Exhibit 2.7
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
Among
BNCCORP, INC.
X.X. XXXXX INSURANCE COMPANY
and
LIPS & XXXX, INC.
XXXXXXX XXXX
XXXX XXX
XXXX XXXXX
XXXXXXX XXXX
XXXXX XXXXXXXXXXX
Dated as of December 19, 1997
COR\60713.4
TABLE OF CONTENTS
Page
ARTICLE 1 - THE MERGER; THE SURVIVING CORPORATION............................1
Section 1.1 The Merger.................................................1
Section 1.2 The Effective Time of the Merger...........................1
Section 1.3 The Surviving Corporation..................................2
Section 1.4 The Closing................................................2
ARTICLE 2 - CONVERSION OF SHARES.............................................2
Section 2.1 Conversion of Shares.......................................2
Section 2.2 Delivery of Certificates...................................3
Section 2.3 Distributions with Respect to Unsurrendered Certificates...3
Section 2.4 No Further Rights in L&L Common Stock......................3
Section 2.5 No Fractional Shares.......................................3
Section 2.6 Further Assurances.........................................3
Section 2.7 Stock Transfer Books.......................................4
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
OF L&L AND THE STOCKHOLDERS............................................4
Section 3.1 Investment Representation..................................4
Section 3.2 Organization; Qualification................................5
Section 3.3 Capital Stock; Subsidiaries................................6
Section 3.4 Corporate Authorization; Enforceability....................6
Section 3.5 No Conflict................................................7
Section 3.6 Consent....................................................7
Section 3.7 L&L Financial Statements; Undisclosed Liabilities..........7
Section 3.8 Accounts Receivable........................................7
Section 3.9 Absence of Certain Changes.................................8
Section 3.10Material Contracts.........................................8
Section 3.11Real Property..............................................8
Section 3.12Real Property Leases.......................................9
Section 3.13Personal Property..........................................9
Section 3.14Compliance with Laws......................................10
Section 3.15Permits...................................................10
Section 3.16Litigation................................................10
Section 3.17Environmental Compliance..................................11
Section 3.18ERISA and Related Matters.................................11
Section 3.19Taxes.....................................................13
Section 3.20Customers.................................................15
Section 3.21Insurance.................................................16
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Section 3.22Safety and Health.........................................16
Section 3.23Labor Matters.............................................16
Section 3.24Transactions with Certain Persons.........................17
Section 3.25Propriety of Past Payments................................17
Section 3.26Intellectual Property.....................................17
Section 3.27Bank Accounts; Powers of Attorney.........................18
Section 3.28Director and Officer Indemnification......................18
Section 3.29Brokers' and Finders' Fee.................................18
Section 3.30Documents and Written Materials...........................18
Section 3.31Effectiveness of Representations and Warranties...........18
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF
BNC AND X.X. XXXXX ..................................................18
Section 4.1 Organization..............................................18
Section 4.2 Capital Stock: ....................................18
Section 4.3 Authority; Enforceability.................................19
Section 4.4 No Conflicts..............................................19
Section 4.5 Consent...................................................19
Section 4.6 Brokers' and Finders' Fee.................................20
Section 4.7 Effectiveness of Representations and Warranties...........20
ARTICLE 5 - PRE-CLOSING COVENANTS...........................................20
Section 5.1 Legal Requirements........................................20
Section 5.2 Access to Properties and Records..........................20
Section 5.3 Conduct of Business By Both Parties Prior to
the Closing Date ......................................20
Section 5.4 Conduct of Business By L&L Prior to the Closing Date......21
Section 5.5 Public Statements.........................................23
Section 5.6 No Solicitation...........................................23
Section 5.7 Update Information........................................23
Section 5.8 Consultation and Reporting................................23
ARTICLE 6 - CLOSING CONDITIONS..............................................24
Section 6.1 Conditions Applicable to all Parties......................24
Section 6.2 Conditions to Obligations of BNC and X.X. Xxxxx .........24
Section 6.3 Conditions to Obligations of L&L and the Stockholders.....25
ARTICLE 7 - TERMINATION AND AMENDMENT.......................................26
Section 7.1 Termination...............................................26
Section 7.2 Effect of Termination.....................................26
Section 7.3 Extension; Waiver.........................................26
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ARTICLE 8 - INDEMNIFICATION; REMEDIES.......................................26
Section 8.1 Indemnification by Stockholders...........................26
Section 8.2 Indemnification by BNC....................................27
Section 8.3 Notice and Defense of Third Party Claims..................27
Section 8.4 Survival of Representations and Warranties................28
ARTICLE 9 - DEFINED TERMS...................................................28
Section 9.1 Definitions...............................................28
ARTICLE 10 - MISCELLANEOUS..................................................32
Section 10.1Confidentiality...........................................32
Section 10.2Remedies..................................................32
Section 10.3Notices...................................................33
Section 10.4Interpretation; Schedules.................................33
Section 10.5Headings; Gender..........................................33
Section 10.6Entire Agreement; No Third Party Beneficiaries............34
Section 10.7Governing Law.............................................34
Section 10.8Assignment................................................34
Section 10.9Severability..............................................34
Section 10.10Counterparts.............................................34
Section 10.11Amendment................................................34
LIST OF EXHIBITS
A - Merger Consideration
B - Form of Articles of Merger
C - Form of Employment Agreement
D - Disclosure Schedule of L&L and the Stockholders
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
December 19, 1997 (this "Agreement"), is by and among BNCCORP, Inc., a Delaware
corporation ("BNC"), and its wholly-owned subsidiary, X.X. Xxxxx Insurance
Company, a North Dakota corporation ("X.X. Xxxxx"), on the one hand, and Lips &
Xxxx, Inc., a North Dakota corporation ("L&L"), and Xxxxxxx Xxxx, Xxxx Xxx, Xxxx
Xxxxx, Xxxxxxx Xxxx and Xxxxx Xxxxxxxxxxx (collectively, the "Stockholders"), on
the other.
W I T N E S S E T H:
WHEREAS, on October 29, 1997, the parties hereto executed that certain
Agreement and Plan of Merger pursuant to which L&L was to be merged with and
into X.X. Xxxxx;
WHEREAS, the parties hereto desire to amend the Agreement and Plan of
Merger and, as amended, to restate it in its entirety;
WHEREAS, it is the parties' mutual intent that the Merger constitute a
reorganization under Section 368 of the Code and that this Agreement constitute
a plan of reorganization thereunder;
WHEREAS, it is the parties mutual intent that the goodwill of L&L be and
will be acquired by X.X. Xxxxx and BNC pursuant to and upon consummation of the
Merger; and
WHEREAS, the parties hereto desire to set forth herein certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties hereto agree as follows:
ARTICLE 1
THE MERGER; THE SURVIVING CORPORATION
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof and in accordance with Section 10-19.1-96 of the NBCA, at the Closing,
L&L shall be merged with and into X.X. Xxxxx pursuant to the Articles of Merger.
As a result, the separate existence of L&L shall thereupon cease and X.X. Xxxxx
shall be the surviving corporation (the "Surviving Corporation") of the Merger
with the effects set forth in Section 10-19.1-102 of the NBCA.
Section 1.2 The Effective Time of the Merger. The Merger shall become
effective when the properly executed Articles of Merger are filed with the
Secretary of State of North Dakota, which filing shall be made as soon as
practicable after the satisfaction or, to the extent permitted hereunder, waiver
of all of the conditions to each party's obligation to consummate the Merger
contained in Article 6. When used in this Agreement, the term "Effective Time"
shall mean the date and time at which the Merger is consummated.
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Section 1.3 The Surviving Corporation.
(a) Following the Merger, X.X. Xxxxx shall be the Surviving
Corporation and shall be a wholly-owned subsidiary of BNC.
(b) The Articles of Incorporation and By-laws of the X.X. Xxxxx in
effect at the Effective Time shall be the Articles of Incorporation and By-laws
of the Surviving Corporation.
(c) The directors of X.X. Xxxxx at the Effective Time shall be the
initial directors of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Articles of Incorporation and
By-laws of the Surviving Corporation or as otherwise provided by Applicable Law.
(d) The officers of X.X. Xxxxx at the Effective Time shall be the
initial officers of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Articles of Incorporation and
By-laws of the Surviving Corporation or as otherwise provided by Applicable Law.
Section 1.4 The Closing. Unless this Agreement shall have been terminated
pursuant to the provisions hereof, and subject to satisfaction or waiver of the
conditions specified in Article 6 hereof, the Closing shall take place
immediately prior to the filing of the Articles of Merger at the offices of BNC
in Bismarck, North Dakota (or such other place as the parties may agree),
commencing at 10:00 a.m., local time, on the Closing Date.
ARTICLE 2
CONVERSION OF SHARES
Section 2.1 Conversion of Shares. (a) At the Effective Time, by virtue of
the Merger and without any further action on the part of BNC, X.X. Xxxxx, L&L or
the Surviving Corporation, or any holder of the following securities:
(i) each issued share of L&L Common Stock that is held in treasury
by L&L or held by any subsidiary of L&L shall be cancelled and no stock of BNC
or other consideration shall be delivered in exchange therefrom;
(ii) each share of L&L Common Stock, issued and outstanding at the
Effective Time shall be converted into (A) the right to receive the number of
shares of BNC Common Stock calculated in accordance with the procedures set
forth on Exhibit "A" attached hereto (the "Primary Shares") and (B) the right to
receive an additional number of shares of BNC Common Stock to be determined in
accordance with the procedures set forth on Exhibit "A-1" attached hereto (the
"Additional Shares," and together with the Primary Shares, the "Merger
Consideration").
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(b) Upon conversion of the shares of L&L Common Stock into the Merger
Consideration in the manner described in Section 2.1(a)(ii) above, each record
holder of issued and outstanding L&L Common Stock immediately prior to the
Effective Time shall have the right to receive, in accordance with Section 2.2
hereof, certificates representing such whole number of shares of BNC Common
Stock calculated in accordance with Section 2.1(a)(ii).
Section 2.2 Delivery of Certificates. Following the Effective Time, the
holders of L&L Common Stock shall deliver to BNC all certificates formerly
representing shares of L&L Common Stock. Provided such certificates have been
delivered to BNC, upon the preparation and delivery (the "Primary Share Delivery
Date"), to BNC of the balance sheet and related statements of operations,
stockholders' equity and cash flow and the related notes thereto of L&L as of
and for the fiscal year ended December 31, 1997 BNC shall deliver to or as
directed by each such former stockholder a certificate representing the number
of Primary Shares of BNC Common Stock specified in Section 2.1(a)(ii)(A) and a
check for any amount due to such Stockholder pursuant to Section 2.5. Until so
delivered, each certificate which, before the Effective Time, represented shares
of L&L Common Stock shall be deemed for all purposes to represent the
consideration into which the shares of L&L Common Stock theretofore represented
thereby shall have been converted. On the first anniversary of the Primary Share
Delivery Date, BNC shall deliver to or as directed by each such former
shareholder a certificate representing the number of Additional Shares of BNC
Common Stock specified in Section 2.1(a)(ii)(B) and a check for any amount due
to such Stockholder pursuant to Section 2.5.
Section 2.3 Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions declared or made after the Effective Time with
respect to BNC Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered certificate formerly representing L&L
Common Stock with respect to the shares of BNC Common Stock the holder thereof
is entitled to receive upon surrender thereof, and no cash payment in lieu of
any fractional shares shall be paid to any such holder pursuant to Section 2.5
until the holder of such certificate shall surrender such certificate.
Section 2.4 No Further Rights in L&L Common Stock. All shares of BNC
Common Stock issued or cash paid upon conversion of the shares of L&L Common
Stock in accordance with the terms hereof (including any cash paid pursuant to
Section 2.5) shall be deemed to have been issued in full satisfaction of all
rights pertaining thereto.
Section 2.5 No Fractional Shares. No certificates or scrip representing
fractional shares of BNC Common Stock shall be issued pursuant to Section 2.2,
and such fractional share interests will not entitle the owner thereof to vote
or to any other rights of a stockholder of BNC. Each holder of a fractional
share interest shall be paid an amount calculated in accordance with the
procedures specified on Exhibits "A" and "A-1" attached hereto. As promptly as
practicable after the determination of the amount of cash, if any, to be paid to
holders of fractional share interests, BNC shall forward payments to such
holders of fractional share interests subject to and in accordance with the
terms of this Section 2.
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Section 2.6 Further Assurances. (a) At the Effective Time, the Surviving
Corporation shall assume those certain Employment Agreements dated January 22,
1996 between L&L and each of Xxxx X. Xxxx and Xxxxxxx Xxxxxxxxx (the "Xxxx and
Charnholm Agreements"), and BNC shall issue to each of such employees a
guarantee of the Surviving Corporation's obligations under each such Employment
Agreement.
(b) If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of L&L acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of L&L or otherwise, all such deeds, bills of sale, assignments
and assurances and to take and do, in such names and on such behalves or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out the purposes of this Agreement.
Section 2.7 Stock Transfer Books. At the Effective Time, the stock
transfer books of L&L shall be closed and there shall be no further registration
of transfers of shares of L&L Common Stock thereafter on the records of L&L.
From and after the Effective Time, the holders of certificates representing
shares of L&L Common Stock shall cease to have any rights with respect to any
such shares, except as otherwise provided herein or by law.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF L&L AND THE STOCKHOLDERS
The Stockholders severally represent to BNC and X.X. Xxxxx as to Section
3.1 and L&L and the Stockholders, jointly and severally, represent and warrant
to BNC and X.X. Xxxxx as to Sections 3.2 through 3.30 that, except as set forth
in the Disclosure Schedule:
Section 3.1 Investment Representation.
(a) Stockholder is acquiring BNC Common Stock for investment for his
own account and not with a view to, or for sale or other disposition in
connection with, any distribution of all or any part thereof except (i) in an
offering covered by a registration statement filed with the Securities and
Exchange Commission under the Securities Act covering BNC Common Stock acquired
by Stockholder or (ii) pursuant to an applicable exemption under the Securities
Act. In receiving BNC Common Stock, Stockholder is not offering or selling, and
will not offer and sell, for BNC in connection with any distribution of such BNC
Common Stock, and Stockholder does not have any contract, undertaking, agreement
or arrangement with any person for the distribution of BNC Common Stock and will
not participate in any undertaking or in any underwriting of such an undertaking
except in compliance with Applicable Law.
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COR\60713.4
(b) Stockholder represents that he is an "accredited investor" as
that term is defined in Regulation D under the Securities Act and that he is
able to fend for himself and can bear the economic risk of his investment in the
BNC Common Stock.
(c) Stockholder has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of an
investment in BNC Common Stock.
(d) Stockholder has also been afforded access to information about
BNC and BNC's financial position, results of operation, business, property and
management sufficient to enable him to evaluate an investment in BNC Common
Stock, and has had the opportunity to ask questions of and has received
satisfactory answers from BNC concerning the foregoing matters.
(e) Stockholder understands that the BNC Common Stock acquired
pursuant hereto has not been registered under the Securities Act on the basis
that the sale provided for in this Agreement and the issuance of BNC's Common
Stock hereunder is exempt from registration under the Securities Act, and that
BNC's reliance on such exemption is based, in part, upon Stockholder's
representations set forth herein.
(f) Stockholder understands that the shares of BNC Common Stock will
not be registered under the Securities Act, that such shares will be "restricted
securities" as that term is defined in Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act, and that Stockholder cannot
transfer such shares unless they are subsequently registered under the
Securities Act and under any applicable state securities law or are transferred
in a transfer that, in the opinion of counsel satisfactory to BNC, is exempt
from such registration. Stockholder further understands that BNC will, as a
condition to the transfer of any such shares, require that the request for
transfer be accompanied by an opinion of counsel, in form and substance
satisfactory to BNC, to the effect that the proposed transfer does not result in
a violation of the Securities Act or any applicable state securities law, unless
such transfer is covered by an effective registration statement. Stockholder
understands that such shares of BNC Common Stock may not be sold publicly in
reliance on the exemption from registration under the Securities Act afforded by
Rule 144 unless and until the minimum holding period (currently one year) and
other requirements of Rule 144 have been satisfied.
(g) Stockholder understands and agrees that all certificates
evidencing the shares of BNC Common Stock issued hereunder will bear restrictive
legends in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or any applicable state law, and may not be
transferred without registration under the Act and any such
state law or an opinion of counsel satisfactory to the
corporation that registration is not required.
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COR\60713.4
Section 3.2 Organization; Qualification. L&L is a corporation duly
organized, validly existing and in good standing under the laws of North Dakota
and has the requisite corporate power and authority to own its property and to
carry on its business as it is now being conducted. No actions or proceedings to
dissolve L&L are pending. Section 3.2 of the Disclosure Schedule sets forth the
jurisdictions in which L&L is qualified to do business as a foreign corporation.
Copies of the articles of incorporation and by-laws of L&L, with all amendments
to the date hereof, have been furnished to BNC or its representatives, and such
copies are accurate and complete as of the date hereof. L&L has made available
to BNC accurate and complete copies of the minutes of all meetings of its board
of directors, any committees of the board and stockholders (and all consents in
lieu of such meetings). Such records, minutes and consents accurately reflect
all actions taken by its board of directors, committees and stockholders. L&L is
not in violation of any provision of its articles of incorporation or by-laws.
Section 3.3 Capital Stock; Subsidiaries. (a) The authorized capital stock
of L&L consists of 10,000 shares of capital stock, of which 1,776.18 shares of
L&L Common Stock are issued and outstanding and 3,223.82 shares of L&L Common
Stock are held in its treasury, and no shares of preferred stock, $.10 par value
per share, have been issued. All issued and outstanding shares of L&L Common
Stock have been duly authorized and are validly issued, fully paid and
non-assessable. All outstanding L&L Common Stock are held of record and
beneficially by the Persons set forth in Section 3.3 of the Disclosure Schedule
in the amounts set forth opposite their respective names.
(b) There are no outstanding stock options or other rights to
acquire any shares of the capital stock of L&L or any security convertible into
L&L Common Stock and L&L has no obligation or other commitment to issue, sell or
deliver any of the foregoing or any other shares of its capital stock. All
shares of L&L Common Stock have been issued in compliance with all legal
requirements and without violation of any pre-emptive or similar rights.
(c) L&L owns, directly or indirectly, no interest in any Person.
Section 3.4 Corporate Authorization; Enforceability.
(a) The execution, delivery and performance of this Agreement has
been duly authorized by the board of directors of L&L and all of the holders of
L&L Common Stock entitled to vote or consent to the transactions contemplated by
this Agreement. To the extent applicable, the execution and delivery of this
Agreement and its obligations hereunder has been duly authorized by all
necessary corporate action of L&L and no further vote or consent of stockholders
or directors of L&L and no further corporate acts or other corporate proceedings
are required of L&L for the due and valid authorization, execution, delivery and
performance of this Agreement or the consummation of the Merger.
(b) This Agreement constitutes the legal, valid and binding
obligation of L&L enforceable against L&L in accordance with its terms, except
that enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting
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COR\60713.4
creditors' rights generally and equitable principles which may limit the
availability of certain equitable remedies in certain instances.
(c) The Employment Agreements, when executed by the respective
Stockholders in accordance with the terms hereof, will be the legal, valid and
binding obligation of the Stockholders enforceable against each of them in
accordance with their terms, except that enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting creditors' rights generally and equitable principles which may
limit the availability of certain equitable remedies in certain instances.
Section 3.5 No Conflict. Neither the execution and the delivery of this
Agreement or the Employment Agreements by L&L or the Stockholders, as the case
may be, nor the consummation of the transactions contemplated hereby or thereby,
nor compliance with any of the terms hereof or thereof, do or will (a) conflict
with or result in any breach of the provisions of the articles of incorporation
or by-laws of L&L, (b) result in the violation or breach of, or constitute (with
or without due notice or the lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, or any material
license, contract, agreement or other instrument or obligation to which any of
L&L or the Stockholders is a party or by which any of them or their respective
properties or assets may be bound, or (c) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to any of L&L or the Stockholders
or any of their respective properties or assets.
Section 3.6 Consent. Section 3.6 of the Disclosure Schedule sets forth a
true and complete list of each consent, approval, order or authorization of, or
declaration, filing or registration with, any Governmental Entity or other
Person that is required to be obtained or made by L&L or the Stockholders in
connection with the execution, delivery or performance by L&L or the
Stockholders of this Agreement or the consummation by L&L or the Stockholders of
the transactions contemplated hereby.
Section 3.7 L&L Financial Statements; Undisclosed Liabilities.
(a) The L&L Annual Financial Statements have been prepared in
accordance with generally accepted accounting principles and present fairly the
financial position of L&L at such dates and the results of operations and cash
flows for the periods then ended.
(b) The L&L Interim Financial Statements have been prepared in
accordance with generally accepted accounting standards on a basis consistent
with the prior periods and reflect all adjustments, consisting only of normal
recurring adjustments, that are necessary for a fair statement of the results
for the interim period presented therein. Except as disclosed in Section 3.7 of
the Disclosure Schedule, neither L&L nor any of its assets are subject to any
liability, commitment, debt or obligation which would be required to be
disclosed in financial statements prepared in accordance with generally accepted
accounting principles, except (i) as and to the extent reflected on the L&L
Interim Financial Statements, or (ii) as may have been incurred or may have
arisen since the date of
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COR\60713.4
the L&L Interim Financial Statements in the ordinary course of business and that
are permitted by this Agreement.
Section 3.8 Accounts Receivable. All of the accounts receivable reflected
on the L&L Interim Financial Statements or created thereafter have arisen only
from bona fide transactions in the ordinary course of business, represent valid
obligations owing to L&L and have been accrued in accordance with generally
accepted accounting principles. Section 3.8 of the Disclosure Schedule sets
forth a summary listing of all accounts receivable of L&L as of the date
specified therein and reflects receivables aged less than 90 days from the date
of invoice as a group and sets forth all receivables aged more than 90 days
individually by customer, invoice and amount.
Section 3.9 Absence of Certain Changes.
(a) Since June 30, 1997, L&L has operated in the ordinary course of
business consistent with past practice and there has been no event or condition
of any character that has had, or can reasonably be expected to have, a Material
Adverse Effect.
(b) Since June 30, 1997, L&L has not, except as set forth on
Schedule 3.9 of the Disclosure Schedule, taken any actions of a type referred to
in Sections 5.3 and 5.4 that would have required the consent of BNC if such
action were to have been taken during the period between the date hereof and the
Closing Date.
Section 3.10Material Contracts. (a) Section 3.10 of the Disclosure
Schedule contains a list and brief description (including the names of the
parties and the date and nature of the agreement) of each Material Contract to
which L&L is a party. BNC has been provided a complete and accurate copy of each
Material Contract listed on Section 3.10 of the Disclosure Schedule. Except as
set forth in Section 3.10 of the Disclosure Schedule, each Material Contract to
which L&L is a party is a legal, valid, binding and enforceable obligation of
L&L, except to the extent that enforcement may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) L&L is not in material breach of or default (and no event has
occurred which, with due notice or lapse of time or both, may constitute such a
breach or default) under any Material Contract, and no party to any Material
Contract has given L&L written notice of or made a claim in writing with respect
to any breach or default under any such Material Contract.
Section 3.11Real Property.
(a) Section 3.11 of the Disclosure Schedule sets forth a true and
complete list of all real property owned by L&L (collectively, the "Owned
Properties"). Except as set forth in Section 3.11 of the Disclosure Schedule,
L&L has good and marketable title in fee simple to all Owned Properties. Except
as disclosed in Section 3.11 of the Disclosure Schedule, none of the Owned
Properties is subject to any Liens, except for (i) Liens that collateralize
indebtedness that is reflected in the L&L Interim Financial Statements, (ii)
Permitted Liens for amounts not yet due or
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which are being contested in good faith and (iii) easements, rights of way,
encroachments or other restrictions or matters affecting title which do not
prevent the Owned Properties from being used for the purpose for which they are
currently being used or otherwise materially impair L&L's current operations.
(b) Except as set forth in Section 3.11 of the Disclosure Schedule,
all improvements on the Owned Properties and the operations therein conducted
conform in all material respects to all applicable health, fire, safety, zoning
and building laws, ordinances and administrative regulations, except for
possible nonconforming uses or violations which do not materially interfere with
the present use, operation or maintenance thereof or access thereto by L&L.
(c) Except as set forth on Section 3.11 of the Disclosure Schedule,
the buildings, driveways and all other structures and improvements upon the
Owned Properties are all within the boundary lines of such Owned Property or the
benefit of valid easements, and there are no encroachments thereof which would
materially affect the use thereof. There are no outstanding requirements by any
insurance company which has issued a title policy covering any such property
which is a condition to continued coverage under such policy at the current
insurance premium.
(d) Except as set forth on Section 3.11 of the Disclosure Schedule,
each Owned Property has unrestricted access to and from public roads and streets
and each Owned Property is designated with one or more separate and exclusive
tax lots.
Section 3.12Real Property Leases.
(a) Section 3.12 of the Disclosure Schedule sets forth a list of all
Leases with respect to all real properties in which L&L has a leasehold,
subleasehold, or other occupancy interest (the "Leased Properties"). Complete
and accurate copies of all Leases and all amendments thereto have been provided
to BNC. Except as set forth in Section 3.12 of the Disclosure Schedule, all of
the Leases for the Leased Properties are valid and effective in accordance with
their respective terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
(b) L&L is not in material breach of or default (and no event has
occurred, which, with due notice or lapse of time or both, may constitute such a
breach or default) under any Lease, and no party to any Lease has given L&L
written notice with respect to any breach or default.
(c) Except as set forth in Section 3.12 of the Disclosure Schedule,
no Leased Property is subject to any sublease, license or other agreement
granting to any Person any right to the use, occupancy or enjoyment of Leased
Property or any portion thereof through L&L.
Section 3.13Personal Property.
(a) Except as set forth in Section 3.13 of the Disclosure Schedule
and Section 3.12(b), L&L has good title to all Personal Property, free and clear
of all Liens other than (i) Liens
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COR\60713.4
for taxes and assessments not yet due or otherwise being contested in good faith
and (ii) Permitted Liens for amounts not yet due or which are being contested in
good faith.
(b) Except as set forth in Section 3.13 of the Disclosure Schedule,
L&L holds valid leaseholds in all of the Personal Property leased by it, which
leases are enforceable in accordance with their respective terms, except that
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and equitable principles which may limit the availability of certain
equitable remedies in certain instances.
(c) Except as set forth in Section 3.13 of the Disclosure Schedule,
L&L is not in material breach of or default (and no event has occurred which,
with due notice or lapse of time or both, may constitute such a lapse or
default) under any lease of any item of Personal Property leased by it.
(d) Except as set forth in Section 3.13 of the Disclosure Schedule,
the Personal Property now owned, leased or used by L&L is sufficient and
adequate to carry on its business as presently conducted.
Section 3.14Compliance with Laws. (a) Except as set forth in Section 3.14
of the Disclosure Schedule, the business of L&L is being conducted, in all
material respects, with all Applicable Laws, including insurance laws, and L&L
has not received notice of any violation by it of any Applicable Law, nor is it
in default with respect to any order, writ, judgment, award, injunction or other
decree of any Governmental Entity applicable to it or any of its respective
assets, properties or operations.
(b) L&L has made available for inspection by BNC complete copies of
all material registrations, filings and submissions made since January 1, 1995
by L&L with any Governmental Entity and any reports of examinations issued since
January 1, 1995 by any such Governmental Entity that relate to L&L. L&L has
filed all reports, statements, documents, registrations, filings or submissions
required to be filed by it with any Governmental Entity, except where the
failure to file, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect; and all such reports, statements, documents,
registrations, filings or submissions were in all material respects true,
complete and accurate when filed.
Section 3.15Permits. (a) Except as set forth in Section 3.15 of the
Disclosure Schedule, L&L has all necessary permits, insurance and other licenses
and governmental authorizations which are material and which are required for
the lease, ownership, occupancy or operation of its properties and assets and
the carrying on of its business.
Section 3.16Litigation.
(a) Except as set forth in Section 3.16 of the Disclosure Schedule,
there are no Proceedings pending or, to the knowledge of the Stockholders,
threatened, against L&L or any of its officers, directors, employees, agents or
Affiliates which are not covered by insurance and, to the
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COR\60713.4
knowledge of the Stockholders, there have been no events and there are no facts
or circumstances that could result in any Proceedings.
(b) Except as set forth in Section 3.16 of the Disclosure Schedule,
neither L&L nor any of its assets or properties is subject to any order, writ,
judgment, award, injunction or decree of any Governmental Entity.
Section 3.17Environmental Compliance.
(a) Except as set forth in Section 3.17 of the Disclosure Schedule,
L&L possesses all necessary licenses, permits and other approvals and
authorizations that are required under, and at all times in the past has been,
in compliance with, all Environmental Laws, including all Environmental Laws
governing the generation, use, collection, treatment, storage, transportation,
recover, removal, discharge or disposal of hazardous substances or wastes, and
all Environmental Laws imposing record-keeping, maintenance, testing,
inspection, notification and reporting requirements with respect to hazardous
substances or wastes. For purposes of this Agreement, "hazardous substances" and
"hazardous wastes" are materials defined as "hazardous substances," "hazardous
wastes," or "hazardous constituents" in (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Sections 9601-9675,
as amended by the Superfund Amendments and Reauthorization Act of 1986, and any
amendments thereto and regulations thereunder; (ii) the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. Sections 6901-6992, as amended by the
Hazardous and Solid Waste Amendments of 1984, and any amendments thereto and
regulations thereunder; (iii) the Oil Pollution Act of 1990, 33 U.S.C. Sections
2701-2761, and any amendments thereto and regulations thereunder; and (iv) any
other applicable federal, state, local or foreign environmental law or
regulation.
(b) Except as set forth in Section 3.17 of the Disclosure Schedule,
L&L has not been subject to any administrative or judicial proceeding pursuant
to, or has received any notice of any violation of, or claim alleging liability
under, any Environmental Laws. To the knowledge of the Stockholders, no facts or
circumstances exist that would be likely to result in a claim, citation or
allegation against L&L for a violation of, or alleging liability under any
Environmental Laws.
(c) There are no underground tanks of any type (including tanks
storing gasoline, diesel fuel, oil or other petroleum products) or disposal
sites for hazardous substances, hazardous wastes or any other regulated waste,
located on or under the Owned Properties or Leased Properties.
(d) Except in the ordinary course of business, and in all cases in
material compliance with all Environmental Laws, L&L has not engaged any third
party to handle, transport or dispose of hazardous substances or wastes
(including for this purpose, gasoline, diesel fuel, oil or other petroleum
product) on its behalf.
Section 3.18ERISA and Related Matters.
(a) Section 3.18 of the Disclosure Schedule lists each Employee Plan
that L&L maintains, administers, contributes to, or has any contingent liability
with respect thereto. BNC has
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COR\60713.4
been provided a true and complete copy of each Employee Plan, current summary
plan description, (and, if applicable, related trust documents) and all
amendments thereto and written interpretations thereof together with: (i) all
annual reports, if any, that have been prepared in connection with each such
Employee Plan within the last three years; (ii) all material communications
relating to any such Employee Plan received from or sent to the Internal Revenue
Service or the Department of Labor within the last three years (including a
written description of any oral communications); and (iii) the most recent
Internal Revenue Services determination letter with respect to each Employee
Plan and the most recent application for a determination letter.
(b) Section 3.18 of the Disclosure Schedule identifies each Benefit
Arrangement that L&L maintains or administers. Except as set forth in Section
3.18 of the Disclosure Schedule, L&L has made all contributions to and has no
contingent liability with respect to any of its Benefit Arrangements. BNC has
been furnished copies or descriptions of each Benefit Arrangement. Each Benefit
Arrangement has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Benefit Arrangement.
(c) Benefits under any Employee Plan or Benefit Arrangement are as
represented in the documents provided to BNC and have not been increased or
modified (whether written or not written) subsequent to the dates of such
documents. L&L has not communicated to any employee or former employee any
intention or commitment to modify any Employee Plan or Benefit Arrangement or to
establish or implement any other employee or retiree benefit or compensation
arrangement.
(d) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and, no event has occurred since such adoption
that would materially adversely affect such qualification, and each trust
created in connection with each such Employee Plan forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. Each Employee Plan has
been maintained and administered in compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code.
(e) Full payment has been made of all amounts which L&L is or has
been required to have paid as contributions to any Employee Plan or Benefit
Arrangement under applicable law or under the terms of any such plan or any
arrangement.
(f) Neither L&L nor any of its stockholders, directors, officers or
employees has engaged in any transaction with respect to an Employee Plan that
could subject L&L to a tax, penalty or liability for a prohibited transaction,
as defined in Section 406 of ERISA or Section 4975 of the Code.
(g) L&L has no liability in respect of post-retirement or
post-employment welfare benefits for retired, current or former employees except
to the extent otherwise required by the continuation requirements of Section
4980B(f) of the Code and Section 601 of ERISA. No medical
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COR\60713.4
benefits have been provided under any Benefit Arrangement to any person who is
not an employee or former employee of L&L or a dependent thereof.
(h) There is no litigation, administrative or arbitration proceeding
or other dispute pending or, to the knowledge of the Stockholders, threatened,
that involves any Employee Plan or Benefit Arrangement which could reasonably be
expected to result in a liability to L&L, any employees or directors of L&L, or
any fiduciary (as defined in ERISA Section 3(21)) of such Employee Plan or
Benefit Arrangement.
(i) No employee or former employee of L&L will become entitled to
any bonus, retirement, severance, job security or similar benefit or enhanced
benefit (including acceleration of compensation, an award, vesting or exercise
of an incentive award) or any fee or payment of any kind solely as a result of
any of the transactions contemplated hereby.
(j) L&L is not a party to any agreement, contract, arrangement or
plan that has resulted or would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code (i.e., a golden parachute).
(k) Neither L&L nor the Stockholders maintains or has ever
maintained an "employee benefit plan" (as defined in Section 3(3) of ERISA)
which is or was (i) a plan subject to Title IV of ERISA or (ii) a "multiemployer
plan" (as defined in Section 3(37) of ERISA). Neither L&L nor the Stockholders
know of any facts or circumstances that might give rise to any liability to the
Pension Benefit Guaranty Corporation under Title IV of ERISA.
Section 3.19Taxes.
(a) All Returns required to be filed by or on behalf of L&L have
been duly filed and such Returns (including all attached statements and
schedules) are true, complete and correct. All Taxes due have been paid in full
on a timely basis, and no other Taxes are payable by L&L with respect to items
or periods covered by such Returns (whether or not shown on or reportable on
such Returns) or with respect to any period prior to the Closing Date.
(b) L&L has withheld and paid over all Taxes required to have been
withheld and paid over (including any estimated taxes), and has complied in all
material respects with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party.
(c) There are no Liens on any of the assets of L&L with respect to
Taxes, other than Liens for Taxes not yet due and payable or for Taxes that are
being contested in good faith through appropriate proceedings and for which
appropriate reserves have been established.
(d) L&L has furnished or made available to BNC true and complete
copies of: (i) all federal and state income and franchise tax returns of L&L for
all periods beginning on or after January 1, 1994, and (ii) all tax audit
reports, work papers statements of deficiencies, closing or other
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COR\60713.4
agreements received by L&L or on their behalf relating to Taxes for all periods
beginning on or after January 1, 1994.
(e) Except as disclosed in Section 3.19 of the Disclosure Schedule:
(i) The Returns of L&L have never been audited by a
governmental or taxing authority, nor is any such audit in process, pending or,
to the knowledge of the Stockholders, threatened (formally or informally).
(ii) No deficiencies exist or have been asserted (either in
writing or verbally, formally or informally) or, to the knowledge of the
Stockholder, are to be asserted with respect to Taxes of L&L, and no notice
(either formal or informal) has been received by L&L that it has not filed a
Return or paid Taxes required to be filed or paid by it.
(iii) L&L is not a party to any pending action or proceeding
for assessment or collection of Taxes, nor has such action or proceeding been
asserted or, to the knowledge of the Stockholders, threatened (either formally
or informally), against it or any of its assets.
(iv) Except as reflected in the Returns, no waiver or
extension of any statute of limitations is in effect with respect to Taxes or
Returns of L&L.
(v) There are no requests for rulings, subpoenas or requests
for information pending with respect to L&L.
(vi) No power of attorney has been granted by L&L with respect
to any matter relating to Taxes.
(vii) The amount of liability for unpaid Taxes of L&L for all
periods ending on or before the Closing Date will not, to the knowledge of the
Stockholders, in the aggregate, exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred taxes), as such accruals are
reflected on the consolidated balance sheet of L&LL&L as of the Closing Date.
(f) Except as disclosed in Section 3.19 of the Disclosure Schedule:
(i) L&L has not issued or assumed any indebtedness that is
subject to section 279(b) of the Code.
(ii) L&L has not entered into any compensatory agreements with
respect to the performance of services which payment thereunder would result in
a nondeductible expense pursuant to Section 280G of the Code or an excise tax to
the recipient of such payment pursuant to Section 4999 of the Code.
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COR\60713.4
(iii) No election has been made under Section 338 of the Code
with respect to L&L and no action has been taken that would result in any income
tax liability to L&L as a result of deemed election within the meaning of
Section 338 of the Code.
(iv) No consent under Section 341(f) of the Code has been
filed with respect to L&L.
(v) L&L has not agreed, nor is it required to make, any
adjustment under Code Section 481(a) by reason of change in accounting method or
otherwise.
(vi) L&L has not disposed of any property that has been
accounted for under the installment method.
(vii) L&L has not made any of the foregoing elections and is
not required to apply any of the foregoing rules under any comparable state or
local income tax provisions.
(g) X.X. Xxxxx will acquire at least 90% of the fair market value of
the net assets and at least 70% of the fair market value of the gross assets
held by L&L immediately prior to the Merger. For purposes of this
representation, amounts paid by L&L to its stockholders, assets of L&L used to
pay its reorganization expenses, and all redemptions and distributions (except
for regular, normal dividends) made by L&L immediately preceding the Merger,
will be included as assets of L&L held immediately prior to the Merger.
(h) The liabilities of L&L assumed by the X.X. Xxxxx and the
liabilities to which the transferred assets of L&L are subject were incurred by
L&L in the ordinary course of its business.
(i) L&L is not an investment company. For purposes of this
representation, the term "investment company" means a regulated investment
company, a real estate investment trust, or a corporation 50% or more of the
value of whose total assets are stock and securities and 80% or more of the
value of whose total assets are assets held for investment. In making the 50%
and the 80% determinations under the preceding sentence, stock and securities in
any subsidiary corporation will be disregarded and the parent corporation will
be deemed to own its ratable share of the subsidiary's assets.
(j) L&L is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
Section 3.20Customers. Section 3.20 of the Disclosure Schedule sets forth
a complete and correct list of: (a) all customers whose purchases exceeded 5% of
the aggregate net sales of L&L for the fiscal year ended December 31, 1996; and
(b) all customers who have delivered a notice of cancellation or default with
respect to any agreement, contract or other arrangement with L&L since January
1, 1996 involving an amount in excess of $20,000 or with whom L&L has delivered
a formal notice of a default with respect to, any agreement, contract or other
arrangement since January 1,
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COR\60713.4
1996, involving an amount in excess of $20,000, in each case with or without
cause, prior to the stated expiration thereof.
Section 3.21Insurance.
(a) Section 3.21 of the Disclosure Schedule sets forth a true and
complete list of all policies of insurance, increased value, protection and
indemnity, title insurance, liability and casualty insurance, property
insurance, auto insurance, business interruption insurance, tenant's insurance,
workers' compensation, life insurance, disability insurance, excess or umbrella
insurance and any other type of insurance insuring the properties, assets,
employees or operations of L&L (collectively the "Policies"). L&L has made
available to BNC a true, complete and accurate copy of all Policies.
(b) All Policies are in full force and effect. L&L shall maintain
the coverage under all Policies in full force and effect through the Closing
Date.
(c) Except as set forth in Section 3.21 of the Disclosure Schedule,
there is no claim by L&L or any other Person pending under any of the Policies
as to which coverage has been denied or disputed by the underwriters or issuers
of such Policies. L&L has not received any notice of default and L&L is not in
default under any provision of the Policies.
(d) Except as set forth in Section 3.21 of the Disclosure Schedule,
L&L has not since January 1, 1997 received any written notice from or on behalf
of any insurance carrier or other issuer issuing such Policies that insurance
rates or other annual premium or fee in effect as of the date hereof will
hereafter be materially increased, that there will be a non-renewal,
cancellation or increase in a deductible (or a material increase in premiums in
order to maintain an existing deductible) of any of the Policies in effect as of
the date hereof, or that material alteration of any equipment or any
improvements to any of the Owned Properties or the Leased Properties, purchase
of additional material equipment, or material modification of any of the methods
of doing business of L&L will be required after the date hereof.
Section 3.22Safety and Health. The property and assets of L&L have been
and are being operated in compliance in all respects with all Applicable Laws
designed to protect safety or health, or both, including without limitation, the
Occupational Safety and Health Act, and the regulations promulgated pursuant
thereto, except for any violations or deficiency which would not result in a
Material Adverse Effect. Except as set forth in Section 3.22 of the Disclosure
Schedule, L&L has not received any written notice of any violations, deficiency,
investigation or inquiry from any Governmental Entity, employer or third party
under any such law and, to the knowledge of the Stockholders, no such
investigation or inquiry is planned or threatened.
Section 3.23Labor Matters.
(a) Set forth in Section 3.23 of the Disclosure Schedule is a list
of all: (i) outstanding employment, consulting or management agreements or
contracts with officers, directors or employees of L&L that are not terminable
on no more than 30 days notice, or that provide for the
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COR\60713.4
payment of any bonus or commission; and (ii) agreements, policies or practices
that require L&L to pay termination or severance pay to salaried, non-exempt or
hourly employees in excess of 30 days' salary and benefits to any employee upon
termination of such employee's employment (other than as required by law). L&L
has made available to BNC complete and correct copies of all such employment and
labor agreements. Except as set forth in Section 3.23 of the Disclosure
Schedule, L&L has not breached or otherwise failed to comply in any material
respect with any provisions of any employment and labor agreement, and there are
no grievances outstanding thereunder.
(b) Except as set forth in Section 3.23 of the Disclosure Schedule:
(i) L&L is in compliance in all material respects with all Applicable Laws
relating to employment and employment practices, wages, hours, and terms and
conditions of employment; (ii) there is no unfair labor practice charge or
complaint against L&L pending before any Governmental Entity; (iii) there is no
representation claim or petition pending before any Governmental Entity; (iv)
there are no charges with respect to or relating to L&L pending before any
Governmental Entity responsible for the prevention of unlawful employment
practices; and (v) L&L has not had formal notice from any Governmental Entity
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of L&L and, to the knowledge of the Stockholders, no
such investigation is in progress.
Section 3.24Transactions with Certain Persons. Except as set forth in
Section 3.24 of the Disclosure Schedule, no director, officer or employee of
L&L, L&L or any of their respective Affiliates is presently a party to any
transaction with L&L, including any contract, agreement or other arrangement
providing for the furnishing of services by or the rental of real or personal
property from any such Person or from any of its Affiliates.
Section 3.25Propriety of Past Payments. Except as set forth in Section
3.25 of the Disclosure Schedule, to the knowledge of the Stockholders, (a) no
funds or assets of L&L have been used for illegal purposes; (b) no unrecorded
funds or assets of L&L have been established for any purpose; (c) no
accumulation or use of L&L's corporate funds or assets has been made without
being properly account for on the books and records of L&L; (d) all payments by
or behalf of L&L have been duly and properly recorded and accounted for in its
respective books and records; (e) no fraudulent entry has been made in the books
and records of L&L for any reason; (f) no payment has been made by or on behalf
of L&L with the understanding that any part of such payment is to be used for
any purpose other than that described in the documents supporting such payment;
and (g) L&L has not made, directly or indirectly, any illegal contributions to
any political party or candidate.
Section 3.26Intellectual Property. L&L either owns or has valid licenses
to use all patents, copyrights, trademarks, software, databases, and other
technical information used in its business as presently conducted, subject to
limitations contained in the agreements governing the use of same, which
limitations are customary for companies engaged in businesses similar to L&L.
L&L is in compliance with all such licenses and agreements and there are no
pending or, to the knowledge of the Stockholders, threatened, Proceedings
challenging or questioning the validity or effectiveness of any license or
agreement relating to such property or the right of L&L to use, copy, modify or
distribute the same.
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COR\60713.4
Section 3.27Bank Accounts; Powers of Attorney. Section 3.27 of the
Disclosure Schedule sets forth with respect to each bank account or cash account
maintained by L&L at any bank, brokerage or other financial firm, the name of
the institution at which such account is maintained, the number of the account,
and the names of the individuals having authority to withdraw funds from such
account.
Section 3.28Director and Officer Indemnification. The directors, officers
and employees of L&L are not entitled to indemnification by L&L, except to the
extent that indemnification rights are provided for generally by Applicable Law
or such corporation's charter or by-laws and there are no pending claims for
indemnification by any such director, officer or employee.
Section 3.29Brokers' and Finders' Fee. No agent, broker, person or firm
acting on behalf of L&L or the Stockholders is or will be entitled to any
commission or brokers' or finders' fees payable by L&L in connection with any of
the transactions contemplated herein.
Section 3.30Documents and Written Materials. Originals or true and
complete copies of all documents or other written materials underlying items
listed in the Disclosure Schedule have been furnished or made available to BNC
in the form in which each of such documents is in effect.
Section 3.31Effectiveness of Representations and Warranties. All of the
representations and warranties of L&L and the Stockholders in this Agreement
shall be true in all material respects on the Closing Date and shall be deemed
to have been made again by L&L and the Stockholders on and as of the Closing
Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
BNC AND X.X. XXXXX
BNC and the X.X. Xxxxx jointly and severally represent and warrant to and
agree with L&L and the Stockholders as follows:
Section 4.1 Organization. Each of BNC and the X.X. Xxxxx is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation and has all requisite corporate power and authority
to own its properties and carry on its business as it is now being conducted. No
actions or proceedings to dissolve either BNC or the X.X. Xxxxx are pending.
Each of BNC and the X.X. Xxxxx is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the property owned, leased or
operated by it or the conduct of its business requires such a qualification or
licensing. Neither BNC nor X.X. Xxxxx is in violation of any provision of its
certificate or articles of incorporation or by-laws.
Section 4.2 Capital Stock: (a) The authorized capital stock of BNC
consists of 10,000,000 shares of BNC Common Stock, of which 2,338,720 shares are
issued and outstanding and 25,380 are held in its treasury, and 2,000,000 shares
of preferred stock, $.01 par value per share,
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COR\60713.4
none of which is issued and outstanding. All issued and outstanding shares of
BNC Common Stock have been duly authorized and are validly issued, fully paid
and non-assessable.
(b) Except for the options granted under BNC's incentive
compensation programs, an option granted to Xxxx Xxxxxxxx Incorporated in July
1995 and as specified in this Agreement, there are no outstanding stock options
or other rights to acquire any shares of the capital stock of BNC or any
security convertible into common stock and BNC does not have any obligation or
other commitment to issue, sell or deliver any of the foregoing or any shares of
its capital stock. All shares of BNC Common Stock have been issued in compliance
with all legal requirements and without violation of any pre-emptive or similar
rights.
(c) The shares of BNC Common Stock to be issued hereby, when issued
in accordance with the terms of this Agreement, will be validly issued, fully
paid and non-assessable.
Section 4.3 Authority; Enforceability. Each of BNC and the X.X. Xxxxx has
the requisite corporate power and authority to execute and deliver this
Agreement and the Employment Agreements, as the case may be, and to carry out
its obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and the Employment Agreements, and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of each of BNC and X.X.
Xxxxx , as appropriate, and no other corporate proceedings on the part of either
BNC or X.X. Xxxxx are necessary to authorize this Agreement or the Employment
Agreements or to consummate the transactions contemplated hereby and thereby.
This Agreement has been, and the Employment Agreements, when executed and
delivered in accordance with the terms hereof will be, duly executed and
delivered by each of BNC and the X.X. Xxxxx , as the case may be, and constitute
valid and binding obligations of each of BNC and the X.X. Xxxxx , as the case
may be, enforceable against each of them in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors' rights generally and
equitable principles which may limit the availability of certain equitable
remedies in certain instances.
Section 4.4 No Conflicts. Neither the execution and the delivery of this
Agreement or the Employment Agreements by BNC or X.X. Xxxxx, nor the
consummation of the transactions contemplated hereby or thereby, nor compliance
with any of the terms hereof or thereof, do or will (a) conflict with or result
in any breach of the provisions of the certificate or articles of incorporation
or by-laws of BNC or X.X. Xxxxx, (b) result in the violation or breach of, or
constitute (with or without due notice or the lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which either BNC or X.X. Xxxxx is a party or by which any of them or their
respective properties or assets may be bound, or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to either BNC or the
X.X. Xxxxx or any of their respective properties or assets.
Section 4.5 Consent. No consent, approval, order or authorization of, or
declaration, filing or registration with, any Governmental Entity or other
Person is required to be obtained or made by BNC or X.X. Xxxxx in connection
with the execution, delivery or performance by BNC or X.X.
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COR\60713.4
Xxxxx of this Agreement or the Employment Agreements or the consummation by any
of them of the transactions contemplated hereby or thereby.
Section 4.6 Brokers' and Finders' Fee. No Person acting on behalf of BNC
or X.X. Xxxxx is or will be entitled to any commission or brokers' or finders'
fees payable by BNC or X.X. Xxxxx in connection with any of the transactions
contemplated herein.
Section 4.7 Effectiveness of Representations and Warranties. All of the
representations and warranties of BNC and X.X. Xxxxx in this Agreement shall be
true in all material respects on the Closing Date and shall be deemed to have
been made again by BNC and X.X. Xxxxx on and as of the Closing Date.
ARTICLE 5
PRE-CLOSING COVENANTS
Section 5.1 Legal Requirements.
(a) Subject to the conditions set forth in Section 6 and to the
other terms and provisions of this Agreement, each of the parties to this
Agreement agrees to take, or cause to be taken, all reasonable actions necessary
to comply promptly with all legal requirements applicable to it with respect to
the transactions contemplated by this Agreement and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them. Each of L&L, the Stockholders, BNC and X.X. Xxxxx will
take all reasonable actions necessary to obtain, and will cooperate with each
other in obtaining, any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private party, required
to be obtained or made by it or the taking or any action contemplated by this
Agreement in order to effect the Merger in accordance with this Agreement at the
earliest practicable date.
Section 5.2 Access to Properties and Records. Until the Closing Date, L&L
shall allow BNC and its authorized representatives full access, during normal
business hours and on reasonable notice, to all of L&L's properties, offices,
equipment, inventory and other assets, documents, files, books and records, in
order to allow BNC a full opportunity to make such investigation and inspection
as its desires of L&L's business and assets. L&L shall further use its best
efforts to cause its employees, counsel and independent public accountants to be
available upon reasonable notice to answer questions of BNC's representatives
concerning the business and affairs of L&L, and shall further use its best
efforts to cause them to make available all relevant books and records in
connection with such inspection and examination, including, without limitation,
work papers for all audits and reviews of financial statements of L&L.
Section 5.3 Conduct of Business By Both Parties Prior to the Closing Date.
During the period from the date of this Agreement to the Effective Time, L&L and
BNC shall each use its reasonable best efforts to preserve the goodwill of
suppliers, customers and others having business relations with it and its
subsidiaries and to do nothing knowingly to impair its ability to keep and
preserve its business as it exists on the date of this Agreement. Without
limiting the generality of
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the foregoing, during the period from the date of this Agreement to the
Effective Time neither BNC (and BNC shall cause its subsidiaries not to) nor L&L
shall (and L&L shall without the prior written consent of the other:
(a) declare, set aside, increase or pay any dividend including any
stock dividend, or declare or make any distribution on, or directly or
indirectly combine, redeem, reclassify, purchase, or otherwise acquire, any
shares of its capital stock.
(b) amend its articles of incorporation or by-laws, or adopt or
amend any resolution or agreement concerning indemnification of its directors,
officers, employees or agents;
(c) commit or omit to do any act which act or omission would cause a
breach of any covenant contained in this Agreement or would cause any
representation or warranty contained in this Agreement to become untrue in any
material respect, as if each such representation and warranty were continuously
made from and after the date hereof;
(d) violate any applicable law, statute, rule, governmental
regulation or order that would have a Material Adverse Effect on such party;
(e) fail to maintain its books, accounts and records in the usual
manner on a basis consistent with that heretofore employed;
(f) fail to pay, or to make adequate provision in all material
respects for the payment of, all Taxes, interest payments and penalties due and
payable (for all periods up to the Effective Time, including that portion of its
fiscal year to and including the Effective Time) to any city, parish, state, the
United States, foreign or any other taxing authority, except those being
contested in good faith by appropriate proceedings and for which sufficient
reserves have been established, or make any elections with respect to Taxes; or
(g) authorize any of, or agree or commit to do any of, the foregoing
actions.
Section 5.4 Conduct of Business By L&L Prior to the Closing Date. During
the period from the date of this Agreement to the Effective Time, in addition to
its covenants set forth in Section 5.3, L&L shall use its best efforts to
preserve the possession and control of all of its assets other than those
permitted to be disposed of pursuant to the terms of this Agreement, shall
conduct its business only in the ordinary course consistent with past practice,
and, except as otherwise provided herein, shall not without the prior written
consent of BNC:
(a) make any material change in the conduct of its businesses and
operations or enter into any transaction other than in the ordinary course of
business consistent with past practices;
(b) issue any additional shares of capital stock or equity
securities or grant any option, warrant or right to acquire any capital stock or
equity securities; issue any security convertible into or exchangeable for its
capital stock; alter any material term of any of its outstanding
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securities or make any change in its outstanding shares of capital stock or
other ownership interests or its capitalization, whether by reason of exchange
or readjustment of shares, stock dividend or otherwise;
(c) incur, assume or guarantee any indebtedness for borrowed money,
issue any notes, bonds, debentures or other corporate securities or grant any
option, warrant or right to purchase any thereof;
(d) make any sale, assignment, transfer, abandonment or other
conveyance of any of its material assets or any part thereof, except
transactions pursuant to existing contracts set forth in the Disclosure Schedule
and dispositions of worn-out or obsolete equipment for fair or reasonable value
in the ordinary course of business consistent with past practices;
(e) subject any of its assets or properties to a Lien other than a
Permitted Lien;
(f) acquire any assets or properties, or enter into any other
transactions, other than in the ordinary course of business;
(g) make or commit to make any capital expenditure not disclosed in
Section 5.4 of the Disclosure Schedule;
(h) pay, loan or advance any amount to, or sell, transfer or lease
any properties or assets to, or enter into any agreement or arrangement with,
any of its Affiliates;
(i) guarantee any indebtedness for borrowed money or any other
obligation of any other Person;
(j) fail to keep in full force and effect insurance comparable in
amount and scope to coverage maintained by it (or on behalf of it) on the date
hereof;
(k) take any other action that would cause any of the
representations and warranties made by L&L in this Agreement not to remain true
and correct in all material respects;
(l) make any loan, advance or capital contribution to or investment
in any Person;
(m) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change required by
reason of a concurrent change in generally accepted accounting principles or
write-down the value of any inventory or write-off as uncollectible any accounts
receivable except in the ordinary course of business consistent with past
practices;
(n) enter into or modify any employment, severance or similar
agreement or arrangement with any director or employee, or grant any increase in
the rate of wages, salaries, bonuses or other compensation or benefits of any
executive officer or other employee other than
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increases in wages, salaries, bonuses, compensation or benefits to field or
operating employees made in the ordinary course of business;
(o) enter into any new line of business;
(p) make any tax election that is inconsistent with any
corresponding election made on a prior return or settle or compromise any income
tax liability for an amount in excess of the liability therefor that is
reflected on the L&L Financial Statements; or
(q) authorize any of, or agree or commit to do any of, the foregoing
actions.
Section 5.5 Public Statements. Prior to the Closing Date, none of the
parties to this Agreement shall, and each party shall use its best efforts so
that none of its advisors, officers, directors or employees shall, except with
the prior written consent of the other parties, publicize, announce or describe
to any third person, except their respective advisors and employees, the
execution or terms of this Agreement, the parties hereto or the transactions
contemplated hereby, except as required by law or as required pursuant to this
Agreement to obtain the consent of such third person; provided, in any case,
that BNC may make such disclosures and announcements as it is advised by counsel
are necessary under applicable securities laws.
Section 5.6 No Solicitation. The Stockholders and L&L will not prior to
the earlier of the Closing Date or the termination of this Agreement pursuant to
Section 7.1, (nor will they permit any of their Affiliates or any of L&L's
officers, directors or agents to) directly or indirectly solicit or participate
or engage in or initiate any negotiations or discussions, or enter into or
authorize any agreement or agreements in principle, or announce any intention to
do any of the foregoing, with respect to any offer or proposal to acquire all or
any significant part of L&L's business and properties or any L&L Common Stock or
other capital stock or securities, whether by merger, exchange, consolidation,
purchase of assets, purchase of stock or otherwise. The Stockholders and L&L
will notify BNC promptly upon receipt of any inquiry, offer or other
communication from any third party regarding any such activities.
Section 5.7 Update Information. Each party hereto will promptly disclose
to the other any information contained in its representations and warranties and
on the related section of the Disclosure Schedule that because of an event
occurring after the date hereof is incomplete or no longer correct; provided,
however, that none of such disclosures will be deemed or modified, amend, or
supplement the representations and warranties of such party, unless the other
party consents to such modification, amendment, or supplement in writing.
Section 5.8 Consultation and Reporting. During the period from the date of
this Agreement to the Closing Date, L&L will, subject to any applicable legal or
contractual restrictions, confer on a regular and frequent basis with BNC to
report material operational matters and to report on the general status of
ongoing operations. L&L will notify BNC of any unexpected emergency or other
change in the normal course of its business or in the operation of its
properties and of any governmental complaints, investigations, adjudicatory
proceedings, or hearings (or communications indicating that the same may be
contemplated) and will keep the other fully informed of such events
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and permit its representatives prompt access to all materials prepared by or on
behalf of such party or served on them, in connection therewith.
ARTICLE 6
CLOSING CONDITIONS
Section 6.1 Conditions Applicable to all Parties. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or, where permissible, waiver by
such party of the following conditions at or prior to the Closing Date:
(a) No statute, rule, regulation, executive order, decree,
preliminary or permanent injunction or restraining order shall be in effect by
any court of competent jurisdiction or other Governmental Entity which prohibits
or restricts the consummation of the transactions contemplated by this
Agreement, and no action, suit, claim or proceeding by a Governmental Entity
before any court or other Governmental Entity shall have been commenced and be
pending which seeks to prohibit or restrict the consummation of the transactions
contemplated by this Agreement; and
(b) All consents and approvals of any Governmental Entity necessary
for consummation of the transactions contemplated hereby shall have been
obtained.
Section 6.2 Conditions to Obligations of BNC and X.X. Xxxxx . The
obligations of BNC and X.X. Xxxxx to consummate the transactions contemplated by
this Agreement are subject to the satisfaction of the following conditions,
unless waived by BNC and X.X. Xxxxx :
(a) The representations and warranties of L&L and the Stockholders
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date, except as otherwise contemplated by this Agreement,
and L&L and the Stockholders shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date.
(b) All consents and approvals of third parties necessary for
consummation of the transactions contemplated by this Agreement shall have been
obtained.
(c) Each of the Stockholders shall have executed and delivered to
BNC an Employment Agreement in the form attached hereto as Exhibit "C."
(d) BNC shall have received a certificate, dated the Closing Date,
of the president of L&L and each of the Stockholders certifying as to the
matters specified in Section 6.2(a).
(e) L&L will have delivered to BNC, each dated as of a date not
earlier than five days prior to the Closing Date, (i) copies of the articles of
incorporation certified by the appropriate government official of L&L, (ii)
certificates from the appropriate governmental official to the effect
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that L&L is in good standing in L&L's jurisdiction of incorporation and listing
all organizational documents on file, (iii) a certificate from the appropriate
governmental official in each jurisdiction in which L&L is qualified to do
business to the effect that it is in good standing in such jurisdiction and (iv)
certificates as to the tax status of L&L in its jurisdiction of organization and
each jurisdiction in which it is qualified to do business.
(f) BNC shall have received a certificate of a duly authorized
officer of L&L, dated the Closing Date, certifying as to the incumbency of any
person executing this Agreement or any certificate or other document delivered
in connection with this Agreement and certifying as to such other matters as BNC
shall reasonably request.
(g) BNC shall have received a letter from Xxxxxx Xxxxxxxx LLP, its
independent public accountants, stating that the Merger qualifies as a pooling
of interests under generally accepted accounting principles.
(h) Any and all changes made to the Disclosure Schedule shall be
satisfactory in all respects to BNC.
Section 6.3 Conditions to Obligations of L&L and the Stockholders. The
obligations of L&L and the Stockholders to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of the following
conditions, unless waived by L&L and the Stockholders:
(a) The representations and warranties of BNC and X.X. Xxxxx set
forth in this Agreement shall be true and correct in all material respects as of
the date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date, except as otherwise contemplated by this Agreement, and BNC
and X.X. Xxxxx shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date.
(b) BNC shall have the Merger Consideration available for delivery
pursuant to Section 2.
(c) BNC shall have executed and delivered to each of the
Stockholders an Employment Agreement.
(d) L&L shall have received a certificate, dated the Closing Date,
of the president of BNC and X.X. Xxxxx certifying as to the matters specified in
Section 6.3(a).
(e) All governmental and other third-party consents and approvals,
if any, necessary to permit the consummation of the transactions contemplated by
this Agreement will have been received.
(f) The Xxxx and Xxxxxxxxx Agreements shall have been amended to
incorporate the following changes:
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(i) employment term: from the effective date of the Merger
until termination on December 31, 2000.
(ii) salary: $100,000 per calendar year commencing January 1,
1998; no commissions.
(iii) health insurance: Employee and his spouse shall be
entitled to coverages equal to the benefits provided by BNC to its management
level employees as of January 1, 1998, and until the employee and his spouse,
respectively, are eligible for benefits under the Federal Medicare System;
provided that the employee remains employed by BNC or one of its subsidiaries.
After employee is no longer employed by BNC or one of its subsidiaries, the
employee will reimburse BNC for the costs of insurance coverage for himself and
his spouse.
(g) BNC shall have executed guarantee agreements with respect to the
Xxxx and Charnholm Agreements.
ARTICLE 7
TERMINATION AND AMENDMENT
Section 7.1 Termination. This Agreement may be terminated and may be
abandoned at any time prior to the Closing Date:
(a) by mutual consent of BNC, L&L and the Stockholders ;
(b) by BNC, L&L or the Stockholders, as the case may be, if
(a) there shall have been a material breach of any representation, warranty,
covenant or agreement on the part of L&L or the Stockholders or on the part of
BNC or X.X. Xxxxx, as the case may be, which breach shall not have been cured
prior to the earlier of (i) 10 days following notice of such breach and (ii) the
Closing Date; or (b) any permanent injunction or other order of a court or other
competent Governmental Entity preventing the transactions contemplated by this
Agreement shall have become final and nonappealable; or
(c) by BNC or L&L if the transactions contemplated by this
Agreement shall not have been consummated on or before January 31, 1998;
provided, that the right to terminate this Agreement under this Section 7.1(c)
shall not be available to any party whose breach of its representations and
warranties in this Agreement or whose failure to perform any of its covenants
and agreements under this Agreement has resulted in the failure of the
transactions contemplated by this agreement to occur on or before such date.
Section 7.2 Effect of Termination. In the event of a termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation under any provisions hereof on the
part of BNC, L&L or the Stockholders, except (a) pursuant to the covenants and
agreements contained in Section 10.1 and this Section 7.2 and (b) to the extent
that such termination results from the willful material breach by a party hereto
of any of
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its representations, warranties, covenants or agreements set forth in this
Agreement, in which case the non-breaching party shall have a right to recover
its damages caused thereby.
Section 7.3 Extension; Waiver. At any time prior to the Closing Date, the
parties hereto may, in their respective sole discretion and to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto; (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto; and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed by or on behalf of such party.
ARTICLE 8
INDEMNIFICATION; REMEDIES
Section 8.1 Indemnification by Stockholders. Except as otherwise expressly
provided in ------------------------------- this Article 8, from and after the
Closing Date the Stockholders shall defend, indemnify and hold harmless BNC and
each of BNC's officers, directors, employees, Affiliates, successors and assigns
(BNC and such persons, collectively, "BNC's Indemnified Persons"), and shall
reimburse BNC's Indemnified Persons, for, from and against each and every
demand, claim, action, loss, liability, judgment, damage, cost and expense
(including, without limitation, interest, penalties, costs of preparation and
investigation, and the reasonable fees, disbursements and expenses of attorneys,
accountants and other professional advisors) (collectively, "Losses") imposed on
or incurred by BNC's Indemnified Persons, directly or indirectly, relating to,
resulting from or arising out of: (a) any inaccuracy in any representation or
warranty of L&L or the Stockholders in this Agreement or any certificate,
document or other instrument delivered or to be delivered pursuant hereto in any
respect whether or not BNC's Indemnified Persons relied thereon or had knowledge
thereof or (b) any breach or nonperformance of any covenant, agreement or other
obligation of L&L or the Stockholders under this Agreement or any certificate,
document or other instrument delivered pursuant hereto..
Section 8.2 Indemnification by BNC. Except as otherwise expressly provided
in this Article 8, from and after the Closing Date BNC shall defend, indemnify
and hold harmless the Stockholders and each of their respective Affiliates,
successors and assigns (such persons, collectively, "L&L's Indemnified
Persons"), and shall reimburse L&L's Indemnified Persons, for, from and against
all Loses imposed on or incurred by L&L's Indemnified Persons, directly or
indirectly, relating to, resulting from or arising out of: (a) any inaccuracy in
any representation or warranty of BNC or the X.X. Xxxxx in this Agreement or any
certificate, document or other instrument delivered pursuant hereto in any
respect whether or not L&L's Indemnified Persons relied thereon or had knowledge
thereof or (b) any breach or nonperformance of any covenant, agreement or other
obligation of BNC or X.X. Xxxxx under this Agreement or any certificate,
document or other instrument delivered pursuant hereto.
Section 8.3 Notice and Defense of Third Party Claims. If any third party
demand, claim, action or proceeding shall be brought or asserted under this
Article 8 against an indemnified party
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COR\60713.4
or any successor thereto (the "Indemnified Person") in respect of which
indemnity may be sought under this Article 8 from an indemnifying person or any
successor thereto (the "Indemnifying Person"), the Indemnified Person shall give
prompt written notice thereof to the Indemnifying Person who shall have the
right to assume its defense, including the hiring of counsel reasonably
satisfactory to the Indemnified Person and the payment of all expenses; except
that any delay or failure to so notify the Indemnifying Person shall relieve the
Indemnifying Person of its obligations under this Article 8 only to the extent,
if at all, that it is prejudiced by reason of such delay or failure. The
Indemnified Person shall have the right to employ separate counsel in any of the
foregoing actions, claims or proceedings and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Person unless both the Indemnified Person and the Indemnifying
Person are named as parties and the Indemnified Person shall in good faith
determine that representation by the same counsel is inappropriate. In the event
that the Indemnifying Person, within ten days after notice of any such action or
claim, does not assume the defense thereof, the Indemnified Personal shall have
the right to undertake the defense, compromise or settlement of such action,
claim or proceeding for the account of the Indemnifying Person, subject to the
right of the Indemnifying Person to assume the defense of such action, claim or
proceeding with counsel reasonably satisfactory to the Indemnified Person at any
time prior to the settlement, compromise or final determination thereof.
Anything in this Article 8 to the contrary notwithstanding, the Indemnifying
Person shall not, without the Indemnified Person's prior consent, settle or
compromise any action or claim or consent to the entry of any judgment with
respect to any action, claim or proceeding for anything other than money damages
paid by the Indemnifying Person. The Indemnifying Person may, without the
Indemnified Person's prior consent, settle or compromise any such action, claim
or proceeding or consent to entry of any judgment with respect to any such
action or claim that requires solely the payment of money damages by the
Indemnifying Person and that includes as an unconditional term thereof the
release by the claimant or the plaintiff of the Indemnified Person from all
liability in respect of such action, claim or proceeding.
Section 8.4 Survival of Representations and Warranties.
(a) The obligation of the Stockholders to indemnify BNC's
Indemnified Persons pursuant to Section 8.1 shall survive the consummation of
the transactions contemplated by this Agreement.
(b) The obligation of BNC to indemnify L&L's Indemnified Persons
pursuant to Section 8.2 shall survive the consummation of the transactions
contemplated by this Agreement.
(c) The provisions of this Article 8 shall apply to any claim of
Loss resulting or arising from any untruth or inaccuracy of any representation
or warranty of any party to this Agreement which gives rise to an indemnity to
one party from another party or parties, with the intent that all such claims
shall be subject to the procedures, limitations and other provisions contained
in this Article 8. The indemnification provided by Sections 8.1 and Section 8.2
shall be the sole and exclusive remedy available to the parties hereto for any
breach or inaccuracy of any of the representations or warranties by a party set
forth in this Agreement. Notwithstanding the foregoing, the provisions of this
Article 8 shall not be deemed to preclude an action by any party for,
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or a recovery pursuant to a final decision of a court of competent jurisdiction
against any party for, actual, and not negligent or unintentional, fraud.
ARTICLE 9
DEFINED TERMS
Section 9.1 Definitions. In addition to the other defined terms used
herein, as used in this Agreement, the following terms when capitalized have the
meanings indicated.
"Affiliate" has the meaning ascribed by Rule 12b-2 promulgated under the
Exchange Act.
"Agreement" means this Agreement and Plan of Merger, including the
Exhibits hereto and the Disclosure Schedule, all as amended or otherwise
modified from time to time.
"Applicable Law" means any statute, law, rule or regulation or any
judgement, order, writ, injunction or decree of any Governmental Entity to which
a specified Person or its property is subject.
"Benefit Arrangement" means any employment, severance or similar contract,
or any other contract, plan, policy or arrangement (whether or not written)
providing for compensation, bonus, profit-sharing, stock option or other stock
related rights or other forms of incentive or deferred compensation, vacation
benefits, insurance coverage (including any self-insured arrangement), health or
medical benefits, disability benefits, severance benefits and post-employment or
retirement benefits (including compensation, pension, health, medical or life
insurance benefits), other than the Employee Plans, that (a) is maintained,
administered or contributed to by the employer and (b) covers any employee or
former employee of the employer.
"Additional Shares" has the meaning ascribed to it in Section 2.1.
"Articles of Merger" means the Articles of Merger in the form attached
hereto as Exhibit "B."
"Closing" means the consummation of the Merger and the other transactions
contemplated by this Agreement.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended.
"Disclosure Schedule" means the disclosure schedules and other documents
attached hereto as Exhibit "D" prepared by L&L and the Stockholders in
accordance with the applicable provisions of this Agreement.
"Effective Time" has the meaning ascribed to it in Section 1.2.
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"Employee Plan" means a plan or arrangement as defined in Section 3(3) of
ERISA, that (a) is subject to any provision of ERISA, (b) is maintained,
administered or contributed to by the employer and (c)covers any employee or
former employee of the employer.
"Employment Agreement" means an agreement in the form attached as Exhibit
"C" hereto to be entered into between BNC and each of the Stockholders.
"Environmental Laws" means all federal, state, local and foreign laws,
common law duties, ordinances, codes and regulations relating to pollution or
the protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Entity" means any court or tribunal in any jurisdiction or
any public, governmental or regulatory body, agency, department, commission,
board, bureau or other authority or instrumentality.
"Indemnified Person" has the meaning ascribed to it in Section 8.3.
"Indemnifying Person" has the meaning ascribed to it in Section 8.3.
"knowledge" whenever the term "knowledge" or "to the knowledge," or words
of similar import are used herein, the same shall mean and include any fact or
circumstance to which the affected Person either (a) had actual knowledge of, or
(b) should have had knowledge of, based upon reasonable inquiry made.
"Xxxx and Xxxxxxxxx Agreements" has the meaning ascribed to it in Section
2.6.
"L&L Annual Financial Statements" means the balance sheets and related
statements of operations, stockholders' equity and cash flows, and the related
notes thereto of L&L as of and for the fiscal years ended December 31, 1996 and
1995.
"L&L Common Stock" means the common stock of L&L.
"L&L Financial Statements" means the L&L Annual Financial Statements and
the L&L Interim Financial Statements, collectively.
"L&L Indemnified Persons" has the meaning ascribed to it in Section 8.2.
"L&L Interim Financial Statements" means the unaudited balance sheet and
the related unaudited statements of income and cash flows of L&L as of and for
the nine-month period ended September 30, 1997.
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"Leases" means any executory lease to which L&L is subject having future
rental payments of more than $20,000 in the aggregate.
"Leased Properties" has the meaning ascribed to it in Section 3.11.
"Liens" means pledges, liens, defects, leases, licenses, equities,
conditional sales contracts, charges, claims, encumbrances, security interests,
easements, restrictions, chattel mortgages, mortgages or deeds of trust, of any
kind or nature whatsoever.
"Material Adverse Effect" means any fact, circumstance, event or condition
which has or would have a material adverse effect on the business, operations,
assets, financial condition of or prospects of L&L.
"Material Contract," with respect to any Person, means any executory
contract, agreement or other understanding, whether or not reduced to writing,
to which such Person or its respective property is subject, including, without
limitation, (a) contracts, agreements and commitments not made in the ordinary
course of business involving an amount in excess of $20,000; (b) purchase
contracts and supply contracts involving an amount in excess of $20,000 on an
annual basis; (c) contracts, loan agreements, repurchase agreements, mortgages,
security agreements, trust indentures, promissory notes and other documents or
arrangements relating to the borrowing of money or for lines of credit; (d) any
hedge, swap, exchange, futures or similar agreements or contracts; (e)
agreements and other arrangements for the sale of any assets other than in the
ordinary course of business or for the grant of any options or preferential
rights to purchase any assets, property or rights involving an amount in excess
of $20,000; (f) any joint venture, partnership or similar contract involving
sharing revenues, expenses or profits; (g) any non-disclosure agreement,
non-competition agreement, tax indemnity, tax sharing or tax allocation
agreement; (h) documents granting any power of attorney to any Person; (i)
suretyship contracts, working capital maintenance or other forms of guaranty
agreements other than bonds and letters of credit executed or obtained in
connection with the submission of bids to contracting parties; (j) contracts or
commitments limiting or restraining such Person from engaging or competing in
any lines of business or with any Person; or (k) stockholder agreements or
agreements relating to the sale issuance or other transfer of any securities.
"Merger" means, the merger of L&L with and into X.X. Xxxxx pursuant to this
Agreement and the Articles of Merger.
"Merger Consideration" has the meaning ascribed to it in Section 2.1.
"Multiemployer Plan" means a plan or arrangement as defined in Section
4001(a)(3) and 3(37) of ERISA.
"NBCA" means the North Dakota Business Corporation Act, as amended from
time to time.
"Owned Properties" has the meaning ascribed to it in Section 3.10.
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COR\60713.4
"Permitted Liens" means any mechanic's, worker's, materialmen's,
operator's, maritime or other liens arising as a matter of law in the ordinary
course of business.
"Personal Property" means all machinery, equipment, furniture, fixtures
and other corporeal or incorporeal (tangible and intangible) personal property
used by L&L to carry on its business as presently conducted.
"Person" means an individual, firm, corporation, general or limited
partnership, limited liability company, limited liability partnership, joint
venture, trust, governmental authority or body, association, unincorporated
organization or other entity.
"Policies" has the meaning ascribed to it in Section 3.21.
"Pre-Closing Periods" means all Tax periods ending at or before the
Closing Date and, with respect to any Tax period that includes but does not end
at the Closing Date, the portion of such period that ends at and includes the
Closing Date.
"Primary Share Delivery Date" has the meaning ascribed to it in Section
2.2.
"Primary Shares" has the meaning ascribed to it in Section 2.1.
"Proceedings" means any suit, action, proceeding, dispute or claim before
or investigation by any Governmental Entity.
"Returns" means all returns, reports, estimates, declarations and
statements of any nature regarding Taxes for any Pre-Closing Period required to
be filed by the taxpayer relating to its income, properties or operations.
"Securities Act" means the Securities Act of 1933, as amended.
"Surviving Corporation" has the meaning ascribed to it in Section 1.1.
"Taxes" means any federal, state, local, foreign or other taxes
(including, without limitation, income, alternative minimum, franchise,
property, sales, use, lease, excise, premium, payroll, wage, employment or
withholding taxes), fees, duties, assessments, withholdings or governmental
charges of any kind whatsoever (including interest, penalties and additions to
tax).
"BNC Common Stock" means the common stock, $.01 par value per share, of
BNC.
"BNC's Indemnified Persons" has the meaning ascribed to it in Section 8.1.
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COR\60713.4
ARTICLE 10
MISCELLANEOUS
Section 10.1Confidentiality.
(a) Until the Closing Date and subsequent to the termination of this
Agreement pursuant to Section 7.1, BNC will not utilize (except in evaluating
the transactions contemplated by this Agreement) and will keep confidential and
will not disclose to any third party any information obtained by it from L&L or
its representatives in connection with this Agreement except (a) that
information may be disclosed by BNC to its advisors in connection with the
negotiation of and the activities conducted pursuant to this Agreement, or (b)
to the extent that such information is or becomes generally available to the
public through no act or omission of BNC in violation of this Agreement.
(b) Until the Closing Date and subsequent to the termination of this
Agreement pursuant to Section 7.1, L&L and the Stockholders will not utilize
(except in evaluating the transactions contemplated by this Agreement) and will
keep confidential and will not disclose to any third party any information
obtained by it from BNC or its representatives in connection with this Agreement
except (a) that information may be disclosed by BNC to its advisors in
connection with the negotiation of and the activities conducted pursuant to this
Agreement, or (b) to the extent that such information is or becomes generally
available to the public through no act or omission of L&L or the Stockholders in
violation of this Agreement.
Section 10.2Remedies. Any party having any rights under any provisions of
this Agreement will have all rights and remedies set forth in this Agreement and
all rights and remedies which such party may have been granted at any time under
any other effective agreement or contract and all of the other rights which such
party may have under any Applicable Law. Any party having any rights or remedies
under this Agreement will be entitled to enforce such rights specifically,
without posting a bond or other security, to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
granted by law.
Section 10.3Notices. All notices hereunder must be in writing and shall be
deemed to have given upon receipt of delivery by: (a) personal delivery to the
designated Person, (b) certified or registered mail, postage prepaid, return
receipt requested, (c) a nationally recognized overnight courier service
(against a receipt therefor) or (d) facsimile transmission with confirmation of
receipt. All such notices must be addressed as follows or such other address as
to which any party hereto may have notified the other in writing:
If to BNC or X.X. Xxxxx , to:
000 Xxxx Xxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxxxx
Facsimile transmission No.: 000-000-0000
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COR\60713.4
if to L&L or the Stockholders, to:
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
Attention: Xxxx X. Xxxx
Facsimile transmission No.: 000-000-0000
Section 10.4Interpretation; Schedules. (a) When a reference is made in
this Agreement to a section or exhibit, such reference shall be to a section of,
or an exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
(b) The information set forth in the Disclosure Schedule to this
Agreement is qualified in its entirety by reference to the specific provisions
of this Agreement, and is not intended to constitute, and shall not be construed
as constituting, separate representations or warranties of the party to which
the Disclosure Schedule relates except as and to the extent provided in this
Agreement. Inclusion of information in the Disclosure Schedule shall not be
construed as an admission that such information is material for purposes of the
specific provisions of this Agreement to which such information relates.
Information included in the Disclosure Schedule that is not required to be so
included under the specific provisions of this Agreement shall be deemed to be
included for informational purposes only.
Section 10.5Headings; Gender. When a reference is made in this Agreement
to a section, exhibit or schedule, such reference shall be to a section, exhibit
or schedule of this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. All
personal pronouns used in this Agreement shall include the other genders,
whether used in the masculine, feminine or neuter gender, and the singular shall
include the plural and vice versa, whenever and as often as may be appropriate.
Section 10.6Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents, exhibits and instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements, and
understandings and communications, both written and oral, among the parties with
respect to the subject matter hereof, and (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
Section 10.7Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of North Dakota without regard to any
applicable principles of conflicts of law.
Section 10.8Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
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COR\60713.4
Section 10.9Severability. If any term or other provision of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal or incapable
of being enforced by reason of any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any adverse manner to either party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible, and in any case such
term or provision shall be deemed amended to the extent necessary to make it no
longer invalid, illegal or unenforceable.
Section 10.1Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same document.
Section 10.1Amendment. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed themselves or by their respective duly authorized officers as of the date
first written above.
BNCCORP., INC.
By:/s/ Xxxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx
President
X.X. XXXXX INSURANCE COMPANY
By:/s/ Xxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx
President
LIPS & XXXX, INC.
By:/s/ Xxxx X. Xxxx
Xxxx X. Xxxx
President
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COR\60713.4
STOCKHOLDERS:
/s/ Xxxxxxx Xxxx
Xxxxxxx Xxxx
/s/ Xxxx Xxx
Xxxx Xxx
/s/ Xxxx Xxxxx
Xxxx Xxxxx
/s/ Xxxxxxx Xxxx
Xxxxxxx Xxxx
/s/ Xxxxx Xxxxxxxxxxx
Xxxxx Xxxxxxxxxxx
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COR\60713.4
EXHIBIT A
MERGER CONSIDERATION
PRIMARY SHARES
The information set forth below is intended only to demonstrate the
calculation of the number of Primary Shares to be distributed to the
Stockholders on the Primary Share Delivery Date. The numbers included herein
will be adjusted to reflect the financial statements of L& L as of and for the
year ended December 31, 1997, when such financial statements delivered to BNC.
The price per share of BNC Common Stock and the commission multiple, $15 and
1.75, respectively, contained herein, will not, however, be adjusted.
Capitalized terms are used herein as defined in the Agreement to which this
exhibit is attached.
Purchase Price
1995 Gross commission income $ 1,621,352
1996 Gross commission income 1,606,177
1997 Gross commission income (Xxx) 1,582,155
------------
TOTAL $ 4,809,684
============
AVERAGE OF THREE YEARS $ 1,603,228
============
Average @ 1.75 $ 2,805,649
Less
Liabilities assumed
Xxxx Xxxx contract 251,211
Xxxxxx Xxxxxxxxx contract 275,786
Evan Lips contract 127,776
Xxxx Xxxx contract 578,576
Xxxx Xxxxxxxxx contract 578,576
Bank note payable 102,616
Accounts payable 3,237
Accrued expenses 76,158
Insurance company payables 347,044
Other liabilities 0
------------
Total liabilities 2,340,980
Assets acquired
Cash (126,841)
Accounts receivable (142,907)
Notes Receivable (44,025)
Less Bad Debt Reserve & W/O's 77,863
Land (0)
L/H improvements, net of accum. deprec. (0)
F&Fixtures, net of accum deprec. (105,223)
Other assets (0)
Great West Profit Sharing Receivable (72,566)
Cash Surrender Value of Life Insurance (51,368)
Prepaid Federal Income Tax (15,680)
Prepaid State Income Tax (5,760)
-------------
Total assets (486,506)
Excess of liabilities over assets (1,854,474)
--------------
Purchase price $ 951,175
=============
BNC shares issued @ $15/share 63,412
=============
Fractional
Lips & Xxxx Shareholders L&L Shares BNC Shares Cash
------------------------------------- ---------- ---------- -----------
Xxxxxxx Xxxx/Xxxxx Xxxxxx 396.62 14,158 $26.84
Xxxx Xxx 344.89 12,312 $14.53
Xxxx Xxxxx 344.89 12,312 $14.53
Xxxx Xxxx 344.89 12,312 $14.53
Xxxxx Xxxxxxxxxxx 344.89 12,312 $14.53
---------- ---------- -----------
1776.18 63,406 $84.96
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COR\60713.4
EXHIBIT A-1
MERGER CONSIDERATION
ADDITIONAL SHARES
The information set forth below is intended only to demonstrate the
calculation of the number of Additional Shares to be distributed to the
Stockholders on the first anniversary of the Primary Share Delivery Date. The
numbers included herein will be adjusted to reflect the actual notes and
accounts receivable balances of L & L as of December 31, 1997 and the actual
amount accrued by L & L at December 31, 1997 for profit sharing payments from
certain insurance companies to be received in 1998 for business transacted in
1997 (the "Contingency Payment Accrual"). The price per share of BNC Common
Stock of $15 and the total reserve for notes and accounts receivable of
$100,000, contained herein, will not, however, be adjusted. Capitalized terms
are used herein as defined in the Agreement to which this exhibit is attached.
On the first anniversary of the Primary Share Delivery Date, the
Stockholders will be entitled to receive the number of shares of BNC Common
Stock calculated in accordance with the following equation: (A + B + C + D)
divided by $15 and, pursuant to Section 2.5 of the Agreement, a check for any
amount representing a fractional share both allocated to the Stockholders in the
same proportions as the shares delivered on the Primary Share Delivery Date.
WHEREIN:
"A" is equal to the amount collected on the X. X. Xxxxx Trucking note
receivable exceeding $16,353.00 (12/31/97 note balance of $46,353 less reserve
of $30,000);
"B" is equal to the amount collected on the Xxxx Trucking LLC note receivable
exceeding $0.00 (12/31/97 note balance of $22,137 less reserve of $22,137);
"C" is equal to the amount collected on all accounts receivable exceeding
$167,472.00 (12/31/97 total trade accounts receivable of $215,335.00 less
remaining reserve of $47,863.00 ($100,000 total agreed-upon reserve less amounts
reserved for X.X. Xxxxx Trucking and Xxxx Trucking LLC notes receivable)); and
"D" is equal to the amount collected in 1998 for profit sharing payments from
certain insurance companies for business transacted in 1997 less the Contingency
Payment Accrual made by L & L as of December 31, 1997.
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COR\60713.4
EXHIBIT B
ARTICLES OF MERGER
of
Lips & Xxxx, Inc.
(a North Dakota corporation)
with and into
X. X. Xxxxx Insurance Agency, Inc.
(a North Dakota corporation)
(filed pursuant to Section 10-19.1-58 of the
North Dakota Business Corporation Act)
In order to effect the merger of Lips & Xxxx, Inc., a North Dakota
corporation ("L & L"), with and into X. X. Xxxxx Insurance Agency, Inc., a North
Dakota corporation ("X. X. Xxxxx"), each of X. X. Xxxxx and L & L certifies
that:
First: The Amended & Restated Agreement and Plan of Merger between L & L
and X. X. Xxxxx (the "Agreement"), providing for the merger of L & L with and
into X. X. Xxxxx (the "Merger") has been duly approved by the shareholders of L
& L and X. X. Xxxxx entitled to vote on such matters in accordance with the
requirements of Section 10-19.1-98 of the North Dakota Business Corporation Act.
Second: A copy of the Agreement is attached hereto and made a part hereof.
Third: These Articles of Merger shall be effective on the date filed and
recorded with the Secretary of State of North Dakota.
IN WITNESS WHEREOF, these Articles of Merger have been executed on this
1st day of January, 1998 by X. X. Xxxxx and L & L, each acting through its
President and Secretary.
X. X. XXXXX INSURANCE AGENCY, INC.
Attest: a North Dakota Corporation
By: /s/ Xxxxxxx X. Xxxxxxxxx By:/s/ Xxxxx Xxxxxxxxx
Secretary President
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COR\60713.4
LIPS & XXXX, INC.
Attest: a North Dakota Corporation
By: /s/ Xxxx Xxx By: /s/ Xxxx Xxxx
Secretary President
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COR\60713.4
