and Power. Xxxxxxx is a professional
corporation duly organized, validly existing and in good standing under the laws
of the State of Indiana. Xxxxxxx has the corporate power to own its properties
and to carry on its business as now being conducted and as proposed to be
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of its business and properties makes such
qualification necessary. Xxxxxxx has delivered a true and correct copy of its
Articles of Incorporation and Code of By-Laws, each as amended to date, to
Somerset. Xxxxxxx is not in violation of any of the provisions of its Articles
of Incorporation or Bylaws. Xxxxxxx does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for any equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity.
2.2 Capital Structure. The authorized capital stock of Xxxxxxx
consists of one thousand (1,000) shares of Common Stock, of which there are
387.5 shares issued and outstanding as of the date hereof. The ownership of the
outstanding shares of Xxxxxxx capital stock is as set forth on Schedule 1.1
hereof. There are no other outstanding shares of capital stock or voting
securities and no outstanding commitments to issue any shares of capital stock
or voting securities of Xxxxxxx. All outstanding shares of Xxxxxxx Capital
Stock are duly authorized, validly issued, fully paid and non-assessable; free
of any liens or encumbrances; and not subject to preemptive rights or rights of
first refusal created by statute, the Articles of Incorporation or Code of By-
Laws of Xxxxxxx or any agreement to which Xxxxxxx or the Xxxxxxx Principals are
parties or by which Xxxxxxx or the Xxxxxxx Principals are bound. Xxxxxxx and
the Xxxxxxx Principals have terminated the Stock Retirement Agreement by and
among them dated August 23, 1996. Except for the rights created pursuant to
this Agreement, there are no options, warrants, calls, rights, commitments or
agreements of any character to which Xxxxxxx or any Xxxxxxx Principal is a party
or by which they are bound obligating Xxxxxxx or any one or more Xxxxxxx
Principals to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of capital stock of Xxxxxxx
or obligating Xxxxxxx or the Xxxxxxx Principals to grant or enter into any
option, warrant, call, right, commitment or agreement. There are no contracts,
commitments or agreements relating to voting, purchase or sale of the Xxxxxxx
Common Stock. All outstanding shares of Xxxxxxx Common Stock were issued in
compliance with all applicable federal and state securities laws, and in
accordance with the Indiana Business Corporation Law and IC 23-1.5.
2.3 No Violation. Neither the execution, delivery and performance of
this Agreement and all of the other agreements and instruments to be executed
and delivered pursuant hereto, nor the consummation of the transactions
contemplated hereby or thereby, will, with or without the passage of time or
the delivery of notice or both, (i) conflict with or result in a violation or
breach of, or constitute a default or require consent of any third party (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease or other instrument or obligation
to which Xxxxxxx or any Xxxxxxx Principal is a party or by which they or the
Xxxxxxx Common Stock may be bound, (ii) violate any statute, ordinance or law or
any rule, regulation, order, writ, injunction or decree of any court, adminis-
trative agency or commission or other governmental authority or instrumentality
("Governmental Entity") applicable to Xxxxxxx or the Xxxxxxx Principals or by
which they or the Xxxxxxx Common Stock may be bound, or (iii) violate any
provision of the Articles of Incorporation or Code of By-Laws of Xxxxxxx.
2.4 Authority of Xxxxxxx. Xxxxxxx has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Xxxxxxx. This Agreement has
been duly executed and delivered by Xxxxxxx and constitutes the valid and
binding obligation of Xxxxxxx enforceable against Xxxxxxx in accordance with its
terms. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Xxxxxxx or any Xxxxxxx Principal in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Articles of Merger, as provided in
Section 1.2, and (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws.
2.5 Authority of Xxxxxxx Principals. Each Xxxxxxx Principal has full
power and authority to execute and deliver this Agreement (and all other
agreements and instruments contemplated hereunder) and to perform his or her
obligations hereunder and thereunder. This Agreement has been duly and validly
executed and delivered by each Xxxxxxx Principal and constitutes, and the other
agreements and instruments to be executed and delivered by each Xxxxxxx
Principal pursuant hereto, upon execution and delivery by each Xxxxxxx Principal
, will constitute legal, valid and binding agreements of each Xxxxxxx Principal,
enforceable against each Xxxxxxx Principal in accordance with their respective
terms.
2.6. Financial Statements. Xxxxxxx and the Xxxxxxx Principals have
delivered to Somerset (a) Xxxxxxx'x unaudited financial reports (balance sheet
and statement of operations and retained earnings) as of and for the twelve (12)
month fiscal years ended June 30, 1997, June 30, 1996 and June 30, 1995
respectively; (b) Xxxxxxx'x unaudited financial reports (balance sheet and
statement of operations and retained earnings) with respect to each quarterly
period ending September 30, December 31, and March 31 during the fiscal years
ending June 30, 1997, June 30, 1996, and June 30, 1995, and (c) Xxxxxxx'x
unaudited financial statements (balance sheet and operations and retained
earnings) as of and for the five (5) month period ended November 30, 1997
(collectively the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and have been prepared in accor-
dance with generally accepted accounting principles applied on a consistent
basis throughout the period indicated, except that the Financial Statements do
not have notes thereto and do not contain provisions for deferred federal and
state income taxes. The Financial Statements accurately set out and describe
the financial condition and operating results of Xxxxxxx in all material
respects as of the dates, and for the periods, indicated therein. The December
31, 1997, Balance Sheet to be prepared and delivered to Somerset by the Xxxxxxx
Principals in accordance with Section 4.9 shall be complete and correct in all
material respects and shall be prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods, except
that such December 31, 1997, Balance Sheet shall not have notes thereto. The
December 31, 1997, Balance Sheet shall accurately set out and describe the
financial condition, including all liabilities, of Xxxxxxx as of December 31,
1997, in all material respects. Xxxxxxx and the Xxxxxxx Shareholders have also
delivered to Somerset certain Control Statistics and Personnel Statistics with
respect to Xxxxxxx for the fiscal years ended June 30, 1997 through 1994, and
such materials are complete and correct in all material respects.
2.7 Absence of Certain Changes. Since June 30, 1997, Xxxxxxx has
conducted its business in the ordinary course consistent with past practice, and
since such time (but since December 31, 1995, with respect to Sections 2.7(b)
and (d) below) Xxxxxxx has not:
(a) Organization Documents. Caused or permitted any
amendments to Xxxxxxx'x Articles of Incorporation or Code of By-Laws;
(b) Dividends; Changes in Capital Stock. Declared or paid any
dividends on or made any other distributions (whether in cash, stock or
property) in respect of any of Xxxxxxx'x capital stock, or split, combined or
reclassified any of Xxxxxxx'x capital stock or issued or authorized the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of Xxxxxxx'x capital stock, or repurchased or otherwise acquired, directly or
indirectly, any shares of Xxxxxxx'x capital stock;
(c) Material Contracts. Entered into any material contract
or commitment, or violated, amended or otherwise modified or waived any of the
terms of any of Xxxxxxx'x material contracts, other than in the ordinary course
of business consistent with past practice;
(d) Issuance of Securities. Issued, delivered or sold or
authorized or proposed the issuance, delivery, or sale of, or purchased or
proposed the purchase of, any shares of Xxxxxxx'x capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any such
shares or other convertible securities;
(e) Intellectual Property. Transferred to any person or
entity any rights to Xxxxxxx'x Intellectual Property (as hereinafter defined)
other than in the ordinary course of business consistent with past practice;
(f) Grant of Rights. Entered into or amended any agreements
pursuant to which any other party is granted marketing or other rights of any
type or scope with respect to any of Xxxxxxx'x services, products, or
technology;
(g) Dispositions. Sold, leased, licensed or otherwise
disposed of or encumbered any of Xxxxxxx'x business or assets other than in the
ordinary course of business;
(h) Indebtedness. Incurred any indebtedness for borrowed
money on behalf of Xxxxxxx or guaranteed any indebtedness or issued or sold any
debt securities or guaranteed any debt securities of others other than in the
ordinary course of business;
(i) Leases. Entered into any operating lease, whether or not
in the ordinary course of business, with aggregate expected payments in excess
of $5,000;
(j) Payment of Obligations. Paid, discharged, or satisfied
in an amount in excess of $10,000 in any one case or $50,000 in the aggregate,
any claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of business;
(k) Capital Expenditures. Made any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;
(l) Insurance. Materially reduced the amount of any insurance
coverage provided by existing insurance policies relating to the business,
assets or liabilities of Xxxxxxx;
(m) Termination or Waiver. Except as described in Section
2.7(s) below, terminated or waived any right of material value to Xxxxxxx, other
than write-offs of work in process and accounts receivable of Xxxxxxx in the
ordinary course of business of Xxxxxxx consistent with past practice;
(n) New Hires; Pay Increases. Adopted or amended any employee
benefit or stock purchase or option plan, hired any new employees, paid any
special bonus or special remuneration to any employee, or increased the salaries
or wage rates of Xxxxxxx'x employees;
(o) Severance Arrangements. Granted any severance or
termination pay (i) to any director or officer of Xxxxxxx or (ii) to any other
employee of Xxxxxxx except grants which are made in the ordinary course of
business in accordance with Xxxxxxx'x standard past practice;
(p) Lawsuits. Commenced a lawsuit relating to Xxxxxxx other
than for the routine collection of bills;
(q) Acquisitions. Acquired or agreed to acquire by merging
or consolidating with, or by purchasing a substantial portion of the assets of,
or by any other manner, any business or any corporation, partnership, assoc-
iation or other business organization or division thereof, or otherwise acquired
or agreed to acquire any assets which are material, individually or in the
aggregate, to the business of Xxxxxxx, taken as a whole;
(r) Taxes. Other than in the ordinary course of business,
made or changed any material election in respect of Taxes relating to Xxxxxxx,
adopted or changed any accounting method in respect of Taxes of Xxxxxxx or
consented to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes of Xxxxxxx;
(s) Revaluation. Revalued any of Xxxxxxx'x assets, including
without limitation writing-off notes or accounts receivable other than in the
ordinary course of business; or
(t) Other. Agreed in writing or otherwise to take, any of the
actions described in Sections 2.7(a) through (s) above, or any action which
would make any of Xxxxxxx'x or representations or warranties of the Xxxxxxx
Principals contained in this Agreement untrue or incorrect or prevent it from
performing or cause it not to perform any covenants of Xxxxxxx or the Xxxxxxx
Principals hereunder.
2.8 Absence of Undisclosed Liabilities; Changes in Financial Condition
and Business. Xxxxxxx has no material obligations or liabilities of any nature
(matured or unmatured, fixed or contingent) other than (i) those set forth or
adequately provided for in the balance sheet in the Financial Statements for the
period ended June 30, 1997 (the "June 30, 1997, Balance Sheet"); (ii) those
incurred in the ordinary course of business and not required to be set forth in
the June 30, 1997, Balance Sheet under generally accepted accounting principles;
(iii) those incurred in the ordinary course of business since June 30, 1997, and
consistent with past practice; (iv) those incurred in connection with the
execution of this Agreement; and (v) those otherwise disclosed on the Xxxxxxx
Disclosure Schedule or other schedules to this Agreement, including but not
limited to any requirements for withholding or contributions of amounts due to
federal, state or local taxing authorities. There has not been, since June 30,
1997, any significant adverse change in the financial condition and business of
Xxxxxxx. The December 31, 1997, Balance Sheet shall not reflect any significant
adverse change in the financial condition and business of Xxxxxxx from that
reflected in the June 30, 1997, Balance Sheet.
2.9 Litigation. There is no private or governmental action, suit,
judicial or administrative proceeding, claim, arbitration or investigation
pending before any agency, court or tribunal, foreign or domestic, or, to the
knowledge of Xxxxxxx or any Xxxxxxx Principal, threatened against Xxxxxxx, any
Xxxxxxx Principal, or any Xxxxxxx employee (to the extent relating to the
business of Xxxxxxx). There is no judgment, decree or order against Xxxxxxx or
any Xxxxxxx Principal, or, to the knowledge of Xxxxxxx or any Xxxxxxx
Principal, any of Xxxxxxx'x directors or officers (in their capacities as such),
that could prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or which relates to or affects Xxxxxxx or its
assets and business or any Xxxxxxx Principal. All claims, suits, and
proceedings to which Xxxxxxx or any Xxxxxxx Principal is a party, or to the
knowledge of Xxxxxxx or the Xxxxxxx Principals in which Xxxxxxx or any Xxxxxxx
Principal is threatened to become a party and which relates in any way to the
business of Xxxxxxx, is disclosed in the Xxxxxxx Disclosure Schedule.
2.10 Restrictions on Business Activities. Except as provided in this
Agreement, there is no agreement, judgment, injunction, order or decree binding
upon Xxxxxxx or any Xxxxxxx Principal which has or could reasonably be expected
to have the effect of prohibiting or materially impairing any current or future
business practice of Xxxxxxx, any acquisition of property by Xxxxxxx, or the
conduct of business by Xxxxxxx as currently conducted by Xxxxxxx.
2.11 Regulatory Authorization. Schedule 2.11 hereto contains a
complete and accurate list and description (including without limitation any
applicable expiration dates) of all licenses, permits, consents, orders,
approvals, certificates of authority, registrations, qualifications and other
authorizations issued by any federal, state, municipal or other government
department, commission, court, board, bureau, arbitration tribunal, agency or
other instrumentality or regulatory entity, including without limitation the
Indiana Board of Accountancy, the National Association of Securities Dealers,
Inc., the Securities Exchange Commission ("SEC") and the Office of the Secretary
of State of Indiana, which are held by Xxxxxxx or any officer, employee or agent
of Xxxxxxx. Except as specifically set forth in Schedule 2.11, all such
licenses, permits, consents, orders, approvals, certificates of authority,
registrations, qualifications and other authorizations have been lawfully
obtained and are in full force and effect, and will not cease to remain in full
force and effect in accordance with their terms by reason of consummation of the
Merger. Xxxxxxx and its officers, employees, and agents, including without
limitation the Xxxxxxx Principals, are in full compliance with the terms and
conditions of all such licenses, permits, consents, orders, approvals,
certificates of authority, registrations, qualifications and other
authorizations. There are no disputes or proceedings pending or to the know-
ledge of the Xxxxxxx Principals threatened with respect to the suspension,
revocation, nonrenewal or limitation of (or any disciplinary or other action
relating to) any such license, permit, consent, order, approval, certificate of
authority, registration, qualification or other authorization. No event has
occurred which, whether with notice or lapse of time or both, will or may result
in the suspension, revocation, nonrenewal or limitation of any such license,
permit, consent, order, approval, certificate of authority, registration,
qualification or other authorization. All filings, submissions and other
actions required to have been made or taken in order to renew any such license,
permit, consent, order, approval, certificate of authority, registration, quali-
fication or other authorization have been made or taken within the time periods
required or reasonably necessary for such renewal.
2.12 Title to Property. Xxxxxxx has good and marketable title to all
of its properties, interests in properties and assets, real and personal,
including without limitation the assets and businesses of the Ancillary Entities
or with respect to leased properties and assets, valid leasehold interests in
such leased properties and assets free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character, except (i) the lien
of current property taxes not yet due and payable, and (ii) such imperfections
of title, liens and easements as do not and will not materially detract from or
interfere with the use of the properties subject thereto or affected thereby, or
otherwise materially impair business operations involving such properties (the
"Permitted Encumbrances"). The property and equipment of Xxxxxxx that are used
in the operations of its businesses are in good operating condition and repair.
Schedule 2.12 is a listing of each parcel of real property owned or leased by
Xxxxxxx and any and all fixtures, furniture, and equipment owned or leased by
Xxxxxxx. Xxxxxxx and the Xxxxxxx Principals have taken any and all actions
required to acquire all assets, contract rights, and business of the Ancillary
Entities, which assets, contract rights, and businesses are subject to all
representations and warranties under this Article II applicable to Xxxxxxx.
Xxxxxxx owns, leases, or holds all property, including real property and
tangible and intangible personal property, used or material to the operation of
the business of Xxxxxxx.
2.13 Intellectual Property.
(a) Xxxxxxx owns, or is licensed or otherwise possesses
legally enforceable rights to use all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material ("Intellectual Property") that is used or proposed to be used in the
business of Xxxxxxx as currently conducted or as proposed to be conducted by
Xxxxxxx.
(b) Schedule 2.13 lists (i) all patents and patent
applications and all registered and unregistered trademarks, trade names and
service marks, copyrights, and maskworks, included in the Intellectual Property,
including the jurisdictions in which each such Intellectual Property right has
been issued or registered or in which any application for such issuance and
registration has been filed, (ii) all licenses, sublicenses and other agreements
as to which Xxxxxxx is a party and pursuant to which any person is authorized to
use any Intellectual Property, and (iii) all licenses, sublicenses and other
agreements to which Xxxxxxx is a party and pursuant to which Xxxxxxx is
authorized to use any third party patents, trademarks or copyrights, including
software ("Third Party Intellectual Property Rights") which are incorporated in,
are, or form a part of any Xxxxxxx product or service that is material to its
business.
(c) There is no material unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of Xxxxxxx,
any trade secret material to Xxxxxxx, or any Intellectual Property right of any
third party to the extent licensed by or through Xxxxxxx, by any third party,
including any employee or former employee of Xxxxxxx. Xxxxxxx has not entered
into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property.
(d) Xxxxxxx is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any material license, sublicense or other
agreement relating to the Intellectual Property or Third Party Intellectual
Property Rights.
(e) All patents, registered trademarks, service marks and
copyrights held by Xxxxxxx are valid and subsisting. Xxxxxxx (i) has not been
sued in any suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party; (ii) has no knowledge that
the marketing, licensing or sale of its products or services infringes any
patent, trademark, service xxxx, copyright, trade secret or other proprietary
right of any third party; and (iii) has not brought any action, suit or
proceeding for infringement of Intellectual Property or breach of any license or
agreement involving Intellectual Property against any third party.
(f) Xxxxxxx has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Xxxxxxx does not
already own by operation of law.
(g) Xxxxxxx has taken all necessary and appropriate steps to
protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, patent applications or copyright ("Confidential
Information"). All use, disclosure or appropriation of Confidential Information
owned by Xxxxxxx by or to a third party has been pursuant to the terms of a
written agreement between Xxxxxxx and such third party. All use, disclosure or
appropriation of Confidential Information not owned by Xxxxxxx has been pursuant
to the terms of a written agreement between Xxxxxxx and the owner of such
Confidential Information, or is otherwise lawful.
2.14 Environmental Matters. Xxxxxxx and its business and properties
are, and at all times have been, in material compliance with all Environmental
Laws. For purposes of this Section 2.14, Environmental Laws shall mean all
federal, regional, state, county or local laws, statutes, ordinances, decisional
law, rules, regulations, codes, orders, decrees, directives and judgments
relating to public health or safety, pollution, damage to or protection of the
environment, environmental conditions, releases or threatened releases of
hazardous materials into the environment or the use, manufacture, processing,
distribution, treatment, storage, generation, disposal, transport or handling of
hazardous materials, whether existing in the past or present or hereafter
enacted, rendered, adopted or promulgated. For purposes of this Agreement,
Environmental Laws shall include, but are not limited to, the following laws,
and the regulations promulgated thereunder, as the same may be amended from time
to time: the Comprehensive Environmental Response Compensation and Liability Act
(42 U.S.C. 9601 et seq.) ("CERCLA"); the Resource Conservation and Recovery Act
(42 U.S.C. 6901 et seq.) ("RCRA"); the Clean Air Act (42 U.S.C. 7401 et seq.);
the Clean Water Act (33 U.S.C. 1251 et seq.); together with their state law
analogs. For purposes of this Section 2.14, Hazardous Materials means any toxic
or hazardous substance, material or waste and any pollutant or contaminant, or
infectious or radioactive substance or material, or any substances, materials
and wastes defined or regulated under any Environmental Laws, including without
limitation solid wastes, petroleum, polychlorinated byphenyls and urea
formaldehyde.
2.15 Taxes.
(a) Definitions. For purposes of this Agreement, the
following definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal income taxes and state income taxes), payroll and employee withholding
taxes, unemployment insurance, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected, (B) any liability for the
payment of amounts referred to in (A) as a result of being a member of any
affiliated, consolidated, combined or unitary group, or (C) any liability for
amounts referred to in (A) or (B) as a result of any obligations to indemnify
another person.
(ii) The term "Returns" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
(b) Returns Filed and Taxes Paid. All Returns required to be
filed by or on behalf of Xxxxxxx have been duly filed on a timely basis and such
Returns are true, complete and correct. All Taxes shown to be payable on such
Returns or on subsequent assessments with respect thereto, and all payments of
estimated Taxes required to be made by or on behalf of Xxxxxxx under Section
6655 of the Code or comparable provisions of state, local or foreign law, have
been paid in full on a timely basis, and no other Taxes are payable by Xxxxxxx
with respect to items or periods covered by such Returns (whether or not shown
on or reportable on such Returns). Xxxxxxx has no liability for unpaid Taxes
(whether actual or contingent, and whether or not shown on Returns filed prior
to the Closing Date) for any periods (or portion thereof) ending on or prior to
the Closing Date, other than accruals for Taxes in the ordinary course of
business to be reflected in the December 31, 1997, Balance Sheet. Xxxxxxx has
withheld and paid over all Taxes required to have been withheld and paid over
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid or owing to any employee, creditor, independent contractor, or
other third party. There are no liens on any of the assets of Xxxxxxx with
respect to Taxes, other than liens for Taxes not yet due and payable or for
Taxes Xxxxxxx is contesting in good faith through appropriate proceedings and
for which appropriate reserves have been established. Xxxxxxx has not been at
any time a member of any partnership or joint venture for a period for which the
statute of limitations for any Tax potentially applicable to Xxxxxxx as a result
of such membership has not expired.
(c) Returns Furnished. Somerset has been furnished by Xxxxxxx
with true and complete copies of (i) relevant portions of income tax audit
reports, statements of deficiencies, closing or other agreements received by or
on behalf of Xxxxxxx relating to Taxes, and (ii) all federal and state income or
franchise tax returns and state sales and use tax Returns for or including
Xxxxxxx (including the Ancillary Entities) for the years ended June 30, 1997,
June 30, 1996, and June 30, 1995. Xxxxxxx has never been a member of an
affiliated group of corporations filing consolidated returns or a unitary group
of corporations filing combined returns. Xxxxxxx is not required to file
Returns with any state other than states for which Returns have been duly filed
and furnished to Somerset.
(d) Tax Deficiencies; Audits; Statutes of Limitations. The
Returns of Xxxxxxx have never been audited by a government or taxing authority,
nor is any such audit in process, pending or to the knowledge of the Xxxxxxx
Principals threatened. No deficiencies exist or have been asserted within the
past six(6) years (either in writing or verbally, formally or informally) or are
expected to be asserted with respect to Taxes of Xxxxxxx, and Xxxxxxx has not
received notice (either in writing or verbally, formally or informally) nor
expects to receive notice that it has not filed a Return or paid Taxes required
to be filed or paid. Xxxxxxx is not a party to any action or proceedings for
assessment or collection of Taxes, nor has such event been asserted or
threatened (either in writing or verbally, formally or informally) against
Xxxxxxx or any of its assets. No waiver or extension of any statute of limi-
tations is in effect with respect to Taxes or Returns of Xxxxxxx.
(e) Tax Sharing Agreements. Xxxxxxx is not (nor has it ever
been) a party to any tax sharing agreement.
(f) Tax Elections. Xxxxxxx is not, nor has it been, a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code, and Somerset is not required to withhold tax on the purchase of the
Xxxxxxx Common Stock by reason of Section 1445 of the Code. Xxxxxxx is not a
"consenting corporation" under Section 341(f) of the Code. Xxxxxxx has not
entered into any compensatory agreements with respect to the performance of
services which payment thereunder would result in a nondeductible expense to
Somerset pursuant to Section 280G of the Code or an excise tax to the recipient
of such payment pursuant to Section 4999 of the Code. Xxxxxxx has not agreed to
nor is it required to make any adjustment under Code Section 481(a) by reason of
a change in accounting method, and Xxxxxxx does not and will not otherwise have
any material income reportable for a period ending after the Closing Date
attributable to a transaction or other event (e.g., an installment sale)
occurring prior to the Closing Date. Xxxxxxx is not, nor has it been, a
"reporting corporation" subject to the information reporting and record
maintenance requirements of Section 6038A and the regulations thereunder.
(g) Representations Relating to Reorganization.
(1) Xxxxxxx is participating in the Merger for good and
valid business reasons and not for tax purposes.
(2) Xxxxxxx has operated its historic business or used a
significant portion of its historic business assets in a trade or business.
(3) The liabilities of Xxxxxxx and the liabilities to
which the assets of Xxxxxxx to be transferred to Somerset in the Merger are
subject have been incurred by Xxxxxxx in the ordinary course of its business.
(4) Xxxxxxx is not an "investment company" within the
meaning of Section 368(a)(2)(F)(iii) and (iv)of the Code.
(5) Xxxxxxx is not under the jurisdiction of a court in
a Title 11 bankruptcy or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
(6) Neither Xxxxxxx nor the Xxxxxxx Principals have any
knowledge of any present plan or intention on the part of the Xxxxxxx Principals
to engage in a sale, exchange, transfer, distribution, pledge, disposition or
any other transaction which results in a reduction in the risk of ownership or a
direct or indirect disposition of shares of Somerset Common Stock to be issued
to the Xxxxxxx Principals in the Merger, which shares would have an aggregate
fair market value, as of the Effective Time, in excess of fifty percent (50%) of
the aggregate fair market value (as determined based on the value to be
exchanged in the Merger), immediately prior to the Merger, of all outstanding
shares of Xxxxxxx Common Stock.
2.16 Employee Benefit Plans.
(a) Schedule 2.16 lists, with respect to Xxxxxxx, including
the Ancillary Entities, (i) all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), (ii) each loan to a non-officer employee in excess of $1,000, each
loan to officers and directors and any stock option, stock purchase, phantom
stock, stock appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria benefit
(Code Section 125) or dependent care (Code Section 129), life insurance or
accident insurance plans, programs or arrangements, (iii) all bonus, pension,
profit sharing, savings, deferred compensation or incentive plans, programs or
arrangements, (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management of Xxxxxxx and that do not
generally apply to all employees, and (v) any current or former employment or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of Xxxxxxx of greater than $20,000 remain for the
benefit of, or relating to, any present or former employee, consultant or
director of Xxxxxxx (together, the "Xxxxxxx Employee Plans").
(b) Xxxxxxx has furnished to Somerset a copy of each of the
Xxxxxxx Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and, to the extent still in its possession, any
material employee communications relating thereto) and has, with respect to each
Xxxxxxx Employee Plan which is subject to ERISA reporting requirements, provided
copies of the Form 5500 reports filed for the last three plan years. Any
Xxxxxxx Employee Plan intended to be qualified under Section 401(a) of the Code
has either obtained from the Internal Revenue Service a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has applied to the Internal Revenue Service for such a determination letter
prior to the expiration of the requisite period under applicable Treasury
Regulations or Internal Revenue Service pronouncements in which to apply for
such determination letter and to make any amendments necessary to obtain a
favorable determination. Xxxxxxx has also furnished Somerset with the most
recent Internal Revenue Service determination letter, if any, issued with
respect to each such Xxxxxxx Employee Plan, and nothing has occurred since the
issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any Xxxxxxx Employee Plan subject to Code
Section 401(a).
(c) (i) None of the Xxxxxxx Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person; (ii)
there has been no "prohibited transaction," as such term is defined in Section
406 of ERISA and Section 4975 of the Code, with respect to any Xxxxxxx Employee
Plan; (iii) each Xxxxxxx Employee Plan has been administered in accordance with
its terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), and Xxxxxxx and
each ERISA Affiliate have performed all obligations required to be performed by
them under, are not in any respect in default under or violation of, and have no
knowledge of any default or violation by any other party to, any of the Xxxxxxx
Employee Plans; (iv) neither Xxxxxxx nor any ERISA Affiliate is subject to any
liability or penalty under Sections 4976 through 4980 of the Code or Title I of
ERISA with respect to any of the Xxxxxxx Employee Plans; (v) all material
contributions required to be made by Xxxxxxx or any ERISA Affiliate to any
Xxxxxxx Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Xxxxxxx Employee
Plan for the current plan years; (vi) with respect to each Xxxxxxx Employee Plan
no "reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; (vii) each of the Xxxxxxx
Employee Plans may be terminated by Xxxxxxx at any time without liability to
Xxxxxxx; and (viii) no Xxxxxxx Employee Plan is covered by, and neither Xxxxxxx
nor any ERISA Affiliate has incurred or expects to incur any liability under
Title IV of ERISA or Section 412 of the Code. With respect to each Xxxxxxx
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, Xxxxxxx has prepared in good faith and timely
filed all requisite governmental reports (which were true and correct as of the
date filed) and, has properly and timely filed and distributed or posted all
notices and reports to employees required to be filed, distributed or posted
with respect to each such Xxxxxxx Employee Plan. No suit, administrative
proceeding, action or other litigation has been brought, or to the best
knowledge of Xxxxxxx is threatened, against or with respect to any such Xxxxxxx
Employee Plan, including any audit or inquiry by the IRS or United States
Department of Labor. Neither Xxxxxxx nor any ERISA Affiliate is a party to, or
has made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Xxxxxxx Employee Plan, Xxxxxxx has
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
proposed regulations thereunder and (ii) the applicable requirements of the
Family Leave Act of 1993 and the regulations thereunder.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Xxxxxxx or any other ERISA Affiliate to severance benefits or any
other payment, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Xxxxxxx or other ERISA Affiliate
relating to, or change in participation or coverage under, any Xxxxxxx Employee
Plan which would materially increase the expense of maintaining such Plan above
the level of expense incurred with respect to that Plan for the most recent
fiscal year included in Xxxxxxx'x financial statements.
2.17 Employee Matters. Xxxxxxx is in full compliance with all
currently applicable laws and regulations respecting employment, discrimination
in employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and is not engaged in any unfair
labor practice. There are no pending claims against Xxxxxxx under any workers
compensation plan or policy or for long term disability. Xxxxxxx has no
obligations under COBRA with respect to any former employees or qualifying
beneficiaries thereunder. There are no proceedings pending or, to the knowledge
of Xxxxxxx or the Xxxxxxx Principals, threatened, between Xxxxxxx and any of its
employees. Xxxxxxx is not a party to any collective bargaining agreement or
other labor union contract and Xxxxxxx does not know of any activities or
proceedings of any labor union or to organize any such employees.
2.18 Interested Party Transactions. Xxxxxxx is not indebted to any
director, officer, employee or agent of Xxxxxxx, including the Xxxxxxx
Principals (except for amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses), and no such person is indebted to Xxxxxxx.
2.19 Insurance. A summary of the policies of insurance (other than
Xxxxxxx Employee Plans) and performance and payment bonds carried by Xxxxxxx,
and a summary of any claims asserted under any such policies and bonds since
January 1, 1993 is attached as Schedule 2.19. The coverages under all such
policies will continue in full force and effect for the benefit of Somerset
subsequent to Closing with respect to the businesses conducted by Xxxxxxx prior
to Closing. There is no claim pending under any of such policies or bonds and
coverage has not been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and Xxxxxxx is otherwise in compliance with the terms of
such policies and bonds. Neither Xxxxxxx nor any Xxxxxxx Principal has any
knowledge of any threatened termination of, or material premium increase with
respect to any of such policies.
2.20 Contracts. Schedule 2.20 sets forth a true and complete list of
all written contracts and agreements to which Xxxxxxx is a party (including but
not limited to contracts relating to asset management) relating to the operation
of the business of Xxxxxxx, with aggregate expected revenue, payments, or
liabilities to Xxxxxxx in excess of $5,000 in any given fiscal year of Xxxxxxx,
other than engagement letters with clients in the ordinary course for the
performance of accounting or consulting services by Xxxxxxx. True and complete
copies of all such contracts, including all amendments, modifications and
supplements thereto, have been delivered to Somerset. Xxxxxxx has entered into
all such contracts in the ordinary course of business consistent with past
practice; Xxxxxxx is not in default thereunder and, to the knowledge of the
Xxxxxxx Principals, no other party to any such contract is in default thereunder
and there are to the knowledge of the Xxxxxxx Principals no existing conditions
or state of facts which with the passage of time or the giving of notice would
constitute such default. Xxxxxxx and the Xxxxxxx Principals have obtained any
and all third party consents under or required by such contracts in connection
with the Merger in order to obtain for Somerset the full benefit under such
contracts.
2.21 Compliance With Laws. Neither Xxxxxxx nor the Xxxxxxx Principals
have received any notices of violation with respect to any federal, state, local
or foreign statute, law or regulation with respect to the conduct of the
business of Xxxxxxx, or the ownership or operation of the business of Xxxxxxx.
Xxxxxxx has complied in all material respects with, and is not in material
violation of any federal, state, local or foreign statute, law or regulation.
2.22 Minute Books; Stock Records. The minute books of Xxxxxxx made
available to Somerset contain a complete summary of all meetings of directors
and shareholders or actions by written consent since the time of incorporation
of Xxxxxxx through the date of this Agreement, and reflect all transactions
referred to in such minutes accurately in all material respects. The stock
records of Xxxxxxx made available to Somerset contain a complete summary of all
issuance and transfers of shares of Xxxxxxx Common Stock and other equity
interests in Xxxxxxx.
2.23 Brokers' and Finders' Fees. Neither Xxxxxxx nor the Xxxxxxx
Principals have incurred, nor will they incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.24 Board Approval. The Board of Directors of Xxxxxxx has unanimously
(i) approved this Agreement and the Merger, (ii) determined that the Merger is
in the best interests of the shareholders of Xxxxxxx and is on terms that are
fair to such shareholders and (iii) recommended that the shareholders of Xxxxxxx
approve this Agreement and the Merger.
2.25 Vote Required; Shareholder Approval. The written consent of the
Xxxxxxx Principals is the only vote of the holders of any of Xxxxxxx'x Common
Stock necessary to approve this Agreement and the transactions contemplated
hereby, and the Xxxxxxx Principals have unanimously approved this Agreement and
the Merger. There are no dissenting shareholders or persons with dissenter's
rights (as such terms are defined in the Indiana Business Corporation Law)
related to the transactions contemplated hereby.
2.26 Accounts Receivable; Unbilled Work in Process. The accounts
receivable of Xxxxxxx as of December 31, 1997, are listed in attached Schedule
2.26. Such accounts receivable represent and will represent bona fide claims
against debtors for sales and other charges. The amounts carried for doubtful
accounts and allowances disclosed in the Financial Statements for the current
fiscal year of Xxxxxxx are sufficient to provide for any losses which may be
sustained on realization of the receivables. The unbilled work-in-process of
Xxxxxxx as of December 31, 1997, is described in attached Schedule 2.26. All
such work in process reflects time incurred by Xxxxxxx employees in performing
services for its clients in the ordinary course of business in accordance with
past practice and in accordance with the terms of engagements with such
clients. There have been no significant changes in the accounts receivable and
work-in-process of Xxxxxxx since December 31, 1997, except in the ordinary
course of business.
2.27 Clients. The Xxxxxxx Principals shall prepare and provide to
Somerset within ten (10) business days subsequent to the Effective Time a
current list of Xxxxxxx clients as of December 31, 1997, indicating as to each
client as applicable total accounts receivable and work-in-process (together
with agings thereof) as of December 31, 1997. There have been no changes in the
accounts receivable and work-in-process of Xxxxxxx since June 30, 1997, except
in the ordinary course of business. No client or account of Xxxxxxx which
individually accounted for more than one percent (1%) of Xxxxxxx'x gross
revenues during the twelve (12) month period preceding December 31, 1997, has
cancelled or otherwise terminated, or to the knowledge of the Xxxxxxx Principals
made any threat to cancel or terminate its relationship with Xxxxxxx or its
prospective relationship with Somerset, and to the knowledge of Xxxxxxx and the
Xxxxxxx Principals, no such clients intend to cancel or otherwise terminate
their relationship with Xxxxxxx or Somerset or to decrease materially their
usage of services or products of Xxxxxxx or Somerset.
2.28 Assets Under Supervision. As of the date hereof, Xxxxxxx has no
less than $130,000,000 (by current market value) in client assets under
supervision, including accounts comprising at least $30,000,000 (by current
market value) in assets to which Xxxxxxx provides periodic consulting services.
The fees for investment supervision and consulting and financial planning
activities earned by Xxxxxxx during calendar year 1997, were $349,451. Within
ten (10) business days after the date hereof, the Xxxxxxx Principals shall
provide to Somerset a listing of all clients for which Xxxxxxx provided asset
supervisory services during calendar year 1997, including in such listing the
name, account number, account start date, assets under management and market
value of assets for each custodian.
2.29 Investment Representations. The Xxxxxxx Principals jointly and
severally represent and warrant that:
(a) Restricted Shares; Rule 144. The Xxxxxxx Principals are
aware that the Somerset Common Stock to be received by them in the merger must
be held indefinitely unless subsequently registered under the Securities Act or
an exemption from such registration is available. The Xxxxxxx Principals are
aware of the provisions of Rules 144 and 145 promulgated under the Securities
Act which permit limited resale of shares received in a private placement
subject to the satisfaction of certain conditions, including, among other things
the existence of a public market for the shares, the availability of certain
current public information about Somerset, the resale occurring not less than
one (1) year after a party has purchased and paid for the security to be sold,
the sale being effected through a "broker's transaction" or in transactions
directly with a "market maker" (as provided by Rule 144(f)) and the number of
shares being sold during any three-month period not exceeding specified limi-
tations. The Xxxxxxx Principals are further aware that the certificates
representing the Somerset Common Stock to be received by them in the Merger
shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER THE ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OR 145
UNDER SUCH ACT"
(b) Experience. The Xxxxxxx Principals have substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to Somerset so that they are capable of
evaluating the merits and risks of their investment in Somerset and have the
capacity to protect their own interests. In addition, each Xxxxxxx Principal
recognizes that a holding in Somerset is highly speculative and involves
significant risks including a complete loss of such holding.
(c) Investment. Each Xxxxxxx Principal is acquiring the
Somerset Common Stock to be received in the Merger for investment for his or her
own account, not as a nominee or agent, and not with the view to, or for resale
in connection with, any distribution thereof. Each Xxxxxxx Principal under-
stands that such Somerset Common Stock has not been, and will not be, registered
under the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon among
other things the bona fide nature of the investment intent and the accuracy of
the representations as expressed herein.
(d) Public Market; No Federal or State Approval. Each Xxxxxxx
Principal understands that while a public market currently exists for the Common
Stock of Somerset, that Somerset has made no assurances that a public market
will continue to exist in the future. Each Xxxxxxx Principal understands that
no federal or state agency has passed upon the Somerset Common Stock or made any
finding or determination as to the fairness of the investment or any
recommendation or endorsement of the Somerset Common Stock.
(e) Access to Data. Each Xxxxxxx Principal has had an
opportunity to discuss the business, management and financial affairs of
Somerset with its management. Each Xxxxxxx Principal has also had opportunity
to ask questions of officers of Somerset, which questions were answered to his
or her satisfaction.
2.30 Representations Complete. None of the representations or
warranties made by Xxxxxxx or the Xxxxxxx Principals herein or in any Schedule
or Exhibit hereto, including the Xxxxxxx Disclosure Schedule, or certificate
furnished by Xxxxxxx or any Xxxxxxx Principals pursuant to this Agreement, when
all such documents are read together in their entirety, as of the date hereof
contains any untrue statement of a material fact, or as of the date hereof omits
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOMERSET
Except as disclosed in a document of even date herewith delivered by
Somerset to Xxxxxxx prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Somerset
Disclosure Schedule"), Somerset represents and warrants to the Xxxxxxx
Principals as follows:
3.1 Organization, Standing and Power. Somerset is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana. Somerset has the corporate power to own its properties and to carry on
its business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the nature of its business and properties makes such qualification necessary.
Somerset has delivered a true and correct copy of its Amended Articles of
Incorporation and Amended and Restated Code of By-Laws, each as amended to date,
to Xxxxxxx. Somerset is not in violation of any of the provisions of its
Amended Articles of Incorporation or Amended and Restated Code of By-Laws.
3.2 No Violation; Authority. Neither the execution, delivery, and
performance of this Agreement and all of the other agreements and instruments to
be executed and delivered pursuant hereto, nor the consummation of the
transactions contemplated hereby or thereby, will, with or without the passage
of time or the delivery of notice or both, (i) conflict with or result in a
violation or breach of, or constitute a default or require consent of any third
party (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions, or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease or other instrument or
obligation to which Somerset is a party or by which Somerset may be bound, (ii)
violate any statute, ordinance, or law or any rule, regulation, order, writ,
injunction, or decree of any court, administrative agency, or commission or
other governmental authority or instrumentality ("Government Entity") applicable
to Somerset or by which Somerset may be bound, or (iii) violate any provision of
the Amended Articles of Incorporation or Amended and Restated Code of By-Laws of
Somerset. Somerset has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the trans-
actions contemplated hereby have been duly authorized by all necessary corporate
action on the part of Somerset. This Agreement has been duly executed and
delivered by Somerset and constitutes the valid and binding obligation of
Somerset enforceable against Somerset in accordance with its terms. No consent,
approval, order, or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Somerset in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of the
Articles of Merger, as provided in Section 1.2, (ii) the filing of a Form 8-K
with the Securities and Exchange Commission ("SEC") and National Association of
Securities Dealers ("NASD") within fifteen (15) days after the Closing Date,
(iii) any filings as may be required under applicable state securities laws and
the securities laws of any foreign country, and (iv) the filing with the NASDAQ
National Market of a Notification Form for Listing of Additional Shares with
respect to the shares of Somerset Common Stock issuable upon conversion of the
Xxxxxxx Common Stock in the Merger.
3.3 Capital Structure. The authorized capital stock of Somerset
consists of 4,000,000 shares of Common Stock, of which there are 2,564,841
shares of Common Stock issued and outstanding as of the date hereof.
3.4 SEC Documents; Financial Statements. Somerset has made available
to Xxxxxxx and the Xxxxxxx Principals a true and complete copy of each statement
report, registration statement (with the prospectus in the form filed pursuant
to Rule 424(b) of the Securities Act), definitive proxy statement, and other
filings made with the SEC by Somerset since January 1, 1997 (collectively, the
"Somerset SEC Documents"). In addition, Somerset has made available to Xxxxxxx
and the Xxxxxxx Principals all exhibits to the Somerset SEC Documents filed
prior to the date hereof. As of their respective filing dates, the Somerset SEC
Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended, and the Securities Act, and none of
the Somerset SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a subsequently
filed Somerset SEC Document. The financial statements of Somerset, including
the notes thereto, included in the Somerset SEC Documents (the "Somerset
Financial Statements") were complete and correct in all material respects as of
their respective dates, complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates, and have been
prepared in accordance with GAAP applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be indicated in
the notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The Somerset
Financial Statements fairly present the consolidated financial condition and
operating results of Somerset and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments). There has been no change in Somerset
accounting policies except as described in the notes to the Somerset Financial
Statements. There has been no material adverse change in the business,
financial condition, or results of operations of Somerset since the date of the
most recent Somerset Financial Statement.
3.5 Representations Relating to Reorganization Status.
(a) Somerset has no plan or intention to reacquire any of its
stock issued in the Merger.
(b) Somerset is not an investment company as defined by
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(c) Somerset is participating in the Merger for good and valid
business reasons and not for tax purposes.
(d) Following the Merger, Somerset intends to continue
substantially all of the historic business of Xxxxxxx other than Audit and
Attestation Services, as defined in Section 4.13.
3.6 Representations Complete. None of the representations or
warranties made by Somerset herein or in any Schedule or Exhibit hereto,
including the Somerset Disclosure Schedule and the Somerset SEC Documents, or
certificate furnished by Somerset pursuant to this Agreement, when all such
documents are read together in their entirety as of the date hereof, contains
any untrue statement or a material fact, or as of the date hereof omits to state
any material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
ARTICLE IV
ADDITIONAL AGREEMENTS OF THE PARTIES
4.1 Employment Agreements. Each Xxxxxxx Principal is this date
entering into an Employment Agreement with Somerset.
4.2 Resignations. Each applicable Xxxxxxx Principal is this date
resigning as a director or officer of Xxxxxxx.
4.3 Noncompetition and Nondisclosure Agreements of Xxxxxxx Principals
and Xxxxxxx & Company, PC. Each Xxxxxxx Principal is this date entering into a
Noncompetition and Nondisclosure Agreement with Somerset. The Xxxxxxx
Principals have caused Xxxxxxx & Company PC this date to enter into a Non-
competition and Nondisclosure Agreement with Somerset.
4.4 Employment Agreements of Additional Xxxxxxx Key Personnel. The
Xxxxxxx Principals have this date obtained and delivered to Somerset executed
Employment Agreements between Somerset and the following additional Key
Personnel of Xxxxxxx ("Key Personnel"): Xxxxx Xx Xxxxxx, Xxxxx Xxxx Xxxxx, Xxxxx
X.Xxxxxxxx, Xxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxxxxx, Xxxxxxx
X. Xxxxxxx, Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxxx X.
Xxxxxxxx, and Xxx Xxxx Xxxxxx. Such Key Personnel will be employed by Somerset
as employees at-will, and Somerset shall have no obligation to employ or to
continue to employ any such Key Personnel.
4.5 Assignments of Employment Agreements. Xxxxxxx has this date
assigned to Somerset all of its right, title, and interest in and to existing
employment agreements between Xxxxxxx and employees of Xxxxxxx other than the
Xxxxxxx Principals and Key Personnel. Subsequent to Closing, the Xxxxxxx
Principals will cooperate with Somerset in effecting the execution by such
employees of new employment agreements in form satisfactory to Somerset. Any
such employees will be employed by Somerset subsequent to Closing as employees
at-will, and Somerset shall have no obligation to employ or to continue to
employ any such employees.
4.6 Incentive Stock Options; Employee Benefits. As soon as
practicable after the date hereof, in consultation with the Xxxxxxx Principals
and based on and in connection with performance of Key Personnel subsequent to
Closing , Somerset will grant incentive stock options to such Key Personnel
employed by Somerset under and in accordance with Somerset's 1991 Stock
Incentive Plan. Somerset shall grant to each Xxxxxxx employee, including but
not limited to the Xxxxxxx Principals and Key Personnel, who remains an employee
of Somerset subsequent to Closing full credit for all time in service of such
employee with Xxxxxxx prior to Closing in connection with eligibility and
vesting of any such employees in any employee welfare and pension benefit plans
of Somerset, subject to any applicable break-in-service rules of such plans, but
specifically excluding benefits payable upon severance or termination from
employment.
4.7 Xxxxxxx Principals; Bonus Plans. Somerset will cause the Xxxxxxx
Principals employed by Somerset to be eligible for stock options and other
performance-based bonus plans of Somerset at the discretion of and subject to
terms approved by the Somerset Board of Directors.
4.8 Election of Xxxxxxx Principal as Director of Somerset. The Board
of Directors of Somerset has elected Xxxxxxx X. Early as a director of Somerset
to serve in such capacity until the 1998 Somerset annual meeting of share-
holders, and has nominated and endorsed Xxxxxxx X. Early for election by the
shareholders of Somerset at the 1998 Somerset annual meeting of shareholders as
a director of Somerset for a three (3) year term.
4.9 December 31, 1997, Balance Sheet. Within five (5) business days
subsequent to the date hereof, the Xxxxxxx Principals shall prepare at their
expense and deliver to Somerset a December 31, 1997, Balance Sheet of Xxxxxxx
which conforms to the representations and warranties for such December 31, 1997,
Balance Sheet contained in Section 2.6, which shall be subject to review and
approval by Somerset. In the event of a dispute between Somerset and the
Xxxxxxx Principals with respect to the form or content of the December 31, 1997,
Balance Sheet which has not been resolved within a period of thirty (30) days
subsequent to Closing, the parties shall submit the dispute, together with all
pertinent records and documents to the Indianapolis office of Xxxxxx Xxxxxxxx,
LLP, the decision of which shall be final and binding. The Xxxxxxx Principals
collectively and Somerset shall each be responsible for one-half of the fees and
expenses of such firm.
4.10 Financial Statements. The Xxxxxxx Principals shall cooperate when
and as requested by Somerset and its independent auditors, KPMG Peat Marwick,
LLP, in providing information and assurances and assisting in the preparation of
audited financial statements of Xxxxxxx required by Somerset in connection with
its filings with the SEC.
4.11 Pooling-of-Interests Accounting Method. Xxxxxxx, the Xxxxxxx
Principals, and Somerset shall as of and subsequent to Closing, use their
reasonable efforts and cooperate in activities in support of the accounting by
Somerset for the Merger under the Pooling-of-Interests Accounting Method in
conformity with the requirements of Opinion No. 16 (Business Combinations) of
the Accounting Principles Board and the related interpretation of the American
Institute of Certified Public Accountants (APB No. 16), as amended by Statements
of the Financial Accounting Standards Board.
4.12 Accounts Receivable. The Xxxxxxx Principals will, as requested
by Somerset, assist Somerset in collecting the accounts receivable of Xxxxxxx as
of Closing, and in billing and collecting unbilled work in process of Xxxxxxx as
of Closing in accordance with the past practice of Xxxxxxx.
4.13 Compliance with Requirements Relating to Practice of Accountancy.
Subsequent to Closing, Somerset and the Xxxxxxx Principals will use their
reasonable efforts and will cooperate, in connection with the business and
operations of Somerset and Xxxxxxx & Company, PC (as defined in Section 4.14
below), in complying with applicable laws and rules relating to the practice of
accountancy, including the Indiana Accountancy Act of 1993, the rules of the
Indiana Board of Accountancy, and all applicable professional requirements and
standards. Without limiting the generality of the foregoing, Somerset (and the
Xxxxxxx Principals in their capacities as employees of Somerset) shall not
subsequent to Closing, provide any services described in IC 25-2.1-12-2 and
IC 25-2.1-12-3, including, but not limited to, preparation of reports in
connection with audits, reviews and compilation of financial statements,
including associated field work (collectively, "Audit and Attestation
Services"). In addition, subsequent to Closing, Somerset (and the Xxxxxxx
Principals as employees of Somerset) shall not hold Somerset out as a licensee
of the Indiana Board of Accountancy under IC 25-2.1-5, and Somerset shall
promptly after Closing terminate and surrender the permit from the Indiana Board
of Accountancy to practice accountancy maintained by Xxxxxxx prior to Closing
under IC 25-2.1-5.
4.14 Operations of Xxxxxxx & Company, PC. Subsequent to Closing, the
Xxxxxxx Principals may form, own, and operate an Indiana professional
corporation, initially under the name Xxxxxxx & Company, PC, by revocable
nonexclusive license from Somerset ("Xxxxxxx PC"), for which the Xxxxxxx
Principals shall obtain a permit under IC 25-2.1-5 and which shall operate
solely for the purpose of providing Audit and Attestation Services. To the
extent permitted by law and applicable professional standards, Xxxxxxx PC shall
refer its clients exclusively to Somerset for the performance of any financial
services other than Audit and Attestation Services, including but not limited to
the following: (1) tax consulting and tax preparation services; (2) business
and management consulting services, including but not limited to business
consulting, medical, valuation, and litigation services; and (3) financial
planning and asset management services (hereinafter collectively "Business
Services"). Xxxxxxx PC has executed and delivered to Somerset this date (a) a
Management Services Agreement, under which Somerset will provide facilities and
services in connection with the operations of Xxxxxxx PC, and (b) a Noncompeti-
tion and Nondisclosure Agreement for the benefit of Somerset with respect to the
performance of Business Services.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification by Xxxxxxx Principals.
(a) Indemnity. From and after the Closing, the Xxxxxxx
Principals (the "Indemnitors") hereby agree jointly and severally to indemnify
and hold harmless Somerset and its respective shareholders, officers, directors,
agents and employees (each an "Indemnitee") from and against any and all losses,
costs, damages, liabilities, claims, demands, actions, causes of action,
including without limitation reasonable legal fees (collectively, "Damages")
arising out of:
(i) Any misrepresentation or breach of or default in
connection with any of the representations, warranties, covenants and agreements
given or made by Xxxxxxx or any one or more Xxxxxxx Principals in this Agreement
the Xxxxxxx Disclosure Schedule or any exhibit or schedule to this Agreement;
and
(ii) All claims, demands, and causes of action by
third parties (including without limitation Governmental Entities) of any kind
or nature arising from the conduct of the business of Xxxxxxx, including the
Affiliated Entities, prior to the date hereof.
(b) Waiver of Contribution and Indemnity. The Xxxxxxx
Principals jointly and severally waive any and all rights of indemnity and
contribution which any or all of them have against Somerset as successor in
interest to Xxxxxxx by operation of law.
(c) Termination of Indemnification. The right to indemnity
under Section 5.1(a) above shall terminate twelve (12) months after the Effec-
tive Time; provided, however, (i) that the right to indemnity under Section
5.1(a) above for claims arising under Sections 2.6, 2.8, 2.15 (other than
subsection [g]), and 2.26 shall terminate as of the date on which the first
audit of the financial statements of the combined entity resulting from the
Merger is completed; (ii) that the right to indemnity under Section 5.1(a) above
for claims arising under Section 2.15(g) shall terminate at Closing, and (iii)
that the right of indemnity under Section 5.1(a) above for any claims asserted
by Somerset prior to any applicable termination date as provided above shall
survive any such termination date.
(d) Indemnification Basket. Somerset shall not have any right
to indemnification under this Section 5.1 until and only to the extent that
amounts owed to Somerset exceed, in the aggregate, the sum of $5,000.
5.2 Indemnification by Somerset.
(a) Indemnity. From and after the Closing, Somerset (the
"Indemnitor") hereby agrees to indemnify and hold harmless the Xxxxxxx
Principals (the "Indemnitees") against any and all losses, costs, damages,
liabilities and expenses arising from claims, demands, actions, causes of action
including without limitation reasonable legal fees (collectively, "Damages")
arising out of any misrepresentation or breach of or default in connection with
any of the representations, warranties, covenants and agreements given or made
by Somerset in this Agreement, the Somerset Disclosure Schedule or any exhibit
or schedule to this Agreement.
(b) Termination of Indemnification. The right to indemnity
under Section 5.2(a) above shall terminate twelve (12) months after the
Effective Time; provided, however, that the right to indemnification for claims
arising under Section 3.3 shall terminate as of the date on which the first
audit of the financial statements of the combined entity resulting from the
Merger is completed; and provided further that the right to indemnification for
claims arising under Section 3.5 shall terminate at Closing. Any right of the
Xxxxxxx Principals to indemnity under Section 5.2(a) above for any claims
asserted prior to the applicable termination date as provided above shall
survive any such termination date.
(c) Indemnification Basket. The Xxxxxxx Principals shall not
have any right to indemnification under this Section 5.2 until and only to the
extent that amounts owed to the Xxxxxxx Principals exceed, in the aggregate, the
sum of $5,000.
5.3 Indemnification Procedure.
(a) Whenever any claim shall be asserted against or incurred
by an Indemnitee (as defined under Section 5.1 for a claim thereunder and under
Section 5.2 for a claim thereunder), the Indemnitee shall given written notice
thereof to Indemnitor (which shall be the Xxxxxxx Principals or Somerset for a
claim under Sections 5.1 or 5.2, respectively) within fifteen (15) days of
notice of such claim. Indemnitee shall furnish to Indemnitor in reasonable
detail such information as the Indemnitee may have with respect to the claim
(including in any case copies of any summons, complaint or other pleading which
may have been served on it and any written claim, demand, invoice, billing or
other document evidencing or asserting the same). The failure to give such
notice shall not relieve Indemnitor of his indemnification obligations under
this Agreement, unless due to such failure Indemnitor is materially prejudiced
in conducting any defense of any such claim under Section 5.3(b) below.
(b) If the claim is based on a claim of a person that is not
a party to this Agreement, Indemnitor may, at its expense, undertake the defense
of such claim with attorneys of its own choosing reasonably satisfactory to the
Indemnitees. In the event Indemnitor, within a reasonable time after receiving
notice of a claim from the Indemnitees, fails to defend the claim, the
Indemnitees may, at the expense of Indemnitor, undertake the defense of the
claim and may compromise or settle the claim, all for the account of Indemnitor.
After notice from Indemnitor to the Indemnitees of its election to assume the
defense of such claim, Indemnitor shall not be liable to the Indemnitees under
this Section 5.3(c) for any legal expenses subsequently incurred by the
Indemnitees in connection with the defense thereof, except for such reasonable
expenses incurred in connection with, in cooperation with, or at the request of,
Indemnitor; provided, however, that the Indemnitees shall have the right to
employ, at their expense, counsel to represent them if, In the Indemnitees'
reasonable judgment, based upon the advice of counsel, it is advisable, in light
of the separate interests of the Indemnitees and Indemnitor, for the Indemnitees
to be represented by separate counsel.
(c) Indemnitor shall not, except with the prior written
consent of the Indemnitees, which shall not be unreasonably withheld, consent to
entry of any judgment or enter into any settlement.
(d) Except as otherwise provided above, all reasonable costs
incurred by the Indemnitees in connection with a claim shall be paid by
Indemnitor.
5.4 Limitations on Indemnification. The aggregate liability of the
Xxxxxxx Principals under Section 5.1 and of Somerset under Section 5.2 shall not
exceed in total an amount equal to ten percent (10%) of the product of (x) the
aggregate number of shares of Somerset Common Stock delivered to the Xxxxxxx
Principals and (y) the average of the bid and asked price per share of Somerset
Common Stock as quoted on NASDAQ as of the close of business on the Closing
Date. For purposes of determining the extent to which Somerset and the Xxxxxxx
Principals, respectively, shall be entitled to indemnification under this
Article V, amounts (if any) due under Sections 5.1 and 5.2 shall be deemed
applied toward the limitations in this Section 5.4 in the order in which claims
with respect to payment of such amounts were asserted under Section 5.3.
5.5 Exclusions. This Article V shall not apply to the agreements
described in Sections 4.1, 4.3, 4.4, and 4.5, and the rights and remedies of the
parties to each such agreements shall be determined under the terms of such
agreement.
ARTICLE VI
GENERAL PROVISIONS
6.1 Expenses. All costs and expenses incurred in connection with this
Agreement, the Agreement of Merger, and the other agreements and activities of
the parties contemplated by this Agreement shall be paid by the party incurring
such expenses.
6.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
(a) If to the Xxxxxxx Principals, to the attention of:
Xxxxxxx X. Early
Xxxxxxx & Company, P.C.
0000 Xxxxxxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000
P. O. Xxx 00000
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
with a copy to:
W. Xxxxx XxXxxxxxxx, Esq.
Xxxxxxx Xxxxxxx Xxxxx & Xxxxxxx
2700 Market Tower
00 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
(b) If to Somerset, to:
The Somerset Group, Inc.
0000 Xxxxx Xxxxxxx Xxxxx
000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxx XxXxxxxx, President and
Chief Executive Officer
with a copy to:
Bose XxXxxxxx & Xxxxx
0000 Xxxxx Xxxxxxx Xxxxx
000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
6.3 Headings. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
6.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
6.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Xxxxxxx Disclosure Schedule and the Somerset Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; (b) are not intended to confer upon any other person any rights or
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided. Notwithstanding the above,
Somerset may assign its rights and benefits under this Agreement to a purchaser
of all or substantially all of the operating assets of Somerset.
6.6 Severability. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
6.7 Remedies Cumulative. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
6.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana without reference to the
conflicts of laws principles thereof. The prevailing party in any dispute under
this Agreement shall be entitled to recover its or his attorneys' fees, all
reasonable out-of-pocket expenses and disbursements incurred in connection with
the dispute.
6.9 Rules of Construction. The parties have been represented and
advised by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
6.10 Survival. The representations, warranties, and agreements set
forth in this Agreement or any instrument delivered pursuant to this Agreement
shall survive the Effective Time of the Merger subject to the provision of
Sections 5.1(c) and 5.2(b).
6.11 Knowledge. Whenever used herein, the term "knowledge" or
"knowledge of the Xxxxxxx Principals" with respect to any subject matter shall
mean the actual knowledge of any one or more Xxxxxxx Principals after reasonable
inquiry.
The parties hereto have caused this Agreement to be executed and delivered
by their respective officers thereunto duly authorized, all as of the date first
written above.
THE SOMERSET GROUP, INC.
By:s/Xxxxx XxXxxxxx
Its:President and C.E.O.
XXXXXXX & COMPANY, P.C.
By: s/Xxxxxxx X. Early
Its: President
s/Xxxxxxx X. Early
Xxxxxxx X. Early
s/Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
s/Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
s/Xxxxxxx X. XxXxxxxx
Xxxxxxx X. XxXxxxxx
s/Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
s/Xxxxx X. Xxxx
Xxxxx X. Xxxx
s/Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
s/Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
s/Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
166334v1/1-16-98
