AGREEMENT AND PLAN OF MERGER
AMONG
ACCEL MERGER SUB, INC.
ACCEL INTERNATIONAL CORPORATION,
ALLEGIANCE INSURANCE MANAGERS LTD., AND
XXXXXX X. XXXXXX, XXXXXX XXXXXXX, ET AL.
JANUARY 11, 2000
1. DEFINITIONS 1
2. MERGER OF ACQUIROR INTO THE COMPANY; CLOSING 9
2.1 EFFECTIVENESS OF AGREEMENT 9
2.2 THE MERGER; EFFECTIVE TIME 9
2.3 CERTIFICATE OF INCORPORATION; BY-LAWS 10
2.4 DIRECTORS AND OFFICERS 10
2.5 CONVERSION OF AIM STOCK 10
2.6 MERGER CONSIDERATION 10
2.7 CLOSING 12
2.8 CLOSING OBLIGATIONS 12
2.9 EARN OUT OF ADDITIONAL BUYER COMMON STOCK 13
2.10 FORFEITURE OF SHARES 15
2.11 SETTLEMENT ACCOUNT SHARES 16
2.12 FINANCIAL COVENANT AND SHAREHOLDERS' OPTION TO RESCIND
TRANSACTION 17
3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS 18
3.1 ORGANIZATION AND GOOD STANDING 18
3.2 AUTHORITY; NO CONFLICT 19
3.3 CAPITALIZATION 20
3.4 FINANCIAL STATEMENTS 20
3.5 BOOKS AND RECORDS 21
3.6 TITLE TO PROPERTIES; ENCUMBRANCES 21
3.7 CONDITION AND SUFFICIENCY OF ASSETS 21
3.8 ACCOUNTS RECEIVABLE 22
3.9 NO UNDISCLOSED LIABILITIES 22
3.10 TAXES 22
3.11 NO MATERIAL ADVERSE CHANGE 23
3.12 EMPLOYEE BENEFITS 23
3.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS 23
3.14 LEGAL PROCEEDINGS; ORDERS 25
3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS 26
3.16 CONTRACTS; NO DEFAULTS 27
3.17 INSURANCE 30
3.18 ENVIRONMENTAL MATTERS 31
3.19 EMPLOYEES 32
3.20 LABOR RELATIONS; COMPLIANCE 33
3.21 INTELLECTUAL PROPERTY 33
3.22 CERTAIN PAYMENTS 36
3.23 RELATIONSHIPS WITH RELATED PERSONS 37
3.24 BROKERS OR FINDERS 37
3.25 PRIVATE OFFERING REPRESENTATIONS 37
3.26 DISCLOSURE 38
4. REPRESENTATIONS AND WARRANTIES OF BUYER 38
4.2 ORGANIZATION AND GOOD STANDING 39
4.3 AUTHORITY; NO CONFLICT 39
4.4 INVESTMENT REPRESENTATIONS OF THE BUYER 40
4.5 CERTAIN PROCEEDINGS 41
4.8 TAXES 41
4.9 BROKERS OR FINDERS 42
4.10 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS 42
4.11 BUYER COMMON STOCK 42
5. COVENANTS OF SHAREHOLDERS 43
5.1 ACCESS AND INVESTIGATION 43
5.2 OPERATION OF THE BUSINESS OF THE COMPANY 43
5.3 NEGATIVE COVENANT 43
5.4 REQUIRED APPROVALS 44
5.5 NOTIFICATION 44
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS 44
5.7 NO NEGOTIATION 44
5.8 BEST EFFORTS 45
5.9 PRE-CLOSING TAXES 45
6. COVENANTS OF BUYER 45
6.1 COVENANTS PRIOR TO CLOSING 45
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE 48
7.1 ACCURACY OF REPRESENTATIONS 49
7.2 SHAREHOLDERS' PERFORMANCE 49
7.3 CONSENTS 49
7.4 ADDITIONAL DOCUMENTS 49
7.5 NO PROCEEDINGS 49
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS 50
7.7 NO PROHIBITION 50
7.8 EMPLOYMENT AGREEMENTS 50
8. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATION TO CLOSE 50
8.1 ACCURACY OF REPRESENTATIONS 50
8.2 BUYER'S PERFORMANCE 50
8.3 CONSENTS 51
8.4 ADDITIONAL DOCUMENTS 51
8.5 NO PROCEEDINGS 51
9. TERMINATION PRIOR TO CLOSING 51
9.1 TERMINATION EVENTS 51
9.2 EFFECT OF TERMINATION PRIOR TO CLOSING 52
10. INDEMNIFICATION; REMEDIES 52
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
OBLIGATIONS 52
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SHAREHOLDERS 53
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER 53
10.4 TIME LIMITATIONS 54
10.5 LIMITATIONS ON AMOUNT - SHAREHOLDERS 54
10.6 LIMITATIONS ON AMOUNT - BUYER 54
10.7 INDEMNITY NEGOTIATIONS; STOCK OFFSET; VALUATION 55
10.8 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS 55
10.9 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS 56
11. GENERAL PROVISIONS 56
11.1 BUYER'S BOARD OF DIRECTORS 56
11.2 EXPENSES 57
11.3 PUBLIC ANNOUNCEMENTS 57
11.4 CONFIDENTIALITY 57
11.5 NOTICES 57
11.6 FURTHER ASSURANCES 58
11.7 WAIVER 58
11.8 ENTIRE AGREEMENT AND MODIFICATION 59
11.9 SCHEDULES 59
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS 59
11.11 SEVERABILITY 59
11.12 SECTION HEADINGS, CONSTRUCTION 60
11.13 GOVERNING LAW 60
11.14 COUNTERPARTS 60
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is made as of
January 11 , 2000, by and among Accel Merger Sub, Inc., a Delaware
corporation ("Acquiror"), Accel International Corporation , a Delaware
corporation and owner of all of the issued and outstanding capital stock
of Acquiror ("Buyer"), Allegiance Insurance Managers, Ltd., a Connecticut
corporation (the "Company"), Xxxxxx X. Xxxxxx, an individual resident in
Simsbury, Connecticut ("Pastor"), Xxxxxx X. Xxxxxx, Trustee, Xxxxxx X.
Xxxxxx Profit Sharing Plan & Trust ("Trust"), and those individuals
listed on Schedule 1 hereto and made a part hereof ( all of the foregoing
except Pastor and the Trust are herein collectively referred to as the
"Other Shareholders," and each individually as an "Other Shareholder").
Pastor, the Trust and the Other Shareholders are collectively referred to
as the "Shareholders" and each as a "Shareholder." Acquiror, Buyer, the
Company and the Shareholders are referred to collectively herein as the
"Parties," and each individually as a "Party."
RECITALS
WHEREAS, Acquiror, Buyer, the Company and the Shareholders deem the
merger of the Company into Acquiror on the terms set forth in this
Agreement and Plan of Merger (the "Agreement") to be desirable and in the
best interests of their respective shareholders; and
WHEREAS, the Boards of Directors of Acquiror and the Company have
approved this Agreement and directed that this Agreement and the Merger
be submitted to their respective shareholders for adoption by written
consent;
NOW, THEREFORE, The parties, intending to be legally bound, agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"AIM STOCK" - as defined Section 2.5.
"APPLICABLE CONTRACT" - any Contract (a) under which the Company has
or may acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability, or (c) by which the Company or
any of the assets owned or used by it is or may become bound.
"BALANCE SHEET" - as defined in Section 3.4.
"BEST EFFORTS" - the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible; provided, however, that
an obligation to use Best Efforts under this Agreement does not require
the Person subject to that obligation to take actions that would result
in a materially adverse change in the benefits to such Person of this
Agreement and the Contemplated Transactions.
"BREACH" - a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if
there is or has been (a) any material inaccuracy in or breach of, or any
material failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision, or (b) any claim (by
any Person) or other occurrence or circumstance that is or was materially
inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"BUYER" - as defined in the first paragraph of this Agreement.
"BUYER COMMON STOCK" - the Common Stock, $.01 par value per share,
of Buyer.
"BUYER DISCLOSURE SCHEDULE" - the disclosure schedule delivered by
Buyer to the Shareholders concurrently with the execution and delivery of
this Agreement.
"CLOSING" - as defined in Section 2.7.
"CLOSING DATE" - the date and time as of which the Closing actually
takes place.
"COMPANY" - as defined in the first paragraph of this Agreement.
"CONSENT" - any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONSOLIDATED PRE-TAX EARNINGS" - the earnings of the Company
computed in accordance with the annual report issued by the Company's
certified public accountants.
"CONTEMPLATED TRANSACTIONS" - all of the transactions contemplated
by this Agreement, including:
(a) the Merger;
(b) the execution, delivery, and performance of the Employment
Agreements, the Shareholders' Releases, and the Escrow Agreement;
(c) the performance by the Parties of their respective
covenants and obligations under this Agreement; and
(d) Buyer's exercise of control over the Company.
"CONTRACT" - any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that
is legally binding.
"DAMAGES" - as defined in Section 10.2.
"EFFECTIVE TIME" - as defined in Section 2.2(b).
"EMPLOYMENT AGREEMENTS" - as defined in Section 2.8(a)(iii).
"ENCUMBRANCE" - any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest,
right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of
any other attribute of ownership.
"ENVIRONMENT" - soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal
life, and any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" - any cost, damages,
expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and
consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment, or
other remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law (whether or not
such Cleanup has been required or requested by any Governmental Body or
any other Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety
and Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW" - any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to human health
or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"ERISA" - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"ESCROW AGENT" - as defined in Section 2.8(c).
"ESCROW AGREEMENT" - as defined in Section 2.8(c).
"FACILITIES" - any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles) currently or
formerly owned or operated by the Company.
"GAAP" - generally accepted United States accounting principles,
applied, when used in reference to the Company, on a basis consistent
with the basis on which the Balance Sheet and the other financial
statements referred to in Section 3.4(b) were prepared and, when used in
reference to Buyer, on a basis consistent with the basis on which the
financial statements of Buyer are prepared.
"GOVERNMENTAL AUTHORIZATION" - any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" - any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
"HAZARDOUS MATERIALS" - any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof
or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"INTELLECTUAL PROPERTY ASSETS" - as defined in Section 3.21.
"IRC" - the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code of
1986 or any successor law.
"IRS" - the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
Provided, however, that for the purposes of Article 3 of this
Agreement, will be deemed to have "Knowledge" of a particular fact or
matter if either subsection (a) or (b) of this definition is true, and
the Other Shareholders will be deemed to have "Knowledge" of a particular
fact or matter only if subsection (a) of this definition is true.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or
at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty.
"MERGER" - as defined in Section 2.2.
"OCCUPATIONAL SAFETY AND HEALTH LAW" - any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by
industry associations and insurance companies), designed to provide safe
and healthful working conditions.
"OHIO APPROVAL" - All approvals that must be obtained by Pastor
under the insurance laws of the State of Ohio in connection with this
Agreement or the Contemplated Transactions.
"ORDER" - any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" - an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person; and
(b) such action is not required to be specifically or
specially authorized by the board of directors of such Person (or by any
Person or group of Persons exercising similar authority).
"ORGANIZATIONAL DOCUMENTS" - (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited
partnership of a limited partnership; (d) any charter or similar document
adopted or filed in connection with the creation, formation, or
organization of a Person; (e) the articles of organization and operating
agreement of a limited liability company; and (f) any amendment to any of
the foregoing.
"PERSON" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
joint venture, estate, trust, association, organization, labor union, or
other entity or Governmental Body.
"PROCEEDING" - any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"MERGER SHARES" - as defined in Section 2.6(a) hereof.
"PASTOR CONSIDERATION" - as defined in Section 2.6(a)(2) hereof.
"RECLASSIFICATION" - as defined in Section 2.6(b) hereof.
"RELATED PERSON" - with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under
common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any
other natural person who is related to the individual or the individual's
spouse within the second degree, and (iv) any other natural person who
resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of voting securities or other voting
interests representing at least 10% of the outstanding voting power of a
Person or equity securities or other equity interests representing at
least 10% of the outstanding equity securities or equity interests in a
Person.
"RELEASE" - any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE" - with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"REQUEST" - any written request by the Buyer pursuant to Article 3,
or the Company pursuant to Article 4, for the other party to provide
written materials pursuant to the Shareholder Disclosure Schedule or the
Buyer Disclosure Schedule.
"SECURITIES ACT" - the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"SECURITIES EXCHANGE ACT" - the Securities Exchange Act of 1934, as
amended, or any successor law, and regulations and rules issued pursuant
to that Act of any successor law.
"SHAREHOLDER DISCLOSURE SCHEDULE" - the disclosure schedule
delivered by Shareholders to Buyer concurrently with the execution and
delivery of this Agreement.
"SHAREHOLDERS" - as defined in the first paragraph of this
Agreement.
"SHAREHOLDERS' RELEASES" - as defined in Section 2.8.
"SHARING PERCENTAGES" - as defined in Section 2.8.
"SUBSIDIARY" - with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having
the power to elect a majority of that corporation's or other Person's
board of directors or similar governing body, or otherwise having the
power to direct the business and policies of that corporation or other
Person (other than securities or other interests having such power only
upon the happening of a contingency that has not occurred) are held by
the Owner or one or more of its Subsidiaries; when used without reference
to a particular Person, "Subsidiary" means a Subsidiary of the Company.
"TAX" - any tax (including any income tax, capital gains tax, value-
added tax, sales tax, use tax, property tax, payroll tax, workers
compensation tax, unemployment tax, gift tax or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or
other fee, and any related charge or amount (including any fine, penalty,
interest, or addition to tax), imposed, assessed, or collected by or
under the authority of any Governmental Body or payable pursuant to any
tax-sharing agreement or any other Contract relating to the sharing or
payment of any such tax, levy, assessment, tariff, duty, deficiency, or
fee.
"TAX RETURN" - any return (including any information return),
report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any
Legal Requirement relating to any Tax.
"TERMINATION OPTION" - defined in Section 2.12.
"THREAT OF RELEASE" - a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment
that may result from such Release.
"THREATENED" - a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or
in writing), or if any other event has occurred or any other
circumstances exist, that would lead a prudent Person to conclude that
such a claim, Proceeding, dispute, action, or other matter is likely to
be asserted, commenced, taken, or otherwise pursued in the future.
2. MERGER OF ACQUIROR INTO THE COMPANY; CLOSING
2.1 EFFECTIVENESS OF AGREEMENT
This Agreement shall become legally binding and effective upon (i)
approval thereof by the Boards of Directors of Acquiror, Buyer and the
Company (ii) execution thereof by the Parties and (iii) approval thereof
by the shareholders of Acquiror and the Company. The approvals referred
to in (iii) hereof may be effected by execution of the consent forms
attached hereto as Exhibits 2.1(a) and 2.1(b) or otherwise in accordance
with law.
2.2 THE MERGER; EFFECTIVE TIME
(a) At the Effective Time (as defined in Section 2.2(b)),
subject to the terms and conditions of this Agreement and in accordance
with the Business Corporation Act of the State of Connecticut (the
"Connecticut Corporation Law") and the General Corporation Laws of the
State of Delaware (the "Delaware Corporation Law"), the Company will be
merged with and into Acquiror (the "Merger"), the separate existence of
the Company (except as may be continued by operation of law) will cease
and Acquiror will continue as the surviving corporation ("Surviving
Corporation") under the present corporate name of the Company as set
forth above as a wholly-owned subsidiary of Buyer. The Merger will have
the effects set forth herein and in Section 33-820 of the Connecticut
Corporation Law and Section 259 of the Delaware Corporation Law.
(b) Subject to the terms and conditions of this Agreement, the
Merger will be consummated by filing a certificate of merger with the
Secretary of State of the State of Connecticut, and with the Secretary of
State of the State of Delaware, in such form as required by, and executed
in accordance with, the Connecticut Corporation Law and the Delaware
Corporation Law, respectively. The time of such filing is referred to
herein as the "Effective Time."
2.3 CERTIFICATE OF INCORPORATION; BY-LAWS
The Certificate of Incorporation of Acquiror, as in effect
immediately prior to the Effective Time, will be the Certificate of
Incorporation of the Surviving Corporation upon the Merger. The By-Laws
of Acquiror, as in effect immediately prior to the Effective Time, will
become the By-Laws of the Surviving Corporation upon the Merger.
2.4 DIRECTORS AND OFFICERS
Subject to the provisions of Section 11.1, the Board of Directors of
Surviving Corporation will be those persons who constitute the Board of
Directors of Acquiror immediately prior to the Effective Time. Subject
to the provisions of Section 11.1, the officers of Surviving Corporation
will be those persons who are the officers of Acquiror immediately prior
to the Effective Time. Each such director or officer will hold office
until such person's respective successor has been duly elected or
appointed pursuant to the By-Laws of Surviving Corporation and the
Connecticut Corporation Law.
2.5 CONVERSION OF AIM STOCK
At the Effective Time, by virtue of the Merger and without any
further action on the part of Acquiror, the Company or the holder of any
of the following securities:
(a) Each share of Common Stock, $1.00 par value, of the
Company ("AIM Stock") issued and outstanding immediately prior to the
Effective Time will be converted into and become a right to receive its
pro rata share of the Merger Consideration (as defined in Section 2.6).
(b) Each share of AIM Stock that is held in the treasury of
the Company, if any, immediately prior to the Effective Time will be
cancelled and retired and no payment will be made with respect thereto.
(c) Each share of Common Stock, $.01 par value, of Acquiror
issued and outstanding immediately prior to the Effective Time will be
converted into one share of Common Stock, $.01 par value, of Surviving
Corporation.
2.6 MERGER CONSIDERATION
(a) The consideration (the "Merger Consideration") to be
exchanged for the AIM Stock will be:
(1) the issuance to the Other Shareholders in the aggregate of
529,038 shares of Buyer Common Stock at Closing in accordance with
Section 2.8(b)(i) hereof, which issuance shall be subject to the escrow
of certain of such shares as described in Section 2.8 hereof, and the
forfeiture provisions of Section 2.10 with respect thereto;
(2) the issuance to Pastor and the Trust of the right to
receive in the aggregate 997,038 shares of Buyer Common Stock if Pastor
obtains the Ohio Approval, or the right to receive an equivalent form of
consideration mutually agreeable to Pastor, the Trust and Buyer if Pastor
does not obtain the Ohio Approval (together the "Pastor Consideration").
The Pastor Consideration shall be subject to the the escrow provisions of
Section 2.8 hereof, and the forfeiture provisions of Section 2.10 with
respect thereto;
(3) the issuance of such additional Buyer Common Stock as may
become due to the Shareholders pursuant to Section 2.9 hereof; and
(4) the issuance of such settlement account shares as may
become due to the Shareholders pursuant to Section 2.11 hereof.
All of the shares of Buyer Common Stock to be issued to the Shareholders
pursuant to this Agreement (whether at or subsequent to the Closing)
shall be referred to as the "Merger Shares."
(b) The number of Merger Shares issuable to the Shareholders
pursuant to the provisions of Section 2.9 and Section 2.11 hereof, or
held pursuant to escrow pursuant to Section 2.8 hereof and ultimately
issued to the Shareholders pursuant to the terms of such Section, shall
be subject to adjustment (increase or decrease) in the event of any stock
dividends, stock splits, reverse stock splits, combinations of shares and
similar re-capitalizations declared by Buyer on or before the date of
their actual issuance to the Shareholders in the same manner and with the
same effect as if such Merger Shares had been issued and outstanding in
the hands of the Shareholders as of the date of declaration of such
dividend, stock split, reverse stock split, combination of shares or
similar re-capitalization. In the event that the Buyer shall declare any
stock dividends (of securities other than Buyer Common Stock), shall
effect a spin-off, split-up, reclassification, combination of Buyer
Common Stock with other securities, or exchange of Buyer Common Stock for
other securities, or any similar transaction (a "Reclassification"),
then, in such case, upon the date of any subsequent issuance of Merger
Shares pursuant to Section 2.9 or 2.11 hereof, the Shareholders shall be
entitled to receive pursuant to this Agreement, without the payment of
any additional consideration therefor, the amount of Buyer Common Stock
and other securities and property that the holders of the Merger Shares
would have received had they held such Shares immediately prior to the
first to occur of the date of declaration, effective or record date of
the Reclassification.
(c) Pastor represents that for a three year period after his
initial receipt of the Merger Shares, he will not voluntarily transfer
the shares he so receives.
Whenever in this Agreement the calculation resulting in Merger
Shares to be issued shall result in one or more fractional shares, no
fractional shares shall be issued, and no payment in lieu thereof shall
be made. All such calculations of Merger Shares shall be rounded up or
down (as appropriate) to the next nearest whole Merger Share.
2.7 CLOSING
The closing of the Merger (the "Closing") provided for in this
Agreement will take place at the offices of Day, Xxxxx & Xxxxxx LLP,
CityPlace I, Hartford, Connecticut, at 10:00 a.m. (local time) on January
14, 2000 or at such other time and place as the Parties may agree.
Subject to the provisions of Section 9, failure to consummate the Merger
provided for in this Agreement on the date and time and at the place
determined pursuant to this Section 2.7 will not result in the
termination of this Agreement and will not relieve any party of any
obligation under this Agreement.
2.8 CLOSING OBLIGATIONS
At the Closing:
(a) Shareholders will deliver to Buyer:
(i) certificates representing the AIM Stock, duly
endorsed (or accompanied by duly executed stock powers), with signatures
guaranteed by a commercial bank or by a member firm of the New York Stock
Exchange, for cancellation;
(ii) releases in the form of Exhibit 2.8(a)(ii) executed
by Shareholders (collectively, "Shareholders' Releases");
(iii) employment agreements in the form of Exhibits
2.8(a)(iii) (A) and (B) executed by Pastor and Xxxxxx Xxxxxxx, a
Shareholder, respectively (collectively, "Employment Agreements"); and
(iv) a certificate executed by Shareholders representing
and warranting to Buyer that each of Shareholders' representations and
warranties in this Agreement was accurate in all respects as of the date
of this Agreement and is accurate in all respects as of the Closing Date
as if made on the Closing Date; and
(b) Buyer will deliver to Shareholders:
(i) certificates for 264,519 of the Merger Shares,
registered in the names of the respective Other Shareholders in
accordance with the percentages set forth opposite their names on Exhibit
2 .8(b)(i) (the "Sharing Percentages");
(ii) a certificate executed by Buyer representing and
warranting to Shareholders that each of Buyer's representations and
warranties in this Agreement was accurate in all respects as of the date
of this Agreement and is accurate in all respects as of the Closing Date
as if made on the Closing Date; and
(iii) the Employment Agreements, executed by Buyer.
(c) Buyer and Shareholders will enter into an escrow agreement
in the form of Exhibit 2.8(c) (the "Escrow Agreement") with Xxxxxx X.
Xxxxxxxx, Esq. as escrow agent (the "Escrow Agent"), Buyer will deliver
to the Escrow Agent certificates for 264,519 of the Merger Shares,
registered in the names of the respective Other Shareholders in
accordance with their Sharing Percentages, and Other Shareholders will
deliver to the Escrow Agent duly executed stock powers, executed in
blank, with respect to said 264,519 Merger Shares. When determined
pursuant to Section 2.6 hereof, one-half of the Pastor Consideration
shall be delivered by Buyer to the Escrow Agent and be subject to the
terms contained in the Escrow Agreement.
2.9 EARN OUT OF ADDITIONAL BUYER COMMON STOCK
(a) Buyer will issue up to an additional 2,180,110 shares of
Buyer Common Stock to Shareholders in the amounts specified below if
Buyer achieves adjusted Consolidated Pre-Tax Earnings, computed in
accordance with GAAP, on a cumulative basis from October 1, 1999 through
December 31, 2005 at the levels set forth in the following table.
Consolidated Pre-Tax Earnings will be computed each year in accordance
with GAAP, but will then be adjusted by increasing them by amounts, if
any, determined in accordance with Section 2.9(b) and (c) for the purpose
of determining whether earnings levels set forth in the following table
have been achieved. The foregoing computation will be made as soon as is
practicable following the close of each fiscal year, but not later than
90 days following the close of any fiscal year. Certificates
representing the shares to be issued shall be promptly issued after such
computation is made.
Cumulative Adjusted Cumulative Pre-tax Earnings*
Additional ($ in thousands)
Shares
Issued*
2001 2002 2003 2004 2005
218,011 $ 4,000 $ 4,000 $ 4,000 $ 4,000 $ 4,000
436,022 5,500 5,500 5,500 5,500 5,500
654,033 9,500 9,500 9,500 9,500
872,044 10,500 10,500 10,500 10,500
1,090,055 15,500 15,500 15,500
1,308,066 17,000 17,000 17,000
1,526,077 23,500 23,500
1,744,088 25,000 25,000
1,962,099 33,000
2,180,110 35,000
* Cumulative from 10/1/1999
The additional shares issuable each year will equal the shares
indicated for the earnings level for each such year, less the number of
additional shares actually issued with respect to prior years. As an
example, for purposes of illustration: (i) if Buyer achieves adjusted
cumulative Consolidated Pre-Tax Earnings by December 31, 2001 of
$5,500,000, then 436,022 additional shares will become issuable; (ii) if
Buyer achieves adjusted cumulative Consolidated Pre-Tax Earnings by
December 31, 2002 of $9,500,000, then the additional shares issuable for
2002 will be 654,033 minus the 436,022 shares issuable for the year ended
December 31, 2001, or 218,011 additional shares; and (iii) if Buyer
achieves adjusted cumulative Consolidated Pre-Tax Earnings by December
31, 2003 of $17,000,000, then the additional shares issuable for 2003
will be 1,308,066 minus the sum of the 436,022 shares issuable for 2001
and the 218,011 shares issuable for 2002, or 654,033 additional shares.
In addition, if Pastor's Employment Agreement is terminated
pursuant to its Section 11(a), 11(c) or (d) thereof at any time, then,
for purposes of this Section, it shall be assumed that for the year of
employment termination and for each subsequent year to and including the
year 2005, the full amount of Adjusted Cumulative Pre-Tax Earnings to be
achieved each year for additional shares to be issued to all Shareholders
was achieved, with the additional shares to be issued on account of such
achievement distributed at the same time, in the same manner and in the
same amounts as is provided in this Section for the distribution of such
additional shares.
(b) Buyer will calculate for each year during the period from
October 1, 1999 through December 31, 2005 (with the first period
consisting of 15 months from October 1, 1999 to December 31, 2000 and
each subsequent period consisting of 12 months) on a cumulative basis an
amount (the "Settlement Account") which will equal the sum of : (i)
amounts paid for judgments and settlements with respect to law suits
against Buyer and Buyer's Subsidiary relating to activities occurring
prior to October 1, 1999 ; (ii) the excess of losses on insurance
policies of Buyer's Subsidiary in force on or before September 30, 1999
over the premiums to be earned on such policies after September 30, 1999
; and (iii) any losses and allocated loss adjustment expense ("ALAE")
developed on insurance policies issued by Buyer's Subsidiary which have
occurrence dates prior to October 1, 1999. Such amount shall be reduced
by the cumulative amount of any liabilities of the Company that were not
disclosed at or prior to closing that become a fixed and payable
liability during this period, but only if such liabilities in toto,
exceed One Hundred Thousand Dollars ($100,000). The amount of the
Settlement Account will be calculated on a cumulative basis each year and
added to the adjusted cumulative Consolidated Pre-Tax Earnings computed
in accordance with GAAP for purposes of determining whether specified
earnings levels have been achieved for any year specified in the table in
Section 2.10(a). As an example, for purposes of illustration, if the
cumulative net charges minus credits to the settlement account were
2,500,000 at December 31, 2001, then Buyer would achieve the second level
of $5,500,000 in the table for the 15-month period ended December 31,
2001 if its cumulative consolidated pre-tax GAAP earnings for the fifteen
month period ended December 31, 2001 were at least $3,000,000 after
reductions for the payments, losses and costs included in the Settlement
Account
(c) If, at any time after the Closing,
(i) the Buyer shall experience the loss of one or more
licenses to conduct business in any jurisdiction in which it was
conducting business as of the Closing Date; and
(ii) if such loss of license occurred because the capital
of the Buyer then or previously decreased below the minimum
capitalization required by such jurisdiction(s); and
(iii) if the reduction of the capital of the Buyer
occurred, entirely or substantially, because of certain judgments or
losses includable in the Settlement Account pursuant to Subsection
2.9(b)(i), (ii) or (iii), above),
(iv) then the value of the license(s) lost as a result of
the foregoing shall be credited to the Settlement Account. For purposes
hereof, the value of each such license is agreed to be $100,000.
(d) Any such additional Merger Shares will be issued to
Shareholders in accordance with the Sharing Percentages within one
hundred twenty (120) days after the end of each year in which they become
issuable in accordance with the foregoing provisions of this Section.
(e) Notwithstanding the foregoing, if Pastor does not obtain
the Ohio Approval, Pastor and the Trust shall receive an equivalent
consideration mutually agreed to by Pastor, the Trust and Buyer.
2.10 FORFEITURE OF SHARES
(a) Notwithstanding anything to the contrary in the preceding
Sections, if Buyer's adjusted Consolidated Pre-Tax Earnings on a
cumulative basis from October 1, 1999 through December 31, 2002 are less
than $5,000,000, then Shareholders will forfeit and return to Buyer
without any payment from Buyer the aggregate of the Merger Shares or
Pastor Consideration held under the Escrow Agreement, with each
Shareholder forfeiting and returning its Sharing Percentage of the
aggregate. For purposes of this determination, Consolidated Pre-Tax
Earnings will first be computed in accordance with GAAP on a cumulative
basis for that period, and then will be adjusted by increasing them by
the amount, if any, of the net charges to Settlement Account through
December 31, 2002. Consolidated Pre-Tax Earnings for these purposes will
not include any good will charges relating to this Merger.
(b) Notwithstanding anything to the contrary in the preceding
Sections, if Pastor voluntarily terminates his employment with Buyer
under the Pastor Employment Agreement prior to January 1, 2003 for other
than Good Reason as defined in such Employment Agreement; or if Buyer
terminates Pastor's employment with Buyer for "Cause" as defined in the
Pastor Employment Agreement prior to January 1, 2003, then Pastor will
forfeit and return to Buyer without any payment from Buyer the number of
the Merger Shares or Pastor Consideration held under the Escrow Agreement
that are allocable to Pastor in accordance with his Sharing Percentage.
(c) Any of the Merger Shares and Pastor Consideration held
under the Escrow Agreement that have not become subject to forfeiture and
returned to Buyer prior to January 1, 2003, will immediately thereafter
be distributed by Escrow Agent to the Shareholders in accordance with the
Sharing Percentages.
2.11 SETTLEMENT ACCOUNT SHARES
(a) The Buyer has agreed that, under certain circumstances,
the Buyer will, after December 31, 2005, issue to the Shareholders a
number of additional Merger Shares calculated in accordance with the
following assumptions and provisions:
(i) The Parties assume that the Company will have a
tangible net worth deficit of no more than $500,000 at the Closing Date.
(ii) For purposes of the calculation under this Section
2.11, the stockholders of Buyer immediately prior to the Closing will be
deemed to have a credit of $2,833,333; provided, however, that if the
Company's tangible net worth deficit at the Closing Date is less than
$500,000 that credit will be decreased proportionately, and if such
tangible net worth deficit is more than $500,000, that credit will be
increased proportionately. The credit after any such adjustment is
referred to as the "Buyer Credit."
(iii) Shareholders' presumed ownership of shares of Buyer
Common Stock at December 31, 2005 will be calculated as the sum of (i)
the 1,526,076 shares initially issued under Section 2.8, adjusted for any
stock dividends, stock splits, reverse stock splits, combinations of
shares and similar re-capitalizations declared by Buyer before January 1,
2006 and (ii) any additional shares issued to Shareholders under Section
2.9, minus any shares forfeited and returned to Buyer under Section 2.10
(the "Presumed Ownership"). The Shareholders' percentage ownership
("Shareholders' Percentage") will then be calculated by dividing the
total shares of Buyer Common Stock outstanding at December 31, 2005 by
Shareholders' Presumed Ownership of Buyer Common Stock.
(iv) As soon as practicable after December 31, 2005, the
Buyer will determine the amount in the Settlement Account as of that
date. If the amount exceeds the Buyer Credit, the excess, after
reduction for taxes at the current corporate tax rate for the year ended
December 31, 2005 The "Excess Amount" will be used to calculate an
additional number of Merger Shares which Buyer will issue to Shareholders
to compensate them for their share of the Excess Amount in accordance
with the following formula: (i) The Excess Amount will be divided by the
Shareholders' Percentage and the resulting number will be divided by the
difference between 100% and the Shareholders' Percentage; then (ii) the
number resulting from that formula will be divided by 2.567 in order to
arrive at the number of additional Merger Shares issuable to Shareholders
under this Section.
As an example, for purposes of illustration, if the amount of the
Buyer Credit were $2,833,333 and the amount of the Settlement Account at
December 31, 2005 were $4,833,333, the Excess Amount would be $2,000,000,
which would be reduced by corporate taxes to $1,300,000. Assume that
Shareholders' Percentage at December 31, 2005 is 20%. Shareholders have
in effect already suffered 20% of the loss represented by the Excess
Amount and the other stockholders of Buyer have suffered 80%.
Shareholders are to be compensated for 20% of that loss (20% of
$1,300,000) or $260,000. When Buyer compensates them for that loss with
new shares, it is in effect partially using their interest in Buyer
because Shareholders own 20% of Buyer, so the amount for which they
receive compensation should be grossed up by dividing the loss by the
percentage of outstanding shares owned by the other stockholders, so the
figure of $260,000 would be divided by 80% to arrive at a resulting
figure of $325,000. That amount in turn would be divided by 2.567 to
calculate the number of additional shares to be issued to Shareholders
under this Section, which in this example would be 126,607 shares of
Merger Stock.
(b) Any such additional shares of Buyer Common Stock will be
issued to Shareholders in accordance with the Sharing Percentages within
one hundred twenty (120) days after December 31, 2005.
(c) Notwithstanding the foregoing, if Pastor does not obtain
the Ohio Approval, Pastor and the Trust shall receive an equivalent
consideration mutually agreed to by Pastor, the Trust and Buyer.
2.12 FINANCIAL COVENANT AND SHAREHOLDERS' OPTION TO RESCIND
TRANSACTION
The Buyer and the Shareholders have contemplated that Pastor will be
authorized and charged with growing the business of the Buyer, and that
as an integral part of such plan Pastor will be making strategic
acquisitions of other businesses. Such acquisitions will require liquid
capital that the Buyer presently does not have. Accordingly, as an
inducement to Pastor, the Trust and to the Other Shareholders to enter
into the transactions contemplated by this Agreement, the Buyer has
agreed to provide a source of sufficient funding for anticipated
acquisitions. Accordingly, the parties have agreed:
(a) As soon as possible following the Closing, but in no event
later than 60 days thereafter, the Buyer will arrange for a credit
facility or line of credit with an aggregate available credit value of
not less than $5,000,000. The terms of such facility will be approved by
the Board of Directors of the Buyer. Such line of credit is to be made
available by the Board to Pastor from time to time as he requests and as
the Board approves for purposes of acquisitions and working capital.
Buyer covenants to maintain such credit facility until such time as it
has been fully drawn down for the purposes of Pastor's requests, or
Pastor gives written notice to the Board of Directors of the Buyer that
it can be reduced or eliminated.
(b) From time to time Pastor may present proposal(s) for the
acquisition and development of retail insurance agencies in strategic
markets and business lines (each a "Proposal"). Board of Directors'
approval of Pastor's proposals shall not be unreasonably withheld.
(c) In the event that the Buyer shall fail to comply with the
terms and covenant set forth in Subsection (a) or (b) above at any time
during the Term of Pastor's Employment Agreement (as defined therein),
the Shareholders shall have the right to exercise their "Termination
Option" as defined herein. The "Termination Option" shall mean that the
Shareholders, by written notice to the Buyer following any such failure,
shall have the right to receive, at their election and for no additional
consideration, and as liquidated damages for such failure to comply by
Buyer: (i) the reissuance in their name, in accordance with the Sharing
Percentages, of all of the stock of the Surviving Company into which the
AIM Stock was converted in the Merger and thereafter held by the Buyer
transferred to them, fully paid, non-assessable, and free and clear of
all Encumbrances; or (ii) the transfer to the Shareholders or any Person
acting as their nominee, of all of the tangible and intangible assets
owned by the Company as of the Closing Date, as the same assets shall
have been administered in the Ordinary Course of Business during the
interval between Closing and the exercise of the Termination Option, free
and clear of all Encumbrances. The Buyer and the Shareholders shall
proceed in good faith upon the exercise of the Termination Option to
effectuate the details of the foregoing, with the intention that the
resulting transaction shall return to the Shareholders, inasmuch as it is
possible, the Company's business that was transferred to the Buyer at the
Closing.
(d) In the event of exercise of the Termination Option, the
Shareholders shall, in addition to their rights set forth in subsection
(c), above, be entitled to retain (without any additional consideration)
whatever Merger Shares have been issued to them or are otherwise due to
them as of the date of notice of exercise of the Termination Option, less
any forfeiture under Section 2.10.
3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders represent and warrant to Buyer as are set forth below
in this Article 3. The following representations and warranties are made
to the Knowledge of the respective Shareholders, as that term is defined
in Article 1 hereof with respect to Pastor, the Trust and the Other
Shareholders. With respect to any written materials or other matter to
be included as a part of the Shareholder Disclosure Schedule upon
Request, the Shareholders shall be obligated to provide such materials or
matter within 15 days of the date of a Request specifying the items to be
provided.
3.1 ORGANIZATION AND GOOD STANDING
(a) Upon Request, Part 3.1 of the Shareholder Disclosure
Schedule will set forth a complete and accurate list for the Company and
each Subsidiary of its jurisdiction of incorporation, other jurisdictions
in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held
by each). The Company and each Subsidiary is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to perform all
its obligations under Applicable Contracts. The Company and each
Subsidiary is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by it,
or the nature of the activities conducted by it, requires such
qualification.
(b) Shareholders have delivered to Buyer copies of the
Organizational Documents of the Company and each Subsidiary, as currently
in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Shareholders, enforceable against Shareholders in
accordance with its terms. Upon the execution and delivery by
Shareholders of the Escrow Agreement, the Shareholders' Releases and the
Employment Agreements (collectively, the "Shareholders' Closing
Documents"), the Shareholders' Closing Documents will constitute the
legal, valid, and binding obligations of Shareholders, enforceable
against the Shareholders executing them in accordance with their
respective terms. Shareholders have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and,
in the case of the Shareholders executing them, the Shareholders' Closing
Documents and to perform their obligations under this Agreement and, in
the case of the Shareholders executing them, the Shareholders' Closing
Documents. Each of the foregoing representations and warranties is
subject, as and where applicable, to the operation of bankruptcy,
insolvency and creditors' rights laws, regulations and decisions
thereunder.
(b) Except as set forth in Part 3.2 of the Shareholder
Disclosure Schedule, neither the execution and delivery of this Agreement
nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or
lapse of time):
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents of the Company or
any Subsidiary, or (B) any resolution adopted by the board of directors
or the stockholders of the Company or any Subsidiary;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the right to challenge
any of the Contemplated Transactions or to exercise any remedy or obtain
any relief under, any Legal Requirement or any Order to which the
Company, any Subsidiary or any Shareholder, or any of the assets owned or
used by the Company or any Subsidiary, may be subject;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Company or any Subsidiary
or that otherwise relates to the business of, or any of the assets owned
or used by, the Company or any Subsidiary;
(iv) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable
Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by
the Company or any Subsidiary.
Except as set forth in Part 3.2 of the Shareholder Disclosure
Schedule, neither any Shareholder nor the Company or any Subsidiary is or
will be required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions,
provided, however, that the foregoing shall not apply to any notice or
Consent required of the Buyer as a result of its status as a reporting
company under the Exchange Act.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 1000
shares of common stock, par value $1.00 per share, of which 900 shares
are issued and outstanding and constitute the AIM Stock. Shareholders
are and will be on the Closing Date the record and beneficial owners and
holders of the AIM Stock, free and clear of all Encumbrances. No legend
or other reference to any purported Encumbrance appears upon any
certificate representing the AIM Stock. All of the outstanding shares of
AIM Stock have been duly authorized and validly issued and are fully paid
and non-assessable. There are no options, warrants, or other commitments
to issue capital stock of the Company, voting agreements, or Contracts
relating to the issuance, sale, or transfer of any equity securities or
other securities of the Company. All of the outstanding AIM Stock and
other securities of the Company have been issued in substantial
compliance with the Securities Act and the Legal Requirements of
applicable State securities laws and regulations. The Company does not
own, or have any Contract to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or ownership
interest in any other business, except as otherwise disclosed in the
Shareholder Disclosure Schedule.
3.4 FINANCIAL STATEMENTS
Shareholders have delivered to Buyer: a consolidated balance sheet
of the Company as at 9/30/99 ("Balance Sheet"), and the related
consolidated statements of income, stockholders' equity, and cash flows
for the fiscal year then ended, together with the report thereon of
Rosenbery and Pastor, Shareholder's accountants. Such financial
statements and notes fairly present the financial condition and the
results of operations, changes in stockholders' equity, and cash flow of
the Company and its Subsidiaries as at the respective dates of and for
the periods referred to in such financial statements, all in accordance
with GAAP. No financial statements of any Person other than the Company
and its Subsidiaries are required by GAAP to be included in the financial
statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other
records of the Company and its Subsidiaries, all of which have been made
available to Buyer, are complete and correct in all material respects and
have been maintained in accordance with sound business practices,
including the maintenance of an adequate system of internal controls.
The minute books of the Company and its Subsidiaries contain accurate and
complete records of all meetings held of, and corporate action taken by,
the stockholders, the Board of Directors, and committees of the Boards of
Directors of the Company and its Subsidiaries. No formal meeting of any
such stockholders, Board of Directors, or committee has been held for
which minutes have not been prepared and are not contained in such minute
books. At the Closing, all of those books and records will be in the
possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Neither the Company nor any Subsidiary owns any real property.
Part 3.6 of the Shareholder Disclosure Schedule contains a complete and
accurate list of all leaseholds or other interests in real property owned
by the Company or any Subsidiary. Each of the Company and its
Subsidiaries owns all the properties and assets (whether real, personal,
or mixed and whether tangible or intangible) that it purports to own,
including all of the properties and assets reflected in the Balance Sheet
(except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Shareholder Disclosure
Schedule upon Request, and personal property sold since the date of the
Balance Sheet in the Ordinary Course of Business), and all of the
properties and assets purchased or otherwise acquired by the Company and
its Subsidiaries since the date of the Balance Sheet (except for personal
property acquired and sold since the date of the Balance Sheet in the
Ordinary Course of Business and consistent with past practice). All
material properties and assets reflected in the Balance Sheet are free
and clear of all Encumbrances except, with respect to all such properties
and assets, (a) mortgages or security interests shown on the Balance
Sheet as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both,
would constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the
date of the Balance Sheet (such mortgages and security interests being
limited to the property or assets so acquired), with respect to which no
default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (c) liens for current taxes not yet due;
and (d) liens and encumbrances of record required to be disclosed in Part
3.6 of the Shareholder Disclosure Schedule.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, structures, and equipment of the Company and its
Subsidiaries are in good operating condition and repair, and are adequate
for the uses to which they are being put. The building, structures, and
equipment of the Company and its Subsidiaries are sufficient for the
continued conduct of the Company's and the Subsidiaries' business after
the Closing in substantially the same manner as conducted prior to the
Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company and its Subsidiaries that are
reflected on the Balance Sheet or on the accounting records of the
Company and its Subsidiaries as of the Closing Date (collectively, the
"Accounts Receivable") represent or will represent valid obligations
arising from sales actually made or services actually performed in the
Ordinary Course of Business. Except as otherwise disclosed in the
Shareholder Disclosure Schedule, neither the Company nor any of its
Subsidiaries has received notice ,contest, claim, or right of set-off
under any Contract with any obligor of an Accounts Receivable relating to
the amount or validity of such Accounts Receivable. Part 3.8 of the
Shareholder Disclosure Schedule will contain a complete and accurate list
of all Accounts Receivable as of the most recent practicable date, which
list sets forth the aging of such Accounts Receivable.
3.9 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.9 of the Shareholder Disclosure
Schedule, the Company and its Subsidiaries have no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected on or reserved against in the Balance Sheet and current
liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.10 TAXES
(a) Each of the Company and its Subsidiaries has filed or
caused to be filed (on a timely basis) all Tax Returns that are or were
required to be filed by or with respect to it, pursuant to applicable
Legal Requirements. Shareholders have delivered to Buyer copies of, and
Part 3.10 of the Shareholder Disclosure Schedule will upon Request
contain a complete and accurate list of, all such Tax Returns filed since
January 1, 1992. The Company and its Subsidiaries have paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Company and its Subsidiaries, except such Taxes, if any,
as are required to be listed in Part 3.10 of the Shareholder Disclosure
Schedule upon Request and are being contested in good faith and as to
which adequate reserves (determined in accordance with GAAP) have been
provided in the Balance Sheet and the Interim Balance Sheet.
(b) The charges, accruals, and reserves with respect to Taxes
on the books of the Company and its Subsidiaries are adequate (determined
in accordance with GAAP) and are at least equal to the Company's and its
Subsidiaries' liability for Taxes. There exists no proposed tax
assessment against the Company or any Subsidiary except as disclosed in
the Balance Sheet or in Part 3.10 of the Shareholder Disclosure Schedule.
No consent to the application of Section 341(f)(2) of the IRC has been
filed with respect to any property or assets held, acquired, or to be
acquired by the Company or any Subsidiary. All Taxes that the Company or
any Subsidiary is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent required,
have been paid to the proper Governmental Body or other Person.
(c) All Tax Returns filed by the Company and its Subsidiaries
are true, correct, and complete. There is no tax sharing agreement that
will require any payment by the Company or any Subsidiary after the date
of this Agreement.
(d) The Company is not a "S" corporation, provided, however
that the Company in the past has elected Subchapter S corporate status.
The foregoing is subject to further disclosure in the Shareholder
Disclosure Schedule, Part 3.10.
3.11 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects,
assets, liabilities, or condition of the Company and its Subsidiaries,
taken as a whole.
3.12 EMPLOYEE BENEFITS
(a) Part 3.12 of the Shareholder Disclosure Schedule lists
each Pension Benefit Plan intended to be qualified under Section 401(a)
or 403(a) of the Code ever maintained by the Company or any Subsidiary or
with respect to which the Company or any Subsidiary has or may have a
Liability. The Company has heretofore delivered to Buyer with respect to
each such Employee Benefit Plan a true and correct copy of the most
recent determination letter issued by the IRS with respect to it. The
Company has no knowledge of any facts, circumstances, actions, or
failures to act that would preclude each such Employee Benefit Plan's
reliance on the most recent determination letter issued by the IRS with
respect to such Employee Benefit Plan as evidence that such Employee
Benefit Plan and any trust adopted in connection therewith are qualified
under Sections 401 and 501, respectively, of the Code.
(b) The execution and delivery of this Agreement by the
Shareholders and the consummation of the Contemplated Transactions will
not result in any Liability (with respect to accrued benefits or
otherwise) of the Buyer to any Employee Benefit Plan or the PBGC. No
amendment to, termination of, or withdrawal from, any Employee Benefit
Plan at any time before or after the Closing Date by (A) the Company, or
(B) any corporation or other entity if such Employee Benefit Plan was
maintained or sponsored by a member of the Controlled Group during any
part of the 72 calendar month period ending on the Closing Date, has or
will subject the Buyer to any Liability to any Employee Benefit Plan, the
PBGC or the IRS, any current or former Employee of the Company or the
Controlled Group, or any other Party.
3.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.13 of the Shareholder
Disclosure Schedule:
(i) each of the Company and the Subsidiaries is, and at
all times since January 1, 1993, has been, in full compliance with each
Legal Requirement that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute or result in
a violation by the Company or any Subsidiary of, or a failure on the part
of the Company or any Subsidiary to comply with, any Legal Requirement,
or (B) may give rise to any obligation on the part of the Company or any
Subsidiary to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature; and
(iii) each of the Company and the Subsidiaries has not
received, at any time since January 1, 1993, any notice or other
communication (whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any Legal Requirement, or (B)
any actual, alleged, possible, or potential obligation on the part of the
Company or any Subsidiary to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature.
(b) Part 3.13 of the Shareholder Disclosure Schedule contains
a complete and accurate list of each Governmental Authorization that is
held by the Company or any Subsidiary or that otherwise relates to the
business of, or to any of the assets owned or used by, the Company or any
Subsidiary. Each Governmental Authorization listed or required to be
listed in Part 3.13 of the Shareholder Disclosure Schedule is valid and
in full force and effect. Except as set forth in Part 3.13 of the
Shareholder Disclosure Schedule:
(i) each of the Company and the Subsidiaries is, and at
all times since January 1, 1993 has been, in full compliance with all of
the terms and requirements of each Governmental Authorization identified
or required to be identified in Part 3.13 of the Shareholder Disclosure
Schedule;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with any
term or requirement of any Governmental Authorization listed or required
to be listed in Part 3.13 of the Shareholder Disclosure Schedule, or (B)
result directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any Governmental
Authorization listed or required to be listed in Part 3.13 of the
Shareholder Disclosure Schedule;
(iii) each of the Company and the Subsidiaries has not
received, at any time since January 1, 1993, any notice or other
communication (whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or
potential revocation, withdrawal, suspension, cancellation, termination
of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Part 3.13 of the Shareholder Disclosure Schedule have been duly
filed on a timely basis with the appropriate Governmental Bodies, and all
other filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis with
the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.13 of the
Shareholder Disclosure Schedule collectively constitute all of the
Governmental Authorizations necessary to permit each of the Company and
the Subsidiaries to lawfully conduct and operate its business in the
manner they currently conduct and operate such businesses and to permit
the Company and the Subsidiaries to own and use their assets in the
manner in which they currently own and use such assets.
3.14 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.14 of the Shareholder
Disclosure Schedule, there is no pending Proceeding:
(i) that has been commenced by or against the Company or
any Subsidiary or that otherwise relates to or may affect the business
of, or any of the assets owned or used by, the Company or any Subsidiary;
or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any
of the Contemplated Transactions.
To the Knowledge of Shareholders and the Company, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding. Shareholders will upon Request
deliver to Buyer copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 3.14 of the
Shareholder Disclosure Schedule.
Except as set forth in Part 3.14 of the Shareholder Disclosure
Schedule:
(iii) there is no Order to which the Company or any
Subsidiary, or any of the assets owned or used by the Company or any
Subsidiary, is subject;
(iv) no Shareholder is subject to any Order that relates
to the business of, or any of the assets owned or used by, the Company or
any Subsidiary; and
(v) to the Knowledge of Shareholders and the Company, no
officer, director, agent, or employee of the Company or any Subsidiary is
subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or
practice relating to the business of the Company or any Subsidiary.
(b) Except as set forth in Part 3.14 of the Shareholder
Disclosure Schedule:
(i) each of the Company and the Subsidiaries is, and at
all times since January 1, 1993 has been, in full compliance with all of
the terms and requirements of each Order to which it, or any of the
assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any
Order to which the Company or any Subsidiary, or any of the assets owned
or used by the Company or any Subsidiary, is subject; and
(iii) each of the Company and the Subsidiaries has not
received, at any time since January 1, 1993, any notice or other
communication (whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any
Order to which the Company or any Subsidiary, or any of the assets owned
or used by the Company or any Subsidiary, is or has been subject.
3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.15 of the Shareholder Disclosure
Schedule, since the date of the Balance Sheet, each of the Company and
its Subsidiaries has conducted its business only in the Ordinary Course
of Business and there has not been any of the following (except as may be
set forth in the minute book, stock record book and other corporate
records of the Company made available to the Buyer):
(a) change in its authorized or issued capital; grant of any
stock option or right to purchase shares of its capital stock; issuance
of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other
acquisition by it of any shares of any such capital stock; or declaration
or payment of any dividend or other distribution or payment in respect of
shares of capital stock;
(b) amendment to its Organizational Documents;
(c) payment by it of any bonuses or material increase in the
salaries, or other compensation to any stockholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of it;
(e) damage to or destruction or loss of any asset or property
of it, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or
prospects of it;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to
it of at least $10,000;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of it
or mortgage, pledge, or imposition of any lien, security interest or
other Encumbrance on any material asset or property of it, including the
sale, lease, or other disposition of any of the Intellectual Property
Assets;
(h) cancellation or waiver of any claims or rights with a
value to it in excess of $10,000;
(i) material change in the accounting methods used by it; or
(j) agreement, whether oral or written, by it to do any of the
foregoing.
3.16 CONTRACTS; NO DEFAULTS
(a) Part 3.16(a) of the Shareholder Disclosure Schedule will
upon Request contain a complete and accurate list, and Shareholders have
delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company or any
Subsidiary of an amount or value in excess of $10,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company or any
Subsidiary of an amount or value in excess of $10,000;
(iii) each Applicable Contract that was not entered into
in the Ordinary Course of Business and that involves expenditures or
receipts of the Company or any Subsidiary in excess of $10,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales agreements
having a value per item or aggregate payments of less than $10,000 and
with terms of less than one year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the non-
disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of profits,
losses, costs, or liabilities by the Company or any Subsidiary with any
other Person;
(viii) each Applicable Contract containing covenants that
in any way purport to restrict the business activity of the Company or
any Affiliate of the Company or limit the freedom of the Company or any
Affiliate of the Company to engage in any line of business or to compete
with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than direct
payments for goods or services;
(x) each power of attorney that is currently effective
and outstanding;
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for an express
undertaking by the Company or any Subsidiary to be responsible for
consequential damages;
(xii) each Applicable Contract for capital expenditures in
excess of $25,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance extended by
the Company or any Subsidiary other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.16(b) of the Shareholder
Disclosure Schedule:
(i) no Shareholder (and no Related Person of any
Shareholder) has or may acquire any rights under, and neither Shareholder
has or may become subject to any obligation or liability under, any
Contract that relates to the business of, or any of the assets owned or
used by, the Company or any Subsidiary; and
(ii) to the Knowledge of Shareholders and the Company, no
officer, director, agent, employee, consultant, or contractor of the
Company or any Subsidiary is bound by any Contract that purports to limit
the ability of such officer, director, agent, employee, consultant, or
contractor to (A) engage in or continue any conduct, activity, or
practice relating to the business of the Company or any Subsidiary, or
(B) assign to the Company or any Subsidiary or to any other Person any
rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.16(c) of the Shareholder
Disclosure Schedule, each Contract identified or required to be
identified in Part 3.16(a) of the Shareholder Disclosure Schedule upon
Request is in full force and effect and is valid and enforceable in
accordance with its terms.
(d) Except as set forth in Part 3.16(d) of the Shareholder
Disclosure Schedule:
(i) each of the Company and its Subsidiaries is, and at
all times since January 1, 1993 has been, in full compliance with all
applicable terms and requirements of each Contract under which it has or
had any obligation or liability or by which it or any of the assets owned
or used by it is or was bound;
(ii) each other Person that has or had any obligation or
liability under any Contract under which the Company or any Subsidiary
has or had any rights is, and at all times since January 1, 1993 has
been, in full compliance with all applicable terms and requirements of
such Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with,
or result in a violation or breach of, or give the Company, any
Subsidiary or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any Applicable Contract; and
(iv) each of the Company and its Subsidiaries has not
given to or received from any other Person, at any time since January 1,
1993, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach
of, or default under, any Contract.
(e) To the Knowledge of the Shareholders and the Company,
there are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to the Company
or any Subsidiary under current or completed Contracts with any Person
and no such Person has made written demand for such re-negotiation.
(f) The Contracts relating to the sale, design, manufacture,
or provision of products or services by the Company and its Subsidiaries
have been entered into in the Ordinary Course of Business and have been
entered into without the commission of any act alone or in concert with
any other Person, or any consideration having been paid or promised, that
is or would be in violation of any Legal Requirement.
3.17 INSURANCE
(a) Shareholders have delivered, or will upon Request deliver
to Buyer:
(i) true and complete copies of all policies of insurance
to which the Company or any Subsidiary is a party or under which the
Company or any Subsidiary, or any director or officer of the Company or
any Subsidiary, is or has been covered at any time within the three years
preceding the date of this Agreement;
(ii) true and complete copies of all pending applications
for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of the Company's
coverage or of the reserves for claims.
(b) Part 3.17(b) of the Shareholder Disclosure Schedule
describes:
(i) any self-insurance arrangement by or affecting the
Company or any Subsidiary, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company or any
Subsidiary; and
(iii) all obligations of the Company or any Subsidiary to
third parties with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy under which such
coverage is provided.
(c) Part 3.17(c) of the Shareholder Disclosure Schedule will
upon Request set forth, by year, for the current policy year and each of
the three preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $5,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim;
and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost of
such claims.
(d) Except as set forth on Part 3.17(d) of the Shareholder
Disclosure Schedule:
(i) All policies to which the Company or any Subsidiary
is a party or that provide coverage to the Company, any Subsidiary or any
director or officer of the Company or any Subsidiary:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially
sound and reputable;
(C) taken together, provide adequate insurance
coverage for the assets and the operations of the Company and its
Subsidiaries;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company or any Subsidiary is a
party or by which it is bound;
(E) will continue in full force and effect following
the consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of the
Company or any Subsidiary.
(ii) Neither the Company nor any Subsidiary has received
(A) any refusal of coverage or any notice that a defense will be afforded
with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any policy is not
willing or able to perform its obligations thereunder.
(iii) The Company and its Subsidiaries have paid all
premiums due, and has otherwise performed all of its respective
obligations, under each policy to which it is a party or that provides
coverage to it or a director or officer thereof.
(iv) The Company and its Subsidiaries have given notice to
the insurer of all claims that may be insured thereby.
3.18 ENVIRONMENTAL MATTERS
Except as set forth in Part 3.18 of the Shareholder Disclosure
Schedule:
(a) The Company and its Subsidiaries and its and their
predecessors have complied with all Environmental Laws and all
Occupational Health and Safety Laws, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against any of them alleging any failure so to
comply or claiming Environmental, Health, and Safety Liabilities.
Without limiting the generality of the preceding sentence, the Company
and its Subsidiaries and its and their predecessors have obtained and
been in compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and have
compiled with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which
are contained in, all Environmental Laws and all Occupational Health and
Safety Laws.
(b) Each of the Company and its Subsidiaries has no
Environmental, Health, and Safety Liabilities (and the Company and its
Subsidiaries and its and their predecessors have not handled or disposed
of any substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or owned or
operated any property or Facility in any manner that could form the basis
for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the Company or
any Subsidiary giving rise to any Environmental, Health, and Safety
Liabilities) for damage to any site, location, or body of water (surface
or subsurface), for any illness of or personal injury to any employee or
other individual, or for any reason under any Environmental Law or any
Occupational Health and Safety Law.
(c) To the knowledge of the Shareholders and the Company, all
properties and equipment used in the business of the Company and its
predecessors have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-transdichloroethylene, dioxins, dibenzofurans,
and Hazardous Materials.
3.19 EMPLOYEES
(a) Part 3.19(a) of the Shareholder Disclosure Schedule will
upon Request contain a complete and accurate list of the following
information for each employee or director of the Company and its
Subsidiaries, including each employee on leave of absence or layoff
status: employer, if other than the Company; name; job title; current
compensation paid or payable and any change in compensation since January
1, 1997; vacation accrued; and service credited for purposes of vesting
and eligibility to participate under the Company's or any Subsidiary's
pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan or any Director Plan.
(b) No employee or director of the Company or any Subsidiary
is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, non-competition, or proprietary rights
agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that in any way adversely affects or
will affect (i) the performance of his duties as an employee or director
of the Company or any Subsidiary, or (ii) the ability of the Company or
any Subsidiary to conduct its business, including any Proprietary Rights
Agreement with the Company or any Subsidiary by any such employee or
director. To the Knowledge of Shareholder and the Company, no director,
officer, or their key employee of the Company or any Subsidiary intends
to terminate his employment with the Company.
(c) Part 3.19(c) of the Shareholder Disclosure Schedule will
also upon Request contain a complete and accurate list of the following
information for each retired employee or director of the Company or any
Subsidiary, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
3.20 LABOR RELATIONS; COMPLIANCE
Each of the Company and its Subsidiaries has not been and is not a
party to any collective bargaining or other labor Contract. There has
not been, there is not presently pending or existing, and there is not
Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting the
Company or any Subsidiary relating to the alleged violation of any Legal
Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity,
or other labor or employment dispute against or affecting the Company,
any Subsidiary or any of its or their premises, or (c) any application
for certification of a collective bargaining agent. No event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by
the Company or any Subsidiary, and no such action is contemplated by the
Company or any Subsidiary. Each of the Company and its Subsidiaries has
complied in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social
security and similar taxes, occupational safety and health, and plant
closing. Each of the Company and its Subsidiaries is not liable for the
payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
3.21 INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY ASSETS - The term "Intellectual
Property Assets" includes:
(i) the Company's name and the names of its Subsidiaries,
all fictional business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in
Mask Works"); and
(v) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data,
process technology, plans, drawings, and blue prints (collectively,
"Trade Secrets"), owned, used, or licensed by the Company or any
Subsidiary as licensee or licensor.
(b) AGREEMENTS - Part 3.21(b) of the Shareholder Disclosure
Schedule contains a complete and accurate list and summary description,
including any royalties paid or received by the Company or any
Subsidiary, of all Contracts relating to the Intellectual Property Assets
to which the Company or any Subsidiary is a party or by which the Company
or any Subsidiary is bound, except for any license implied by the sale of
a product and any perpetual, paid-up license for commonly available
software programs with a value of less than $500 under which the Company
or any Subsidiary is the licensee. There are no outstanding and, to
Shareholders' Knowledge, no Threatened disputes or disagreements with
respect to any such agreement.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS
(i) The Intellectual Property Assets are all those
necessary for the operation of the Company's and its Subsidiaries'
business as it is currently conducted. The Company or a Subsidiary is
the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens, security
interests, charges, Encumbrances, equities, and other adverse claims, and
has the right to use without payment to a third party all of the
Intellectual Property Assets.
(ii) Except as set forth in Part 3.21(c) of the
Shareholder Disclosure Schedule, all former and current employees of the
Company and its Subsidiaries have executed written Contracts with the
Company or a Subsidiary that assign to the Company or a Subsidiary all
rights to any inventions, improvements, discoveries, or information
relating to the business of the Company or a Subsidiary. No employee of
the Company or a Subsidiary has entered into any Contract that restricts
or limits in any way the scope or type of work in which the employee may
be engaged or requires the employee to transfer, assign, or disclose
information concerning his work to anyone other than the Company or a
Subsidiary.
(d) PATENTS
(i) Part 3.21(d) of the Shareholder Disclosure Schedule
contains a complete and accurate list and summary description of all
Patents. The Company or a Subsidiary is the owner of all right, title,
and interest in and to each of the Patents, free and clear of all liens,
security interests, charges, Encumbrances, entities, and other adverse
claims.
(ii) All of the issued Patents are currently in compliance
with formal legal requirements (including payment of filing, examination,
and maintenance fees and proofs of working or use), are valid and
enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition proceeding. To
Shareholders' Knowledge, there is no potentially interfering patent or
patent application of any third party.
(iv) No Patent is infringed or, to Shareholders'
Knowledge, has been challenged or threatened in any way. None of the
products manufactured and sold, nor any process or know-how used, by the
Company or any Subsidiary infringes or is alleged to infringe any patent
or other proprietary right of any other Person.
(v) All products made, used, or sold under the Patents
have been marked with the proper patent notice.
(e) TRADEMARKS
(i) Part 3.21(e) of Shareholder Disclosure Schedule
contains a complete and accurate list and summary description of all
Marks. The Company or a Subsidiary is the owner of all right, title, and
interest in and to each of the Marks, free and clear of all liens,
security interests, charges, Encumbrances, equities, and other adverse
claims.
(ii) All Marks that have been registered with the United
States Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration filing
of affidavits of use and incontestability and renewal applications), are
valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety days after the Closing Date.
(iii) No Xxxx has been or is now involved in any
opposition, invalidation, or cancellation and, to Shareholders'
Knowledge, no such action is Threatened with respect to any of the Marks.
(iv) To Shareholders' Knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) No Xxxx is infringed or, to Shareholders' Knowledge,
has been challenged or threatened in any way. None of the Marks used by
the Company and its Subsidiaries infringes or is alleged to infringe any
trade name, trademark, or service xxxx of any third party.
(vi) All products and materials containing a Xxxx xxxx the
proper federal registration notice where permitted by law.
(f) COPYRIGHTS
(i) Part 3.21(f) of the Shareholder Disclosure Schedule
contains a complete and accurate list and summary description of all
Copyrights. The Company or a Subsidiary is the owner of all right,
title, and interest in and to each of the Copyrights, free and clear of
all liens, security interests, charges, Encumbrances, equities, and other
adverse claims.
(ii) All the Copyrights have been registered and are
currently in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the date of Closing.
(iii) No Copyright is infringed or, to Shareholders'
Knowledge, has been challenged or threatened in any way. None of the
subject matter of any of the Copyrights infringes or is alleged to
infringe any copyright of any third party or is a derivative work based
on the work of a third party.
(iv) All works encompassed by the Copyrights have been
marked with the proper copyright notice.
(g) TRADE SECRETS
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient in
detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any individual.
(ii) Shareholders and the Company and its Subsidiaries
have taken all reasonable precautions to protect the secrecy,
confidentiality, and value of the Trade Secrets.
(iii) The Company or a Subsidiary has good title and an
absolute (but not necessarily exclusive) right to use the Trade Secrets.
The Trade Secrets are not part of the public knowledge or literature,
and, to Shareholders' Knowledge, have not been used, divulged, or
appropriated either for the benefit of any Person (other than the Company
or a Subsidiary) or to the detriment of the Company or any Subsidiary.
To the Shareholders' Knowledge, no Trade Secret is subject to any adverse
claim or has been challenged or threatened in any way.
3.22 CERTAIN PAYMENTS
Neither the Company, any of its Subsidiaries, any director, officer,
agent, or employee of the Company or any Subsidiary, or to Shareholders'
Knowledge any other Person associated with or acting for or on behalf of
the Company or any Subsidiary, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback,
or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment
in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions
already obtained, for or in respect of the Company or any Subsidiary or
any Affiliate of the Company, or (iv) in violation of any Legal
Requirement, or (b) established or maintained any fund or asset that has
not been accurately recorded in the books and records of the Company and
its Subsidiaries.
3.23 RELATIONSHIPS WITH RELATED PERSONS
No Shareholder or any Related Person of Shareholders or of the
Company or any Subsidiary has, or since January 1, 1997 has had, any
interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Company's or any
Subsidiary's business. No Shareholder or any Related Person of
Shareholders or of the Company or any Subsidiary is, or since January 1,
1997 has owned (of record or as a beneficial owner) an equity interest or
any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction
with the Company or any Subsidiary, other than business dealings or
transactions conducted in the Ordinary Course of Business with the
Company or a Subsidiary at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition
with the Company or any Subsidiary with respect to any line of the
products or services of the Company or any Subsidiary (a "Competing
Business") in any market presently served by the Company or any
Subsidiary, except for less than one percent of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market. Except as set forth in Part
3.23 of the Shareholder Disclosure Schedule, no Shareholder or any
Related Person of Shareholders or of the Company or any Subsidiary has
any unfulfilled claim or right against the Company other than claims or
rights arising out of employment relationships with the Company.
3.24 BROKERS OR FINDERS
Shareholders and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this
Agreement, and will indemnify and hold Buyer harmless from any such
payment alleged to be due by or through Shareholders as a result of the
action of Shareholders or their agents.
3.25 PRIVATE OFFERING REPRESENTATIONS
(a) Each of the Shareholders represents and warrants that he,
she or it, either alone or with a purchaser representative or
representatives, has such knowledge and experience in financial and
business matters that he, she or it is capable, either individually or
with such representative(s) of evaluating the merits and the risks of the
acquisition of shares of Buyer's Common Stock and is able financially to
bear the risks thereof; and
(b) It is the Shareholders' collective and individual present
intention to acquire the Purchase Price Shares for their own account (and
each such Shareholder will be the sole beneficial owner thereof), and
that the shares of Buyer's Common Stock are being and will be acquired by
them for the purpose of investment and not with a view to distribution or
resale thereof except pursuant to a registration under the Securities Act
or exemption therefrom and from applicable Blue Sky laws. The
acquisition of the Purchase Price Shares shall constitute a confirmation
of this representation.
(c) Each Shareholder understands that: (i) the shares of
Buyer Common Stock being issued to him or her have not been registered
under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act of 1933
(the "Securities Act") pursuant to Section 4(2) thereof or Rule 506
promulgated under the Securities Act; (ii) the shares of Buyer Common
Stock acquired by him or her must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or
is exempt from such registration; (iii) the shares of Buyer Common Stock
acquired by him or her will bear a legend to such effect; (iv) Buyer will
make a notation on its transfer books to such effect; (v) Buyer will rely
on his or her representations and warranties in this Section 3.25 in
offering and issuing shares of Buyer Common Stock and to him or her and
the Other Shareholders pursuant to this agreement without registering
such shares under the Securities Act.
(d) The shares of Buyer's Common Stock are not listed for
trading on any stock exchange or NASDAQ, the shares having been de-listed
from NASDAQ on December 15, 1999.
(e) Each Other Shareholder hereby appoints Mr. Xxxx Xxxxx to
be his purchaser representative (as that term is defined in Rule 501(h)
of the Securities Act) during the course of the transactions contemplated
by this Agreement, in connection with evaluating the merits and risks of
the prospective investment by the Other Shareholder.
3.26 DISCLOSURE
(a) No representation or warranty of Shareholders in this
Agreement and no statement in the Shareholder Disclosure Schedule
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein, in the
light of the circumstances under which they were made, not misleading.
(b) No notice given pursuant to this Agreement will contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein or in this Agreement, in the
light of the circumstances under which they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to each of the Shareholders as
follows. With respect to any written materials or other matter to be
included as a part of the Buyer Disclosure Schedule upon Request, the
Buyer shall be obligated to provide such materials or matter within 15
days of the date of a Request specifying the items to be provided.
4.1 SEC FILINGS
(a) The Buyer has timely filed all reports, forms and
documents required to be filed by it pursuant to the Securities Act, the
Securities Exchange Act of 1934 (the "Exchange Act"), and any regulations
promulgated thereunder. The Buyer has timely filed all reports, forms and
documents required to be filed by it pursuant to the Legal Requirements
of any State or Territory having jurisdiction thereof with regard to the
securities of the Buyer (collectively "Blue Sky Laws"), and has paid all
fees associated therewith. As of the respective date of each such filing
required of it, the Buyer has complied in all material respects with all
of the foregoing Legal Requirements, and none of the foregoing filings
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(b) Part 4.1 of the Buyer Disclosure Schedule will upon
Request contain a complete and accurate list of all of the reports, forms
or other documents described in subsection (a), above, together with a
true, correct and complete copy of each such report, form or filing
(collectively the "SEC Filings") made by the Buyer during the past 36
months.
4.2 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware, with full corporate
power and authority to conduct its business as it is now being conducted,
to own or use the properties and assets that it purports to own or use,
and to perform its obligations under this Agreement and any other
agreements to which it is a party.
4.3 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms. Upon the execution and delivery by Buyer of the Escrow Agreement,
the Employment Agreements, and the (collectively, the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal,
valid, and binding obligations of Buyer, enforceable against Buyer, in
accordance with their respective terms. Buyer has the absolute and
unrestricted right, power, and authority to execute and deliver this
Agreement and the Buyer's Closing Documents and to perform its
obligations under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.3, neither the execution
and delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will give
any Person the right to prevent, delay, or otherwise interfere with any
of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or
the stockholders of Buyer;
(iii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the right to challenge
any of the Contemplated Transactions or to exercise any remedy or obtain
any relief under, any Legal Requirement or any Order to which the Buyer,
or any of the assets owned or used by the Buyer, may be subject;
(iv) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Buyer or that otherwise
relates to the business of, or any of the assets owned or used by, the
Buyer;
(v) Cause the Shareholders to become subject to, or to
become liable for the payment of, any Tax other than taxes due on the
income of the Shareholders for dividends or other distributions from the
Buyer on or after the Closing;
(vi) any Legal Requirement or Order to which Buyer may be
subject; or
(vii) any Contract to which Buyer is a party or by which
Buyer may be bound.
Except as set forth in Schedule 4.3, Buyer is not and will not be
required to obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.4 INVESTMENT REPRESENTATIONS OF THE BUYER
(a) It is the Buyer's present intention to acquire the AIM
Stock for its own account (and it will be the sole beneficial owner
thereof), and that the AIM Stock are being and will be acquired by it for
the purpose of investment and not with a view to distribution or resale
thereof except pursuant to a registration under the Securities Act or
exemption therefrom and from applicable Blue Sky laws. The acquisition
of the AIM Stock shall constitute a confirmation of this representation.
(b) The Buyer understands that: (i) the shares of AIM Stock
being issued to it have not been registered under the Securities Act by
reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act of 1933 (the "Securities Act")
pursuant to Section 4(2) thereof or Rule 506 promulgated under the
Securities Act; (ii) the shares of AIM Stock acquired by it must be held
indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration; (iii) the shares
of AIM Stock acquired by it will bear a legend to such effect; (iv) the
Company will make a notation on its transfer books to such effect; (v)
the Company will rely on Buyer's representations and warranties in this
Section 4.4 in offering and issuing shares of AIM Stock without
registering such shares under the Securities Act.
It is the Buyer's present intention to acquire the AIM Stock for its
own account (and it will be the sole beneficial owner thereof), and that
the AIM Stock are being and will be acquired by it for the purpose of
investment and not with a view to distribution or resale thereof except
pursuant to a registration under the Securities Act or exemption
therefrom and from applicable Blue Sky laws. The acquisition of the AIM
Stock shall constitute a confirmation of this representation. It is
understood and agreed that, until registered under the Securities Act or
transferred pursuant to the provisions of Rule 144 or Rule 144A of the
Securities Act, all certificates evidencing any of the AIM Stock shall
bear a legend, prominently stamped or printed thereon, memorializing such
restrictions.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer
and that challenges, or may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.6 NO MATERIAL ADVERSE CHANGE
Since the date of the most recent Annual Report on Form 10-K (or
Quarterly Report on Form 10-Q, as applicable), and subject only to
interim Reports on Form 8-K included in Part 4.1 of the Buyer Disclosure
Schedule upon Request, there has been no material adverse change in the
assets, properties, business, results of operations or financial
condition of the Buyer.
4.7 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 4.7 of the Buyer Disclosure Schedule,
the Buyer has no liabilities or obligations of any nature (whether known
or unknown and whether absolute, accrued, contingent, or otherwise)
except for liabilities or obligations reflected on or reserved against in
the balance Sheet constituting a part of Buyer's most recent 10K filing.
4.8 TAXES
(a) The Buyer has filed or caused to be filed (on a timely
basis) all Tax Returns that are or were required to be filed by or with
respect to it, pursuant to applicable Legal Requirements
(b) The charges, accruals, and reserves with respect to Taxes
on the books of the Buyer and as disclosed in the SEC Filings are
adequate (determined in accordance with GAAP) to discharge the Buyer's
liability for Taxes. There exists no proposed tax assessment against the
Buyer except as disclosed in SEC Filings. No consent to the application
of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by Buyer. All Taxes
that the Buyer is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent required,
have been paid to the proper Governmental Body or other Person.
(c) All Tax Returns filed by the Buyer are true, correct, and
complete. There is no tax sharing agreement that will require any
payment by the Buyer after the date of this Agreement.
4.9 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this
Agreement, and will indemnify and hold Shareholders harmless from any
such payment alleged to be due by or through Buyer as a result of the
action of Buyer or its officers or agents.
4.10 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 4.10 of the Buyer Disclosure
Schedule the Buyer has at all times been and remained in full compliance
with each Legal Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use of any of
its assets;
(b) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
violation by the Buyer of, or a failure on the part of the Buyer to
comply with, any Legal Requirement, or (B) may give rise to any
obligation on the part of the Buyer to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(c) the Buyer has not received, at any time since it became
subject to the provisions of the Exchange Act, or at any time prior
thereto with respect to any matter or thing required to be disclosed at
any time in any SEC Filing: any notice or other communication (whether
oral or written) from any Governmental Body or any other Person regarding
(A) any actual, alleged, possible, or potential violation of, or failure
to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of the Company or any
Subsidiary to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature, to the extent that any of the
foregoing are not fully disclosed in the Buyer's SEC Filings.
4.11 BUYER COMMON STOCK
The Buyer Common Stock to be used in connection with the payment of
the Merger Shares will, at the Closing, be the only class of capital
stock of Buyer then issued and outstanding. All Buyer Common Stock
issued to the Shareholders pursuant to this Agreement will be validly
issued, fully paid, non-assessable and free and clear of any Encumbrance.
5. COVENANTS OF SHAREHOLDERS
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date,
Shareholders will, and will cause the Company and its Representatives to,
(a) afford Buyer and its Representatives and prospective lenders and
their Representatives (collectively, "Buyer's Advisors") full and free
access to the Company's personnel, properties, contracts, books and
records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c)
furnish Buyer and Buyer's Advisors with such additional financial,
operating, and other data and information as Buyer may reasonably
request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date,
Shareholders will, and will cause the Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of the Company, keep available the services of the
current officers, employees, and agents of the Company, and maintain the
relations and good will of the Company with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, Shareholders will not,
and will cause the Company not to, without the prior consent of Buyer,
take any affirmative action, or fail to take any reasonable action within
their or its control, as a result of which any of the changes or events
listed in Section 3.15 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement,
Shareholders will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate
the Contemplated Transactions. Between the date of this Agreement and
the Closing Date, Shareholders will, and will cause the Company to, (a)
cooperate with Buyer with respect to all filings that Buyer elects to
make or is required by Legal Requirements to make in connection with the
Contemplated Transactions, and (b) cooperate with Buyer in obtaining all
consents identified in Schedule 4.3.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each
Shareholder will promptly notify Buyer in writing if such Shareholder or
the Company becomes aware of any fact or condition that causes or
constitutes a Breach of any of Shareholders' representations and
warranties as of the date of this Agreement, or if such Shareholder or
the Company becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made
as of the time of occurrence or discovery of such fact or condition.
Should any such fact or condition require any change in the Shareholder
Disclosure Schedule if the Shareholder Disclosure Schedule were dated the
date of the occurrence or discovery of any such fact or condition,
Shareholders will promptly deliver to Buyer a supplement to the
Shareholder Disclosure Schedule specifying such change. During the same
period, each Shareholder will promptly notify Buyer of the occurrence of
any Breach of any covenant of Shareholders in this Section 5 or of the
occurrence of any event that may make the satisfaction of the conditions
in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Shareholders will
cause all indebtedness owed to the Company by any Shareholder or any
Related Person of any Shareholder to be paid in full at or prior to
Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Shareholders will not, and will cause the Company and each of
their Representatives not to, directly or indirectly solicit, initiate,
or encourage any inquiries, proposals or offers from, discuss or
negotiate with, provide any non-public information to, or consider the
merits of any unsolicited inquiries, proposals or offers from, any Person
(other than Buyer) relating to any transaction involving the sale of the
business or assets (other than in the Ordinary Course of Business) of the
Company, or any of the capital stock of, or any equity interest in, the
Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date,
Shareholders will use their Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
5.9 PRE-CLOSING TAXES
Buyer agrees to immediately provide Shareholders with a copy of all
communications received after the Closing Date from the IRS and any state
taxing authority regarding federal or state income tax matters applicable
to any taxable period preceding the Closing Date. Buyer agrees that
Shareholders will have the authority and responsibility to resolve any
federal tax matter affecting the federal tax liability of any Shareholder
in his or her sole discretion, provided that any resolution which would
have an adverse financial impact on Buyer shall require the written
consent of Buyer. The Shareholders agree that Buyer will have the
authority and responsibility to resolve any state tax matter affecting
state tax liability in its sole discretion, provided that any resolution
which would have an adverse financial impact on a Shareholder shall
require the written consent of such Shareholder unless Buyer shall agree
to hold such Shareholder harmless therefrom. Nothing in this paragraph
shall limit the indemnification provided for in Article XII hereof.
Buyer and Shareholders shall provide the other party with all
correspondence relating to any such matter, whether with the IRS or any
state taxing authority, and shall inform the other party in writing of
any proposed resolution of any such tax matter. The other party shall be
notified of, and shall have the right to attend, any meeting between the
responsible party and any such taxing authority and to participate in any
telephone conference or discussions among such parties.
6. COVENANTS OF BUYER
6.1 COVENANTS PRIOR TO CLOSING
(a) APPROVALS OF GOVERNMENT BODIES. As promptly as practicable
after the date of this Agreement, Buyer will, and will cause each of its
Related Persons to, make all filings required by Legal Requirements to be
made by them to consummate the Contemplated Transactions. Between the
date of this Agreement and the Closing Date, Buyer will, and will cause
each Related Person to, cooperate with Shareholders with respect to all
filings that Shareholders are required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with
Shareholders in obtaining all consents identified in Part 3.2 of the
Shareholder Disclosure Schedule; provided that this Agreement will not
require Buyer to dispose of or make any change in any portion of its
business or to incur any other burden to obtain a Governmental
Authorization.
(b) BEST EFFORTS. Except as set forth in the proviso to
Section 6.1(a), between the date of this Agreement and the Closing Date,
Buyer will use its Best Efforts to cause the conditions in Sections 7 and
8 to be satisfied.
(c) NOTIFICATION. Between the date of this Agreement and the
Closing Date, the Buyer will promptly notify the Shareholders in writing
if the Buyer becomes aware of any fact or condition that causes or
constitutes a Breach of any of Buyer's representations and warranties as
of the date of this Agreement, or if the Buyer becomes aware of the
occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or
constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition
require any change in the Buyer Disclosure Schedule if the Buyer
Disclosure Schedule were dated the date of the occurrence or discovery of
any such fact or condition, the Buyer will promptly deliver to
Shareholders a supplement to the Buyer Disclosure Schedule specifying
such change. During the same period, the Buyer will notify the
Shareholders of the occurrence of any Breach of any covenant of the
Buyers of this Section 6 or of the occurrence of any event that may make
the satisfaction of the conditions in Section 8 impossible or unlikely.
6.2 COVENANTS AT AND SUBSEQUENT TO CLOSING
(a) CERTIFICATES FOR PURCHASE PRICE SHARES. Whenever the
Buyer shall be obligated to issue Purchase Price Shares to the
Shareholders hereunder, the Buyer shall cause appropriate certificates
representing such shares to be signed by the President and the Secretary
of Buyer, and the corporate seal of the Buyer to be affixed thereon.
Such certificates shall be issued in the name of and delivered to the
appropriate Shareholder (subject only the provisions of Section 2.8 and
2.10 hereof with respect to escrow and forfeiture) without legend or
restriction except as specifically provided for in this Agreement.
(b) REGISTRATION RIGHTS
(1) Certain Definitions:
(i) "Commission" shall mean the Securities and Exchange
Commission.
(ii) "Register," "Registered" and "Registration" refer to
a registration effected by preparing and filing a registration statement
in compliance with the Securities Act ("Registration Statement"), and the
declaration or ordering of the effectiveness of such Registration
Statement.
(iii) "Registration Expenses" shall mean all expenses
incurred by the Buyer in complying with this Section, including, without
limitation, all federal and state registration, qualification and filing
fees, printing expenses, fees and disbursements of counsel for the Buyer,
blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration, but shall not include
Selling Expenses or any legal or other expenses of the Shareholders or
any other stockholder.
(iv) "Selling Expenses" means all underwriting discounts
and selling commissions applicable to the sale of registrable securities
pursuant to this Subsection.
(2) Piggyback Registration.
Subject to the terms hereof, in the event that the Buyer determines to
Register any of the Buyer Common Stock on or after the Closing Date
(either for its own account or the account of a security holder
exercising registration rights) (other than Common Stock a registration
statement on Form S-8 or S-4, or their successors), the Buyer will (A)
promptly give the Shareholders written notice thereof, which notice shall
be given sufficiently in advance of such Registration to permit the
notices required hereunder, and which notice shall include a list of the
jurisdictions in which the Buyer intends to attempt to qualify such
securities under applicable Blue Sky or state securities laws, and (B)
include in such Registration (and any related qualification under Blue
Sky or state securities laws or other compliance), and in any
underwriting involved therein, all the Purchase Price Shares specified in
a written request delivered to the Buyer by the Shareholders within 15
days after delivery of such written notice from the Buyer ("Registrable
Securities").
(i) If the Registration of which the Buyer gives notice
is a Registered Public offering involving an underwriting, the Buyer
shall so advise the Shareholders as a part of the written notice given
pursuant to subsection (i), above. In such event the right of the
Shareholders to Registration shall be conditioned upon such underwriting
and the inclusion of Registrable Securities in such underwriting to the
extent provided in this subsection. The Shareholders shall enter into an
underwriting agreement with the Underwriter's representative for such
offering. The Shareholders shall not have any right to participate in the
selection of the underwriters for an offering pursuant to this Section.
(ii) In the event that the Underwriter's representative
advises the Buyer and the Shareholders, with respect to a Registration
under subsection (i), above, that the market factors (including, without
limitation, the aggregate number of shares of Buyer Common Stock
requested to be Registered, the general condition of the market, and the
status of persons proposing to sell securities pursuant to the
Registration) require a limitation on the number of shares to be
underwritten, the Underwriter's representative (subject to an appropriate
allocation among all selling shareholders) may exclude some or all of the
Registrable Securities from such registration and underwriting. In such
event, the Shareholders shall be entitled to include a portion of the
Registrable Securities requested to be included in such registration pro
rata (based on the Sharing Percentages) with all other requesting
shareholders having demand or piggyback registration rights.
(iii) If the Shareholders disapprove of the terms of any
such underwriting, they may elect to withdraw therefrom by written notice
to the Buyer and the Underwriter's Representative given at least seven
days prior to the effective date of the Registration Statement. In the
event of any Registration of the Registrable Shares pursuant to
subsection (i), above, the Buyer will use its best efforts to Register
and qualify the securities covered by the Registration Statement under
such Blue Sky or securities laws of such jurisdictions as the
Shareholders may reasonably request; provided, however, that (A) the
Buyer shall not be required to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions, and (B) notwithstanding anything herein to the contrary,
in the event that any jurisdiction in which the securities shall be
qualified imposes a non-waivable requirement that expenses incurred in
connection with the qualification of the securities be born by selling
shareholders, such expenses shall be payable pro rata by all selling
shareholders.
(iv) The Buyer will keep the Shareholders informed as to
the initiation and completion of the Registration. At its own expense,
the Buyer will (A) use its best efforts to keep such Registration
effective for a period of ninety days or until the registering
stockholders, including the Shareholders, shall have completed the
distribution described in the Registration Statement relating thereto,
whichever first occurs; and (B) furnish such number of prospectuses
(including preliminary prospectuses) and other documents as the
Shareholders from time to time may reasonably request. The Buyer's
obligation hereunder is conditioned upon the Shareholders' agreement to
refrain from selling shares pursuant to a Registration (1) during any
period when the Buyer has notified the Shareholders that, as the result
of any event, the applicable prospectus includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or to make the statements therein not misleading; and (2) during
the pendency of any stop order with respect to such Registration.
(v) It shall be a condition precedent of the Buyer's
obligations under this Section that the Shareholders furnish to the Buyer
upon reasonable request information regarding the Shareholders and the
distribution proposed by the Shareholders.
(vi) If, at any time after giving written notice of its
intention to register any securities in a Registration but before the
effective date of the related Registration Statement, the Buyer shall
determine for any reason not to register such securities, the Buyer shall
give notice of such determination to the Shareholders and shall thereupon
be relieved of its obligations to register the Registrable Securities in
connection with such abandoned Registration.
(vii) All Registration expenses incurred in connection
with all Registrations shall be borne by the Buyer. Selling Expenses
shall be born pro-rata by the holders of Registrable Shares and all other
shares being registered by selling shareholders in such Registration.
(viii) The Buyer's obligations hereunder shall terminate
at such time as the public sale of all Registrable Securities is no
longer restricted by paragraph (d) of Commission Rule 144, as amended.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the AIM Shares and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of Shareholders' representations and warranties in
this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and
must be accurate in all material respects as of the Closing Date as if
made on the Closing Date.
(b) Each of Shareholders' representations and warranties in
Sections 3.3, 3.4, 3.12, and 3.24 must have been accurate in all respects
as of the date of this Agreement, and must be accurate in all respects as
of the Closing Date as if made on the Closing Date, without giving effect
to any supplement to the Shareholder Disclosure Schedule (except for
information provided upon Request).
7.2 SHAREHOLDERS' PERFORMANCE
(a) All of the covenants and obligations that Shareholders are
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.
(b) Each document required to be delivered by Shareholders
pursuant to Section 2.8 must have been delivered.
7.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Shareholder
Disclosure Schedule, and each Consent identified in Part 4.3 of the Buyer
Disclosure Schedule, must have been obtained and must be in full force
and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) Such Documents as Buyer may reasonably request for the
purpose of (i) evidencing the accuracy of any of Shareholders'
representations and warranties, (ii) evidencing the performance by any
Shareholder of, or the compliance by any Shareholder with, any covenant
or obligation required to be performed or complied with by such
Shareholder, (iii) evidencing the satisfaction of any condition referred
to in this Section 7, or (iv) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced
or Threatened against Buyer, or against any Person affiliated with Buyer
or any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or
(b) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of,
or has the right to acquire or to obtain beneficial ownership of, any
stock of, or any other voting, equity, or ownership interest in, the
Company, or (b) is entitled to all or any portion of the Purchase Price
payable for the AIM Shares.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person
affiliated with Buyer to suffer any material adverse consequence under,
(a) any applicable Legal Requirement or Order, or (b) any Legal
Requirement or Order that has been published, introduced, or otherwise
formally proposed by or before any Governmental Body.
7.8 EMPLOYMENT AGREEMENTS
Each of the employees named in Section 2.8(a)(iii) shall have
entered into an Employment Agreement.
8. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATION TO CLOSE
Shareholders' obligation to sell the AIM Shares and to take the
other actions required to be taken by Shareholders at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Shareholders, in
whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
(a) All of Buyer's representations and warranties in this
Agreement (considered collectively), and each of these representations
and warranties (considered individually), must have been accurate in all
material respects as of the date of this Agreement and must be accurate
in all material respects as of the Closing Date as if made on the Closing
Date, without giving effect to any supplement to the Buyer Disclosure
Schedule (except for information provided upon Request).
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Buyer must have delivered each of the documents and
payments required to be delivered by Buyer pursuant to Section 2.8.
8.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Shareholder
Disclosure Schedule and each Consent identified in Part 4.3 of the Buyer
Disclosure Schedule must have been obtained and must be in full force and
effect.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to
Shareholders:
(a) such documents as Shareholders may reasonably request for
the purpose of (i) evidencing the accuracy of any representation or
warranty of Buyer, (ii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (iii) evidencing the satisfaction of
any condition referred to in this Section 8, or (iv) otherwise
facilitating the consummation of any of the Contemplated Transactions.
8.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced
or Threatened against the Shareholders, or against any Person affiliated
with Shareholders or any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the
Contemplated Transactions.
9. TERMINATION PRIOR TO CLOSING
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) Upon not less than ten (10) days prior written notice by
either Buyer or Shareholders if a material Breach of any provision of
this Agreement has been committed by the other party and such Breach has
not been waived or cured during said ten (10) day notice period;
(b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and
Shareholders have not waived such condition on or before the Closing
Date; or (ii) by Shareholders, if any of the conditions in Section 8 has
not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Shareholders to comply with their obligations under this Agreement) and
Buyer has not waived such condition on or before the Closing Date;
(c) By the Buyer if the Shareholder Disclosure Schedule has
been modified in one or more material and adverse respects and by the
Shareholder if the Buyer Disclosure Schedule has been modified in one or
more material and adverse respects;
(d) immediately upon written notice by Buyer if Shareholders,
the Company or their representatives breach the provisions of the first
sentence of Section 5.7;
(e) by mutual consent of Buyer and Shareholders in writing; or
(f) immediately upon written notice by either Buyer or
Shareholders if the Closing has not occurred (other than through the
failure of any party seeking to terminate this Agreement to comply fully
with its obligations under this Agreement) on or before January 31, 2000,
or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION PRIOR TO CLOSING
Each party's right of termination under Section 9.1 is in addition
to any other rights it may have under this Agreement or otherwise, and
the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate,
except that the obligations in Section 11.2 will survive and except that
if this Agreement is terminated by a party because of the Breach of the
Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied
as a result of the other party's failure to comply with its obligations
under this Agreement, the terminating party's right to pursue all legal
remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
OBLIGATIONS
All representations, warranties, covenants, and obligations in this
Agreement, the Buyer and Shareholder Disclosure Schedules, the
certificates delivered pursuant to Sections 2.8(a)(iv) and (b)(ii), and
any other certificate or document delivered pursuant to this Agreement
will survive the Closing for a period of three (3) years thereafter
unless a longer or shorter survival period is specified herein, following
which applicable period all such representations, warranties, covenants
and obligations shall cease and be of no further force and effect. The
waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties,
covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SHAREHOLDERS
Shareholders, jointly and severally, will indemnify and hold
harmless Buyer, the Company, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the
amount of, any loss, liability, claim, damage (including incidental and
consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether
or not involving a third-party claim (collectively, "Damages"), arising,
directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Shareholders in this Agreement, the Shareholder Disclosure Schedule, the
supplements to the Shareholder Disclosure Schedule, or any other
certificate or document delivered by Shareholders pursuant to this
Agreement;
(b) any Breach of any representation or warranty made by
Shareholders in this Agreement as if such representation or warranty were
made on and as of the Closing Date, other than any such Breach that is
disclosed in a supplement to the Shareholder Disclosure Schedule on or
before the Closing;
(c) any Breach by any Shareholder of any covenant or
obligation of such Shareholder in this Agreement;
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any Shareholder or the
Company (or any Person acting on their behalf) in connection with any of
the Contemplated Transactions.
The remedies provided in this Section 10.2 will not be exclusive of
or limit any other remedies that may be available to Buyer or the other
Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless each of the Shareholders,
their respective heirs, executors and beneficiaries (the "Shareholder
Indemnified Persons"), and will pay to the Shareholder Indemnified
Persons the amount of any Damages arising, directly or indirectly, from
or in connection with:
(a) any Breach of any representation or warranty made by Buyer
in this Agreement, in the Buyer Disclosure Schedule, the supplements to
the Buyer Disclosure Schedule or in any certificate delivered by Buyer
pursuant to this Agreement;
(b) any Breach of any representation or warranty made by Buyer
in this Agreement as if such representation or warranty were made on and
as of the Closing Date, other than any such Breach that is disclosed in a
supplement to the Buyer Disclosure Schedule on or before the Closing;
(c) any Breach by Buyer of any covenant or obligation of Buyer
in this Agreement, or
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Buyer (or
any Person acting on its behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.3 will not be exclusive of
or limit any other remedies that may be available to Shareholders or the
Other Shareholder Indemnified Persons.
10.4 TIME LIMITATIONS
If the Closing occurs, Shareholders will have no liability for
indemnification with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the
Closing Date, unless on or before the third anniversary of the Closing
Date Buyer notifies Shareholders of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Buyer. If
the Closing occurs, Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date,
unless on or before the third anniversary of the Closing Date
Shareholders notify Buyer of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Shareholders.
10.5 LIMITATIONS ON AMOUNT - SHAREHOLDERS
Shareholders will have no liability for indemnification with respect
to the matters described in Section 10.2 until the total of all Damages
with respect to such matters exceeds $ 100,000. In no event shall the
aggregate liability of Shareholders with respect to all claims for
indemnification by Buyer or any Indemnified Persons exceed that portion
of the Merger Shares actually issued to the Indemnified Persons as of the
date the claim for indemnity is made. However, this Section 10.5 will not
apply to any Breach of any of Shareholders' representations and
warranties of which any Shareholder had Knowledge at any time prior to
the date on which such representation and warranty is made or any
intentional Breach by any Shareholder of any covenant or obligation, and
Shareholders will be liable for all Damages with respect to such
Breaches.
10.6 LIMITATIONS ON AMOUNT - BUYER
Buyer will have no liability for indemnification with respect to the
matters described in Section 10.4 until the total of all Damages with
respect to such matters exceeds $ 100,000. In no event shall the
aggregate liability of Buyer with respect to all claims for
indemnification by Shareholders exceed the Merger Consideration.
However, this Section 10.6 will not apply to any Breach of any of Buyer's
representations and warranties of which Buyer had Knowledge at any time
prior to the date on which such representation and warranty is made or
any intentional Breach by Buyer of any covenant or obligation, and Buyer
will be liable for all Damages with respect to such Breaches.
10.7 INDEMNITY NEGOTIATIONS; STOCK OFFSET; VALUATION
In the event of a claim by Buyer or Shareholders for indemnification
pursuant to the provisions of this Article 10, the Buyer and Shareholders
shall attempt, wherever possible, to increase or decrease, as the case
may be, the number of shares of Merger Shares payable hereunder to
satisfy the indemnification obligation prior to requiring the payment of
cash. Such attempt shall be conducted in good faith by all parties. For
purposes of such negotiations and any increase or decrease in the Merger
Shares payable hereunder, the value of the shares of Buyer Common Stock
shall be the average closing price of such stock during the four weeks
preceding the date of valuation, or if no closing prices are available,
such valuation shall be determined by agreement of the parties in good
faith or $2.567 (Two and 567/1000 Dollars), whichever is greater.
10.8 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Section 10.2 or Section 10.3 of notice of the commencement of any
Proceeding against it, such indemnified party will, if a claim is to be
made against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure to
notify the indemnifying party will not relieve the indemnifying party of
any liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of such
action is prejudiced by the indemnifying party's failure to give such
notice.
(b) If any Proceeding referred to in subsection (a), above, is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will, unless the claim involves Taxes, be entitled to
participate in such Proceeding and, to the extent that it wishes (unless
(i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation
would be inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as
it diligently conducts such defense, be liable to the indemnified party
under this Section 10 for any fees of other counsel or any other expenses
with respect to the defense of such Proceeding, in each case subsequently
incurred by the indemnified party in connection with the defense of such
Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims
made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no
effect on any other claims that may be made against the indemnified
party, and (B) the sole relief provided is monetary damages that are paid
in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party
will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) Shareholders hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person
may have under this Agreement with respect to such Proceeding or the
matters alleged therein, and agree that process may be served on
Shareholders with respect to such a claim anywhere in the world.
10.9 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS
A claim for indemnification for any matter not involving a third-
party claim may be asserted by notice to the party from whom
indemnification is sought.
11. GENERAL PROVISIONS
11.1 BUYER'S BOARD OF DIRECTORS
Buyer and its Board of Directors will use their best efforts to have
the Board of Directors of Buyer immediately after the Closing consist of
nine (9) individuals: Xxxxx X. Xxxxx, Xxxxxxx Xxxxx, Xxxxxxx X. Deck,
Xxxxxxx Dessich, Xxxxxx Xxxxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx
Xxxxxxxxx, and Xxxxxxx Grusse. Subject to the requirements of the
Exchange Act and regulations promulgated thereunder, the Buyer covenants
and agrees that it will, on and after the Closing and until the
termination of the Employment Agreement between the Buyer and Pastor,
cause to be nominated by management and described in the Company's proxy
materials a Board of Directors consisting of nine individuals, three of
whom are to be nominated by Shareholders.
11.2 EXPENSES
Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and accountants. In the
event of termination of this Agreement, the obligation of each party to
pay its own expenses will be subject to any rights of such party arising
from a breach of this Agreement by another party.
11.3 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at
such time and in such manner as Buyer determines. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing
Shareholders shall, and shall cause the Company to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement
to any Person. Shareholders and Buyer will consult with each other
concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of
the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
11.4 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and
Shareholders will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, and not use to the detriment of another party or
the Company, any written, oral, or other information obtained in
confidence from another party or the Company in connection with this
Agreement or the Contemplated Transactions.
11.5 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), or (c) when
received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to
the other parties):
Shareholders: c/o Xxxxxx X. Xxxxxx
00 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxxxxx, Esquire
000 Xxxxxxxx Xxxx
X.X. Xxx 0000
Xxxx, XX 00000 and
Xxxxxx X. Xxxxxxxxx, Esquire
1484 New Britain Ave.
X.X. Xxx 000
Xxxxxxxxxx, XX 00000
Buyer: Accel International Corporation
00 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
with a copy to:
Day, Xxxxx & Xxxxxx LLP
CityPlace I
Hartford, Connecticut 06103-3499
Attention: Xxxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent
of this Agreement and the documents referred to in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver
of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further
exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this Agreement or
the documents referred to in this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may
be given by a party will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of such party or of the right
of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred
to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties
with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect
to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
11.9 SCHEDULES
(a) The disclosures in the Buyer or Shareholder Disclosure
Schedules, and those in any supplement thereto, must relate only to the
representations and warranties in the Section of the Agreement to which
they expressly relate and not to any other representation or warranty in
this Agreement.
(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Buyer or Shareholder
Disclosure Schedules (other than an exception expressly set forth as such
in such Disclosure Schedule with respect to a specifically identified
representation or warranty), the statements in the body of this Agreement
will control.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement
without the prior consent of the other parties, except that Buyer may
assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors
and permitted assigns of the parties. Nothing expressed or referred to
in this Agreement will be construed to give any Person other than the
parties to this Agreement any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and
their successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this
Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or
unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation.
All references to "Section" or "Sections" refer to the corresponding
Section or Sections of this Agreement. All words used in this Agreement
will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does
not limit the preceding words or terms.
11.13 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Connecticut without regard to conflicts of laws principles.
11.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
ACCEL INTERNATIONAL CORPORATION Shareholders:
By /s/ Xxxxxxx X. Deck /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxxx X. Deck Xxxxxx X. Xxxxxx
Title: Chairman of the Board
ACCEL MERGER SUB, INC. /s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
By /s/ Xxxxxxx X. Deck /s/ Xxxxxx X. Xxxxxx, Trustee
Name: Xxxxxxx X. Deck Xxxxxx X. Xxxxxx, Trustee, Xxxxxx X. Xxxxxx
Title: Chairman Profit Sharing Plan & Trust
ALLEGIANCE INSURANCE MANAGERS, /s/ Xxxxxx XxXxxxx
LTD. Xxxxxx XxXxxxx
By /s/ Xxxxxx X. Xxxxxx /s/ Xxxxxxx St. Xxxxxx
Name: Xxxxxx X. Xxxxxx Xxxxxxx St. Xxxxxx
Title: President & CEO
/s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
/s/ Xxxx Xxxxxxxxxx
Xxxx Xxxxxxxxxx
/s/ Xxxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
