EXHIBIT 2.1
Execution Copy
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AGREEMENT AND PLAN OF
MERGER
by and among
FIDELITY NATIONAL FINANCIAL, INC.,
XMAS MERGER CORP.,
and
SEDGWICK CMS HOLDINGS, INC.
Dated as of December 23, 2005
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
1.1 The Merger............................................................................... 1
1.2 Closing.................................................................................. 1
1.3 Effective Time........................................................................... 2
1.4 Effects of the Merger.................................................................... 2
1.5 Certificate of Incorporation and By-Laws................................................. 2
1.6 Directors................................................................................ 2
1.7 Officers................................................................................. 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; PAYMENT
PROCEDURES; CANCELLATION OF OPTIONS
2.1 Effect on Capital Stock.................................................................. 3
2.2 Payment Procedures....................................................................... 4
2.3 Option and Deferred Stock Unit Cancellation.............................................. 4
2.4 Escrow Funds............................................................................. 5
ARTICLE III
INITIAL MERGER CONSIDERATION ADJUSTMENTS
3.1 Delivery of Estimated Closing Statement.................................................. 6
3.2 Delivery and Review of Closing Statement................................................. 6
3.3 The Accountant........................................................................... 7
3.4 The Adjustment Report.................................................................... 7
3.5 Adjustment and Payment................................................................... 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Corporate Status and Authority........................................................... 9
4.2 Capitalization........................................................................... 10
4.3 Company Subsidiaries..................................................................... 11
4.4 No Conflicts; Consents and Approvals..................................................... 12
4.5 Financial Statements..................................................................... 12
4.6 Absence of Undisclosed Liabilities....................................................... 13
4.7 Real Property; Assets.................................................................... 13
4.8 Contracts................................................................................ 14
4.9 Employment Benefits...................................................................... 15
4.10 Intellectual Property.................................................................... 17
4.11 Governmental Authorizations; Compliance with Law......................................... 19
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TABLE OF CONTENTS
(Continued)
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4.12 Litigation............................................................................... 19
4.13 Taxes.................................................................................... 19
4.14 Absence of Changes....................................................................... 22
4.15 Insurance................................................................................ 23
4.16 Environment, Health, and Safety Matters.................................................. 24
4.17 Brokers.................................................................................. 24
4.18 Affiliate Transactions................................................................... 25
4.19 Referral Fees............................................................................ 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SUB
5.1 Corporate Status and Authority........................................................... 25
5.2 No Conflicts; Consents and Approvals..................................................... 26
5.3 Financing................................................................................ 26
5.4 Solvency................................................................................. 26
5.5 Purchase for Investment.................................................................. 27
5.6 Litigation............................................................................... 27
5.7 Brokers.................................................................................. 27
ARTICLE VI
COVENANTS
6.1 Conduct of Business...................................................................... 27
6.2 Certain Filings.......................................................................... 30
6.3 Further Actions.......................................................................... 30
6.4 Access and Information................................................................... 31
6.5 Publicity................................................................................ 32
6.6 Employee Matters......................................................................... 32
6.7 Tax Matters.............................................................................. 33
6.8 Indemnification of Directors and Officers................................................ 33
6.9 Financing................................................................................ 34
6.10 Intercompany Accounts.................................................................... 34
6.11 Solvency of the Company.................................................................. 34
6.12 Disclosure of Certain Matters............................................................ 35
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligations of the Parties................................................. 35
7.2 Conditions to Obligations of the Company................................................. 36
7.3 Conditions to Obligations of the Parent and the Sub...................................... 36
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TABLE OF CONTENTS
(Continued)
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ARTICLE VIII
TAX INDEMNIFICATION
8.1 Tax Indemnification...................................................................... 38
8.2 Straddle Period Allocation and Tax Returns............................................... 39
8.3 Notice and Payment of Indemnified Amounts................................................ 40
8.4 Nature of Payments....................................................................... 40
8.5 Tax Audits and Contests; Cooperation..................................................... 40
8.6 Refunds.................................................................................. 42
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties and Covenants................................. 42
9.2 Indemnification.......................................................................... 43
9.3 Claims................................................................................... 44
9.4 Limitations; Payments.................................................................... 46
9.5 Remedies Exclusive....................................................................... 47
9.6 Duty to Mitigate......................................................................... 47
9.7 Assignment of Claims..................................................................... 48
9.8 Tax Indemnification...................................................................... 48
ARTICLE X
DEFINITIONS
10.1 Definition of Certain Terms.............................................................. 48
10.2 Other Definitions........................................................................ 57
ARTICLE XI
GENERAL PROVISIONS
11.1 Modification; Waiver..................................................................... 59
11.2 Entire Agreement......................................................................... 59
11.3 Schedules and Exhibits................................................................... 59
11.4 Certain Limitations...................................................................... 59
11.5 Termination.............................................................................. 60
11.6 Expenses; Transfer Taxes................................................................. 61
11.7 FIRPTA................................................................................... 61
11.8 Further Actions.......................................................................... 61
11.9 Notices.................................................................................. 61
11.10 Assignment............................................................................... 63
11.11 No Third Party Beneficiaries............................................................. 63
11.12 Representative........................................................................... 63
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TABLE OF CONTENTS
(Continued)
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11.13 Counterparts............................................................................. 64
11.14 Facsimile................................................................................ 64
11.15 Severability............................................................................. 65
11.16 Interpretation........................................................................... 65
11.17 Governing Law............................................................................ 65
11.18 Enforcement.............................................................................. 65
11.19 Waiver of Jury Trial..................................................................... 66
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Schedules:
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Schedule 4.1 Corporate Status and Authority
Schedule 4.2(b) Company Options and Deferred Stock Units
Schedule 4.2(c) Option Loans
Schedule 4.3 Company Subsidiaries
Schedule 4.4(a) No Conflicts; Consents and Approvals
Schedule 4.6 Absence of Undisclosed Liabilities
Schedule 4.7(a) Leased Real Property
Schedule 4.8 Material Contracts
Schedule 4.9 Plans
Schedule 4.10 Intellectual Property
Schedule 4.11 Governmental Authorizations; Compliance with Law
Schedule 4.12 Litigation
Schedule 4.13 Taxes
Schedule 4.14 Absence of Changes
Schedule 4.15 Insurance
Schedule 4.17 Brokers
Schedule 4.18 Affiliate Transactions
Schedule 4.19 Referral Fees
Schedule 6.1 Conduct of Business
Schedule 6.6 Employee Matters
Schedule 6.10 Intercompany Accounts
Schedule 7.3 Closing Consents
Exhibits:
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Exhibit A Escrow Agreement
Exhibit B Officers of Surviving Corporation
Exhibit C Amended Trademark License Agreement
Exhibit D JURIS Software Service Agreement
Exhibit E Form of Holder Agreement
Exhibit F Certain Matters
Exhibit G JURIS Software License Termination Agreement
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of December 23,
2005, by and among Fidelity National Financial, Inc., a Delaware corporation
(the "Parent"), Xmas Merger Corp., a Delaware corporation and a wholly-owned
subsidiary of the Parent (the "Sub"), Sedgwick CMS Holdings, Inc., a Delaware
corporation (the "Company"), and for purposes of the rights and obligations, as
the case may be, expressly set forth in Article III, Article VIII, Article IX
and Sections 11.9 and 11.12 hereof only, the Representative (as defined below).
Capitalized terms used herein and not otherwise defined have the respective
meanings set forth in Section 10.1.
RECITALS
WHEREAS, the respective boards of directors of each of the Parent and the
Sub and the Board have approved and declared advisable this Agreement and the
merger of the Sub with and into the Company on the terms and subject to the
conditions set forth in this Agreement (the "Merger") and have determined that
the Merger and the other transactions contemplated by this Agreement are fair
to, and in the best interest of, their respective stockholders; and
WHEREAS, substantially concurrently herewith, all of the Company's
stockholders have executed and delivered written consents approving the Merger.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties made herein and of the mutual benefits to be
derived herefrom, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), the Sub shall be merged with and into the Company at the Effective
Time. Following the Effective Time, the separate corporate existence of the Sub
shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of the Sub in accordance with the DGCL.
1.2 Closing. The closing of the Merger (the "Closing") will take place at
the offices of Debevoise & Xxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 at 10:00 a.m. New York City time on the later of (i) January 31, 2006 and
(ii) the third Business Day following the satisfaction or waiver of the
conditions set forth in Article VII (other than the conditions which by their
terms are to be satisfied at Closing, but subject to the satisfaction of such
conditions) or on such other date and time as the Company and Parent shall agree
(the actual date and time of the Closing, the "Closing Date").
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1.3 Effective Time. Subject to the provisions of this Agreement, as soon
as practicable on or after the Closing Date, the parties shall file with the
Secretary of State of the State of Delaware a certificate of merger or other
appropriate documents as provided in Section 251 of the DGCL (in any such case,
the "Certificate of Merger") executed in accordance with the relevant provisions
of the DGCL and shall make all other filings or recordings required under the
DGCL to effectuate the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Secretary of State of the State
of Delaware, or at such other time as the Sub and the Company shall agree should
be specified in the Certificate of Merger (the time the Merger becomes effective
being hereinafter referred to as the "Effective Time").
1.4 Effects of the Merger. The Merger shall have the effects set forth in
the applicable provisions of the DGCL.
1.5 Certificate of Incorporation and By-Laws.
(a) The certificate of incorporation of the Sub as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
(b) The by-laws of the Sub as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
1.6 Directors. From and after the Effective Time, the directors of the Sub
immediately prior to the Effective Time shall become the directors of the
Surviving Corporation and shall serve on the Surviving Corporation's board of
directors, until their respective successors are duly elected and qualified.
1.7 Officers. Unless otherwise specified by the Parent in written notice
delivered to the Company at least three Business Days prior to the Closing Date,
the officers set forth on Exhibit B shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed or qualified, or until their
earlier death, resignation or removal in accordance with the certificate of
incorporation and by-laws of the Surviving Corporation.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
PAYMENT PROCEDURES; CANCELLATION OF OPTIONS
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Stock or any shares of capital stock of the Sub:
(a) Capital Stock of the Sub. Each issued and outstanding share of
capital stock of the Sub shall be converted into one validly issued, fully
paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each
share of Common Stock that is owned by the Company and each share of Common
Stock that is owned by the Parent, the Sub or any other subsidiary of the
Parent shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Stock. (i) (A) Each share of Common Stock
issued and outstanding (other than shares of Common Stock to be canceled in
accordance with Section 2.1(b)) shall be converted into the right to receive
the sum of (x) the Initial Common Stock Cash Consideration in cash, without
interest, and (y) a portion of the Escrow Funds (the "Escrow Consideration"),
such portion determined as provided in the Escrow Agreement, and (B) each
share of Preferred Stock issued and outstanding (other than any shares of
Preferred Stock to be canceled in accordance with Section 2.1(b)) shall be
converted into the right to receive the Preferred Stock Consideration in
cash, without interest. The "Initial Merger Consideration" means the sum of
the Initial Common Stock Cash Consideration, the Escrow Consideration and the
Preferred Stock Consideration.
(ii) As of the Effective Time, all such shares of Company Stock shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
Company Stock shall cease to have any rights with respect thereto, except the
right to receive for each share the Initial Common Stock Cash Consideration or
the Preferred Stock Consideration, as the case may be, without interest upon
surrender of such certificate in accordance with, or as otherwise contemplated
by, Section 2.2, plus, in the case of each such share of Common Stock, the right
to receive its applicable fractional interest in the Escrow Consideration, if
any, in each case, in accordance with the applicable terms hereof and the Escrow
Agreement.
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(d) Withholding Tax. Subject to Section 11.7, the Parent and the
Surviving Corporation shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Stock outstanding immediately prior to the Effective Time
such amounts as may be required to be deducted and withheld with respect to
the making of such payment under the Internal Revenue Code of 1986, as
amended (the "Code"), or any provision of state, local or foreign tax law.
For the avoidance of doubt, the full amount of any withholding required with
respect to the consideration to be paid to a holder of Common Stock under
Section 2.1(c)(i)(A) may be withheld from the Initial Common Stock Cash
Consideration payable to such holder. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Stock
outstanding immediately prior to the Effective Time in respect of which such
deduction and withholding was made.
2.2 Payment Procedures. Immediately after the Effective Time, the Parent
shall cause the Surviving Corporation to pay the applicable Initial Common Stock
Cash Consideration to each holder of Common Stock and the applicable Preferred
Stock Consideration to each holder of Preferred Stock that has (a) either
tendered to the Company certificate(s) representing all of such holder's shares
of Common Stock or Preferred Stock, as the case may be, to be converted in the
Merger (such certificates to be duly endorsed in blank or accompanied by stock
powers or other instruments of transfer duly executed in blank, in either case,
and with wire instructions for such holder's receipt of such payment) or
delivered a lost certificate affidavit in form reasonably satisfactory to the
Parent to the effect that such certificates have been lost, stolen or destroyed
(and, if required by the Parent, the posting by such holder of a bond, in such
reasonable amount as the Parent may direct, as indemnity against any claim that
may be made against it with respect to that certificate), (b) duly consented to
the Merger in accordance with Section 228 of the DGCL, and (c) with respect to
any holder other than the Primary Shareholders, executed and delivered a Holder
Agreement in the form attached hereto as Exhibit E (each such agreement
individually, a "Holder Agreement" and, collectively, the "Holder Agreements").
2.3 Option and Deferred Stock Unit Cancellation.
(a) Each Company Option, whether vested or unvested, shall be
canceled in exchange for a cash payment equal to the Option Cancellation
Amount. Subject to Section 2.3(c) and to the execution and delivery by each
Option Holder of a Holder Agreement, the Company shall pay the applicable
portion of the Option Cancellation Amount consisting of the Initial Common
Stock Cash Consideration less the Exercise Price of such Company Option owing
to each Option Holder immediately after the Effective Time and shall pay the
remaining portion of the Option Cancellation
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Amount to each such Option Holder as and if the same becomes due and payable,
in accordance with the applicable terms hereof and the Escrow Agreement.
(b) Each Deferred Stock Unit owned by a DSU Holder, whether vested
or unvested, shall be canceled in exchange for a cash payment to such DSU
Holder equal to the Initial Common Stock Cash Consideration, plus the right
to receive its portion of the Escrow Funds, if any, as and if the same
becomes due and payable, in accordance with the applicable terms hereof and
the Escrow Agreement. Subject to Section 2.3(c), the Company shall pay the
amount consisting of the Initial Common Stock Cash Consideration owing to
each such DSU Holder pursuant to this Section 2.3 immediately after the
Effective Time and the remaining portion of such amount shall be paid to each
such DSU Holder, as and if the same becomes due and payable, in accordance
with the applicable terms hereof and the Escrow Agreement.
(c) Withholding Tax -- Option Loan Repayment. Subject to Section
11.7, the Parent and the Surviving Corporation shall be entitled to deduct
and withhold, or cause to be deducted or withheld, from any payment made
pursuant to this Section 2.3, such amounts as are required to be deducted and
withheld with respect to the making of such payment under the Code, or any
provision of applicable U.S. federal, state, local or foreign tax law. For
the avoidance of doubt, the full amount of any withholding required with
respect to the consideration to be paid to an Option Holder under Section
2.3(a) and to a DSU Holder under Section 2.3(b) may be withheld from the
Initial Common Stock Cash Consideration payable to such holder. To the extent
that amounts are so deducted and withheld from any such holder, such deducted
and withheld amounts shall be treated for all purposes of this Agreement as
having been paid to such holder. Notwithstanding anything herein or in any
Option Loan to the contrary, any amount otherwise payable to an Option Holder
pursuant to Section 2.3(a), after any deduction or withholding pursuant to
this Section 2.3(c), shall be applied first to discharge all outstanding
principal and accrued but unpaid interest on any Option Loan to which such
Option Holder is a party. This Section 2.3 shall be interpreted in a manner
to avoid adverse consequences under Section 409A of the Code to the greatest
extent practicable.
2.4 Escrow Funds.
(a) Deposit into Escrow. At the Effective Time, the Parent shall
cause the Surviving Corporation to deliver an amount equal to the Escrow
Funds to the Escrow Agent in accordance with the terms of the Escrow
Agreement.
(b) Release from Escrow. From and after the Effective Time, the
Escrow Funds shall be released to the Parent and/or paid to the Holders,
respectively, in accordance with, and subject to the conditions set forth in,
this Agreement and the Escrow Agreement.
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ARTICLE III
INITIAL MERGER CONSIDERATION ADJUSTMENTS
3.1 Delivery of Estimated Closing Statement. No later than the fifth
Business Day prior to the Closing Date, the Company shall deliver to the Parent
a statement (the "Estimated Closing Statement") of the Estimated Closing Equity
and Estimated Cash Shortfall and a calculation of the Preliminary Adjustment
Amount, together with supporting calculations. As used in this Agreement, the
"Preliminary Adjustment Amount" shall mean an amount equal to the sum of (a) the
excess, if any, of (i) the Target Equity over (ii) the Estimated Closing Equity
plus (b) the Estimated Cash Shortfall.
3.2 Delivery and Review of Closing Statement.
(a) Preparation of Closing Statement. As promptly as practicable,
but no later than 120 days after the Closing Date, the Parent in good faith
shall prepare and deliver to the Representative, at the Parent's expense, a
statement (the "Closing Statement") of the Closing Equity and the Cash
Shortfall, if any, together with supporting calculations.
(b) Review of Closing Statement. The Representative shall have 30
days from the date on which the Closing Statement is delivered to it to
review such documents relating to the Parent's computation as the
Representative may reasonably request (the "Review Period"). During the
Review Period, the Representative and its representatives will have
reasonable access to all documentation or work papers reasonably requested by
the Representative related to the Parent's computation of Closing Equity and
the Cash Shortfall (it being understood that access to any work papers of any
third party accountants shall require the execution of a customary access
letter). If the Representative believes the computation of Closing Equity or
Cash Shortfall (i) has not been prepared in accordance with the principles,
procedures and elections referred to in the definitions of Closing Equity and
Closing Cash Balance or (ii) is not mathematically correct, the
Representative may, on or prior to the last day of the Review Period, deliver
a notice to the Parent to such effect, setting forth, in reasonable detail,
each disputed item, the amount disputed and the basis for the
Representative's disagreement therewith, together with supporting
calculations and the Representative's position as to the proper calculation
of such amount (the "Dispute Notice"). For the avoidance of doubt, the
Representative may provide a Dispute Notice on the basis only of the matters
referred to in clauses (i) or (ii) of the immediately preceding sentence. If
no Dispute Notice is received by the Parent on or prior to the last day of
the Review Period, the Closing Statement and the computation of the Closing
Equity and Cash Shortfall set forth therein shall be deemed accepted by the
Representative for all purposes of this Agreement.
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3.3 The Accountant. If the Representative delivers a Dispute Notice, the
Parent and the Representative will negotiate in good faith for 15 Business Days
in order to determine the actual Closing Equity and Cash Shortfall. If the
parties fail to so resolve the dispute by the end of the 15th Business Day
following the delivery of the Dispute Notice, any dispute shall be determined
within 45 days thereafter by a nationally recognized firm of independent
certified public accountants (the "Accountant") mutually agreeable to the Parent
and the Representative. The Accountant shall determine, based solely on written
presentations by the Parent and the Representative and their respective
representatives, and not by independent review, only those issues in dispute
specifically set forth in the Dispute Notice that have not previously been
resolved between the Parent and the Representative. Such written presentations
shall be made to the Accountant within 30 days of the engagement of the
Accountant. In resolving any disputed item, the Accountant: (a) shall be bound
by the principles set forth in the definitions of Closing Equity and Closing
Cash Balance, (b) shall limit its review to matters specifically set forth in
the Dispute Notice, and (c) shall further limit its review solely to whether the
determination of Closing Equity and the Cash Shortfall set forth in the Closing
Statement is mathematically accurate and has been prepared in accordance with
Section 3.2. The determination of the Accountant in respect of any disputed item
in the Dispute Notice cannot, however, be in excess of, nor less than, the
greatest or lowest value, respectively, claimed for that particular item in the
Parent's Closing Statement or in the Representative's Dispute Notice.
3.4 The Adjustment Report. The Accountant shall, as promptly as
practicable and in no event later than 45 days following the date of its
retention, deliver to the Representative and the Parent a report (the
"Adjustment Report"), in which the Accountant shall, after considering all
matters set forth in the Dispute Notice, determine in accordance with Section
3.2 what adjustments, if any, should be made to the Closing Equity and the Cash
Shortfall. The Adjustment Report shall set forth, in reasonable detail, the
Accountant's determination with respect to each of the disputed items or amounts
specified in the Dispute Notice, and the revisions, if any, to be made to the
Closing Equity and/or the Cash Shortfall together with supporting calculations.
The determination of the Accountant will be final and binding on the parties
hereto and judgment may be entered upon the determination of the Accountant in
any court having jurisdiction over the party against which such determination is
to be enforced. The fees, costs and expenses of the Accountant shall be borne by
the Parent and the Company, jointly and severally, in the event that Closing
Equity (or, in the event that Closing Equity is not a subject of the Dispute
Notice, the Closing Cash Balance), as set forth in the Adjustment Report, is
closer to the amount proposed by the Representative to the Accountant than to
the amount proposed by the Parent to the Accountant, and otherwise shall be paid
by the Representative on behalf of the Holders, which may use the Escrow Funds
in accordance with the terms of Section 7 of the Escrow Agreement.
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3.5 Adjustment and Payment.
(a) Effective upon the end of the Review Period (if a timely Dispute
Notice is not delivered), or upon the resolution of all matters set forth in
the Dispute Notice by agreement of the parties or by the issuance of the
Adjustment Report (if a timely Dispute Notice is delivered), the Final
Adjustment Amount and the Net Adjustment Amount shall be determined. The
"Final Adjustment Amount" shall mean an amount equal to the sum of (a) the
excess, if any, of (i) the Target Equity over (ii) the Closing Equity plus
(b) the Cash Shortfall, if any. The "Net Adjustment Amount" shall mean an
amount equal to the excess, if any, of the Final Adjustment Amount over the
Preliminary Adjustment Amount.
(b) Any Net Adjustment Amount payable pursuant to this Section 3.5
shall be paid on the fifth Business Day following the end of the Review
Period (if a timely Dispute Notice is not delivered), or on the fifth
Business Day following either the date on which the Adjustment Report has
been received by the Parent and the Representative (if a timely Dispute
Notice is delivered) or the date on which the Parent and Representative
otherwise resolve all matters in respect of a Dispute Notice, in either case,
through the distribution by the Escrow Agent to the Parent from the Escrow
Funds, to the extent of funds available therefor, of an amount equal to the
Net Adjustment Amount. The Parent's sole and exclusive recourse for any
amounts due under this Section 3.5 shall be limited to the collection of any
amounts held in the Escrow Funds in accordance with the terms of the Escrow
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter delivered to the Parent on
the date hereof and constituting an integral part of this Agreement (the
"Disclosure Letter") (and any fact or item disclosed in any Schedule to the
Disclosure Letter shall be deemed disclosed in all other Schedules thereof to
which such fact or item applies, but only if the application of such fact or
item to such other Schedule is reasonably apparent from a reasonable reading of
the disclosure made in the Schedule, and shall otherwise not qualify or be an
exception to any representation and warranty other than the specific
representation and warranty to which such Schedule relates), the Company
represents and warrants to the Parent and the Sub, as of the date hereof and as
of the Closing Date (except that those representations and warranties that are
made as of a specified date shall be made only as of such date):
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4.1 Corporate Status and Authority.
(a) Company. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to execute and deliver this Agreement and
the other Transaction Documents and to perform its obligations hereunder and
thereunder. This Agreement has been duly executed and delivered by the
Company and constitutes, and each of the other Transaction Documents will be
duly executed and delivered prior to the Closing Date by the Company, and
each will constitute, the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
limited by laws affecting the enforcement of creditors' rights generally or
by general equitable principles.
(b) Board Approval; Vote Required.
(i) The Board, by resolutions duly adopted by unanimous vote (with one
abstention) at a meeting duly called, has (A) determined that this Agreement and
the transactions contemplated hereby, including the Merger, are fair to and in
the best interests of the Company and its stockholders and declared this
Agreement and the Merger to be advisable, (B) approved this Agreement and the
transactions contemplated hereby, including the Merger and (C) recommended that
the stockholders of the Company adopt this Agreement.
(ii) The written consent of the holders of a majority of the outstanding
shares of the Common Stock, which has been obtained, is the only vote or consent
of the holders of any class or series of stock of the Company necessary to
approve and adopt this Agreement and the transactions contemplated hereby,
including the Merger.
(iii) No vote or consent of any or all of the Option Holders or of any
or all of the DSU Holders is necessary to adopt this Agreement or authorize the
Merger or any other transaction contemplated hereby.
(c) Agreements with Respect to Capital Stock. There are no
preemptive or similar rights on the part of any holder of any class of
securities of the Company. Except for the Company Options and Deferred Stock
Units and the agreements with respect to them with the Option Holders and DSU
Holders listed in Schedule 4.1 of the Disclosure Letter, there are (i) no
authorized or outstanding securities, options, warrants, conversion or other
rights, subscriptions, undertakings, agreements, commitments, arrangements or
understandings of any kind obligating the Company, contingently or otherwise,
to issue or sell any shares of its capital stock or any securities
convertible into or exchangeable for any such shares, (ii) no outstanding
debt or equity securities of the Company or any Company Subsidiary that upon
the conversion, exchange, or exercise thereof would require the issuance,
sale, or transfer
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by the Company or any Company Subsidiary of any new or additional capital
stock of the Company or any Company Subsidiary (or any other securities of
the Company or any Company Subsidiary which, whether after notice, lapse of
time, or payment of monies, are or would be convertible into or exchangeable
or exercisable for capital stock of the Company or any Company Subsidiary),
(iii) no agreements or commitments obligating the Company or any Company
Subsidiary to repurchase, redeem, or otherwise acquire capital stock or other
securities of the Company or any Company Subsidiary and (iv) no outstanding
or authorized stock appreciation rights, phantom stock, stock rights, or
other equity-based interests, rights or agreements in respect of the Company
or any Company Subsidiary.
4.2 Capitalization.
(a) Capital Stock. As of the date hereof, the authorized capital
stock of the Company consists of (i) 1,000,000 shares of Class A common
stock, par value $.01 per share (the "Class A Common Stock"), of which
319,528 shares are issued and outstanding, (ii) 1,000,000 shares of Class B
common stock, par value $.01 per share (the "Class B Common Stock"), of which
224,000 shares are issued and outstanding, (iii) 500,000 shares of Class C
common stock, par value $.01 per share (the "Class C Common Stock," and,
together with the Class A Common Stock and the Class B Common Stock, the
"Common Stock"), of which 7,500 shares are issued and outstanding, and (iv)
500,000 shares of Preferred Stock, par value $.01 per share (the "Preferred
Stock"), of which 300,000 shares are issued and outstanding. As of the date
hereof, the issued and outstanding shares of Common Stock and Preferred Stock
specified in this Section 4.2(a) together constitute all of the issued and
outstanding shares of the capital stock of the Company, and there are no
additional shares reserved for issuance (other than shares reserved in
respect of Company Options and Deferred Stock Units). All issued and
outstanding shares of Company Stock have been duly authorized and validly
issued and are fully paid and non-assessable and are not subject to or issued
in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision
of the DGCL, the certificate of incorporation or by-laws of the Company or
any Contract to which the Company is a party or otherwise bound. The Company
has not issued any voting indebtedness. As of the date hereof, except for the
Holders, there are no other record owners of any shares of the Company Stock.
(b) Options and Deferred Stock Units. As of the date hereof, there
are 79,528 shares of the Company's Class C Common Stock reserved for issuance
under the Company's 2003 Long-Term Incentive and Share Award Plan (the
"Company Stock Incentive Plan") that may be issued upon the exercise of
options and the settlement of deferred stock units. As of the date hereof,
there are options for the purchase of 61,055 shares of Class C Common Stock
(the "Company Options"), and 16,473 deferred stock units with respect to
shares of Class C Common Stock (the
10
"Deferred Stock Units"), outstanding. Schedule 4.2(b) of the Disclosure
Letter contains a complete and correct list of (i) each holder of Company
Options (the "Option Holders"), including the number of shares of Class C
Common Stock issuable upon exercise of such Option Holders' Company Options
and the Exercise Price thereof and (ii) each holder of Deferred Stock Units
(the "DSU Holders"), and the number of shares of Class C Common Stock
issuable upon settlement of such DSU Holders' Deferred Stock Units. As of the
Closing Date, each Option Holder will have executed and delivered a Holder
Agreement providing for the cancellation of such Option Holder's Company
Options in exchange for the amounts described in Section 2.3.
(c) Upon consummation of the transactions contemplated hereby, all
of the issued and outstanding Common Stock of the Company shall be owned by
the Parent free and clear of any Liens other than Liens created by the Parent
or the Sub, and no Preferred Stock, Company Options or Deferred Stock Units
will be outstanding. Schedule 4.2(c) of the Disclosure Letter contains a
complete and correct list, including the aggregate outstanding principal
amount and accrued interest, if any, of each outstanding loan made by the
Company to Option Holders in respect of any Company Options.
4.3 Company Subsidiaries.
(a) Each Company Subsidiary and their respective jurisdictions of
organization are identified on Schedule 4.3 of the Disclosure Letter. Each of
the Company Subsidiaries (i) is a corporation, partnership or other legal
entity, as the case may be, duly organized and validly existing and in good
standing (if applicable) under the laws of its jurisdiction, (ii) has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as presently conducted and (iii) is duly qualified and
in good standing (if applicable) as a foreign corporation duly authorized to
do business in all jurisdictions, except, in the case of clause (ii) and
(iii), where the failure to have such power and authority or to be duly
qualified and in good standing would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. Other than the
Company Subsidiaries, neither the Company nor any Company Subsidiary owns any
capital stock, membership interest, partnership interest, joint venture
interest or other equity interest in any other Person.
(b) All of the issued and outstanding shares or other ownership
interests of each Company Subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable and, now and at the Closing, all
such issued and outstanding shares or other ownership interests are and will
be owned directly or indirectly by the Company free and clear of all Liens,
except for any Liens created by the Parent or the Sub, including as a result
of any financing to be undertaken by the Parent or the Sub in connection with
transactions contemplated by this Agreement.
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4.4 No Conflicts; Consents and Approvals.
(a) The execution, delivery and performance by the Company of this
Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby do not and will not (with or
without the giving of notice, the lapse of time, or both) conflict with, or
result in any violation or breach of, or require any Consent under or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of the Company or any
Company Subsidiary under (i) assuming compliance with the matters referred to
in Section 4.4(b), any Applicable Law applicable to the Company, any of the
Company Subsidiaries or any of their respective properties or assets, (ii)
any Material Contract to which the Company or any of the Company Subsidiaries
is a party or by which any of them or their properties or assets is bound or
affected or (iii) any Organizational Documents of the Company or any of the
Company Subsidiaries, except in the case of clauses (i) and (ii) above, for
any such violation, breach or approval which would not reasonably be expected
to materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement or to otherwise have,
individually or in the aggregate, a Material Adverse Effect.
(b) No Governmental Approval is required to be obtained or made by
or with respect to the Company or any Company Subsidiary in connection with
the execution and delivery of this Agreement and the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby, except (i) any Governmental Approvals required to be obtained or
made, as the case may be, as a result of any legal or regulatory status of,
or other facts pertaining specifically to, the Parent, the Sub or any of
their respective Affiliates, (ii) filings required with respect to the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (iii) where the failure to do so would not reasonably be expected
to materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement or to otherwise have,
individually or in the aggregate, a Material Adverse Effect.
4.5 Financial Statements. The Company has made available to the Parent
complete and correct copies of (a) the audited consolidated balance sheet of the
Company and the Company Subsidiaries as at December 31, 2004 and December 31,
2003, and the statements of income and cash flows for the fiscal year ended
December 31, 2004 and December 31, 2003, together with the report thereon by the
Company's accountants (the "Audited Financial Statements"), and (b) the
unaudited consolidated balance sheet of the Company and the Company Subsidiaries
as at November 30, 2005 and the related statements of income and cash flows for
the eleven month period ended November 30, 2005 (the "Unaudited Interim
Financial Statements", and together with the Audited Financial Statements, the
"Financial Statements"). The Financial Statements present
12
fairly in all material respects the financial position, cash flows and results
of operations of the Company and the Company Subsidiaries as at the respective
dates or for the respective periods thereof and have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods presented in the
Financial Statements, except as otherwise noted therein and subject, in the case
of Unaudited Interim Financial Statements, to normal year-end adjustments that
in the aggregate would not be material and the absence of notes.
4.6 Absence of Undisclosed Liabilities. There are no liabilities or
obligations of any nature, whether absolute, accrued, contingent, unasserted or
otherwise and whether due or to become due, which would be required to be set
forth on a consolidated balance sheet of the Company and the Company
Subsidiaries or in the notes thereto, prepared in accordance with GAAP applied
in a manner consistent with the Financial Statements, except (a) as reflected on
and reserved against in the Financial Statements or in the notes to the Audited
Financial Statements, (b) for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since December 31,
2004, and (c) for liabilities or obligations that would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
The Company and the Company Subsidiaries have no outstanding indebtedness for
borrowed money and have not guaranteed any such indebtedness.
4.7 Real Property; Assets.
(a) Schedule 4.7(a) of the Disclosure Letter lists all material
items of real property leased by the Company or any of the Company
Subsidiaries (the "Leased Real Property"). The Company and the Company
Subsidiaries have valid leasehold interests in the Leased Real Property, in
each case free and clear of all Liens, except for (i) Liens for Taxes and
other governmental charges and assessments that are not yet due and payable
or that are being contested in good faith by appropriate proceedings, (ii)
Liens of carriers, warehousemen, mechanics, materialmen and other like Liens
arising in the ordinary course of business consistent with past practice that
are not yet due and payable or are being contested in good faith, (iii)
purchase money Liens on property acquired by the Company or any Company
Subsidiary after the Balance Sheet Date in connection with its business which
were created contemporaneously with such acquisition to secure or provide for
the payment or financing of all or any part of the purchase price thereof,
(iv) easements, rights of way, restrictions, zoning ordinances and other
similar encumbrances affecting the real property that do not materially
interfere with the current use of properties or assets affected thereby, (v)
Liens disclosed on the Balance Sheet or notes thereto or Liens incurred in
the ordinary course of business consistent with past practice since the
Balance Sheet Date, (vi) any other Liens that do not materially interfere
with the current use of properties or assets affected thereby, and (vii)
statutory Liens in favor of lessors arising in connection with any property
leased to the Company or the Company Subsidiaries (collectively, "Permitted
Liens"). Neither the Company nor any Company Subsidiary owns any real
property.
13
(b) Each lease (including any option to purchase contained therein)
pursuant to which the Company or any of the Company Subsidiaries leases any
Leased Real Property (the "Leases") is in full force and effect and, to the
knowledge of the Company, is enforceable against the landlord that is party
thereto in accordance with its terms, except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. To the knowledge of the Company, there exists no default or event of
default on the part of the Company or any of the Company Subsidiaries under
any Leases, except for any such default or event of default which would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Neither the Company nor any of the Company Subsidiaries has
received any written notice of any default under any Lease nor any other
written termination notice with respect thereto.
(c) The Company and the Company Subsidiaries have good title to, or
in the case of leased property and assets have valid leasehold interests in,
all material property and assets (whether real, personal, tangible or
intangible) reflected on the Balance Sheet or acquired after the Balance
Sheet Date, except for properties and assets sold since the Balance Sheet
Date in the ordinary course of business consistent with past practice (the
"Company Assets"). None of such owned property or assets, or leasehold
interests in such property or assets, is subject to any Lien, except for
Permitted Liens. All such Company Assets are in good condition and repair in
all material respects, reasonable wear-and-tear excepted, and are adequate to
carry on the business of the Company and the Company Subsidiaries.
4.8 Contracts. Schedule 4.8 of the Disclosure Letter lists all Material
Contracts. The term "Material Contracts" means all of the following types of
Contracts to which the Company or any of the Company Subsidiaries is a party or
by which the Company or any of the Company Subsidiaries or any of their
respective properties is bound as of the date hereof (other than real property
leases, labor or employment-related agreements and agreements related to
intellectual property, which are provided for in Sections 4.7, 4.9 and 4.10,
respectively, and agreements related to expenses of lawyers, investment bankers
and other third parties payable at or before Closing in connection with the
transactions contemplated by this Agreement, which are provided for in Section
4.17): (a) joint venture and partnership agreements, (b) mortgages, indentures,
loan or credit agreements, guarantees (other than any guarantees between the
Company and its Subsidiaries or between Company Subsidiaries), security
agreements and other agreements and instruments relating to the borrowing of
money or extension of credit in any case in excess of $325,000, (c) Contracts
with customers who generate annual revenues or expenditures in excess of
$1,700,000 per year, (d) other Contracts that are not cancelable by the Company
or any of the Company Subsidiaries on notice of 90 days
14
or less and that require payment by the Company after the date hereof of more
than $325,000, (e) any agreement containing a non-competition provision or other
covenant restricting in any material respect the distribution of products and
services of the Company or any Company Subsidiary, (f) any other Contract
entered into other than in the ordinary course of business consistent with past
practice involving aggregate payments by or to the Company or any of the Company
Subsidiaries in excess of $250,000 per year or $500,000 in the aggregate, (g)
other than the articles of incorporation and bylaws of the Company or any of the
Company Subsidiaries, any Contract providing for the indemnification of any
officer, director, employee, manager or independent contractor of the Company or
any Company Subsidiary, (h) Contracts providing for any obligation of the
Company or any Company Subsidiary to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any Company
Subsidiary or any other Person, (i) outstanding power of attorney, or obligation
or liability (whether absolute, accrued, contingent or otherwise) as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any Person, in each case in excess of $325,000 individually, other
than obligations between the Company and any of the Company Subsidiaries, (j)
any agency Contract with any Person for the distribution of the services of the
Company or any Company Subsidiary, which Contract had relevance with respect to
more than 1% of the new business of the Company and the Company Subsidiaries in
2004 or 2005, (k) any Contract set forth on Schedule 4.18 of the Disclosure
Letter and (l) any other Contract that is material to the business of the
Company and the Company Subsidiaries, taken as a whole (other than Contracts
with customers, which are subject to clause (c) of this Section 4.8) which
generates annual revenues or expenditures in excess of $325,000 per year. Each
such Material Contract is and, as of the Closing Date only, each other Contract
entered into or amended after the date hereof that if in effect on such terms as
of the date hereof would have been a Material Contract (the "Other Contracts")
will be a valid and binding agreement of the Company or one of the Company
Subsidiaries and is, or will be, as the case may be, in full force and effect as
to the Company or the Company Subsidiary party thereto and, to the Company's
knowledge, as to each other party thereto, except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Neither the Company nor any of the Company Subsidiaries has, and, to the
Company's knowledge, none of the other parties thereto have, violated any
provision of, or committed or failed to perform any act, and no event or
condition exists, which with or without notice, lapse of time or both would
constitute a default or event of default under the provisions of, any Material
Contract, or as of the Closing Date only, any Other Contract, except in each
case for those violations and defaults which would not be expected to have,
individually or in the aggregate, a Material Adverse Effect.
4.9 Employment Benefits.
(a) Agreements and Plans. Schedule 4.9 of the Disclosure Letter sets
forth an accurate list of all material Plans.
15
(b) Documents. With respect to each Plan listed on Schedule 4.9 of
the Disclosure Letter, the Company has provided or made available to the
Parent true and complete copies of the following documents, to the extent
applicable: (i) the most recent Plan document and all amendments thereto;
(ii) the most recent trust instruments, insurance contracts or other funding
agreements; (iii) the most recent summary plan description; (iv) the most
recent determination letter issued by the IRS; and (v) the most recent Form
5500 Annual Report.
(c) Compliance with Law. All Plans comply, in form and operation, in
all respects with their terms and the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Code and other
Applicable Laws, except for any failures to comply that would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect. Except for the Sedgwick Claims Management Services Retirement Plan
(the "Pension Plan"), neither the Company nor any other entity that, together
with the Company, is or was treated as a single employer under Section
414(b), (c), (m) or (o) of the Code maintains or contributes to an employee
benefit plan that is subject to Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code for which the Company, the Parent, or any Affiliate
of the Parent has or will have at any time in the future any liability or
obligation. None of the Company or any of the Company Subsidiaries has
incurred, or could reasonably be expected to incur, any liability for any tax
or penalty imposed by Section 4975 of the Code or Section 502(i) of ERISA,
except for any such liability that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. No Plan is a
multiemployer plan, as defined in Section 3(37) of ERISA. There are no
pending or, to the knowledge of the Company, threatened claims by or on
behalf of any of the Plans subject to ERISA or by any employee involving any
such Plan (other than routine claims for benefits), except for any claims
that would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(d) Tax Qualification. Each Plan that is intended to be "qualified"
within the meaning of Section 401(a) of the Code, and the trust maintained
pursuant thereto, has been determined to be so qualified and exempt from
federal income taxation under Section 501 of the Code by the IRS, and to the
Company's knowledge, nothing has occurred with respect to the operation of
any such Plan that would reasonably be expected to cause the loss of such
qualification of exemption from tax.
(e) Employment Relations. None of the Company or any of the Company
Subsidiaries is a party to or bound by any collective bargaining agreement,
nor has any of them experienced any strike or material grievance, claim of
unfair labor practices, or other collective bargaining dispute within the
past two years.
16
(f) Retiree Health and Welfare Benefits. None of the Plans provides
post-employment or post-service welfare benefits for any current or former
officer, employee, director, consultant or independent contractor, except as
may be required under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and at the expense of the current or former officer,
employee, director, consultant or independent contractor.
(g) Plan Funding. Projected as of December 31, 2005, the accrued
liabilities (as determined under GAAP) of the Pension Plan do not exceed the
fair market value of its assets (as determined under GAAP) by more than
$4,600,000 based on actuarial assumptions used in the letter from Xxxxxx
Human Resource Consulting, Inc. to Sedgwick Claims Management Services, Inc.
dated November 14, 2005.
4.10 Intellectual Property. (a) Schedule 4.10(a)(i) of the Disclosure
Letter lists all material applications and registrations for trademarks,
copyrights, trade names, service marks, patents and Internet domain names owned
by the Company or any of the Company Subsidiaries as of the date hereof. Except
for the third-party software identified on Schedule 4.10(a)(ii) of the
Disclosure Letter, the Company or the Company Subsidiaries own all right, title
and interest, including copyrights, in the JURIS Software and the viaOne
software used by them as of the date hereof. Each of the items set forth on
Schedule 4.10(a)(i) of the Disclosure Letter and each of the material
unregistered trademarks, copyrights, trade names, service marks, inventions and
trade secrets owned by the Company or any of the Company Subsidiaries (together
with the JURIS Software and the viaOne software not identified as third-party
software on Schedule 4.10(a)(ii) of the Disclosure Letter, collectively the
"Owned Intellectual Property") are owned free and clear of all Liens, except as
set forth in Schedule 4.10(a)(ii) of the Disclosure Letter and except for
Permitted Liens, and the Company's ownership rights in the Owned Intellectual
Property are not invalid or unenforceable, except where such invalidity or
unenforceability would not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect. The Company and the Company
Subsidiaries own or have the right to use, all trademarks, service marks, trade
names and designs (including any registrations or applications for registration,
as well as common law rights in any of the foregoing); patents (including any
continuations, continuations in part, renewals and applications for any of the
foregoing) and inventions; copyrights (including any registrations and
applications therefor and whether registered or unregistered); Internet domain
names, computer software, data, databases, works of authorship, mask works,
technology, trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, user interfaces,
inventions, discoveries, concepts, ideas, techniques, methods, source codes,
object codes, methodologies and, with respect to all of the foregoing, related
confidential data or information (collectively, the "Company Intellectual
Property") which in each case is used in or necessary for the conduct of their
respective business substantially as currently conducted, except where such
failures to own or possess rights to use such Company
17
Intellectual Property would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. None of the Company
or any of the Company Subsidiaries has received any notice or claim, nor to the
Company's knowledge, has any proceeding been threatened, that its respective use
or ownership of the Company Intellectual Property infringes on or
misappropriates the trademark, patent, copyright, trade secret or other
intellectual property rights of any Person, and no infringement or
misappropriation by any Person of the Owned Intellectual Property has occurred
or exists other than, in each case, for infringements or misappropriations as
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. Schedule 4.10(a)(iii) of the Disclosure Letter lists
all material Contracts to which the Company or any of the Company Subsidiaries
is a party, in each case as of the date hereof (other than Contracts for
commercial, off-the-shelf software and end user license or access agreements for
the JURIS Software or viaOne software) and pursuant to which (i) the Company or
such Company Subsidiary permits any Person to use any of the Owned Intellectual
Property, including, without limitation, the JURIS Software or the viaOne
software that is not identified on Schedule 4.10(a)(ii) of the Disclosure Letter
as third-party software, (ii) any Person permits the Company or such Company
Subsidiary to use any Company Intellectual Property that is not Owned
Intellectual Property or (iii) the Company or such Company Subsidiary permits
any Person to use any Company Intellectual Property that is not Owned
Intellectual Property. Each such material Contract (and any material Contract
for commercial, off-the-shelf software and any end user license or access
agreement for the JURIS Software or viaOne software) is a valid and binding
agreement of the Company or one of the Company Subsidiaries and is in full force
and effect as to the Company or the Company Subsidiary party thereto and, to the
Company's knowledge, as to each other party thereto, except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. To the Company's knowledge, all material Company Intellectual
Property that has been licensed to the Company or the Company Subsidiaries is
being used by the Company or the Company Subsidiaries substantially in
accordance with the applicable license or Contract pursuant to which the Company
or such Company Subsidiaries acquired the right to use such material Company
Intellectual Property. Other than in connection with the modification of Company
Intellectual Property for use by the Company or any of the Company Subsidiaries,
none of the Company or any of the Company Subsidiaries has entered into an
agreement to indemnify any party against a charge of infringement arising out of
the authorized use of the Owned Intellectual Property.
(b) The Company and the Company Subsidiaries have established and
are in compliance with commercially reasonable security protocols and industry
accepted practices that are designed to protect (i) the security,
confidentiality and integrity of transactions executed through their computer
systems, including transmission encryption and/or other security protocols and
techniques when appropriate and (ii) the security, confidentiality and integrity
of confidential or proprietary data except, in each case, where the failure to
be in compliance would not reasonably be expected to have,
18
individually or in the aggregate, a Material Adverse Effect. The Company and the
Company Subsidiaries have not, since December 31, 2002, suffered a material
security breach with respect to their data or systems, and neither the Company
nor any of the Company Subsidiaries has notified customers or employees of any
material information security breach with respect to the security,
confidentiality or integrity of information related to such customers or
employees due to the Company's or any of the Company Subsidiaries' computer
systems or those of any third-party subcontractor to the Company or any of the
Company Subsidiaries.
4.11 Governmental Authorizations; Compliance with Law. All Governmental
Approvals necessary to conduct the business of the Company and the Company
Subsidiaries as currently conducted have been duly obtained or made, are held by
the Company or the Company Subsidiaries and are in full force and effect, except
as would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. The Company and the Company Subsidiaries are in
compliance with all Applicable Laws and none of the Company or any of the
Company Subsidiaries has received any notice of any violation of any Applicable
Law, except in each case as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or with respect to
matters that prior to the date hereof have been resolved or are no longer
outstanding. This Section 4.11 does not relate to employee benefits matters, tax
matters, or environmental, health and safety matters which are instead the
subject of Section 4.9, Section 4.13 and Section 4.16, respectively.
4.12 Litigation. There are no judicial, arbitral, governmental or
administrative actions, proceedings or investigations pending or, to the
knowledge of the Company, threatened against or affecting the Company, any
Company Subsidiary or any of their respective properties or assets that (a) have
a reasonable likelihood of being determined in a manner that would reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect or
(b) question the validity of this Agreement or seek to prevent or delay any
action taken or to be taken by the Company or any of the Company Subsidiaries in
connection herewith. There are no outstanding orders, judgments, warrants,
decrees or injunctions against the Company or any Company Subsidiary issued by
any Governmental Authority, and neither the Company nor any Company Subsidiary
is a party to any agreement with any Governmental Authority (other than
Contracts for the provision of services entered into in the ordinary course of
business consistent with past practice), in each case except as would not
reasonably be expected (i) to have, individually or in the aggregate, a Material
Adverse Effect or (ii) to prevent or delay the consummation of any of the
transactions contemplated hereby or by any of the other Transaction Documents.
19
4.13 Taxes. Except as reflected or reserved against in the Financial
Statements:
(a) each material Tax Return required to have been filed by the
Company or any of the Company Subsidiaries has been filed;
(b) all amounts shown as due on such Tax Returns have been paid;
(c) all material employment and withholding Taxes required to have
been paid or withheld by or on behalf of the Company or any of the Company
Subsidiaries have been paid or properly set aside in accounts for such
purpose;
(d) no written agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any material
Taxes payable by the Company or any of the Company Subsidiaries is in effect
as of the date hereof;
(e) neither the Company nor any of the Company Subsidiaries is, as
of the date hereof, the beneficiary of any extension of time (other than an
automatic extension of time not requiring the consent of the IRS or any other
Taxing Authority) within which to file any material Tax Return not previously
filed;
(f) as of the date hereof, there are not pending or, to the
knowledge of the Company, threatened any audits, examinations, investigations
or other proceedings in respect of material Taxes payable by the Company or
any of the Company Subsidiaries;
(g) all Tax Returns filed by the Company or any of the Company
Subsidiaries were true and correct in all material respects when filed or
subsequently modified or amended prior to the date hereof and all Taxes shown
due on any modified or amended Tax Return filed prior to the date hereof have
been paid;
(h) with respect to audits: (i) no deficiencies for any Taxes have
been proposed, asserted or assessed against the Company or any of the Company
Subsidiaries that have not been finally resolved and (ii) neither the Company
nor any of the Company Subsidiaries has executed, become subject to or
entered into any closing agreement as defined in Section 7121 of the Code or
any similar or predecessor provisions thereof under the Code or any other
Applicable Tax Law;
(i) there are no Liens for Taxes upon the assets of the Company or
any of the Company Subsidiaries except liens for Permitted Liens;
(j) with respect to requests for changes in method of accounting and
ruling requests: (i) neither the Company nor any of the Company Subsidiaries
has agreed to make any adjustment (as a result of which the Company or any of
the Company Subsidiaries would be required to include any item of income or
exclude any item of deduction from taxable income for any Post-Closing
Period) pursuant to
20
Section 481(a) of the Code (or any predecessor provision) by reason of any
change in any accounting method, (ii) neither the Company nor any of the
Company Subsidiaries has pending any application with any Taxing Authority
requesting permission for any change in any accounting method and (iii) there
are no outstanding rulings or requests for rulings with any Taxing Authority
addressed, directly or indirectly, to the Company or any of the Company
Subsidiaries that are, or if issued would be, binding upon the Company or any
of the Company Subsidiaries;
(k) neither the Company nor any of the Company Subsidiaries is party
to or bound by any Tax indemnity, Tax sharing, or Tax allocation agreement or
arrangement;
(l) with respect to intercompany transactions, (i) neither the
Company nor any of the Company Subsidiaries will have any taxable income or
gain as a result of prior intercompany transactions that will be taken into
account as a result of the changes in ownership contemplated by this
Agreement, (ii) neither the Company nor any of the Company Subsidiaries has
any material deferred taxable income or gain as a result of prior
intercompany transactions that could be taken into account in any
Post-Closing Period and (iii) neither the Company nor any of the Company
Subsidiaries has an "excess loss account" (as defined in Treasury Regulation
Section 1.1502-19) with respect to the stock of any of its Subsidiaries;
(m) neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any employee, director of (or independent contractor
providing services to or on behalf of) the Company or any Company Subsidiary,
(ii) increase any benefits otherwise payable under any Plan or (iii) result
in the acceleration of the time of payment, funding or vesting of any such
benefits. Neither the Company nor any Company Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement,
contract, arrangement, or plan that could obligate it to make any payments,
that are or could be, separately or in the aggregate, "excess parachute
payments" within the meaning of Section 280G of the Code;
(n) each asset with respect to which the Company or any of the
Company Subsidiaries claims depreciation, amortization or similar expense for
Tax purposes is owned for Tax purposes by the Company or a Company Subsidiary
under Applicable Tax Law;
(o) neither the Company nor any of the Company Subsidiaries owns,
directly or indirectly, any interest in any entity classified as a
partnership for United States federal income Tax purposes;
21
(p) neither the Company nor any of the Company Subsidiaries is a
party to any safe harbor lease within the meaning of Section 168(f)(8) of the
Code, as in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982;
(q) neither the Company nor any of the Company Subsidiaries is, or
has been, a United States real property holding corporation within the
meaning of Section 897(c)(1)(A)(ii) of the Code during the 5-year period
ending on the Closing Date;
(r) neither the Company nor any of the Company Subsidiaries has
participated in an international boycott as defined in Section 999 of the
Code;
(s) there are no outstanding claims by any Taxing Authority in a
jurisdiction where the Company or any of the Company Subsidiaries does not
file Tax Returns that any such entity is or may be subject to taxation by
that jurisdiction;
(t) the Company and the Company Subsidiaries have complied in all
material respects with the requirements of Section 6038A of the Code and the
Treasury Regulations thereto;
(u) the Company and the Company Subsidiaries are not parties to any
record maintenance agreement with the IRS with respect to Section 6038A of
the Code;
(v) neither the Company nor any of the Company Subsidiaries has
entered into any transaction that is a "listed transaction" within the
meaning of Treasury Regulation Section 1.6011-4(b)(2); and
(w) neither the Company nor any of the Company Subsidiaries has ever
participated in an affiliated, consolidated, combined, unitary, or aggregate
Tax Return with any corporation other than the Company and the Company
Subsidiaries in any year for which the statute of limitations with respect to
the assessment or collection of any Tax remains open.
4.14 Absence of Changes. Since December 31, 2004, (x) other than in
connection with the transactions contemplated by this Agreement, the Company and
the Company Subsidiaries have conducted their business in the ordinary course
consistent with past practice, (y) there has been no change, event, condition or
circumstance that has had or would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, and (z) none of the Company or
any of the Company Subsidiaries has:
(a) other than in the ordinary course of business consistent with
past practice pursuant to the Company Stock Incentive Plan, or to fulfill
certain employment related obligations existing prior to such date, or as
set forth on Schedule 4.14 of the Disclosure Letter, issued, sold or
granted or purchased or
22
redeemed any shares of its capital stock or options, deferred stock units or
warrants to acquire shares of its capital stock;
(b) incurred indebtedness for borrowed money or entered into any
guaranty;
(c) mortgaged, pledged or subjected to any Lien any of its
properties or assets, except for Permitted Liens;
(d) except as required by GAAP, made any change in its accounting
principles or the methods by which such principles are applied for financial
reporting purposes;
(e) increased the compensation, bonus or benefits (including
severance) of, or entered into any Contract with, any officer or employee,
other than (i) compensation increases to reflect cost of living adjustments
in the ordinary course of business consistent with past practice, (ii) with
respect to any employee whose annual salary is less than $100,000,
compensation increases in the ordinary course of business consistent with
past practice, (iii) to comply with Applicable Law or (iv) as may be required
to satisfy contractual obligations existing as of the date hereof under
Contracts listed in Schedule 4.9 of the Disclosure Letter;
(f) disposed or agreed to dispose of any properties or assets (other
than inventory) in an aggregate amount in excess of $250,000 or acquired or
agreed to acquire assets or properties in an aggregate amount in excess of
$250,000, other than (i) in the ordinary course of business consistent with
past practice or (ii) as otherwise expressly permitted by this Agreement;
(g) canceled or forgiven any material debts or claims or redeemed or
repaid any indebtedness for borrowed money, in each case except (i) in the
ordinary course of business consistent with past practice, (ii) in accordance
with the mandatory provisions of the instruments governing such debts, claims
or indebtedness and (iii) through the application at any time or from time to
time of excess cash generated by the Company's operations;
(h) paid any dividend or other distribution on any of its capital
stock, Company Option, Deferred Stock Unit or other equity interest; or
(i) authorized, or entered into any agreement, arrangement or
understanding to do, any of the foregoing.
4.15 Insurance. Schedule 4.15 of the Disclosure Letter lists all material
policies of insurance maintained by the Company or any Company Subsidiary as of
the date hereof. Such policies are in full force and effect and all premiums due
with respect
23
to all periods specified in Schedule 4.15 of the Disclosure Letter have either
been paid or adequate provisions for the payment by the Company thereof has been
made, except for such failures to be in full force and effect or to pay such
premiums that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
4.16 Environment, Health, and Safety Matters. To the knowledge of the
Company, each of the Company and the Company Subsidiaries has complied and is in
compliance with all Environmental, Health, and Safety Requirements, except where
the failure to do so would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. Without limiting the generality of
the foregoing, each of the Company and the Company Subsidiaries has obtained,
has complied, and is in compliance with permits, licenses and other
authorizations that are required pursuant to Environmental, Health, and Safety
Requirements for the occupation of its facilities and the operation of its
business, except, in each case, where the failure to do so would not reasonably
be expected to have or result in a Material Adverse Effect. None of the Company
or the Company Subsidiaries has received any notice, report or other information
regarding any actual or alleged violation of Environmental, Health, and Safety
Requirements, or any material liabilities or potential material liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations, relating to any of them
or their facilities (including any currently or formerly owned or leased
properties or for any property for which the Company could be deemed a successor
by contract or operation of law) arising under Environmental, Health, and Safety
Requirements. There are no conditions existing on currently or formerly owned or
leased properties, assets or businesses of the Company or the Company
Subsidiaries (including soils, groundwater, surfacewater, indoor air, buildings
or other structures) that would reasonably be expected to give rise to any
claim, proceeding or action, or to any material liability under any
Environmental, Health, and Safety Requirements, except for any such conditions
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. No such properties, assets or businesses
contain or contained any underground storage tanks, asbestos-containing
material, lead products, or polychlorinated biphenyls, except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company has made available to the Parent all material
reports and information prepared for or in the possession of the Company or any
Company Subsidiary with respect to environmental, health, and safety matters
concerning all currently or formerly owned or leased properties, assets or
businesses of the Company and the Company Subsidiaries.
4.17 Brokers. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried out without the intervention
of any Person acting on behalf of the Company or the Parent in such manner as to
give rise to any claim against the Parent or the Company for any brokerage or
finder's commission, fee or
24
similar compensation. True and correct copies of all engagement letters or
similar agreements with brokers, accountants, counsel and other professionals
relating to this Agreement or the transactions contemplated hereby have been
made available to the Parent by the Company.
4.18 Affiliate Transactions. Other than any Company Subsidiary, no
Affiliate of the Company (a) owns, leases or licenses any assets which are
currently used by the Company or any Company Subsidiary to conduct the business
of the Company as it is currently conducted or (b) is a party to, or has a
controlling interest in any Person that is a party to, any contract or agreement
with the Company or any of the Company Subsidiaries. Except as set forth in
Schedule 4.18 of the Disclosure Letter, neither the Company nor any Affiliate of
the Company has any agreement, arrangement or other understanding with any
officer, director or employee of the Company with respect to any matter relating
to the transactions contemplated by this Agreement. No current or former officer
or director of the Company or any Company Subsidiary has asserted any claim,
charge, action or cause of action against the Company or any Company Subsidiary,
which has not been resolved as of the date hereof, except for immaterial claims
for accrued vacation pay, accrued benefits under any Plan and similar matters.
4.19 Referral Fees. Neither the Company nor any Company Subsidiary is now
or has been since January 1, 2000 a party to any arrangement, agreement or
understanding, except as set forth on Schedule 4.19 of the Disclosure Letter,
with any Person that is in the business of providing insurance brokerage or
agency services, for the payment of referral, profit sharing or other fees in
connection with such broker's or agent's referral or recommendation of, or
placement of business with, the Company or any Company Subsidiary.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SUB
The Parent and the Sub, jointly and severally, represent and warrant to
the Company, as of the date hereof and as of the Closing Date, as follows
(except that those representations and warranties that are made as of a
specified date shall be made only as of such date):
5.1 Corporate Status and Authority. Each of the Parent and the Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and authority to
execute and deliver this Agreement and the other Transaction Documents and to
perform its obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and the other Transaction Documents have been duly
authorized by the stockholders and board of directors of the Sub and the board
of directors of the Parent and the Sub, which
25
constitutes all necessary corporate action on the part of the Parent and the Sub
for such authorization. This Agreement has been duly executed and delivered by
the Parent and the Sub and constitutes, and each of the other Transaction
Documents will be duly executed and delivered prior to the Closing Date by the
Parent and the Sub, and each will constitute, the valid and binding obligation
of the Parent and the Sub, enforceable against each of the Parent and the Sub in
accordance with its terms, except as limited by laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
5.2 No Conflicts; Consents and Approvals.
(a) The execution, delivery and performance by each of the Parent
and the Sub of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby do not and
will not (with or without the giving of notice, the lapse of time, or both)
conflict with, or result in any violation or breach of, or require any
Consent under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
result in the creation of any Lien upon any of the properties or assets of
the Parent or the Sub under (i) assuming compliance with the matters referred
to in Section 5.2(b), any Applicable Law applicable to the Parent or the Sub
or any of the properties or assets of the Parent or the Sub, (ii) any
Contract to which the Parent or the Sub is a party or by which the Parent or
the Sub or any of their properties or assets is bound or affected (iii) any
Organizational Documents of the Parent or Sub, except in the case of clauses
(i) and (ii) above, for any such violation, breach or approval which would
not reasonably be expected to materially impair the ability of the Parent or
the Sub to consummate the transactions contemplated by this Agreement.
(b) No Governmental Approval is required to be obtained or made by
or with respect to the Parent or the Sub in connection with the execution and
delivery of this Agreement and the other Transaction Documents or the
consummation of the transactions contemplated hereby or thereby except (i)
filings required with respect to the HSR Act and (ii) where the failure to do
so would not reasonably be expected to materially impair the ability of the
Parent or the Sub to consummate the transactions contemplated by this
Agreement.
5.3 Financing. The Parent and the Sub possess and will possess at the
Effective Time sufficient cash funds and borrowing capacity available to pay all
amounts contemplated by the Agreement to be paid by them and to perform their
respective obligations hereunder.
5.4 Solvency. Assuming the representations and warranties of the Company
in this Agreement are true and correct as of the Closing Date, and that each of
the representations and warranties in this Section 5.4 would be true and correct
immediately before giving effect to the transactions contemplated by this
Agreement, then
26
immediately after giving effect to the transactions contemplated by this
Agreement (including the consideration for the Merger and any financings to be
undertaken in connection therewith), (a) none of the Company or any Company
Subsidiary will have incurred debts beyond its ability to pay such debts as they
mature or become due, (b) the then present fair salable value of the assets of
each of the Company and the Company Subsidiaries will not exceed the amount that
will be required to pay its probable liabilities (including the probable amount
of all contingent liabilities) and its debts as they become absolute and
matured, (c) the assets of each of the Company and the Company Subsidiaries, in
each case at a fair valuation, will exceed its respective debts (including the
probable amount of all contingent liabilities) and (d) none of the Company or
Company Subsidiaries will have unreasonably small capital to carry on its
business as presently conducted or as proposed to be conducted. No transfer of
property is being made and no obligation is being incurred in connection with
the transactions contemplated by this Agreement at the direction or otherwise on
behalf of Parent or the Sub with the intent to hinder, delay or defraud any
present or future creditors of the Company or any Company Subsidiary.
5.5 Purchase for Investment. Each of the Parent and the Sub is purchasing
the Company Stock for investment for its own account and not with a view to, or
for sale in connection with, any distribution thereof. The Parent and the Sub
(either alone or together with their advisors) have sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the shares of Company Stock and are
capable of bearing the economic risks of such investment.
5.6 Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or, to the knowledge of the Parent or the
Sub, threatened that question the validity of this Agreement or seek to prevent
or delay any action taken or to be taken by the Parent or the Sub in connection
herewith.
5.7 Brokers. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried out without the intervention
of any Person acting on behalf of the Parent or the Sub in such manner as to
give rise to any valid claim against the Parent or the Company for any brokerage
or finder's commission, fee or similar compensation.
ARTICLE VI
COVENANTS
6.1 Conduct of Business. (a) From the date hereof to the Closing Date,
except (i) as set forth on Schedule 6.1 of the Disclosure Letter, (ii) for
entering into this Agreement and (iii) as otherwise consented to by the Parent
in writing, such consent not
27
to be unreasonably withheld, the business of the Company and the Company
Subsidiaries shall be conducted only in, and the Company will not take any
action, or permit any Company Subsidiary to take any action, other than actions
in the ordinary course of such entity's business consistent with past practice,
and, to the extent consistent therewith, will use commercially reasonable
efforts to keep intact their respective businesses, keep available the services
of their current employees, keep insurance coverage in force with respect to
their operations and preserve their relationships with customers, suppliers,
licensors, licensees, distributors and others with whom they deal to the end
that their respective businesses shall be unimpaired at the Closing; it being
understood and agreed that subject to the performance of its obligations under
this Section 6.1(a), the Company shall not be responsible for any failure to
keep intact its business, keep insurance coverage in force with respect to their
operations, loss of services of current employees or of relationships with
customers, suppliers, licensors, licensees, distributors and others with whom
they deal that results solely from the announcement of the Agreement (including
the identity of the Parent as the buyer of the Company).
(b) In addition (and without limiting the generality of the
foregoing), except (i) as set forth on Schedule 6.1 of the Disclosure Letter,
(ii) as otherwise expressly set forth in this Agreement and (iii) as otherwise
consented to by the Parent in writing, the Company and the Company's
Subsidiaries shall not do any of the following:
(i) amend its certificate of incorporation or by-laws;
(ii) declare or pay any dividend or make any other distribution to
its stockholders;
(iii) redeem or otherwise acquire any shares of Company Stock or
issue any Company Stock (except upon the exercise of outstanding options), any
Deferred Stock Units or any option, warrant or right relating to the Company
Stock or any securities convertible into or exchangeable for any shares of
Company Stock;
(iv) adopt or amend, in any material respect, any Plan or enter into
any collective bargaining agreement or other Contract with any labor
organization, union or association, or increase the compensation, bonus or
benefits (including severance) of, or enter into any Contract with, any officer
or employee, other than (i) compensation increases to reflect cost of living
adjustments in the ordinary course of business consistent with past practice,
(ii) with respect to any employee whose annual salary is less than $100,000,
compensation increases in the ordinary course of business consistent with past
practice, (iii) to comply with Applicable Law or (iv) as may be required to
satisfy contractual obligations existing as of the date hereof under Contracts
listed in Schedule 4.9 of the Disclosure Letter;
28
(v) incur indebtedness for borrowed money or enter into any
guaranty;
(vi) permit, allow or suffer any of its assets to become subjected
to any Lien of any nature (other than Permitted Liens);
(vii) cancel any material indebtedness (individually or in the
aggregate) or waive any claims or rights of value greater than $100,000;
(viii) pay, loan or advance any amount to, or sell, transfer or
lease any of its assets to, or enter into any agreement or arrangement with, any
Holder or any of its Affiliates, except for transactions among the Company and
the Company Subsidiaries and for payments of (but not increases in, except as
permitted by clause (iv) hereof) compensation and benefits to employees in the
ordinary course of business consistent with past practice;
(ix) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire any assets that are material, except for
the entering into of Contracts for rendering services in the ordinary course of
business consistent with past practice;
(x) sell, lease, license (other than any licenses under customer
agreements in the ordinary course of business consistent with past practice) or
otherwise dispose of any of its assets that are material, individually or in the
aggregate, to the Company and the Company Subsidiaries, taken as a whole;
(xi) enter into any lease of real property except for any renewals
or replacements of existing leases in the ordinary course of business consistent
with past practices on or prior to January 31, 2006, with respect to the leases
listed on Schedule 6.1 of the Disclosure Letter;
(xii) modify, amend, terminate or permit the lapse of any lease of,
or reciprocal easement agreement, operating agreement or other material
agreement relating to, real property (except (x) as required by their terms or
(y) modifications or amendments associated with renewals of existing leases in
the ordinary course of business consistent with past practices on or prior to
January 31, 2006, with respect to the leases listed on Schedule 6.1 of the
Disclosure Letter;
(xiii) enter into any Other Contract, other than any such Other
Contract specifically permitted by another subsection of this Section 6.1(b),
including the entering into of Contracts for rendering services in the ordinary
course of business consistent with past practice; or
29
(xiv) authorize any of, or commit or agree, whether in writing or
otherwise, to do any of, the foregoing actions.
6.2 Certain Filings. (a) The parties shall cooperate with one another (i)
in determining whether any action by or in respect of, or filing with, any
Governmental Authority is required (including, without limitation, under
applicable Antitrust Laws), or any actions, consents, approvals or waivers are
required to be obtained from parties to any Contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (ii) in
taking such actions or making any such filings, furnishing information required
in connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers (including, without limitation, seeking early termination
of applicable waiting periods).
(b) The parties shall use reasonable best efforts to cooperate in
all reasonable respects with each other, and to keep the other party informed
in all material respects with respect to any communication given or received,
in connection with any filing, submission, investigation or proceeding
relating to the transactions contemplated hereby.
(c) The parties agree to take all actions necessary to make the
filings required of it or any of its Affiliates under applicable Antitrust
Laws with respect to the transactions contemplated hereby as promptly as
practicable and in any event with respect to filings pursuant to the HSR Act,
within 10 Business Days of the date hereof, and to supply as promptly as
practicable, and in any event within 5 Business Days of the receipt of any
request therefor, any additional information and documentary or other
material that may be requested pursuant to any such Antitrust Law. The
parties further agree not to withdraw their respective Notification and
Report Form or to otherwise extend the time for review of the transaction
without the other party's prior written consent.
(d) If any objections are asserted with respect to the transactions
contemplated hereby under any Antitrust Law or if any suit or proceeding is
instituted or threatened by any Governmental Authority or any private party
challenging any of the transactions contemplated hereby as violative of any
Antitrust Law, the parties shall use their reasonable best efforts promptly
to resolve such objections. For purposes of this Section 6.2(d), the
"reasonable best efforts" of Parent or the Company, as the case may be, shall
not require Parent or the Company, as the case may be, to agree to any
prohibition, limitation or other requirement of the type set forth in Section
7.3(g).
6.3 Further Actions. Upon the terms and subject to the conditions of this
Agreement, the parties shall use their reasonable best efforts to bring about
the satisfaction as promptly as practicable of all the conditions contained in
Article VII, in
30
each case to the extent such party has the ability to cause or facilitate the
satisfaction of such conditions, and otherwise to consummate the transactions
contemplated by this Agreement and the other Transaction Documents. Without
limiting the generality of the foregoing, the parties shall, as promptly as
practicable, apply for and diligently prosecute all applications for, and shall
use their reasonable best efforts promptly to: (a) effect, in addition to
filings discussed in Section 6.2, all necessary registration and filings, (b)
defend any lawsuits or other legal proceedings, whether judicial or
administrative, whether brought derivatively or on behalf of third parties
(including Governmental Authorities or officials), challenging this Agreement or
the consummation of the transactions contemplated hereby and (c) furnish to each
other such information and assistance and to consult with respect to the terms
of any registration, filing, application or undertaking as reasonably may be
requested in connection with the foregoing.
6.4 Access and Information.
(a) From the date hereof to the Closing Date or as otherwise
provided in this Agreement, subject to existing confidentiality obligations
owed to third parties, the Company and each of the Company Subsidiaries shall
give to the Parent and its representatives reasonable access, at reasonable
times, to the properties, books and records and personnel of the Company and
the Company Subsidiaries and shall furnish such information and documents in
its possession relating to the Company and the Company Subsidiaries as the
Parent may reasonably request, including with respect to operational
developments and the general status of ongoing operations; provided that the
Parent shall not be entitled to any such access, information or documents
that would interfere unreasonably with the conduct of the business of the
Company or the Company Subsidiaries or that could, in the good faith opinion
of the Company, result in the loss of attorney-client privilege with respect
to any such information or documents. All such information and documents
obtained by the Parent shall be subject to the terms of the Confidentiality
Agreement, dated as of September 7, 2005 (the "Confidentiality Agreement"),
between an Affiliate of the Parent and the Company, provided that the terms
of the Confidentiality Agreement shall be binding upon the Parent and the
Sub, and all requests for and provision of such information and documents
shall be made through and coordinated by the Company.
(b) Parent and Sub shall cause the Company, following the Closing,
to reasonably cooperate with Holders (with any reasonable out of pocket
expenses to be borne by Holders) in connection with any inquiries or
investigations by Holders, any governmental agency or other regulatory
authority, or any litigation of any kind, involving the business of the
Company and relating to matters occurring prior to the Closing. Parent and
Sub shall cause the Company to maintain, for the five year period following
the Closing, a complete and accurate set, in all material respects, of the
Company's and its subsidiaries' records (electronic and hardcopy), in
existence as of the Closing, which may be relevant to the investigations,
litigations or other regulatory
31
matters existing as of the Closing Date, provided, that after such period,
the Parent and Sub shall cause the Company, prior to the destruction or other
disposition of any such records, to provide notice to and afford the Holders
a reasonable opportunity to copy such records, at such Holder's expense.
Parent and Sub shall cause the Company to afford promptly to each Holder and
its agents reasonable access, during normal business hours and upon
reasonable notice, to such records (except to the extent such records have
been destroyed by the Company in compliance with the proviso in the preceding
sentence), and to furnish copies thereof which such Holder or its agents
reasonably requests in connection with any such matters, provided that any
such access by any such Holder or its agents shall not unreasonably interfere
with the conduct of the business of the Company. Parent and Sub shall cause
the Company to afford promptly to each Holder and its agents reasonable
access to the Company's employees, who shall be available for interviews
and/or depositions in connection with any such inquiries, investigations or
litigations.
6.5 Publicity. No press release or public announcement related to this
Agreement, or the transactions contemplated hereby, shall be issued or made by
any party without the joint approval of the Company and the Parent, unless
required by Applicable Law (in the reasonable opinion of counsel), in which case
the Company and the Parent shall have the right to review such press release or
announcement prior to publication.
6.6 Employee Matters. Except as provided in Schedule 6.6 of the Disclosure
Letter, the Parent shall, or shall cause the Surviving Corporation and its
Subsidiaries to, provide each employee of the Company or any of the Company
Subsidiaries (an "Employee"), with during the period commencing on the Closing
Date and ending on December 31, 2006, (i) health and welfare benefits (other
than compensation and bonuses) that are comparable in the aggregate to the
benefits of such employee in effect as of the date hereof, as changed if at all
through the Closing Date in accordance with subclauses (iii) and (iv) of Section
6.1(b)(iv), and (ii) other benefits (other than defined benefit plans) that are
comparable in the aggregate to, at Parent's option, (x) the benefits (other than
health and welfare benefits and defined benefit plans) received by
similarly-situated employees of other subsidiaries of Parent or (y) the benefits
(other than health and welfare benefits and defined benefit plans) of such
employee as of the date hereof, as changed if at all through the Closing Date in
accordance with subclauses (iii) and (iv) of Section 6.1(b)(iv). The Parent
shall, or shall cause the Surviving Corporation to, cause each Buyer Plan in
which an Employee participates or will participate to (a) recognize all service
of such Employee with the Company, any of the Company Subsidiaries and their
predecessor entities for purposes of vesting, eligibility, participation and
coverage (but excluding, for the avoidance of doubt, accrual and level of
benefits) to the extent such service would be recognized under the analogous
Plan, (b) honor or provide appropriate credit for co-payments, deductibles and
other expenses incurred by such Employee or his or her beneficiaries under the
analogous Plans, and, (c) if applicable, waive any waiting periods or other
eligibility limitations and exclusions for preexisting conditions;
32
provided, however that such crediting of services shall not operate to duplicate
any benefit or the funding of any such benefit. If the Closing shall have
occurred, the Parent shall, or shall cause the Surviving Corporation to, pay on
or about February 15, 2006, annual bonuses to Employees as approved by the Board
prior to the date hereof and described on Schedule 6.1(b)(iv)(iii) of the
Disclosure Letter. Nothing herein shall be deemed to be a guaranty of employment
for any Employee, or to restrict the right of the Company, any Company
Subsidiaries, the Parent, the Sub or any Affiliates to amend terminate any
benefit plans in accordance with the terms and conditions of such benefit plans.
6.7 Tax Matters.
(a) The Parent shall not make or permit any Person to make an
election under Section 338(g) of the Code with respect to the purchase of
Company Stock pursuant to this Agreement.
(b) Except as otherwise contemplated by this Agreement or
specifically consented to in writing by the Parent, from the date of this
Agreement through the Closing Date, the Company shall not, and shall not
permit any of the Company Subsidiaries to, (i) make or rescind any express or
deemed material election relating to Taxes, (ii) settle or compromise any
material claim, audit, dispute, controversy, examination, investigation, or
other proceeding relating to Taxes, (iii) execute any waiver of restriction
on assessment or collection of any Tax, including without limitation any
extension of limitations period, (iv) materially change any of its methods of
reporting income or deductions for federal income Tax purposes except as may
be required by Applicable Tax Law, in each case other than in the ordinary
course of business consistent with past practice.
(c) The Company and the Company Subsidiaries shall timely file all
Tax Returns required to be filed after the date of this Agreement until the
Closing Date in a manner consistent with past practice, to the extent
permitted by Applicable Tax Law, and shall pay any Taxes shown as due
thereon.
6.8 Indemnification of Directors and Officers.
(a) The certificate of incorporation and bylaws of the Surviving
Corporation shall continue to contain provisions no less favorable with
respect to indemnification, advancement of expenses and exculpation of each
present and former director and officer of the Company and the Company
Subsidiaries (collectively, the "Indemnitees") than are presently set forth
in the Company's certificate of incorporation and bylaws, which provisions
shall not be amended, repealed or otherwise modified in any manner that would
adversely affect the rights thereunder of any such individuals.
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(b) Prior to the Closing Date, the Company shall purchase six year
tail policies of directors' and officers' liability and errors and omissions
insurance covering the Company, the Company Subsidiaries and the current and
former officers, directors and employees of the Company and the Company
Subsidiaries who are currently covered by the Company's existing directors'
and officers' liability and errors and omissions insurance, as applicable,
from an insurance carrier currently providing such coverage to Xxxxx &
XxXxxxxx Companies, Inc. ("Marsh"), on terms and conditions no less favorable
to the Company, the Company Subsidiaries and such directors and officers than
those in effect on the date hereof, except that the maximum deductible shall
be $1 million and the coverage limit shall be $20 million. The aggregate cost
of such policies is referred to in this Agreement as the "Tail Cost."
6.9 Financing. The Company and the Company Subsidiaries shall provide all
reasonable cooperation in connection with the arrangement of any financing
sought by the Parent in connection with the Merger (the "Financing") as may be
reasonably requested by the Parent (provided that such requested cooperation (i)
does not unreasonably interfere with the ongoing business of the Company or the
Company Subsidiaries or (ii) otherwise would not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect). Further,
subject, for the avoidance of doubt, to the last sentence of this Section 6.9,
in connection with the Financing, the Company shall make any reasonable
representations and warranties to, and enter into any reasonable covenants for
the benefit of third parties providing or arranging any Financing. In no event
shall the Company or the Company Subsidiaries be required to pay any commitment
or similar fee, enter into any binding commitment or incur any liability in
connection with the Financing prior to the Closing, except to the extent the
Parent has provided the indemnity referenced in the last sentence of this
Section 6.9. The Parent shall, promptly upon request by the Company, reimburse
the Company and the Company Subsidiaries for all reasonable out-of-pocket costs
incurred by the Company or the Company Subsidiaries in connection with such
cooperation. The Parent shall indemnify and hold harmless the Company, the
Company Subsidiaries and their respective representatives for and against any
and all liabilities, losses, damages, claims, costs, expenses, interest, awards,
judgments and penalties suffered or incurred by them in connection with the
arrangement of the Financing and the performance of their respective obligations
under this Section 6.9 and any information utilized in connection therewith.
6.10 Intercompany Accounts. Except as set forth in Schedule 6.10 of the
Disclosure Letter, any agreements between the Company or any Company Subsidiary,
on the one hand, and any Affiliate of the Company or any Company Subsidiary, on
the other hand, shall be terminated at or prior to the Closing, and any amounts
due under such terminated agreements shall be paid in full at such time.
6.11 Solvency of the Company. The Parent shall furnish or cause to be
furnished to the Company copies of any solvency opinions or similar materials
obtained
34
from third parties in connection with the financing of the transactions
contemplated by this Agreement, to the extent contractually permitted by the
issuer of such opinion. The Parent shall use reasonable efforts to cause the
firms issuing any such solvency opinions to allow the Company to rely thereon;
provided that no material fee or expense is associated with obtaining such
reliance.
6.12 Disclosure of Certain Matters. Each of the Parent and the Company, as
applicable, shall promptly upon becoming aware thereof (the "Notifying Party")
disclose to the other (the "Notified Party") (i) any breach of its
representations or warranties set forth in this Agreement, whether arising after
the date hereof (a "Post-Signing Rep Breach") or existing as of the date hereof
and subsequently discovered (a "Pre-Signing Rep Breach"), (ii) any failure by it
to comply in all material respects with any material covenant, condition or
agreement to be complied with or satisfied by any of them under this Agreement
and (iii) in the case of the Company being the Notifying Party, the occurrence
of any matter or event which would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. In the event the Notifying Party
provides the Notified Party notice of a Post-Signing Rep Breach, the Notifying
Party will concurrently state whether such breach would cause the condition set
forth in Section 7.2(a) or Section 7.3(a), as applicable, to fail to be
satisfied (any such breach, a "Waiver Breach"). In the event the Notifying Party
so states that a Post-Signing Rep Breach is a Waiver Breach, then if the
Notified Party nonetheless proceeds with the Closing, it shall have waived any
right to indemnification for such breach under Article IX hereof. Except for the
foregoing, no notice provided under this Section 6.12 shall be deemed to cure
any breach of representation, warranty or covenant or update the Disclosure
Letter or otherwise affect in any respect the rights and remedies of the
Notified Party.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligations of the Parties. The obligations of the
Company and the Parent to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment on or prior to the Closing Date of
the following conditions:
(a) HSR Act. The waiting period under the HSR Act shall have been
terminated or expired.
(b) No Injunction. There shall not be in effect any injunction or
other order issued by a court of competent jurisdiction or any other
Applicable Law restraining or prohibiting the consummation of the
transactions contemplated by this Agreement.
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7.2 Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment on or prior to the Closing Date of the following
additional conditions:
(a) Representations, Warranties and Covenants of the Parent and the
Sub. Each of the representations and warranties of the Parent and the Sub
contained in this Agreement shall be true and correct on the date hereof and
at and as of the Closing Date with the same effect as though made at and as
of such time (without regard to any materiality or Material Adverse Effect
qualifications included therein and except that those representations and
warranties that are made as of a specified date shall be true and correct
only as of such date) with such exceptions as would not materially impair the
ability of the Parent or the Sub to fulfill its obligations under this
Agreement. Each of the Parent and the Sub shall have duly performed and
complied in all material respects with all covenants and agreements contained
herein required to be performed or complied with by it at or before the
Closing.
(b) Officer's Certificate. The Parent shall have delivered to the
Company a certificate, dated the Closing Date and signed by a senior
executive officer on behalf of each of the Parent and the Sub, as to the
fulfillment of the conditions set forth in Section 7.2(a).
(c) Escrow Agreement. The Escrow Agreement shall have been executed
and delivered by the Parent and the Escrow Agent.
(d) Absence of Proceedings. There shall not be pending or threatened
by any Governmental Authority any proceeding (or by any other Person any
proceeding that has a reasonable likelihood of success) challenging or
seeking to restrain or prohibit the transactions contemplated by this
Agreement.
7.3 Conditions to Obligations of the Parent and the Sub. The obligations
of the Parent and the Sub to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment on or prior to the Closing Date of
the following additional conditions:
(a) Representations, Warranties and Covenants of the Company. Each
of the representations and warranties of the Company contained in this
Agreement shall be true and correct on the date hereof and at and as of the
Closing Date with the same effect as though made at and as of such time
(without regard to any materiality or Material Adverse Effect qualifications
included therein and except that those representations and warranties that
are made as of a specified date shall be true and correct only as of such
date) with such exceptions as would not reasonably be expected (x) to have,
individually or in the aggregate, a Material Adverse Effect or (y) to
36
materially impair the ability of the Company to fulfill its obligations under
this Agreement; provided, that the truth and correctness of the last sentence
of Section 4.2(b) as of the Closing Date shall not be considered in
determining whether this condition has been satisfied. The Company shall have
duly performed and complied in all material respects with all covenants and
agreements contained herein required to be performed or complied with by it
at or before the Closing.
(b) Officer's Certificate. The Company shall have delivered to the
Parent a certificate, dated the Closing Date and signed by a senior executive
officer of the Company, as to the fulfillment of the conditions with respect
to the Company, set forth in Section 7.3(a).
(c) Resignations. The Company shall have received, and delivered
copies to the Parent and the Sub of, valid resignations, effective as of
immediately following the Effective Time, from all of the non-employee
directors of the Company.
(d) Cash at Closing. The Parent shall have received evidence,
reasonably satisfactory to it, that immediately after the Closing and after
giving effect, for the avoidance of doubt, to the payment of the Option Loans
in the manner provided for pursuant to Section 2.3(c), the Company shall have
no less than an amount in cash or cash equivalents equal to $28,900,000
(which amount, for the avoidance of doubt, shall be calculated on the
assumption that all principal and interest with respect to all Option Loans
is repaid in full as of the Closing Date) less the sum of (i) the Tail Cost
and (ii) the Deal Expenses.
(e) Consents. All Consents set forth on Schedule 7.3 of the
Disclosure Letter shall have been obtained in form and substance reasonably
satisfactory to Parent and shall be in full force and effect.
(f) No Material Adverse Effect. Since December 31, 2004, there shall
not have been any change, event, condition or circumstance that has had or
would reasonably be expect to have, individually or in the aggregate, a
Material Adverse Effect.
(g) Absence of Proceedings. There shall not be pending or threatened
by any Governmental Authority any proceeding (or by any other Person any
proceeding that has a reasonable likelihood of success) (i) challenging or
seeking to restrain or prohibit the transactions contemplated by this
Agreement or seeking to obtain from the Parent or any of its Subsidiaries in
connection with the Merger any damages that are material in relation to the
Company and its Subsidiaries taken as a whole, (ii) seeking to prohibit or
limit the ownership or operation by the Parent or any of its Subsidiaries of
any portion of the business or assets of the Parent, the Company or any of
their respective Subsidiaries, or to compel the Parent, the Company or any of
37
its Subsidiaries to dispose of or hold separate any material portion of the
business or assets of the Parent, the Company or any of their respective
Subsidiaries, in each case as a result of the Merger or any of the other
transactions contemplated by this Agreement, or (iii) seeking to prohibit the
Parent or any of its Subsidiaries from effectively controlling in any
material respect the business or operations of the Company or any Subsidiary.
(h) Employment Agreements. The Company shall not have amended or
terminated in any respect, without consent of the Parent, either of the
employment agreements entered into as of the date hereof with Messrs. North
and Wiertelak.
(i) Certain Ancillary Agreements. The Company shall have delivered
the JURIS Software Service Agreement and the JURIS Software License
Termination Agreement, in each case, executed by each of the parties thereto.
The Amended Trademark License Agreement shall remain in full force and effect
in accordance with its terms.
(j) Escrow Agreement. The Escrow Agreement shall have been executed
and delivered by the Company and the Escrow Agent.
ARTICLE VIII
TAX INDEMNIFICATION
8.1 Tax Indemnification.
(a) Subject to the terms and conditions set forth in this Article
VIII and Article IX, the Company, the Parent, and their respective Affiliates
shall be indemnified and held harmless from and against, (i) any and all
Taxes imposed on or due with respect to the Company or to any of the Company
Subsidiaries for any Pre-Closing Period, (ii) any liability for Taxes under
Section 6038A(d) arising from any failure by the Company or any of the
Company Subsidiaries to comply with Section 6038A in any Pre-Closing Period,
(iii) any Taxes resulting from, arising out of or related to any breach by
the Company of the representation and warranty set forth in Section 4.13(q),
(iv) any obligation of the Company or any of the Company Subsidiaries for any
Pre-Closing Period to contribute to the payment of a Tax determined on a
consolidated, combined, or unitary basis with respect to a group of
corporations that includes or included the Company or any of the Company
Subsidiaries and any corporation other than the Company and the Company
Subsidiaries, (v) any (A) gross-up payment that results from the imposition
of Taxes under Section 4999 of the Code on any excess parachute payments (as
that term is used for purposes of Section 4999 of the Code) resulting (either
alone or in combination with another event) from the execution and delivery
of this Agreement or the
38
transactions contemplated thereby (for purposes of this Article VIII and
related provisions of Article IX and of the Escrow Agreement, any such
gross-up payment shall be deemed to be a Tax) and (B) loss of any Tax
deduction (excluding any loss of deduction on any gross-up payment to the
extent the indemnification for the gross-up payment is not included in the
taxable income of the Company or any Company Subsidiary) by the Company or
any Company Subsidiary, or any successor thereto, resulting from the
application of Section 280G of the Code to any payment (as that term is used
for purposes of Section 280G of the Code and any regulations promulgated
thereunder) made to a current or former employee, director, service provider,
or shareholder of the Company or any Company Subsidiary and resulting (either
alone or in combination with another event) from the execution and delivery
of this Agreement or the transactions contemplated thereby and (vi) any Taxes
resulting from the denial of deductions for the items described in clauses
(a) and (b) of the definition of Closing Tax Benefits.
(b) The Company, the Company Subsidiaries, and the Parent will be
liable for, and will indemnify, defend and hold the Company Indemnitees
harmless from and against, any and all Taxes imposed on or with respect to
the Company or any of the Company Subsidiaries for which the Company
Indemnitees are not required to indemnify the Company, the Company
Subsidiaries, or the Parent pursuant to Section 8.1(a) of this Agreement.
(c) Notwithstanding anything to the contrary herein, the Company,
the Parent and their respective Affiliates shall not be indemnified under
this Agreement with respect to Taxes of the Company or the Company
Subsidiaries to the extent of the reserves for Taxes taken into account in
calculating Closing Equity.
(d) A Person entitled to indemnification for Taxes under this
Section 8.1 shall also be entitled to indemnification for all reasonable fees
and costs (including reasonable outside professional fees and costs) incurred
in contesting or otherwise in connection with any such Taxes.
8.2 Straddle Period Allocation and Tax Returns.
(a) In the case of any Straddle Period, Tax items will be
apportioned between Pre-Closing Periods and Post-Closing Periods based on a
closing of the books and records of the relevant entity or entities as of the
Closing Date, provided that:
(i) any Tax item incurred by reason of the transactions occurring on or
before the Closing Date as contemplated by this Agreement will be treated as
occurring in a Pre-Closing Period and any Tax item incurred by reason of any
transaction not contemplated by this Agreement and occurring after the Closing
will be treated as occurring in a Post-Closing Period;
39
(ii) depreciation, amortization and depletion will be apportioned on a
daily pro rata basis; and
(iii) any liability of the Company or any of the Company Subsidiaries
for any real property Tax, any personal property Tax, or any similar ad valorem
obligation will be apportioned between Pre-Closing Periods and Post-Closing
Periods based on the number of days of such Taxable Period that fall on or prior
to the Closing Date and the number of days of such Taxable Period that fall
after the Closing Date.
(b) Parent shall cause the Company and the Company Subsidiaries to
prepare and timely file all Tax Returns with respect to the Company or any
Company Subsidiary for (i) all Straddle Periods and (ii) to the extent
required to be filed (or otherwise filed) after the Closing Date, all
Pre-Closing Periods, and such Tax Returns shall, with respect to any
Pre-Closing Period, be prepared in a manner consistent with past practice of
the Company or relevant Company Subsidiary unless the Representative consents
otherwise (which consent shall not be unreasonably withheld or delayed).
8.3 Notice and Payment of Indemnified Amounts.
(a) Duty to Notify. The Parent shall notify the Representative of
any Taxes paid or incurred by the Parent, the Company, or any of the Company
Subsidiaries which are subject to indemnification under this Article VIII.
The Representative shall notify Parent of any Taxes paid or incurred by the
Company Indemnitees which are subject to indemnification by the Parent, the
Company, and the Company Subsidiaries under this Article VIII.
(b) Explanation of Claim. Any notice contemplated by this Section
8.3 shall include a detailed calculation and a brief explanation of the basis
for such indemnification.
8.4 Nature of Payments. Any payment (other than interest on a payment)
owing to the Parent, the Company, or any of the Company Subsidiaries pursuant to
this Article VIII shall be treated by all parties for all purposes as a
reduction of the Initial Merger Consideration. Any payment (other than interest
on a payment) owing to the Company Indemnitees pursuant to this Article VIII
shall be treated by all the parties for all purposes as a net adjustment to the
Initial Merger Consideration.
8.5 Tax Audits and Contests; Cooperation.
(a) After the Closing Date, except as provided in (b) and (c) below,
the Parent shall control the conduct, through counsel of its own choosing and
at its own expense, of any audit, claim for refund, or administrative or
judicial proceeding
40
involving any asserted Tax liability or refund with respect to the Company or
any of the Company Subsidiaries (any such audit, claim for refund, or
proceeding relating to an asserted Tax liability referred to herein as a
"Contest").
(b) In the case of a Contest after the Closing Date that relates
solely to Taxes for which the Parent is indemnified under Section 8.1 and
which are not reportable on Parent's consolidated federal income Tax Return
or any state combined, consolidated, or unitary Tax Return that includes any
entity other than the Company or a Company Subsidiary, the Representative
shall control the conduct of such Contest, but the Parent shall have the
right to participate in such Contest at its own expense, and the
Representative shall not be able to settle, compromise and/or concede any
portion of such Contest without the consent of the Parent, which consent
shall not be unreasonably withheld or delayed; provided that, if the
Representative fails or declines to assume control of the conduct of any such
Contest within a reasonable period following the receipt by the
Representative of notice of such Contest, the Parent shall have the right to
assume control of such Contest but the Representative shall have the right to
participate in such contest at its own expense and the Parent shall not be
able to settle, compromise and/or concede any portion of such contest that is
likely to result in a claim for indemnification hereunder without the consent
of the Representative, which consent shall not be unreasonably withheld or
delayed.
(c) In the case of a Contest after the Closing Date that relates
both to Taxes for which the Parent is indemnified under Section 8.1 and
either (i) to Taxes of the Parent, any Parent affiliate, the Company or any
Company Subsidiary for which the Parent is not indemnified under Section 8.1,
or (ii) to any Taxes reportable on Parent's consolidated federal income Tax
Return or on any state combined, consolidated, or unitary Tax Return that
includes any entity other than the Company or a Company Subsidiary, the
Parent shall control the conduct of such Contest, but the Representative
shall have the right to participate in such Contest at its own expense, and
with respect to any Tax for which Parent is indemnified under Section 8.1,
the Parent shall not settle, compromise and/or concede such Contest without
the consent of the Representative, which consent shall not be unreasonably
withheld or delayed.
(d) The Representative and the Parent agree to furnish or cause to
be furnished to each other, upon request, as promptly as practicable, such
information (including access to books and records) and assistance relating
to the Company and the Company Subsidiaries as is reasonably requested for
the preparation, prosecution, defense or conduct of any Contest. The
Representative and Parent shall reasonably cooperate with each other in the
conduct of any Contest or other proceeding involving or otherwise relating to
the Company or the Company Subsidiaries (or their income or assets) with
respect to any Tax and each shall execute and deliver such powers of attorney
and other documents as are necessary to carry out the intent of this Section
8.5. Any information obtained under this Section 8.5(d) shall be kept
confidential,
41
except as may be otherwise necessary in connection with the filing of Tax
Returns or in the conduct of a Contest or other Tax proceeding.
(e) Each of the Parent and the Company shall use its reasonable best
efforts to properly retain and maintain the Tax and accounting records of the
Company and the Company Subsidiaries that relate to any Tax Periods (or
portions thereof) ending on or before the Closing Date until the expiration
of the applicable statutes of limitations. Any information obtained under
this Section 8.5 shall be kept confidential, except as may be otherwise
necessary in connection with the filing of tax returns or in the conduct of a
Contest or other Tax proceeding.
(f) The Parent shall promptly notify the Representative, and the
Representative shall promptly notify the Parent, in writing within 30
Business Days from the receipt of notice of any pending or threatened Tax
audits or assessments of the Company or any Company Subsidiary, with respect
to which the notifying party may seek to be indemnified under Section 8.1.
Failure to notify the indemnifying party under this Section 8.5(f) shall not
relieve the indemnifying party from its obligations under Section 8.1, except
to the extent that the indemnifying party shall have been actually prejudiced
as a result of such failure. In that case, the amount the indemnifying party
is otherwise required to pay under Section 8.1 shall be reduced by the amount
determined pursuant to the preceding sentence.
8.6 Refunds. The Company and its Subsidiaries shall be entitled to receive
and retain any Tax refund or credit that is paid after the Closing Date with
respect to Taxes of the Company or any of its Subsidiaries. If the Holders or
any Affiliate of the Holders receive any Tax refund or credit after the Closing
Date with respect to the Taxes of the Company or any of its Subsidiaries, the
Holders shall, within 30 days, pay the amount of such refund (together with any
interest received in connection with such refund or credit) to the Company. Any
payment made after such 30-day period shall include interest at the Overdue Rate
accrued from the final day of the 30-day period until the date of payment.
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties and Covenants
(a) The representations and warranties set forth herein (other than
the representations and warranties in Section 4.13, except Section 4.13(q)),
and the right to commence any claim with respect thereto, shall survive until
the fifteen month anniversary of the Closing Date and shall expire
thereafter, and the Parent and its Affiliates right to make any claim for
indemnification for any Special Obligation in
42
accordance with the terms hereof, shall survive until the twenty-seven month
anniversary of the Closing Date and shall expire thereafter; provided that in
the event written notice of any claim for indemnification under Section 9.2
or Section 8.1 shall have been given in accordance with Section 9.3(b) or
Section 8.3 hereof or written notice of the commencement of a Tax audit shall
have been given in accordance with Section 8.5(f) hereof within the
applicable survival period, the right to be indemnified with respect to such
matter shall survive until such time as such matter is fully and finally
resolved. Any investigation or other examination that may have been made or
may be made at any time by or on behalf of the party to whom representations
and warranties are made shall not limit, diminish or in any way affect or be
deemed to modify the representations and warranties in this Agreement, and
the parties may rely on the representations, warranties and covenants in this
Agreement, and any schedule, exhibit or certificate in respect thereof,
irrespective of any information obtained by them by any investigation,
examination or otherwise, in all cases subject to any and all limitations to
which such representations, warranties and covenants are subject pursuant to
this Agreement, including the Disclosure Letter.
(b) Any covenant or agreement of the parties contained in this
Agreement which by its terms contemplates performance after the Closing shall
survive the Closing in accordance with its terms; provided, that this
provision is not intended to release any party from liability for any breach
occurring prior to the Closing of any covenant or agreement that does not
survive the Closing.
9.2 Indemnification.
(a) Subject to the terms and conditions of this Article IX, from and
after the Closing Date, the Parent and its Affiliates (including, after the
Closing, the Company and the Company Subsidiaries) and each of their
respective directors, officers and employees (collectively, the "Parent
Indemnitees"), shall be indemnified and held harmless from and against any
and all Losses, whether or not resulting from any Third Party Claims,
resulting from, arising out of or related to:
(i) any breach by the Company of any representation and warranty of the
Company (without regard to any limitation as to Material Adverse Effect or
materiality contained therein (collectively, the "Excluded Qualifiers"))
in this Agreement or in the certificate delivered pursuant to Section
7.3(b); provided, however, that this provision shall not apply to Taxes,
which shall be governed by Article VIII;
(ii) the failure of the Company to perform any of its covenants or
agreements contained in this Agreement in accordance with the terms
hereof; provided, however, that this provision shall not apply to Taxes,
which shall be governed by Article VIII; and
43
(iii)the matters described in Exhibit F hereto (the indemnification
obligations referred to in this clause (iii) and under Section 8.1 are
referred to in this Agreement as the "Special Obligations").
(b) Subject to the terms and conditions set forth in this Article
IX, from and after the Closing Date, each of the Parent and the Sub shall,
jointly and severally, indemnify and hold harmless each of the Holders and
their respective Affiliates (other than the Company and the Company
Subsidiaries) and each of their respective present and former directors,
officers and employees (collectively, the "Company Indemnitees"), against any
and all Losses incurred or suffered by any Company Indemnitee, arising out of
(i) any breach by the Parent or Sub of any representation and warranty of the
Parent or Sub (without regard to the Excluded Qualifiers) in this Agreement
or in the certificate delivered pursuant to Section 7.2(b) and (ii) the
failure of the Parent or Sub to perform any of its covenants or agreements
contained in this Agreement in accordance with the terms hereof.
9.3 Claims.
(a) A party entitled to indemnification under this Agreement shall
be referred to as an "Indemnified Party." A party obligated to indemnify an
Indemnified Party under this Agreement shall be referred to as an
"Indemnifying Party"; provided that in the case of Sections 8.1 and 9.2(a),
the Representative shall be deemed to have such rights as though it were the
Indemnifying Party for purposes of this Section 9.3 and Section 8.3 (for the
avoidance of doubt, without being subject to the indemnification obligations
under Section 9.2 or Section 8.1, which shall be satisfied from the Escrow
Funds).
(b) Each Indemnified Party agrees to provide prompt written notice
to the Indemnifying Party of the assertion of any claim, or the commencement
of any suit, action or proceeding in respect of which indemnity may be sought
under this Article IX, which notice shall: (i) specify in reasonable detail
the basis on which indemnification is being asserted, (ii) if possible,
provide a reasonable estimate of the amount of the Losses asserted therein,
(iii) specify the provision or provisions of this Agreement under which such
Losses are asserted and (iv) in the case of a Third Party Claim, include
copies of all notices and documents (including court papers), if any, served
on or received by the Indemnified Party by such third party; provided,
however, that the failure to give such notification shall not affect the
indemnification provided under this Article IX except to the extent that the
Indemnifying Party has been actually prejudiced as a result of such failure.
(c) The Indemnifying Party shall be entitled to assume, conduct and
control, through counsel of its own choosing and at its own expense, the
settlement or defense of any claim asserted by any third party ("Third Party
Claim"). If the
44
Indemnifying Party shall assume the control of the defense of any Third Party
Claim in accordance with the provisions of this Section 9.3, (i) the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of such Third Party Claim, if the settlement does not release the
Indemnified Party from all liabilities and obligations with respect to such
Third Party Claim or the settlement imposes injunctive or other equitable
relief against the Indemnified Party or admits any liability in connection
therewith and (ii) the Indemnified Party shall be entitled to participate in
(but not conduct or control) the defense of such Third Party Claim and to
employ separate counsel of its choice for such purpose. The fees and expenses
of such separate counsel shall be paid by the Indemnified Party; provided,
however, that such Indemnified Party will be entitled to participate in any
such defense with separate counsel at the expense of the Indemnifying Party
if (i) authorized by the Indemnifying Party to participate or (ii) in the
reasonable opinion of counsel to the Indemnified Party, a conflict or
potential conflict exists between the Indemnified Party and the Indemnifying
Party that would make such separate representation advisable; and provided
further, that the Indemnifying Party will not be required to pay for more
than one such counsel for all Indemnified Parties in connection with any
Third Party Claim.
(d) Each party shall cooperate, and cause their respective
Affiliates to cooperate, in the defense or prosecution of any Third Party
Claim and shall furnish or cause to be furnished such records, information
and testimony, and attend such conferences, discovery proceedings, hearings,
trials or appeals, as may be reasonably requested in connection therewith.
(e) If the Indemnifying Party receiving such notice of a Third Party
Claim does not elect to defend such Third Party Claim or does not defend such
Third Party Claim in good faith, the Indemnified Party shall have the right,
in addition to any other right or remedy it may have hereunder, at the
Indemnifying Party's expense, to defend such Third Party Claim; provided,
however, that the Indemnified Party shall not settle, compromise or
discharge, or admit any liability with respect to, any such Third Party Claim
without the written consent of the Indemnifying Party (which consent will not
be unreasonably withheld or delayed).
(f) If the Indemnifying Party has disputed its liability with
respect to any claim hereunder, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute
and, if not resolved through negotiations, such dispute shall be resolved
pursuant to Section 11.18 and Section 11.19.
(g) For the avoidance of doubt, Sections 9.3(b) through (f) shall
not apply to Taxes, which shall be governed by Article VIII.
45
9.4 Limitations; Payments.
(a) Notwithstanding anything contained in this Agreement to the
contrary, the Parent Indemnitees shall be entitled to indemnification under
this Agreement (i) in the case of indemnification for Losses under Section
9.2(a)(i) (other than in respect of a breach of Section 4.2), only to the
extent that the aggregate amount of all such Losses exceeds, on a cumulative
basis, 1% of the Purchase Price, and then only to the extent of such excess,
(ii) only to the extent that the aggregate amounts required to be paid to the
Parent Indemnitees in respect of all Losses or under Article VIII shall not
exceed in the aggregate 13% of the Purchase Price, plus all Earnings (as
defined in the Escrow Agreement) to which they are entitled under the terms
of the Escrow Agreement and (iii) only to the extent of funds available in
the Escrow Funds, it being understood that such Escrow Funds shall be the
sole and exclusive source of recovery and remedy of any Parent Indemnitee
with respect to any claim for indemnification under Sections 8.1 and 9.2(a)
and, as such, the indemnifications obligations set forth herein are
non-recourse to the Company, the Company Subsidiaries or the Holders in all
respects; provided, that the limitations in clauses (i) through (iii) shall
not apply to any Losses resulting from, arising out of or relating to any
intentional misrepresentation or any fraud.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the Company Indemnitees shall be entitled to indemnification under
this Agreement:
(i) in the case of indemnification for Losses under Section 9.2(b)(i)
only to the extent that the aggregate amount thereof exceeds, on a
cumulative basis, 1% of the Purchase Price, and then only to the extent of
such excess; and
(ii) only to the extent that the aggregate amount required to be paid
to the Company Indemnitees does not exceed in the aggregate 13% of the
Purchase Price; provided, that the limitations in clauses (i) and (ii)
shall not apply to any Losses resulting from, arising out of or relating
to any intentional misrepresentation or any fraud.
(c) The amount of any Losses that the Indemnifying Party is
obligated to pay to the Indemnified Party pursuant to this Article IX or,
with respect to clause (ii) of this sentence only, all amounts that the
Indemnifying Party is obligated to pay to the Indemnified Party pursuant to
Article VIII, shall be net of (i) any amounts collected in connection with
such Losses from any applicable insurance policies or other prior or
subsequent recoveries from any other Person alleged to be responsible for
such Losses, in each case subject to the limits in the last sentence of this
Section 9.4(c) and in Section 9.7 and (ii) any Tax Benefit (net of any
associated Tax Cost) actually realized by an Indemnified Party arising from
the incurrence or payment of any such Losses
46
and the receipt of indemnity payments hereunder. Any Indemnified Party shall
use reasonable efforts to (i) collect any amounts available under such
insurance policies or from such other Person alleged to be responsible and
(ii) realize any Tax Benefit with respect to any indemnified Losses. If an
Indemnified Party receives any amounts under applicable insurance policies,
or from any other Person alleged to be responsible for any indemnified
Losses, subsequent to an indemnification payment by the Indemnifying Party,
then such Indemnified Party shall promptly reimburse the Indemnifying Party
for any payment made or expense incurred by such Indemnifying Party in
connection with providing such indemnification payment up to the amount
received by the Indemnified Party, net of any expenses incurred by such
Indemnified Party in collecting such amount; provided, that such
reimbursement shall only be required to the extent the Indemnified Party
would otherwise retain an amount greater than the full amount of the Losses
incurred by the Indemnified Party as a result of the underlying claim.
(d) The Indemnified Parties shall be deemed not to have suffered or
incurred a Loss in respect of any item to the extent (and only to the extent)
an amount in respect of such item has reduced Closing Equity or increased the
Cash Shortfall.
9.5 Remedies Exclusive. Except in cases of intentional misrepresentation
or fraud or as otherwise specifically provided herein, the remedies provided in
Article VIII and this Article IX shall be the exclusive monetary remedies
(including equitable remedies that involve monetary payment, such as restitution
or disgorgement, other than specific performance to enforce any payment or
performance due hereunder) of the parties from and after the Closing in
connection with any breach of a representation or warranty, any failure or
breach of any covenant, obligation, condition or agreement to be performed or
fulfilled and any of the Special Obligations.
9.6 Duty to Mitigate. Each Indemnified Party shall take all commercially
reasonable efforts required by Applicable Law, at the expense of the
Indemnifying Party, to mitigate any claim or liability that an Indemnified Party
asserts or is reasonably likely to assert under this Article IX or Article VIII
upon becoming aware of any event that would reasonably be expected to give rise
to such assertion. In the event that an Indemnified Party shall fail to make
such commercially reasonable efforts to mitigate any such claim or liability,
then notwithstanding anything contained in this Agreement to the contrary, to
the extent required by Applicable Law, no Indemnifying Party shall be required
to indemnify any Indemnified Party for that portion of any Losses that could
reasonably be expected to have been avoided if the Indemnified Party had made
such efforts.
47
9.7 Assignment of Claims. If an Indemnified Party receives any payment in
respect of any Loss pursuant to Section 9.3 and such Indemnified Party could
have recovered all or a part of such Loss from an unaffiliated third party (a
"Potential Contributor") based on the underlying claim asserted, if the
Indemnified Party shall have received full payment of all Losses with respect to
such claim, such Indemnified Party shall assign such of its rights to proceed
against the Potential Contributor as are necessary to permit the Indemnifying
Party to recover from the Potential Contributor any amount of such Loss that the
Indemnifying Party paid to the Indemnified Party pursuant to this Article IX;
provided, that if the Indemnified Party shall not have received payment in full
of all such Losses (including as a result of any limits on indemnification in
this Article IX), then no such assignment shall be required until such full
payment has been received from the Indemnifying Party and such third party.
9.8 Tax Indemnification. Except as otherwise expressly provided in this
Article IX, this Article IX shall not apply to indemnification with respect to
Taxes, which is provided for in Article VIII.
ARTICLE X
DEFINITIONS
10.1 Definition of Certain Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings set forth below; provided that
all capitalized terms defined in this Article X or elsewhere in this Agreement
that are defined in the singular shall have a comparable meaning when used in
the plural and vice versa. All references herein to a Section, Article, Exhibit,
Schedule or Recital are to a Section, Article, Exhibit, Schedule or Recital of
or to this Agreement, unless otherwise indicated and the words "hereof",
"hereto" and "hereunder" will be deemed to refer to this Agreement as a whole
and not to any particular provision. The words "includes" and "including" will
be deemed to be followed by the words "without limitation" whenever used.
"Aggregate Preferred Stock Consideration" means an amount (rounded to the
nearest $0.01) equal to (a) $30 million (which equals the Liquidation
Preference, as defined in the Certificate of Designations) plus (b) any accrued
and unpaid dividends on the Preferred Stock as of the Closing Date.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with such
Person and (for the avoidance of doubt) with respect to the Company, includes
Xxxxx & XxXxxxxx Companies, Inc., Trident II, L.P. and their respective
Affiliates.
48
"Amended Trademark License Agreement" means Amendment No. 1 to the
Trademark License Agreement, by and among Xxxxx & McLennan Companies, Inc.,
Sedgwick CMS Holdings, Inc. and Sedgwick Claims Management Services, Inc. in the
form of Exhibit C attached hereto.
"Antitrust Law" means the Xxxxxxx Act, as amended, the Xxxxxxx Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, the EC
Merger Regulations and all other applicable federal, state and foreign statutes,
rules, regulations, orders, decrees, administrative and judicial doctrines and
other laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition.
"Applicable Laws" means all applicable provisions of all (a)
constitutions, treaties, statutes, laws (including the common law), rules,
regulations, ordinances, codes or orders of any Governmental Authority, (b)
Governmental Approvals and (c) orders, decisions, injunctions, judgments, awards
and decrees of or agreements with any Governmental Authority.
"Applicable Tax Law" means any law of any nation, state, region, province,
locality, municipality, or other jurisdiction relating to Taxes, including
regulations and other official pronouncements or any governmental entity or
political subdivision of such jurisdiction charged with interpreting such laws.
"Balance Sheet" means the audited consolidated balance sheet of the
Company and the Company Subsidiaries as of December 31, 2004.
"Balance Sheet Date" means December 31, 2004.
"Board" means the Board of Directors of the Company.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required to
close.
"Buyer Plan" means each employee benefit plan, scheme, program, policy,
arrangement and contract (including, but not limited to, any "employee benefit
plan," as defined in Section 3(3) of ERISA, whether or not subject to ERISA, and
any bonus, deferred compensation, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, stay agreement or bonus, change in
control and severance plan, program, policy, arrangement, agreement and
contract) for the benefit of any current or former officer, employee, director,
consultant or independent contractor of the Parent or the Surviving Corporation
that is maintained or contributed to by the Parent or the
49
Surviving Corporation or under which the Parent or Surviving Corporation has any
continuing payment obligations.
"Cash Shortfall" means an amount equal to the greater of $0 and an amount
equal to (a) $28.9 million less (b) the sum of the Deal Expenses, the Tail Cost
and the Closing Cash Balance.
"Certificate of Designations" means the Certificate of Designations of the
Company as filed with the Secretary of State of the State of Delaware on October
27, 1999.
"Closing Cash Balance" means an amount equal to the sum of the cash and
cash equivalents of the Company and its consolidated subsidiaries, in each case
as of the Closing (after giving effect to the Closing), calculated in accordance
with the GAAP principles, procedures and elections used in the preparation of
the Audited Financial Statements, consistently applied; provided that such
amount shall (x) be reduced by the amount of any Deal Expenses not paid in full
at the Closing, (y) be reduced by the amount of any other payment that becomes
due as of or prior to, and in connection with, the Closing that is not paid in
full as of the Closing, and (z) give effect to the repayment in full of all
principal and interest with respect to all Option Loans as of the Closing Date.
"Closing Equity" means an amount equal to (a) total assets of the Company
and its consolidated subsidiaries less (b) total liabilities of the Company and
its consolidated subsidiaries, in each case as of the Closing (after giving
effect to the Closing), calculated in accordance with the GAAP principles,
procedures and elections used in the preparation of the Audited Financial
Statements, consistently applied (and, for the avoidance of doubt, without
giving effect to any purchase accounting adjustments resulting from the Merger);
provided, that notwithstanding the foregoing, (x) total assets will include (A)
an accrual for the repayment in full of all principal and accrued and unpaid
interest with respect to all Option Loans as of the Closing Date and (B) an
accrual for the amount of the Closing Tax Benefits, (y) total liabilities (A)
will exclude any accrual for any Excess Expenses to the extent taken into
account in determining the Initial Common Stock Cash Consideration and (B) will
include an accrual for the full amount that could be payable after the Closing
to any employee or consultant of the Company or any Company Subsidiary in
respect of the Sedgwick CMS Holdings, Inc. Incentive Award Plan approved by the
Company's Executive Committee on November 15, 2005 and (z) the amount of the
asset/liability for current income Taxes and for deferred income Taxes included
in total assets and total liabilities for this purpose shall be determined
without taking into account the items described in clauses (a) and (b) of the
definition of Closing Tax Benefits.
"Closing Tax Benefits" means an amount equal to 39.0625 percent of the sum
of all the maximum amounts properly taken into account as deductions for United
States
50
federal income tax purposes by the Company and the Company Subsidiaries for any
Tax Period that are attributable to (a)(i) the acceleration and cancellation of
the Company Options and the Deferred Stock Units, (ii) any other compensation
(excluding any such amount that does not reduce Closing Equity) payable to any
present or former employee or consultant of the Company or any Company
Subsidiary in each case as a result (either alone or in combination with another
event) of either the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby and (iii) the assumed
payment of the amount accrued in Closing Equity pursuant to clause (y)(B) of the
proviso thereto and (b) the total amount of Deal Expenses incurred by the
Company or any of the Company Subsidiaries on or before the Closing Date.
"Company Stock" means, collectively, the Common Stock and the Preferred
Stock.
"Company Subsidiary" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly or indirectly owned by the Company.
"Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, certificate, exemption, order,
registration, declaration, filing, report or notice of, with or to any Person.
"Contract" means any written or oral agreement, contract, commitment,
instrument, undertaking or arrangement.
"Deal Expenses" means (i) the fees and expenses payable to lawyers
(including Debevoise & Xxxxxxxx, LLP, Xxxxxxxx & Xxxxxxxx and Xxxxx Xxxx &
Xxxxxxxx), investment bankers (including Banc of America Securities LLC) and
accountants for the Company and the Holders and (ii) the amounts payable upon
Closing to any employee or consultant of the Company or any Company Subsidiary
in respect of the Sedgwick CMS Holdings, Inc. Incentive Award Plan approved by
the Company's Executive Committee on November 15, 2005.
"Environmental, Health and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, as well as all judicial and
administrative orders, interpretations and determinations relating to health and
safety or pollution or protection of the environment, including, but not limited
to, all those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides,
51
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation.
"Escrow Agent" means a nationally recognized bank or trust company to be
mutually agreed by the Company and the Parent.
"Escrow Agreement" means the escrow agreement by and among the Company,
the Representative, and the Escrow Agent, substantially in the form of Exhibit A
attached hereto.
"Escrow Funds" means $82,550,000.
"Estimated Cash Shortfall" means the Company's good faith estimate of the
Cash Shortfall.
"Estimated Closing Equity" means the Company's good faith estimate of the
Closing Equity.
"Excess Expenses" means any amount of Deal Expenses in excess of $10.95
million.
"Exercise Price" means, with respect to any Company Option, the per share
amount required to be paid by the holder thereof to exercise such Company
Option.
"Fully Diluted Shares" means the number of shares of Common Stock issued
and outstanding immediately prior to the Closing if at such time all Company
Options then outstanding were exercised for shares of Class C Common Stock and
all Deferred Stock Units then outstanding were settled for shares of Class C
Common Stock.
"GAAP" means generally accepted accounting principles as applied in the
United States.
"Governmental Approval" means any Consent of, made with or obtained from,
any Governmental Authority.
"Governmental Authority" means any Federal, state, local or foreign court,
arbitrator or governmental agency, authority, instrumentality or regulatory
body, and any self-regulatory organization.
"Holders" means the holders of shares of Company Stock, Company Options
and/or Deferred Stock Units immediately before the Effective Time.
"Initial Common Stock Cash Consideration" means an amount (rounded to the
nearest $0.01) equal to (x) the sum of (i) $635 million minus (ii) the Aggregate
Preferred
52
Stock Consideration minus (iii) any Preliminary Adjustment Amount, plus (iv) the
Option Exercise Consideration, minus (v) the Escrow Funds, minus (vi) the Excess
Expenses, minus (vii) the Tail Cost, divided by (y) the number of Fully Diluted
Shares.
"IRS" means the Internal Revenue Service of the United States.
"JURIS Software" means the software, computer routines, procedures,
knowledge, copyrightable works (including related documentation) and other
related intangible rights created, developed, prepared or enhanced by the
Company in the JURIS System, but does not include the equipment, network
connections or other tangible materials embodying any of the foregoing or the
rights of third-parties in such equipment, network connections, or other
tangible materials.
"JURIS Software Service Agreement" means the JURIS Software Service
Agreement, by and among Sedgwick Claims Management Services, Inc., and Xxxxx
Canada Limited in the form of Exhibit D attached hereto.
"JURIS System" means the proprietary data management system that has been
created, developed, prepared and enhanced by the Company, including the JURIS
Software, documentation, and all related material and network connections that
allows certain equipment to interact with the JURIS database and operating
environment.
"Liens" means, with respect to any property or asset, any mortgage, lien,
pledge charge, encumbrance or security interest with respect thereto.
"Losses" means all costs, damages, disbursements, obligations, penalties,
liabilities, assessments, judgments, losses, injunctions, orders, decrees,
rulings, dues, fines, fees, settlements, deficiencies or awards (including
interest, penalties, investigation, reasonable legal, accounting and other
professional fees, and other costs or expenses incurred in the investigation,
collection, prosecution and defense of any action, suit, proceeding or claim and
amounts paid in settlement) imposed upon or incurred, sustained or suffered by
an Indemnified Party; provided, however, that Losses shall not include (i) any
exemplary or punitive damages, unless such exemplary or punitive damages are
awarded against any of the Indemnified Parties in a Third Party Claim or (ii)
any consequential damages, unless (x) incurred, sustained or suffered in
connection with a Special Obligation or (y) awarded against any of the
Indemnified Parties in a Third Party Claim.
"Material Adverse Effect" means any material adverse change in or effect
on the business, financial condition or results of operations of the Company and
the Company Subsidiaries, taken as a whole, other than any change or effect that
results or arises from or relates to (a) changes in (i) general economic,
banking, currency, capital market, regulatory, political or other similar
conditions (including acts of war, declared or
53
undeclared, armed hostilities and terrorism), general financial, securities or
commodities market conditions or prevailing interest rates, (ii) conditions
generally affecting the industry in which the Company and the Company
Subsidiaries operate or (iii) Applicable Laws or accounting standards,
principles or interpretations; provided, that any change described in this
clause (a) does not disproportionately affect the Company and the Company
Subsidiaries relative to other companies in their industry or (b) the
announcement of this Agreement (including the identity of the Parent as the
buyer of the Company).
"Option Cancellation Amount" means, with respect to any Company Option, an
amount equal to (a) the Initial Common Stock Cash Consideration less the
Exercise Price of such Company Option, multiplied by (b) the number of shares of
Common Stock of the Company represented by such Company Option, plus (c) the
right to receive its applicable portion of the Escrow Funds, if any, as and if
the same is ultimately payable in accordance with the applicable terms hereof
and the Escrow Agreement.
"Option Exercise Consideration" means the aggregate of the exercise prices
with respect to each Company Option issued and outstanding as of immediately
prior to the Effective Time.
"Option Loans" means the aggregate outstanding principal amount and
accrued interest, if any, as of the Closing Date under the loans listed on
Schedule 4.2(c) of the Disclosure Letter.
"Organizational Documents" means, as to any Person, if a corporation, its
articles or certificate of incorporation or organization and by-laws, if a
partnership, its partnership agreement or, if any other entity, all of the
formation and constitutive documents of such entity.
"Overdue Rate" means the prime rate of interest as reported in the Wall
Street Journal (or the generally prevailing "prime rate" as charged by major New
York banks, if a prime rate is not so published in the Wall Street Journal) on
the first business day of the month for which the interest is computed.
"Person" means any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority or other
entity.
"Plan" means each employee benefit plan, scheme, program, policy,
arrangement and contract (including, but not limited to, any "employee benefit
plan," as defined in Section 3(3) of ERISA, whether or not subject to ERISA, and
any bonus, deferred compensation, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, stay agreement or bonus, change in
control and severance plan, program, policy, arrangement, agreement and
contract) for the benefit of any current or former
54
officer, employee, director, consultant or independent contractor of the Company
or any of the Company Subsidiaries that is maintained or contributed to by the
Company or any of the Company Subsidiaries, or under which the Company or any of
the Company Subsidiaries has any current or contingent liability or obligations.
"Post-Closing Period" means, with respect to the Company and the Company
Subsidiaries, any Tax Period beginning after the Closing Date and the portion of
any Straddle Period beginning after the Closing Date.
"Pre-Closing Period" means, with respect to the Company and the Company
Subsidiaries, any Tax Period ending on or before the Closing Date and the
portion of any Straddle Period ending on the Closing Date.
"Preferred Stock Consideration" means an amount (rounded to the nearest
$0.01) equal to (a) the Aggregate Preferred Stock Consideration divided by (b)
300,000.
"Primary Shareholders" means, collectively, Xxxxx USA Inc., Xxxxx &
McLennan Employees Securities Company, L.P., Xxxxx & XxXxxxxx Capital
Professionals Fund, L.P., Trident II, L.P., Xxxxx X. North, Jr., Xxxxx X.
Xxxxxxxxx and Xxxxxxx Xxxxxxxx.
"Purchase Price" means $635,000,000.
"Restricted Business" means outsourced claims management services relating
to any of workers' compensation, liability, disability, integrated disability
management or total absence management, and any other bundled or value-added
services to the extent offered solely in connection with the foregoing.
"Straddle Period" means, with respect to the Company and the Company
Subsidiaries, any Tax Period that begins before and ends after the Closing Date.
"Subsidiaries" means each corporation or other Person in which a Person
owns or controls, directly or indirectly, capital stock or other equity
interests representing at least 50% of the outstanding voting stock or other
equity interests.
"Target Equity" means an amount equal to $112 million.
"Taxes" means all U.S. or non-U.S. federal, national, state or local
taxes, assessments, levies or other governmental charges in the nature of taxes,
including all income, franchise, withholding, unemployment insurance, social
security, sales, use, excise, real and personal property, stamp, transfer, VAT
and workers' compensation taxes, together with all interest, penalties and
additions payable with respect thereto.
55
"Taxing Authority" means, with respect to any Tax, the governmental entity
or political subdivision thereof that imposes such Tax, and any agency charged
with the collection of such Tax for such entity or subdivision, including any
governmental or quasi-governmental entity or agency that imposes, or is charged
with collecting, social security or similar charges or premiums.
"Tax Benefit" shall mean the Tax effect of any item of loss, deduction or
credit or any other item which decreases Taxes paid or payable or increases Tax
basis, including any interest with respect thereto.
"Tax Cost" shall mean the Tax effect of any item of gain or income, or any
other item which increases Taxes paid or payable or decreases Tax basis,
including any interest with respect thereto.
"Tax Period" means, with respect to any Tax, the period for which the Tax
is computed as provided under Applicable Tax Laws.
"Tax Return" means any return or report required to be supplied to a
taxing authority relating to Taxes.
"Termination Agreements" means, collectively, the JURIS Software License
Termination Agreement, by and among Sedgwick Claims Management Services, Inc.,
Marsh, and Xxxxx USA Inc., to be executed and delivered after the date hereof in
the form attached as Exhibit G, such agreement to be effective upon the Closing
of the Merger; (b) the Intercompany Agreement Termination Agreement, by and
among the Company, Sedgwick Claims Management Services, Inc., Marsh and Xxxxx
USA Inc., dated as of the date hereof, such agreement to be effective upon the
Closing of the Merger; (c) the Stockholders Agreement Termination Agreement, by
and among the Company, Xxxxx USA Inc., Xxxxx & XxXxxxxx Employees Securities
Company, L.P., Xxxxx & McLennan Capital Professionals Fund, L.P., Trident II,
L.P., Trident Capital II, L.P., and the parties designated as Management
Stockholders on the signature pages thereto, dated as of the date hereof, such
agreement to be effective upon the Closing of the Merger; (d) the Purchase
Agreement Termination Agreement, by and among the Company, Xxxxx USA Inc., Xxxxx
& McLennan Employees Securities Company, L.P., Xxxxx & XxXxxxxx Capital
Professionals Fund, L.P., Trident II, L.P. and Trident Capital II, L.P., dated
as of the date hereof, such agreement to be effective upon the Closing of the
Merger; (e) the Share Contribution Agreement Termination Agreement, by and among
Company, Sedgwick Claims Management Services, Inc., and Xxxxx USA Inc., dated as
of the date hereof, such agreement to be effective upon the Closing of the
Merger; and (f) the Contribution and Assumption Agreement Termination Agreement,
by and between Sedgwick Claims Management Services, Inc. and Xxxxx USA Inc.,
dated as of the date hereof, such agreement to be effective upon the Closing of
the Merger.
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"Transaction Documents" means, collectively, this Agreement, the Escrow
Agreement, the Holder Agreements, the Termination Agreements, the JURIS Software
Service Agreement and the Amended Trademark License Agreement.
"Treasury Regulations" means the regulations prescribed under the Code.
10.2 Other Definitions. The following capitalized terms used herein are
defined in the following Sections:
Term Section
---- -------
Accountant 3.3
Adjustment Report 3.4
Agreement Preamble
Audited Financial Statements 4.5
Certificate of Merger 1.3
Class A Common Stock 4.2(a)
Class B Common Stock 4.2(a)
Class C Common Stock 4.2(a)
Closing 1.2
Closing Date 1.2
Closing Statement 3.2(a)
Code 2.1(d)
Common Stock 4.2(a)
Company Preamble
Company Assets 4.7(c)
Company Indemnitees 9.2(b)
Company Intellectual Property 4.10
Company Options 4.2(b)
Company Stock Incentive Plan 4.2(b)
Confidentiality Agreement 6.4(a)
Contest 8.5(a)
Deferred Stock Units 4.2(b)
DGCL 1.1
Disclosure Letter Article IV
Dispute Notice 3.2(b)
DSU Holders 4.2(b)
Effective Time 1.3
Employees 6.6
ERISA 4.9(c)
Escrow Consideration 2.1(c)
Estimated Closing Statement 3.1
Excluded Qualifiers 9.2(a)
57
Term Section
---- -------
Final Adjustment Amount 3.5(a)
Expiry Date 9.1(a)
Financial Statements 4.5
Financing 6.9
HSR Act 4.4(b)
Holder Agreement 2.2(c)
Indemnified Party 9.3(a)
Indemnifying Party 9.3(a)
Indemnitees 6.8(a)
Initial Merger Consideration 2.1(c)
Leased Real Property 4.7(a)
Leases 4.7(b)
Marsh 6.8
Material Contracts 4.8
Merger Recitals
Net Adjustment Amount 3.5(a)
Notified Party 6.12
Notifying Party 6.12
Option Holders 4.2(b)
Other Contracts 4.8
Owned Intellectual Property 4.10
Parent Preamble
Parent Indemnitees 9.2(a)
Pension Plan 4.9(c)
Permitted Liens 4.7(a)
Potential Contributor 9.7
Pre-Signing Rep Breach 6.12
Post-Signing Rep Breach 6.12
Preferred Stock 4.2(a)
Preliminary Adjustment Amount 3.1
Representative 11.12
Review Period 3.2(b)
Special Obligations 9.2(a)
Sub Preamble
Surviving Corporation 1.1
Tail Cost 6.8
Third Party Claim 9.3(b)
Transfer Taxes 11.6
Unaudited Interim Financial Statements 4.5
Waiver Breach 6.12
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ARTICLE XI
GENERAL PROVISIONS
11.1 Modification; Waiver. This Agreement may be amended or modified only
by a written instrument executed by the parties hereto. Any of the terms and
conditions of this Agreement may be waived in writing at any time on or prior to
the Closing Date by the party entitled to the benefits thereof. Any such waiver
shall constitute a waiver only with respect to the specific matter described in
such writing and shall in no way impair the rights of the party granting such
waiver in any other respect or at any other time.
11.2 Entire Agreement. This Agreement, including the Disclosure Letter,
together with the Confidentiality Agreement and the other Transaction Documents
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede all other prior agreements, understandings,
documents, projections, financial data, statements, representations and
warranties, oral or written, express or implied, between the parties hereto and
their respective Affiliates, representatives and agents in respect of the
subject matter hereof.
11.3 Schedules and Exhibits. Disclosure of any fact or item in any
Schedule or Exhibit hereto shall not necessarily mean that such item or fact
individually is material to the business or financial condition of any of the
Company or the Company Subsidiaries individually or of the Company and the
Company Subsidiaries taken as a whole.
11.4 Certain Limitations. It is the explicit intent and understanding of
each of the parties hereto that no party nor any of its Affiliates,
representatives or agents is making any representation or warranty whatsoever,
oral or written, express or implied, other than those set forth in this
Agreement and none of the parties is relying on any statement (including any
projected financial information, estimates or budgets provided to the Parent),
representation or warranty, oral or written, express or implied, made by the
other party or such other party's Affiliates, representatives or agents, except
for the representations and warranties set forth in this Agreement. EXCEPT AS
OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE PARTIES EXPRESSLY
DISCLAIM ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION, MERCHANTABILITY
OR SUITABILITY AS TO ANY OF THE ASSETS OF THE BUSINESS AND, EXCEPT AS OTHERWISE
SPECIFICALLY SET FORTH IN THIS AGREEMENT, IT IS UNDERSTOOD THAT EACH OF THE
PARENT AND THE SUB TAKES THE ASSETS OF THE BUSINESS "AS IS" AND "WHERE IS." The
parties agree that this is an arm's length transaction. The Parent acknowledges
that it is a sophisticated investor and that there is no special relationship of
trust or reliance between the Parent on the one hand, or the Company on the
other hand.
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11.5 Termination.
(a) This Agreement may be terminated: (i) at any time prior to the
Closing Date by mutual written consent of the Parent and the Company, by
action of their respective board of directors, or (ii) by either the Parent
or the Company by written notice to the other party, if the Closing has not
taken place on or before February 14, 2006 or such later date as the parties
may agree to in writing or (iii) by either the Parent or the Company by
written notice to the other party if any event, fact or condition occurs or
exists that otherwise makes it impossible to satisfy a condition precedent to
the terminating party's obligations to consummate the transactions
contemplated by this Agreement, and such event, fact or condition shall not
have been cured by the non-terminating party or waived by the terminating
party within 20 Business Days of notice thereof from the terminating party,
unless the occurrence or existence of such event, fact or condition shall be
due to the failure of the terminating party to perform or comply with any of
the agreements or covenants hereof to be performed or complied with by such
party prior to the Closing.
(b) In the event of termination by the Company or the Parent
pursuant to this Section 11.5, written notice thereof shall promptly be given
to the other party and the transactions contemplated by this Agreement shall
be terminated without further action by either party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(i) The Parent shall return to the Company all documents and other
materials received from the Company, its Affiliates or its agents (including all
copies of or materials developed from any such documents or other materials)
relating to the transactions contemplated hereby, whether obtained before or
after the execution hereof.
(ii) All confidential information received by the Parent with
respect to the Company and its Affiliates or its agents shall be treated in
accordance with the Confidentiality Agreement, which shall remain in full force
and effect for the remainder of its term notwithstanding the termination of this
Agreement.
(iii) If this Agreement is terminated as provided in this Section
11.5, this Agreement shall become null and void and of no further force or
effect, provided, that the Confidentiality Agreement, Section 6.5 relating to
publicity, and Section 11.6 relating to certain expenses shall survive any
termination of this Agreement. Nothing in this Section 11.5 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or to impair the right of either party to
compel specific performance by the other party of its obligations under this
Agreement.
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11.6 Expenses; Transfer Taxes. Except as otherwise expressly provided
herein, the Holders shall bear the expenses incurred by them, the Company shall
bear the expenses incurred by it, and the Parent shall bear the expenses
incurred by it and the Sub, in each case as are incident to this Agreement and
the transactions contemplated hereby, including all fees and disbursements of
counsel and accountants retained by such party, and all fees and disbursements
of any investment bankers or finders retained by such party, whether or not the
transactions contemplated hereby shall be consummated. The Parent shall bear
100% of all filing fees in connection with the filings required by the HSR Act.
The Parent shall bear 50% and the Company shall bear 50% of all expenses in
connection with all sale, use, transfer, conveyance, recording, registration,
excise, stamp duty and similar Taxes arising from any transaction contemplated
by this Agreement ("Transfer Taxes"), and the Parent shall be responsible for
preparing and filing any Tax Returns in connection therewith.
11.7 FIRPTA. Neither the Parent nor the Surviving Corporation shall
withhold amounts pursuant to Section 1445 of the Code provided that the Company
delivers to the Parent at the Closing a certificate complying with the Code and
the Treasury Regulations, duly executed and acknowledged, certifying that the
Company Stock is not a U.S. real property interest.
11.8 Further Actions. Each party shall execute and deliver such
certificates and other documents and take such other actions as may reasonably
be requested by the other party in order to consummate or implement the
transactions contemplated hereby.
11.9 Notices. All notices, requests, demands and other communications
hereunder shall be in writing (including facsimile transmission) and shall be
given or made as follows:
(i) if to the Company to:
Sedgwick CMS Holdings, Inc.
0000 Xxxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq., General Counsel
with copies to:
Debevoise & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile Number: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
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Stone Point Capital LLC
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Facsimile Number: (000) 000-0000
Attention: Xxxxxxxxxxx X. Xxxxx, Vice President
(ii) if to the Parent or the Sub to:
Fidelity National Financial, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
Attention: Xxxxxxxxxxx X. Xxxx, Senior Vice President
with a copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
(ii) if to the Representative to:
Stone Point Capital LLC
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Facsimile Number: (000) 000-0000
Attention: Xxxxxxxxxxx X. Xxxxx, Vice President
and
Xxxxx USA Inc.
Xxxxx & XxXxxxxx Companies, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile Number: (000) 000-0000
Attention: General Counsel
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with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Xx., Esq.
or to such other address or facsimile number or to such other Person as any
party hereto shall have last designated by notice to the other party. All such
notices, requests or other communications shall be deemed received on the date
of receipt by the recipient thereof if received prior to 5:00 p.m. in the place
of receipt and such day is a Business Day in the place of receipt. Otherwise,
any such notice, request or communication shall be deemed not to have been
received until the succeeding Business Day in the place of receipt.
11.10 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
provided that any assignment (other than by operation of law) by any party
hereto shall require the prior written consent of the other party and any
purported assignment or other transfer without such consent shall be void and
unenforceable. Notwithstanding the foregoing, (i) Parent and Sub may each assign
its rights hereunder by way of security in connection with any financing and the
secured party may assign such rights by way of any exercise of remedies in
connection therewith and (ii) Parent may assign this agreement and all of its
rights and obligations hereunder to an Affiliate, provided that Parent remains
liable for the performance thereof in the event that such Affiliate fails to
perform.
11.11 No Third Party Beneficiaries. Except with respect to (a) the Option
Holders and DSU Holders under Section 2.3, (b) the Holders under Sections 2.2,
2.4(b), 6.4(b) and 9.4(b), (c) the Indemnitees under Section 6.8(a), (d) the
Company Indemnitees under Article IX and (e) the Parent Indemnitees under
Article IX, all of whom are intended third-party beneficiaries of this Agreement
for the purposes of these respective Sections only, nothing in this Agreement
shall confer any rights upon any Person that is not a party or a successor or
permitted assignee of a party to this Agreement.
11.12 Representative. The Holders irrevocably appoint Stone Point Capital
LLC to act as the designated representative, agent and attorney-in-fact of such
Holders with full authority to make all decisions and determinations and to take
all actions required or permitted under or relating to this Agreement and the
Escrow Agreement on behalf of such Holders (the committee, in such capacity, the
"Representative"), including (i) approving any of the documents required to be
delivered by such Holders on or after the Closing Date, (ii) approving or
contesting the Closing Statement, and/or the Initial Merger Consideration
adjustments, as set forth in Article III of this Agreement, and any other matter
provided for in Article III of this Agreement, (iii) administering any
63
indemnification matter on behalf of the Holders, agreeing to the settlement of
any indemnification matter and otherwise handling and negotiating
indemnification matters, (iv) agreeing to any waiver, consent or amendment under
or to this Agreement, provided that no such waiver, consent or amendment shall
adversely affect the allocation of any consideration hereunder to any Holder who
does not expressly consent thereto in writing, (v) distributing to the Holders
any portion of any consideration hereunder payable to the Holders after the
Closing Date, (vi) sending, receiving and reviewing notices under this Agreement
on behalf of the Holders and (vii) appointing a successor Representative in the
event of the resignation or death of the then current Representative. Each
Holder acknowledges that this Section 11.12 is intended to have the broadest
possible scope for the purpose of promoting the efficient negotiation and
handling of all matters which arise under or in connection with this Agreement.
All actions taken by the Representative in connection with, or relating to, the
subject matter of this Agreement or the Escrow Agreement that are within the
authority conferred upon the Representative pursuant to this Section 11.12 shall
be deemed authorized, approved, ratified and confirmed by the Holders, having
the same force and effect as if performed pursuant to the direct authorization
of such Holders. Subject to the terms of the Escrow Agreement, the
Representative shall be entitled, absent gross negligence or bad faith, to
indemnification in connection with the performance by the Representative of its
rights and obligations pursuant to this Section 11.12 and/or under the Escrow
Agreement, which indemnification shall be satisfied solely by having recourse
against the Escrow Funds; provided that, subject to Section 7 of the Escrow
Agreement, any such indemnification of the Representative shall be subject and
strictly subordinated to any rights of the Parent and the other Indemnified
Parties against the Escrow Fund pursuant to the Escrow Agreement, with no Escrow
Funds to be paid to the Representative until the Parent and the Indemnified
Parties have no further rights thereto and such funds are about to be returned
to the Holders. The Parent shall be entitled to rely upon, without independent
investigation, any act, notice, instruction or communication from the
Representative on behalf of the Holders and shall not be liable in any manner
whatsoever for any action taken or not taken in reliance upon the actions taken
or not taken or communications or writings given or executed by the
Representative. The Parent shall be entitled to disregard any notices or
communications given or made by any Holder unless given or made through the
Representative.
11.13 Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute one and the same instrument.
11.14 Facsimile. This Agreement, to the extent signed and delivered by
means of facsimile transmission, shall be treated in all manner and respects as
an original agreement or instrument and shall be considered to have the same
binding effect as if it were the original signed version thereof delivered in
person. No party hereto shall claim that this Agreement is invalid, not binding
or unenforceable based upon the use of facsimile transmission to deliver a
signature, or the fact that any signature or agreement
64
or instrument was transmitted or communicated through the use of facsimile
transmission, and each such party forever waives any such claim or defense.
11.15 Severability. If any provision of this Agreement is invalid,
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering the provision in question invalid, inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions contained herein invalid, inoperative or unenforceable
to any extent whatsoever.
11.16 Interpretation. The Section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision hereof. Any references to Company's
knowledge or the knowledge of the Company shall mean the actual knowledge, after
reasonable inquiry, of any of Xxxxx Xxxxx, Xxxxx Xxxxxxxxx, Xxxxxx Xxxxxxx or
Xxxx Xxxxx, Xx. Except to the extent made by the Company under, and subject to
the terms of, Section 6.9, none of the Company, the Company Subsidiaries, the
Parent or the Sub makes any representation or warranty herein other than, with
respect to Parent and the Sub, to the extent set forth in Sections 5.3 and 5.4,
the accuracy of which is based on, or gives effect to, any financing sought or
obtained by the Parent or the Sub in connection with the Merger.
11.17 Governing Law. This Agreement and the agreements entered into in
connection with the transaction contemplated by this Agreement shall be governed
in all respects, including but not limited to, as to validity, interpretation
and effect, by the internal laws of the State of New York, without giving effect
to its principles or rules of conflict of laws.
11.18 Enforcement.
(a) Notwithstanding anything to the contrary set forth herein or
elsewhere (including, for the avoidance of doubt, Section 3.5(b)), the
parties agree that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions of
this Agreement in any New York State court or any Federal court of the United
States of America sitting in New York City, this being in addition to any
other remedy to which they are entitled at law or in equity. Each of the
parties hereto hereby irrevocably and unconditionally submits, for itself and
its property, to the exclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and
any appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby or
for recognition or enforcement of any judgment relating thereto, and each of
the parties hereto hereby irrevocably and
65
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to
the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
(b) Each of the parties hereto hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection that it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby in any New York State or
Federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 11.9. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by Applicable Law.
11.19 Waiver of Jury Trial.
(a) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
(b) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER
VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
11.19.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
FIDELITY NATIONAL FINANCIAL, INC.
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President,
Corporate Finance
XMAS MERGER CORP.
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President,
Corporate Finance
SEDGWICK CMS HOLDINGS, INC.
By: /s/ Xxxxx X. North, Jr.
----------------------------------
Name: Xxxxx X. North, Jr.
Title: President and Chief
Executive Officer
For purposes of the rights and obligations
expressly set forth in Article III,
Article VIII and Article IX and Sections
11.9 and 11.12 hereof only:
STONE POINT CAPITAL LLC
By: /s/ Xxxxx Xxxxxxx
-----------------------------
Name: Xxxxx Xxxxxxx
Title: Principal
67
