EXHIBIT 99.1
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
by and among
HUB U.S. HOLDINGS, INC.
HUB INTERNATIONAL LIMITED
and
CITIZENS BANK OF MASSACHUSETTS
CITIZENS BANK OF PENNSYLVANIA
COURT STREET HOLDINGS, INC.
CITIZENS FINANCIAL GROUP, INC.
Dated as of March 1, 2006
TABLE OF CONTENTS
PAGE
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1. THE PURCHASE............................................................................................ 1
1.1 Purchase of Interests.......................................................................... 1
1.2 Certain Excluded Assets and Liabilities........................................................ 2
2. PURCHASE PRICE.......................................................................................... 2
2.1 Purchase Price................................................................................. 2
2.2 Estimated Closing Date Balance Sheets.......................................................... 2
2.3 Post Closing Adjustment........................................................................ 2
2.4 Earn-out....................................................................................... 3
2.5 Reconciliation Procedures...................................................................... 4
2.6 Closing........................................................................................ 5
2.7 Transfer Taxes................................................................................. 5
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS........................................................... 5
3.1 Organization................................................................................... 5
3.2 Capitalization................................................................................. 5
3.3 Authorization; Validity of Agreement........................................................... 7
3.4 No Violations; Consents and Approvals.......................................................... 7
3.5 Financial Statements........................................................................... 8
3.6 Absence of Certain Changes..................................................................... 8
3.7 Litigation..................................................................................... 10
3.8 Compliance with Law............................................................................ 10
3.9 Licenses and Permits........................................................................... 11
3.10 Employee Benefit Plans; ERISA.................................................................. 11
3.11 Real Property.................................................................................. 13
3.12 Intellectual Property; Computer Software....................................................... 15
3.13 Tangible Personal Property..................................................................... 16
3.14 Material Contracts............................................................................. 16
3.15 Taxes.......................................................................................... 17
3.16 Environmental Matters.......................................................................... 18
3.17 Affiliated Party Transactions.................................................................. 18
3.18 No Undisclosed Liabilities..................................................................... 19
3.19 Absence of Sensitive Payments.................................................................. 20
3.20 No Brokers or Finder's Fees.................................................................... 20
3.21 Receivables.................................................................................... 20
3.22 Insurance...................................................................................... 20
3.23 Delivery of Documents; Corporate Records....................................................... 21
3.24 Bank Accounts.................................................................................. 21
3.25 Labor and Employment Matters................................................................... 21
3.26 Managers and Officers.......................................................................... 22
3.27 Accredited Investors........................................................................... 22
3.28 Redistribution of Earn-Out Shares.............................................................. 22
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4. REPRESENTATIONS AND WARRANTIES OF THE BUYER............................................................. 23
4.1 Organization of the Buyer...................................................................... 23
4.2 Authorization; Validity of Agreement........................................................... 23
4.3 No Violations; Consents and Approvals.......................................................... 23
4.4 Litigation..................................................................................... 24
4.5 Financing...................................................................................... 24
4.6 No Broker's or Finder's Fees................................................................... 24
4.7 Earn-out Shares................................................................................ 24
4.8 SEC Filings.................................................................................... 24
4.9 Financial Statements........................................................................... 24
4.10 Investment Company Act......................................................................... 25
4.11 Similar Offerings.............................................................................. 25
4.12 No General Solicitation........................................................................ 25
4.13 No Registration Required....................................................................... 25
5. OTHER AGREEMENTS OF THE PARTIES......................................................................... 25
5.1 Noncompete; Non Solicitation of Employees; etc................................................. 25
5.2 Employee Wages Tax Reporting................................................................... 27
5.3 Change of Name................................................................................. 27
5.4 Conduct of Business............................................................................ 28
5.5 Access and Information; Further Assurances..................................................... 30
5.6 Public Statements.............................................................................. 31
5.7 Employment Matters............................................................................. 31
5.8 Certain Post-Closing Costs..................................................................... 33
5.9 Real Estate Matters............................................................................ 34
5.10 Provision of Financial Information............................................................. 34
5.11 Other Acquisition Proposals.................................................................... 34
5.12 Confidentiality................................................................................ 35
5.13 Tax Matters.................................................................................... 35
5.14 Purchase Price Allocation...................................................................... 37
5.15 Reporting Requirements; Integration............................................................ 37
5.16 Other Transaction Documents.................................................................... 38
5.17 Errors and Omissions........................................................................... 38
5.18 Transfer of Personal Property and Casualty Business............................................ 38
5.19 Amounts Due from Certain Producers............................................................. 38
5.20 License Reinstatements......................................................................... 38
5.21 Other Actions.................................................................................. 38
6. CONDITIONS PRECEDENT TO CLOSING......................................................................... 38
6.1 Conditions Precedent to the Buyer's Obligations to Close....................................... 38
6.2 Condition Precedent to the Sellers' and Parent's Obligations to Close.......................... 40
6.3 No Prohibitions................................................................................ 41
7. INDEMNIFICATION......................................................................................... 41
7.1 Survival of Representations, Warranties, Covenants and Agreements.............................. 41
7.2 Indemnification by the Sellers................................................................. 42
7.3 Indemnification by the Buyer................................................................... 43
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7.4 Limitations on Liability....................................................................... 44
7.5 Indemnification Procedures..................................................................... 45
7.6 No Double Recovery............................................................................. 47
7.7 Tax Treatment of Indemnity Payments............................................................ 47
8. TERMINATION............................................................................................. 47
8.1 Termination of Agreement....................................................................... 47
8.2 Obligations; Survival.......................................................................... 48
9. DEFINITIONS............................................................................................. 49
10. MISCELLANEOUS........................................................................................... 61
10.1 Transaction Fees and Expenses.................................................................. 61
10.2 Notices........................................................................................ 61
10.3 Amendments..................................................................................... 63
10.4 Waiver......................................................................................... 63
10.5 Governing Law.................................................................................. 63
10.6 Severability................................................................................... 63
10.7 Force Majeure.................................................................................. 63
10.8 Successors and Assigns......................................................................... 63
10.9 Usage.......................................................................................... 63
10.10 Entire Agreement; Ambiguities.................................................................. 64
10.11 Section Headings............................................................................... 64
10.12 Counterparts................................................................................... 64
10.13 No Personal Liability.......................................................................... 64
10.14 No Third Party Beneficiaries................................................................... 64
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SCHEDULES
Schedule 1.2 Excluded Assets and Liabilities
Schedule 2.4 Earn-out Schedule and Criteria
Schedule 3.1 Domestic and Foreign Corporation Qualifications
Schedule 3.2(a) Capitalization of the Companies
Schedule 3.2(b) Capitalization of the Subsidiaries
Schedule 3.2(c) Other Interests of the Companies
Schedule 3.4(a) Sellers' Violations
Schedule 3.4(b) Sellers' Required Consents
Schedule 3.6 Absence of Certain Changes
Schedule 3.9 Licenses and Permits
Schedule 3.10(a) Employee Benefit Plans
Schedule 3.10(j) Payroll Practices and Severance Plans
Schedule 3.11(a) Owned Real Property
Schedule 3.11(b) Leased Real Property
Schedule 3.12(a) Intellectual Property
Schedule 3.13 Tangible Personal Property
Schedule 3.14 Material Contracts
Schedule 3.15 Taxes
Schedule 3.16(a) Environmental Matters
Schedule 3.24 Bank Accounts
Schedule 3.25 Employee Matters
Schedule 3.26 Managers, Directors and Officers
Schedule 4.3(a) Buyer Violations
Schedule 4.3(b) Buyer Required Consents
Schedule 4.4 Litigation
Schedule 5.4 Conduct of Business
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Schedule 5.7(a) Existing Employment Agreements
Schedule 5.18 Transfer of Charter One Insurance Agency, Inc. Business
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EXHIBITS
Exhibit A Form of Tangible Net Worth Statement.
Exhibit B Strategic Alliance Terms.
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PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT (the "Agreement"), dated as of March 1, 2006,
by and among Hub U.S. Holdings, Inc., a Delaware corporation (the "Buyer"), Hub
International Limited, a corporation incorporated under the laws of Canada
("HIL") (solely with respect to Section 5.15), Citizens Bank of Massachusetts, a
Massachusetts-chartered trust company ("CBMA"), Citizens Bank of Pennsylvania, a
Pennsylvania-chartered savings bank ("CBPA"), and Court Street Holdings, Inc., a
Massachusetts corporation ("CSH") (each of CBPA, CBMA and CSH a "Seller" and
collectively, the "Sellers"), and Citizens Financial Group, Inc., a Delaware
corporation ("Parent") of which the Sellers are each direct wholly owned
subsidiaries.
WHEREAS, CBMA owns all of the outstanding membership interests of The
Xxxxxxxxxx Company LLC, a Delaware limited liability company ("Xxxxxxxxxx");
WHEREAS, CBMA owns 99.99% of the outstanding membership interests of
Xxxxxx & Lord LLC, a Massachusetts limited liability company ("B & L"), and CSH
owns the remaining outstanding membership interests of B & L;
WHEREAS, CBPA owns all of the outstanding membership interests of Citizens
Clair Insurance Agency, LLC, a Pennsylvania limited liability company ("Citizens
Clair");
WHEREAS, the Sellers desire to sell to the Buyer all of their respective
membership interests representing 100% of the outstanding membership interests
in each of the Companies ("Interests") on the terms and conditions provided
herein;
WHEREAS, the Buyer wishes to purchase the Interests and to assume the
obligations of the Sellers with respect to the Companies on the terms and
conditions provided herein; and
WHEREAS, the parties expect to enter into a separate agreement, that will
provide for cross-marketing of banking and insurance business between the Buyer
and its Affiliates on the one hand, and Parent, the Sellers and certain of their
Affiliates on the other after the Closing Date (the "Strategic Alliance
Agreement").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Buyer, each Seller and Parent (to the extent set forth below) hereby agree as
follows:
1. THE PURCHASE
1.1 Purchase of Interests. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date, each Seller shall
sell, assign, transfer, convey and deliver their respective Interests to the
Buyer, and the Buyer shall purchase all of the Sellers' rights, titles and
interests in and to all of the Interests, free and clear of any Encumbrances. At
the Closing, each Seller will deliver to the Buyer (a) the documents or
certificates required by this Agreement and (b) such other documents as may be
reasonably required by the Buyer to effect a valid transfer of the Interests by
the Sellers to the Buyer.
1.2 Certain Excluded Assets and Liabilities. The Sellers shall not
sell or assign and the Buyer shall not purchase or assume, the assets,
liabilities and obligations set forth in Schedule 1.2 ("Excluded Assets and
Liabilities"), and accordingly, the Excluded Assets and Liabilities shall be
transferred out of Xxxxxxxxxx, B & L, and Citizens Clair, as appropriate, prior
to Closing.
2. PURCHASE PRICE.
2.1 Purchase Price. In consideration of the sale by the Sellers of
all of the Interests on the terms and conditions provided herein to the Buyer,
and in reliance upon the representations and warranties of the Sellers contained
herein and subject to the satisfaction of all of the conditions contained
herein, the Buyer agrees to pay the Sellers, at the Closing, an aggregate
amount, in cash, equal to Eighty Million U.S. dollars ($80,000,000), subject to
adjustment in accordance with Section 2.3, by wire transfer of immediately
available funds to an account or accounts designated by the Sellers, at least
three (3) business days prior to Closing, or to be paid as otherwise reasonably
directed by the Sellers at least three (3) business days prior to the Closing.
2.2 Estimated Closing Date Balance Sheets. Five (5) business days
prior to the Closing, each Company shall deliver to the Buyer estimated balance
sheets as of the Closing Date (as aggregated, the "Estimated Closing Date
Balance Sheets") and an exhibit for the Tangible Net Worth Statement as of the
Closing Date, substantially in the form attached hereto as Exhibit A, which
Exhibit sets forth the Tangible Net Worth as of December 31, 2005. The parties
intend that the Tangible Net Worth as of the Closing Date will be calculated
consistent with and substantially on the same basis as Exhibit A attached hereto
or otherwise as mutually agreed upon by the parties.
2.3 Post Closing Adjustment.
(a) Within ninety (90) days of the Closing, the Buyer shall
have conducted a financial review of each Company, and delivered to
the Sellers a statement (including supporting evidence reasonably
acceptable to the Sellers) setting forth the Tangible Net Worth as
of the Closing Date. Subject to Section 2.5, the Sellers, by no
later than the thirtieth (30th) day after receiving the aforesaid
statement, shall notify the Buyer in writing that the Sellers agree
with such financial review, in which case such Tangible Net Worth
shall be the "Audited Tangible Net Worth" for purposes of Section
2.3(b).
(b) In the event that the Audited Tangible Net Worth (as
determined in Sections 2.3(a) and 2.5) exceeds Three Million U.S.
Dollars ($3,000,000) (the "Targeted Tangible Net Worth"), the Buyer
shall be obligated to pay the Sellers an amount in addition to the
Purchase Price (within ninety (90) days of the Closing), in cash,
equal to the amount by which the Audited Tangible Net Worth exceeds
the Targeted Tangible Net Worth. In the event that the Audited
Tangible Net Worth is less than the Targeted Tangible Net Worth, the
Sellers shall be obligated to pay the Buyer (within ninety (90) days
of the Closing), and be jointly and severally liable for an amount,
in cash, equal to the
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amount by which the Audited Tangible Net Worth is less than the
Targeted Tangible Net Worth. The adjustments referred to in the
previous two sentences are hereinafter referred to as the "Audit
Adjustment."
2.4 Earn-out.
(a) Subject to Sections 2.4(b) and 2.5, as determined on each
Anniversary Date, the Buyer shall pay, in cash or shares of HIL
Common Stock, to the Sellers an amount determined in accordance with
Schedule 2.4 (each, an "Earn-out Payment" and collectively, the
"Earn-out Payments"). The aggregate amount to be paid pursuant to
the preceding sentence shall not exceed Twenty Four Million Seven
Hundred and Fifty Thousand U.S. dollars ($24,750,000). As soon as
practicable following each of the respective Anniversary Dates, the
Buyer shall cause the preparation of a calculation of the Earn-out
Payment relating to such Anniversary Date (each, an "Earn-out
Calculation"). The Earn-out Calculation for each such year shall be
delivered promptly to the Sellers following its completion, but in
no event later than ninety (90) calendar days after each of the
respective Anniversary Dates. The Buyer shall pay to the Sellers on
or before the tenth (10th) business day following the date on which
such amount becomes final and conclusive pursuant to the terms
hereof (such dates, respectively, the "2007 Earn-out Payment Date,"
the "2008 Earn-out Payment Date" and the "2009 Earn-out Payment
Date"). The number (adjusted, as appropriate, to reflect any stock
split, reverse stock split or similar transaction effected by HIL
that occurred between the tenth (10th) trading day immediately prior
to an Anniversary Date and the following 0000 Xxxx-xxx Payment Date,
the 2008 Earn-out Payment Date or the 2009 Earn-out Payment Date, as
applicable) of Earn-out Shares (as defined in Section 3.28) shall be
determined based upon the average per share closing sale price of
HIL Common Stock as reported on the New York Stock Exchange
Composite Transaction Reporting System for the twenty (20)
consecutive trading day period that ends on the tenth (10th) trading
day immediately preceding each of the respective Anniversary Dates.
(b) "2006 Income" shall mean contingent commissions, override
commissions and bonus income paid after the Closing Date in 2006 for
the 2005 performance of the Companies. In the event that, as of
December 31, 2006, the 2006 Income to which the Companies are
entitled (the "Actual 2006 Income") is less than Three Million U.S.
dollars ($3,000,000) (the "Targeted Contingent Payments"), the Buyer
may reduce the first Earn-out Payment by an amount equal to that
obtained by subtracting the Actual 2006 Income from the Targeted
Contingent Payments. If the difference between the Actual 2006
Income and the Targeted Contingent Payments is greater than the
first Earn-out Payment, such additional amount shall be deducted
from the second Earn-Out Payment. If the difference between the
Actual 2006 Income and the Targeted Contingent Payments is greater
than the sum of the first Earn-Out Payment and the second Earn-Out
Payment, without giving effect to any deductions pursuant to this
Section 2.4, such additional amount shall be deducted from the third
Earn-out Payment. If the difference between the Actual 2006 Income
and the Targeted
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Contingent Payments is greater than the total Earn-out Payments
without giving effect to any deductions pursuant to this Section
2.4, such additional amount shall be paid to the Buyer by the
Sellers and the Sellers shall be jointly and severally liable for
such obligation.
2.5 Reconciliation Procedures.
(a) In the event that the Sellers do not agree with (i) the
results of the financial review conducted by the Buyer in connection
with Section 2.3(a) or (ii) any Earn-out Calculation, the Sellers
shall have thirty (30) calendar days following receipt of such
financial review or Earn-out Calculation to notify the Buyer that
the Sellers disagree with such financial review or Earn-out
Calculation, which notice shall set forth the adjustments that the
Sellers believe should be made to such financial review, including
the exhibits, or Earn-out Calculation.
(b) If the Buyer and the Sellers reconcile their differences,
such reconciliation shall become (i) the "Audited Tangible Net
Worth," for purposes of Section 2.3 or (ii) the respective Earn-out
Payment, as applicable, for purposes of Section 2.4 and shall
thereupon become final and conclusive.
(c) If the Buyer and the Sellers are unable to reconcile their
differences within sixty (60) calendar days after receipt by the
Sellers (i) the results of the financial review conducted by the
Buyer in connection with Section 2.3(a) or (ii) the Earn-out
Calculation, the items in dispute shall be submitted to the Boston
office of a nationally recognized accounting firm mutually
acceptable to the Buyer and the Sellers (the "Arbitrator") for final
determination; provided that such accounting firm does not have a
prior contractual or commercial relationship with the Buyer, the
Sellers or Parent. Any and all expenses incurred with respect to the
retention of such Arbitrator shall be borne equally by the Buyer and
the Sellers. The determination of the Arbitrator shall become (i)
the "Audited Tangible Net Worth" or (ii) the relevant Earn-out
Payment, as applicable, and shall thereupon become final and
conclusive. If the Sellers do not give the Buyer timely notice, as
described above, of any disagreement with (i) the results of the
financial review conducted by the Buyer in connection with Section
2.3(a) or (ii) the Earn-out Calculation, such financial review or
Earn-out Calculation shall become the "Audited Tangible Net Worth"
or any Earn-out Payment .
(d) If the Buyer and the Sellers fail to select a mutually
acceptable accounting firm within fifteen (15) calendar days after
it is determined that the appointment of an arbitrator is required,
either the Buyer or the Sellers may request the American Arbitration
Association in Boston to appoint an independent firm of certified
public accountants to perform the arbitration services stipulated by
Section 2.5(c) to be performed by the Arbitrator; provided that such
certified public accountant does not have a prior contractual or
commercial relationship with either the Buyer, the Sellers or
Parent. The term "Arbitrator" shall include such accounting firm
chosen pursuant to this Section 2.5(d).
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2.6 Closing. The Closing shall be held at the offices of Xxxxxxx
Procter LLP, Exchange Place, Boston, Massachusetts, at 10:00 a.m. local time, on
or before the second (2nd) business day after the conditions to the Closing set
forth in Article 6 are satisfied (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the satisfaction or
waiver thereof), or, if permissible, waived by the party entitled to the benefit
of the same, or at such other place or later date or time as may be mutually
agreed upon by the parties.
2.7 Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and interest) incurred in
connection with consummation of the transactions contemplated by this Agreement
shall be paid fifty percent (50%) by the Sellers, jointly and severally, and
fifty percent (50%) by the Buyer either directly or through reimbursement of
Sellers (if any such Taxes are initially paid by Sellers). The Buyer shall file
all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and fees,
and, if required by applicable Law, the Sellers shall, and shall cause their
Affiliates to, join in the execution of any such Tax Returns and other
documentation and the Buyer shall pay the entire cost of the preparation and
filings of such Tax Returns.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers jointly and
severally represent and warrant to the Buyer that each of the following
statements is true and correct:
3.1 Organization. Each of the Companies is a limited liability
company and each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its state of organization and
each has the requisite corporate power and authority to carry on its business as
it is now being conducted. The Companies are duly qualified or licensed to do
business and the Subsidiaries are duly qualified or licensed to do business as
foreign corporations and each is in good standing in each jurisdiction in which
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed or to be in
good standing would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Schedule 3.1 lists all jurisdictions in
which any Company or Subsidiary is qualified to do business.
3.2 Capitalization.
(a) The record and beneficial ownership of all of the
Interests and other securities of each of the Companies is set forth
in Schedule 3.2(a) of the Sellers' Disclosure Schedule. All of the
Interests are owned of record and beneficially by one or more of the
Sellers. The Interests are free and clear of all claims, liens,
mortgages, encumbrances, pledges, and other security interests of
any kind (collectively, "Encumbrances") and upon the Closing, the
Buyer shall receive good and marketable title to the Interests free
and clear of all Encumbrances. Except as set forth in Schedule
3.2(a) of the Sellers' Disclosure Schedule, there are no outstanding
(i) Interests, other securities or phantom
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or other equity interests of each of the Companies, (ii) securities
of each of the Companies convertible into or exchangeable for
Interests or other securities of each of the Companies or (iii)
warrants, options, contracts, rights (preemptive or otherwise),
calls or commitments of any character binding on any Company
relating to any issued and unissued Interests, securities, or
phantom or other equity interests (or parts of Interests or other
securities or phantom or other equity interests) of each Company or
other instruments binding on any Company convertible or exchangeable
for such, or that obligate any Company to seek authorization to
issue additional Interests or other securities nor will any be
created by this Agreement, the other Transaction Documents or the
transactions contemplated hereby or thereby (the items in clauses
(i), (ii) and (iii) being referred to collectively as the "Company
Securities"). There are no outstanding obligations of each of the
Companies, actual or contingent, to issue or deliver or to
repurchase, redeem or otherwise acquire any Company Securities.
(b) The record and beneficial ownership of all of the
securities of each of the Subsidiaries is set forth in Schedule
3.2(b) of the Sellers' Disclosure Schedule (the "Subsidiary
Interests"). All of the Subsidiary Interests are owned of record and
beneficially by one or more of the Companies. The Subsidiary
Interests are free and clear of all Encumbrances and, upon the
Closing, Companies shall have good and marketable title to the
Subsidiary Interests free and clear of all Encumbrances. Except as
set forth in Schedule 3.2(b) of the Sellers' Disclosure Schedule,
there are no outstanding (i) Subsidiary Interests, other securities
or phantom or other equity interests of each of the Subsidiaries,
(ii) securities of each of the Subsidiaries convertible into or
exchangeable for Subsidiary Interests or other securities of each of
the Subsidiaries or (iii) warrants, options, contracts, rights
(preemptive or otherwise), calls or commitments of any character
binding on any Subsidiary relating to any issued and unissued
Subsidiary Interests, securities, or phantom or other equity
interests (or parts of Subsidiary Interests or other securities or
phantom or other equity interests) of each Subsidiary or other
instruments binding on any Subsidiary convertible or exchangeable
for such, or that obligate any Subsidiary to seek authorization to
issue additional Subsidiary Interests or other securities, nor will
any be created by this Agreement, the other Transaction Documents or
the transactions contemplated hereby or thereby (the items in
clauses (i), (ii) and (iii) being referred to collectively as the
"Subsidiary Securities"). There are no outstanding obligations of
each of the Subsidiaries, actual or contingent, to issue or deliver
or to repurchase, redeem or otherwise acquire any Subsidiary
Securities.
(c) Except as set forth in Schedule 3.2(b) and Schedule 3.2(c)
of the Sellers' Disclosure Schedule, none of the Companies directly
or indirectly owns any outstanding shares of capital stock
securities, warrants, options, contracts, rights (preemptive or
otherwise), calls or commitments of any character or other equity
interests of entities other than corporations of any Person. Except
as set forth in Schedule 3.2(c) of the Sellers' Disclosure Schedule,
none of the Companies is a participant in any joint venture,
partnership, or similar arrangement. Except as set forth in Schedule
3.2(b) and Schedule 3.2(c) of the
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Sellers' Disclosure Schedule, none of the Companies has any
subsidiaries or controls any Person or Affiliate.
3.3 Authorization; Validity of Agreement. Each Seller and Parent has
the requisite corporate power and authority to execute, deliver and perform this
Agreement and the Strategic Alliance Agreement, as well as documents related
thereto (collectively, the "Transaction Documents" to which it is a party, and
to consummate the transactions contemplated hereby and thereby. Each of the
Transaction Documents has been duly executed and delivered by each Seller and
Parent, as applicable, and assuming the due execution and delivery hereof and
thereof by the Buyer is a valid and binding obligation of each Seller and
Parent, enforceable against each in accordance with its respective terms, except
that the enforceability hereof and thereof may be subject to bankruptcy,
insolvency, receivership, reorganization, moratorium or other similar laws in
effect relating to or affecting creditors' rights generally, and to general
principles of equity.
3.4 No Violations; Consents and Approvals.
(a) Except as set forth in Schedule 3.4(a) of the Sellers'
Disclosure Schedule, the execution, delivery and performance of each
of the Transaction Documents by each Seller and Parent, as
applicable, does not, and the consummation by each of them of the
transactions contemplated thereby will not: (i) violate any
provision of the articles of organization or certificate of
formation (or equivalent document), bylaws or other charter or
organizational documents of such Seller, Parent, any Company or any
Subsidiary; (ii) result in a violation or breach of, or constitute
(with due notice or lapse of time or both) a default under, or
result in the acceleration of any obligation of a Company or a
Subsidiary, or change in any right (except for loss of any
discretionary rights or options under any Leases) or obligation of a
Company or a Subsidiary or counterparty under any provision, or
result in the termination of, any of the Material Contracts, or by
which any of the material assets of any Company or any Subsidiary or
the Interests or the Subsidiary Interests may be affected or
secured; (iii) violate any Law applicable to such Seller, Parent,
any Company or any Subsidiary; or (iv) result in the creation of any
Encumbrance on any of the material assets of any Company or any
Subsidiary, except, in the case of clauses (ii), (iii) and (iv), as
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(b) Except as set forth in Schedule 3.4(b) of the Sellers'
Disclosure Schedule ("Seller Required Consents"), no consents of or
filings with any Governmental Entity are necessary, and no consents
or approvals of any Person under any Material Contract or any third
party are necessary, in connection with the execution and delivery
by each of Parent, the Sellers and the Companies, as applicable, of
this Agreement and any of the Transaction Documents or the
consummation by the Sellers, Parent or the Companies of the
transactions contemplated hereby and thereby, except where the
failure to obtain such Seller Required Consents would not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect. To the Sellers' Knowledge, there is no
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fact or circumstance relating to such Seller, Parent, any Company or
any Subsidiary that is reasonably likely to materially impede or
delay receipt of any consent of any Governmental Entity.
3.5 Financial Statements.
(a) The Sellers have previously made available to the Buyer
true and complete copies of the following (collectively, the
"Financial Statements"): (i) the consolidated balance sheet of each
of the Companies as of December 31, 2003, December 31, 2004,
December 31, 2005 and January 31, 2006 (each a "Latest Balance
Sheet" and collectively, the "Latest Balance Sheets") and (ii) the
consolidated statements of income and stockholders' equity of each
of the Companies for fiscal years 2003, 2004 and 2005.
(b) The Financial Statements have been prepared in accordance
with GAAP, as of the dates and for the periods involved, subject to
the absence of notes. The Financial Statements fairly present in all
material respects the financial position of the Companies, as of the
respective dates thereof, and the results of operations of the
Companies for the respective periods set forth therein.
3.6 Absence of Certain Changes.
(a) Since December 31, 2005, each of the Companies has
operated its Business and each of the Subsidiaries has operated its
business in the ordinary course and in a manner consistent with past
practice. The Sellers and each of the Companies have used
commercially reasonable efforts to prevent harm or damage to the
reputation of the Business or reduction of existing customer
accounts.
(b) Except as set forth on Schedule 3.6 of the Sellers'
Disclosure Schedule and except as specifically contemplated by this
Agreement or the other Transaction Documents, since December 31,
2005, neither Parent nor the Sellers, on behalf of or with respect
to any Company or any Subsidiary, nor any Company or any Subsidiary,
has, respectively:
(i) amended the Companies' or Subsidiaries'
organizational documents;
(ii) incurred any liabilities, except in the ordinary
course of business consistent with past practice;
(iii) paid any obligation or liability, or discharged or
satisfied any Encumbrance (other than any Encumbrance securing
a current liability), except in the ordinary course of
business;
(iv) mortgaged, pledged or subjected to any Encumbrance,
any material assets or properties of any Company (including,
and on a consolidated basis with, any Subsidiary), except in
the ordinary course of business;
8
(v) sold, transferred or leased any material assets of a
Company (including, and on a consolidated basis with, any
Subsidiary), except in the ordinary course of business and
except for that certain purchase and sale agreement with
respect to Plymouth Owned Property;
(vi) suffered any material physical damage, destruction
or loss (whether or not covered by insurance) that would
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, affecting each Company's
properties or Business or each Subsidiary's property or
business;
(vii) entered into any material transaction exceeding
Fifty Thousand U.S. dollars ($50,000);
(viii) encountered, to the Sellers' Knowledge, any labor
union organizing activities;
(ix) issued, delivered, sold or authorized any
Interests, Subsidiary Interests or any other security, or any
class of securities convertible into, or rights, warrants or
options to acquire, any such Interests, Subsidiary Interests
or other securities or entered into any Contract with respect
to any of the foregoing;
(x) made any material acquisition or disposition of any
assets or become involved in any other material transaction
(including, without any limitation, any merger or
consolidation with, purchase of all or a part of the assets
of, or acquisition of any business of any Person or division
thereof);
(xi) increased the compensation payable, or to become
payable, to any directors, consultants, officers or employees
of any Company or any Subsidiary, or made any bonus payment or
similar arrangement with any directors, consultants, officers
or employees or increased the scope or nature of any fringe
benefits provided for any directors, consultants, officers or
employees by more than One Hundred Thousand U.S. dollars
($100,000) in the aggregate for all such persons;
(xii) entered into, amended or modified any collective
bargaining Contract;
(xiii) entered into, amended or modified any Plan,
except where such entrance, amendment or modification would
not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(xiv) changed the method of accounting or any accounting
principle, method, estimate or practice, of any Company or any
Subsidiary;
9
(xv) made any capital investment in or any acquisition
of the securities or assets of any other Person;
(xvi) made any loan to any Person, except in the
ordinary course of business;
(xvii) canceled, compromised, waived or released any
material right or claim;
(xviii) entered into, amended or modified any
employment, consulting or similar Contract with any of the
Companies' or any of the Subsidiaries' directors, consultants,
officers or employees, except in the ordinary course of
business;
(xix) made or pledged to make any charitable
contribution or capital contribution, except in the ordinary
course of business;
(xx) accelerated, terminated, modified or canceled any
Material Contract to which a Company is a party or by which a
Company or its assets are bound, except where such
acceleration, termination, modification or cancellation would
not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; or
(xxi) agreed or committed, whether in writing or
otherwise, to do any of the foregoing.
(c) Except for any (i) change in industry conditions that does
not disproportionately affect any Company, (ii) change relating to
any transactions contemplated under any Transaction Document, or
(iii) matter referenced in this Agreement or any Schedule or Exhibit
hereto, since December 31, 2005 through the date of execution of
this Agreement, no event, condition or circumstance, has occurred
that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
3.7 Litigation. There is no Proceeding pending, or to the Sellers'
Knowledge, threatened against or that involves or affects the Companies, that
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. None of the Companies are, and neither Parent nor the
Sellers, with respect to any Company is, subject to any outstanding Orders that
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
3.8 Compliance with Law. The Companies have not violated any Order
or Law and are in material compliance with all applicable statutes, ordinances,
judgments, decrees, rules and regulations promulgated by any Governmental Entity
which apply to the Companies or to the Business. None of Parent, any Seller or
any Company has received written notice of a violation or alleged violation by
any Company of any Order or Law, except where noncompliance would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
10
3.9 Licenses and Permits. Except as set forth in Schedule 3.9, each
Company and each Subsidiary has every license, permit, certification,
qualification or franchise issued by any Governmental Entity (each, a "License")
required for it to conduct its business as presently conducted, except where the
failure to have such License would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. Except as set forth
in Schedule 3.9, all such Licenses are in full force and effect and none of
Parent, the Sellers, the Companies or the Subsidiaries have received written
notice of any pending cancellation or suspension of any thereof nor to the
Sellers' Knowledge is any cancellation or suspension thereof threatened.
3.10 Employee Benefit Plans; ERISA.
(a) Schedule 3.10(a) of the Sellers' Disclosure Schedule
contains a complete and accurate list of all Employee Benefit Plans
(excluding bonuses, incentive compensation arrangements,
commissions, pay practices, leave policies and ad hoc employment
practices and similar non-material arrangements, but only to the
extent such items are "payroll practices" as described in 29 C.F.R.
Section 2510.3-1(b) (the "Payroll Practices")) which the Sellers,
the Companies or any ERISA Affiliate sponsor, maintain or contribute
to for the benefit of any employees of the Companies (and their
beneficiaries), or to which any of the Companies may have any
obligation or any liability of any nature on or before the Closing
(individually a "Plan" or collectively the "Plans").
(b) There are no claims (except claims for benefits payable in
the normal operation of the Plans and proceedings with respect to
qualified domestic relations orders), suits or proceedings against
or involving any Plan or asserting any rights or claims to benefits
under any Plan that could give rise to any material liability to the
Companies or the Buyer. To the Sellers' Knowledge after due inquiry,
there are no investigations by any Governmental Entity involving any
Plan.
(c) There are currently no, and to the Sellers' Knowledge
after due inquiry there are no threatened, audits, investigations,
claims, suits, grievances or other proceedings, involving, directly
or indirectly, any Plan, or any rights or benefits thereunder
(except claims for benefits payable in the normal operation of the
Plan and proceedings with respect to qualified domestic relations
orders) that could give rise to any material liability to the
Companies or the Buyer.
(d) The Plans that are intended to be qualified under Section
401(a) of the Code have each received a currently effective
determination letter from the Internal Revenue Service to the effect
that each such Plan is qualified and that each trust related to each
such Plan is exempt from federal income taxes under Sections 401(a)
and 501(a), respectively, of the Code. No such determination letter
has been revoked and such revocation has not been threatened.
(e) No Plan is or has been (i) a "multiemployer plan" (as
defined in Sections 3(37) or 4001 of ERISA), (ii) a "multiple
employer plan" (within the
11
meaning of Section 413(c) of the Code), or (iii) a "multiple
employer welfare arrangement" (within the meaning of Section 3(40)
of ERISA). No "reportable event" within the meaning of Section 4043
of ERISA for which reporting is not waived has occurred with respect
to any Plan that would in any manner give rise to liability or
obligation to the Companies or the Buyer. None of the Companies, the
Sellers or any ERISA Affiliate has ceased operations at any facility
which has subjected or could subject the Companies or the Buyer to
any liability or obligation under Sections 4062(e), 4063 or 4064 of
ERISA. The transactions contemplated by this Agreement are not
transactions to evade or avoid liability (as described in Sections
4069(a) or 4212(c) of ERISA). None of the Companies sponsors or
maintains (other than by virtue of contributions) any Employee
Benefit Plan which is subject to Section 302 or Title IV of ERISA or
Section 412 of the Code. There has been no waiver (or application
for a waiver) of the minimum funding standards imposed by Section
412 of the Code with respect to any Plan, and there are no facts or
circumstances that would materially change the funded status of any
such Plan. None of the Sellers, or any Company or any ERISA
Affiliate has any liability to the Pension Benefit Guaranty
Corporation (the "PBGC") (except for payment of premiums). None of
the Companies, or the assets thereof, is subject to any lien under
ERISA or the Code.
(f) No act or omission has occurred and to the Sellers'
Knowledge after due inquiry, no condition exists with respect to any
Plan that would subject either the Buyer or the Companies to any
material fine, penalty or Taxes.
(g) None of the Companies, the Sellers or any ERISA Affiliate,
or any plan fiduciary of any Plan has engaged in any transaction in
violation of Section 406(a) or (b) of ERISA or any "prohibited
transaction" (as defined in Section 4975(c)(1) of the Code), which
could subject the Companies or the Buyer to any material Taxes,
penalties or other liabilities resulting from such prohibited
transaction.
(h) "Severance Plans" shall mean (i) each agreement with any
employee or director of the Companies (A) the benefits of which are
contingent, or the terms of which are altered, upon the occurrence
of a transaction involving the Companies, the Sellers, Parent, or an
ERISA Affiliate of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment
or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such employee
or director; and (ii) each agreement, plan or arrangement under
which any person may receive payments from the Companies, the
Sellers, Parent, or any ERISA Affiliate that has subjected or could
subject the Buyer or Companies to the Taxes imposed by Section 4999
of the Code or included in the determination of such person's
parachute payment under Section 280G of the Code. No payments under
any Severance Plans or other agreement will be parachute payments
under Section 280G of the Code that are non-deductible to the
Companies or the Buyer or subject to Taxes under Section 4999 of the
Code.
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(i) [RESERVED]
(j) Except as otherwise specified in this Section 3.10(j)
hereof, on and after the Closing Date, neither Companies nor the
Buyer will have any liability or be under any obligation with
respect to any Employee Benefit Plan (excluding Payroll Practices
and Severance Plans covering employees of the Companies, all of
which are set forth on Schedule 3.10(j) hereof).
(k) The transactions contemplated herein will not result in
the acceleration of accrual, vesting, funding or payment of any
contribution or benefit under any Employee Benefit Plan which could
subject the Companies or the Buyer to any material liability or
obligation.
(l) The Companies do not now, nor have they ever, had the
obligation to maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan. "International
Employee Plan" shall mean any Employee Benefit Plan (determined
without regard to whether such plan is subject to ERISA) that has
been adopted or maintained by the Companies, the Sellers, Parent, or
any ERISA Affiliate, whether formally or informally, or with respect
to which the Companies, the Sellers, Parent or any ERISA Affiliate
will or may have any liability, for the benefit of any employees who
perform services outside the United States.
(m) With respect to each Plan, Sellers have provided the Buyer
with true, complete and correct copies of (to the extent
applicable): (i) summary plan descriptions and (ii) the most recent
determination letter, if any, received from the Internal Revenue
Service.
(n) Each Plan and Payroll Practice that is a "nonqualified
deferred compensation plan" (as defined in Section 409A(d)(1) of the
Code) has been operating since January 1, 2005 in good faith
compliance with Section 409A of the Code, IRS Notice 2005-1 and
Proposed Regulation Sections 1.409A-1 through 1.409A-6, inclusive.
To the Sellers' Knowledge, there are no facts based upon which any
employee or former employee of any of the Companies could be
assessed the additional tax described in Section 409A(a)(1)(b) of
the Code with respect to any payment that has been, or should have
been, received from any Company or any Affiliate thereof.
3.11 Real Property.
(a) As used in this Agreement, the term "Real Property" shall
mean all interests in real property owned and leased by any of the
Companies as set forth in Schedules 3.11(a) and 3.11(b) of the
Sellers' Disclosure Schedule. Except as set forth in Schedule
3.11(a) of the Sellers' Disclosure Schedule, the Real Property
constitutes all interests in real property used in the conduct of
the business of the Companies as conducted on the date hereof. As of
the date of this Agreement, Xxxxxxxxxx owns fee title to the Real
Property located at 00 Xxxx Xxxx
00
Xxxx, #0, Xxxxxxxx, Xxxxxxxxxxxxx (xxx "Plymouth Owned Property");
000 Xxxx Xxxxxx Xxxxxx, #0, Xxxx Xxxxxxxxxxx, Xxxxxxxxxxxxx (the
"Xxxx 0, Xxxx Xxxxxxxxxxx Owned Property"); and 000 Xxxx Xxxxxx
Xxxxxx, #0, Xxxx Xxxxxxxxxxx, Xxxxxxxxxxxxx (the "Xxxx 0, Xxxx
Xxxxxxxxxxx Owned Property"). The Plymouth Owned Property, the Xxxx
0, Xxxx Xxxxxxxxxxx Owned Property and the Xxxx 0, Xxxx Xxxxxxxxxxx
Owned Property may be referred to in this Agreement collectively as
the "Owned Real Property."
(b) The Companies have valid leasehold interests in the Real
Property leased by it (the "Leased Real Property"), free and clear
of all Encumbrances attributable to the Companies or any activities
of the Companies, but expressly subject to all matters of record and
other matters which affect the fee title interest of any Leased Real
Property and are not attributable to the Companies, and those which
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Schedule 3.11(b) of the
Sellers' Disclosure Schedule contains a true, correct and complete
list of all Leases under which the Companies use or occupy any
Leased Real Property. The Companies have heretofore delivered to the
Buyer true and correct copies of all Leases.
(i) All Leased Real Property is leased by the applicable
Company under valid and existing Leases (as the same may have
been amended or modified) that are in full force and effect;
(ii) none of the Companies have received written notice of any
material breach or default, or cancellation or termination
thereunder; and (iii) to the Sellers' Knowledge, there is no
condition, event or circumstance which with notice or lapse of
time, or both, would constitute a material breach or default
under such Leases.
(ii) To the Sellers' Knowledge, there are no matters
under any of the Real Property Leases or affecting the Leased
Real Property which could reasonably be expected to materially
curtail or materially interfere with the use of any of the
Leased Real Property for the purpose of operating the business
of the Companies.
(iii) None of the Sellers and, to Sellers' Knowledge,
none of the Companies has received written notice of any
charges or violations filed, served, made upon or against the
Companies or, to the Sellers' Knowledge, threatened against or
relating to the Leased Real Property or any of the Companies'
operations conducted thereon as a result of any violation or
alleged violation of any applicable ordinances, requirements,
regulations, zoning, subdivision and building laws or
restrictive covenants (including, without limitation, those
relating to health, safety or environmental protection) caused
by the Companies or the Sellers.
(iv) The Companies have not entered into any assignment
of any Lease, sublease of all or any portion of any Leased
Real Property and
14
no Person has any right to occupy the Leased Real Property
other than the Companies, except for subleases and the
subtenants identified on Schedule 3.11(b) of the Sellers'
Disclosure Schedule.
(v) None of the Companies or the Sellers have received
written notice from any insurance company or Board of Fire
Underwriters (or organization exercising functions similar
thereto) or from any mortgagee requesting the performance of
any work or alteration in respect of any of the Leased Real
Property.
3.12 Intellectual Property; Computer Software.
(a) Schedule 3.12(a) of the Sellers' Disclosure Schedule lists
all Patents, applications for Patents, registered Copyrights
applications for registered Copyrights, registered Marks and
applications for registered Marks, in each such case which are owned
by the Companies. Except as set forth in Schedule 3.12(a) of the
Sellers' Disclosure Schedule:
(i) the Companies own the Intellectual Property Assets
listed on Schedule 3.12(a) of the Sellers' Disclosure Schedule
free and clear of Encumbrances;
(ii) there are no pending or, to the Sellers' Knowledge,
threatened claims by any Person alleging that the operation of
the Business by the Companies infringes the rights of others
under Intellectual Property Assets ("Third Party Rights");
(iii) to the Sellers' Knowledge, neither the
Intellectual Property Assets nor the operation of the Business
by the Companies infringes on any Third Party Right; and
(iv) all Patents, Marks and Copyrights owned by the
Companies which are issued by, or registered or are the
subject of applications filed with, as applicable, the U.S.
Patent and Trademark Office, the U.S. Copyright Office or
similar office or agency anywhere in the world have been duly
maintained (including the payment of maintenance fees) and are
not expired, cancelled or abandoned, except for such
issuances, registrations or applications that the Companies
have permitted to expire or have cancelled or abandoned in
their reasonable business judgment.
(b) The Companies have such rights of ownership (free and
clear of all Encumbrances) of, or such rights by license or other
agreement to use, all computer software programs (including, without
limitation, application software) that are used by the Companies and
that are material to the conduct of the Business as currently
conducted.
(c) "Intellectual Property Assets" means:
15
(i) patents and patent applications (collectively,
"Patents");
(ii) trade names, logos, slogans, Internet domain names,
registered and unregistered trademarks and service marks and
related registrations and applications for registration
(collectively, "Marks");
(iii) copyrights in both published and unpublished
works, including without limitation all compilations,
databases and computer programs, manuals and other
documentation and all copyright registrations and applications
(collectively, "Copyrights"); and
(iv) know-how and trade-secrets.
3.13 Tangible Personal Property.
(a) Schedule 3.13 of the Sellers' Disclosure Schedule is a
complete and accurate list of all material tangible personal
property used by the Companies in their respective Business which
the Sellers can identify based on their books and records and
limited review, as of December 31, 2005 (the "Personal Property").
The Personal Property is in good operating condition and in a good
state of maintenance and repair, ordinary wear and tear excepted,
and is adequate for use in the conduct of the Business as presently
conducted.
(b) Each Company has good title, free and clear of all
Encumbrances, to all of the material assets, personal property,
tangible or intangible, that are reflected as owned by such Company
on its Financial Statements, except where the failure to do so would
not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
3.14 Material Contracts.
(a) Schedule 3.14 of the Sellers' Disclosure Schedule sets
forth a true, complete and correct list of every contract that any
Company is a party to or is bound as of the date hereof that: (i)
provides for aggregate future payments by any Company or to any
Company of more than Fifty Thousand U.S. dollars ($50,000); (ii) is
a collective bargaining or similar Contract; (iii) guarantees or
indemnifies or otherwise causes any Company to be liable or
otherwise responsible for the obligations or liabilities of another
or provides for a charitable contribution by any Company; (iv)
involves an agreement with any bank, finance company or similar
organization; (v) restricts any Company from engaging in any
business or activity anywhere in the world; (vi) is a lease of real
property; (vii) was entered into by such Company, or is an
obligation of such Company, and is with an officer, director,
employee or Affiliate of such Company; (viii) is an employment,
consulting, independent sales representative, independent contractor
or similar Contract; (ix) is a brokerage agreement; or (x) is a
Contract relating to any Additional Compensation Arrangement (the
foregoing, collectively, "Material Contracts"). The Sellers have
heretofore made available true, complete and correct copies of all
Material Contracts to the Buyer.
16
(b) Each of the Material Contracts is valid and binding and is
in full force and effect and there is not now and there has not been
claimed or alleged, whether to the Sellers' Knowledge, or as a
result of Parent, the Sellers or any Company receiving notice, that
there is no uncured or unwaived default or event of default, or
event that with notice or lapse of time or both would constitute a
default or event of default, on the part of any Company or on the
part of any other party thereto, except where such default or event
of default would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
3.15 Taxes. Except as set forth in Schedule 3.15 of the Sellers'
Disclosure Schedule:
(a) Each Company and each Subsidiary has timely filed all Tax
Returns (taking into account any extensions of time to file) that it
was required to file on or before the Closing Date and all such Tax
Returns are true, correct and complete, and each Company and each
Subsidiary has paid all Taxes due (whether or not shown on a Tax
Return), except where a failure with respect to any of the foregoing
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(b) There are no Liens for Taxes upon the Interests or any of
the assets of any Company or of any Subsidiary (except for any
statutory lien for any Tax not yet due).
(c) No Company and no Subsidiary is a party to any Tax
allocation, indemnification or sharing arrangement that will remain
in effect with respect to any of the Companies or any of the
Subsidiaries, as applicable, after the Closing, or for which it will
have any obligations after the Closing Date.
(d) None of the Companies and none of the Subsidiaries has
"tax-exempt bond-financed property" or "tax-exempt use property,"
within the meaning of Code Section 168(h).
(e) No asset of any of the Companies or of any of the
Subsidiaries is required to be treated as being owned by any other
Person pursuant to the "safe harbor" leasing provisions of Code
Section 168(f)(8), as in effect prior to the repeal of those "safe
harbor" leasing provisions.
(f) No Company and no Subsidiary is or has ever been a direct
participant in, in its own name, or benefited on a Tax Return filed
in its own name, from any reportable transaction within the meaning
of Treasury Regulation Section 1.6011-4(b)(1).
(g) Each Company is and always was a limited liability company
that is (and always was) either wholly-owned and treated as a
disregarded entity for all federal and, state and local tax
purposes, or treated as a partnership for all federal and state and
local income tax purposes. No Company is subject to an
17
entity level tax for federal and state and local purposes. No
Company is subject to any Tax Return filing obligations.
(h) The Sellers have made available to the Buyer all material
Tax Returns filed by any Company or any Subsidiary in its own name
since January 1, 2003 and all audit reports, closing agreements,
letter rulings, or technical advice memoranda solely relating to one
or more of the Companies or one or more of the Subsidiaries, as
applicable, or with respect to which any Company or Subsidiary is a
signatory or an obligor in its own name.
3.16 Environmental Matters.
(a) Except as set forth in Schedule 3.16(a) of the Sellers'
Disclosure Schedule, the Companies are in material compliance with
all Environmental Laws and Environmental Permits;
(b) To the Sellers' Knowledge, there has been no Release of a
Hazardous Substance by the Companies at, from, in, to, on or under
any Site that is reasonably likely to give rise to an Environmental
Claim against the Companies;
(c) The Companies have obtained and hold all material
Environmental Permits required in connection with the Business, and
those Environmental Permits will remain in full force and effect
after the consummation of the transactions contemplated hereby;
(d) There is no pending or, to the Sellers' Knowledge,
threatened Environmental Claims against the Companies;
(e) To the Sellers' Knowledge, none of the Companies, any
entity previously owned by the Companies, or any predecessor of the
Companies, has transported or arranged for the treatment, storage,
handling, disposal, or transportation of any Hazardous Substance to
or at any off-Site location in a manner that is reasonably likely to
result in an Environmental Claim against the Companies; and
(f) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses (which have been reduced to
writing) that are in the possession of the Companies with respect to
any Site or any transportation, handling or disposal of any
Hazardous Substance that has not been made available to the Buyer
prior to execution of this Agreement.
3.17 Affiliated Party Transactions.
(a) Except for any obligations arising under (i) any
Transaction Document, (ii) any intercompany transactions (other
than, to the Sellers' Knowledge, an intercompany transaction that
would be material to the Latest Balance Sheet of each Company) in
the ordinary course of business, (iii) any
18
Material Contract or (iv) any amounts that are reflected on or
reserved for on the Estimated Closing Date Balance Sheets, none of
the Sellers nor any of their Affiliates (other than the Companies)
has, directly or indirectly, any obligation due from or cause of
action or claim against the Companies.
(b) None of the Companies has a loan or advance in excess of
One Thousand U.S. dollars ($1,000.00) outstanding to any manager,
officer, director or any "associate" (as such term is defined in
Rule 405 of the Rules and Regulations under the Securities Act) of
any of the Companies, except for advances in the ordinary course of
business. To the Sellers' Knowledge, no manager, officer or director
or any "associate" (as such term is defined in Rule 405 of the Rules
and Regulations under the Securities Act) of any of the Companies
has, either directly or indirectly:
(i) an equity interest of five percent (5%) or more in
any Person that purchases from or sells or furnishes any goods
to any of the Companies or otherwise does business with any of
the Companies; or
(ii) a beneficial interest in any Material Contract,
commitment or agreement to which any of the Companies are a
party or under which any of the Companies are obligated or
bound or to which the property of any of the Companies may be
subject, other than Material Contracts, commitments or
agreements between any of the Companies and such Persons in
their capacities as managers, officers or directors of any of
the Companies; provided that such representation and warranty
shall not apply to the ownership, as a passive investment, by
any such manager, officer, director, or "associate" (as
defined above) of less than one percent (1%) of a class of
securities listed for trading on a national securities
exchange or publicly traded in the over-the-counter market.
3.18 No Undisclosed Liabilities.
(a) As of the date hereof, none of the Companies and none of
the Subsidiaries has any liability (whether accrued, contingent,
known, or otherwise) other than those that (i) were set forth or
reserved against on the Latest Balance Sheet of any such Company (or
would not be required to be set forth under the standard in Section
3.5(b)), (ii) are obligations under executory portions of Material
Contracts incurred in the ordinary course of business of any of the
Companies or any of the Subsidiaries and not required to be
reflected in the Latest Balance Sheet of any such Company, (iii)
were incurred after January 31, 2006 and either (A) are in the
ordinary course of business, or (B) would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect, or (iv) were agreed to by the parties in writing or
otherwise contemplated by the Transaction Documents.
19
(b) The accounts payable of each Company that are set forth on
its Latest Balance Sheet are the results of bona fide transactions
in the ordinary course of business.
3.19 Absence of Sensitive Payments. To the Sellers' Knowledge, no
Company or any manager, officer, director or any "associate" (as such term is
defined in Rule 405 of the Rules and Regulations under the Securities Act) of
any of the Companies:
(a) has made or has agreed to make any contribution, payment
or gift or to provide any other compensation or other benefit to any
Governmental Entity or any Person (including, but not limited to,
any employee or agent) associated or affiliated with or representing
a Governmental Entity, where the contribution, payment, compensation
or other benefit or the purpose of the contribution, payment,
compensation or other benefit was or is illegal under the applicable
Law or other rules of any Governmental Entity; or
(b) has made or agreed to make any contribution or
expenditure, or has reimbursed any political gift or contribution or
expenditure made by any other Person to candidates for public
office, whether federal, state or local (foreign or domestic) where
such contributions were or would be a violation of applicable Law.
3.20 No Brokers or Finder's Fees. No agent, broker, investment
banker, Person or firm acting on behalf of or under authority of any Seller,
Parent, or any Company, other than Xxxxxx Consulting, is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly in connection with any of the transactions contemplated by this
Agreement. Any compensation or broker's or finder's fee due to Xxxxxx Consulting
shall be paid in its entirety by the Sellers and the Sellers agree that the
Buyer shall have no obligation and has made no commitment to pay such
compensation or fee.
3.21 Receivables. All of the Accounts Receivable of the Companies
have arisen from bona fide transactions in the ordinary course of the Business
consistent with past practice and are not subject to any credits or allowances,
other than allowances for doubtful accounts (which allowances have been made in
accordance with the ordinary course of business and consistent with past
practices).
3.22 Insurance. All insurance policies of any kind covering the
Companies (a) are with insurance companies that are, to the Sellers' Knowledge,
financially sound and reputable, (b) are in full force and effect, sufficient
for compliance with all material requirements of Law and of all applicable
Material Contracts, and (c) are valid, outstanding and enforceable policies,
except in each case as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. From their acquisition or formation
by the Sellers, as applicable, until the date hereof, the Companies have not
been denied any insurance coverage which each has requested. The Sellers have
made available to the Buyer true, correct and complete copies of all insurance
policies.
20
3.23 Delivery of Documents; Corporate Records. The Sellers have
heretofore made available to the Buyer copies of the articles of organization or
certificate of formation (or equivalent document), bylaws, operating agreements
or other charter or organizational documents and the minute and record books of
the Companies which are true, correct and complete in all material respects.
3.24 Bank Accounts. Schedule 3.24 of the Sellers' Disclosure
Schedule sets forth the names and locations of all banks, depositories and other
financial institutions in which the Companies have an account or safe deposit
box and the names of all Persons authorized to draw thereon or to have access
thereto.
3.25 Labor and Employment Matters.
(a) (i) The Companies are not party to nor bound by any
collective bargaining agreement or similar agreement with any labor
organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of the
Companies, (ii) none of the employees of the Companies are
represented by any labor organization and there are no
organizational campaigns, demands, petitions or proceedings pending
or, to the Sellers' Knowledge, threatened by any labor organization
or group of employees seeking recognition or certification as
collective bargaining representative of any group of employees of
the Companies, (iii) none of the employees of the Companies is, or
within the five years preceding this Agreement has been, represented
by any labor organization in connection with their employment by the
Companies and, to the Sellers' Knowledge, there are no, nor within
the five years preceding this Agreement have there been any,
organizational campaigns, demands, petitions or proceedings pending
or, to the Sellers' Knowledge, has any Company been threatened by
any labor organization or group of employees seeking recognition or
certification as collective bargaining representative of group of
employees of the Companies, (iv) to the Sellers' Knowledge, there
are no current, nor within the five years preceding this Agreement
have there been any, union claims to represent the employees of the
Companies, and (v), there are no current, nor within the five years
preceding this Agreement have there been any, strikes, slowdowns,
work stoppages, lockouts pending or, to the Sellers' Knowledge,
threatened against or affecting any Company.
(b) The Companies are, and have at all times during at least
the last five (5) years, been in material compliance with all
applicable Law respecting immigration, labor and employment,
employment policies and practices, withholdings and payroll taxes,
workers' compensation insurance, and the terms and conditions of
employment, including, without limitation, employment standards,
equal employment opportunity, non-discrimination, non-harassment,
non-retaliation, family and medical leave, wages, hours of work and
occupational health and safety, and are not engaged in and, within
the five (5) years preceding this Agreement, have not committed any
unfair labor practices as defined in the National Labor Relations
Act or any other applicable employment-related Law, except for any
non-compliance that would not reasonably be expected to have,
21
individually or in the aggregate, a Material Adverse Effect. There
are no employment contracts, severance agreements or retention
agreements, oral or written, with any employees of the Companies and
no written personnel policies, rules or procedures applicable to
employees of the Companies, other than those set forth in Schedule
3.25 of the Sellers' Disclosure Schedule, true and correct copies of
which have heretofore been made available to the Buyer. Except as
set forth in Schedule 3.25 of the Sellers' Disclosure Schedule,
there are (i) no complaints, claims, controversies, charges,
lawsuits or other proceedings related to the Companies pending, or,
to the Sellers' Knowledge, threatened, in any court or with any
agency responsible for the enforcement of federal, state, local or
foreign labor or employment laws regarding breach of any express or
implied contract of employment, any law or regulation governing
employment or the termination thereof or other illegal,
discriminatory, harassing, retaliatory, wrongful or tortious conduct
in connection with the employment relationship, the terms and
conditions of employment, wage and hour laws, disability laws,
leaves of absence laws or applications for employment with the
Companies, and (ii) no federal, state, local or foreign agency
responsible for the enforcement of immigration, labor, equal
employment opportunity, family and medical leave, wages, hours of
work, occupational health and safety or any other employment law has
given oral or written notice to any of the Companies that it intends
to conduct or is conducting an investigation with respect to or
relating to the Companies.
(c) Since 2004, the Companies have not effectuated (i) a
"plant closing" as defined in the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN") affecting any site of employment
or one or more facilities or operating units within any site of
employment or facility of the Companies, or (ii) a "mass layoff" as
defined in WARN affecting any site of employment or facility of the
Companies; nor have the Companies been affected by, or engaged in,
any transaction or sale of assets or engaged in a mass layoff or
relocation or termination sufficient in number to trigger
application of any similar state or local law. Except as set forth
in Schedule 3.25 of the Sellers' Disclosure Schedule, none of the
employees of the Companies has suffered an "employment loss" as
defined in WARN within the last six (6) months preceding the date
hereof.
3.26 Managers and Officers. Schedule 3.26 of the Sellers' Disclosure
Schedule sets forth a true and complete list of all managers and officers of the
Companies as of the date hereof.
3.27 Accredited Investors. Each of the Sellers is an "accredited
investor" within the meaning of Rule 501 of Regulation D under the Securities
Act.
3.28 Redistribution of Earn-Out Shares. None of the HIL Common Stock
to be issued to the Sellers as part of the Earn-out Payments in accordance with
this Agreement (the "Earn-out Shares") is being acquired by the Sellers with a
view to, or in connection with, any resale or distribution in violation of
applicable U.S. federal or state securities laws. Each of the Sellers is aware
that the Earn-out Shares cannot be resold or otherwise transferred unless
22
registered under the Securities Act and applicable state securities laws or
unless an exemption from such registration is available.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Sellers that each of the following statements is true and
correct:
4.1 Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware. The Buyer has the requisite corporate power and authority to carry on
its business as now being conducted. The Buyer is duly qualified or licensed to
do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed or
to be in good standing would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
4.2 Authorization; Validity of Agreement. The Buyer has the
requisite corporate power and authority to execute, deliver and perform each of
the Transaction Documents to which it is a party, and to consummate the
transactions contemplated hereby and thereby. Each of the Transaction Documents
to which it is a party has been duly executed and delivered by the Buyer, and
assuming the due execution and delivery hereof by the Sellers and Parent is a
valid and binding obligation of the Buyer, enforceable against it in accordance
with its respective terms, except that the enforceability hereof and thereof may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws in effect relating to or affecting creditors' rights generally, and
general principles of equity.
4.3 No Violations; Consents and Approvals.
(a) Except as set forth in Schedule 4.3(a) of the Buyer's
Disclosure Schedule, the execution, delivery and performance by the
Buyer of each of the Transaction Documents to which it is a party
does not, and the consummation by it of the transactions
contemplated thereby will not: (i) violate any provision of the
articles of incorporation (or equivalent document), bylaws or other
charter or organizational documents of the Buyer, (ii) result in a
violation or breach of, or constitute (with due notice or lapse of
time or both) a default under, or result in the acceleration of any
obligation of the Buyer, or change in any right or obligation of the
Buyer or a counterparty under any of the terms, conditions or
provisions of, or result in the termination of any material contract
to which the Buyer is a party or by which the Buyer or any of its
respective properties or assets may be bound or otherwise subject
to, or (iii) violate any Law applicable to the Buyer, except, in the
case of clauses (ii) and (iii), as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect.
(b) Except as set forth in Schedule 4.3(b) of the Buyer's
Disclosure Schedule ("Buyer Required Consents"), no consents of or
filings with any Governmental Entity are necessary, and no consents
or approvals of any third parties are necessary, in connection with
the execution and delivery by the Buyer of any of the Transaction
Documents to which it is a party or the consummation
23
by the Buyer of the transactions contemplated hereby and thereby,
except where the failure to obtain such Buyer Required Consents
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the Buyer's Knowledge,
there is no fact or circumstance relating to Buyer that is
reasonably likely to materially impede or delay receipt of any
consent of any Governmental Entity.
4.4 Litigation. Except as set forth in Schedule 4.4 of the Buyer's
Disclosure Schedule, there is no Proceeding pending, or to the Buyer's
Knowledge, threatened against or that involves or affects the Buyer, that would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Buyer is not subject to any outstanding Orders that would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
4.5 Financing. The Buyer has and will have at the Closing sufficient
funds required to pay the Purchase Price and to consummate the transactions
contemplated by this Agreement and the other Transaction Documents. The Buyer
acknowledges and agrees that the Buyer's performance of its obligations under
this Agreement and the Transaction Documents is not in any way contingent upon
the availability of financing to the Buyer.
4.6 No Broker's or Finder's Fees. No agent, broker, investment
banker, Person or firm acting on behalf of or under authority of the Buyer, is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly in connection with any of the transactions
contemplated by this Agreement.
4.7 Earn-out Shares. The Earn-out Shares have been, or prior to the
Closing will be, duly and validly reserved for issuance, and when issued in
accordance with this Agreement, will be validly issued, fully paid, non
assessable and free of any preemptive rights.
4.8 SEC Filings. The Buyer has supplied, or otherwise made available
to, the Sellers and Parent copies of the following: (a) HIL's Annual Report on
Form 10-K for the year ended December 31, 2004, as filed with the SEC (the "HIL
10-K"), (b) HIL's Quarterly Reports on Form 10-Q for the quarters ended March
31, 2005, June 30, 2005, and September 30, 2005, as filed with the SEC (the "HIL
10-Qs"), (c) all proxy statements relating to HIL's meetings of its stockholders
held after December 31, 2004 and through the date hereof, and (d) all other
documents filed by HIL with the SEC under the Exchange Act or the Securities Act
since December 31, 2004 ((a) through (d) collectively, the "HIL SEC Reports")
through the date hereof. As of their respective dates, such documents complied
in all material respects with applicable SEC requirements and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.9 Financial Statements. The financial statements included in or
incorporated into the HIL SEC Reports, together with the related schedules and
notes, present fairly, in all material respects, the financial position of HIL
and its consolidated subsidiaries at the dates indicated and the statement of
operations, stockholders' equity and cash flows of HIL and its consolidated
subsidiaries for the periods specified; and said financial statements have been
24
prepared in all material respects in conformity with GAAP applied on a
consistent basis throughout the periods involved, except as stated therein.
4.10 Investment Company Act. HIL is not an "investment company" or
an entity "controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended.
4.11 Similar Offerings. HIL has not, directly or through any agent,
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any "security" (as defined in the Securities Act) which as a result
of the doctrine of "integration" referred to in Rule 502 under the Securities
Act has or will render invalid, for the purpose of the issuance of the Earn-out
Shares to the Sellers in accordance with this Agreement, the exemption from the
registration requirements of the Securities Act provided by Section 4(2) thereof
or otherwise.
4.12 No General Solicitation. None of the Buyer or any of its
affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act),
or any person acting on its or their behalf, has engaged or will engage, in
connection with the issuance of the Earn-out Shares to the Sellers in accordance
with this Agreement, in any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act.
4.13 No Registration Required. Assuming the representations and
warranties of the Sellers are true and correct, the issuance of the Earn-out
Shares to the Sellers in accordance with this Agreement is exempt from the
registration requirements of the Securities Act. The Buyer has not taken any
actions which would require the registration of the issuance of the Earn-out
Shares to the Sellers in accordance with this Agreement pursuant to the
Securities Act or any state securities or "Blue Sky" law.
5. OTHER AGREEMENTS OF THE PARTIES.
5.1 Noncompete; Non Solicitation of Employees; etc.
(a) Parent and the Sellers covenant, acknowledge and agree
that, for a period beginning on the Closing Date and ending on the
fourth (4th) anniversary of the Closing Date (the "Noncompete
Period"), neither Parent nor any of its subsidiaries shall (i)
solicit or engage in any Prohibited Business with any Person who (A)
was a customer of the Companies as of the Closing Date and (B) is
principally located or resides in the Restricted Market or (ii)
engage in any Prohibited Business in the Restricted Market, other
than (in the case of either (i) or (ii)) (A) pursuant to an
agreement with the Buyer or any of its Affiliates, or (B) as
directed by any direct or indirect parent company or any
nonsubsidiary Affiliate of Parent.
(b) Notwithstanding anything to the contrary in this Article
5, if at any time during the Noncompete Period, Parent or any of its
subsidiaries should acquire direct or indirect control of a majority
of the capital stock or other equity interests or assets of another
Person (through a purchase, merger, consolidation or otherwise), the
provisions of this Article 5 shall not preclude Parent from
25
continuing, through such acquired Person, to engage in activities
that would otherwise breach this Article 5 so long as Parent divests
or otherwise discontinues such activities no later than twelve (12)
months from the closing of such acquisition as contemplated by
Section 5.1(c).
(c) If Parent or any of its subsidiaries (i) is required,
pursuant to Section 5.1(b), to divest the activities of a business
which breach this Article 5, or (ii) in their sole discretion,
decide to divest any other insurance agency (regardless of such
agency's location in the United States) that engages to a material
extent in the same business as the Business, then Parent shall
notify the Buyer of such election to divest and for a period of
forty-five (45) business days following the Buyer's receipt of such
notice (the "Negotiation Period"), Parent shall, if the Buyer
desires, negotiate exclusively with the Buyer in good faith in an
attempt to reach agreement upon the terms and conditions of such
sale to the Buyer. If, at the end of the Negotiation Period, the
parties have not reached an agreement with respect to such sale to
the Buyer, the Sellers' obligations under this Section 5.1(c) to
negotiate exclusively with the Buyer shall terminate and such Seller
may elect to proceed with a third party suitor on whatever terms and
conditions as it determines in its sole discretion.
(d) During the Noncompete Period, Parent and the Sellers
covenant and agree that neither Parent nor any of its subsidiaries
shall, without the prior written consent of the Buyer, solicit any
employee or producer employed by any Company on the date hereof or
on the Closing Date, or at any time during the one (1) year period
prior to the date hereof, to terminate his or her employment with a
Company, except that neither Parent nor any of its subsidiaries
shall be precluded from soliciting any such employee or producer who
responds to any public advertisement placed by Parent or any of its
subsidiaries.
(e) Notwithstanding anything to the contrary in this Section
5.1:
(i) nothing herein shall restrict any business
operations directed or owned by any direct or indirect parent
company or any nonsubsidiary Affiliate of Parent;
(ii) nothing herein shall restrict any activities
undertaken for the purpose of operating the Excluded Business;
(iii) a Competitive Acquirer may engage in any activity
in the Restricted Market;
(iv) nothing herein shall in any way restrict or limit
the rights of Parent or its Affiliates from owning,
beneficially or as record owner, up to five percent (5%) of
any class of the outstanding securities of a publicly-held
corporation; or
26
(v) nothing herein shall restrict the ability of Parent
and its subsidiaries to refer business to insurance agents and
be compensated for such referrals, subject to the Strategic
Alliance Agreement.
(f) During the Noncompete Period, if any Affiliate of
Parent successfully obtains any Company Client, that was a
Company Client at any time during the one (1) year period
prior to the Closing, Parent shall pay to the Buyer, no later
than seven (7) business days following the end of the Parent's
or its Affiliate's fiscal year, an amount equal to the product
of (i) 2.5 and (ii) the average annual commission revenue
derived from such Company Client.
(g) During the Noncompete Period, the Buyer may not solicit
any of the employees of the Excluded Business or any of the
employees of Parent associated with the transactions set forth in
the Transaction Documents, except that the Buyer shall not be
precluded from soliciting any such employee or producer who responds
to any public advertisement placed by any of the Buyer or its
Affiliates.
(h) During the Noncompete Period, neither Parent nor the
Sellers may solicit any of the employees of the Buyer or its
Affiliates associated with the transactions set forth in the
Transaction Documents, except that Parent and the Sellers shall not
be precluded from soliciting any such employee or producer who
responds to any public advertisement placed by any of Parent, the
Sellers, or their Affiliates.
(i) The parties acknowledge and agree that a breach or
violation of any of the provisions of this Section 5.1 will cause
irreparable harm and damage and that, in the event of such breach,
the non-breaching party shall have, in addition to any and all
remedies at law, the right to an injunction, specific performance or
other equitable relief to prevent the breach or violation of the
obligations of the breaching party hereunder without the necessity
of proving such irreparable harm or damage or the inadequacy of
remedies at law and without the necessity of posting any bond.
5.2 Employee Wages Tax Reporting. The Buyer, the Sellers, Parent and
each of the Companies agree to utilize, or cause their respective Affiliates to
utilize, the standard procedure set forth in Revenue Procedure 2004-53, 2004-34
I.R.B. 320 (Aug. 18, 2004) for wage reporting with respect to employees of each
Company.
5.3 Change of Name.
(a) Immediately upon the Closing Date, except as otherwise
expressly agreed upon by the Sellers and Parent, the Buyer and the
Companies shall immediately cease using any trademarks or service
marks of any of the Companies which include the word "CITIZENS" or
any logo or design used by Parent or any of its subsidiaries, or any
derivative thereof or anything confusingly similar thereto. As
promptly as practicable after the Closing, the Buyer shall
27
cause the name of Citizens Clair to be changed to remove the word
"Citizens." Promptly after the Closing Date, except as otherwise
expressly agreed upon by the Buyer, the Sellers and Parent shall
immediately cease using any trademarks or service marks which
include the word "Clair," "Xxxxxxxxxx," or "Xxxxxx & Lord" or any
derivative thereof or anything confusingly similar thereto in the
insurance agency business.
(b) At Closing, Parent shall assign and transfer all right,
title and interest to the trademark "Xxxxx Xxxxx Group" to the
Buyer.
5.4 Conduct of Business. Prior to the Closing Date, except as set
forth on Schedule 5.4 of the Sellers' Disclosure Schedule and as otherwise
contemplated by the Transaction Documents or consented to or approved by the
Buyer, the Sellers shall cause each of the Companies to operate and conduct
their business in the ordinary course consistent with past practice and to use
commercially reasonable efforts to retain its and their employees and to
preserve existing business relationships with customers and clients of the
Companies and the Sellers shall cause each of the Companies not to (without the
prior written consent of the Buyer, which shall not be unreasonably withheld):
(a) amend the Companies' organizational documents;
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver any Company Securities;
(c) split, combine or reclassify any Interests, declare, set
aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) to the Sellers, Parent
or any other Person or otherwise in respect of their Interests or
redeem or otherwise acquire any of its securities, or make any
payments or distributions to or on behalf of the Sellers, any of
their Affiliates, any Person to which the Companies have any
liability (other than trade accounts payable and other liabilities
incurred in the ordinary course of business and liabilities incurred
in connection with this agreement) or any officer or director of the
Companies;
(d) make or incur any capital expenditure, lease or commitment
for additions to property, plant, equipment or other capital assets
in excess of Fifty Thousand U.S. dollars ($50,000);
(e) amend, waive, surrender, terminate, exercise any right or
option under or extend or renew any Contract or Lease, except in the
ordinary course of business;
(f) acquire, lease, sell, convey, dispose of or subject to any
Encumbrance on any of its material assets, except in the ordinary
course of business and except as expressly permitted by the terms of
this Agreement, including without limitation Section 3.11;
28
(g) permit any Company, except as may be required by
applicable Law, or consistent with past practice or applicable
Contracts, to (i) adopt, terminate or amend, fund or secure, as
applicable to any Company, any Plan or bonus, profit-sharing,
deferred compensation, incentive, stock option or stock purchase
plan, program or commitment, paid time off for sickness or other
plan, program or arrangement for the benefit of employees, former
employees, consultants or directors of any Company, (ii) grant any
material increase (other than increases required under a Contract)
in the compensation of directors, officers or employees of any
Company, (iii) make any bonus payment or similar arrangement with
any director, consultant or employee of any Company, or (iv)
increase the scope or nature of any fringe benefits provided for any
employee or director of any Company;
(h) take or suffer any action that would result in the
creation, or consent to the imposition, of any Encumbrance on any of
its assets (unless such Encumbrance is promptly discharged at the
sole expense of the Companies), except in the ordinary course of
business;
(i) with respect to the Sellers and the Companies, merge or
consolidate with any other Person or enter into any Contract with
respect thereto;
(j) change its method of accounting or any accounting
principle, method, estimate or practice, except in the ordinary
course of business or as may be required by applicable Law;
(k) cancel, terminate, default on or materially amend any
Material Contract, except where such cancellation, termination,
default or material amendment would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect;
(l) fail to maintain insurance at presently existing levels;
(m) amend or modify any existing employment or consulting or
similar Contract with respect to an employee of or consultant to
such Company, except where such amendment or modification would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(n) enter into any new employment or consulting Contract with
respect to an employee of or consultant to such Company requiring an
aggregate annual compensation, for any individual, equal to or
exceeding Fifty Thousand U.S. dollars ($50,000);
(o) enter into, amend, modify or default on any collective
bargaining Agreement;
(p) fail to advise the mutually agreed-upon personnel of each
Company in a mutually agreed-upon manner not to issue any
communication to any employee of such Company with respect to
compensation, benefits or
29
employment continuation or opportunity following the Closing Date,
except as required by applicable Law;
(q) make or modify any Tax election (made by any Company in
its own name);
(r) effectuate a "plant closing" or "mass layoff" as defined
in the WARN Act affecting any site of employment or one of more
facilities or operating units within any site of employment or
facility of such Company, or permit such Company to take any action
that would, under the WARN Act or other applicable Law, create any
obligation by such Company to provide sixty (60) days' advance
notice to an employee of such Company;
(s) incur or assume any indebtedness; assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for any obligations of any other Person;
or make any loans, advances or capital contributions to, or
investments in, any other Person; in each case, except in the
ordinary course of business; or
(t) enter into any contract to do, or take, or agree in
writing or otherwise to take or consent to, any of the foregoing
actions.
5.5 Access and Information; Further Assurances
(a) Subject to Section 5.12, the Sellers shall, upon
reasonable notice to any one of Messrs. Xxxx X. Xxxxxxxx, Xxxxxxxx
X. Xxxx or Xxxx X. Xxxxxxxx: (i) afford the Buyer and its
representatives reasonable access, during normal business hours, to
(A) the properties of the Companies (provided that neither the Buyer
nor its representatives shall be permitted to conduct
environmentally invasive investigations or testing, including but
not limited to, soil or groundwater sampling, without the Sellers'
prior written consent), and (B) those officers, directors and
employees of the Companies who have any knowledge relating to the
Companies' business; and (ii) furnish to the Buyer and its
representatives such additional information at the Buyer's sole
expense regarding the Companies and its and their Business,
properties, assets and personnel as the Buyer may reasonably
request.
(b) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use commercially reasonable efforts
to take or cause to be taken all actions and to do or cause to be
done all things reasonably necessary, proper or advisable in
compliance with applicable Law to consummate the transactions
contemplated herein and by the other Transaction Documents,
including, without limitation, (i) contesting any Proceeding
relating to the transactions contemplated by this Agreement and the
other Transaction Documents and (ii) executing, delivering and
filing any additional documents or instruments necessary to
consummate the transactions contemplated by this Agreement and the
other Transaction Documents. If at any time after the Closing
30
Date any further action is necessary to carry out the purposes of
this Agreement or the other Transaction Documents, the proper
officers and directors of each party hereto shall take all such
necessary action.
5.6 Public Statements. As soon as practicable after the execution of
this Agreement, the Buyer and Parent shall mutually agree upon the press
releases to be made concerning this Agreement and the other Transaction
Documents and the transactions contemplated hereby and thereby. Except as may be
required by applicable Law, Parent, the Sellers and the Buyer shall not make any
public announcement with respect to, or reveal the terms or status of any of,
this Agreement or the other Transaction Documents, or the transactions
contemplated hereby or thereby, except as otherwise agreed upon by the parties
and with the prior written consent of such parties. Until the Closing, the Buyer
and the Sellers shall coordinate in advance as to (a) the form and content of
any communication intended for dissemination, or reasonably expected to be
disseminated to the public generally regarding the transactions contemplated by
this Agreement and the other Transaction Documents and (b) the form and content
of any application made to any Governmental Entity relating to the transactions
contemplated hereby and thereby. No party shall disseminate any such
communication without the prior approval of the other party, which approval
shall not be unreasonably withheld or delayed, except that nothing contained in
this Agreement shall prevent any party from making any and all public
disclosures that it shall believe are necessary to make, based upon the advice
of counsel, to comply with any applicable securities laws or regulations or
requests of Governmental Entities.
5.7 Employment Matters.
(a) Effective as of the Closing Date, the Buyer shall cause
the Companies (or their successors or assigns) to abide by the terms
of the employment agreements of the Companies' employees set forth
on Schedule 5.7(a), as they existed as of the Closing Date except as
they may be modified in the ordinary course of business, of which
true, complete and correct copies have been made available to the
Buyer.
(b) The Buyer shall ensure that the Companies' employees are
allowed to participate in the Buyer's employee benefit plans under
the same conditions and in the same manner as similarly situated
employees of the Buyer to the extent that such employees satisfy the
Buyer's standard eligibility requirements.
(c) All service credited to each employee by Parent and the
Sellers through the Closing Date shall be recognized by the Buyer
and its Affiliates for all purposes, including for purposes of
eligibility, vacation entitlement and vesting under any employee
benefit plan provided by the Buyer or each applicable Affiliate of
the Buyer for the benefit of such employees. With respect to any
Plan which is a welfare benefit plan established or maintained by
the Buyer or its Affiliates for the benefit of employees of the
Sellers and their eligible dependents, the Buyer shall, or shall
cause its Affiliates to make a good faith effort to, waive any
pre-existing condition exclusions, eligibility waiting periods, and
evidence of
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insurability requirements (to the same extent such limitations,
waiting periods, or evidence of insurability requirements would not
have applied under the relevant Plan) and provide that any covered
expenses incurred on or before the Closing Date in respect of the
current plan year by any employee of the Sellers (or any covered
dependent of such an employee) shall be taken into account for
purposes of satisfying applicable deductible, offset, coinsurance
and maximum out-of-pocket provisions (or similar payments or
limitations) after the Closing Date in respect of such current plan
year, but only to the extent accurate and verifiable information
related to such deductibles, offsets and co-insurance is timely
provided to the Buyer by any employee who becomes an employee of the
Buyer as a result of the consummation of the transactions
contemplated by this Agreement. Notwithstanding anything herein to
the contrary, no action taken under this Section 5.7(c) shall result
in the duplication of benefits.
(d) Sellers or their respective Affiliates shall be
responsible for providing all notices and continuation coverage
required under Section 4980B of the Code and Sections 601 through
608 of ERISA to all individuals who are or become "M&A Qualified
Beneficiaries" (as such term is defined in Treas. Reg. ss.
54.4980B-9) as a result of the consummation of the transactions
contemplated by this Agreement.
(e) For each participating employee of any of the Companies
who becomes an employee of the Buyer or its Affiliates as a result
of the transactions contemplated by this Agreement, prior to the
Closing Date, Parent and the Buyer shall, and shall cause their
respective service providers to, act in good faith to facilitate, as
of the Closing Date, a reasonable transition of participation from
the health care and dependent care flexible spending account plans
maintained by Parent or its Affiliates to similar plans maintained
by the Buyer and its Affiliates on the other hand, including, with
respect to each such participating employee, a transfer of both the
contribution election made by such participating employee, as well
as the amounts contributed (but not yet paid as reimbursements) by
such participating employee as of the Closing Date. In addition, in
connection with such reasonable transfer described in the preceding
sentence, Parent shall provide the Buyer with a true, complete and
correct record or amounts paid and/or reimbursed on behalf of each
such participating employees under the relevant plans maintained by
the Parent or its Affiliates during the plan year in which the
Closing Date occurs.
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5.8 Certain Post-Closing Costs
(a) Promptly upon reasonable written notice (which notice
shall set forth in reasonable detail the nature of the facts giving
rise to the Sellers' obligations under (i) or (ii)), the Sellers
shall pay up to Five Hundred Thousand U.S. dollars ($500,000), on a
dollar-for-dollar basis with the Buyer, up to a combined aggregate
sum of One Million U.S. dollars ($1,000,000) for costs and expenses
related to: (i) all severance pay and benefits paid by the Buyer or
the Companies to such employees under the Buyer or the Companies
severance plan, policy or practice for the Companies' employees
whose employment is terminated during the one year period following
the Closing, and (ii) the enforcement of any applicable restrictive
covenants and noncompete covenants in the existing employment
agreements, which are listed on Schedule 5.7(a), with the key
executives and key personnel of the Companies, and with respect to
which the Buyer has provided written notice to Parent during the one
year period following the Closing. The Buyer shall be solely
responsible for all such costs and expenses that exceed One Million
U.S. dollars ($1,000,000), as well as for any such costs and
expenses that are not compliant with the time frame set forth above.
(b) As soon as practicable after the date of execution of this
Agreement, and in no event later than thirty (30) days following the
Closing, the Buyer shall identify to Parent in writing a number (as
determined below) of employees of Citizens Clair and any Affiliate
of the Buyer whose employment shall be terminated as promptly as
practicable, and in any event within six (6) months after the
Closing. The number of such employees shall be the lesser of: (i)
the number of employees whose base salaries in the aggregate are
equal to or less than One Million Four Hundred Thousand U.S. dollars
($1,400,000) and (ii) twenty-two (22) (which number may, in either
event, include up to four (4) employees of an Affiliate of the
Buyer). Parent shall, promptly upon written notice from the Buyer of
such employment terminations, pay or reimburse the Buyer for all
severance pay and benefits paid by the Buyer or Citizens Clair to
such employees under Parent's severance plan, policy or practice, as
well as the enforcement of any applicable restrictive covenants and
noncompete covenants in any applicable existing employment
agreements. Parent shall be responsible for all compensation to be
paid to the employees of Citizens Clair at the Closing during any
applicable notice period under the WARN ACT or any comparable state
or local law. The Buyer, however, shall be solely responsible for
all compensation paid by the Buyer or the Companies to any other
employees during any applicable notice period under the WARN Act or
any comparable state or local Law.
(c) Notwithstanding anything in Article 7 to the contrary,
this Section 5.8 sets forth the complete extent of Sellers'
liability with respect to (i) severance pay and benefits triggered
as a result of the termination of employees under this Section 5.8
and (ii) the costs of attempting to enforce any applicable
restrictive covenants and noncompete covenants in the existing
employment agreements of any employees of the Companies, in each
case as of the Closing
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Date and any damages arising from any breach of restrictive
covenants and noncompete covenants related thereto.
5.9 Real Estate Matters.
(a) At Closing, solely with respect to Citizens Clair, CBPA
and the Buyer, or their respective Affiliates, as applicable, will
use commercially reasonable efforts to negotiate in good faith a
Sub-Lease (a "Sub-Lease Agreement") with respect to a mutually
agreeable amount of space in (i) CBPA's Norristown, Pennsylvania
facility, and (ii) the York, PA leased premises identified in
Section 3.11(b), subject to obtaining the prior written consent of
the respective overlandlord.
(b) At Closing, solely with respect to Xxxxxxxxxx, CBMA,
Parent, or any of their Affiliates, on the one hand and the Buyer or
any of its Affiliates on the other, as applicable, will use
commercially reasonable efforts to negotiate in good faith a Lease
(the "Owned RE Lease") with respect to the Xxxx 0, Xxxx Xxxxxxxxxxx
Property that is owned by CBMA or any of its Affiliates as of the
Closing Date.
5.10 Provision of Financial Information. The Buyer and the Sellers
shall work in good faith to engage an accounting firm to perform an audit of the
balance sheet for each of the Companies as of the end of the month immediately
preceding the Closing. The Sellers are aware that the Buyer desires such audit
to be completed within sixty (60) days after the Closing, and agree to use
commercially reasonable efforts to assist Buyer to accomplish that objective.
The Buyer shall pay the cost of such accounting firm engagement in connection
with such audit.
5.11 Other Acquisition Proposals. From and after the date hereof,
unless and until this Agreement shall have been terminated in accordance with
its terms, Parent and the Sellers agree, and shall cause its and the Companies
and their representative, to agree, (a) to immediately cease any existing
discussions or negotiations with any Person conducted heretofore, directly or
indirectly, relating to the acquisition of any of the Companies, the Sellers or
Parent, or any of its or their assets, or the Interests; (b) to refrain from
directly or indirectly, soliciting, initiating, encouraging or facilitating the
submission of proposals or offers from any Person (other than the Buyer or its
Affiliates) relating to any merger or acquisition of any of the Companies, the
Sellers or Parent, or a material portion of the assets of, or the Interests or
other similar transaction involving, any of the Companies, the Sellers or Parent
(an "Acquisition Proposal"); or (c) to refrain from, directly or indirectly,
participating in any discussions or negotiations regarding, or furnishing any
information to any Person (other than the Buyer or its representatives) in
connection with, any Acquisition Proposal by any Person (other than the Buyer or
its Affiliates). Parent and the Sellers shall promptly notify any Person who
contacts either the Sellers, the Companies or Parent with respect to an
Acquisition Proposal of the existence of this Agreement and notify the Buyer
regarding any contact between any of the Sellers, the Companies, the Parent or
its or their respective representatives and any other Person regarding any
Acquisition Proposal.
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5.12 Confidentiality. Each of the Buyer, Parent and each Seller
hereby acknowledges and agrees that it is subject to, and will comply with, the
provisions of the confidentiality agreement, dated December 30, 2005 (the
"Confidentiality Agreement"), between the Buyer and Parent and further agrees
that if for any reason, termination of this Agreement occurs prior to the
Closing, the Buyer shall continue to comply with the Confidentiality Agreement
in accordance with its terms.
5.13 Tax Matters.
(a) To the extent permitted under applicable Law, the Sellers,
the Companies, the Subsidiaries and the Buyer shall close or
terminate (or cause to be closed or terminated), as of the Closing
Date, each Tax period relating to any Tax Return of a Company or a
Subsidiary.
(b) To the extent not filed prior hereto, the Sellers shall
prepare or cause to be prepared, in accordance with applicable Law
and consistent with past practice, each Tax Return of a Company or a
Subsidiary for each Pre-Closing Period (other than a Straddle
Period). At least twenty (20) days prior to the date on which a Tax
Return of a Company or a Subsidiary for a Pre-Closing Period (other
than a Straddle Period) is due (after taking into account any valid
extension), the Buyer may propose reasonable changes and revisions
to such Tax Return provided that such changes and revisions shall
not increase the Taxes of the Sellers, except for those changes that
are required by applicable Law. The Sellers shall cooperate fully in
making any reasonable changes and revisions to the Tax Return for a
Pre-Closing Period (other than a Straddle Period). At least three
(3) days prior to the date on which the Tax Return (as reasonably
revised by the Buyer) for a Pre-Closing Period (other than a
Straddle Period) is due (after taking into account any valid
extension), the Sellers shall pay to the Buyer an amount equal to
any Tax due with respect to such Tax Return, but only if and to the
extent such Tax was not taken into account in determining the
Audited Tangible Net Worth (otherwise such Tax shall be paid by the
Buyer).
(c) The Buyer shall prepare and file each Tax Return of a
Company or a Subsidiary for any Straddle Period in accordance with
applicable Law. At least twenty (20) days prior to the date on which
a Tax Return of a Company or a Subsidiary for a Straddle Period is
due (after taking into account any valid extension), the Buyer shall
deliver such Tax Return to the Sellers. No later than five (5) days
prior to the date on which such Tax Return for any Straddle Period
is due (after taking into account any valid extension), the Sellers
may make reasonable changes and revisions to such Tax Return. The
Buyer shall co-operate fully in making any reasonable changes and
revisions to the Tax Return for any Straddle Period. At least three
(3) days prior to the date on which such Tax Return for a Straddle
Period is due (after taking into account any valid extension), the
Sellers shall pay to the Buyer an amount equal to the Tax on such
Tax Return to the extent such Tax relates, as determined under
Section 5.13(d), to the portion of such Straddle Period ending on
and including the Closing Date, but
35
only if and to the extent such Tax was not taken into account for
purposes of determining the Audited Tangible Net Worth.
(d) In the case of a Tax of a Company or a Subsidiary for a
Straddle Period, the portion of such Tax that relates to the portion
of the Straddle Period ending on the Closing Date shall (i) in the
case of a Tax (other than a Tax based upon or related to income,
employment, sales or other transactions, franchise or receipts) be
deemed to be the amount of such Tax for the entire Straddle Period
multiplied by a fraction the numerator of which is the number of
days in the portion ending on the Closing Date of the Straddle
Period and the denominator of which is the number of all of the days
in the Straddle Period; and (ii) in the case of a Tax based upon or
related to income, employment, sales or other transactions,
franchise or receipts, be deemed equal to the amount which would be
payable if the Straddle Period ended on the Closing Date and such
Tax was based on an interim closing of the books as of the Closing.
(e) Each party shall promptly forward to the other a copy of
all written communications from any Governmental Entity relating to
any Tax or Tax Return of a Company or a Subsidiary for a Pre-Closing
Period or Straddle Period. Upon reasonable request, the Buyer and
the Sellers shall each make available to the other all information,
records or other documents relating to any Tax or any Tax Return of
a Company or a Subsidiary for a Pre-Closing Period or Straddle
Period. The Buyer and the Sellers shall preserve all information,
records or other documents relating to a Tax or a Tax Return of a
Company or a Subsidiary for a Pre-Closing Period or Straddle Period,
until the date that is six (6) months after the expiration of the
statute of limitations applicable to the Tax or the Tax Return.
Prior to transferring, destroying or discarding any information,
records or documents relating to any Tax or any Tax Return of a
Company or a Subsidiary for a Pre-Closing Period or Straddle Period,
the Sellers shall give to the Buyer a reasonable written notice and,
to the extent the Buyer so requests, the Sellers shall permit the
Buyer to take possession of all such information, records and
documents. In addition, the Buyer and each Seller shall cooperate
with each other in connection with all matters relating to the
preparation of any Tax Return or the payment of any Tax of a Company
or a Subsidiary and in connection with any Proceeding relating to
any Tax or Tax Return of a Company or a Subsidiary. Nothing in this
Section 5.13(e) shall affect or limit any indemnity or similar
provision or any other representations, warranties or obligations of
the Companies, the Subsidiaries, or the Sellers. Each party shall
bear its own costs and expenses in complying with the provisions of
this Section 5.13(e).
(f) Any Tax sharing or similar agreement with respect to or
involving a Company or a Subsidiary shall be terminated as of the
Closing Date, without liability to any party and shall have no
further effect for any year (whether the current year, a future year
or a past year). Any amounts payable under any Tax sharing or
similar agreement shall be cancelled as of the Closing Date.
36
(g) The Buyer and the Sellers shall co-operate to ensure that
any Earn-Out Payment consists of cash sufficient to satisfy any
withholding Tax obligations and employment-related Taxes (employer
and employee) incurred as a result of any subsequent transfer of all
or any portion of the Earn-Out Payment (after giving effect to any
adjustment set forth in Section 2.4). The Buyer agrees to indemnify
the Sellers and its Affiliates for any income Taxes incurred as a
result of the disallowance of any deduction resulting from or
relating to a subsequent transfer of all or any portion of an
Earn-Out Payment. Section 7.5 shall apply to any indemnity claim
made under the preceding sentence, except that no Claim Notice shall
be required under Section 7.5 prior to the time at which an issue
that would give rise to an indemnity claim under the preceding
sentence is communicated in any manner with reasonable specificity
in the course of any Proceeding and "ninety (90) days" will be
inserted in lieu of "thirty (30) days" in Section 7.5(b), and it is
understood and agreed that the Buyer shall not assume the defense of
any Proceeding prior to ninety (90) days after receiving a Claim
Notice.
5.14 Purchase Price Allocation. The Buyer shall prepare an
allocation of the Purchase Price (and all other capitalized costs, if any) among
the purchased assets (or deemed purchased assets for US federal income tax
purposes) in accordance with Section 1060 of the Code and the Treasury
regulations thereunder (and any similar provision of state or local law). The
Buyer shall deliver such allocation to the Sellers within sixty (60) days after
the Closing Date. In the event that the Sellers do not agree with such
allocation, the Sellers shall have thirty (30) days following receipt of such
allocation to notify the Buyer that the Sellers disagree with such allocation,
which notice shall set forth the adjustments that the Sellers believe should be
made to such allocation. The Sellers and the Buyer shall reasonably cooperate to
reconcile their differences, if any, with respect to the allocation of the
Purchase Price. The Buyer and the Sellers and their Affiliates shall report, act
and file Tax Returns (including, but not limited to, Internal Revenue Service
Form 8594) in all respects and for all purposes consistent with such allocation
prepared by the Buyer. None of Buyer, the Sellers or any of their respective
Affiliates shall take any position (whether in audits, tax returns or otherwise)
that is inconsistent with such allocation unless required to do so by applicable
Law.
5.15 Reporting Requirements; Integration. Through the second
anniversary of the 2009 Earn-out Payment Date, HIL will file all documents
required to be filed with the SEC pursuant to the Exchange Act within the time
periods required by the Exchange Act and the regulations thereunder. As of their
respective dates, such documents will comply in all material respects with
applicable SEC requirements and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. For a period of at least 180 days after
the issuance of the Earn-out Shares to the Sellers in accordance with this
Agreement, HIL will not, directly or indirectly though any agent, sell, offer to
sell, solicit offers to buy or otherwise negotiate in respect of any "security"
(as defined in the Securities Act) if, as a result of the doctrine of
"integration" referred to in Rule 502 under the Securities Act, such offer or
sale would render invalid, for the purpose of, the exemption from the
registration requirements of the Securities Act provided by Section 4(2) thereof
or otherwise.
37
5.16 Other Transaction Documents. Each of the parties hereto, as
applicable, shall use commercially reasonable efforts to negotiate, in good
faith, and enter into: (a) an agreement regarding the provision of certain
information technology services (the "Transition Services Agreement") containing
such terms and conditions as mutually agreed upon by the parties and (b) the
Strategic Alliance Agreement containing the terms and conditions set forth on
Exhibit B attached hereto and as otherwise mutually agreed upon by the parties.
5.17 Errors and Omissions. The parties will reasonably cooperate in
good faith to resolve any claims arising under the E and O Coverage.
5.18 Transfer of Personal Property and Casualty Business. At the
Closing, Parent shall cause all right, title and interest in all assets (but no
liabilities) relating to the personal property and casualty lines of insurance
business of Charter One Insurance Agency, Inc. as more specifically set forth in
Schedule 5.18, to be transferred to the Affiliate of the Buyer designated by the
Buyer to Parent in writing at least ten (10) days prior to the Closing Date, and
such Affiliate shall assume all right, title and interest in such assets (but no
liabilities).
5.19 Amounts Due from Certain Producers. The Buyer shall reimburse
CBPA for any amounts that are collected by the Buyer or any of its Affiliates,
after expending commercially reasonable efforts, during the eighteen (18) month
period following the Closing, in connection with any accounts receivable or
other amounts due from the any of the individuals listed in Section
9(qqqqq)(i)(E).
5.20 License Reinstatements. As promptly as practicable after the
date hereof, the Sellers at their sole cost and expense shall use commercially
reasonable efforts to cause all of the Licenses set forth on Schedule 3.9 of the
Sellers' Disclosure Schedule to be reinstated.
5.21 Other Actions. Each of the parties hereto shall use all
commercially reasonable efforts to take, or cause to be taken, all actions, do,
or cause to be done, all things, and negotiate, execute and deliver all
documents, including the Transaction Documents, as may be necessary, proper or
advisable under applicable Laws or reasonably required pursuant to the terms of
this Agreement in order to consummate the transactions contemplated hereby,
including the Transaction Documents. Each of the parties hereto will, and will
each cause its representatives to, deliver all documents required to be
delivered at the Closing by such persons and entities as required and as set
forth in Article 6 hereof.
6. CONDITIONS PRECEDENT TO CLOSING.
6.1 Conditions Precedent to the Buyer's Obligations to Close. The
obligation of the Buyer to consummate the transactions contemplated hereby is
subject to the satisfaction prior to or as of the Closing Date of each of the
following conditions, to the extent not waived by the parties hereto:
(a) The representations and warranties of the Sellers
contained in Article 3 that (i) contain qualifications and
exceptions therein relating to materiality or a Material Adverse
Effect shall be true and correct on and as of the Closing Date and
(ii) do not contain any qualifications and exceptions therein
38
relating to materiality or a Material Adverse Effect shall be true
and correct in all material respects on and as of the Closing Date
(except, in the case of either (i) or (ii), to the extent such
representations and warranties expressly relate to an earlier date,
in which case such representations and warranties shall be true and
correct or materially true and correct, as appropriate, as of such
earlier date).
(b) The covenants and agreements of the Sellers and Parent
contained in this Agreement and required to be complied with or
performed prior to or as of the Closing Date shall have been
complied with or performed in all material respects.
(c) The Buyer shall have received a certificate dated as of
the Closing Date and executed by an officer of each Seller and
Parent, certifying the satisfaction of the conditions set forth in
clauses (a) and (b).
(d) The Sellers and Parent shall have executed and/or
delivered, as applicable:
(i) The Strategic Alliance Agreement;
(ii) Seller Required Consents;
(iii) The Sub-Lease Agreement;
(iv) The Owned RE Lease;
(v) The Transition Services Agreement;
(vi) The resignations of those managers and officers of
each of the Companies who are also full-time employees of
Parent or any of its subsidiaries (excluding the Companies);
(vii) An Assignment and Assumption Agreement with
respect to the intellectual property described in Section
5.3(b); and
(viii) A Xxxx of Sale with respect to the assets
described in Section 5.18.
(e) The Buyer shall have received the Estimated Closing Date
Balance Sheets at least five (5) days prior to the Closing.
(f) A certificate duly executed by the Secretary of each of
the Sellers, certifying the resolutions duly and validly adopted by
the board of directors of the Sellers, evidencing the authorization
of the Sellers' consummation of the transactions contemplated hereby
and, as to its certificate of incorporation and by-laws, each in
effect as of the Closing Date.
39
(g) The transactions contemplated hereby and by the other
Transaction Documents shall have received HSR Clearance.
(h) There shall not be in effect any injunction or Order
issued by a court of competent jurisdiction in any Proceeding
against the consummation of the transactions contemplated hereby or
by any Transaction Document.
(i) The Buyer shall have received long-form good standing
certificates, where recognized (or the equivalent thereto in the
relevant jurisdiction) relating to each Company, dated within five
(5) business days of the Closing Date, issued by the Secretary of
State (or other similar official) of their respective states of
organization or formation, as the case may be.
(j) The Buyer shall have received such instruments of
assignment and transfer as are reasonably required to effect the
transfer of the Interests to the Buyer in accordance with this
Agreement.
6.2 Condition Precedent to the Sellers' and Parent's Obligations to
Close. The obligation of the Sellers and Parent to consummate the transactions
contemplated hereby is subject to the satisfaction prior to or as of the Closing
Date of the following conditions:
(a) The representations and warranties of the Buyer contained
in Article 4 that (i) contain qualifications and exceptions therein
relating to materiality or a Material Adverse Effect shall be true
and correct on and as of the Closing Date and (ii) do not contain
any qualifications and exceptions therein relating to materiality or
a Material Adverse Effect shall be true and correct in all material
respects on and as of the Closing Date (except, in the case of
either (i) or (ii), to the extent such representations and
warranties expressly relate to an earlier date, in which case such
representations and warranties shall be true and correct or
materially true and correct, as appropriate as of such earlier
date).
(b) The covenants and agreements of the Buyer contained in
this Agreement and required to be complied with or performed prior
to or as of the Closing Date shall have been complied with or
performed in all material respects.
(c) The Sellers and Parent shall have received a certificate
dated as of the Closing Date and executed by an officer of the
Buyer, certifying the satisfaction of the conditions set forth in
clauses (a) and (b).
(d) The Buyer shall have executed and/or delivered, as
applicable:
(i) The Strategic Alliance Agreement;
(ii) The Purchase Price;
(iii) Buyer Required Consents;
(iv) The Sub-Lease Agreement;
40
(v) The Owned RE Lease; and
(vi) The Transition Services Agreement.
(e) A certificate duly executed by the Secretary of the Buyer,
certifying the resolutions duly and validly adopted by the board of
directors of the Buyer, evidencing the authorization of the Buyer's
consummation of the transactions contemplated hereby and, as to its
certificate of incorporation and by-laws, each in effect as of the
Closing Date.
(f) The transactions contemplated hereby and by the other
Transaction Documents shall have received HSR Clearance.
(g) There shall not be in effect any injunction or Order
issued by a court of competent jurisdiction in any Proceeding
against the consummation of the transactions contemplated hereby or
by any Transaction Document.
6.3 No Prohibitions. No applicable Order or Law shall exist and
remain in effect, which would render it unlawful, as of the Closing Date, to
effect the transactions contemplated by this Agreement or the Transaction
Documents in accordance with their terms.
7. INDEMNIFICATION.
7.1 Survival of Representations, Warranties, Covenants and
Agreements.
(a) The respective representations and warranties of Parent,
the Sellers and the Buyer hereunder, unless otherwise specifically
addressed herein, shall survive the Closing for a period of two (2)
years; provided, that (i) the representations and warranties set
forth in Section 3.10 and Section 3.15 shall survive the Closing for
a period equal to the applicable statute of limitations plus ninety
(90) days, (ii) any representation or warranty contained in Section
3.1, Section 3.2, Section 3.3, Section 4.1, Section 4.2 or Section
4.7 shall survive indefinitely, (iii) any representation or warranty
contained in Section 4.11 shall survive until one business day after
the delivery of the 2009 Earn-out Payment and (iv) any
representations and warranties fraudulently made in this Agreement
or in any certificate delivered pursuant hereto shall survive
indefinitely. Thereafter all such representations and warranties of
Parent, the Sellers and the Buyer shall be extinguished and no claim
for indemnification under this Agreement may be asserted in respect
thereof; provided, however, that claims first asserted with
specificity in writing prior to the expiration of the applicable
period referred to above shall not thereafter be barred.
(b) The covenants and agreements of Parent, the Sellers and
the Buyer contained in this Agreement shall survive the Closing
until the expiration of the applicable statute of limitations plus
ninety (90) days, except that those covenants and agreements for
which survival is expressly limited by their terms to other dates or
times shall survive to such other dates or times. Without limiting
41
the generality of the foregoing, for the avoidance of doubt, the
covenants and agreements of the Seller contained in Section 5.4 and
Section 5.5(a) shall terminate at the Closing.
7.2 Indemnification by the Sellers. Each of the Sellers, jointly and
severally, shall indemnify and defend each of the Companies and the Buyer and
each of its and their respective successors, transferees, assignees, officers,
directors, employees, shareholders, agents, advisors or representatives (each, a
"Buyer Indemnitee") against, and hold each Buyer Indemnitee harmless from, any
loss, liability, obligation, deficiency, damage, Tax or expense including,
without limitation, interest, penalties, reasonable attorneys' and consultants'
fees, disbursements and other out-of-pocket expenses (collectively, "Damages"),
that any Buyer Indemnitee may suffer or incur based upon, attributable to,
arising from, relating to or in connection with any of the following (whether or
not in connection with any third party claim):
(a) The inaccuracy in or breach of any representation or
warranty of Parent or the Sellers contained in this Agreement, to
the extent such inaccuracy or breach has not been waived by the
Buyer;
(b) The failure of such Seller or Parent to perform or to
comply in all material respects with any covenant or agreement
required to be performed by such Seller or Parent contained in this
Agreement, to the extent such failure to perform or noncompliance
has not been waived by the Buyer;
(c) Any obligation to provide post-retirement welfare coverage
to any employee or former employee of any Company which may have
accrued through the Closing Date as a result of such employee's
service with any Company or any ERISA Affiliate prior to the Closing
Date (except as required by Section 4980B of the Code or Sections
601 through 608 of ERISA);
(d) (i) With respect to any arrangement set forth in Schedule
3.10(j), any claim with respect to such arrangement that arises from
benefits accrued or any event that occurred prior to or on the
Closing Date, and (ii) with respect to any Employee Benefit Plan not
described in Section 7.2(d)(i) above, any claim with respect to such
Employee Benefit Plan;
(e) Any claims for Damages with respect to any Excluded
Liabilities;
(f) Any Company Tax relating to a Pre-Closing Period or the
pre-Closing portion of a Straddle Period (except if and to the
extent such Company Tax was taken into account for purposes of
determining the Audited Tangible Net Worth or paid by Sellers
pursuant to Section 5.13);
(g) Any Accounts Receivable of any of the Companies as of the
Closing Date, if and to the extent any of the Companies (or any of
their Affiliates), despite commercially reasonable efforts, is
unable to collect such Accounts Receivable within one hundred and
eighty (180) days following the Closing;
42
(h) Any claims in the nature of an errors and omissions
insurance claim, as such term is defined in and to the extent
covered by the Business Professional Liability policy in effect for
Parent or its subsidiaries as of the date of execution of this
Agreement ("E and O Coverage") (assuming such policy contained no
deductible), asserted within three (3) years of the Closing Date
against any of the Companies relating to the periods prior to the
Closing;
(i) Any claim asserted by Zurich Financial Services Inc. or
any of its Affiliates relating to or in connection with a payment
made in 2005;
(j) Any note or other amount due from Xxxxx Insurance, Xxxxx
Xxxxx or Xxxxxx Xxxxx, either collectively and/or individually, and
any contingent payment owed to Citizens Clair by Xxxxx and Xxxxx, if
and despite commercially reasonable efforts, any of the Companies is
unable to collect on such note or contingent payment within the
later of one hundred and eighty (180) days following the Closing
Date or sixty (60) days following maturity or the date such
contingent payment is due; and
(k) Any amounts due in excess of any claims for disability
insurance or similar benefits for the period through and including
the Closing Date.
7.3 Indemnification by the Buyer. The Buyer shall indemnify and
defend Parent, the Sellers and their successors, transferees, assignees,
officers, directors, trustees, employees, shareholders, agents, advisors or
representatives (each, a "Seller Indemnitee") against, and hold each Seller
Indemnitee harmless from, any Damages that any Seller Indemnitee may suffer or
incur, based upon, attributable to, arising from, relating to or in connection
with any of the following (whether or not in connection with any third party
claim):
(a) The inaccuracy in or breach of any representation or
warranty of the Buyer contained in this Agreement, to the extent
such inaccuracy or breach has not been waived by the Sellers or
Parent;
(b) The failure of the Buyer to perform or to comply in all
material respects with any covenant or agreement required to be
performed by the Buyer contained in this Agreement, to the extent
such failure to perform or noncompliance has not been waived by
Parent or the Sellers;
(c) All liabilities and obligations assumed by the Buyer or
any Affiliate of the Buyer pursuant to the terms of this Agreement,
or otherwise relating to the operation of the Business, excluding
the Excluded Liabilities, after the Closing;
(d) Any Tax of a Company relating to a Post-Closing Period or
to the post-Closing portion of the Straddle Period;
(e) Any Damages with respect to the Companies' employees to
the extent arising in connection with events that occur on or after
the Closing Date;
43
(f) The failure of the Buyer to perform or to comply in all
material respects with Section 5.13(g).
7.4 Limitations on Liability. Except for the liabilities and
obligations contemplated by Section 7.2(d), Section 7.2(e), Section 7.2(f),
Section 7.2(i), Section 7.2(j), Section 7.3(e) and Section 7.3(f), the liability
of the Sellers or the Buyer, as applicable, for claims under this Agreement
shall be limited by the following:
(a) If the Closing shall not have occurred, recovery of the
Buyer, Parent, the Sellers or the Companies pursuant to this Article
7 shall be limited to actual out-of-pocket expense. In no event,
whether prior to or after the Closing, shall Damages include any
punitive, exemplary, special, indirect, incidental or consequential
damages whatsoever except for any such damages owed to a third
party.
(b) The amount of Damages otherwise recoverable under this
Article 7, and the amount of any claim which may be asserted for any
purpose whatsoever hereunder, shall be reduced to the extent to
which any Federal, state, local or foreign tax liabilities of Seller
Indemnitee or Buyer Indemnitee, as applicable, is decreased by
reason of any Damage in respect of which such Seller Indemnitee or
Buyer Indemnitee, as applicable, shall be entitled to indemnity
under this Agreement.
(c) No Damages shall be recoverable by a Seller Indemnitee or
Buyer Indemnitee, and no claim therefor shall be asserted for any
purpose whatsoever hereunder, with respect to any matter which is
covered by insurance, to the extent proceeds of such insurance or
other third party indemnitor are paid or payable.
(d) (i) No Damages shall be recoverable by a Seller Indemnitee
or Buyer Indemnitee pursuant to the provisions of this Article 7,
and no claim therefor shall be asserted for any purpose whatsoever
hereunder, with respect to any individual Damage unless the amount
thereof equals at least Ten Thousand U.S. dollars ($10,000).
(ii) No Damages shall be recoverable by a Seller
Indemnitee or Buyer Indemnitee pursuant to the provisions of
this Article 7, and no claim therefor shall be asserted for
any purpose whatsoever hereunder, unless the amount of Seller
Indemnitees' or Buyer Indemnitees', as the case may be,
Damages equals at least One Hundred Thousand U.S. dollars
($100,000) in the aggregate, whereupon an amount equal to the
excess shall be recoverable by a Seller Indemnitee or Buyer
Indemnitee in accordance with the terms hereof.
(iii) The aggregate amount of Damages recoverable
pursuant to the provisions of this Article 7 by all Seller
Indemnitees or Buyer
44
Indemnitees, as the case may be, shall be limited to Twenty
Five Percent (25%) of the Purchase Price in the aggregate.
(iv) Notwithstanding Sections 7.4(d)(i) and (ii) above,
the Sellers shall indemnify the Buyer with respect to Damages
relating to any Accounts Receivable of any of the Companies,
to the extent such Damages, in the aggregate, exceed Ten
Thousand U.S. dollars ($10,000).
(e) The Sellers shall indemnify the Buyer with respect to
Damages relating to the E and O Coverage for up to a maximum of Ten
Million U.S. dollars ($10,000,000). Payments under this Section
7.4(e) shall not be subject to, or count against, any of the
limitations set forth in Section 7.4(d).
(f) No Damages shall be recoverable by any Buyer Indemnitee
pursuant to the provisions of this Article 7, and no claim therefor
shall be asserted for any purpose whatsoever hereunder, which arise
out of facts, circumstances or conditions which are disclosed in
this Agreement or any Schedule or Exhibit hereto.
7.5 Indemnification Procedures.
(a) Any Seller Indemnitee or Buyer Indemnitee seeking
indemnification for Damages under this Agreement (each, an
"Indemnified Party") shall, promptly after receipt by such
Indemnified Party of notice of any claim or circumstances in which
indemnification may be sought, or the commencement of any
Proceeding, including any Proceeding by a third party, if a claim
for indemnification in respect thereof is sought, give the party or
parties against whom such indemnification is sought (collectively
the "Indemnifying Parties"), written notice (a "Claim Notice"),
setting forth in reasonable detail the nature thereof, the facts
giving rise to any claim for indemnification and the basis upon
which the Indemnified Party seeks indemnification hereunder;
provided, that a Claim Notice in respect of any action at law or in
equity by or against a third party as to which indemnification will
be sought shall be given promptly after the action or suit is
commenced. The omission of any Indemnified Party to notify promptly
such Indemnifying Party of any such claim or circumstance shall not
relieve such Indemnifying Party from any liability which it may have
to such Indemnified Party under this Article 7 unless, and only to
the extent that, such omission results in such Indemnifying Party's
forfeiture of substantive rights or defenses.
(b) In the case of any such Proceeding by a third party
against an Indemnified Party, the Indemnifying Party shall, upon
notice submitted within thirty (30) days of receipt of the Claim
Notice, assume the defense thereof, with counsel reasonably
satisfactory to the Indemnified Party; provided that (i) the
Indemnifying Party provides the Indemnified Party with a written
representation to the effect that the Indemnifying Party has
sufficient financial resources to satisfy the amount of any adverse
monetary judgment that is reasonably likely to
45
result; (ii) the liability claim solely seeks (and continues to
seek) monetary damages; and (iii) the Indemnifying Party expressly
agrees in writing that, as between the Indemnifying Party and the
Indemnified Party, the Indemnifying Party shall be solely obligated
to satisfy and discharge the liability claim in accordance with this
Agreement (the conditions set forth in clauses (i) through (iii) are
collectively referred to as the "Litigation Conditions") and, after
notice from the Indemnifying Party to the Indemnified Party of its
assumption of the defense thereof and compliance with the Litigation
Conditions, the Indemnifying Party shall not be liable to such
Indemnified Party for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense
thereof (but the Indemnified Party shall have the right, but not the
obligation, to participate at its own cost and expense in such
defense by counsel of its own choice) or for any amounts paid or
foregone by the Indemnified Party as a result of the settlement or
compromise thereof (without the written consent of the Indemnifying
Party). Anything in this Section 7.5(b) notwithstanding, if both the
Indemnifying Party and the Indemnified Party are named as parties or
subject to such Proceeding and either such party determines with
advice of counsel that there may be one or more legal defenses
available to it that are different from or additional to those
available to the other party or that a material conflict of interest
between such parties may exist in respect of such Proceeding, then
the Indemnifying Party may decline to assume the defense on behalf
of the Indemnified Party or the Indemnified Party may retain the
defense on its own behalf, and, in either such case, after notice to
such effect is duly given hereunder to the other party, the
Indemnifying Party shall be relieved of its obligation to assume the
defense on behalf of the Indemnified Party, but shall be required to
pay any legal or other expenses including, without limitation,
reasonable attorneys' fees and disbursements, incurred by the
Indemnified Party in such defense.
(c) If the Indemnifying Party assumes the defense of any such
Proceeding, the Indemnified Party shall cooperate fully with the
Indemnifying Party and shall appear and give testimony, produce
documents and other tangible evidence, allow the Indemnifying Party
reasonable access to the books and records of the Indemnified Party
and otherwise assist the Indemnifying Party in conducting such
defense. The Indemnifying Party shall have the sole right to settle
or otherwise dispose of such claim or demand on such terms as it
shall deem appropriate; provided that the consent of the Indemnified
Party to the settlement or disposition of such claim or demand shall
be required if such settlement or disposition shall result in any
liability to, or equitable relief against, the Indemnified Party. No
Indemnifying Party shall, without the consent of the Indemnified
Party, consent to entry of any judgment or enter into any settlement
or compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified
Party of a release from all liability in respect of such claim or
Proceeding. If the Indemnifying Party shall (x) fail promptly and
diligently to assume the defense of any Proceeding, or (y) the
Litigation Conditions cease to be met, then the Indemnified Party
may respond to, contest and defend against such Proceeding and may
make in good faith any
46
compromise or settlement with respect thereto, and recover from the
Indemnifying Party the entire cost and expense thereof including,
without limitation, reasonable attorneys' fees and disbursements and
all amounts paid or foregone as a result of such Proceeding, or the
settlement or compromise thereof. The indemnification required
hereunder shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills
or invoices are received or loss, liability, obligation, damage or
expense is actually suffered or incurred.
(d) The liability of an Indemnifying Party to indemnify the
Indemnified Party for Damages shall be limited to claims as to which
the Indemnified Party has given written notice on or prior to the
expiration of the applicable survival periods set forth in this
Article 7.
(e) The parties shall use commercially reasonable efforts to
mitigate and minimize Damages for which indemnification is available
under this Article 7 and shall act in good faith in responding to,
defending against, settling or otherwise dealing with such claims.
Without limiting the generality of the foregoing, in connection with
any claim for indemnification under this Article 7, an Indemnified
Party shall diligently pursue any available claims against insurers
who may have provided insurance coverage for any Damages and shall
use its commercially reasonable efforts to pursue, or to assign to
the Indemnifying Party, any claims or rights it may have against any
Person that may reduce the Damages otherwise incurred by the
Indemnified Party.
7.6 No Double Recovery. Except for remedies that cannot be waived as
a matter of law, and remedies for injunctive or other equitable relief as
provided in this Agreement, the sole and exclusive remedy of both the Buyer and
the Sellers hereunder or otherwise in connection with the transactions
contemplated hereby shall be restricted to the indemnification rights set forth
in this Article 7.
7.7 Tax Treatment of Indemnity Payments. The Buyer, the Sellers and
the Companies agree to treat all indemnification payments made pursuant to
Article 7 as adjustments to the Purchase Price (as increased or decreased as
applicable by the amount, if any, of the Audit Adjustment) for Tax purposes and
that such treatment shall govern for purposes hereof, except to the extent that
the laws of a particular jurisdiction provide otherwise.
8. TERMINATION.
8.1 Termination of Agreement. This Agreement may not be terminated
prior to the Closing, except as follows:
(a) by mutual agreement of the Sellers, Parent and the Buyer;
(b) at the election of the Sellers, Parent or the Buyer upon
prior written notice, if any one or more of the conditions set forth
in Article 6 (other than those that by their nature are to be
satisfied at the Closing) has not been
47
fulfilled as of the close of business on December 31, 2006 (the
"Outside Date"); provided that the conduct of the party electing to
terminate this Agreement pursuant to this Section 8.1(b) has not
substantially resulted in the failure of such condition or
conditions to be satisfied;
(c) at the election of the Sellers, Parent or the Buyer upon
prior written notice, if any Governmental Entity shall have issued a
final Order, without any further right of appeal, restraining,
enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement or any Transaction
Document;
(d) at the election of the Buyer, upon prior written notice to
the Sellers, if there has been an inaccuracy in, breach or
non-compliance by the Sellers of any representation, warranty,
covenant or agreement contained in this Agreement that would result
in the failure of the condition set forth in Section 6.1 to be
satisfied, which breach is incapable of being cured or, if such
breach is capable of being cured, is not cured within thirty (30)
days following receipt by the Sellers of notice of such breach; or
(e) at the election of the Sellers, upon prior written notice
to the Buyer, if there has been an inaccuracy in, breach or
non-compliance by the Buyer of any representation, warranty,
covenant or agreement contained in this Agreement that would result
in the failure of the condition set forth in Section 6.2 to be
satisfied, which breach is incapable of being cured or, if such
breach is capable of being cured, is not cured within thirty (30)
days following receipt by the Buyer of notice of such breach.
8.2 Obligations; Survival. If this Agreement terminates pursuant to
Section 8.1 and the transactions contemplated hereby are not consummated,
(a) this Agreement shall become null and void and have no
further force or effect, except that any such termination shall be
without prejudice to the rights of any party with respect to the
failure to satisfy any term or provision of this Agreement arising
from or relating to the willful breach or violation of the
representations, warranties, covenants or agreements of the other
party under this Agreement;
(b) notwithstanding anything in this Agreement to the
contrary, the provisions of Section 5.1(g), Section 5.1(h), Section
5.5, Section 5.6, Section 5.12, Article 7, this Section 8.2 and
Article 10 of this Agreement, shall survive any termination of this
Agreement; and
(c) the Buyer shall promptly dispose of or return to the
Sellers all books and records and all other information furnished by
the Sellers, their agents, employees or representatives (including
all copies, if any) in accordance with the provisions of the
Confidentiality Agreement and shall not use or disclose the
48
information contained in such books and records for any purpose or
make such information available to any other Person.
9. DEFINITIONS. For purposes of this Agreement, the following definitions
shall apply:
(a) "2006 Income" has the meaning set forth in Section 2.4(b).
(b) "2007 Earn-out Payment Date" has the meaning set forth in
Section 2.4(a).
(c) "2008 Earn-out Payment Date" has the meaning set forth in
Section 2.4(a).
(d) "2009 Earn-out Payment Date" has the meaning set forth in
Section 2.4(a).
(e) "Accounts Receivable" means the Companies' customer
premium and direct xxxx accounts receivable relating to the
Business, including, but not limited to, any such account derived
from a premium financing transaction, net of any unearned commission
reserves maintained in accordance with SAB 101.
(f) "Actual 2006 Income" has the meaning set forth in Section
2.4(b).
(g) "Acquisition Proposal" has the meaning set forth in
Section 5.11.
(h) "Additional Compensation Arrangement" means any agreement
or other arrangement in effect as of the date hereof pursuant to
which any Company has received, is receiving or may be entitled to
receive any compensation, payment or other benefit, if and to the
extent based upon volume, loss history, customer quality, or other
similar factors, from or on behalf of any insurance or reinsurance
underwriter.
(i) "Affiliate" means, with respect to any Person, any other
Person that controls, is controlled by, or is under common control
with the such Person. The term "control" (including, with
correlative meaning, the terms "controlled by" and "under common
control with") (whether or not exercised), as applied to any Person,
means the possession, directly or indirectly, of the power (whether
or not exercised) to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
or other securities, by contract or otherwise.
(j) "Agreement" means this Purchase and Sale Agreement.
49
(k) "Anniversary Date" means each of the first, second, and
third anniversary dates of the Closing Date.
(l) "Arbitrator" has the meaning set forth in Section 2.5(c).
(m) "Audit Adjustment" has the meaning set forth in Section
2.3(b).
(n) "Audited Tangible Net Worth" has the meaning set forth in
Section 2.3(a) and Section 2.5.
(o) "B & L" has the meaning set forth in the Recitals.
(p) "Business" means the material business activities and
operations directly associated with the insurance agency operations
engaged in by any of the Companies at the time of execution of this
Agreement, other than the operations related to the Excluded
Business.
(q) "business day" means a day other than Saturday, Sunday or
any other day on which banks located in New York, New York are
authorized or obligated by Law to close.
(r) "Buyer" has the meaning set forth in the Recitals.
(s) "Buyer Indemnitee" has the meaning set forth in Section
7.2.
(t) "Buyer Required Consents" has the meaning set forth in
Section 4.3(b).
(u) "CBMA" has the meaning set forth in the Recitals.
(v) "CBPA" has the meaning set forth in the Recitals.
(w) "Change of Control" shall mean, with respect to any
Person, (i) a sale of the majority of such Person's capital stock or
membership interests to a Person that was not an Affiliate of such
Person prior to such sale, or (ii) the result of a merger of such
Person with an entity that is not an Affiliate in which a majority
of the capital stock or membership interests of such Person is
transferred to a Person that was not an Affiliate of such Person
prior to such merger.
(x) "Citizens Clair" has the meaning set forth in the
Recitals.
(y) "Claim Notice" has the meaning set forth in Section
7.5(a).
(z) "Closing" means the consummation of the transactions
contemplated by this Agreement.
(aa) "Closing Date" means the date on which the Closing
occurs.
50
(bb) "Code" means the Internal Revenue Code of 1986, as
amended.
(cc) "Company" or "Companies", as applicable, means
Xxxxxxxxxx, B & L, and Citizens Clair, or any successors thereto or
any transferees thereof.
(dd) "Company Client" means any individual for whom any
Company serves as the validly appointed broker or agent for the
placement of insurance.
(ee) "Company Securities" has the meaning set forth in Section
3.2(a).
(ff) "Company Tax" means any Tax, if and to the extent that
Parent, a Seller, a Company or a Subsidiary is or may be potentially
liable under applicable Law, under contract or on any other grounds
(including, but not limited to, as a transferee or successor, under
Code Section 6901 or Treasury Regulation Section 1.1502-6, as a
result of any Tax sharing or other agreement, or by operation of
law) for any such Tax).
(gg) "Competitive Acquirer" means any entity which acquires
Parent in a transaction constituting a Change of Control.
(hh) "Confidentiality Agreement" has the meaning set forth in
Section 5.12.
(ii) "Contract" means any agreement, contract, covenant,
instrument, or other similar item (including, but not limited to,
any bond, commission arrangement, easement, employment or consulting
agreement, debt, "drag-along" or tag-along" right, earn-out or
similar arrangement, guarantee, indebtedness, indemnity, indenture,
lease, loan, license, mortgage, option, trust agreement,
non-competition, non-solicitation or other restrictive covenant,
note, partnership or limited liability company agreement, purchase
or repurchase right, redemption right, right of first refusal,
security interest, shareholder agreement, understanding, or
undertaking).
(jj) "Copyrights" has the meaning set forth in Section
3.12(c)(iii).
(kk) "CSH" has the meaning set forth in the Recitals.
(ll) "Damages" has the meaning set forth in Section 7.2.
(mm) "E and O Coverage" has the meaning set forth in Section
7.2(h).
(nn) "Earn-out Calculation" has the meaning set forth in
Section 2.4(a).
51
(oo) "Earn-out Payment" or "Earn-out Payments," as applicable,
has the meaning set forth in Section 2.4(a).
(pp) "Earn-out Shares" has the meaning set forth in Section
3.28.
(qq) "EBITDA" means, as determined on each Anniversary Date
with respect to a particular Company, earnings before taking into
account any interest, taxes, depreciation or amortization for the
one year period ending on the Anniversary Date. Any income accruing
within any one (1) year period shall not be included if such income
is properly attributable to any time period prior to the beginning
of such one (1) year period. The Buyer shall make such other
adjustments as it reasonably determines in good faith to prevent the
bunching of income and/or expenses.
(rr) "Employee Benefit Plans" means (i) any "employee pension
benefit plan" (as defined in Section 3(2) of ERISA, (ii) any
"employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), and (iii) any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including
without limitation, a "multiemployer plan" (as defined in either
Section 3(37) or Section 4001(a)(13) of ERISA), insurance coverage,
severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock
appreciation, one or more of the Severance Plans or post-retirement
compensation which is sponsored, maintained or contributed to, by
any of the Companies, the Sellers or any ERISA Affiliate, or for
which the Companies, the Sellers or any ERISA Affiliate has any
obligation or any liability of any nature.
(ss) "Encumbrance" has the meaning set forth in Section
3.2(a).
(tt) "Environment" means all air, surface water, groundwater,
or land, including land surface or subsurface, including all fish,
wildlife, biota and all other natural resources.
(uu) "Environmental Claim" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices, violations,
requests for information, proceedings or other written
communications, whether criminal or civil, pursuant to any
Environmental Law applicable to the Companies by any Person
(including, but not limited to, any Governmental Entity, Person and
citizens' group) alleging, asserting, or claiming any actual or
potential: (i) violation of or liability under any Environmental
Law, (ii) violation of any Environmental Permit, or (iii) liability
for investigatory costs, cleanup costs, removal costs, remedial
costs, response costs, natural resource damages, fines, or penalties
arising out of, or resulting from the presence, Release, or
threatened Release into the Environment, of any Hazardous Substances
at any location, including, but not limited to, any off-Site
location to which Hazardous Substances or materials containing
Hazardous Substances were sent for handling, storage, treatment, or
disposal; provided, however, that "Environmental Claim" does not
52
include any claims made against the Companies arising out of or
related to any policy of insurance issued by the Companies.
(vv) "Environmental Law" means any and all Laws relating to
the protection of the Environment, worker health and safety, and/or
governing the handling, use, generation, treatment, storage,
transportation, disposal, manufacture, distribution, formulation,
packaging, labeling, or Release of Hazardous Substances.
(ww) "Environmental Permit" means any Licenses or Consents
required by any Governmental Entity under or in connection with any
Environmental Law.
(xx) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(yy) "ERISA Affiliate" means any entity which with respect to
the Companies or the Sellers is a member of (i) a controlled group
of corporations (as defined in Section 414(b) of the Code), (ii) a
group of trades or businesses under common control (as defined in
Section 414(c) of the Code), or (iii) an affiliated service group
(as defined under Section 414(m) of the Code or the regulations
under Section 414(o) of the Code), any of which includes the
Companies or the Sellers.
(zz) "Estimated Closing Date Balance Sheets" have the meaning
set forth in Section 2.2.
(aaa) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(bbb) "Excluded Assets and Liabilities" has the meaning
specified in Section 1.2.
(ccc) "Excluded Business" means the business activities,
operations, assets and obligations relating to the placement or sale
of life insurance including variable products and annuities,
disability insurance and long-term care insurance, and any insurance
products offered by Parents' consumer finance division on behalf of
Parent's Affiliates and their customers (including without
limitation vehicle single interest or VSI insurance, credit life
insurance, credit insurance, gap insurance and payment protection
insurance.
(ddd) "Xxxxxxxxxx" has the meaning set forth in the Recitals.
(eee) "Financial Statements" has the meaning set forth in
Section 3.5(a).
53
(fff) "GAAP" means generally accepted accounting principles,
consistently applied, as used in the United States of America as in
effect as of the date hereof.
(ggg) "Governmental Entity" means:
(i) any international, foreign, provincial, United
States, federal, state, county, municipal or local government
or governmental organization or any component part (including,
but not limited to, any officer, official, branch, court,
arbitration panel, agency, department, regulatory body,
authority, tribunal, commission, instrumentality or agency) of
any government or governmental organization,
(ii) any Person with any regulatory power or authority
or any governmental power or authority (including, but not
limited to, the National Association of Securities Dealers
(NASD), any stock exchange or any securities market, or any
Person with any power or authority to administer, assess,
audit, calculate, collect, impose, investigate, review or
otherwise act with respect to any Tax or any Tax-related
matter), or
(iii) any Person acting for or on behalf of any of the
foregoing.
(hhh) "Hazardous Substance" means any chemicals, materials,
substances or wastes in any amount or concentration which are now
included in the definition of "hazardous substances," "hazardous
materials," "hazardous wastes," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutants," or "contaminants" or words of similar
import, under any Environmental Law.
(iii) "HIL" has the meaning set forth in the Recitals.
(jjj) "HIL Common Stock" shall mean the common stock, no par
value per share, of HIL.
(kkk) "HIL SEC Reports" has the meaning set forth in Section
4.8.
(lll) "HIL 10-K" has the meaning set forth in Section 4.8.
(mmm) "HIL 10-Qs" has the meaning set forth in Section 4.8.
(nnn) "HSR Act" shall mean the Xxxx Xxxxx Xxxxxx Antitrust
Improvements Act of 1976, as amended.
(ooo) "HSR Clearance" shall mean the expiration or early
termination of any applicable waiting period under the HSR Act,
without any suit to enjoin the transactions contemplated herein
having been filed by the Department of Justice or Federal Trade
Commission under Title 15 of the United States Code.
54
(ppp) "Indemnified Party" has the meaning set forth in Section
7.5(a).
(qqq) "Indemnifying Parties" has the meaning set forth in
Section 7.5(a).
(rrr) "Intellectual Property Assets" has the meaning set forth
in Section 3.12(c).
(sss) "Interest" or "Interests" has the meaning set forth in
the Recitals.
(ttt) "International Employee Plan" has the meaning set forth
in Section 3.10(l).
(uuu) "Knowledge" means the actual knowledge, without
investigation, of any of Messrs. Xxxxxxx X'Xxxxx, Xxxx Xxxxxxxx,
Xxxx X. Xxxxxxxx or Xxxxxxxx X. Xxxx in the case of the Sellers and
any of Xxxxx Xxxxxxx or Xxxxxxx Xxxxxxxx in the case of the Buyer.
(vvv) "Latest Balance Sheet" or "Latest Balance Sheets" has
the meaning set forth in Section 3.5(a).
(www) "Laws" or "Law" means all applicable criminal, civil or
common laws, statutes, ordinances, orders, codes, rules,
regulations, policies, guidance documents, writs, judgments,
decrees, injunctions, or agreements of any Governmental Entity.
(xxx) "Lease" means all leases, subleases, licenses and other
agreements under which the Companies use or occupy or have the right
to use or occupy, now or in the future, any Leased Real Property.
(yyy) "Leased Real Property" has the meaning set forth in
Section 3.11.
(zzz) "Lessors" have the meaning set forth in Section 3.11.
(aaaa) "License" has the meaning set forth in Section 3.9.
(bbbb) "Litigation Conditions" has the meaning set forth in
Section 7.5(b).
(cccc) "Marks" has the meaning set forth in Section
3.12(c)(ii).
(dddd) "Material Adverse Effect" means, with respect to any
party to this Agreement or any of the Companies, (i) a change or
effect that is or is reasonably likely to be materially adverse to
the business, results of operations or financial condition of such
party or Company, including its subsidiaries, taken as
55
a whole, or (ii) a material adverse effect on the ability of such
party to timely consummate, as applicable, the transactions
contemplated by this Agreement.
(eeee) "Material Contracts" has the meaning set forth in
Section 3.14(a).
(ffff) "Negotiation Period" has the meaning set forth in
Section 5.1(c).
(gggg) "Noncompete Period" has the meaning set forth in
Section 5.1(a).
(hhhh) "Orders" means any orders, judgments, injunctions,
awards, decrees, consents or writs.
(iiii) "Organic Revenue Growth" means, as determined on each
Anniversary Date with respect to a particular Company, the
percentage determined by dividing (i) the excess (if any) of the
Total Revenue (excluding any Total Revenue produced by, derived from
or otherwise attributable to any asset (including, but not limited
to, any stock or other equity interest) if the asset was acquired
from another Person during the one year period ending on such
Anniversary Date) for the one year period ending on the Anniversary
Date over (B) the Total Revenue for the one year period ending on
the immediately-preceding Anniversary Date (or, in the case of the
determination made on the first Anniversary Date, the Closing Date)
by (ii) the Total Revenue for the one year period ending on the
immediately-preceding Anniversary Date (or, in the case of the
determination made on the first Anniversary Date, the Closing Date).
The amount set forth in the preceding sentence shall be determined
in accordance with GAAP.
(jjjj) "Owned Real Property" has the meaning set forth in
Section 3.11.
(kkkk) "Owned RE Lease" has the meaning set forth in Section
5.9(b).
(llll) "PBGC" has the meaning set forth in Section 3.10(e)
(mmmm) "Parent" has the meaning set forth in the Recitals.
(nnnn) "Patents" has the meaning set forth in Section
3.12(c)(i).
(oooo) "Payroll Practices" has the meaning set forth in
Section 3.10(a).
(pppp) "Person" means any natural person or legal person
(including, but not limited to, a corporation, joint stock company,
limited liability company, partnership, joint venture, association,
estate, trust, government or governmental
56
authority, agency or instrumentality) or any group of any of natural
or legal persons acting in concert.
(qqqq) "Personal Property" has the meaning set forth in
Section 3.13(a).
(rrrr) "Plan" and "Plans" have the meaning set forth in
Section 3.10(a).
(ssss) "Plymouth Owned Property" has the meaning set forth in
Section 3.11.
(tttt) "Post-Closing Period" means any Tax period beginning on
or after the Closing Date.
(uuuu) "Pre-Closing Period" means any Tax period ending on or
before the Closing Date.
(vvvv) "Proceeding" means any audit, administrative action,
assessment, case, deposition, examination, executive action, filing,
hearing, information request, injunction, inquiry, investigation,
judgment, levy, litigation, order, reassessment, review, seizure,
subpoena, suit, summons, testimony, or other activity involving or
conducted by or on behalf of any Governmental Entity.
(wwww) "Prohibited Business" means the following insurance
business lines: (i) commercial property and casualty insurance
(including customary bonds and surety in connection therewith); (ii)
personal property and casualty insurance; and (iii) group health
insurance.
(xxxx) "Purchase Price" has the meaning set forth in Section
2.1.
(yyyy) "Real Property" has the meaning set forth in Section
3.11.
(zzzz) "Release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing of a Hazardous Substance into the
Environment.
(aaaaa) "Remuneration" means, as determined on each
Anniversary Date with respect to a particular Company, the total
expenditures (including, but not limited to, wages, commissions,
bonuses, pension and fringe benefits, FICA, FUTA and other
employment-related Taxes, unemployment insurance, healthcare and
administrative expenditures) relating to all officers, directors,
employees, producers consultants, independent contractors and other
personnel incurred for the one-year period ending on the Anniversary
Date. The amount set forth in the preceding sentence shall be
determined in accordance with GAAP.
(bbbbb) "Representative" has the meaning set forth in Section
10.2.
57
(ccccc) "Restricted Market" means each of the following
states: Connecticut, Delaware, Massachusetts, New Hampshire,
Pennsylvania, and Rhode Island.
(ddddd) "SEC" means the United States Securities and Exchange
Commission.
(eeeee) "Securities Act" means the Securities Act of 1933, as
amended.
(fffff) "Seller Indemnitee" has the meaning set forth in
Section 7.3.
(ggggg) "Sellers" has the meaning set forth in the Recitals.
(hhhhh) "Seller Required Consents" has the meaning set forth
in Section 3.4(b).
(iiiii) Severance Plans" has the meaning set forth in Section
3.10(h).
(jjjjj) "Site" means any of the real properties currently or
previously owned, leased, used or operated by the Companies, any
predecessors of the Companies or any entities previously owned by
the Companies, including all soil, subsoil, surface waters and
groundwater thereat.
(kkkkk) "Straddle Period" means any Tax period beginning
before the Closing Date and ending after the Closing Date.
(lllll) "Strategic Alliance Agreement" has the meaning set
forth in the Recitals.
(mmmmm) "Sub-Lease Agreement" has the meaning set forth in
Section 5.9(a).
(nnnnn) "Subsidiary Interests" has the meaning set forth in
Section 3.2(b).
(ooooo) "Subsidiary Securities" has the meaning set forth in
Section 3.2(b).
(ppppp) "Subsidiaries" means The Xxxxxxxxxx Company of Rhode
Island, Inc. and B & L Insurance Advisers, Inc.
(qqqqq) "Tangible Net Worth" means the aggregate assets (as of
the Closing Date) of the Companies less the sum of the aggregate
liabilities (as of the Closing Date) of the Companies and the
aggregate intangible assets (including, but not limited to,
goodwill) (as of the Closing Date) of the Companies. The amount set
forth in the preceding sentence shall be determined (without
duplication) in accordance with GAAP and, if permitted under GAAP,
in a
58
manner consistent with the balance sheets (as described in Section
3.5(a) and as of December 31, 2005) of the Companies, except as
otherwise set forth below:
(i) Any asset relating to, derived from or created by any of
the following items shall be disregarded: (A) any contingent
commission or similar arrangement, (B) any transaction
contemplated under any Transaction Document (including, but
not limited to any insurance or indemnity benefit under
Section 7.2(h)), (C) any and all assets (including, but not
limited to, any goodwill associated therewith) purchased
directly or indirectly from Wachovia Insurance Services, LLC
pursuant to that certain purchase agreement dated July 1, 2005
or Xxxxxxxxxxx Xxxxxxx, (D) any and all leasehold improvements
associated with the Norristown, PA facility, (E) without any
reduction for any reserve or similar offset, any account
receivable or other amounts due from any employee or
independent contractor (including, but not limited to, amounts
due from Xxxx XxXxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx Xxxxxx, Xxxxxx
XxXxxxx, Xxxx Xxxxxxxx, Xxxxxxx X. Xxxxx, Xxxx Xxxxxx, Xxxx
Xxxxxxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxxx and Xxxx
Xxxx), (F) without any reduction for any reserve or similar
offset, any and all accounts receivable or other amounts due
from the Parent, the Sellers or any Affiliate of any of the
foregoing, (G) any and all arbitration awards (including, but
not limited to, the amount set forth in Account Number 10170),
(H) the sale of real property in Falmouth, MA (including, but
not limited to, the amount recorded in B & L's financial
records in Account Number 23071), (I) any and all amounts
listed or treated as inventory (including, but not limited to,
supplies and envelopes and the amount set forth in Account
Number 13030 in B & L's financial records), (J) any and all
amounts (to the extent relating to or derived from any
commissions or other fees) recorded in Account Number
1.11081.00 in Xxxxxxxxxx'x general ledger, (K) any interests
in real property, (L) the escrow account balance or other
security associated with the purchase of assets from Waypoint
Insurance Group, Inc., pursuant to that certain purchase
agreement dated November 30, 2004 and (M) any account
receivable or other amount due from or under any Plan or life
insurance policy;
(ii) Any liability relating to, derived from or created by any
of the following items shall be disregarded: (A) any and all
amounts payable to Xx. Xxxxxxx Xxxxxxx, (B) any mortgage or
other debt secured by real property, and (C) any account
payable or other amount incurred under any Plan or life
insurance policy;
(iii) To the extent not otherwise treated as a liability in
accordance with GAAP, each of the following items or amounts
shall be deemed to be and treated as a liability: (A) any
account payable relating to or other amount to be paid under
any Plan or life insurance policy, (B) with respect to any
contingent payment obligation incurred in connection with a
purchase of assets from AllTown Insurance, the excess (if any)
of $949,631 over any
59
actual payments made prior to the Closing Date by B & L to
AllTown Insurance, and (C) with respect to any contingent
payment obligation incurred in connection with a purchase of
the assets of Xxxxx Insurance, the excess (if any) of $812,000
over any actual payments made since January 31, 2006 and prior
to the Closing Date by B & L to the sellers of Xxxxx
Insurance;
(iv) Any allowance for doubtful accounts established with
respect to any Accounts Receivable, any and all reserves
established with respect to error and omission insurance
claims, and any and all reserves established with respect to
Section 9(qqqqq)(i)(E) above shall be reversed; and
(v) Reserves for policy cancellations (as established in
accordance with SEC issued Bulletin No. 101 (SAB 101)) shall
be deemed to be $394,000 in the aggregate (consisting of
$145,000 in the case of Citizens Clair, $173,000 in the case
of B & L, and $76,000 in the case of B & L).
(rrrrr) "Targeted Contingent Payments" has the meaning
specified in Section 2.4(a).
(sssss) "Targeted Tangible Net Worth" has the meaning set
forth in Section 2.3(b).
(ttttt) "Tax" means any net income, gross income, profits,
gross receipts, excise, property, sales, ad valorem, withholding,
social security, retirement, excise, employment, unemployment,
minimum, alternative, add-on minimum, estimated, severance, stamp,
occupation, environmental, premium, capital stock, disability,
windfall profits, use, service, net worth, payroll, franchise,
license, gains, customs, transfer, recording, and other tax, duty,
fee, assessment or charge of any kind whatsoever, assessed or
otherwise imposed by any Governmental Entity or under applicable
Law, together with any interest, penalties or any other additions or
increases.
(uuuuu) "Tax Return" means any return, election, declaration,
report, schedule, information return, document, statement relating
to Taxes, or any amendment to any of the foregoing (including,
without limitation, any consolidated, combined or unitary return)
filed or required to be filed with any Governmental Entity.
(vvvvv) "Third Party Rights" has the meaning set forth in
Section 3.12(a)(ii).
(wwwww) "Total Revenue" means, as determined on each
Anniversary Date with respect to a particular Company, the total
gross revenues consisting of commissions, fees and interest for the
one year period ending on each Anniversary Date. The amount set
forth in the preceding sentence shall be determined in accordance
with GAAP.
60
(xxxxx) "Transaction Documents" has the meaning set forth in
Section 3.3.
(yyyyy) "Transition Services Agreement" has the meaning set
forth in Section 5.16.
(zzzzz) "Unit 0, Xxxx Xxxxxxxxxxx Owned Property" has the
meaning set forth in Section 3.11.
(aaaaaa) "Unit 2, West Bridgewater Owned Property" has the
meaning set forth in Section 3.11.
(bbbbbb) "WARN" has the meaning set forth in Section 3.25(c).
10. MISCELLANEOUS.
10.1 Transaction Fees and Expenses. Except as otherwise specified
herein, each party shall bear such costs, fees and expenses as may be incurred
thereby in connection with this Agreement and the transactions contemplated
hereby. In connection with the transactions contemplated by this Agreement, the
Buyer shall be solely responsible for all expenses associated with any
notification filings under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
10.2 Notices. Any notice, demand, request or other communication
which is required, called for or contemplated to be given or made hereunder to
or upon any party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or a recognized national
overnight courier service for next day delivery with receipt therefor, or (ii)
certified or registered mail, postage paid, return receipt requested, or (b)
sent by facsimile transmission with a written copy thereof sent on the same day
by postage paid first-class mail, or (c) by personal delivery to such party at
the following address:
if to the Buyer, to:
Hub International Limited
00 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx Rosenman LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
61
if to the Sellers and Parent:
Citizens Financial Group, Inc.
0 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxx X. Xxxx
Group Executive Vice President
Tel: (000) 000-0000
Fax: (000) 000-0000
and to:
Citizens Financial Group, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Senior Vice President,
General Counsel and Secretary
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Procter LLP
Exchange Place
Boston, MA 02109
Attention: Xxxxxxx X. Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this Section
10.2. Notwithstanding the foregoing, each Seller hereby appoints and constitutes
Xx. Xxxxxxxx X. Xxxx, and any person he designates in writing to the Buyer (the
"Representative"), as its true and lawful agent and attorney-in-fact to act for
and on behalf of such Seller for the purpose of taking any and all actions by
such Seller specified in or contemplated by this Agreement, including as agent
and attorney-in-fact for such Seller (a) in connection with any amendment or
waiver of any provision of this Agreement, (b) in connection with the receipt of
the Purchase Price and all agreements, certificates and other documents at the
Closing, (c) with respect to the matters set forth in Section 2.3 and Section
2.5 relating to the review of, making any objections to and reaching agreement
on, the calculation of Audited Tangible Net Worth and any Earn-out Calculation,
(d) for the purpose of receiving from the Buyer and distributing to the Sellers
any Earn-out Payment, (e) for the purpose of collecting from the Sellers and
paying to the Buyer any amounts required to be paid to the Buyer under this
Agreement, (f) giving and receiving notices on behalf of the Sellers under this
Agreement, and (g) for the purpose of defending all indemnity claims pursuant to
Article 7, consenting to, compromising or settling all such indemnity claims,
and conducting negotiations with the Buyer under this Agreement. Any decision,
act, consent or instruction of the Representative hereunder shall constitute a
decision of all of the Sellers and shall be final,
62
binding and conclusive upon each Seller, and the Buyer shall be entitled to rely
upon any such decision, act, consent or instruction of the Representative as
being the decision, act, consent or instruction of each Seller.
10.3 Amendments. Except as otherwise provided herein, no amendment
of this Agreement shall be valid or effective unless in writing and signed by or
on behalf of the party against whom the same is sought to be enforced.
10.4 Waiver. No course of dealing of any party hereto, no omission,
failure or delay on the part of any party hereto in asserting or exercising any
right hereunder, and no partial or single exercise of any right hereunder by any
party hereto shall constitute or operate as a waiver of any such right or any
other right hereunder. No waiver of any provision hereof shall be effective
unless in writing and signed by or on behalf of the party to be charged
therewith. No waiver of any provision hereof shall be deemed or construed as a
continuing waiver, as a waiver in respect of any other or subsequent breach or
default of such provision, or as a waiver of any other provision hereof unless
expressly so stated in writing and signed by or on behalf of the party to be
charged therewith.
10.5 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts,
without regard to conflict of law provisions, except to the extent precluded by
federal law of mandatory application.
10.6 Severability. The provisions hereof are severable and if any
provision of this Agreement shall be determined to be legally invalid,
inoperative or unenforceable in any respect by a court of competent
jurisdiction, then the remaining provisions hereof shall not be affected, but
shall, subject to the discretion of such court, remain in full force and effect,
and any such invalid, inoperative or unenforceable provision shall be deemed,
without any further action on the part of the parties hereto, amended and
limited to the extent necessary to render such provision valid, operative and
enforceable.
10.7 Force Majeure. No party shall be liable to the other party for
any default or delay in the performance of its obligations under this Agreement
if such default or delay is caused, directly or indirectly, by revolution or
other civil disorders, wars, acts of enemies, strikes not involving employees of
the party failing to perform, fires, floods, acts of God, federal, state, or
municipal action, statute, ordinance or regulation or, without limiting the
foregoing, any other causes not within its reasonable control, and which, by the
exercise of reasonable diligence, it is unable to prevent.
10.8 Successors and Assigns. This Agreement is binding upon, shall
inure to, and is for the benefit of the parties hereto and their respective
successors, legal representatives, and assigns. This Agreement cannot be
assigned (except to any Affiliate of each of the parties), whether by operation
of law or otherwise, except by a written agreement executed by the parties
hereto or their respective successors and assigns.
10.9 Usage. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
All terms defined in this Agreement in their singular or plural forms have
correlative meanings when used herein in their
63
plural or singular forms, respectively. Unless otherwise expressly provided, the
words "include," "includes" and "including" do not limit the preceding words or
terms and shall be deemed to be followed by the words "without limitation."
10.10 Entire Agreement; Ambiguities. This Agreement, together with
the Exhibits, Schedules, certificates and other documentation referred to herein
or required to be delivered pursuant to the terms hereof, contains the terms of
the entire agreement among the parties with respect to the subject matter hereof
and thereof and supersedes any and all prior agreements, commitments,
understandings, discussions, negotiations or arrangements of any nature relating
thereto. Each party hereto has been represented by legal counsel in the review
and revisions of this Agreement and each party agrees that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not apply in interpreting this Agreement, and the terms and
provisions of this Agreement shall be construed fairly as to all parties,
regardless of which party was generally responsible for the preparation of this
Agreement. Any Law defined or referred to herein (or in any agreement or
instrument that is referred to herein) means such law as, from time to time, may
be amended, modified or supplemented, including (in the case of statutes) by
succession of comparable successor statutes. References to a Person also refer
to its predecessors and its permitted successors and assigns.
10.11 Section Headings. Article and Section headings in this
Agreement are for convenience and reference only, do not constitute part of this
Agreement and shall not modify or affect its interpretation.
10.12 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other parties hereto.
10.13 No Personal Liability. This Agreement (and each agreement,
certificate and instrument delivered pursuant hereto) shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any officer, director, employee, agent, representative or investor of any party
hereto.
10.14 No Third Party Beneficiaries. No provision of this Agreement
is intended to, or shall, confer any third party beneficiary or other rights or
remedies upon any Person other than the parties hereto. Without limiting the
generality of the foregoing, no provision of this Agreement shall create any
third party beneficiary rights in any employee or former employee of the
Companies (including any beneficiary or dependent thereof) in respect of
continued employment by the Companies or otherwise.
[SIGNATURE PAGE FOLLOWS]
64
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first set forth above.
SELLERS:
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Xxxxxx X. Xxxxx, Xx.
------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: Senior Vice President
CITIZENS BANK OF PENNSYLVANIA
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Executive Vice President
COURT STREET HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: President
CITIZENS FINANCIAL GROUP, INC:
By: /s/ Xxxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxxx X. Xxxx
Title: Group Executive Vice President
BUYER:
HUB U.S. HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
HUB INTERNATIONAL LIMITED
(as to Section 5.15 only)
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
2
