Exhibit 2.1
STOCK PURCHASE AGREEMENT
by and among
SUSQUEHANNA BANCSHARES, INC.,
SUSQUEHANNA ACQUISITION, LLC,
THE ADDIS GROUP, INC.
and
THE SHAREHOLDERS OF THE ADDIS GROUP, INC.
Dated as of April 30, 2002
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ARTICLE I SALE AND TRANSFER OF THE SHARES............................................................1
Section 1.1 Purchase and Sale of the Shares.......................................................1
Section 1.2 Closing...............................................................................2
Section 1.3 Closing Deliveries....................................................................2
Section 1.4 No Fractional Shares..................................................................2
Section 1.5 Shareholder Representative............................................................3
ARTICLE II POST-CLOSING ADJUSTMENT; CONTINGENT CONSIDERATION..........................................3
Section 2.1 Post-Closing Adjustment...............................................................3
Section 2.2 Contingent Consideration..............................................................6
Section 2.3 Calculation of Contingent Consideration...............................................6
Section 2.4 Change of Control.....................................................................7
Section 2.5 Notice of Contingent Consideration....................................................8
ARTICLE III ESCROW....................................................................................10
Section 3.1 Creation of Escrow...................................................................10
Section 3.2 Duration and Terms...................................................................10
Section 3.3 Voting and Investment................................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF AGI AND THE SHAREHOLDERS................................10
Section 4.1 Organization.........................................................................10
Section 4.2 Capitalization.......................................................................12
Section 4.3 Authority............................................................................12
Section 4.4 Consents and Approvals; No Violations................................................12
Section 4.5 Subsidiaries; Predecessor Status; Spin-Offs..........................................13
Section 4.6 No Third Party Options...............................................................13
Section 4.7 Financial Statements.................................................................13
Section 4.8 Title to Assets, Properties, Interests in Properties, Rights and Related
Matters..............................................................................13
Section 4.9 Absence of Certain Changes...........................................................14
Section 4.10 Absence of Undisclosed Liabilities...................................................14
Section 4.11 Legal Proceedings....................................................................14
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Section 4.12 Contracts, Leases, Agreements and Other Commitments..................................14
Section 4.13 Insurance............................................................................16
Section 4.14 Benefit Plans........................................................................16
Section 4.15 Collective Bargaining Agreements and Employment Agreements...........................19
Section 4.16 Compliance with Applicable Law.......................................................19
Section 4.17 Actions since the Balance Sheet Date.................................................19
Section 4.18 Tax Matters..........................................................................21
Section 4.19 Environmental Matters................................................................23
Section 4.20 Books and Records....................................................................25
Section 4.21 Intellectual Property................................................................25
Section 4.22 Condition of Tangible Assets.........................................................25
Section 4.23 Conflict of Interest.................................................................25
Section 4.24 Customers............................................................................26
Section 4.25 Broker Services......................................................................26
Section 4.26 Disclosure...........................................................................26
ARTICLE V FURTHER REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS................................26
Section 5.1 Ownership of Capital Stock of AGI....................................................26
Section 5.2 Valid and Binding Agreement..........................................................27
Section 5.3 Marital Status.......................................................................27
Section 5.4 Shareholder Agreements...............................................................27
Section 5.5 Investment Intent....................................................................27
Section 5.6 Compliance with Law..................................................................27
Section 5.7 Economic Risk; Sophistication........................................................28
Section 5.8 Information Supplied.................................................................28
Section 5.9 Accredited Investor..................................................................28
Section 5.10 Securities Legends...................................................................28
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SBI AND THE ACQUISITION SUB.............................29
Section 6.1 Organization.........................................................................29
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Section 6.2 Authority............................................................................29
Section 6.3 Consents and Approvals; No Violation.................................................29
Section 6.4 SEC Reports and Financial Statements.................................................30
Section 6.5 Disclosure...........................................................................30
Section 6.6 SBI Stock............................................................................30
ARTICLE VII CERTAIN COVENANTS.........................................................................30
Section 7.1 Access and Information...............................................................30
Section 7.2 Conduct of the Business of AGI pending the Closing Date..............................31
Section 7.3 Conduct of SBI Pending the Closing Date..............................................32
Section 7.4 Notices..............................................................................32
Section 7.5 Advice of Changes....................................................................33
Section 7.6 Legal Conditions.....................................................................33
Section 7.7 No Shopping..........................................................................33
Section 7.8 Best Efforts.........................................................................33
Section 7.9 Conduct of AGI following the Closing Date............................................33
ARTICLE VIII INDEMNIFICATION...........................................................................34
Section 8.1 Basic Provision......................................................................34
Section 8.2 Definitions..........................................................................35
Section 8.3 Procedures for Establishment of Deficiencies.........................................35
Section 8.4 Payment of Deficiencies..............................................................37
Section 8.5 Survival of Representations, Warranties and Agreements...............................37
Section 8.6 Limitations on Indemnification.......................................................37
ARTICLE IX CONDITIONS TO CLOSING.....................................................................38
Section 9.1 Conditions to Each Party's Obligation To Effect the Transaction......................38
Section 9.2 Conditions of Obligations of SBI and the Acquisition Sub.............................38
Section 9.3 Conditions of Obligations of AGI and the Shareholders................................40
ARTICLE X DELIVERIES................................................................................41
Section 10.1 Shareholders' Deliveries.............................................................41
Section 10.2 SBI's and the Acquisition Sub's Deliveries at Closing................................42
Section 10.3 SBI's Deliveries on Payment Date.....................................................42
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ARTICLE XI TAX MATTERS...............................................................................42
Section 11.1 Returns for Tax Periods Ending on or Before the Closing Date.........................42
Section 11.2 Returns for Tax Periods Beginning Before and Ending After the Closing Date...........43
Section 11.3 Cooperation on Tax Matters...........................................................43
Section 11.4 S Corporation Status.................................................................43
Section 11.5 Section 338(h)(10) Election..........................................................44
Section 11.6 Certain Taxes........................................................................44
ARTICLE XII TERMINATION AND AMENDMENT.................................................................45
Section 12.1 Termination..........................................................................45
Section 12.2 Effect of Termination................................................................45
Section 12.3 Amendment............................................................................46
Section 12.4 Extension; Waiver....................................................................46
ARTICLE XIII FORM D FILING; REGISTRATION OF THE NEW SHARES.............................................46
Section 13.1 Form D Filing; Registration of New Shares............................................46
Section 13.2 Transfer of Shares After Registration................................................48
Section 13.3 Furnish Information..................................................................48
Section 13.4 Indemnification......................................................................48
ARTICLE XIV MISCELLANEOUS.............................................................................50
Section 14.1 Costs and Expenses...................................................................50
Section 14.2 Brokers or Finders...................................................................50
Section 14.3 Notices..............................................................................50
Section 14.4 Publicity............................................................................52
Section 14.5 Binding Nature of Agreement; No Assignment...........................................52
Section 14.6 Controlling Law......................................................................52
Section 14.7 Exhibits and Schedules...............................................................52
Section 14.8 Execution in Counterparts............................................................52
Section 14.9 Provisions Separable.................................................................52
Section 14.10 Entire Agreement.....................................................................53
Section 14.11 Paragraph Headings...................................................................53
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Section 14.12 Gender, Etc..........................................................................53
Section 14.13 Knowledge of AGI and the Shareholders................................................53
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of April 30,
2002 by and among Susquehanna Bancshares, Inc., a Pennsylvania business
corporation registered as a financial holding company under the Bank Holding
Company Act of 1956, as amended ("SBI"), Susquehanna Acquisition, LLC, a
Pennsylvania limited liability company and wholly-owned subsidiary of SBI (the
"Acquisition Sub"), The Addis Group, Inc., a Pennsylvania business corporation
("AGI"), and F. Xxxxx Xxxxx, Xxxxxxx X. Xxxxxx, III and Xxxxx X. Xxxxx, who
constitute all of the shareholders of AGI (each individually, a "Shareholder"
and collectively, the "Shareholders").
WHEREAS, SBI is a multi-state financial holding company headquartered in
Lititz, Pennsylvania;
WHEREAS, AGI is an insurance brokerage firm specializing in risk management
consulting and placement of property and casualty coverages to medium to
large-sized companies throughout the United States, principally in the Middle
Atlantic states;
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of AGI (the "Shares"), set forth opposite their respective names on Annex
I to this Agreement; and
WHEREAS, the Shareholders desire to sell to the Acquisition Sub, and the
Acquisition Sub desires to purchase from the Shareholders, all of the Shares for
the consideration and on the terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, and intending to be legally bound, the parties hereto hereby agree as
follows:
ARTICLE I
SALE AND TRANSFER OF THE SHARES
Section 1.1 Purchase and Sale of the Shares. (a) Subject to the terms and
conditions of this Agreement, at the Closing (as defined in Section 1.2 below),
the Acquisition Sub agrees to purchase from the Shareholders, and the
Shareholders agree to sell to the Acquisition Sub, the Shares. In consideration
therefor, SBI agrees to pay or cause Acquisition Sub to pay (i) on the day
immediately following the Closing Date as defined in Section 1.2 below (the
"Payment Date"), an aggregate amount of $7,000,000 in cash, plus $4,000,000 in
value of shares of common stock, par value $2.00 per share, of SBI (the "SBI
Stock"), valued at the Average Closing Price (as defined below) (except that in
no event shall SBI be required to issue a number of shares of the SBI Stock
representing greater than 19.9% of the currently outstanding shares of the SBI
Stock as of the Closing Date at a price less than the greater of book or market
value of the SBI Stock), plus (ii) the Contingent Consideration (as defined in
Section 2.2 below). In the event the 19.9% limitation set forth in the
immediately preceding sentence results in the Shareholders receiving SBI Stock
having an aggregate value of less than $4,000,000 valued at
the Average Closing Price, then on the Payment Date the cash to be paid to the
Shareholders shall be increased by an amount equal to the difference between
$7,000,000 and the value of the SBI Stock issued to the Shareholders. The cash
and the SBI Stock to be paid on the Payment Date in consideration for the sale
of the Shares shall be referred to collectively as the "Base Consideration" and
shall be subject to adjustment as provided in Section 2.1 below. For purposes of
this Section 1.1, the "Average Closing Price" shall mean the amount per share of
SBI Stock equal to the average of the closing sale price of the SBI Stock for
the 10 trading days prior to the day immediately preceding the Closing Date
reported by the Nasdaq National Market (or the facilities of any national
securities exchange or over-the-counter market on which the SBI Stock is then
traded).
(b) On the Payment Date, each Shareholder shall, subject to Article
III, be entitled to receive, in payment for the Shares owned by such
Shareholder, (i) a percentage of the cash portion of the Base Consideration that
is equal to the percentage ownership of such Shareholder in AGI as set forth in
Annex I hereto, and (ii) a certificate or certificates registered in the name of
such Shareholder representing that number of whole shares of SBI Stock equal to
the stock portion of the Base Consideration that is equal to the percentage
ownership of such Shareholder in AGI as set forth in Annex I hereto.
Section 1.2 Closing. The closing of the transactions contemplated herein
(the "Closing") will take place at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP,
0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000 (or such other place as the parties
hereto may agree) on the next business day (or such later date as the parties
hereto may agree) following the first business day on which the last to be
fulfilled or waived of the closing conditions set forth in Article IX shall be
fulfilled or waived in accordance herewith. The date on which the Closing occurs
is hereinafter referred to as the "Closing Date."
Section 1.3 Closing Deliveries. (a) At the Closing, the Shareholders shall
deliver to SBI, free and clear of all liens, claims, charges, restrictions,
equities, or encumbrances thereon, the certificates representing all of the
Shares, accompanied by blank stock powers duly executed with all necessary
transfer tax and other revenue stamps affixed and canceled, and, in
consideration therefor, on the Payment Date, SBI shall deliver to the
Shareholders the Base Consideration.
(b) In the event any certificates for the Shares shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed and, if requested by
SBI, the posting by such person of a bond in such amount as SBI may direct as
indemnity against any claim that may be made against it or AGI with respect to
such certificate, SBI will pay or deliver the Base Consideration in exchange for
such lost, stolen or destroyed certificate into which such certificate.
Section 1.4 No Fractional Shares. Notwithstanding any other provision of
this Article I, no fractional shares of SBI Stock will be issued and any holder
of the Shares entitled hereunder to receive a fractional share of SBI Stock but
for this Section 1.4 will be entitled hereunder to receive in lieu of such
fractional share a cash payment equal to the value of such fractional share
valued at the Average Closing Price.
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Section 1.5 Shareholder Representative. Simultaneously with the execution
of this Agreement, each of the Shareholders hereby appoints F. Xxxxx Xxxxx as
his agent and as his true and lawful attorney in fact (the "Shareholder
Representative"), for such Shareholder and in such Shareholder's name (i) to
hold each of the Shares held by such Shareholder and deliver the same to SBI at
Closing, and (ii) to act on behalf of such Shareholder at the Closing in
connection with any and all issues that may arise at Closing in connection with
the transactions contemplated by this Agreement and to execute and deliver all
instruments and documents or every kind incident thereto. This power of attorney
is coupled with an interest as provided by applicable law and shall survive
bankruptcy or mental incapacity of each Shareholder to the extent that such
Shareholder may legally contract for such survival. All parties to this
Agreement and any person to whom any of the agreements, undertakings, consents
and other documents referred to in this Agreement relate may conclusively
presume and rely upon this power of attorney without further inquiry. This
appointment of the Shareholder Representative may only be revoked in a writing
which shall name a successor who agrees to be bound by the terms of this
Agreement and shall be signed by a majority of the Shareholders.
ARTICLE II
POST-CLOSING ADJUSTMENT; CONTINGENT CONSIDERATION
Section 2.1 Post-Closing Adjustment. (a) Within sixty (60) calendar days
following the Closing Date, SBI at its own expense, shall cause
PricewaterhouseCoopers ("SBI's Accountant") to audit (the "Post-Closing Audit")
the books of AGI to determine the accuracy of the information set forth in the
AGI Closing Financial Certificate (as defined in Section 9.2(j) herein). In the
course of the Post-Closing Audit, SBI's Accountant shall apply generally
accepted accounting principles consistently applied throughout the periods
involved ("GAAP"), subject to the treatment of contingencies and direct xxxx
receivables required by Section 7.9(d) of this Agreement. The Shareholders shall
cooperate with SBI and SBI's Accountant in furnishing information, documents,
evidence and other assistance to SBI's Accountant to facilitate the completion
of the Post-Closing Audit. In the event that SBI's Accountant determines that
(i) the actual Working Capital (as defined below) of AGI on the Closing Date was
less than $1,000, (ii) AGI had long term liabilities on the Closing Date, or
(iii) the actual Tangible Net Worth (as defined below) of AGI on the Closing
Date was less than $100,000 (each of (i) - (iii) a "Financial Requirement
Deficiency" and together "Financial Requirement Deficiencies") or that the
actual Tangible Net Worth of AGI on the Closing Date was greater than $100,000
(such difference the "Excess Tangible Net Worth"), then SBI shall promptly
deliver a written notice to that effect with supporting documentation to the
Shareholder Representative setting forth such Financial Requirement Deficiency
or Deficiencies of AGI and/or any Excess Tangible Net Worth, as the case may be,
on the Closing Date ("Adjustment Notice"). As used in this agreement, "Working
Capital" means current assets less current liabilities and "Tangible Net Worth"
means total assets (excluding all intangible items) less total liabilities; also
provided that, any receivables relating to loans to employees will be excluded
from assets.
(b) As soon as practicable, but in any event within thirty (30)
calendar days of receipt of the Adjustment Notice from SBI, the Shareholders may
cause their accountant(s), at such Shareholders' sole expense, to provide a
report to SBI indicating their agreement or objections to the Adjustment Notice.
Any such objections shall be set forth in reasonable detail
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in a report (the "Shareholders' Report") that shall indicate the grounds upon
which the Shareholders' accountant disputes the calculation of the Financial
Requirement Deficiencies and/or the Excess Tangible Net Worth in the Adjustment
Notice.
(c) (i) Within fifteen (15) calendar days of the receipt by SBI of the
Shareholders' Report, the Shareholder Representative and SBI shall endeavor to
agree on any matters in dispute.
(ii) If SBI and the Shareholder Representative are unable to
agree on any matters in dispute within 15 calendar days after receipt of the
Shareholders' Report, the matters in dispute will be submitted for resolution to
an accounting firm of national reputation (excluding each of SBI's and the
Shareholders' respective regular outside accounting firms) as may be mutually
acceptable to the Shareholder Representative and SBI; provided, however, that in
the event that SBI and the Shareholder Representative are unable to agree on
such an accounting firm within ten (10) calendar days, then the accounting firm
shall be selected by lot. Any accounting firm agreed to or chosen pursuant to
this Section 2.1(c)(ii) is referred to, for purposes of this Section 2.1, as the
"Accountants". Within thirty (30) calendar days of such submission, the
Accountants shall determine and issue a written report to the Shareholder
Representative and SBI upon such disputed items and such written decision shall
be final and binding upon the parties. If a dispute is submitted to the
Accountants for resolution, SBI and the Shareholder Representative: (i) will
exchange and furnish or make available to the Accountants at reasonable times
and upon reasonable notice, the Post-Closing Audit report and Financial
Requirement Deficiency and/or Excess Tangible Net Worth calculations, and such
financial statements, work papers and other documents and information relating
to the disputed issues as the Accountants may request and are available to that
party (or its independent public accountants), including supporting schedules,
work papers and back up materials used in preparing the Financial Requirement
Deficiency and/or Excess Tangible Net Worth calculations, the books, records,
and financial staff of AGI, the parties' accountants, and summaries by SBI and
the Shareholder Representative of their resolution of any objections thereto;
and (ii) will be afforded the opportunity to present to the Accountants any
material relating to the Accountants' determination, and to discuss with the
Accountants in a hearing with all parties present, the Accountants'
determination. The role of the Accountants will be to determine whether SBI
properly performed the Post-Closing Audit and accounted for and calculated the
Financial Requirement Deficiencies and/or Excess Tangible Net Worth in
accordance with this Agreement. The fees and disbursements of the Accountants
shall be shared equally by the Shareholders and SBI.
(iii) The Financial Requirement Deficiencies of AGI and the
Excess Tangible Net Worth of AGI, determined after resolution of matters in
dispute (if any), are referred to as the "Actual Financial Requirement
Deficiencies" and the "Actual Excess Tangible Net Worth," respectively. The
Actual Financial Requirement Deficiencies and the Actual Excess Tangible Net
Worth have the legal effect of an arbitral award and shall be final, binding and
conclusive on the parties hereto.
(iv) In acting under this Agreement, the Shareholders'
accountants, SBI's accountant and the Accountants shall be entitled to the
privileges and immunities of arbitrators.
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(d) The Base Consideration pursuant to Section 1.1 shall be (x)
reduced by an aggregate amount of deficiencies (the "Post-Closing Adjustment")
equal to the sum of (A), (B) and (C) and (y) increased by the amount of (D)
(collectively, the "Post Closing Adjustment"), where (A), (B), (C) and (D) shall
be as follows:
(A) any shortfall between the actual Working Capital of AGI on
the Closing Date and $1,000;
(B) any long term liabilities of AGI on the Closing Date;
(C) any shortfall between the actual Tangible Net Worth of AGI on
the Closing Date and $100,000; and
(D) any Excess Tangible Net Worth.
Notwithstanding the foregoing, no increase in the Base Consideration shall be
payable pursuant to clause (D) to the extent the payment of any such increase
would result in any deficiencies pursuant to clauses (A), (B) or (C), after
taking into account any payments of increased amounts in Base Consideration that
would otherwise occur.
(e) In the event any Post-Closing Adjustment results in a reduction of
the Base Consideration, within five (5) business days after notification of the
amount of the Post-Closing Adjustment, each Shareholder shall pay to SBI his
Proportionate Share (as defined below) of the Post-Closing Adjustment, which
payment may be made, at the election of each respective Shareholder, in cash or
in shares of SBI Stock issued as part of the Base Consideration valued at the
Average Closing Price; and in the event any Post-Closing Adjustment results in
an increase of the Base Consideration, within five (5) business days after
notification of the amount of the Post-Closing Adjustment, SBI shall pay to each
Shareholder his Proportionate Share of the Post-Closing Adjustment, which
payment may be made, at the election of SBI, in cash or in additional shares of
SBI Stock valued at the Average Closing Price which additional cash or shares
shall be treated as part of the Base Consideration. Such "Proportionate Share"
shall be such percentage of the Post-Closing Adjustment that is equal to the
percentage ownership interest of such Shareholder in AGI as set forth on Annex I
hereto. If any Shareholder fails to promptly make payment of an amount due SBI,
SBI shall have the right to offset the amount of such payment by a claim against
any payments of the Contingent Consideration to which such Shareholder may
become entitled in accordance with Section 2.2. Any amount still not collected
from such Shareholder shall remain the personal obligation of that Shareholder.
Any amounts not paid by any Shareholder when due shall bear interest from the
Closing Date until the date of payment at an annual rate equal to the prime
rate, in effect from time to time, as reported in The Wall Street Journal.
Section 2.2 Contingent Consideration. In addition to the Base Consideration
as set forth in Section 1.1 above, the Shareholders shall be entitled to receive
additional consideration for the Shares (allocated pro rata in accordance with
each Shareholder's percentage ownership interest in AGI as set forth on Annex I
hereto) in the form of cash payments in an aggregate maximum amount of
$6,000,000 (the "Contingent Consideration"). Such Contingent Consideration shall
be calculated in accordance with Section 2.3 below and paid or caused to be paid
by SBI when and if earned each Fiscal Year (defined below) until the maximum
amount of the Contingent Consideration has been paid pursuant to this Agreement
whether or not the Shareholders continue to be employed by AGI; provided,
however, that, except as otherwise
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provided in this Agreement, a maximum of $4,000,000 of the Contingent
Consideration may be earned during the first four Fiscal Years, and any
Contingent Consideration not earned during the first four Fiscal Years may be
earned in any Fiscal Year(s) thereafter. For the purposes of this Agreement, the
term "Fiscal Year" shall mean a twelve-month period beginning on the first day
of the month in which the Closing occurs.
Section 2.3 Calculation of Contingent Consideration. (a) The Contingent
Consideration for a Fiscal Year shall be determined by taking AGI's Adjusted
Pre-tax Profit (hereinafter defined) in excess of $2,000,000 ("Excess Earnings")
and multiplying such Excess Earnings by 5, then deducting from that result all
amounts previously paid as Contingent Consideration for prior Fiscal Year(s).
"Pre-tax Profit" means for a Fiscal Year, AGI's income before provision for
income taxes, determined in accordance with GAAP, subject to the treatment of
contingencies and direct xxxx receivables required by Section 7.9(e) of this
Agreement, and "Adjusted Pre-tax Profit" means, for any Fiscal Year, the figure
obtained after making additions and adjustments to Pre-tax Profit for any
applicable items set forth in subsections (b) and (c).
(b) In calculating Adjusted Pre-tax Profit, the following adjustments
shall be made:
(x) the following items shall be eliminated and not taken as
expenses in this calculation: (i) management fees or similar charges or expenses
imposed by SBI; provided, however, that charges by SBI for reasonable and
necessary business products or services of the type customarily purchased by AGI
that can be provided to AGI by SBI (for example, insurance or auditing) may be
allowed as expenses for up to the amount paid to third parties by AGI for such
products or services in the past, plus moderate vendor induced increases, with
only the excess being eliminated; (ii) allocation of any overhead by SBI or
affiliates thereof; (iii) amortization of goodwill or other intangible assets;
(iv) income taxes; (v) any indemnification payments by AGI to the Escrow Agent
pursuant to the provisions of the Escrow Agreement (as hereinafter defined);
(vi) any costs and expenses, including, without limitation, for the payment of
premiums, incurred in connection with obtaining and maintaining life insurance
coverage on the lives of one or more of the Shareholders to the extent the
benefits of such coverage are payable to SBI, AGI, or any affiliate of SBI or
AGI; and (vii) any interest payable on intercompany subordinated debt issued to
SBI or any affiliate of SBI in connection with the purchase of the Shares;
(y) the following item shall be added and included as revenue in
this calculation: an amount equal to the foregone opportunity cost of any
interest that would have been earned by AGI on funds that shall have been paid
or transferred, at any time from and after the Closing Date, by AGI to SBI in
the form of dividends or in the form of management fees or other charges or
expenses described in clauses (x)(i) (but only to the extent the amount is
required to be eliminated from expenses), (ii) and (vi) above and any principal
and interest payments associated with clause (x)(vii) above (together, the
"Transfers"), shall be added to Pre-tax Profit; provided, however, that to the
extent that AGI has received a tax benefit in the Fiscal Year for which Pre-tax
Profit is being determined in connection with the Section 338(h)(10) Election
(as defined in Section 11.5 hereof) due to amortization of purchase price, then
only aggregate dividend payments in excess of such amount per Fiscal Year shall
be deemed to be
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Transfers (up to a maximum amount of $233,000). Such foregone opportunity costs
shall be determined by multiplying (A) the average prime rate, as reported from
time to time in The Wall Street Journal, eastern edition, for the Fiscal Year
for which Pre-tax Profit is being determined (the "Prime Rate"), by (B) the
aggregate amount of (1) any Transfers made during the Fiscal Year for which
Pre-tax Profit is being determined, pro rated for the portion of the Fiscal Year
between the date on which such Transfer is paid and last day of such Fiscal
Year, plus (2) any Transfers made prior to the Fiscal Year for which Pre-tax
Profit is being determined; and
(z) an amount equal to the imputed cost of any capital funds
supplied to AGI by SBI, whether in the form of equity or debt (the "Capital
Funds"), shall be taken as an expense in the determination of Pre-tax Profit.
Such imputed cost shall be determined by multiplying (A) the Prime Rate, by (B)
the aggregate amount of (1) Capital Funds supplied during the Fiscal Year for
which Pre-tax Profit is being determined, pro rated for the portion of the
Fiscal Year between the date on which such Capital Funds are paid or issued and
the last day of such Fiscal Year, plus (2) any Capital Funds paid or issued
prior to the Fiscal Year for which Pre-tax Profit is being determined.
(c) Pre-tax Profit also shall be adjusted for the net amount of all
unusual and infrequently occurring items (including but not limited to items set
forth below) as follows: (i) if the net amount of such items plus carryovers
from prior Fiscal Years resulting from the application of this subsection is
equal to or less than $100,000 (whether revenue or expense) in any Fiscal Year,
then the full amount thereof shall be included in the determination of Pre-tax
Profit for the Fiscal Year; or (ii) if the net amount of such items plus
carryovers from prior Fiscal Years is greater than $100,000 (whether revenue or
expense), then the amount above $100,000 (whether revenue or expense) shall be
eliminated from the calculation of Pre-tax Profit for the current Fiscal Year
and carried over into the next Fiscal Year. Unusual and infrequently occurring
items subject to this subparagraph (c) shall include but not be limited to (i)
extraordinary items as defined by GAAP, (ii) correction of errors, and (iii)
changes in GAAP.
(d) Upon the earlier of (i) the completion of the Fiscal Year end
review of the books and records of AGI; or (ii) sixty days following the Fiscal
Year end (the "Calculation Date"), SBI shall, in accordance with Section 2.5
below, notify the Shareholder Representative of the aggregate amount of the
Contingent Consideration earned, if any.
Section 2.4 Change of Control. In the event, prior to the fifth anniversary
of this Agreement, of (a) a Change of Control (as hereinafter defined) of SBI,
or (b) a sale of SBI's retail banking business or other material change in the
nature of SBI's business that is reasonably likely to have a material adverse
effect on the performance of AGI, or (c) a breach of any covenant of SBI
contained in Section 7.9 hereof (each an "Acceleration Event"), $3,000,000 of
the Contingent Consideration, less any amounts previously paid as Contingent
Consideration payments and amounts properly retained by SBI to satisfy any
Post-Closing Adjustment or Deficiency (as defined in Article VIII), shall become
immediately payable to the Shareholders. In addition, if an Acceleration Event
occurs prior to the fifth anniversary of this Agreement, and any prior
Contingent Consideration pay-out was limited by the $4,000,000 maximum during
the first four Fiscal Years as provided under Section 2.2 above, then the amount
of Contingent Consideration that would have otherwise been paid if not for such
limitation shall also become immediately payable to the Shareholders. For
purposes of this Agreement, a "Change of
7
Control" shall mean (i) a merger, consolidation, or other corporate
reorganization or combination in which 50% or more of the voting power of SBI is
transferred or which results in SBI, directly or indirectly, owning less than
50% of the voting power of AGI; (ii) the acquisition of a majority of the
outstanding equity interests of SBI by a single person or entity by means of any
transaction or series of related transactions; or (iii) a sale of all or
substantially all of the assets of SBI in one or more related transactions. Any
Contingent Consideration that has not been earned prior to or as the result of
an Acceleration Event shall continue to be available to be earned by the
Shareholders pursuant to the terms of this Agreement; provided that, for
purposes of determining whether any Contingent Consideration is earned for the
Fiscal Year in which the Acceleration Event occurs, the Pre-tax Profit for such
Fiscal Year shall include all income for such Fiscal Year whether earned prior
to or following the Acceleration Event.
Section 2.5 Notice of Contingent Consideration. Each year on the
Calculation Date, SBI shall provide the Shareholder Representative, notice of
its calculation, with supporting financial statements and appropriate
explanations when reasonably requested, of the Contingent Consideration payment
for the applicable Fiscal Year ("Calculation Notice").
(a) If the Shareholder Representative has not given SBI written notice
of an objection to the Contingent Consideration calculation within thirty (30)
calendar days following receipt of the Calculation Notice, then the amount set
forth in the Calculation Notice will be deemed the Contingent Consideration
payment for the applicable Fiscal Year and SBI shall pay such amount to the
Shareholders within forty-five (45) calendar days of receipt of such notice. Any
such payments due to the Shareholders with respect to the applicable Fiscal Year
shall be allocated and distributed to the Shareholders on a pro rata basis based
on each Shareholder's percentage ownership interest in AGI as set forth on Annex
I hereto.
(b) If the Shareholder Representative has any objections to the
Calculation Notice, then he must provide SBI with written notice of the
objections within thirty (30) days following his receipt of the Calculation
Notice. The written notice must describe in reasonable detail the manner in
which SBI allegedly failed to account for or calculate the Contingent
Consideration in accordance with this Agreement. Except with respect to fraud,
bad faith or willful misconduct by SBI, the Shareholder Representative and the
Shareholders will be precluded from later raising any objection to the
Contingent Consideration that is not raised within this thirty-day period.
(c) SBI and the Shareholder Representative will use reasonable efforts
to resolve any objections to the Contingent Consideration calculation. If SBI
and the Shareholder Representative do not resolve the objections within thirty
(30) calendar days after SBI's receipt of the Shareholder Representative's
written notice of objections, then the matter in dispute will be submitted for
resolution to an independent accounting firm of national reputation (excluding
each of SBI's and the Shareholder's or AGI's respective regular outside
accounting firms) as may be mutually acceptable to SBI and the Shareholder
Representative; provided, however, that in the event SBI and the Shareholder
Representative are unable to agree on such an accounting firm within ten (10)
calendar days, then the accounting firm shall be selected by lot. Any accounting
firm agreed to or chosen pursuant to this Section 2.5(c) is hereinafter referred
to, for purposes of this Section 2.5, as the "Accountants." The Shareholder
Representative shall be under no obligation to initiate a determination by the
Accountants unless and until some or all of
8
the Shareholders agree in writing to pay any fees and expenses incurred in
accordance with this Section 2.5(c), and deposit with the Shareholder
Representative such amount of money as he or she shall consider sufficient in
his or her reasonable judgment to cover the estimated amount of such fees and
expenses. If a dispute is submitted to the Accountants for resolution, SBI and
the Shareholder Representative: (i) will exchange and furnish or make available
to the Accountants at reasonable times and upon reasonable notice, the
Contingent Consideration calculations, and such financial statements, work
papers and other documents and information relating to the disputed issues as
the Accountants may request and are available to that party (or its independent
public accountants), including supporting schedules, work papers and back up
materials used in preparing the Contingent Consideration calculation, the books,
records, and financial staff of AGI, the parties' accountants, and summaries by
AGI and the Shareholder Representative of their resolution of any objections
thereto; and (ii) will be afforded the opportunity to present to the Accountants
any material relating to the Accountants' determination, and to discuss with the
Accountants in a hearing with all parties present, the Accountants'
determination. The role of the Accountants will be to determine whether SBI
properly accounted for and calculated the Contingent Consideration in accordance
with this Agreement. If the Accountants determine that any disputed items
resulted in an incorrect determination of the Contingent Consideration, then the
Accountants will recalculate the Contingent Consideration for the applicable
Fiscal Year and so notify SBI and the Shareholder Representative. The
Accountants' determination of the Contingent Consideration for the Fiscal Year
in question, as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties, and the amount so
determined shall be paid by SBI within thirty (30) days of delivery of such
notice.
(d) If the Shareholder Representative in good faith submits any
dispute to the Accountants for resolution as provided in this Section 2.5 and
the Accountants determine that SBI's calculation of Contingent Consideration was
understated, then the fees and expenses of the Accountants, SBI and the
Shareholder Representative shall be paid by SBI; otherwise, all such fees and
expenses shall be paid by the Shareholder Representative from the deposit
provided for above and, if the deposit is insufficient, the excess shall be paid
by those Shareholders who agreed to pay such fees and expenses.
ARTICLE III
ESCROW
Section 3.1 Creation of Escrow.
(a) On the Payment Date, the Shareholders shall deliver to a bank
escrow agent (the "Escrow Agent") the SBI Stock issued as part of the Base
Consideration (the "Escrow Property"). The Escrow Agent shall be selected by SBI
and the Shareholder Representative prior to the Closing.
(b) In addition to the assets to be delivered to the Escrow Agent
pursuant to Section 3.1(a), the Escrow Property shall include all cash and
non-cash dividends and other property at any time received or otherwise
distributed in respect of or in exchange for any or all of the Escrow Property,
all securities hereafter issued in substitution for any of the foregoing, all
certificates and instruments representing or evidencing such securities, all
cash and non-cash
9
proceeds of all of the foregoing property and all rights, titles, interests,
privileges and preferences appertaining or incident to the foregoing property.
Section 3.2 Duration and Terms. The Escrow Property shall be held and
disbursed by the Escrow Agent in accordance with the terms of an Escrow
Agreement substantially in the form attached hereto as Exhibit A. The Escrow
Agent shall hold the Escrow Property pursuant to the Escrow Agreement until the
later of the (a) fifth anniversary of the date of the Escrow Agreement (the
"Escrow Termination Date"); and (b) the resolution of any claim for
indemnification or payment that is pending after the Escrow Termination Date,
but only to the extent of the amount of such pending claim and only to the
extent such claim may be satisfied out of the Escrow Property pursuant to the
Escrow Agreement.
Section 3.3 Voting and Investment. The Shareholders shall be entitled to
exercise all voting powers incident to the shares of SBI Stock held by the
Escrow Agent as their nominee, and shall be entitled to elect to convert or
exchange such SBI Stock into such other investment property as permitted under
the terms of the Escrow Agreement (the "Permitted Investments"). The Permitted
Investments shall be held pursuant to the terms of the Escrow Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AGI AND THE SHAREHOLDERS
As of the date hereof and as of the Closing Date, AGI and each Shareholder,
jointly and severally, represents and warrants to SBI and the Acquisition Sub as
follows:
Section 4.1 Organization.
(a) AGI is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and has all
requisite corporate power and corporate authority and all necessary governmental
approvals to own, lease and operate its properties, and to carry on its business
in the places and in the manner as presently conducted, to enter into this
Agreement and the other documents and instruments to be executed and delivered
by it pursuant hereto and to carry out the transactions contemplated hereby and
thereby. AGI is duly licensed or qualified to do business as a foreign
corporation and is in good standing in all jurisdictions wherein the character
of the properties owned or leased or the nature of its business make such
qualification to do business necessary, except for those jurisdictions where the
failure to be so qualified would not have a material adverse effect. Schedule
4.1(a) lists all of the jurisdictions in which AGI is qualified to do business.
AGI has delivered to SBI true and correct copies of its Articles of
Incorporation and Bylaws, each as in effect on the date hereof.
(b) AGI has all federal, state, local and foreign governmental
licenses, permits, or registrations required for its business as currently
conducted, except where the absence would not have a material adverse effect.
Schedule 4.1(b) lists all of such licenses, permits or registrations currently
in effect, the applicable jurisdictions, and the date of expiration, if any. All
of such licenses, permits or registrations are in full force and effect, no
violations have occurred or been asserted with respect thereto, and no material
change in the facts or circumstances reported or assumed in any documents
submitted by AGI in connection with any
10
such license, permit or registration has occurred which would require an
amendment of such document, license, permit or registration.
(c) AGI is not, and has never been, registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), and is not, and has never been, registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act").
(d) AGI is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"), which is required
to be registered under the 1940 Act in order to engage in the transactions
described in Section 6 of the 1940 Act. AGI does not act as an investment
advisor or subadvisor to any "investment company," as defined in the 1940 Act,
which is registered under the 1940 Act.
(e) Schedule 4.1(e) contains a complete list of all of the directors
and officers of AGI as of the date hereof.
(f) There is no pending or, to the knowledge of AGI or the
Shareholders, any threatened claim or litigation against AGI (nor to the
knowledge of AGI or the Shareholders does there exist any basis therefor)
contesting the validity of or right to use the "The Addis Group" name as
currently used by AGI as its corporate name in connection with its business
activities, nor has AGI received any notice that its use of its respective name
conflicts, with the asserted rights of others. AGI does not use and has not used
any fictitious name other than the name "Xxxxx & Xxxxx."
(g) Except as set forth on Schedule 4.1(g), AGI does not own any
capital stock or other equity interest of any corporation, has no direct or
indirect equity or ownership interest in, by way of stock ownership or
otherwise, any corporation, partnership, joint venture, association or business
enterprise and is not contemplating acquiring any such interest.
Section 4.2 Capitalization.
(a) The authorized capital stock of AGI consists of 100,000 shares of
common stock, par value $0.001 per share, of which 25,000 shares are issued and
outstanding. No other shares of capital stock are authorized, issued or
outstanding. All of the Shares are validly issued, fully paid and nonassessable
and not subject to any preemptive rights. There are no existing options,
warrants, calls, subscriptions or other rights or other agreements or
commitments of any character relating to the issued or unissued capital stock of
AGI, and, as of the date hereof, there are no outstanding contractual
obligations of AGI to repurchase, redeem or otherwise acquire any shares of its
capital stock.
(b) AGI has not acquired any treasury stock. No option, warrant, call,
conversion right or commitment of any kind exists which obligates AGI to issue
any of its authorized but unissued capital stock. There are no agreements or
commitments of any character (including voting agreements) relating to the
issued or unissued capital stock of AGI, and AGI has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof.
11
Section 4.3 Authority. The execution, delivery and performance by AGI of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of AGI, and
no other corporate proceedings on the part of AGI are necessary to authorize
this Agreement or to consummate the transactions so contemplated.
Section 4.4 Consents and Approvals; No Violations. This Agreement, the
Escrow Agreement, the Employment Agreements and the Incentive Compensation
Agreement (as defined in Section 9.2(i)) constitute, or when executed and
delivered will constitute, valid and binding agreements of AGI and are
enforceable in accordance with their terms, and the execution and delivery of
this Agreement, the Escrow Agreement, the Employment Agreements and the
Incentive Compensation Agreement, and the consummation of the transactions
contemplated hereby do not or will not (i) conflict or result in a breach of any
provision of the Articles of Incorporation or Bylaws of AGI, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any of the AGI Agreements (as defined in Section 4.12), note, bond, mortgage,
indenture, lease or license to which AGI is a party or by which any of its
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to AGI or any of its properties
or assets. No permit, authorization, consent or approval of, any court or other
adjudicatory body, administrative agency or commission or other governmental or
regulatory authority or agency is required in connection with the execution,
delivery or performance by AGI of this Agreement, the Escrow Agreement the
Employment Agreements, the Incentive Compensation Agreement or the consummation
of the transactions contemplated hereby.
Section 4.5 Subsidiaries; Predecessor Status; Spin-Offs. AGI has no
subsidiaries or commonly controlled entities and is not a participant in any
joint venture, partnership or other noncorporate entity. There are no
predecessor companies of AGI and no entities from whom AGI previously acquired
significant assets. AGI has never been a subsidiary or division of another
corporation or been a part of an acquisition that was later rescinded. There has
not been any sale or spin-off of significant assets of AGI other than (a) AGI's
risk management advisory services business ("Risk Check") or (b) in the ordinary
course of business.
Section 4.6 No Third Party Options . Except as set forth on Schedule 4.6,
there are no existing agreements, options, commitments or rights with, of or to
any person for that person to acquire any properties, assets or rights of AGI or
any interest therein.
Section 4.7 Financial Statements.
(a) AGI has delivered to SBI the reviewed financial statements,
including notes thereto, of AGI for the years ended December 31, 2000 and 1999
accompanied by the report of Ernst & Young LLP with respect thereto (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with GAAP consistently applied throughout the periods involved. All
of the balance sheets included in the Financial Statements, including the
related notes, fairly present, in all material respects, the assets, liabilities
(whether accrued, absolute, contingent or otherwise) and financial condition of
AGI on a consolidated basis at the dates indicated and the corresponding results
of operations, retained earnings and cash flows for
12
the periods indicated were prepared in accordance with GAAP consistently applied
throughout the periods involved. In addition, AGI has delivered unaudited
financial statements for the twelve months ended December 31, 2001, which were
prepared on a basis consistent with the reviewed financial statements of AGI,
subject to normal, recurring year-end adjustments, including a balance sheet at
December 31, 2001 (the "AGI Balance Sheet," and the date of such AGI Balance
Sheet is referred to herein as the "AGI Balance Sheet Date").
(b) AGI has not received any management letters from its outside
auditors relating to the Financial Statements.
Section 4.8 Title to Assets, Properties, Interests in Properties, Rights
and Related Matters.
(a) AGI has good title to all of its properties, interest in
properties, and assets, free and clear of any mortgages, pledges, liens,
security interests, conditional and installment sale agreements, right of first
refusal or similar claims or encumbrances or charges of any kind other than (i)
any such claim or encumbrance as disclosed in the notes to the Financial
Statements; (ii) the lien of current taxes not yet due and payable; (iii)
properties, interests and assets that are leased or have been disposed of by AGI
since the AGI Balance Sheet Date, in the ordinary course of business consistent
with past practice; and (iv) such imperfections of title, easements and
encumbrances, if any, as are not substantial in character, amount or extent and
do not materially detract from the value, or interfere with the present or
proposed use, of the properties subject thereto.
(b) The assets and properties of AGI constitute the rights, properties
and assets (tangible or intangible) necessary for the conduct of its business as
currently conducted.
(c) AGI owns no real property.
Section 4.9 Absence of Certain Changes. Since the AGI Balance Sheet Date,
AGI has not experienced, nor to the knowledge of AGI or the Shareholders, has
there been threatened, any material adverse change in its condition (financial
or otherwise), assets, liabilities (absolute, accrued, contingent or otherwise),
business, or operations of AGI, nor has any customer material to the conduct of
the business of AGI or its financial condition or prospects, to the knowledge of
AGI or the Shareholders, threatened to terminate its relationship with AGI.
Section 4.10 Absence of Undisclosed Liabilities. Except to the extent set
forth in the AGI Balance Sheet, AGI has no material liabilities or obligations
of any nature, whether or not accrued, contingent or otherwise, that would be
required by GAAP to be reflected on its balance sheet (including the notes
thereto), and it does not have any material claims by or debts, liabilities or
obligations to or any alleged material claims by or debts, liabilities or
obligations to any party, including but not limited to claims made by
governmental authorities for taxes or otherwise, except for (x) liabilities
expressly disclosed in this Agreement and in the Exhibits or Schedules hereto
and (y) liabilities incurred between the date of this Agreement and the Closing
Date, the occurrence of which is not in violation of the provisions of this
Agreement.
Section 4.11 Legal Proceedings. There are no claims, actions, suits,
orders, proceedings or investigations pending or, to the knowledge of AGI or the
Shareholders,
13
threatened by or against AGI at law or in equity or before or by any federal,
state or municipal or other governmental department, commission, board, agency,
instrumentality or authority. There is no valid basis known to AGI for any such
claims, actions, suits, orders, proceedings or investigations, which if
adversely determined could have a material adverse effect on AGI or the ability
of AGI to consummate the transactions contemplated hereby. There are no
judgments, decrees, injunctions or orders of any court or governmental
department or agency outstanding against AGI.
Section 4.12 Contracts, Leases, Agreements and Other Commitments.
(a) Schedule 4.12(a) contains an accurate list of all commitments,
contracts, leases and agreements to which AGI is a party or by which it is bound
which involves a commitment or obligation in excess of $10,000 in the aggregate
for each such commitment contract, lease or agreement or is otherwise material
to the business of AGI (including, without limitation, joint venture or
partnership agreements, employment agreements, contracts, tenant leases,
equipment leases, equipment maintenance agreements, agreements with
municipalities and labor organizations, loan agreements, bonds, mortgages, liens
or other security agreements) (the "AGI Agreements"). AGI has delivered true,
correct and complete copies of such agreements to SBI. Except as set forth in
Schedule 4.12(a) attached hereto, as of the date of this Agreement, AGI is not a
party to, or bound by, any oral or written:
(i) contract, agreement or commitment with any consultant or
independent contractor not terminable on thirty (30) days' or less notice
involving the payment of more than $10,000 per annum, in the case of any such
agreement;
(ii) agreement with any officer or other key employee the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction of the nature contemplated by this
Agreement;
(iii) agreement with respect to any officer providing any term of
employment or compensation guarantee extending for a period longer than one year
or for a payment in excess of $50,000;
(iv) agreement or plan, including any stock option plan, stock
appreciation rights plan, employee stock ownership plan, restricted stock plan
or stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(v) agreement containing covenants that limit its ability to
compete in any line of business or with any person, or that involve any
restriction on the geographic area in which, or method by which, it may carry on
its business (other than as may be required by law or any regulatory agency);
(vi) agreement, contract or understanding, other than this
Agreement, regarding its capital stock or committing to dispose of substantially
all of its assets;
14
(vii) collective bargaining agreement, contract, or other
agreement or understanding with a labor union or labor organization;
(viii) employment contract or any other contract, agreement or
commitment to or with individual employees or agents of AGI which involves a
commitment or obligation in excess of $50,000 in the aggregate for each such
contract, agreement or commitment;
(ix) power of attorney given by AGI;
(x) contract or commitment providing for payments based in any
manner on the revenues or profits of AGI;
(xi) contract under which AGI has agreed (i) to maintain the
confidentiality of third party information, (ii) not to compete or solicit for
hire employees of a third party or (iii) to otherwise limit or restrict its
operations;
(xii) instrument relating to indebtedness for borrowed money,
including any note, bond, deed of trust, mortgage, indenture or agreement to
borrow money or any agreement of guarantee or indemnification, whether written
or oral, in favor of any person or entity; or
(xiii) other contract or commitment, whether in the ordinary
course of business or not, which involves future payments, performance of
services or delivery of goods or materials, to or by AGI of any amount or value
in excess of $50,000 in the aggregate for each such contract or commitment.
(b) The AGI Agreements constitute valid and legally binding
obligations of AGI and are enforceable in accordance with their terms, assuming
due authorization, execution and delivery by parties other than AGI.
(c) Each AGI Agreement constitutes the entire agreement by and between
the respective parties thereto with respect to the subject matter thereof.
(d) All obligations previously required to be performed under the
terms of the AGI Agreements have been performed by AGI and, to AGI's and the
Shareholders' knowledge, by the other parties thereto, and no act or omission
has occurred or failed to occur which, with the giving of notice, the lapse of
time or both would constitute a default by AGI under the AGI Agreements.
(e) Except as expressly set forth on Schedule 4.12(e), none of the AGI
Agreements contains any provision that requires the consent of the other parties
thereto in order for it to be in full force and effect with respect to AGI upon
consummation of the transactions contemplated under this Agreement or that would
give rise to the other party's right to terminate any AGI Agreement as a result
of the consummation of the transactions contemplated under this Agreement; and
AGI will use its best efforts to obtain any required consents prior to the
Closing. Except as expressly set forth on Schedule 4.12(e), AGI has no plans,
programs, commitments or arrangements to which it is a party, or to which it is
subject, pursuant to which payments may be
15
required or acceleration of benefits may be required upon change of control of
AGI or the consummation of the transactions contemplated under this Agreement.
Section 4.13 Insurance. Schedule 4.13 is a summary of all insurance
policies maintained by AGI (specifying, among other things, the insurer, type of
insurance, amount of coverage and policy number). Such policies are in full
force and effect and all premiums with respect to such policies are currently
paid. AGI has not been denied or had revoked or rescinded any policy of
insurance or received any notice of intent to cancel or not renew during the
past three years.
Section 4.14 Benefit Plans.
(a) Schedule 4.14 contains a complete list of all pension, retirement,
stock option, stock purchase, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance, severance, health or
welfare, vacation, and any other employee incentive or compensatory plan or
contract that AGI maintains or sponsors, or to which it contributes or for which
AGI otherwise has or may have any liability, contingent or otherwise, either
directly or indirectly or as a result of an ERISA Affiliate (as defined in
Section 4.14(c) below) for any of its present or former directors, employees,
agents or independent contractors (hereinafter referred to collectively as the
"Employee Plans"). Neither AGI nor any ERISA Affiliate has any liability with
respect to any benefit plan or arrangement other than the Employee Plans listed
on Schedule 4.14.
(b) To the knowledge of AGI and the Shareholders, (i) all of the
Employee Plans comply, conform and are maintained in accordance with its
documents and in all material respects with all applicable requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Code
and other applicable laws and all reporting, disclosure, and notice requirements
of ERISA, the Code and other applicable laws have been fully and completely
satisfied with respect to each Employee Plan; (ii) AGI has not engaged in a
non-exempt "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) with respect to any Employee Plan which is likely to
result in any material penalties, taxes or other events under Section 502(i) of
ERISA or Section 4975 of the Code; and (iii) AGI has not breached any fiduciary
duty described in Section 404 of ERISA that could result in any liability,
direct or indirect, for AGI, the Shareholders or directors or employees of AGI.
(c) Neither AGI nor any person that, together with AGI, is or was at
any time treated as a single employer under Section 414 of the Code or Section
4001 of ERISA and any general partnership of which AGI is or has been a general
partner (an "ERISA Affiliate") sponsor, maintain or contribute to, and has never
sponsored, maintained or contributed to, or had any liability with respect to,
any employee benefit plan subject to Section 302 of ERISA, Section 412 of the
Code or Title IV of ERISA.
(d) Neither AGI nor any ERISA Affiliate contributes to, and has ever
contributed to, or had any liability with respect to, a "multi-employer plan,"
as defined in Section 3(37) of ERISA.
16
(e) Each Employee Plan of AGI which is an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the Code (a "Qualified Plan") has been
determined by the IRS (as defined in Section 4.18(b)) to be qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code,
and each such determination remains in effect and has not been revoked. To the
knowledge of AGI and the Shareholders, nothing has occurred with respect to the
design or operation of any Qualified Plan that could cause the loss of such
qualification or exemption or the imposition of any liability, lien, penalty or
tax under ERISA or the Code, and the Qualified Plans have been timely amended to
comply with current law.
(f) To the knowledge of AGI and the Shareholders, neither AGI, nor any
ERISA Affiliate, has committed any act or omission or engaged in any transaction
that has caused it to incur, or created a material risk that it may incur,
liability for any material excise tax under Sections 4971 through 4980B, 4980D
or 4980E of the Code, other than excise taxes which heretofore have been paid
and fully reflected in its financial statements.
(g) There is no pending, or to the knowledge of AGI and the
Shareholders any threatened, litigation, administrative action or proceeding
relating to any Employee Plan other than routine claims for benefits. No
Employee Plan is presently under audit or examination (nor has notice been
received of a potential audit or examination) by the IRS, the Department of
Labor, or any other governmental entity, and no matters are pending with respect
to any Employee Plan under any IRS program.
(h) Except as disclosed in Schedule 4.14(h), there has been no
announcement or legally binding commitment by AGI to create an additional
Employee Plan, or to amend an Employee Plan except for amendments required by
applicable law which do not materially increase the cost of such Employee Plan.
All Employee Plans may be amended or terminated without penalty by AGI at any
time on or after the Closing.
(i) With respect to any Employee Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA), (i) each welfare
plan for which contributions are claimed as deductions under any provision of
the Code is in compliance with all applicable requirements pertaining to such
deduction, (ii) with respect to any welfare benefit fund (within the meaning of
Section 419 of the Code) related to a welfare plan, there is no disqualified
benefit (within the meaning of Section 4976(b) of the Code) that would result in
the imposition of a material tax under Section 4976(a) of the Code, (iii) any
Employee Plan that is a group health plan (within the meaning of Section
4980B(g)(2) of the Code) complies, and in each and every case has complied, in
all material respects with all of the requirements of Section 4980B of the Code,
ERISA, Title XXII of the Public Health Service Act, the applicable provisions of
the Social Security Act, the Health Insurance Portability and Accountability Act
of 1996, and other applicable laws, and (iv) no welfare plan provides health or
other benefits after an employee's or former employee's retirement or other
termination of employment except as required by Section 4980B of the Code.
(j) Except as disclosed in Schedule 4.14(j), the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not result in any payment or series of payments by AGI, to any
person which is an "excess parachute payment"
17
(as defined in Section 280G of the Code) under any Employee Plan or under any
agreement executed in connection with this Agreement, increase any benefits
payable under any Employee Plan, or accelerate the time of payment or vesting of
any such benefit.
(k) Except as disclosed in Schedule 4.14(k), all required annual
reports have been filed timely with respect to each Employee Plan, and AGI has
made available to SBI a true and correct copy of (A) the three most recent
reports on the applicable form of the Form 5500 series filed with the IRS and
any financial statements attached thereto, (B) such Employee Plan, including
amendments thereto, (C) each trust agreement and insurance contract relating to
such Employee Plan, including amendments thereto, (D) the most recent summary
plan description for such Employee Plan, including amendments thereto, if the
Employee Plan is subject to Title I of ERISA, (E) the most recent determination
letter issued by the IRS if such Employee Plan is a Qualified Plan, (F) all
notices that were issued within the preceding three years by the IRS, Department
of Labor, or any other governmental entity with respect to any Employee Plan,
and (G) all employee manuals or handbooks containing personnel or employee
relations policies.
(l) AGI and each ERISA Affiliate has paid all amounts that AGI and the
ERISA Affiliate is required to pay as contributions to the Employee Plans as of
the last day of the most recent fiscal year of each of the Employee Plans; all
benefits accrued under any funded or unfunded Employee Plan have been paid,
accrued, or otherwise adequately reserved in accordance with GAAP as of the AGI
Balance Sheet Date; and all monies withheld from employee paychecks with respect
to Employee Plans have been transferred to the appropriate Employee Plan in a
timely manner as required by applicable law.
(m) To the knowledge of AGI and the Shareholders, all persons
classified by AGI and each ERISA Affiliate as independent contractors satisfy
and have at all times satisfied the requirements of applicable law to be so
classified; AGI and each ERISA Affiliate have fully and accurately reported
their compensation on IRS Forms 1099 when required to do so; and AGI and each
ERISA Affiliate have no obligations to provide benefits with respect to such
persons under the Employee Plans or otherwise. No individuals are currently
providing, or have ever provided, services to AGI or an ERISA Affiliate pursuant
to a leasing agreement or similar type of arrangement, nor has AGI or any ERISA
Affiliate entered into any arrangement whereby services will be provided by such
individuals.
Section 4.15 Collective Bargaining Agreements and Employment Agreements.
(a) AGI has not entered into any collective bargaining agreements;
(ii) there is no labor strike, slowdown or work stoppage or lockout actually
pending or, to the knowledge of AGI or the Shareholders, threatened against or
affecting, AGI, and during the past five years there has not been any such
action; (iii) no union organizational campaign is in progress with respect to
the employees of AGI; (iv) there is no unfair labor practice charge or complaint
pending or to the knowledge of AGI threatened before the National Labor
Relations Board; and (v) no charges with respect to or relating to AGI is
pending before the Equal Employment Opportunity Commission. AGI does not have
any plans, programs, commitments or arrangements to which either such entity is
a party, or to which either such entity may be subject, pursuant to which
payments may be required or acceleration of benefits may be required upon change
of control of AGI.
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(b) Except as set forth on Schedule 4.15, AGI is not a party to any
employment agreement with any of its employees, nor any consulting, retainer or
service agreement or arrangement with any individual or entity.
Section 4.16 Compliance with Applicable Law. AGI has in the past complied
and is presently complying, in respect of the assets and operation of its
respective business in all material respects, with all applicable laws (whether
statutory or otherwise), rules, regulations, orders, ordinances, judgments or
decrees of all governmental authorities (federal, state, local or otherwise),
including but not limited to the Securities Act of 1933 Act, as amended (the
"Securities Act") and the 1934 Act, and in each case, the rules promulgated
thereunder, and AGI has not received notification of any asserted present or
past failure to so comply. AGI has delivered to SBI all inspection reports or
similar documents received during the past three years from the SEC or state
regulatory authorities, and their responses thereto.
Section 4.17 Actions since the Balance Sheet Date. Except as set forth on
Schedule 4.17, AGI has not, since the AGI Balance Sheet Date, and to date
hereof:
(a) taken any action outside of the ordinary course of business;
(b) borrowed any money or become contingently liable for any
obligation or liability of others outside of the ordinary course of business;
(c) failed to pay all of its debts and obligations as they became due
or otherwise in the ordinary course of business;
(d) incurred any material debt, liability or obligation of any nature
to any party except for obligations arising from the purchase of goods or the
rendition of services in the ordinary course of business;
(e) knowingly waived any right of substantial value;
(f) failed to use its reasonable best efforts to preserve its business
organization intact, keep available the services of its employees, and preserve
relationships with customers, suppliers and others with whom it deals;
(g) purchased or redeemed any shares of its capital stock, or
transferred, distributed or paid, directly or indirectly, any money or other
property or assets to its shareholders, other than employee compensation and
dividends in amounts consistent with past practices and other distributions in
amounts that would not result in a Financial Requirement Deficiency;
(h) made a change in the number of shares of capital stock of AGI
issued and outstanding;
(i) declared, set aside, paid or distributed any dividend or other
distribution with respect to its capital stock, or with respect to any split,
combination or reclassification of its capital stock, other than dividends or
other distributions of assets, including, without limitation, Risk Check, that
in the aggregate would not result in a Financial Requirement Deficiency;
19
(j) increased the compensation or severance pay payable or to become
payable by AGI to any employee or with respect to any employee welfare, pension,
retirement, profit-sharing or similar payment plan or arrangement applicable to
any present or former employee;
(k) incurred any capital expenditure or authorization for a capital
expenditure, acquisition of assets or execution of any lease, or incurred
liability therefor, requiring any payment or payments in excess of $10,000 in
the aggregate with respect to each individual transaction;
(l) borrowed or lent money, issued debt securities or pledged the
credit of AGI or guaranteed any indebtedness of others;
(m) lost the services of any employee that is, either individually or
in the aggregate, material to the conduct of the business of AGI;
(n) incurred the loss or termination of relationship with any
supplier, client or customer that is, either individually or in the aggregate,
material to the conduct of the business of AGI or its financial condition or
prospects; or
(o) entered into any agreement, arrangement or understanding to do any
of the foregoing.
Section 4.18 Tax Matters.
(a) For purposes of this Agreement, the term "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, premium taxes, employment, excise,
withholding, property, sales, use, transfer, license, payroll, and franchise
taxes, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, imposed by the United States, or any
state, local, or foreign government or subdivision or agency thereof. For
purposes of this Agreement, the term "Tax Return" shall mean any report, return,
or other information required to be supplied to a taxing authority in connection
with Taxes. All citations to provisions of the Code, or to the Treasury
Regulations promulgated thereunder, shall include any amendments thereto and any
substitute or successor provisions thereto.
(b) AGI has duly filed all Tax Returns required to be filed on or
before the date hereof (and will file all Tax Returns required to be filed on or
before the Closing Date). All such Tax Returns are (and, as to Tax Returns not
filed as of the date hereof but filed on or before the Closing Date, will be)
true, correct and complete in all material respects and were (and, as to Tax
Returns not filed as of the date hereof but filed on or before the Closing Date,
will be) filed on a timely basis. All taxes shown on such Tax Returns or
otherwise due or payable (whether or not shown on any Tax Return) have been
timely paid. Except as disclosed in Schedule 4.18(b), AGI has not requested any
extension of time within which to file any Tax Return, which Tax Return has not
since been filed. True and complete copies of the federal, state and local
income Tax Returns filed by AGI since December 31, 1998 and related examination
reports, if any, have been provided to SBI prior to the date hereof. The
reserves for Taxes reflected in (i) the Financial Statements are sufficient for
the payment of all unpaid Taxes (whether or not currently
20
disputed) which are incurred or may be incurred with respect to the period (or
portion thereof) ended on the date of such Financial Statements and for all
years and periods ended prior thereto, (ii) the AGI Balance Sheet are sufficient
for the payment of all unpaid Taxes (whether or not currently disputed) which
are incurred or may be incurred with respect to the period (or portion thereof)
ended on the AGI Balance Sheet Date, and for all years and periods ended prior
thereto, and (iii) the proforma balance sheet referenced in Section 9.2(k)(ii)
hereof are sufficient for the payment of all unpaid Taxes (whether or not
currently disputed) which are incurred or may be incurred with respect to the
period (or portion thereof) ended on the proforma balance sheet date and for all
years and periods ended prior thereto. Schedule 4.18(b) sets forth a description
of the specific Taxes for which such reserves are accrued, and the amounts of
the reserves accrued with respect to each specific Tax. AGI has not incurred any
liability for Taxes other than in the ordinary course of business, which Taxes
would result in a material decrease in the net worth of AGI. No waiver or
extension of any statute of limitations relating to Taxes has been given to, or
requested by, the Internal Revenue Service (the "IRS"), or any state or local
taxing authority. No claim is currently being made by any authority in a
jurisdiction where neither AGI nor any subsidiary thereof files Tax Returns that
they are or may be subject to Taxes in that jurisdiction.
(c) Except as set forth on Schedule 4.18(c), AGI has complied (and
until the Closing Date will comply) in all material respects with the provisions
of the Code relating to the withholding and payment of Taxes, including, without
limitation, the withholding and reporting requirements under Code sections 1441
through 1464, 3401 through 3406, and 6041 through 6049, as well as similar
provisions under any other laws, and has, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to the proper
governmental authorities all amounts required. AGI has undertaken in good faith
to appropriately classify all service providers as either employees or
independent contractors for all Tax purposes.
(d) Neither the federal income Tax Returns nor the state or local
income Tax Returns of AGI have been examined by the IRS or relevant state taxing
authorities, except as set forth on Schedule 4.18(d). All deficiencies asserted
as a result of the examinations referred to on Schedule 4.18(d) have been paid,
and no issue has been raised by any federal, state, local or foreign income tax
authority in any such examination which, by application of the same or similar
principles to similar transactions, could reasonably be expected to result in a
proposed deficiency for any subsequent period. Further, to the Shareholders'
knowledge, no state of facts exists or has existed which would constitute
grounds for the assessment of any material liability for Taxes with respect to
the periods which have not been audited by the IRS or other taxing authority.
Except as described on Schedule 4.18(d), there are no examinations or other
administrative or court proceedings relating to Taxes in progress or pending nor
has AGI received a revenue agent's report asserting a tax deficiency. To the
knowledge of the Shareholders, there are no threatened actions, suits,
proceedings, investigations or claims relating to or asserted for Taxes of AGI
and there is no basis for any such claim.
(e) Since its date of incorporation, AGI has not (A) filed any consent
or agreement under Section 341(f) of the Code, (B) applied for any tax ruling,
(C) entered into a closing agreement with any taxing authority, (D) filed an
election under Section 338(g) or Section 338(h)(10) of the Code (nor has a
deemed election under Section 338(e) of the Code occurred), (E) made any
payments, or been a party to an agreement (including this Agreement),
21
or any transactions related thereto that under any circumstances could obligate
it to make payments that will not be deductible because of Section 280G or
Section 162(m) of the Code, (F) been a party to any tax allocation or tax
sharing agreement, (G) been a U.S. real property holding corporation within the
meaning of Section 897 of the Code, or (H) taken any position on a Tax Return
that could give rise to a penalty under Section 6662 of the Code.
(f) AGI (and any predecessor of AGI) is currently, and has been at all
times during its existence, an S corporation within the meaning of Code
(S)(S)1361 and 1362, and will be an S corporation at all times up to and
including the Closing Date. At all such times, AGI has been an S corporation for
Pennsylvania tax purposes. During its existence, AGI (and any predecessor of
AGI) has complied with all applicable federal, state and local tax laws relating
to election as an S corporation, including, but not limited to, provisions
applicable to Pennsylvania law.
(g) AGI has not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to any Tax assessment or
deficiency.
(h) AGI has filed all abandoned and unclaimed property reports and
escheat reports required by law to be filed by it and has paid all amounts and
surrendered all property as required by law to be paid or surrendered in
connection therewith.
(i) AGI would not be liable for any Tax under Code (S)1374 (or under
any equivalent state tax provision) if its assets were sold (or deemed sold
pursuant to an election under Code (S)338(h)(10)) for their fair market value on
the Closing Date. AGI has not, in the past 10 years, (A) acquired assets from
another corporation in a transaction in which AGI's Tax basis for the acquired
assets was determined, in whole or in part, by reference to the Tax basis of the
acquired assets (or any other property) in the hands of the transferor or (B)
acquired the stock of any corporation which is a qualified subchapter S
subsidiary.
Section 4.19 Environmental Matters.
(a) Except as disclosed in Schedule 4.19(a):
(i) AGI has been and is in full compliance with all Environmental
Laws (as defined below) applicable to the operations of, and the property owned,
operated, occupied or otherwise used by, AGI. To the knowledge of AGI and the
Shareholders, there are no circumstances that may prevent or interfere with such
full compliance in the future.
(ii) AGI has obtained all Permits (as defined below) necessary
for the operation of its business and the ownership, operation, occupation or
other use of its properties, all such Permits are in good standing and AGI are
in compliance with all terms and conditions of such Permits. There has been no
material change in the facts or circumstances reported or assumed in the
applications for or the granting of such Permits.
(iii) There is no lawsuit, claim, action, cause of action,
judicial or administrative proceeding, investigation, summons, or written notice
by any person pending, or to AGI's or the Shareholder's knowledge threatened,
against AGI alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs,
22
governmental response costs, natural resource damages, property damages,
personal injuries or penalties) arising out of or resulting from (i) the
violation of any Environmental Law or (ii) the presence or Release of any
Hazardous Substance (as defined below) at any location, whether or not owned,
operated, occupied or otherwise used by AGI.
(iv) AGI is not subject to any writ, injunction, order, decree or
settlement addressing (i) any alleged violation of any Environmental Law or (ii)
the alleged presence, or Release into the environment of any Hazardous Substance
at any location, whether or not owned, operated, occupied or otherwise used by
AGI.
(v) No Environmental Lien (as defined below) has attached to any
of the property owned, operated, occupied or otherwise used by AGI.
(vi) There has been no Release of any Hazardous Substance at, to
or from any of the properties owned, operated, occupied or otherwise used by
AGI.
(vii) AGI has not transported or arranged for the transport of
any Hazardous Substance to any facility or site for the purpose of treatment,
storage, disposal or recycling which (i) is included on the National Priorities
List or the Comprehensive Environmental Response, Compensation and Liability
Information System under the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. (S)(S) 9601 et. seq. ("CERCLA"), or any similar
state list which is required by any state Environmental Law to be kept, or (ii)
is presently subject to a governmental enforcement action under CERCLA or the
Solid Waste Disposal Act, 42 U.S.C. (S)(S) 6901 et. seq., or any similar state
Environmental Law.
(viii) All of the third parties with which AGI presently has
arrangements, engagements or contracts to accept, treat, transport, store,
dispose, remove or recycle any Hazardous Substances generated or present at any
of the properties owned, operated, occupied or otherwise used by AGI are
properly permitted under Environmental Laws to perform the foregoing activities
or conduct.
(ix) AGI does not have any liability for the violation of any
Environmental Law or the Release of any Hazardous Substance in connection with
any business or property previously owned, operated, occupied or otherwise used
by AGI or any of the predecessors of AGI.
(x) There are no past or present actions, activities,
circumstances, conditions, event or incidents, including, without limitation,
the generation, handling, transportation, treatment, storage, Release, presence,
disposal or arranging for disposal of any Hazardous Substance, that could form
the basis of any claim against AGI under any Environmental Law.
(xi) The following terms shall have the following meanings:
a. "Environmental Laws" means all federal, state, local and
foreign laws, statutes, codes, ordinances, rules, regulations, orders,
directives, binding policies, common law, or Permits as amended and in effect on
the date hereof and on the Closing
23
Date relating to or addressing the environment, health or safety, including, but
not limited to, any law, statute, code, ordinance, rule, regulation, order,
directive, binding policy, common law or Permit relating to the generation, use,
handling, treatment removal, storage, production, manufacture, transportation,
remediation, disposal, arranging for disposal, or Release of Hazardous
Substances.
b. "Environmental Lien" means a lien in favor of any
governmental authority for any (a) liability under any Environmental Law or (b)
damages arising from, or costs incurred by, such governmental authority in
response to a release or threatened release of a Hazardous Substance into the
environment.
c. "Hazardous Substances" means any toxic or hazardous
substances (including, without limitation, wastes), pollutants, explosives,
radioactive materials or substances (including, without limitation, wastes),
including, without limitation, asbestos, PCBs, petroleum products and
byproducts, and substances (including, without limitation, wastes) defined in or
regulated under Environmental Law.
d. "Permit" means any permit, license, consent or other
approval or authorization required under any Environmental Law.
e. "Release" means the release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migrating of any Hazardous Substance through or in the air, soil, surface water,
or groundwater.
Section 4.20 Books and Records. The books and records of AGI have been, and
are being, maintained in accordance with applicable legal and accounting
requirements and reflect in all material respects the substance of events and
transactions that should be included therein.
Section 4.21 Intellectual Property. AGI, directly or indirectly, possesses
or has adequate rights to all licenses, permits and all other franchises,
trademarks, trade names, service marks, inventions, patents, copyrights, and any
applications therefor, trade secrets, research and development, know-how,
technical data, computer software programs or applications and technology
systems necessary to operate its business and required by applicable law (the
"Intellectual Property"). Except as set forth on Schedule 4.21, all right, title
and interest in and to each item of Intellectual Property is owned by AGI, is
not subject to any license, royalty arrangement or pending or threatened claim
or dispute and is valid and in full force and effect. To AGI's and the
Shareholders' knowledge, none of the Intellectual Property owned or used by AGI,
infringes any Intellectual Property right of any other entity and no
Intellectual Property owned by AGI is infringed upon by any other entity.
Section 4.22 Condition of Tangible Assets. In all material respects: (i)
all buildings, structures and improvements on the real property leased by AGI
are in good condition, ordinary wear and tear excepted, and are free from
structural defects; and (ii) the equipment, including heating, air conditioning
and ventilation equipment owned by AGI, is in good operating condition, ordinary
wear and tear excepted. The operation and use of the property in the business
conform in all material respects to all applicable laws, ordinances,
regulations, permits, licenses and certificates.
24
Section 4.23 Conflict of Interest. No present or former officer or
director, or managerial employee, of AGI and no Shareholder has (i) any interest
in the property, tangible or intangible, including, without limitation,
licenses, inventions, processes, know how or formula of a proprietary nature
used in or pertaining to the business of AGI, or (ii) any contract, commitment,
claim, arrangement or understanding, including, without limitation, any loan
arrangement, with AGI. To the knowledge of AGI and the Shareholders, no present
officer, director or managerial employee of AGI, and no Shareholder, has any
ownership or stock interest in any other enterprise, firm, corporation, trust or
any other entity, other than Risk Check, which is engaged in any contractual
arrangement or understanding with AGI or is engaged in any line or lines of
business which are the same as, or similar to, or competitive with, the line or
lines of business of AGI. For the purpose of this representation, ownership of
not more than 3% of the voting stock of any publicly-held company whose stock is
listed on a recognized securities exchange or traded over-the-counter shall be
disregarded.
Section 4.24 Customers. Schedule 4.24 sets forth a list of the ten largest
customers of AGI, in terms of dollar value of services sold by AGI, for each of
the two years ended December 31, 2000 and 2001. No customer listed on Schedule
4.24 has notified AGI that it does not expect to continue to do business with
AGI, and AGI has no basis to believe that any of such customers intend to cease
doing business with AGI. No customers have represented, or are expected to
represent, greater than 5% of the total annual revenues of AGI for each of the
three years ended December 31, 1999 and 2000, and 2001, other than G.F.
Management. More than 5% of the total annual revenues of AGI for each of such
years was derived from AGI' s relationship with Captive Resources, Inc. and
Xxxxxxxxx Casualty Ltd, and AGI expects to derive more than 5% of its total
annual revenues in 2002 from such relationship.
Section 4.25 Broker Services. AGI has at all times since its inception
acted solely in the capacity of an insurance broker, and has not incurred any
risks or liabilities associated with the underwriting of insurance policies
issued in connection with such broker services.
Section 4.26 Disclosure. No representation or warranty by the Shareholders
contained in this Agreement, and no statement contained in any annex, exhibit or
schedule hereto or any lists, certificates or writing delivered by AGI in
connection herewith or pursuant hereto, to the knowledge of the Shareholders,
contains any untrue statement of a material fact, or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading or necessary in order to fully and fairly provide the information
required to be provided in such document.
ARTICLE V
FURTHER REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
As of the date hereof and as of the Closing Date, each Shareholder,
individually and not jointly and severally, represents and warrants as follows:
Section 5.1 Ownership of Capital Stock of AGI. Such Shareholder resides at
the address indicated opposite his name on Annex I and owns the number of the
Shares set forth
25
opposite his name on Annex I hereto. Such Shareholder has good, marketable and
unencumbered title to his Shares, free and clear of all liens, security
interests, pledges, claims, options and rights of others.
Section 5.2 Valid and Binding Agreement. This Agreement constitutes and
will constitute the valid and binding obligation of such Shareholder.
Section 5.3 Marital Status. Such Shareholder has not commenced an action
for divorce or annulment of his current marriage in any court. The Shares held
by such Shareholder are not subject to any lien as security for the payment of
alimony, child support or other award granted in any prior divorce or annulment
proceeding.
Section 5.4 Shareholder Agreements. There are no agreements between AGI and
such Shareholder and no agreements between such Shareholder and any of the other
Shareholders pertaining to AGI or the Shares, other than the First Amended and
Restated Shareholders' Agreement, dated December 31, 2000 (the "Shareholders'
Agreement"), which shall be terminated prior to Closing. Such Shareholder does
not have (i) any interests in the property, tangible or intangible, including
without limitation, licenses, inventions, processes, know how or formula of a
proprietary nature used in or pertaining to the business of AGI, or (ii) any
contract, commitment, claim, arrangement or understanding, including, without
limitation, any loan arrangement, with AGI. Such Shareholder does not have any
ownership or stock interest in any other enterprise, firm, corporation, trust or
any other entity, other than Risk Check, which is engaged in any contractual
arrangement or understanding with AGI or is engaged in any line or lines of
business which are the same as, or similar to, or competitive with, the line or
lines of business of AGI. For the purpose of this representation, ownership of
not more than 3% of the voting stock of any publicly-held company whose stock is
listed on a recognized securities exchange or traded over-the-counter shall be
disregarded.
Section 5.5 Investment Intent. Such Shareholder acknowledges and agrees
that the SBI Stock to be delivered to the Shareholder pursuant to this Agreement
has not been and will not be registered under the Securities Act and therefore
may not be resold without compliance with the Securities Act. Such Shareholder
represents and warrants that the shares of SBI Stock to be acquired by the
Shareholder pursuant to this Agreement are being acquired solely for his own
account, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
Section 5.6 Compliance with Law. Such Shareholder covenants, warrants and
represents that none of the shares of SBI Stock issued to such Shareholder will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Securities Act and the rules and regulations of the Securities and
Exchange Commission (the "SEC") thereunder, and except after full compliance
with any applicable state securities laws.
Section 5.7 Economic Risk; Sophistication. Such Shareholder represents and
warrants that he is able to bear the economic risk of an investment in the SBI
Stock acquired by him pursuant to this Agreement and can afford to sustain a
total loss of such investment. Such Shareholder further represents and warrants
that he (a) fully understands the nature, scope and
26
duration of the limitations on transfer contained in this Agreement and (b) has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment and
therefore has the capacity to protect his own interests in connection with the
acquisition of the SBI Stock.
Section 5.8 Information Supplied. Such Shareholder represents and warrants
that he has had an adequate opportunity to ask questions and receive answers
from the officers of SBI concerning its business, operations, plans and
strategy, and the background and experience of its officers and directors. Such
Shareholder represents and warrants that he has asked any and all questions that
he may have in the nature described in the preceding sentence and that all such
questions have been answered to their satisfaction.
Section 5.9 Accredited Investor. Such Shareholder represents and warrants
that he is an "accredited investor" as that term is defined in Rule 501 of
Regulation D.
Section 5.10 Securities Legends. Such Shareholder hereby acknowledges that
the certificates evidencing the SBI Stock to be received by him at Closing will
bear a legend substantially in the form set forth below and containing such
other information as SBI may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
SUCH SHARES UNDER THE SECURITIES ACT AND ANY STATE SECURITIES OR BLUE
SKY LAWS, UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear such other legends as
counsel for SBI reasonably determines are required under the applicable laws of
any state.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SBI and THE ACQUISITION SUB
As of the date hereof and as of the Closing Date, SBI and the Acquisition
Sub, jointly and severally, hereby represent and warrant as follows:
Section 6.1 Organization. SBI and the Acquisition Sub are entities duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and have all requisite corporate power or limited
liability company power, as the case may be, and authority and all necessary
governmental approvals to own, lease and operate each of its properties, and to
carry on each of its respective businesses in the places and in the manner as
27
presently conducted, to enter into this Agreement, and the other documents and
instruments to be executed and delivered by each of them pursuant hereto and to
carry out the transactions contemplated hereby and thereby.
Section 6.2 Authority. The execution, delivery and performance of this
Agreement and the other documents and instruments to be executed and delivered
by SBI and the Acquisition Sub pursuant hereto and the consummation by SBI and
the Acquisition Sub of the transactions contemplated hereby have been duly
authorized by all necessary corporate or operating action, as the case may be,
on the part of SBI and the Acquisition Sub. No other corporate act or limited
liability company act, as the case may be, or proceeding on the part of SBI or
its respective shareholders, or on the part of the Acquisition Sub or its sole
member, is necessary to authorize this Agreement, the transactions contemplated
by this Agreement or the other documents and instruments to be executed and
delivered by SBI and the Acquisition Sub.
Section 6.3 Consents and Approvals; No Violation. This Agreement, the
Escrow Agreement, the Employment Agreements and the Incentive Compensation
Agreement each constitute, or when executed and delivered will each constitute,
the valid and binding agreements of SBI and the Acquisition Sub, as the case may
be, and of the Acquisition Sub with respect to the Employment Agreements,
enforceable in accordance with its terms, and neither the execution and delivery
of this Agreement, the Escrow Agreement, and the Incentive Compensation
Agreement nor the consummation of the transactions contemplated hereby and
thereby do or will (i) conflict or result in a breach of any provision of the
Articles of Incorporation or Bylaws of SBI, or the operating agreement of the
Acquisition Sub (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which SBI or
the Acquisition Sub is a party, as the case may be, or by which any of their
respective properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to SBI or the
Acquisition Sub, or any of their respective properties or assets. Except as set
forth in Schedule 6.3, no permit, authorization, consent or approval of, any
court or other adjudicatory body, administrative agency or commission or other
governmental or regulatory authority or agency ("Governmental Entity") is
required in connection with the execution, delivery or performance by SBI of
this Agreement, the Escrow Agreement, or the Incentive Compensation Agreement or
in connection with the execution, delivery or performance by the Acquisition Sub
of the Employment Agreements, or the consummation of the transactions
contemplated hereby or thereby.
Section 6.4 SEC Reports and Financial Statements. SBI has delivered to AGI
complete (except in certain cases for listed exhibits which are available upon
request) and correct copies of SBI's (a) Proxy Statement and Annual Report on
Form 10-K for the fiscal year ended December 31, 2000; (b) Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, June 30 and September 30,
2001, in each case as filed by SBI with the SEC pursuant to the 1934 Act (such
reports and other filings collectively referred to herein as the "1934 Act
Filings"). As of their respective dates, the 1934 Act Filings complied in all
material respects with the requirements of the 1934 Act and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
28
financial statements of SBI included in the 1934 Act Filings, including any
amendments thereto, present fairly, in all material respects, the consolidated
financial position of SBI and its subsidiaries at the dates thereof and the
results of operations and cash flows for the periods then ended in accordance
with GAAP. Since the date of the last 1934 Act Filing, SBI has not experienced,
nor to the knowledge of SBI has there been threatened or anticipated, any
material adverse change in the condition (financial or otherwise), assets,
liabilities (absolute, accrued, contingent or otherwise), business, or
operations of SBI taken as a whole.
Section 6.5 Disclosure. No representation or warranty by SBI contained in
this Agreement, and no statement contained in any annex, exhibit or schedule
hereto or any lists, certificate or writing delivered by SBI in connection
herewith or pursuant hereto, to the knowledge of SBI, contains any untrue
statement of a material fact, or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading or
necessary in order to fully and fairly provide the information required to be
provided in any such document.
Section 6.6 SBI Stock. Upon issuance in accordance with this Agreement, the
SBI stock will be duly authorized, validly issued, fully paid and
non-assessable, free and clear of any and all liens, encumbrances and other
restrictions on transfer, other than restrictions on transfer pursuant to
applicable securities laws.
ARTICLE VII
CERTAIN COVENANTS
Section 7.1 Access and Information. Between the date hereof and the Closing
Date, AGI will give SBI and its authorized representatives full and free access
during normal business hours and upon reasonable advance notice, in such manner
as not to unduly disrupt normal business activities, to any and all premises,
properties, contracts, commitments, books and records of AGI, and AGI will cause
its officers to furnish any and all financial, technical and operating data and
other information as SBI and its authorized representatives from time to time
reasonably may request.
Section 7.2 Conduct of the Business of AGI pending the Closing Date.
Between the date hereof and the Closing Date, unless SBI otherwise consents in
writing, AGI shall:
(a) not take any action that would render untrue any of the
representations or warranties herein contained; not omit to take any action, the
omission of which would render untrue any such representation or warranty;
provided, however, that AGI shall not be obligated to take any action not in the
ordinary course of business that would result in the expenditure of funds by it
exceeding $5,000 in the aggregate; and not take any action or commit any
omission that would have as a result any of the conditions set forth in Article
IX not being satisfied;
(b) conduct its business in a good and diligent manner in the ordinary
and usual course;
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(c) use its best efforts to preserve its business organization intact,
to keep available the services of its employees, and to preserve its
relationships with customers, vendors, suppliers and others with whom it deals;
(d) not reveal, orally or in writing, to any party, other than
consultants and vendors of services with a need to know and other than SBI and
its authorized agents, any of the confidential business procedures and practices
followed by it in the conduct of its business;
(e) not enter into any contract, agreement, commitment or arrangement
with any party, other than contracts in the ordinary and usual course of
business;
(f) not redeem or otherwise acquire any shares of its capital stock or
issue any capital stock or any stock or any stock option, warrant, preference,
call or right relating thereto;
(g) use its best efforts to maintain in full force and effect all of
the insurance policies presently maintained by AGI, make no change in any
insurance coverage and notify SBI at least ten days prior to any pending
cancellation or lapse of any insurance policy;
(h) keep the premises occupied and owned or leased by it and all of
its equipment and other tangible personal property in good order and repair and
perform all necessary repairs and maintenance;
(i) continue to maintain all of its usual business books and records
in accordance with its past practices;
(j) not amend or propose to amend its Articles of Incorporation or
Bylaws;
(k) not waive any of its material rights, or cancel any of its
material claims, without the receipt of adequate consideration;
(l) maintain its respective corporate existence and not merge or
consolidate it with any other entity;
(m) comply with all applicable laws, rules and regulations;
(n) not make any capital expenditure other than in the ordinary course
of its business and in an amount not exceeding $10,000 in the aggregate;
(o) not place any additional encumbrances on any of its inventory or
assets not in the ordinary course of business, except that existing encumbrances
may attach to its inventory or assets acquired after the date hereof;
(p) not pay any severance, deferred compensation or other payments to
any shareholder, whether or not accrued;
(q) not declare or pay any increases in compensation to any of its
employees, other than such increases as may be consistent with past practices
and in any one case is not greater than five percent (5%) of such employee's
base salary on an annual basis; and
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(r) not engage in any transaction of the type listed in Section 4.17.
Section 7.3 Conduct of SBI Pending the Closing Date. Between the date
hereof and the Closing Date, unless AGI otherwise consents in writing, SBI shall
not take any action which would render untrue any of the representations or
warranties of SBI herein contained; not omit to take any action, the omission of
which would render untrue any such representation or warranty; provided,
however, SBI shall not be obligated to take any action not in the ordinary
course of business that would result in the expenditure of funds in excess of
$5,000 in the aggregate; and not take any action or commit any omission that
would have as a result any of the conditions set forth in Article IX not be
satisfied.
Section 7.4 Notices.
(a) Between the date hereof and the Closing Date, AGI shall give
prompt notice to SBI of (i) any notice of, or other communication relating to, a
default under AGI's Articles of Incorporation or Bylaws or any of the AGI
Agreements which would have a material adverse effect on AGI or event which,
with notice or lapse of time or both, would become a default under AGI's
Articles of Incorporation or Bylaws or any of the AGI Agreements which would
have a material adverse effect on AGI, received by it subsequent to the date of
this Agreement and prior to the Closing, (ii) any claim, action, suit,
proceeding or investigation by any Governmental Entity involving or relating to
AGI's assets, properties or business or the AGI Agreements (or any communication
indicating that the same may be contemplated), (iii) any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated hereby
and (iv) any matter which would cause any material change with respect to any
representations made hereunder by AGI or the Shareholders.
(b) Between the date hereof and the Closing Date, SBI shall give
prompt notice to AGI of (i) any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated hereby and (ii) any matter which
would cause any material change with respect to any representations made
hereunder by SBI or the Acquisition Sub.
Section 7.5 Advice of Changes. SBI and AGI shall confer on a regular and
frequent basis with the other, report on operational matters and promptly advise
the other orally and in writing of any change or event having, or which, insofar
as can reasonably be foreseen, could have, a material adverse effect on such
party.
Section 7.6 Legal Conditions. SBI, the Acqusition Sub and AGI will each
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the transactions
contemplated hereby (which actions shall include, without limitation, approvals
or filings with any Governmental Entity) and will promptly cooperate with and
furnish information to each other with any such requirements imposed upon any of
them in connection with the same. SBI, the Acquisition Sub and AGI will each
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party,
required to be obtained by SBI, the
31
Acquisition Sub or AGI in connection with the taking of any action contemplated
by this Agreement. SBI, the Acquisition Sub and AGI will each use its best
efforts to effectuate the transactions and agreements contemplated by this
Agreement, and, in furtherance thereof, shall make and execute, under the
corporate seal of SBI and AGI, if required, whatever certificates and documents
are required by the appropriate federal and state regulatory authorities to
effect the transactions contemplated hereby, and to cause the same to be filed,
in the manner provided by law, and to do all things whatsoever, whether within
or without the Commonwealth of Pennsylvania, which would be necessary and proper
to effect the transactions and agreements contemplated herein.
Section 7.7 No Shopping. The Shareholders and AGI agree that none of them
shall solicit, enter into or continue any discussions, negotiations or contracts
(including any disclosure of business information concerning AGI) with any
person or entity other than SBI concerning the disposition of AGI's capital
stock or of its assets and business operations, whether by sale, merger or other
transaction.
Section 7.8 Best Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use reasonable best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Section 7.9 Conduct of AGI following the Closing Date. From and after the
Closing Date and until the earlier of (i) the eighth anniversary of the date of
this Agreement, or (ii) the later of (x) such date as the Shareholders have
received all Contingent Consideration of which they are eligible to earn in
accordance with Article II of this Agreement or (y) such date as all Escrow
Property (as defined in the Escrow Agreement) has been released by the Escrow
Agent pursuant to the terms of the Escrow Agreement, unless otherwise agreed in
writing by the Shareholder Representative, AGI, SBI and the Acquisition Sub
shall:
(a) not acquire or hold an entity interest in any insurance broker
with customers in the Commonwealth of Pennsylvania or the States of New Jersey,
Delaware or Maryland, unless the Cumulative Escrow Penalty (as defined in the
Escrow Agreement) exceeds $2,000,000;
(b) not require any Shareholder who is employed by AGI to divert his
full time, attention, skill and efforts from the management of AGI, from the
production of business for AGI or from maximizing the profitability of AGI;
(c) take all actions necessary to cause F. Xxxxx Xxxxx, Xxxxxxx X.
Xxxxxx, III and Xxxxx X. Xxxxx to be elected to the Board of Directors, or such
equivalent governing body, of AGI, but only to the extent that such individual
remains an employee of AGI, and to cause F. Xxxxx Xxxxx to be elected the Chief
Executive Officer, or such equivalent officer, of AGI for so long as F. Xxxxx
Xxxxx is an employee of AGI and delegate to F. Xxxxx Xxxxx in his capacity as
such officer the authority to recruit, hire, terminate and establish reasonable
compensation packages for the employees of AGI;
32
(d) maintain a Tangible Net Worth plus subordinated debt of AGI equal
to at least $100,000;
(e) with respect to the calculation of Pre-tax Profit, cause the
financial statements of AGI to be prepared in such a manner that (i) all
contingent income expected in the next succeeding fiscal year is accrued in the
current year based upon such current year's underwriting, provided that AGI has
fulfilled all of the criteria (e.g., volume and loss ratios, etc.) for such
current year set forth in the respective contingency agreement with the
insurance carriers with whom AGI deals; (ii) all direct xxxx income is recorded
on an accrual basis on the effective date of the insurance (as opposed to when
payment is received from the insurance companies); and (iii) an offset to income
and each direct xxxx receivable is recorded for a reserve in an amount
equivalent to AGI's historical experience with rebates for cancelled policies.
These accounting practices will be followed for purposes of determining Pre-tax
Profit for purposes of the Contingent Consideration, the Escrow Agreement and
the Incentive Compensation Agreement; and
(f) subject to the corresponding reduction in salary and other
payments provided for under the Employment Agreements, permit F. Xxxxx Xxxxx, as
the Chief Executive Officer of AGI, to grant bonuses to employees of AGI in such
amounts and at such times as he shall determine in his sole discretion.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Basic Provision. The Shareholders severally (as provided in
Section 8.6(b)) and not jointly, and AGI (only if the Closing does not occur)
jointly and severally with the Shareholders, hereby indemnify and agree to hold
harmless SBI, the Acquisition Sub, and each of its respective Affiliates (as
defined herein), successors and assigns, and SBI and the Acquisition Sub,
jointly and severally, hereby indemnify and agree to hold harmless the
Shareholders and AGI and their respective Affiliates, successors and assigns
from, against and in respect of the amount of any and all Deficiencies (as
hereinafter defined); provided, however, that no Shareholder shall be liable for
breaches or misrepresentations by the other Shareholders of their
representations or warranties contained in Article V of this Agreement.
Section 8.2 Definitions. As used in this Article VIII, the following terms
have the meanings:
(a) "Affiliate" as to any person or entity, means any other person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such person or entity.
(b) "Deficiency" means any and all loss or damage, resulting from (i)
any breach of representation or warranty, or any non-fulfillment of any
warranty, representation, covenant or agreement by an Indemnitor contained
herein; (ii) any misrepresentation contained in any statement, report,
certificate or other document or instrument delivered by an Indemnitor pursuant
to this Agreement or contained in any exhibit or schedule delivered pursuant
hereto or
33
in connection herewith; (iii) claims by the Shareholders that the materials
delivered by or on behalf of SBI to such Shareholder in connection with
obtaining approval of the transactions contemplated by this Agreement contain
any untrue statement of material fact or omit to state a material fact or are
otherwise defective (a "Shareholder Disclosure Deficiency"); and (iv) any and
all acts, suits, proceedings, demands, assessments, judgments, reasonable
attorneys' fees, costs and expenses incident to any of the foregoing.
Notwithstanding any term of this Agreement to the contrary, "Deficiency" shall
not include any liability (including without limitation, any liability for Taxes
of AGI) to the extent that any such liability resulted in an amount of Actual
Financial Requirement Deficiency and is otherwise accounted for pursuant to a
Post-Closing Adjustment in accordance with Section 2.1 hereof.
(c) "Indemnified Party" means the individuals or entities entitled to
indemnification under this Article VIII consisting of (i) SBI, the Acquisition
Sub and each of its respective Affiliates, successors and assigns, and each of
their respective officers and directors or (ii) AGI, the Shareholders, their
respective Affiliates, successors and assigns and their respective officers and
directors, as the case may be.
(d) "Indemnitor" means the individuals or entities obligated to
provide indemnification under this Article VIII consisting of SBI, the
Acquisition Sub, AGI or the Shareholders, as the case may be.
Section 8.3 Procedures for Establishment of Deficiencies.
(a) In the event that any claim shall be asserted by any third party
against an Indemnified Party which, if sustained, would result in a Deficiency,
such Indemnified Party, within a reasonable time after learning of such claim,
shall notify Indemnitor of such claim, and shall extend to Indemnitor a
reasonable opportunity to defend against such claim at Indemnitor's sole expense
and through legal counsel acceptable to the Indemnified Party, provided that
Indemnitor proceed in good faith, expeditiously and diligently. No determination
shall be made pursuant to subparagraph (b) below while such defense is still
being made until the earlier of (i) the resolution of said claim by Indemnitor
with the claimant, or (ii) the termination of the defense by Indemnitor against
such claim or the failure of Indemnitor to prosecute such defense in good faith
in an expeditious and diligent manner. The Indemnified Party shall be entitled
to rely upon the opinion of its counsel as to the occurrence of either of said
events. The Indemnified Party shall, at its option, have the right to
participate in any defense undertaken by Indemnitor with legal counsel of its
own selection, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party unless (I) the employment of such counsel shall have
been authorized in writing by Indemnitor in connection with the defense of such
action, suit, or proceeding, or (II) Indemnitor shall fail actively and
diligently to defend such claim, in either of which events the defense of such
claim on behalf of the Indemnified Party shall be controlled by the Indemnified
Party and that portion of any fees and expenses of counsel related to matters
covered by the indemnity agreement contained in Section 8.1 shall be borne by
Indemnitor. The Indemnified Party shall be kept fully informed of such claim at
all stages thereof whether or not they are so represented. Each party shall make
reasonably available to the other party and its attorneys and accountants all
books and records of such party relating to such claim and the parties hereto
shall render to each other such assistance as they may reasonably require of
each other in order to ensure a proper and adequate defense. No settlement or
34
compromise of any claim which may result in a Deficiency may be made by
Indemnitor without the prior written consent of the Indemnified Party unless (i)
prior to such settlement or compromise Indemnitor acknowledges in writing its
obligation to pay in full the amount of the settlement or compromise and all
associated expenses and (ii) the Indemnified Party is furnished with security
reasonably satisfactory to the Indemnified Party that Indemnitor will in fact
pay such amount and expenses.
(b) In the event that the Indemnified Party asserts the existence of
any Deficiency, the Indemnified Party shall give written notice to Indemnitor of
the nature and amount of the Deficiency asserted. If Indemnitor, within a period
of twenty (20) business days after the giving of the Indemnified Party's notice,
shall not give written notice to the Indemnified Party announcing its intent to
contest such assertion of the Indemnified Party (such notice by Indemnitor being
hereinafter called the "contest notice"), such assertion of the Indemnified
Party shall be deemed accepted and the amount of the Deficiency shall be deemed
established. In the event, however, that a contest notice is given to the
Indemnified Party within said twenty-day period, then the contested assertion of
a Deficiency shall be settled by arbitration to be held in Philadelphia,
Pennsylvania in accordance with the rules of the American Arbitration
Association then obtaining. The arbitrator shall be a firm or person mutually
selected by the Shareholders and SBI (or by the rules of the American
Arbitration Association absent such agreement within ten (10) business days
after a request for such selection by the Indemnified Party or Indemnitor) which
has not been engaged by SBI, the Shareholders or AGI or their respective
subsidiaries or Affiliates during the prior five years. The determination of the
arbitrator(s) and the reasons therefor shall be delivered in writing to
Indemnitor and the Indemnified Party and shall be final, binding and conclusive
upon all of the parties hereto, and the amount of the Deficiency, if any,
determined to exist, shall be deemed established.
(c) Indemnitor and the Indemnifying Party may agree in writing, at any
time, as to the existence and amount of a Deficiency, and, upon the execution of
such agreement such Deficiency shall be deemed established.
Section 8.4 Payment of Deficiencies. Each Indemnitor hereby agrees to pay
the amount of established Deficiencies to the applicable Indemnified Party
within twenty (20) days after the establishment thereof in cash. Any amounts not
paid by an Indemnitor when due under this subparagraph shall bear interest from
the due date thereof until the date paid at a rate equal to the prime rate, as
reported from time to time in The Wall Street Journal, eastern edition. In the
event one or more Deficiencies are established against the Shareholders, each
Indemnitor Shareholder shall pay to the Indemnified Party his Proportionate
Share of the Deficiencies, which payment may be made, at the election of the
respective Indemnitor Shareholder, out of the Escrow Property in accordance with
the terms and conditions of the Escrow Agreement (such "Proportionate Share"
shall equal the percentage of the Deficiency equal to such Shareholder's
percentage ownership interest in AGI as set forth on Annex I hereto, except in
the case of a Deficiency arising from a breach by a Shareholder of a
representation made as to such Shareholder in Article V hereof, in which event
such Shareholder's Proportionate Share shall be 100% and the Proportionate Share
of the other Shareholders shall be 0%). If an Indemnitor Shareholder does not
elect to make payment out of the Escrow Property, SBI shall nonetheless have the
right to offset the amount of such payment by a claim against the Escrow
Property in accordance with the terms and conditions of the Escrow Agreement.
SBI shall also have the
35
right to offset any such Deficiencies not so paid against any payments to which
such Indemnitor Shareholder may become entitled as Contingent Consideration. Any
amount not collected from such Shareholder through the application of Escrow
Property, offset or otherwise shall remain the personal obligation of that
Shareholder. If such Indemnitor Shareholder would not have been entitled to
receive funds in escrow which have been paid to SBI pursuant to this Section 8.4
(the "Deficiency Disqualified Amount") because the conditions to distribution of
such funds would not have been satisfied, then such Indemnitor Shareholder shall
remain liable to the Indemnified Party for an amount equal to the Deficiency
Disqualified Amount.
Section 8.5 Survival of Representations, Warranties and Agreements.
(a) All representations and warranties contained in Articles IV, V and
VI of this Agreement and any certificates pertaining thereto to be delivered at
the Closing and the rights of the parties to seek indemnification under this
Article VIII with respect to such representations and warranties and
certificates delivered at Closing pertaining thereto, shall survive the Closing
Date but, except as set forth below in respect of any claims as to which notice
shall have been duly given prior to the relevant expiration date set forth
below, shall expire on the second anniversary of the Closing Date.
(b) All agreements and covenants contained in this Agreement and the
rights of the parties to seek indemnification under this Article VIII with
respect to such agreements and covenants shall survive Closing.
(c) Except as provided in the last sentence of Section 8.2(b), nothing
contained herein shall limit or restrict the Shareholders continuing liability
for any breach of representations and warranties contained in Section 4.18 which
in each case shall continue until the expiration of the applicable statute of
limitations.
(d) Nothing contained in this Section 8.5 shall limit or restrict the
Shareholders continuing liability for Deficiencies pursuant to Section 8.4.
(e) Except for claims involving fraud and provisions for remedial
actions set forth in Article II, the indemnification provided in this Article
VIII shall be the exclusive remedies the parties have under the terms of this
Agreement with respect to Deficiencies.
Section 8.6 Limitations on Indemnification. The indemnification provided
for in this Article VIII shall be subject to the following limitations:
(a) No Indemnitor shall have liability to an Indemnified Party for
indemnification under this Article VIII unless the aggregate amount of
Deficiency claims against the Shareholders as a group, or SBI and its Affiliates
as a group, as the case may be, exceeds $250,000 (the "Threshold Amount"), in
which case all Deficiencies incurred shall be subject to indemnification
hereunder; provided, however, that the Threshold Amount shall not apply to
Deficiencies arising out of breaches of representations and warranties set forth
in Section 4.18, a Shareholder Disclosure Deficiency or a Deficiency relating to
Section 2.1.
(b) The Shareholders' total liability for indemnity to an Indemnified
Party in respect of all claims for indemnification under this Article VIII shall
not exceed $11,000,000.
36
Notwithstanding any other provision in this Agreement, the Shareholders'
obligations for indemnification under this Article IX shall be allocated among
the Shareholders in accordance with each Shareholders' Proportionate Share, and
in no event shall any Shareholder be required to pay more than his Proportionate
Share of any indemnity obligation arising under this Article VIII.
ARTICLE IX
CONDITIONS TO CLOSING
Section 9.1 Conditions to Each Party's Obligation To Effect the
Transaction. No party shall be obligated to effect the Closing if any temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall be in
effect.
Section 9.2 Conditions of Obligations of SBI and the Acquisition Sub. The
obligations of SBI and the Acquisition Sub to effect the Closing are subject to
the satisfaction of the following conditions, unless waived by SBI:
(a) Representations and Warranties. The representations and warranties
of AGI and the Shareholders set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date.
(b) Performance of Obligations of the Shareholders. The Shareholders
shall have performed in all material respects all of the obligations required to
be performed by them under this Agreement at or prior to the Closing Date.
(c) Consents, Approvals, etc. Any and all material consents, waivers,
permits and approvals from any Governmental Entity required by AGI in connection
with the execution, delivery and performance of this Agreement shall have been
duly obtained and shall be in full force and effect on the Closing Date.
(d) No Litigation. No litigation, governmental action or other
proceedings involving or potentially involving a liability, obligation or loss
on the part of AGI, or which by reason of the nature of the relief sought might
have a materially adverse effect on AGI's business, shall be threatened or
commenced against AGI with respect to any matter and no litigation, governmental
action or other proceedings shall be threatened or commenced against any person
with respect to the consummation of the transactions provided for herein.
(e) Other Approvals. All authorizations, consents, orders or
approvals, including, without limitation, all licenses or assignments of
licenses, of, or declarations or filings with any Governmental Entity by AGI, of
which the failure to obtain would have a material adverse effect on AGI, shall
have been filed, occurred or been obtained. In addition, (i) AGI shall have
received and delivered to SBI and the Acquisition Sub an executed waiver from
the members of Capital Planning Group of Pennsylvania, LLC ("CPG") waiving the
rights of such members, other than AGI, to notice to and exercise of the "blind
option" referred to in Section 7.05 under the Operating Agreement of CPG, and
(ii) AGI shall use its best efforts to cause
37
Xxxxxx X. Xxxxx, Inc. to file a withdrawal or cancellation of any and all
Applications for Registration of Fictitious Name filings held in the name of
Xxxxxx X. Xxxxx, Inc relating to its use of the fictitious name "Xxxxx & Xxxxx".
(f) Closing Documents. All documents required to be delivered by AGI
and the Shareholders at or prior to the Closing Date shall have been delivered.
(g) Termination of Shareholders' Agreement and Restrictions on the
Shares. The Shareholders' Agreement and any and all share transfer restrictions
on the Shares, including, without limitation, voting, preemptive rights or
co-sale agreements, shall have been terminated in accordance with the terms and
provisions of each such agreement.
(h) Payment of AGI's Expenses. AGI shall have paid or accrued all fees
and expenses of its advisors, accountants and counsel, whether incident to the
negotiations, preparation, execution, delivery and performance of this Agreement
or otherwise for the period through the Closing Date, such that AGI shall have
no liability or obligation with respect to such fees and expenses except as
shown on AGI's balance sheet as of the Closing Date.
(i) Employment Agreements; Incentive Compensation Agreement. Each of
the Shareholders shall have entered into an employment agreement in the form
attached hereto as Exhibit B (the "Employment Agreement"), and the incentive
compensation agreement in the form attached hereto as Exhibit C (the "Incentive
Compensation Agreement").
(j) Working Capital, Etc. SBI shall have received a certificate (the
"AGI Closing Financial Certificate") dated as of the Closing Date, signed on
behalf of AGI certifying that (x) as of the month ended prior to the Closing
Date and, (y) immediately after the Closing, after making all payments required
or permitted to be made by AGI under this Agreement:
(i) the Working Capital of AGI as of such date is at least
$1,000;
(ii) AGI has no long term liabilities as of such date;
(iii) the Tangible Net Worth of AGI as of such date is at least
$100,000; and
(iv) AGI has no receivables relating to loans to employees as of
such date.
An example of the calculation of such certificate is set forth on
Schedule 9.2(j).
(k) Financial Statements. At least ten (10) calendar days prior to the
Closing Date, AGI shall have delivered to SBI (i) reviewed financial statements
for the year ended December 31, 2001, and (ii) a pro forma balance sheet and
income statement for the period from January 1, 2002 through the month ended
prior to the Closing Date, which shall confirm, to the satisfaction of SBI in
its sole discretion, (A) the accuracy of the AGI Closing Financial Certificate,
and (B) a Pre-tax Profit for the year ended December 31, 2001 of at least
$1,400,000, after adjustment for the items listed on Annex II hereto.
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(l) Consents. SBI shall have received evidence in a form reasonably
satisfactory to SBI of AGI's receipt of all required consents as referenced in
Section 4.12(e), including, but not limited to, any consents required in
connection with the leasing of AGI's office space and/or equipment and licensing
of business systems.
Section 9.3 Conditions of Obligations of AGI and the Shareholders. The
obligation of the Shareholders to effect the transactions contemplated herein is
subject to the satisfaction of the following conditions unless waived by the
Shareholders:
(a) Representations and Warranties. The representations and warranties
of SBI and the Acquisition Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date.
(b) Performance of Obligations of SBI and the Acquisition Sub. SBI and
the Acquisition Sub shall have performed in all material respects all of its
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
(c) Consents, Approvals, etc. Any and all material consents, waivers,
permits and approvals from any Governmental Entity required by SBI or the
Acquisition Sub in connection with the execution, delivery and performance of
this Agreement as listed in Schedule 6.3 shall have been duly obtained and shall
be in full force and effect on the Closing Date.
(d) No Litigation. No litigation, governmental action or other
proceedings involving a liability, obligation or loss on the part of SBI or the
Acquisition Sub, or which by reason of the nature of the relief sought might
have a materially adverse effect on SBI's or the Acquisition Sub's respective
business shall be threatened or commenced against SBI or the Acquisition Sub
with respect to any matter, and no litigation, governmental action or other
proceedings shall be threatened or commenced against any person with respect to
the consummation of the transactions provided for herein.
(e) Other Approvals. All authorizations, consents, orders or approvals
shall have been filed, occurred or been obtained.
(f) Closing Documents. All documents required to be delivered by SBI
at or prior to the Closing Date shall have been delivered.
ARTICLE X
DELIVERIES
Section 10.1 Shareholders' Deliveries. At the Closing, the Shareholder
Representative shall deliver or cause to be delivered to SBI, the following:
(a) Certificates for all of the Shares outstanding on the Closing
Date, duly endorsed by the respective Shareholders in blank, or with stock
transfer powers duly executed by the respective Shareholders in blank attached,
and with all required transfer tax stamps, if any, affixed.
39
(b) Executed Escrow Agreement.
(c) The legal opinion of Xxxxxx Xxxxxxxx LLP substantially in the form
of Exhibit D hereto and otherwise reasonably acceptable to SBI and its counsel;
(d) The AGI Closing Financial Certificate described in Section 9.2(j);
(e) A "Good Standing Certificate" and/or a certificate of valid
registration of AGI issued by the Secretary of State of each jurisdiction in
which it does business or is registered to do business, dated as of recent date
of the Closing;
(f) A certified copy of AGI's Articles of Incorporation and all
amendments thereto issued by the Commonwealth of Pennsylvania, dated as of a
recent date of the Closing;
(g) A certificate of each Shareholder certifying that, as of the
Closing Date, (i) each of the representations and warranties of AGI and such
Shareholder under this Agreement is true and correct in all material respects,
(ii) AGI and such Shareholder have performed all of its or his, as the case may
be, obligations required to be performed by it or him under this Agreement; and
(iii) such Shareholder has not revoked his appointment of the Shareholder
Representative as his agent and attorney in fact in connection with the
transactions contemplated by this Agreement;
(h) Secretary's Certificate of the Secretary of AGI certifying and
setting forth (i) the names of the directors and officers of AGI; (ii) a true
and complete copy of the Articles of Incorporation and the Bylaws of AGI, in
each case as in effect on the date thereof, and (iii) a true and complete copy
of all resolutions, if any, adopted by the Board of Directors and Shareholders
of AGI relating to the transactions contemplated by this Agreement;
(i) The stock books and records, corporate minute books (containing,
to the best knowledge of the Shareholders, the originals of all minutes and
resolutions ever adopted or consented to or agreed by the shareholders of AGI,
directors or any committee of directors of AGI) and corporate seal of AGI; and
(j) Copies of all consents or assignments from governmental agencies
or third parties necessary for the consummation of the transactions contemplated
by this Agreement.
(k) A list of all Tax Returns that will be due with respect to fiscal
year 2001 and which have not been filed as of the Closing Date.
Section 10.2 SBI's and the Acquisition Sub's Deliveries at Closing. At the
Closing, SBI and the Acquisition Sub shall deliver or cause to be delivered to
the Shareholder Representative, the following:
(a) Executed Escrow Agreement;
(b) Executed Employment Agreements;
(c) Executed Incentive Compensation Agreement; and
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(d) The legal opinion of Xxxxxx, Xxxxx & Bockius LLP, substantially in
the form of Exhibit E hereto and otherwise reasonably acceptable to AGI and its
counsel;
(e) A "Good Standing Certificate" of each of SBI and the Acquisition
Sub and a certified copy of the Articles of Incorporation of SBI and Certificate
of Organization of Acquisition Sub and all amendments thereto issued by the
Commonwealth of Pennsylvania dated as of a recent date of the Closing;
(f) Officer's Certificates of each of SBI and the Acquisition Sub
certifying that, as of the Closing Date, (i) each of the representations and
warranties of SBI and the Acquisition Sub, as the case may be, is true and
correct in all material respects, and (ii) each of SBI and the Acquisition Sub,
as the case may be, has performed all of its obligations under this Agreement;
and
(g) Secretary's Certificate of (i) SBI certifying that (A) attached
thereto is a true and complete copy of the Articles of Incorporation and the
Bylaws of SBI, in each case as in effect on the date thereof, and (B) that
attached thereto is a true and complete copy of all resolutions adopted by the
Board of Directors of SBI relating to the transactions contemplated by this
Agreement, and (ii) the Acquisition Sub certifying that attached thereto is a
true and complete copy of the Certificate of Organization and Operating
Agreement of the Acquisition Sub.
Section 10.3 SBI's Deliveries on Payment Date. On the Payment Date, SBI
shall deliver or cause to be delivered to the Shareholders the Base
Consideration.
ARTICLE XI
TAX MATTERS
Section 11.1 Returns for Tax Periods Ending on or Before the Closing Date.
SBI shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns of AGI for all periods ending on or prior to the Closing Date that are
filed after the Closing Date and shall pay or cause to paid all Taxes due in
connection with such Tax Returns. SBI shall permit the Shareholders to review
and comment on each such Tax Return prior to filing and shall make such
revisions to such Tax Returns as are reasonably requested by the Shareholders.
The Shareholders, jointly and severally, shall reimburse SBI for the Taxes of
AGI with respect to such periods, within fifteen (15) days after payment by SBI
of such Taxes, to the extent the Shareholders would be obligated to indemnify
SBI for such Taxes under Article VIII.
Section 11.2 Returns for Tax Periods Beginning Before and Ending After the
Closing Date. SBI shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns of AGI for Tax periods which begin before the Closing Date
and end after the Closing Date and shall pay or cause to be paid all Taxes due
in connection with such Tax Returns. SBI shall permit the Shareholders to review
and comment on each such Tax Return prior to filing and shall make such
revisions to such Tax Returns as Shareholders may reasonably request. The
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Shareholders, jointly and severally, shall pay to SBI, within fifteen (15) days
after the date on which Taxes are paid, with respect to such periods an amount
equal to the portion of such Taxes which relates to the portion of such taxable
period ending on the Closing Date, to the extent the Shareholders would be
obligated to indemnify SBI for such taxes under Article VIII. For purposes of
this Agreement, in the case of any Taxes that are imposed on a periodic basis
and are payable for a Tax period that includes (but does not end on) the Closing
Date, the portion of such Tax period ending on the Closing Date shall (x) in the
case of any Taxes other than Taxes based upon or related to income or receipts,
be deemed to be the amount of such Tax for the entire Tax period multiplied by a
fraction of numerator of which is the number of days in the portion of the Tax
period ending on the Closing Date and the denominator of which is the number of
days in the entire Tax period; and (y) in the case of any Tax based upon or
related to income or receipts, be deemed equal to the amount of Tax which would
be payable if the Tax period ended on the Closing Date. Any credits related to a
Tax period that begins before and ends after the Closing Date shall be taken
into account as though the Tax period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with the past practices of AGI, provided that such
practices are consistent with applicable Tax laws, rules and regulations.
Section 11.3 Cooperation on Tax Matters. SBI, AGI and the Shareholders
shall, and shall each cause its affiliates to, provide to each of the other
parties hereto such cooperation and information, as and to the extent reasonably
requested by the other party, in connection with the filing of any Tax Return,
amended Tax Return or claim for refund, determining liability for Taxes or a
right to refund of Taxes, or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings and other determinations by taxing authorities, and relevant records
concerning the ownership and Tax basis of property, which any such party may
possess. Each party will retain all Tax Returns, schedules, work papers, and all
material records and other documents relating to Tax matters, of AGI for the Tax
period first ending after the Closing Date and for all prior Tax periods until
the expiration of the applicable statute of limitations for the Tax periods to
which the Tax Returns and other documents relate. Thereafter, the party holding
such Tax Returns or other documents may dispose of them; provided that such
party shall notify the other in writing prior to doing so.
Section 11.4 S Corporation Status. With respect to any period ended prior
to the Closing Date, AGI and the Shareholders shall not revoke AGI's election to
be taxed as an S corporation within the meaning of Code (S)(S)1361 and 1362 and
any corresponding provisions of state law. AGI and the Shareholders shall not
take or allow any action, other than the transactions contemplated by this
Agreement, that would result in the termination of AGI's status as a validly
electing S corporation within the meaning of Code (S)(S) 1361 and 1362 and any
corresponding provisions of state law.
Section 11.5 Section 338(h)(10) Election. (a) At SBI's request, AGI and
each Shareholder shall join with SBI in making an election under Section
338(h)(10) of the Code (and any corresponding elections under state, local, or
foreign law) (collectively a "Section 338(h)(10) Election") with respect to the
purchase and sale of the stock of AGI. Subject to SBI's compliance with each of
its obligations under Sections 11.1 and 11.2, the Shareholders, jointly
42
and severally, shall pay any Taxes resulting from the making of the Section
338(h)(10) Election, including (i) any tax imposed under Code (S) 1374, (ii) any
tax imposed under Reg. (S) 1.338(h)(10)-1(d)(5), or (iii) any state, local, or
foreign Tax imposed on AGI's gain, and, jointly and severally, shall indemnify
SBI against any Deficiency arising out of the failure to pay such Taxes. The
Shareholders, jointly and severally, shall indemnify and hold harmless SBI
against any Deficiency arising out of the failure of any Shareholder to join SBI
in making the Section 338(h)(10) Election (and any corresponding elections under
state, local, or foreign law).
(b) If SBI decides to make the Section 338(h)(10) Election, SBI, AGI
and the Shareholders shall cooperate as provided herein to determine the
aggregate deemed sales price ("ADSP") and the allocation of the ADSP among AGI's
assets in accordance with applicable Treasury Regulations. SBI shall initially
determine and send notice to the Shareholders of (i) the calculation of the ADSP
and (ii) the allocation of the ADSP among AGI's assets. The Shareholders will be
deemed to have accepted such calculation and allocation unless they provide
written notice of disagreement to SBI within ten (10) days of receipt of SBI's
notice of calculation and allocation. If the Shareholders provide such notice of
disagreement to SBI, the parties shall proceed in good faith to determine the
ADSP and allocation in dispute. If within ten (10) days after SBI receives the
Shareholders' notice of disagreement the Shareholders and SBI have not reached
agreement, the Accountants referred to in Section 2.1(c)(ii) shall be engaged to
determine the ADSP (if in dispute) and the allocation (if in dispute) of the
ADSP. The Shareholders and SBI shall share equally the fees of such Accountants.
(c) Promptly following the final determination of the ADSP and the
allocation of the ADSP pursuant to Section 11.5(b), SBI shall deliver to the
Shareholders for execution a Form 8023 and any similar form under state or local
law, and any schedules or attachments thereto (collectively, "Section 338
Forms"). Within ten (10) days of receipt of the Section 338 Forms, AGI and each
Shareholder shall duly and promptly execute such Section 338 Forms and shall
deliver them to SBI. SBI shall timely file such executed Section 338 Forms and
shall provide copies of them to the Shareholders. The Shareholders, AGI and SBI
shall file all Tax Returns (including amended returns and claims for refund) in
a manner consistent with such Section 338 Forms.
Section 11.6 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such taxes and fees (including, without limitation, any
penalties and interest) incurred in connection with this Agreement for periods
on or before the Closing Date shall be paid by the Shareholders when due, and
the Shareholders will, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration, and other such taxes and fees, and, if required by
applicable law, SBI will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
ARTICLE XII
TERMINATION AND AMENDMENT
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Section 12.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval of the matters
presented in connection with the transactions contemplated herein:
(a) by SBI, if the Average Closing Price of the SBI Stock is below
$17.00 per share;
(b) by AGI, if the Average Closing Price of the SBI Stock is below
$17.00 per share;
(c) by mutual consent of SBI and the Shareholders (through the
Shareholder Representative);
(d) (i) by SBI on the one hand or by the Shareholders (through the
Shareholder Representative) on the other hand if there shall have been a
material breach of any representation, warranty, covenant or agreement on the
part of the Shareholders on the one hand, or SBI or the Acquisition Sub on the
other hand, set forth in this Agreement which breach shall not have been cured,
in the case of a representation or warranty, within five business days following
notice of such breach given to the breaching party by the applicable party or,
in the case of a covenant or agreement, within five business days following
receipt by the breaching party of notice of such breach, or (ii) by SBI or the
Shareholders if any permanent injunction or other order of a court or other
competent authority preventing the consummation of the transactions hereby shall
have become final and non-appealable; or
(e) by either SBI or the Shareholders if the transactions contemplated
herein shall not have been consummated before June 30, 2002.
Section 12.2 Effect of Termination. In the event of a termination of this
Agreement as provided in Section 12.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of the
Shareholders , SBI or its respective officers or directors, or the Acquisition
Sub or its respective members or officers, except (i) with respect to Sections
13.1 and 13.2, and (ii) to the extent that such termination results from the
willful breach by a party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
Section 12.3 Amendment. This Agreement may be amended by the parties hereto
at any time; provided however, this Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 12.4 Extension; Waiver. At any time prior to the Closing Date, the
parties hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
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ARTICLE XIII
FORM D FILING; REGISTRATION OF THE NEW SHARES
Section 13.1 Form D Filing; Registration of New Shares. SBI shall:
(a) file in a timely manner a Form D relating to the sale of the SBI
Stock issued pursuant to Section 1.1 herein (the "New Shares"), pursuant to
Regulation D of the Securities Act.
(b) as soon as practicable after the Closing Date, but in no event
later than ninety (90) days following the Closing Date, prepare and file with
the SEC a Registration Statement on Form S-3 (or, if SBI is ineligible to use
Form S-3, then on Form S-1) relating to the sale of the New Shares by the
Shareholders from time to time on the Nasdaq National Market (or the facilities
of any national securities exchange or over-the-counter market on which the SBI
Stock is then traded) or in privately negotiated transactions (the "Registration
Statement");
(c) provide the Shareholders with any information required to permit
the sale of the New Shares under rule 144A of the Securities Act;
(d) subject to receipt of necessary information from the Shareholders,
use its best efforts to cause the SEC to notify SBI of the SEC's willingness to
declare the Registration Statement effective on or before 90 days after the
Closing Date;
(e) notify the Shareholders promptly upon the Registration Statement
being declared effective by the SEC;
(f) prepare and file with the SEC such amendments and supplements to
the Registration Statement and the prospectus in the form first filed with the
SEC pursuant to Rule 424(b) of the regulations of the Securities Act, or filed
as part of the Registration Statement at the time of effectiveness if no Rule
424(b) filing is required (the "Prospectus") and take such other action, if any,
as may be necessary to keep the Registration Statement effective until the
earlier of (i) two years after the effective date of the Registration Statement,
(ii) the date on which the New Shares may be resold by the Shareholders without
registration or without regard to any volume limitations by reason of Rule
144(k) under the Securities Act or any other rule of similar effect or (iii) all
of the New Shares have been sold pursuant to the Registration Statement or Rule
144(k) under the Securities Act or any other rule of similar effect;
(g) promptly furnish to the Shareholders with respect to the New
Shares registered under the Registration Statement such reasonable number of
copies of the Registration Statement and the Prospectus, including any
supplements to or amendments of the Registration Statement and the Prospectus,
in order to facilitate the public sale or other disposition of all or any of the
New Shares by the Shareholders;
(h) during the period when copies of the Prospectus are required to be
delivered under the Securities Act or the 1934 Act, will file all documents
required to be filed with the SEC pursuant to Section 13, 14 or 15 of the 1934
Act within the time periods required by the 1934 Act and the rules and
regulations promulgated thereunder;
45
(i) file documents required of SBI for customary blue sky clearance in
all applicable states, if required; provided, however, that SBI shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
(j) promptly inform each Shareholder when any stop order has been
issued by the SEC with respect to the Registration Statement and use its
commercially practical best efforts to promptly cause such stop order to be
withdrawn;
(k) notify the Shareholders at any time when the Shareholders must
suspend offers or sales of the New Shares under the Registration Statement,
either (i) because the Prospectus included in such Registration Statement is
required to be amended for any reason, such as an amendment under the Securities
Act to provide current information, or (ii) because the Prospectus includes an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing, or (iii) because underwriters
of the New Shares have insisted on suspension of such offerings and sales in
connection with a public offering by SBI of its shares of common stock; provided
that with respect to any such suspension pursuant to clause (iii), the duration
for such suspension shall not exceed ninety (90) days and not more than one such
suspension may occur during any six (6) month period. SBI shall not be required
to inform any Shareholder of the reason for the suspension but shall use its
best efforts to enable the Shareholders to recommence offers and sales under the
registration statement at the earliest possible date. Notwithstanding the
foregoing and anything to the contrary set forth in this Article XIII, there may
occasionally be times when SBI must suspend the use of the Prospectus included
in such Registration Statement until such time as an amendment to the
Registration Statement has been filed by SBI and declared effective by the SEC,
or until such time as SBI has filed an appropriate report with the SEC pursuant
to the 1934 Act, or until the suspension period may be terminated under the
provisions of an underwriting agreement. Shareholders may not offer or sell any
New Shares pursuant to such Prospectus during the period commencing when SBI
notifies the Shareholders of the suspension of the use of such prospectus and
ending when SBI notifies the Shareholders that the Shareholders may thereafter
effect offers and sales pursuant to such Prospectus;
(l) prior to filing the Registration Statement, cause all of the SBI
Stock covered by the Registration Statement to be listed on the Nasdaq National
Market (or the facilities of any national securities exchange or
over-the-counter market on which the SBI Stock is then traded); and
(m) SBI shall bear all expenses in connection with the procedures in
clauses (a) through (l) in this Section 13.1 and the registration of the New
Shares pursuant to the Registration Statement, other than fees and expenses, if
any, of counsel or other advisers to the Shareholders or and any expenses
relating to the sale of the New Shares by the Shareholders (including without
limitation, broker's commissions, discounts or fees of any nature and transfer
taxes or charges of any nature).
Section 13.2 Transfer of Shares After Registration. Each Shareholder agrees
that it will not effect any disposition of the New Shares or its right to
purchase the SBI Stock that
46
would constitute a sale within the meaning of the Securities Act, except as
contemplated in the Registration Statement or as otherwise permitted by law, and
that it will promptly notify SBI of any changes in the information set forth in
the Registration Statement regarding such Shareholder or its plan of
distribution.
Section 13.3 Furnish Information. It is a condition precedent to the
obligations of SBI to take any action pursuant to Section 13.1 hereof that the
Shareholders shall furnish to SBI such information regarding the Shareholders,
including such Shareholder's ownership of SBI Stock and the intended method of
disposition of the New Shares as shall be required to effect the registration of
the New Shares and as may be required from time to time to keep such
registration current.
Section 13.4 Indemnification. (a) To the fullest extent permitted by law,
SBI shall indemnify, defend and hold harmless each Shareholder against any
losses, claims, damages, or liabilities (joint and/or several) to which they may
become subject under the Securities Act, the 1934 Act or other federal or state
law, insofar a such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or other violations (collectively a "Violation") by SBI: (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus or any amendment or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by SBI of the Securities
Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the 1934 Act or any state securities law
in connection with the offering covered by such registration statement, and SBI
will pay as incurred to each such Shareholder for any legal or other expenses
reasonably incurred by him in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 13.4(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of SBI, which consent shall not be
unreasonably withheld, nor shall SBI be liable in any such case for any such
loss, claim, damage, liability or action to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Shareholder.
(b) To the fullest extent permitted by law, each Shareholder shall
indemnify, defend and hold harmless SBI, its Affiliates, successors and assigns,
and each of their respective directors and officers, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
or entities may become subject under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon information
contained in the Registration Statement in conformity with written information
furnished by such Shareholder expressly for use in connection with the
Registration Statement; and each such Shareholder will pay, as incurred, any
legal or other expenses reasonably incurred by any person or entity intended to
be indemnified pursuant to this Section 13.4(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
13.4(b) shall not apply to amounts paid in
47
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Shareholder, which consent
shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
13.4 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 13.4, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 13.4, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 13.4.
(d) If the indemnification provided for in this Section 13.4 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. In no event shall a person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) be
entitled to contribution from any person or entity who was not guilty of
fraudulent misrepresentation.
(e) The obligations of SBI and the Shareholders under this Section
13.4 shall survive the completion of the offering of New Shares under the
Registration Statement.
ARTICLE XIV
MISCELLANEOUS
48
Section 14.1 Costs and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
(i) paid by the Shareholders to the extent incurred by them and out of such
accrued funds on the books of AGI specifically designated for the payment of
such costs and expenses, and (ii) paid by SBI and the Acquisition Sub to the
extent incurred by them. To the extent that AGI has over-accrued for the payment
of such costs and expenses of the Shareholders on its books, SBI shall release
to the Shareholders the excess of such accrued amounts over the actual costs and
expenses incurred by the Shareholders. To the extent that AGI has under-accrued
for the payment of such costs and expenses of the Shareholders on its books,
then the Shareholders shall be jointly and severally liable for the amount of
such deficiencies between the accrued funds and the actual costs and expenses
incurred by the Shareholders.
Section 14.2 Brokers or Finders. Except with respect to any amounts that
might be due to the Shareholders' advisors (any of which amounts shall be paid
by AGI and the Shareholders), each of SBI, the Acquisition Sub and the
Shareholders hereby represents and warrants that there is no corporation, firm
or person entitled to receive from it any brokerage commission or finder's fee
in connection with this Agreement or the transactions and agreements provided
for herein, and each such party hereby indemnifies and agrees to save the other
parties hereto harmless from and against any claim for brokerage commission or
finder's fee based on any retention or alleged retention of a broker or finder
by it.
Section 14.3 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed), sent by nationally recognized overnight express courier
service, or mailed by registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if SBI or the Acquisition Sub, to:
Susquehanna Bancshares, Inc.
00 Xxxxx Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, President and
Chief Executive Officer
Telecopy No.: 717.626.1874
with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxx X. Xxxxxx, Esquire
Telecopy No.: 215.963.5299
(b) if AGI prior to the Closing, to:
The Addis Group, Inc.
0000 Xxxxxxxxxxx Xxxx.
00
Xxxx xx Xxxxxxx, XX 00000-0000
Attention: F. Xxxxx Xxxxx
Telecopy No.: 610.279.8543
with a copy to:
Xxxxxx Xxxxxxxx LLP
000 Xxxxxx Xxxx
000 Xxxxxxx Xxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esquire
Telecopy No.: 000-000-0000
(c) if to the Shareholders, to the address as set forth opposite his
name on Annex I hereto, or such other address as the Shareholders shall have
notified SBI of in writing.
with a copy to:
Xxxxxx Xxxxxxxx LLP
000 Xxxxxx Xxxx
000 Xxxxxxx Xxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esquire
Telecopy No.: 000-000-0000
Any communication given in conformity with this Section 14.3, shall be
effective upon the earlier of actual receipt or deemed delivery. Delivery shall
be deemed to have occurred as follows: if delivered personally on the day so
delivered; if telecopied, upon written confirmation by the sending machine of
effective transmission; if sent by overnight express courier service, the next
business day; and if mailed, three business days after deposits in the United
States Mail.
Section 14.4 Publicity. Except as otherwise required by law, and for so
long as this Agreement is in effect, AGI, the Shareholders, SBI and the
Acquisition Sub shall not issue or cause the publication of any press release or
other public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other parties, which consent shall not be
unreasonably withheld. Until a press release of the execution of this Agreement
has been made in accordance herewith, all of the parties hereto shall treat this
Agreement and the terms thereof in the strictest confidence.
Section 14.5 Binding Nature of Agreement; No Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns, except that
no party may assign or transfer its
Section 14.6 rights or obligations under this Agreement (other than as
provided herein) without the prior written consent of the other parties hereto.
50
Section 14.7 Controlling Law. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement (including without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania,
regardless of the conflicts of law provisions thereof, and without the aid of
any canon, custom, or rule of law requiring construction against the drafting
party.
Section 14.8 Exhibits and Schedules. All exhibits and schedules attached
hereto are hereby incorporated by reference into, and made a part of, this
Agreement.
Section 14.9 Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signature of all of the parties reflected hereon as the
signatories.
Section 14.10 Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provisions shall be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be invalid or unenforceable in whole or
in part.
Section 14.11 Entire Agreement. This Agreement contains the entire
understanding among the parties hereto and with respect to the subject matter
hereof, and together supersede all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. This Agreement may not be modified or amended other
than by an agreement in writing signed by the parties hereto.
Section 14.12 Paragraph Headings. The headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
Section 14.13 Gender, Etc. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context requires.
Section 14.14 Knowledge of AGI and the Shareholders. For purposes of this
Agreement, "knowledge of AGI" or similar words and phrases shall be conclusively
deemed to include: (i) actual knowledge of the Shareholders or the officers and
directors of AGI, and (ii) that knowledge which any officer or director of AGI
should have obtained after exercising due diligence which a prudent officer or
director should have undertaken with respect thereto. In connection therewith,
the knowledge (both actual and constructive) of the officers and directors of
AGI shall be imputed to be the knowledge of the Shareholders and, except as to
Article V, the knowledge of one Shareholder shall be imputed to the other
Shareholders.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
51
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement as of the day and year first above written.
SUSQUEHANNA BANCSHARES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
SUSQUEHANNA ACQUISITION, LLC THE SHAREHOLDERS
By: /s/ Xxxxxxx X. Xxxxxx /s/ F. Xxxxx Xxxxxx
--------------------- -------------------------------------
Name: Xxxxxxx X. Xxxxxx F. Xxxxx Xxxxx
Title: President
/s/ Xxxxxxx X. Xxxxxx, III
-------------------------------------
Xxxxxxx X. Xxxxxx, III
/s/ Xxxxx X. Xxxxx
-------------------------------------
Xxxxx X. Xxxxx
THE ADDIS GROUP, INC.
By: /s/ F. Xxxxx Xxxxx
---------------------------------
Name: F. Xxxxx Xxxxx
Title: President
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement (this "Amendment") is
entered into as of June 28, 2002, by and among Susquehanna Bancshares, Inc., a
Pennsylvania business corporation registered as a financial holding company
under the Bank Holding Company Act of 1956, as amended ("SBI"), Susquehanna
Acquisition, LLC, a Pennsylvania limited liability company and wholly-owned
subsidiary of SBI (the "Acquisition Sub"), The Addis Group, Inc., a Pennsylvania
business corporation ( "AGI"), and F. Xxxxx Xxxxx, Xxxxxxx X. Xxxxxx, III and
Xxxxx X. Xxxxx (collectively, the "Shareholders"). Capitalized terms used but
not defined herein shall have the respective meanings ascribed to them in the
Stock Purchase Agreement, dated April 30, 2002, by and among the parties hereto
(the "Agreement").
WHEREAS, the parties hereto entered into the Agreement, pursuant to which
the Shareholders have agreed to sell to the Acquisition Sub, and the Acquisition
Sub has agreed to purchase from the Shareholders, the shares of AGI owned by the
Shareholders, which constitute all of the issued and outstanding shares of AGI,
under the terms and conditions set forth in the Agreement; and
WHEREAS, the parties hereto now desire to amend certain provisions of the
Agreement as set forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and in the Agreement, and intending to be legally bound hereby, the parties
agree as follows:
1. In accordance with Section 14.11 of the Agreement, the last sentence of
Section 2.2 of the Agreement is hereby amended and restated to read in its
entirety as follows:
"For the purposes of this Agreement, the term "Fiscal Year" shall mean a
twelve-month period beginning on the first day of the month following the month
in which the Closing occurs."
2. In accordance with Section 14.11 of the Agreement, Section 12.1(e) of
the Agreement is hereby amended and restated in its entirety as follows:
"(e) by either SBI or the Shareholders if the transactions contemplated
herein shall not have been consummated before July 1, 2002."
3. In accordance with Section 14.11 of the Agreement, Section 13.1 (a) of
the Agreement is hereby amended and restated in its entirely as follows:
"(a) to the extent determined by SBI to be necessary, file in a timely
manner a Form D relating to the sale of the SBI Stock issued pursuant to Section
1.1 herein (the "New Shares"), pursuant to Regulation D of the Securities Act."
4. Schedule 6.3 of the Agreement shall be amended and restated in its
entirety in the form attached hereto as Exhibit A.
5. Schedule 4.1(a) shall be amended and restated in its entirety in the
form attached hereto as Exhibit B.
6. Schedule 4.1(b) shall be amended and restated in its entirety in the
form attached hereto as Exhibit C.
7. This Amendment and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania, regardless of
the conflicts of law provisions thereof, without the aid of canon, custom, or
rule of law requiring construction against the drafting party.
8. Except as specifically modified by this Amendment, all of the provisions
of the Agreement are hereby ratified and confirmed to be in full force and
effect, and shall remain in full force and effect.
9. This Amendment and the Agreement constitute the entire agreement between
the parties hereto with respect to subject matter hereof and thereof. Said
documents supersede all other agreements and understandings between the parties
with respect to the subject matter hereof and thereof, whether written or oral.
This Amendment shall be binding upon and shall inure to the benefit of the
parties and their respective heirs, administrators, executors, affiliates,
successors and permitted assigns.
10. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument. This Agreement shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signature of all of the
parties reflected hereon as the signatories. This Amendment may also be
delivered by facsimile transmission with the same force and effect as if
originally executed copies of this Agreement were delivered to all parties.
[Signatures appear on following pages]
IN WITNESS WHEREOF, the undersigned have caused this First Amendment to
Stock Purchase Agreement be signed by their respective officers thereunder duly
authorized, all as of the date first written above.
SUSQUEHANNA BANCSHARES, INC. THE ADDIS GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ F. Xxxxx Xxxxx
--------------------- ---------------------------------
Name: Xxxxxxx X. Xxxxxx Name: F. Xxxxx Xxxxx
Title: President and CEO Title: President
SUSQUEHANNA ACQUISITION, LLC THE SHAREHOLDERS
By: /s/ Xxxxxxx X. Xxxxxx /s/ F. Xxxxx Xxxxx
--------------------- -------------------------------------
Name: Xxxxxxx X. Xxxxxx F. Xxxxx Xxxxx
Title: President
/s/ Xxxxxxx X. Xxxxxx, III
-------------------------------------
Xxxxxxx X. Xxxxxx, III
/s/ Xxxxx X. Xxxxx
-------------------------------------
Xxxxx X. Xxxxx
