[EXECUTION COPY]
EXHIBIT 2.1
MERGER AGREEMENT
BY AND AMONG
SAFETY HOLDINGS, INC.,
SAFETY ACQUISITION, INC.,
XXXXXX XXXXX CORPORATION
AND
THE SHAREHOLDERS OF
XXXXXX XXXXX CORPORATION
DATED AS OF MAY 31, 2001
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
1.01 Definitions.........................................................1
1.02 Interpretation......................................................8
1.03 Accounting Conventions..............................................9
1.04 Business Days.......................................................9
ARTICLE II
THE MERGER
2.01 The Merger..........................................................9
2.02 Time and Place of Closing..........................................11
2.03 Directors..........................................................12
2.04 Officers...........................................................12
2.05 Certificate of Incorporation and By-Laws...........................12
ARTICLE III
REPRESENTATIONS AND WARRANTIES
RELATING TO THE COMPANY AND SUBSIDIARIES
3.01 Corporate Organization; Etc........................................12
3.02 Capitalization.....................................................13
3.03 Authority Relative to this Agreement...............................13
3.04 Consents and Approvals; No Violations..............................13
3.06 Financial Statements...............................................14
3.07 Absence of Certain Changes.........................................15
3.08 Compliance with Law................................................15
3.09 Contracts and Commitments..........................................15
3.10 No Undisclosed Liabilities.........................................16
3.11 No Default.........................................................16
3.12 Litigation........................................................16
3.13 Taxes..............................................................16
3.14 Brokers and Finders................................................17
3.15 Title to Properties................................................17
3.16 Intellectual Property..............................................18
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3.17 Insurance..........................................................19
3.18 Environmental Matters..............................................19
3.19 Employee Benefit Plans.............................................20
3.20 Insurance Business.................................................21
3.21 Real Property......................................................24
3.22 Permits............................................................24
3.23 Reinsurance........................................................24
3.24 No Other Agreements to Sell the Business...........................25
3.25 Accuracy of Information............................................25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER AND ACQUISITION
4.01 Organization.......................................................26
4.02 Authority Relative to this Agreement...............................26
4.03 Consents and Approvals; No Violation...............................27
4.04 Litigation.........................................................27
4.05 Brokers and Finders................................................27
4.06 Purchaser's Acknowledgments........................................28
ARTICLE V
COVENANTS OF THE PARTIES
5.01 Conduct of Business................................................28
5.02 Access to Information..............................................30
5.03 Further Assurances.................................................30
5.04 Filings............................................................31
5.05 Public Announcements...............................................31
5.06 Fees and Expenses..................................................31
5.07 Disclosure Supplements............................................31
5.08 Employee Benefit Matters...........................................32
5.09 Exclusivity........................................................33
5.10 Financing Commitments..............................................34
5.11 Appointment of Shareholder Representative..........................34
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5.12 Termination of Certain Agreements..................................35
5.13 Meeting of Shareholders............................................35
5.14 Shareholders/Voting Arrangement....................................35
5.15 Proxy Statement....................................................35
5.16 Assignment.........................................................36
ARTICLE VI
CLOSING CONDITIONS
6.01 Conditions to the Obligations of the Company and the Shareholders
to Effect the Transactions Contemplated Hereby.....................36
6.02 Conditions to the Obligations of the Purchaser and Acquisition
to Effect the Transactions Contemplated Hereby.....................37
ARTICLE VII
TERMINATION AND ABANDONMENT
7.01 Termination........................................................39
7.02 Procedure and Effect of Termination................................39
ARTICLE VIII
INDEMNIFICATION
8.01 Survival, Representations and Warranties...........................40
8.02 Indemnification Obligation of the Shareholders.....................40
8.03 Indemnification Obligation of Purchaser............................41
8.04 Indemnification Procedures.........................................41
8.05 Payment............................................................42
8.06 Adjustment to Indemnities..........................................42
8.07 Payment of Taxes ..................................................43
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01 Amendment and Modification.........................................45
9.02 Waiver of Compliance; Consents.....................................45
9.03 Notices............................................................45
9.04 Assignment.........................................................46
9.05 Jurisdiction; Forum................................................46
9.06 Governing Law......................................................47
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9.07 Counterparts.......................................................47
9.08 Interpretation.....................................................47
9.09 Entire Agreement...................................................47
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MERGER AGREEMENT
THIS
MERGER AGREEMENT is made as of this 31st day of May, 2001, by and
among Safety Holdings, Inc., a Delaware corporation (the "PURCHASER"), Safety
Acquisition, Inc., a Delaware corporation and first-tier, wholly-owned
subsidiary of the Purchaser ("ACQUISITION"), Xxxxxx Xxxxx Corporation, a
Massachusetts corporation (the "COMPANY"), and the holders of Company Capital
Stock (the "SHAREHOLDERS").
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in the related Certificate of Merger attached as EXHIBIT A hereto (the
"CERTIFICATE OF MERGER"), and in accordance with the
Massachusetts Business
Corporation Law ("MBCL") and the Delaware General Corporation Law ("DGCL"),
Acquisition will be merged with and into the Company (the "MERGER") with the
Company being the surviving corporation (the "SURVIVING CORPORATION");
WHEREAS, the Surviving Corporation will be a corporation organized under
the DGCL pursuant to Section 78 of the MBCL, and Section 252 of the DGCL; and
WHEREAS, the parties to this Agreement desire for Acquisition and the
Company to engage in, and the boards of directors of the Purchaser, Acquisition,
and the Company have approved and adopted this Agreement and have approved, the
Merger and other transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises, covenants and agreements
set forth in this Agreement and for other good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged, and intending to
be legally bound, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 DEFINITIONS. The terms defined in this SECTION 1.01, whenever used
herein, shall have the following meanings for all purposes of this Agreement.
"Accounting Referee" means KPMG LLP.
"Acquisition" shall have the meaning set forth in the preamble hereof.
"Acquisition Proposal" shall have the meaning set forth in SECTION 5.09
hereof.
"Affiliate" means, with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlled" and "controlling" have meanings correlative thereto.
"Affiliate Contracts" shall mean any Contract between the Company or any of
its Subsidiaries, on the one hand, and any Affiliate or Associate of the Company
or any of its Subsidiaries, on the other hand. For clarity, the term "Affiliate
Contracts" shall not include Contracts solely between the Company and any
Subsidiaries or solely between or among Subsidiaries.
"Agency Agreements" shall have the meaning set forth in SECTION 3.20(b)
hereof.
"Agreement" means this
Merger Agreement, including all exhibits and
schedules hereto, as it and they may be amended from time to time in accordance
herewith.
"Associate" shall have the meaning given to such term in Rule 12b-2 under
the Securities Exchange Act of 1934, as in effect as of the date of this
Agreement.
"Audited Financial Statements" shall have the meaning set forth in
SECTION 3.06 hereof.
"Breach" shall have the meaning set forth in SECTION 5.07 hereof.
"Business Day" means any day on which banking institutions are not required
or authorized to close in Boston,
Massachusetts or New York, New York.
"Certificate of Merger" shall have the meaning set forth in the recitals
hereof.
"Closing" shall have the meaning set forth in SECTION 2.02 hereof.
"Closing Audit" shall mean the statement of the Post-Closing Adjustment
Consideration of the Company.
"Closing Date" shall have the meaning set forth in SECTION 2.02 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the preamble hereof.
"Company Actuarial Analyses" shall have the meaning set forth in SECTION
3.20(i) hereof.
"Company Capital Stock" shall have the meaning set forth in SECTION 2.01(c)
hereof.
"Company Expenses" shall have the meaning set forth in Section 5.06 hereof.
"Company Group" shall have the meaning set forth in SECTION 5.09 hereof.
"Company Identified Other IP" shall have the meaning set forth in
SECTION 3.16(a) hereof.
"Company Indemnified Parties" shall have the meaning set forth in
SECTION 5.08(b) hereof.
"Company IP" shall have the meaning set forth in SECTION 3.16(a) hereof.
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"Company Marks" shall have the meaning set forth in SECTION 3.16(a) hereof.
"Company Patents" shall have the meaning set forth in SECTION 3.16(a)
hereof.
"Company Registered Copyrights" shall have the meaning set forth in SECTION
3.16(a) hereof.
"Company's Knowledge" means the actual knowledge as of the date hereof of
Xxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxx, Xx., Chairman,
President, and Chief Financial Officer of the Company, respectively, without any
investigation or inquiry.
"Consolidated After Tax Net Income" shall mean, for any period, the net
earnings (or Loss) after Taxes of the Company and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period
determined in conformity with GAAP; PROVIDED, HOWEVER that Consolidated After
Tax Net Income will not include any deduction or addition for a gain resulting
from the revaluation of the ESOP, contributions by the Company to the XSOP, any
breakage or similar fee incurred by the ESOP in connection with a buyout of the
swap related to the ESOP Note or the fees and expenses paid or payable by the
Company to Xxxxxx Xxxxxxx Incorporated in connection with this Agreement and the
transactions contemplated hereby.
"Contract" shall mean any contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage, license, franchise,
insurance policy, commitment or other arrangement or agreement, whether written
or oral.
"Debt" means any amount owed (including accrued and unpaid interest
thereon) by the Company or its Subsidiaries in respect of (i) borrowed money or
(ii) capitalized lease obligations.
"DGCL" shall have the meaning set forth in the recitals hereof.
"Disclosure Date" shall have the meaning set forth in SECTION 5.07 hereof.
"Disclosure Schedule" shall mean the Disclosure Schedule delivered by the
Company to the Purchaser concurrently with and as an integral part of this
Agreement.
"Dissenting Shares" shall have the meaning set forth in SECTION 2.01(f)
hereof.
"Division" shall have the meaning set forth in SECTION 3.05 hereof.
"Effective Time" shall have the meaning set forth in SECTION 2.01(b)
hereof.
"Encumbrance" shall mean any claim, lien, pledge, option, charge, easement,
deed of trust, security interest, mortgage, right-of-way, encroachment,
encumbrance, restriction on transfer (such as a right of first refusal or other
similar rights but not including any restrictions on transfer arising under
federal or state securities laws), defect of title or other similar right of any
third party whether voluntarily incurred or arising by operation of law, and
includes any agreement to give any of the foregoing in the future, and any
contingent sale or other title retention agreement or lease in the nature
thereof.
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"Environmental Law" means any Law and any orders, consent orders,
judgments, notices, Permits or demand letters issued, promulgated or entered
pursuant thereto, concerning pollution or the protection of human health, safety
and the environment, including, but not limited to, the federal Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, and the
Occupational Safety and Health Act, each as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974 and any
similar or successor federal statute, and the rules, regulations and
interpretations thereunder, all as the same shall be in effect at the time.
"ERISA Affiliate" means, with respect to any Person, any corporation, trade
or business which, together with such Person, is a member of a controlled group
of corporations or a group of trades or businesses under common control within
the meaning of Section 414 of the Code.
"ESOP" means the Safety Insurance Employee Stock Ownership Plan (created by
the Agreement dated April 12, 1995, as amended or supplemented to date) entered
into between the Plan Sponsor and Eastern Bank and Trust Company, as Initial
Trustee.
"ESOP Holdback Amount" shall have the meaning set forth in SECTION 2.01(h)
hereof.
"ESOP Note" means the Secured Promissory Note, dated April 12, 1995, in the
original principal amount of $36,000,000, given by the ESOP in favor of the
Company.
"Financial Statements" shall have the meaning set forth in SECTION 3.06
hereof.
"Financing Commitments" shall mean the commitments emanating from or
contained in the financing letters or financing term sheets entered into for the
purpose of obtaining debt and equity financing in respect of the Merger and the
other transactions contemplated in this Agreement.
"GAAP" shall have the meaning set forth in SECTION 3.06 hereof.
"Governmental Entity" shall mean any federal, state, local or foreign
governmental, regulatory or administrative body, agency, department, board,
commission or governmental entity (including the Division), any court or
judicial governmental entity, any public, private or industry regulatory
governmental entity, whether federal, state, local, foreign or otherwise, or any
Person lawfully empowered by any of the foregoing to enforce or seek compliance
with any applicable Law.
"Hazardous Substance" means all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
subject to regulation, control or remediation under applicable Environmental
Laws. By way of example only, the term Hazardous Substances includes petroleum,
urea formaldehyde, flammable, explosive and radioactive materials, PCBs,
pesticides, herbicides, asbestos, sludge, slag, acids, metals, solvents, medical
wastes, and waste waters.
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"HSR Act" means Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
"HSR Filings" means filings required under the HSR Act.
"Indemnification Agreement" shall have the meaning set forth in
SECTION 5.08(b) hereof.
"Indemnified Party" shall have the meaning set forth in SECTION 8.04(a)
hereof.
"Indemnifying Party" shall have the meaning set forth in SECTION 8.04(a)
hereof.
"Insurance Companies" shall have the meaning set forth in SECTION 3.20(c)
hereof.
"Insurance Division Documents" shall have the meaning set forth in SECTION
3.05 hereof.
"Insurance Policies" shall have the meaning set forth in SECTION 3.17
hereof.
"Insurance Statements" shall have the meaning set forth in SECTION 3.20(d)
hereof.
"IRS" shall mean the Internal Revenue Service.
"Law" shall mean any federal, state, local or foreign law, statute,
constitution, ordinance, decree, requirement, code, order, judgment, settlement
agreement, injunction, restriction, rule or regulation, including, but not
limited to, the terms of any license or Permit issued by any Governmental
Entity.
"Leased Property" shall have the meaning set forth in SECTION 3.21(b)
hereof.
"Loss" or "Losses" shall mean any and all actual losses (including actual
losses in value), liabilities, costs, damages, penalties and expenses (including
reasonable attorneys' fees and expenses and litigation costs); PROVIDED,
HOWEVER, that punitive damages shall not be included in any calculation of
"Losses" except to the extent awarded in a third party claim.
"Material Adverse Effect" shall mean any change, circumstance or effect
that, individually or in the aggregate, has, or would reasonably be expected to
have, a material adverse effect on the business, assets, operations, properties,
prospects or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole or which would reasonably be expected to
materially impair or materially delay the ability of the Company to consummate
the transactions contemplated by this Agreement.
"Material Contract" shall have the meaning set forth in SECTION 3.09(a)
hereof.
"MBCL" shall have the meaning set forth in the recitals hereof.
"Merger" shall have the meaning set forth in the recitals hereof.
"Merger Consideration" shall mean the sum of (i) the amount of One Hundred
Twelve Million Eight Hundred Five Thousand Sixty Three Dollars ($112,805,063)
reduced, dollar for dollar, by all Transaction Costs paid or payable as of the
Effective Time and (ii) the Post-Closing Adjustment Consideration.
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"New Facts" shall have the meaning as set forth in SECTION 5.07 hereof.
"Ordinary Course of Business" shall mean the ordinary course of business
consistent with past custom and practice including quantity and frequency.
"Outside Financing Commitment Date" shall have the meaning set forth in
SECTION 5.10(a) hereof.
"Owned Property" shall have the meaning set forth in SECTION 3.21(a)
hereof.
"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any Governmental Entity.
"Person" shall mean an individual, partnership, corporation, limited
liability company, joint stock company, unincorporated organization or
association, trust, joint venture, association or other organization, whether or
not a legal entity, or any Governmental Entity.
"Plan" shall have the meaning set forth in SECTION 3.19(a) hereof.
"Plan Sponsor" shall mean Xxxxxx Xxxxx Insurance Agency, Inc., a
Massachusetts corporation.
"Post-Closing Adjustment Consideration" shall mean an amount equal to the
lesser of: (i) an annual amount of $12.0 million pro rated for the period from
January 1, 2001 through the Closing Date; or (ii) 55.0% of the Consolidated
After Tax Net Income of the Company for the period from January 1, 2001 through
the Closing Date; PROVIDED, THAT, either such amount shall be reduced by (w) the
amount of all releases or reversals of Reserves during this period, (x) the
amount of dividends or other distributions made to the holders of Shares during
this period, (y) all payments by the Company to Xxxxxxx X. Xxxxxxx and his
Affiliates and Associates from January 1, 2001 through the Closing Date in
excess of an annual rate of $3.0 million in the aggregate, pro- rated for the
period from January 1, 2001 through the Closing Date and (z) any contribution to
or benefits provided by the Company to the XSOP in excess of $1,130,483 for the
period from January 1, 2001 through the Closing Date; PROVIDED, FURTHER, THAT
the Company notifies the Purchaser prior to such releases, reversals and excess
payments and the Purchaser consents in advance to such releases, reversals and
excess payments, which consent will not be (1) unreasonably withheld, delayed or
conditioned or (2) required for any such releases and/or reserves required by
GAAP or Statutory Accounting Practice. In addition, the Post-Closing Adjustment
Consideration shall be further increased or decreased to the extent that the
capitalized lease obligations of the Company and its Subsidiaries as of the
Effective Time are less or more than $64,454, as applicable.
"Potential Sale" shall have the meaning set forth in SECTION 5.09 hereof.
"Pro Rata Indemnification Share" shall have the meaning set forth in
SECTION 8.02(b) hereof.
"Proceeding" shall have the meaning set forth in SECTION 8.04(a) hereof.
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"Profit Sharing-Retirement Plan" means the Xxxxxx Xxxxx Insurance Agency,
Inc. and Affiliates Profit Sharing-Retirement Plan effective November 1, 1972,
as most recently amended by a First Amendment dated December 20, 1995.
"Proprietary Rights" means any or all of the following, and all rights in,
arising out of or associated therewith: (i) patents, patent applications, patent
disclosure and inventions (whether patentable or unpatentable and whether or not
reduced to practice) including all reissues, divisions, renewals, extensions,
provisionals, confirmations and confirmations-in-part thereof, (ii) trademarks,
service marks, trade dress, trade names, logos, slogans, corporate names and
Internet domain names, and registrations and applications for registration
thereof, together with all of the goodwill associated therewith, (iii)
copyrights and copyrightable works, and registrations and applications for
registration thereof, (iv) computer software in source and object code and all
enhancements, modifications and derivative works thereto, data bases and
documentation, and (v) trade secrets and other confidential information
(including ideas, formulae and compositions), know-how, processes, techniques,
research and development information, drawings, specifications, computer models,
pricing and cost information, designs, plans, proposals, data, financial,
business and marketing plans and customer and supplier lists and information.
"Purchaser" shall have the meaning set forth in the preamble hereof.
"Purchaser Indemnitees" shall have the meaning set forth in SECTION 8.02(a)
hereof.
"Purchaser Material Adverse Effect" shall have the meaning set forth in
SECTION 4.01(a) hereof.
"Real Property" shall have the meaning set forth in SECTION 3.21(b) hereof.
"Reserves" shall have the meaning set forth in SECTION 3.20(h) hereof.
"Revised Schedule" shall have the meaning set forth in SECTION 5.07 hereof.
"Seller Indemnitee" shall have the meaning set forth in SECTION 8.03
hereof.
"Share(s)" shall have the meaning set forth in SECTION 2.01(c) hereof.
"Shareholder(s)" shall have the meaning set forth in the preamble hereof.
"Shareholder Representative" shall have the meaning set forth in
SECTION 5.11 hereof.
"Statutory Accounting Practices" shall mean statutory accounting practices
consistently applied throughout the periods specified and the immediately prior
period in accordance with the National Association of Insurance Commissioners
Annual Statement Instructions and Accounting Practices and Procedures Manual,
except to the extent that applicable state law may differ or that state rules or
regulations require differences in reporting not related to accounting practices
and procedures in which case such state requirements shall apply.
"Statutory Financial Statements" shall have the meaning set forth in
SECTION 3.06 hereof.
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"Subsidiaries" shall collectively mean Safety Insurance Company, Inc.,
Safety Indemnity Insurance Company, RBS, Inc. and Xxxxxx Xxxxx Insurance Agency,
Inc., all
Massachusetts corporations, and any other Person with respect to which
the Company (or a Subsidiary thereof) owns a majority of the common stock of
such Person or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors or similar governing body of
such Person.
"Surviving Corporation" shall have the meaning set forth in the recitals
hereof.
"Tax Benefit" shall mean (i) an actual reduction in Taxes payable, (ii) a
refund of Taxes previously paid, or (iii) the present value of any future
refund, future credit, reduction in future Taxes payable as a result of an
increased net operating loss or other future reduction in an otherwise required
Tax payment, including in each such case any interest paid (or in the case of a
future refund, payable) thereon. The present value of the amounts described in
clause (iii) of the preceding sentence shall be computed (i) using the Tax rate
applicable to the highest level of income with respect to such Tax under the
applicable Tax law on the date prescribed for payment of the indemnity payment
(taking into account, if applicable, the character of the income which is
reduced by the loss or similar item) and assuming sufficient income in all
applicable Tax periods to use such benefit, and (ii) using as a discount rate
the interest rate on such date imposed on corporate deficiencies paid within
thirty (30) days of a notice of proposed deficiency under the Code or other
applicable Tax law..
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Taxes" shall mean all taxes, of any kind whatsoever, including (without
limitation) income, gross receipts, net proceeds, ad valorem, turnover, real and
personal property (tangible and intangible), sales, use, franchise, excise,
value added, stamp, user, transfer, fuel, excess profits, occupational, interest
equalization, windfall profits, and employees' income withholding, unemployment
and Social Security taxes, which are imposed by the United States, or any state,
local or foreign government or subdivision or agency thereof, including any
interest, penalties or additions to tax related thereto.
"Transaction Costs" means (i) all expenses paid or incurred and to be paid
and incurred by the Company or its Subsidiaries in conjunction with the
negotiation, preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including, but not limited to, attorneys' fees
and expenses and accounting fees and expenses and (ii) charges, expenses, fees,
penalties, duties, breakage costs and other obligations of the Company or its
Subsidiaries that are incurred in connection with the repayment or refinancing
of the existing Debt of the Company or its Subsidiaries; PROVIDED, HOWEVER, that
up to $1,250,000 of the fees and expenses of Xxxxxx Xxxxxxx Incorporated shall
be (x) excluded from the term Transaction Costs and (y) borne by the Company.
"Transaction Documents" shall mean, collectively, this Agreement and all
agreements, instruments, certificates, and other documents executed or delivered
in accordance with the terms of this Agreement or any other Transaction
Document.
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"XSOP" means the Safety Insurance Supplemental Executive Stock Ownership
Plan dated June 30, 1995.
1.02 INTERPRETATION. Unless otherwise indicated to the contrary herein by
the context or use thereof: (i) the words, "herein," "hereto," "hereof" and
words of similar import refer to this Agreement as a whole and not to any
particular Section or paragraph hereof; (ii) the word "including" means
"including, but not limited to"; (iii) masculine gender shall also include the
feminine and neutral genders, and vice versa; (iv) words importing the singular
shall also include the plural, and vice versa, and (v) references to statutes
shall include all regulations promulgated thereunder and references to statutes
or regulations shall be construed as including all statutory and regulatory
provisions consolidating, amending or replacing the statute or regulation.
1.03 ACCOUNTING CONVENTIONS. Each accounting term used herein, including
within the defined terms herein, shall have the meaning that is applied thereto
in accordance with GAAP, consistently applied, and shall be consistent in all
material respects with the books and records of the Company and its
Subsidiaries.
1.04 BUSINESS DAYS. Whenever the last day for the exercise of any privilege
or the discharge of any duty hereunder shall fall upon any day which is not a
Business Day, the party having such privilege or duty may exercise such
privilege or discharge such duty on the next succeeding Business Day.
ARTICLE II
THE MERGER
2.01 THE MERGER.
(a) Upon the performance of the terms, covenants and obligations and
subject to the fulfillment of all conditions to the obligations of the parties
contained herein (other than such covenants, obligations and conditions as shall
have been waived in accordance with the terms hereof), and in accordance with
the relevant provisions of the MBCL and DGCL, at the Effective Time, Acquisition
shall be merged with and into the Company in accordance with the Certificate of
Merger, the separate existence of Acquisition shall cease and the Company shall
be the Surviving Corporation and shall continue its corporate existence under
the laws of the State of Delaware. The Merger shall have the effects set forth
in Section 78 of the MBCL and Section 252 of the DGCL.
(b) On the Closing Date, Acquisition and the Company shall duly
execute and file the Certificate of Merger with the Secretaries of State of the
Commonwealth of
Massachusetts and the State of Delaware in accordance with the
provisions of Section 78 of the MBCL and Section 252 of the DGCL, respectively.
The Merger shall become effective at such time (the "EFFECTIVE TIME") as the
Certificate of Merger is filed with the Secretaries of State of the Commonwealth
of
Massachusetts and the State of Delaware, respectively.
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders of shares of capital stock of the Company
("COMPANY CAPITAL STOCK"), each
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issued and outstanding share (each a "SHARE" and collectively, the "SHARES,"
which terms, for purposes of this Agreement, shall include any and all
fractional shares) of Company Capital Stock immediately prior to the Effective
Time (other than treasury shares and Dissenting Shares, which shall be disposed
of in the manner set forth in the Certificate of Merger and in SECTION 2.01(f)
hereof), shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of any issued and outstanding
certificate or certificates representing such Shares of Company Capital Stock
shall cease to have any rights with respect thereto, except the right to receive
a cash payment from the Company equal to (i) that portion of the Merger
Consideration which will be allocable to such Shares as set forth on
SCHEDULE 2.01 annexed hereto, upon the surrender of the certificate(s)
representing such Shares and the delivery of a letter of transmittal to the
Company stating that such holder represents and warrants that such holder owns
such Shares free and clear of any Encumbrances, plus (ii) subject to adequate
delivery and review of the Closing Audit and the procedures set forth in SECTION
2.01(d) below, the portion of the Post-Closing Adjustment Consideration which
would be allocable to such Shares.
(d) The Shareholder Representative shall cause the Closing Audit to be
determined and delivered to the Purchaser as soon as practicable after the
Closing Date but, in any event, no later than forty-five (45) days after the
Closing Date. The Company will allow the Shareholder Representative to access
its books and records for purposes of preparing the Closing Audit. The Closing
Audit shall be prepared in good faith by or on behalf of the Shareholder
Representative and, when delivered to the Purchaser, shall be accompanied by
work papers showing, in reasonable detail, the calculation of the Post-Closing
Adjustment Consideration. The Purchaser shall have forty-five (45) days to
consider the Closing Audit after the delivery thereof. In the event the
Purchaser disputes the calculation of the Post-Closing Adjustment Consideration,
the Purchaser shall send a notification of such dispute (which shall be prepared
in writing and set forth the Purchaser's computations in reasonable detail), to
the Shareholder Representative. In the event such forty-five (45) day period
lapses without any written notice of Purchaser having been sent to the
Shareholder Representative, then the Purchaser shall be deemed to have finally
accepted such determination by the Shareholder Representative. The Shareholder
Representative shall have ten (10) days following its receipt of the Purchaser's
notification to consider and object to the Purchaser's determination of the
Post-Closing Adjustment Consideration. In the event that the Shareholder
Representative objects to such determination by the Purchaser, the Shareholder
Representative and the Purchaser shall use their reasonable efforts to promptly,
and, in any event within seven (7) days, resolve any differences they may have
with respect to such determination of the Post-Closing Adjustment Consideration.
In the event that such ten (10) day period lapses without any written notice of
the Shareholder Representative having been sent to the Purchaser, then the
Shareholder Representative shall be deemed to have finally accepted such
determination of the Purchaser. In the event that the Purchaser and the
Shareholder Representative are not able to agree upon the Post-Closing
Adjustment Consideration during such seven (7) day period, the calculation of
such amounts (but only amounts in dispute between the Shareholder Representative
and Purchaser) will be referred for final binding resolution to an Accounting
Referee. The Accounting Referee shall be directed to issue its written
determination of such amounts within thirty (30) days after such submission. The
fees and expenses of the Accounting Referee shall be allocated between the
Shareholders and the Purchaser in the same proportion that the aggregate amount
of disputed items so submitted that is unsuccessfully disputed by each such
party (as finally determined by such
10
independent accounting) bears to the total amount of such remaining disputed
items so submitted. The Purchaser shall cause the Company to pay the
Shareholders the Post-Closing Adjustment Consideration as promptly as
practicable after the final determination thereof but, in any event, within
three (3) Business Days of the final determination. All amounts not paid when
due under this SECTION 2.01(d) will accrue interest, payable on demand, at the
rate of eighteen percent (18%) per annum from the date due until paid in full
and Purchaser will pay the Shareholder Representative's reasonable and
documented out-of-pocket costs and expenses (including without limitation,
reasonable attorneys' fees and expenses) incurred in collecting the Post-Closing
Adjustment Consideration.
(e) In the event any certificate representing Company Capital Stock
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such certificate to be lost, stolen or
destroyed and the undertaking of corresponding indemnity in form and substance
reasonably satisfactory to the Purchaser, such Person shall receive in the
Merger such portion of the Merger Consideration as would otherwise have been
deliverable to such Person in respect of the lost, stolen or destroyed
certificate.
(f) Notwithstanding anything in this Agreement to the contrary, Shares
which are issued and outstanding immediately prior to the Effective Time and
which are held by stockholders who were entitled to vote in connection with
approval of the Merger, and who did not vote in favor of the Merger, and who
comply with all of the relevant provisions of Section 45 of the MBCL
("DISSENTING SHARES"), shall not be converted into or exchangeable for the right
to receive any allocable portion of the Merger Consideration under
SECTION 2.01(c) above (but instead shall be converted into the right to receive
payment from the Company with respect to such Dissenting Shares under the MBCL),
unless and until such holders shall have failed to perfect or shall have
effectively withdrawn or lost their rights to appraisal under the MBCL. If any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such right, such holder's Shares shall be treated as having been converted
as of the Effective Time of the Merger into the right to receive the allocable
portion of the Merger Consideration in accordance with SECTION 2.01(c) above.
The Company shall give prompt notice to the Purchaser of any demands received by
the Company for appraisal of Shares of Company Capital Stock, and the Purchaser
shall have the right to participate in all negotiations and proceedings with
respect to such demands.
(g) As of the Effective Time of the Merger, each holder of an
outstanding certificate or certificates which prior thereto represented Shares
of Company Capital Stock shall, upon surrender to the Company of such
certificate or certificates and acceptance thereof by the Company, be entitled
to and shall receive prompt payment of the amount of cash into which the number
of Shares of Company Capital Stock previously represented by such certificate or
certificates surrendered shall have been converted pursuant to this Agreement.
After the Effective Time there shall be no further transfer on the records of
the Company or its transfer agent of certificates representing Shares which have
been converted pursuant to this Agreement into the right to receive cash, and if
such certificates are presented to the Company for transfer, they shall be
cancelled against delivery of cash.
(h) To assure sufficient funds for the payment of the indemnification
obligations of the ESOP provided for in ARTICLE VIII, the ESOP shall not
distribute and shall retain an
11
amount equal to 10% of its share of the Merger Consideration (the "ESOP HOLDBACK
Amount") to the individual participants in the ESOP until the date that is 540
days after the Closing Date. The right of any individual participant to receive
distributions of the ESOP Holdback Amount shall be subject to the
indemnification obligations of the ESOP set forth in ARTICLE VIII hereof.
2.02 TIME AND PLACE OF CLOSING. Consummation of the Merger and the other
transactions contemplated by this Agreement (the "CLOSING") will take place at
the offices of Xxxxxxxx, Xxxxxxx & Xxxxxxx, A Professional Corporation, 000
Xxxxxxx Xxxxxx, Xxxxxx, XX 00000, at 10:00 a.m. on the second Business Day
following the satisfaction or waiver of the closing conditions contemplated
hereby, or at such other place or time as the parties may agree. The date and
time at which the Closing actually occurs is hereinafter referred to as the
"CLOSING DATE."
2.03 DIRECTORS. The directors of Acquisition at the Effective Time shall be
the initial directors of the Surviving Corporation, each to hold office in
accordance with the certificate of incorporation and by-laws of the Surviving
Corporation until such director's successor is duly elected or appointed and
qualified.
2.04 OFFICERS. The officers of Acquisition at the Effective Time shall be
the initial officers of the Surviving Corporation, each to hold office in
accordance with the certificate of incorporation and by-laws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
2.05 CERTIFICATE OF INCORPORATION AND BY-LAWS. The certificate of
incorporation of the Surviving Corporation shall be in the form attached to the
Certificate of Merger until amended in accordance with applicable law. The
by-laws of the Surviving Corporation shall be amended and restated at the
Effective Time to read the same as the by-laws of Acquisition until amended in
accordance with applicable Law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
RELATING TO THE COMPANY AND SUBSIDIARIES
The Company represents and warrants to the Purchaser and Acquisition that
the statements contained in this ARTICLE III are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date hereof throughout this ARTICLE III):
3.01 CORPORATE ORGANIZATION; ETC. The Company and each of the Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to conduct its business as it is now being conducted and to
own, lease and operate its properties and assets except where the failure to be
so organized, existing and in good standing or to have such power or authority
is not, in the aggregate, reasonably likely to be material to the Company and
the Subsidiaries, taken as a whole. Neither the Company nor any of the
Subsidiaries is qualified or licensed to do business as a foreign corporation in
any jurisdiction except for its jurisdiction of
12
incorporation, and such qualification is not required. True and complete copies
of the certificate of incorporation and by-laws of the Company and each of the
Subsidiaries, in each case as presently in effect, have previously been
delivered to the Purchaser. Section 3.01 of the Disclosure Schedule lists the
directors and officers of the Company and each of its Subsidiaries as of the
date hereof.
3.02 CAPITALIZATION. The capitalization of the Company and each of the
Subsidiaries is set forth on Section 3.02 of the Disclosure Schedule. Section
3.02 of the Disclosure Schedule lists the name and address of each lawful owner
of all Shares of Company Capital Stock and each lawful owner of all shares of
the capital stock of each Subsidiary and the number of shares owned by each such
Person. Except as disclosed in Section 3.02 of the Disclosure Schedule, there
are no outstanding shares of capital stock or other equity interests of the
Company or any of the Subsidiaries, and there is no subscription, option,
warrant, call, right, agreement or other commitment relating to the issuance,
sale, delivery or transfer by the Company or any of the Subsidiaries of any
capital stock or other equity interests or security convertible into or
exchangeable for any capital stock or other equity interests of the Company or
any of the Subsidiaries, nor are there outstanding or authorized any stock
appreciation rights, phantom stock or similar rights or instruments with respect
to the Company Capital Stock or the capital stock of the Subsidiaries. All of
the issued and outstanding shares of Company Capital Stock are duly authorized,
fully paid and non-assessable and are, to the Company's Knowledge, held free and
clear of any preemptive rights or Encumbrances. All of the issued and
outstanding shares of capital stock of each of the Subsidiaries are duly
authorized, validly issued, fully paid and non-assessable and are held free and
clear of any preemptive rights or Encumbrances.
3.03 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all requisite
power and authority (including corporate authority and power) to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions provided for herein. The execution and
delivery of this Agreement and the other Transaction Documents to which it is a
party and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the other Transaction Documents to which it is a
party or to consummate the transactions contemplated hereby except for the
consent and approval of the stockholders of the Company as set forth in
SECTION 5.13. Subject to obtaining such stockholder consent and approval, this
Agreement has been duly and validly executed and delivered by the Company, and,
assuming this Agreement has been duly authorized, executed and delivered by the
Purchaser, this Agreement constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
that (a) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium (whether general or specific) or other similar Laws
now or hereafter in effect relating to creditors' rights generally and (b) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
3.04 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth in Section
3.04 of the Disclosure Schedule, neither the execution and delivery of this
Agreement by the Company or the other Transaction Documents to which it is a
party, nor the consummation of the transactions
13
contemplated hereby by the Company, will (i) violate any Law, ruling or other
restriction of any Governmental Entity to which the Company or any of the
Subsidiaries is subject, (ii) breach or violate any provision of the certificate
of incorporation or by-laws of the Company or any of the Subsidiaries, (iii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party a right to accelerate, terminate or modify
or cancel, any Contract to which the Company or any of the Subsidiaries is a
party or by which it is bound (x) that involves annual payments by or to the
Company or any of its Subsidiaries in excess of One Hundred Thousand Dollars
($100,000) per Contract or series of related Contracts or (y) if the existence
of such conflict, breach, acceleration or right under such Contract would have a
Material Adverse Effect, or (iv) require any consent, waiver, approval,
authorization or permit of, or filing with or notification to any other party to
any such Contract in connection with the execution delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby or
to, any Governmental Entity; except for (a) HSR Filings (or other competition
filings), (b) such filings as may be required as a result of the specific legal
or regulatory status of the Company, the Subsidiaries and/or Purchaser, or as a
result of any other facts that specifically relate to the business or activities
in which the Company, the Subsidiaries and/or Purchaser is or proposes to be
engaged or (c) such violations, breaches, defaults, conflicts or consents which,
in the aggregate, are not reasonably likely to be expected to be material to the
Company and the Subsidiaries, taken as a whole, or with respect to which
requisite waivers or consents have been or shall be obtained prior to the
Closing.
3.05 FILINGS. Each of the Insurance Companies is current and up-to-date in
all material respects with all reports, forms and other documents (the
"INSURANCE DIVISION DOCUMENTS") required to be filed with or submitted to the
Massachusetts Division of insurance (the "DIVISION") and has made available to
the Purchaser and Acquisition for its review and inspection all Insurance
Division Documents filed with or submitted to the Division over the last three
(3) years. As of their respective dates, the Insurance Division Documents
complied in all material respects with the requirements of the Division and the
rules and regulations of the Division applicable thereto. The Statutory
Financial Statements of the Insurance Companies included in the Insurance
Division Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Division with respect thereto
and have been prepared in accordance with the rules and regulations of the
Division as such rules and regulations were in effect at the time of the
preparation and submission thereof.
3.06 FINANCIAL STATEMENTS. The Company has furnished the Purchaser with its
Consolidated Financial Statements and Additional Information dated December 31,
2000 and 1999 audited by Price Waterhouse Coopers LLP (the "AUDITED FINANCIAL
STATEMENTS") and the "Safety Insurance Company Consolidated Financial Statements
and Related Materials To Comply with Statutory Filing Requirements" for the
years ended December 31, 2000 and 1999 audited by Price Waterhouse Coopers LLP
(the "STATUTORY FINANCIAL STATEMENTS" and sometimes together with the Audited
Financial Statements, collectively, the "FINANCIAL STATEMENTS"). The Audited
Financial Statements, including the notes thereto, have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods indicated ("GAAP"), and are correct and complete in all
material respects and consistent in all material respects with the Company's
books and records. The Balance Sheets included among the Audited Financial
Statements fairly present the financial condition of the Company and the
Subsidiaries on a consolidated basis at the respective dates thereof, and
reflect all claims against
14
and debts and liabilities of the Company and the Subsidiaries, fixed or
contingent, as at the respective dates thereof which are required to be
disclosed in accordance with GAAP; and the related statements of income,
stockholders' equity and cash flows fairly present the results of the operations
of the Company and the Subsidiaries and the changes in its financial position
for the periods indicated. The Statutory Financial Statements, including the
notes thereto have been audited in accordance with generally accepted auditing
standards and the Statutory Financial Statements and other Insurance Statements
have been prepared in conformity with Statutory Accounting Practices, and are
correct and complete in all material respects and consistent in all material
respects with the Company's books and records.
3.07 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 3.07 of the
Disclosure Schedule and except for the transactions contemplated by this
Agreement, since the date of the most recent Audited Financial Statements,
neither the Company nor any of the Subsidiaries has (a) suffered any change in
its business, operations or financial position, except such changes which, in
the aggregate, are not reasonably likely to be material and adverse to the
Company and the Subsidiaries, taken as a whole, (b) conducted its business in
any material respect not in the Ordinary Course of Business, (c) except in the
Ordinary Course of Business, incurred any long-term indebtedness for borrowed
money or issued any debt securities or assumed, guaranteed or endorsed the
obligations of any Person other than the obligations of each other or (d) except
in the Ordinary Course of Business, (i) sold, transferred or otherwise disposed
of, any of their material property or assets or (ii) mortgaged or encumbered any
of their material property or assets.
3.08 COMPLIANCE WITH LAW. Except as set forth in Section 3.08 of the
Disclosure Schedule, as of the date of this Agreement, to the Company's
Knowledge, the businesses of the Company and the Subsidiaries are not being
conducted in violation of any applicable Law except such violations which in the
aggregate are not reasonably likely to be material and adverse to the Company
and the Subsidiaries, taken as a whole.
3.09 CONTRACTS AND COMMITMENTS.
(a) Section 3.09(a) of the Disclosure Schedule sets forth a list of
all Contracts involving annual payments in excess of Five Hundred Thousand
Dollars ($500,000) and indentures, mortgages and notes or other instruments
evidencing indebtedness (contingent or otherwise) (collectively, the "MATERIAL
CONTRACTS") to which the Company or any of the Subsidiaries is a party. Except
as set forth in Section 3.09(b) of the Disclosure Schedule, as of the date of
this Agreement, neither the Company nor any of the Subsidiaries is in default
under any of the Material Contracts, except such defaults which, in the
aggregate, are not reasonably likely to be material to the Company and the
Subsidiaries, taken as a whole.
(b) With respect to each Material Contract and except as set forth in
Section 3.09(b) of the Disclosure Schedule: (i) each Material Contract is legal,
valid, binding and enforceable against the Company and/or the Subsidiary which
is party thereto, and, to the Company's Knowledge, the other parties thereto,
and, to the Company's Knowledge, is in full force and effect; (ii) to the
Company's Knowledge, no other party to any such agreement is in material breach
or default thereunder and no event has occurred which with notice or lapse of
time would reasonably be expected to constitute such a material breach or
default, or permit
15
termination, modification, or acceleration, under any Material Contract; (iii)
neither the Company nor any of the Subsidiaries has repudiated any material
provision of any Material Contract; (iv) each of the Company and the
Subsidiaries has performed, in all material respects, all requirements to be
performed by it under each of such Material Contract; and (v) none of the
Company nor any of the Subsidiaries has received any written notice that it has
violated, defaulted or breached under any of such Material Contract. Except as
set forth in Section 3.09(b) of the Disclosure Schedule, neither the Company nor
any of the Subsidiaries is required to obtain any authorization, waiver,
license, consent, or approval of, or make any declaration, filing or
registration with, or give notice to any other party to any such Material
Contract in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
3.10 NO UNDISCLOSED LIABILITIES. Except as and to the extent set forth in
the Audited Financial Statements and the notes thereto, the Company did not have
at December 31, 2000 any liabilities of a nature required by GAAP to be
reflected therein. Except as and to the extent set forth in Section 3.10 of the
Disclosure Schedule, since December 31, 2000, neither the Company nor any of the
Subsidiaries has incurred any material liabilities, of a nature required by GAAP
to be reflected on, a consolidated balance sheet of the Company except
liabilities incurred in the Ordinary Course of Business.
3.11 NO DEFAULT. Except as set forth in Section 3.11 of the Disclosure
Schedule, neither the Company nor any of the Subsidiaries is in default or
violation (and no event has occurred which with notice or the lapse of time or
both would constitute a material default or violation) of any term, condition or
provision of (i) their respective certificate of incorporation or by-laws or
(ii) any Law applicable to the Company or the Subsidiaries, except such defaults
and violations which, in the aggregate, are not reasonably likely to be material
to the Company and the Subsidiaries, taken as a whole.
3.12 LITIGATION. Except as set forth in Section 3.12 of the Disclosure
Schedule, as of the date of this Agreement, there is no action, suit or
proceeding pending or, to the Company's Knowledge, threatened, against the
Company or the Subsidiaries before any court or Governmental Entity, except for
the defense of claims asserted by insureds in the Ordinary Course of Business
against the Insurance Companies' business. No such action, suit or proceeding is
reasonably likely to be material to the Company and the Subsidiaries, taken as a
whole. Except as set forth in Section 3.12 of the Disclosure Schedule, as of the
date of this Agreement, neither the Company nor any of the Subsidiaries has
received notice that it is subject to any outstanding judgment, order,
injunction or decree of any Governmental Entity which is reasonably likely to be
material to the Company and the Subsidiaries, taken as a whole.
3.13 TAXES.
(a) The reserves (excluding reserves for deferred Taxes) provided on
the balance sheet of the most recent Audited Financial Statements for all Taxes
imposed by any taxing authority are adequate to cover all unpaid liabilities for
which the Company and the Subsidiaries may be liable for all Taxes (including
any interest or penalties with respect to such Taxes), whether or not disputed,
for any years and periods ending on or prior to December 31, 2000, and the
amount of all unpaid liabilities for which the Company and the Subsidiaries may
be liable for
16
all Taxes (including any interest or penalties with respect to such Taxes),
whether or not disputed, for all periods ending on or before the Closing Date,
excluding all such Taxes relating to the transaction that is the subject of this
Agreement, shall not, in the aggregate, exceed such reserves adjusted for the
operations and transactions in the Ordinary Course of Business of the Company
and the Subsidiaries since December 31, 2000. There are no Tax liens (other than
liens for current Taxes not yet due and payable) upon the properties or assets
of the Company or the Subsidiaries. Except as set forth in Section 3.13 of the
Disclosure Schedule, the Company or the Subsidiaries have not granted or been
requested in writing to grant waivers of any statutes of limitations applicable
to any claim for Taxes.
(b) All material Federal, state, local and foreign Tax Returns have
been filed for the Company and the Subsidiaries, as required by all applicable
laws for all periods through and including the Closing Date. All Taxes shown as
due on all such Tax Returns have been paid. Each such Tax Return is true and
correct in all material respects. Except as set forth in Section 3.13 of the
Disclosure Schedule, none of the income Tax Returns that include the operations
of the Company or the Subsidiaries have ever been audited or investigated by any
taxing authority. Except as set forth in Section 3.13 of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries have received written
notice of any material issues that have been raised in any examination by any
taxing authority with respect to the businesses and operations of the Company or
the Subsidiaries which, by application of similar principles, reasonably could
be expected to result in a proposed adjustment to the liability for Taxes for
any other period not so examined. All Taxes which the Company or the
Subsidiaries are required by law to withhold or collect, including without
limitation, sales and use taxes, and amounts required to be withheld for Taxes
of employees, have been duly withheld or collected and, to the extent required,
have been paid over to the proper Governmental Entities or are held in separate
bank accounts for such purpose.
(c) Neither the Company nor any of the Subsidiaries is a "foreign
person" as defined in Section 1445(f)(3) of the Code.
(d) Except as set forth in Section 3.13 of the Disclosure Schedule,
the Company is not subject to any joint venture, partnership or other
arrangement or contract which is treated as a partnership for Federal income tax
purposes. Except as set forth in Section 3.13 of the Disclosure Schedule, the
Company is not a party to any tax sharing agreement.
(e) Except as set forth in Section 3.13 of the Disclosure Schedule, as
of the date hereof, no Subsidiary is required, or has agreed, to make any
adjustment under Section 481 of the Code (or any similar provision of state,
local or foreign law) as a result of any change of accounting method.
3.14 BROKERS AND FINDERS. Neither the Company, any of the Subsidiaries nor
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any investment banking fees, brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement, except for fees and expenses payable to Xxxxxx
Xxxxxxx Incorporated. The Company has previously delivered to the Purchaser a
true and complete copy of the engagement letter between the Company and Xxxxxx
Xxxxxxx Incorporated.
17
3.15 TITLE TO PROPERTIES. Except as set forth in Section 3.15 of the
Disclosure Schedule, the Company and each of the Subsidiaries has good and
marketable title to all of the material assets, personal property and real
property which it owns and which are reflected on the balance sheets included as
part of the most recent Audited Financial Statements or acquired since the date
of the most recent Audited Financial Statements (except for assets, personal
property and real property sold, consumed or otherwise disposed of by any of
them in the Ordinary Course of Business since the date thereof), and such
assets, personal property and real property are owned free and clear of all
Encumbrances, except for (a) Encumbrances listed in Section 3.15 of the
Disclosure Schedule, (b) liens for current Taxes not yet due and payable or for
Taxes the validity of which is being contested in good faith, (c) Encumbrances
to secure indebtedness reflected on such balance sheets or indebtedness incurred
in the Ordinary Course of Business and (d) mechanic's, materialmen's and other
Encumbrances which have arisen in the Ordinary Course of Business.
3.16 INTELLECTUAL PROPERTY.
(a) Section 3.16(a) of the Disclosure Schedule sets forth an accurate
and complete list of (i) all marks in which the Company or any Subsidiary has an
ownership interest or which the Company or any Subsidiary uses in its business,
other than those licensed from another person on a non-exclusive basis
(collectively "COMPANY MARKS"), including all registrations and applications for
registration with all Governmental Entities that have been made by or for the
Company or any Subsidiary with regard to such Company Marks, identifying for
each (w) its registration (as applicable) and application numbers, (x) whether
it is owned by or exclusively licensed to the Company or such Subsidiary, (y)
its current status and (z) the class(es) of goods or services to which it
relates; (ii) all Patents in which the Company or any Subsidiary has an
ownership interest or which have been exclusively licensed to the Company or any
Subsidiary (collectively the "COMPANY PATENTS") and identifies for each (w) the
patent number and issue date (if issued) or application number and filing date
(if not issued), (x) its title, (y) the named inventors and (z) whether it is
owned by or exclusively licensed to the Company or such Subsidiary; (iii) all
registered copyrights (whether registered with the United States Copyright
Office or in or with the appropriate office or Governmental Entity in any other
jurisdiction) in which the Company or any Subsidiary has an ownership interest
or which have been licensed to the Company or any Subsidiary, and all pending
applications for registration of Copyrights filed anywhere in the world by or
for the Company or any Subsidiary, or which has been exclusively licensed to the
Company or any Subsidiary (collectively the "COMPANY REGISTERED COPYRIGHTS");
and (iv) all other intellectual property in which the Company or any Subsidiary
has an ownership interest or which have been licensed to the Company or any
Subsidiary that are material to the Company or the Subsidiaries, taken as a
whole (collectively the "COMPANY IDENTIFIED OTHER IP", with the Company Marks,
Company Registered Copyrights, Company Patents and Company Identified Other IP
sometimes collectively called "COMPANY IP").
(b) Except as set forth in Section 3.16(b) of the Disclosure Schedule,
(i) the Company IP are the only Proprietary Rights which are material to the
conduct of the business of the Company and the Subsidiaries, taken as a whole,
(ii) as of the date of this Agreement, the validity of the Company IP and the
title thereto are not being questioned in any litigation nor, to the Company's
Knowledge, is any such litigation threatened and (iii) as of the date of this
Agreement, to the Company's Knowledge, the conduct of the business of the
Company and the
18
Subsidiaries as now conducted does not conflict with any valid patents,
trademarks, trade name, service marks or copyrights of others in any way which
is reasonably likely to be material to the Company and the Subsidiaries, taken
as a whole.
3.17 INSURANCE. All material insurance policies (the "INSURANCE POLICIES")
with respect to the property, assets, operations and business of the Company and
the Subsidiaries are in full force and effect. Except as set forth in Section
3.17 of the Disclosure Schedule, as of the date of this Agreement, there are no
pending material claims against the Insurance Policies as to which the insurers
have denied liability or which would give rise to retroactive premium
adjustments or other material Loss-sharing arrangements. The Company makes no
representation or warranty that such insurance will be continued or is
continuable after the Closing. Neither the Company, the Subsidiaries, nor to the
Company's Knowledge, any other party to the policy is in material breach or
default (including with respect to the payment of premiums or the giving of
notices), and, to the Company's Knowledge, no event has occurred which, with
notice or the lapse of time, would constitute such a material breach or default,
or permit termination, modification, or acceleration, under the Insurance
Policies; and, to the Company's Knowledge, no party to the policy has repudiated
any material provision thereof. Section 3.17 of the Disclosure Schedule
describes any material self-insurance arrangements affecting any of the Company
and the Subsidiaries. All known claims, if any, made against the Company or any
of the Subsidiaries that are covered by insurance have been disclosed to and
accepted by the appropriate insurance companies and, to the Company's Knowledge,
are being defended by such appropriate insurance companies and are described in
Section 3.17 of the Disclosure Schedule and, except as disclosed in Section 3.17
of the Disclosure Schedule, and, to the Company's Knowledge, no claims have been
denied coverage during the last three years. Except as set forth in Section 3.17
of the Disclosure Schedule, neither the Company nor any of the Subsidiaries is
required to obtain any authorization, waiver, consent or approval of, make any
declaration, filing or registration with, or give notice to any other party to
any such Insurance Policy in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
3.18 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Section 3.18(a) of the Disclosure Schedule,
the Company and each Subsidiary holds, and is in substantial compliance with,
all material permits, licenses and government authorizations, if any, required
for it to conduct its businesses under Environmental Laws;
(b) Except as set forth in Section 3.18(b) of the Disclosure Schedule,
neither the Company nor any of the Subsidiaries has received any lawsuit, claim,
notice of violation, written request for information, or has been notified in
writing that it is a potentially responsible party, under any Environmental Law;
(c) Except as set forth in Section 3.18(c) of the Disclosure Schedule,
neither the Company nor any of the Subsidiaries has entered into or agreed to
any consent decree or order, and none of them is subject to any judgment,
decree, or order relating to compliance with any Environmental Law or to
investigation or cleanup of regulated substances under any Environmental Law;
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(d) to the Company's Knowledge, no Hazardous Substance is present or
has been released at, on or under, any Real Property in such amount as would
require remediation under any applicable Environmental Law;
(e) the Purchaser has been provided with true and correct copies of
any reports, audits or assessments in the possession or control of the Company
or any of the Subsidiaries that describe the environmental conditions at any of
the Real Property or any property previously owned, leased or occupied by the
Company or any of the Subsidiaries; and
(f) the Company and the Subsidiaries have never owned or operated an
underground storage tank at any Real Property.
3.19 EMPLOYEE BENEFIT PLANS.
(a) Section 3.19 of the Disclosure Schedule lists and identifies each
profit sharing, 401(k), retirement, disability, medical, dental, severance pay,
vacation pay, sick pay, stock purchase, stock option, deferred compensation,
bonus, incentive compensation, fringe benefit, stay-with-bonus, change of
control agreement or other employee benefit plan, program or agreement,
including without limitation, any employee benefit plan as defined in
Section 3(3) of ERISA, which is maintained or contributed to by the Company or
any of the Subsidiaries, or under or with respect to which the Company or any of
the Subsidiaries has any liability or contingent liability (individually a
"PLAN" and collectively, the "PLANS"). Each Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
favorable determination letter from the IRS to the effect that it meets the
requirements of Section 401(a) of the Code which favorable determination letter
covers all amendments to any such plan for which the remedial amendment period
(within the meaning of Section 401(b) of the Code and applicable regulations)
has expired. None of the Plans is or has been subject to Title IV of ERISA and
none of the Plans is a multi-employer plan (as defined in Section 3(37) of
ERISA).
(b) Subject to Section 3.19(d) of the Disclosure Schedule, to the
Company's Knowledge, all Plans have been administered in all material respects
in accordance with their terms and comply in all material respects in form and
operation with all applicable requirements of law and subject to Section 3.19(d)
of the Disclosure Schedule, to the Company's Knowledge, no event has occurred
which will or could cause any such Plan to fail to comply with such requirements
and no notice has been issued by any Governmental Entity questioning or
challenging such compliance.
(c) Subject to Section 3.19(d) of the Disclosure Schedule, none of the
Company, the Subsidiaries nor any of its ERISA Affiliates has engaged in any
"prohibited transaction" (as described in section 406 of ERISA or Section 4975
of the Code) with respect to any Plan.
(d) There have been no acts or omissions by the Company, the
Subsidiaries or any of its ERISA Affiliates which have given rise to fines,
penalties, Taxes or related charges under section 502 of ERISA or Chapters 43,
47, 68 or 100 of the Code for which the Company or any of the Subsidiaries was
liable or, except as set forth in Section 3.19 of the Disclosure Schedule,
which, to the Company's Knowledge, may give rise to such fines, penalties, Taxes
or related charges.
20
(e) Except as set forth in Section 3.19 of the Disclosure Schedule,
the Company and the Subsidiaries have not made or become obligated to make, and
will not as a result of any event connected with the Acquisition or any other
transaction contemplated herein become obligated to make, any material payment
that will not be deductible under Section 280G of the Code.
(f) There are no actions, suits or claims (other than routine claims
for benefits) pending or, to the Company's Knowledge, threatened involving any
Plan or the assets thereof.
(g) None of the Company or the Subsidiaries has any liability or
contingent liability for providing, under any Plan or otherwise, any
post-retirement medical or life insurance benefits, other than statutory
liability for providing group health plan continuation coverage under Part 6 of
Title I of ERISA and Section 4980B of the Code or applicable state law.
(h) A true and complete copy of each Plan, and where applicable, a
copy of the most recent IRS Form 5500 annual report, IRS determination letter,
trust agreement or other funding arrangement, and summary plan description with
respect to each such Plan have been made available to the Purchaser.
(i) To the Company's Knowledge, no executive, key employee, or
significant group of employees presently plans to terminate employment with the
Company or any of the Subsidiaries during the next twelve (12) months.
(j) Except as set forth in Section 3.19 of the Disclosure Schedule,
there is no labor strike pending against or involving or, to the Company's
Knowledge, threatened against the Company or any of the Subsidiaries.
3.20 INSURANCE BUSINESS.
(a) Except as disclosed in Section 3.20(a) of the Disclosure Schedule,
all policies of insurance issued by the Company and the Subsidiaries as now in
force are, to the extent required under applicable Law, on forms which have been
approved by applicable insurance regulatory authorities or which have been filed
and not objected to by such authorities within the period provided for
objection. Except as disclosed in Section 3.20(a) of the Disclosure Schedule,
any premium rates required to be filed with or approved by insurance regulatory
authorities have been so filed and/or approved and premium rates established by
the Company and each of the Subsidiaries conform thereto. Except as disclosed in
Section 3.20(a) of the Disclosure Schedule, any Contract to which the Company or
any Subsidiary is a party and which is required to be filed with or approved by
insurance regulatory authorities has been so filed or approved except for those
which, if not filed or approved, as the case may be, would not be material to
the Insurance Companies taken as a whole.
(b) The Company will furnish to Purchaser a list of all material
written Contracts between the Company or any of the Subsidiaries and its agents,
managing general agents or brokers ("AGENCY AGREEMENTS"). Included in Section
3.20(b) of the Disclosure Schedule are copies of the Company's and each of the
Subsidiaries' standard agency agreements, including copies of all schedules and
exhibits customarily attached thereto and made part of such
21
Agency Agreements. Except as set forth in Sections 3.12 and 3.23 of the
Disclosure Schedule, or as separately set forth in writing by the Company to the
Purchaser, neither the Company nor any of the Subsidiaries has received any
notification by its agents threatening litigation or termination of their agency
agreements with the Company or the Subsidiaries. No insurance agent or group of
related agents accounted for more than two (2) percent of the gross premium
income of the Company and the Subsidiaries combined for the year ended December
31, 2000.
(c) Section 3.20(c) of the Disclosure Schedule sets forth a complete
and accurate list of each Subsidiary that is an insurance company (each an
"INSURANCE COMPANY" and, collectively, the "INSURANCE COMPANIES"). Each of the
Insurance Companies is (i) duly licensed or authorized as an insurance company
in its jurisdiction of incorporation, (ii) duly licensed or authorized as an
insurance company and, where applicable, to engage in the business of
reinsurance in each other jurisdiction where it is required to be so licensed or
authorized and (iii) duly licensed or authorized in its jurisdiction of
incorporation to write or conduct each line of its business. Each Insurance
Company is, where required, duly licensed or authorized and appointed as a third
party administrator, insurance agency, managing general agency or similar
service provider in its jurisdiction of incorporation and in each other
jurisdiction where it is required to be so licensed or authorized.
(d) Each Insurance Company has filed all required annual and quarterly
statements with the Insurance Department of the Commonwealth of
Massachusetts or
any other applicable regulatory authorities for the years ended December 31,
1999 and 2000 or such other periods as required by such regulatory authorities
(the "INSURANCE STATEMENTS"). The Company has previously furnished the Purchaser
with copies of the Insurance Statements, together with all exhibits and
schedules thereto, and any actuarial opinions, affirmations or certifications
filed in connection therewith.
(e) The business and operations of the Insurance Companies have been
conducted in material compliance with all applicable Laws regulating the
business of insurance and all applicable orders and directives of Governmental
Entities. To the Company's Knowledge, none of the Insurance Companies is in
violation of or since January 1, 1999 has violated, any applicable Laws
regulating the business of insurance or has received any notice from any
Governmental Entity or any other person that any Insurance Company is in
violation of, or has violated, any applicable provisions of any applicable Laws
regulating the business of insurance. To the Company's Knowledge, all insurance
products marketed, serviced, administered, sold or issued by or on behalf of an
Insurance Company have been marketed, serviced, administered, sold and issued in
compliance with all applicable consumer protection laws, whether federal or
state, and all applicable insurance Laws, including, without limitation, in
compliance with (i) all applicable prohibitions on withdrawal of business lines,
(ii) all applicable requirements relating to the disclosure of the nature of
insurance products as policies of insurance, (iii) all applicable requirements
relating to insurance product projections and illustrations, (iv) all applicable
prohibitions against "churning" and (v) all applicable anti-discrimination Laws.
(f) All policies, binders slips, certificates, annuity contracts and
participation agreements and other agreements of insurance, and all amendments,
applications, brochures, illustrations and certificates pertaining thereto, and
any and all marketing materials, in effect as
22
of the date hereof that are issued or have been issued by the Insurance
Companies are, to the extent required under applicable Law, on forms approved by
applicable regulatory authorities or which have been filed and not objected to
by such authorities within the period provided for objections, and all such
forms comply in all material respects with applicable insurance Laws. Any
premium rates of the Insurance Companies that are required to be filed with or
approved by any Governmental Entity have been so filed or approved and the
premiums charged conform thereto, and such premiums comply in all material
respects with all applicable anti-discrimination Laws and all applicable
insurance Laws.
(g) No material claim or assessment that is peculiar or unique to any
Insurance Company is pending or to the Company's Knowledge threatened against
any Insurance Company by any state insurance guaranty association in connection
with such association's fund relating to insolvent insurers, and none of the
Companies, the Subsidiaries, nor any Insurance Company has received notice of
any such claim or assessment.
(h) The reserves for payment of future policy benefits, Losses,
claims, expenses and similar purposes under all presently issued policies
reflected in, or included with, the Insurance Statements (collectively, the
"RESERVES") were determined in all material respects in accordance with the
Statutory Accounting Practices, to the Company's Knowledge, utilized actuarial
assumptions which are appropriate in all material respects for the risks of the
relevant policy and contract provisions, are fairly stated in accordance with
sound actuarial principles and are in compliance, in all material respects, with
the requirements of applicable Laws, including, without limitation, meeting all
applicable statutory and regulatory requirements as to reserve amounts for each
line of business in which the applicable Company or Subsidiary operates, and to
the Company's Knowledge, such Reserves were appropriate to cover the total
amount of all reasonably anticipated liabilities of the Company and each
Subsidiary under all outstanding insurance, reinsurance and other applicable
agreements as of the respective dates of such Insurance Statements.
(i) Prior to the date of this Agreement, the Company has delivered or
made available to the Purchaser copies of all actuarial reports prepared by
actuaries, independent or otherwise, with respect to any of the Insurance
Companies since December 31, 1998, and all attachments, addenda, supplements and
modifications thereto (the "COMPANY ACTUARIAL ANALYSES"). The information and
data furnished by any of the Company, the Subsidiaries or Insurance Companies to
its independent actuaries in connection with the preparation of the Company
Actuarial Analyses were accurate and complete in all material respects. To the
Company's Knowledge, each Company Actuarial Analysis was based upon an accurate
inventory of policies in force for the Insurance Companies at the relevant time
of preparation, was prepared using appropriate modeling procedures accurately
applied and in conformity with generally accepted actuarial standards
consistently applied, and the projections contained therein were properly
prepared in accordance with the assumptions stated therein.
(j) Since December 31, 1999, neither A.M. Best Company nor any other
ratings agency has announced that it has under surveillance or review its rating
of the financial strength or claims-paying ability of any Insurance Company, and
the Company has no reason to believe that any rating presently held by any
Insurance Company is likely to be modified,
23
qualified, lowered or placed under such surveillance for any reason, including,
without limitation, as a result of the transactions contemplated by this
Agreement.
3.21 REAL PROPERTY.
(a) Section 3.21(a) of the Disclosure Schedule lists all real
property that the Company or any of the Subsidiaries owns ("OWNED PROPERTY").
Except as set forth in Section 3.21(a) of the Disclosure Schedule, with respect
to each such parcel of Owned Property:
(i) the identified owner has sole, good and marketable title to the
parcel of Owned Property, free and clear of any Encumbrances;
(ii) there are no leases, subleases, licenses, concessions, or other
agreements granting to any party or parties the right of use or occupancy
of any portion of the parcel of Owned Property; and
(iii) there are no outstanding options or rights of first refusal to
purchase the parcel of Owned Property, or any portion thereof or interest
therein.
(b) Section 3.21(b) of the Disclosure Schedule lists all real
property leased or subleased from or to the Company or any of the Subsidiaries,
the name of the third party lessor or lessee and the date of the lease and all
amendments thereto (the "LEASED PROPERTY" and, collectively with the "OWNED
PROPERTY", the "REAL PROPERTY"). The Company has delivered to the Purchaser
correct and complete copies of the leases and subleases and all amendments
thereto set forth in Section 3.21(b) of the Disclosure Schedule (the "PROPERTY
LEASES").
(c) The Company and the Subsidiaries have the right to use the Real
Property in the manner and for the purposes as each is currently being used by
the Company or the Subsidiaries, as the case may be. To the Company's Knowledge,
there are no material eminent domain, condemnation or other similar proceedings
pending or threatened against the Company or any of the Subsidiaries or
otherwise affecting any portion of the Real Property and none of the Company nor
any of the Subsidiaries has received any written notice of the same. None of the
Company nor any of the Subsidiaries has received any written notice of any
material violation or claimed material violation by any of them of any material
applicable building, zoning, subdivision, health and safety and other similar
land use Laws with respect to the Real Property within the past three (3) years.
3.22 PERMITS. Except as set forth in Section 3.22 of the Disclosure
Schedule, the Company and each of its Subsidiaries has obtained all Permits that
are necessary for the ownership and conduct of the business of the Company and
each of its Subsidiaries as presently conducted including any Permits required
by the Division pursuant to
Massachusetts' Law; such Permits are in full force
and effect and are sufficient for the ownership and conduct of such business; to
the Company's Knowledge, no violations are or have been recorded by the entity
that issued the Permit in respect of any such Permit; and no proceeding is
pending or, to the Company's Knowledge, threatened, to suspend, revoke or limit
any such Permit.
3.23 REINSURANCE. Section 3.23 of the Disclosure Schedule sets forth a list
of all reinsurance and coinsurance treaties or agreements, including
retrocessional agreements, to
24
which any Insurance Company is a party or under or with respect to which any
Insurance Company has any existing rights, obligations or liabilities. All such
reinsurance and coinsurance treaties or agreements are legal, valid, binding and
enforceable against the Insurance Company party thereto and, to the Company's
Knowledge, the other parties thereto, and to the Company's Knowledge, are in
full force and effect. None of the Company or any Subsidiary, nor, to the
Company's Knowledge, any other party to any such reinsurance or coinsurance
treaty or agreement, is in default in any material respect under any provision
thereof, and no such agreement contains any provision providing that the other
party thereto may terminate such agreement by reason of the transactions
contemplated by this Agreement. None of the Insurance Companies has received any
notice to the effect that the financial condition of any other party to any such
agreement is impaired with the result that a default thereunder may reasonably
be anticipated, whether or not such default may be cured by the operation of any
offset clause in such agreement. No insurer or reinsurer or group of affiliated
insurers or reinsurers accounted for the direction to Insurance Companies or the
ceding by the Insurance Companies of insurance or reinsurance business in an
aggregate amount equal to two percent (2%) or more of the consolidated gross
premium income of the Insurance Companies for the year ended December 31, 2000.
3.24 NO OTHER AGREEMENTS TO SELL THE BUSINESS. None of the Companies or any
Subsidiary has any agreement, absolute or contingent, with any other person to
sell the capital stock, material assets or business of any of the Subsidiaries
or to effect any merger, consolidation or other reorganization of any of the
Subsidiaries or to enter into any agreement with respect thereto.
3.25 MANAGEMENT AGREEMENTS AND BONUSES. Section 3.25 of the Disclosure
Schedule sets forth all agreements providing for salary, bonuses and other
compensation by the Company or any of its Subsidiaries to any officer, director,
employee or former employee of the Company or any of its Subsidiaries, as
applicable. Section 3.25 of the Disclosure Schedule lists in all material
respects the amount and form of the salary, bonuses and other compensation
payable pursuant to each such agreement, including as a result of the
transactions contemplated by this Agreement.
3.26 ACCURACY OF INFORMATION. Other than as set forth on Section 3.26 of
the Disclosure Schedule, the representations and warranties set forth in this
Agreement (including the exceptions to such representations and warranties set
forth in the Disclosure Schedule) do not contain any untrue statement of a
material fact.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER AND ACQUISITION
The Purchaser and Acquisition jointly and severally represent and warrant
to the Company and the Shareholders as follows:
25
4.01 ORGANIZATION.
(a) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted except where the failure to be so organized,
existing and in good standing or to have such power or authority (i) is not, in
the aggregate, reasonably likely to have a material adverse effect on the
business, assets or financial condition of the Purchaser ("PURCHASER MATERIAL
ADVERSE EFFECT"), or (ii) would not impair, hinder or adversely affect the
ability of the Purchaser to perform any of its obligations under this Agreement
or to consummate the transactions contemplated hereby. The Purchaser has
heretofore delivered to the Company complete and correct copies of its
certificate of incorporation and by-laws, as currently in effect.
(b) Acquisition is a corporation duly organized, validly existing and
in good standing under the laws of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted except where the failure to be so organized,
existing and in good standing or to have such power or authority (i) is not, in
the aggregate, reasonably likely to have a material adverse effect on the
business, assets or financial condition of Acquisition or (ii) would not impair,
hinder or adversely affect the ability of Acquisition to perform any of its
obligations under this Agreement or to consummate the transactions contemplated
hereby. Acquisition has heretofore delivered to the Company complete and correct
copies of its certificate of incorporation and by-laws, as currently in effect.
4.02 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) The Purchaser has full corporate power and authority to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the other Transaction Documents to
which it is a party and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by the Board of Directors of
the Purchaser and no other corporate proceedings on the part of the Purchaser
are necessary to authorize the execution and delivery of this Agreement and the
other Transaction Documents to which it is a party or to consummate the
transactions contemplated hereby. This Agreement and the other Transaction
Documents to which it is a party have been duly and validly executed and
delivered by the Purchaser and constitute valid and binding agreements of the
Purchaser, enforceable against the Purchaser in accordance with their terms,
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium (whether general or specific) or other similar laws
now or hereafter in effect relating to creditors' rights generally and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(b) Acquisition has full corporate power and authority to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the other Transaction Documents to
which it is a party and the consummation of the
26
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of Acquisition and no other corporate
proceedings on the part of Acquisition are necessary to authorize the execution
and delivery of this Agreement and the other Transaction Documents to which it
is a party or to consummate the transactions contemplated hereby. This Agreement
and the other Transaction Documents to which it is a party have been duly and
validly executed and delivered by Acquisition and constitute valid and binding
agreements of Acquisition, enforceable against Acquisition in accordance with
their terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium (whether general or specific) or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
4.03 CONSENTS AND APPROVALS; NO VIOLATION. Except for HSR Filings (and
other competition filings) and the filings, permits, authorizations, consents
and approvals set forth on Section 4.03 to the Disclosure Schedule, there is no
requirement applicable to the Purchaser or Acquisition to make any filing with,
or to obtain any permit, authorization, consent or approval of, any governmental
or regulatory authority as a condition to lawful consummation by the Purchaser
and Acquisition of the consummation of the transactions contemplated by the
Transaction Documents. Neither the execution and delivery of this Agreement or
the other Transaction Documents by the Purchaser or Acquisition nor the
consummation of the transactions pursuant to this Agreement will (i) conflict
with or result in any breach of any provision of the certificate of
incorporation or by-laws of the Purchaser or Acquisition, (ii) require any
consent, waiver, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except as set forth in said Section
4.03 to the Disclosure Schedule and except for such consents, waivers,
approvals, authorizations, permits, filings or notifications which, in the
aggregate, are not reasonably likely to have a Purchaser Material Adverse
Effect, (iii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any agreement, lease or other instrument or obligation to which the Purchaser
or Acquisition or any of the Purchaser's subsidiaries is a party, except for
such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been or shall prior to the Closing be
obtained or which, in the aggregate, would not have a Purchaser Material Adverse
Effect or (d) violate any applicable order, writ, injunction or decree.
4.04 LITIGATION. There is no action, suit or proceeding pending, or, to the
knowledge of the Purchaser, action, suit or proceeding threatened, against the
Purchaser or Acquisition before any Governmental Entity which is reasonably
likely to have a Purchaser Material Adverse Effect. The Purchaser has not
received notice that it or Acquisition is subject to any outstanding judgment,
order or decree of any Governmental Entity which is reasonably likely to have a
Purchaser Material Adverse Effect.
4.05 BROKERS AND FINDERS. Neither the Purchaser nor Acquisition nor any of
their officers, directors or employees has employed any investment banker,
broker or finder, or incurred any liability for any investment banking fees,
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement, except for fees and
27
expenses payable by the Purchaser to Xxxx & Co. and The Jordan Company LLC for
investment banking services.
4.06 PURCHASER'S ACKNOWLEDGMENTS. The Purchaser and Acquisition acknowledge
and agree that they (i) have made their own inquiry and investigation into, and,
based thereon, have formed an independent judgment concerning, the Company and
the Subsidiaries and (ii) have been furnished with or given adequate access to
such representatives of the Company and the Subsidiaries, and books, records and
other information about the business of the Company and the Subsidiaries as they
have requested.
ARTICLE V
COVENANTS OF THE PARTIES
5.01 CONDUCT OF BUSINESS. Except as contemplated by this Agreement, during
the period from the date of this Agreement to the Closing Date, the Company
will, and will cause the Subsidiaries to, conduct its and their business and
operations according to in the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Company will not, without the prior written
consent of the Purchaser (which consent shall not be unreasonably withheld or
delayed), and will not permit any Subsidiary to:
(a) (i) create, incur or assume any indebtedness for money borrowed,
including obligations in respect of capital leases but excluding short term
indebtedness or (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person; PROVIDED, HOWEVER, that the Company and the Subsidiaries may
incur indebtedness in the Ordinary Course of Business and (ii) endorse
negotiable instruments in the Ordinary Course of Business;
(b) except in the Ordinary Course of Business, (i) sell, transfer or
otherwise dispose of any of its material property or assets or (ii) mortgage or
encumber any of its material property or assets;
(c) enter into any agreement, commitment or transaction (including
without limitation any borrowing, capital expenditure or capital financing)
material to the Company and the Subsidiaries, taken as a whole, except
agreements, commitments or transactions in the Ordinary Course of Business or as
contemplated herein;
(d) materially change the accounting methods, principles or practices
employed by any of them;
(e) amend their respective certificates of incorporation, by-laws or
other organizational or governing documents or effect any reclassification,
recapitalization or similar change in the capitalization of the Company or any
of the Subsidiaries;
(f) (i) enter into any new or amend any existing, employment,
severance, deferred compensation or similar arrangements, (ii) increase the
compensation payable, or to become payable, by the Company or any of the
Subsidiaries to any employee, or any director or officer
28
of the Company or any of the Subsidiaries, (iii) except pursuant to agreements,
plans or other arrangements existing as of the date hereof, pay or make
provision for the payment of any bonus, stock option, stock purchase, profit
sharing, deferred compensation, pension or retirement payment to any employee of
the Company or any of the Subsidiaries, or any director or officer of the
Company or any of the Subsidiaries, or (iv) provide for the first time or
increase the coverage or benefits available under, any severance pay,
termination pay, vacation pay, company awards, salary continuation or
disability, sick leave, deferred compensation, bonus or other incentive
compensation, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any employee or former employee of the Company
or any of the Subsidiaries or any director or officer of the Company or any of
the Subsidiaries, other than, in the case of clauses (ii), (iii) and (iv) normal
increases or payments in the Ordinary Course of Business that are not material,
individually or in the aggregate, and that do not result in any material
increase in the cost of any such plans;
(g) liquidate, sell, lease, transfer, assign or dispose of or agree to
liquidate, sell, lease, transfer, assign or dispose of any tangible or
intangible assets outside the Ordinary Course of Business;
(h) take or omit to take any action that would have a Material Adverse
Effect;
(i) enter into, adopt or terminate any Plan;
(j) acquire (by merger, consolidation or other combination, or
acquisition of stock or assets) any corporation, partnership or other business
organization, or any division thereof;
(k) issue, sell or otherwise dispose of or agree to issue sell or
otherwise dispose of any of its capital stock, or grant any options, warrants,
or other rights to purchase or obtain (including upon conversion, exchange or
exercise) any of its capital stock;
(l) create, incur, issue any debt securities, endorse, assume or
guaranty or enter into any agreement to provide for indebtedness for borrowed
money and capitalized lease obligations;
(m) make or commit to make any capital expenditure not in the Ordinary
Course of Business in an amount in excess of $50,000, individually or in the
aggregate;
(n) declare, set aside or pay any dividend or make any distribution
with respect its capital stock (whether in cash or in kind) or redeem, purchase,
or otherwise acquire any of its capital stock, other than any such dividend by
any Subsidiary to the Company;
(o) make any loan to, or enter into any transaction with, any of its
directors, officers, stockholders or any Affiliate or Associate thereof, except
for advances for travel and other business expenses in the Ordinary Course of
Business that do not exceed $50,000 in the aggregate;
(p) create or impose any Encumbrances upon any of its assets or
properties, tangible or intangible, except for Encumbrances arising by operation
of Law;
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(q) grant any license or sublicense of any material rights under or
allow to lapse, sell, transfer or otherwise dispose of, or otherwise experience
any adverse effect with respect to any material Company Proprietary Rights;
(r) make any equity or debt investment in, or any loan to, any other
Person, other than transactions between the Company and the Subsidiaries or
between the Subsidiaries;
(s) initiate any legal proceeding or action or compromise any pending
legal proceeding or action outside the Ordinary Course of Business, except for
legal proceedings or actions relating to any employee of the Company or the
Subsidiaries or against the Purchaser or its Affiliates in connection with this
Agreement or the transactions contemplated hereby;
(t) make any material Tax election or settle or compromise any
federal, state, local or foreign Tax liability, or waive or extend the statute
of limitations in respect of any Taxes; or
(u) materially change its overall pricing of insurance premiums on
contracts of insurance sold by the Company or any of the Subsidiaries except for
any premium increases reflected in filings made with state insurance
departments; or
(v) enter into any agreement to take, or cause to be taken, any of the
actions prohibited in this SECTION 5.01.
5.02 ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Closing Date, the
Company will, during ordinary business hours and upon reasonable advance notice,
(i) give the Purchaser and its authorized representatives reasonable access to
all books, records, offices and other facilities and properties of the Company
and the Subsidiaries, (ii) permit the Purchaser to make such inspections thereof
as the Purchaser may reasonably request, and (iii) cause the officers of the
Company to furnish the Purchaser with such financial and operating data and
other information with respect to the business and properties of the Company and
the Subsidiaries as the Purchaser may from time to time reasonably request;
PROVIDED, HOWEVER, that any such investigation shall be conducted in such a
manner as not to interfere unreasonably with the operation of the business of
the Company and the Subsidiaries.
(b) Any information provided pursuant to this Agreement shall be held
by the Purchaser in accordance with and shall be subject to the terms of the
Confidentiality Agreement, dated March 13, 2001, between The Jordan Company, LLC
and the Company (the "CONFIDENTIALITY AGREEMENT") which agreement is and shall
remain in full force and effect in accordance with its terms.
(c) Purchaser may, upon prior notice to the Shareholder
Representative, meet with designated members of the Company's senior management,
at reasonable times and in a manner not disruptive to the Company's business for
the purpose of discussing and negotiating post-Closing employment arrangements
and the terms and conditions on which such senior management may participate as
investors in the Purchaser, PROVIDED, HOWEVER, that no such prior notice shall
be necessary for the Purchaser to contact the Company's senior management for
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purposes of assisting Purchaser in preparing any and all documents necessary for
Purchaser to secure the Financing Commitments or otherwise as is reasonably
necessary in connection with the consummation of the transactions contemplated
by this Agreement. Such employment and investment negotiations shall be subject
to the terms of the Confidentiality Agreement and any arrangements negotiated
with any employee of the Company shall expressly by its terms not become
effective or impose any obligation on such employee prior to the Effective Date
of the Merger. If for any reason this Agreement is terminated or the Merger does
not become effective, all such agreements will by their terms terminate and be
without any further force or effect.
5.03 FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of the Company, the Purchaser and Acquisition agrees to use its
commercially reasonable efforts and good faith to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective and pay for as promptly as
practicable the transactions contemplated by this Agreement and to cooperate in
connection with the foregoing, including using its commercially reasonable
efforts (i) to obtain all necessary waivers, consents and approvals from other
parties to material leases and other Contracts, (ii) to obtain all consents,
approvals and authorizations that are required to be obtained under any Law,
(iii) to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties hereto to consummate the
transactions contemplated hereby, (iv) to effect all necessary registrations and
filings including, but not limited to, HSR Filings and other competition filings
(the cost of which will be borne by the Purchaser) and submissions of
information requested or required by Governmental Entities, (v) to obtain
sufficient financing in order to consummate the transactions contemplated hereby
and (vi) to fulfill all conditions to this Agreement. Each of the Company, the
Purchaser and Acquisition further covenants and agrees, with respect to a
threatened or pending preliminary or permanent injunction or other order, decree
or ruling or statute, rule, regulation or executive order that would adversely
affect the ability of the parties hereto to consummate the transactions
contemplated hereby, to use their respective best efforts to prevent the entry,
enactment or promulgation thereof, as the case may be.
5.04 FILINGS. The Purchaser will make or cause to be made and pay for all
such HSR Filings (and any other such competition filings) and submissions under
laws and regulations applicable to the Purchaser, if any, as may be required of
the Purchaser for the consummation of the transactions contemplated by this
Agreement, including, without limitation, any such filings with the Division
pursuant to Massachusetts Law. The Company will make or cause to be made and pay
for all such filings and submissions under laws and regulations applicable to
the Company and the Subsidiaries as may be required of the Company and the
Subsidiaries for the consummation of the transactions contemplated by this
Agreement, including any such filing with the Division pursuant to Massachusetts
Law. The parties hereto will coordinate and cooperate with one another in
exchanging such information and providing reasonable assistance as may be
requested in connection with all of the foregoing.
5.05 PUBLIC ANNOUNCEMENTS. The Shareholder Representative and the Purchaser
will consult with each other before issuing any press releases or otherwise
making any public statements with respect to this Agreement and the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement without the consent of the other,
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except that such approval shall not be required for a public statement to the
extent either party is advised by its legal counsel that such disclosure is
required by applicable Law.
5.06 FEES AND EXPENSES. Whether or not the transactions contemplated hereby
are consummated, each party agrees to bear its own expenses in connection with
the transactions contemplated hereby, including fees and expenses of
accountants, attorneys, investment advisors and other professionals; PROVIDED,
HOWEVER, if the transactions contemplated hereby are not consummated due to the
failure of Purchaser to satisfy the covenant set forth in SECTION 5.10,
Purchaser shall pay or reimburse the Company for all of the reasonable and
documented out of pocket expenses incurred by the Company in connection with the
transactions contemplated hereby ("COMPANY EXPENSES") and; PROVIDED, FURTHER if
the transactions contemplated hereby are not consummated due to the failure of
the Shareholders to satisfy the conditions set forth in SECTION 6.02(G), the
Company shall pay or reimburse the Purchaser for up to $500,000 of the
reasonable and documented out of pocket expenses incurred by the Purchaser or
Acquisition in connection with the transactions contemplated hereby.
5.07 DISCLOSURE SUPPLEMENTS. Between the date of this Agreement and the
Closing Date, the Company shall promptly notify Purchaser in writing to the
extent of the Company's Knowledge of any fact or condition that causes or
constitutes, or reasonably could cause or constitute, a misrepresentation or
breach of any of the Company's representations and warranties as of the date of
this Agreement (in either case, a "BREACH"). Between the date of this Agreement
and the Closing Date, the Company shall also promptly notify Purchaser in
writing to the extent of the Company's Knowledge of any fact, thing, matter,
occurrence, variance or condition hereafter arising ("NEW FACTS") which, if
existing or occurring at, or prior to the date of this Agreement, would have
been required to be set forth in the Disclosure Schedule, in the form of a
"REVISED SCHEDULE" delivered to the Purchaser. Each such date of disclosure
shall hereinafter be referred to as a "DISCLOSURE DATE". Any Revised Schedule
shall be marked to show changes between the original Disclosure Schedule and the
Revised Schedule. The Purchaser shall have ten (10) days following each
Disclosure Date to review the New Facts so disclosed. In the event that such New
Facts would reasonably be expected to constitute a material Breach, the
Purchaser may deliver to the Company a notice setting forth in reasonable detail
the basis for such conclusion and its election to terminate its obligations
under this Agreement (the "TERMINATION NOTICE") no later than 5:00 p.m. Eastern
Time on the tenth calendar day following the Disclosure Date. In the event the
Purchaser does not have the right or for any reason does not terminate this
Agreement pursuant to this SECTION 5.07, then such Revised Schedule shall be
deemed to amend and/or supplement the original Disclosure Schedule hereto and
cure and correct for all purposes any Breach which would have existed by reason
of the Company not having disclosed such Revised Schedule.
5.08 EMPLOYEE BENEFIT MATTERS.
(a) BENEFIT ARRANGEMENTS. Except as set forth in SECTION 5.08(e), (f)
and (g), the Purchaser shall on and after the Effective Time, cause the Company
and each of the Subsidiaries to honor, without offset, deduction, counterclaims,
interruptions or deferment (other than withholdings under applicable law), all
plans and employment, severance, termination and retirement agreements and
arrangements set forth on Section 5.08(a) of the Disclosure Schedule to which
each of them is presently a party, as such plans, agreements and arrangements
may
32
hereafter be modified with the consent of the other party or as otherwise
permitted by such plans, agreements and arrangements of the Company and the
Subsidiaries in effect on the date hereof.
(b) INDEMNIFICATION. The Purchaser agrees that all rights to
indemnification or exculpation now existing in favor of the employees, agents,
directors or officers of the Company and each Subsidiary (the "COMPANY
INDEMNIFIED PARTIES") as provided in their respective certificate of
incorporation or by-laws, as provided in an agreement between a Company
Indemnified Party and the Company and/or any Subsidiary (the "INDEMNIFICATION
AGREEMENT") or otherwise in effect on the date hereof shall continue in full
force and effect for a period of not less than seven (7) years from the Closing
Date; PROVIDED, HOWEVER, that, in the event any claim or claims are asserted or
made within such seven (7) year period, all rights to indemnification in respect
of any such claim or claims shall continue until disposition of any and all such
claims. Any determination required to be made with respect to whether a Company
Indemnified Party's conduct complies with the standards set forth in such
certificate of incorporation or by-laws or under the Indemnification Agreements
or otherwise shall be made by independent counsel selected by the Company
Indemnified Party reasonably satisfactory to the Company (whose fees and
expenses shall be paid by the Company).
(c) BENEFITS; PRIOR SERVICE. From and after the Effective Time, the
Company shall cause each employee of the Company and each employee of any
Subsidiary to be credited with service with the Company and/or a Subsidiary for
purposes of determining such employee's eligibility to participate in and
vesting under each employee benefit plan maintained by the Purchaser or its
Affiliates after the Effective Time; PROVIDED, HOWEVER, that such service shall
not be recognized to the extent that such recognition would result in a
duplication of benefits.
(d) BINDING ON SUCCESSORS. If the Company or any of the Subsidiaries
or any of their successors or assigns consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, then and in each such case, proper provision shall
be made so that the successors and assigns of the Company or any of the
Subsidiaries (or their successors or assigns) shall assume the obligations set
forth in SECTIONS 5.08(a), (b) and (c).
(e) XSOP. Effective as of the Closing Date, the XSOP shall be
terminated and each participant thereunder at that time or then beneficiary of a
deceased participant shall receive as soon as administratively feasible a cash
payment equal to the value, determined as of the day before the termination
occurs, of the participant's benefits under the XSOP. Prior to the Closing Date,
the Plan Sponsor shall take all actions that are necessary to give effect to the
transaction contemplated by this SECTION 5.08(e).
(f) ESOP. As of the Closing Date, but subject to SECTION 2.01(h)
hereof, the ESOP shall be terminated. Prior to the Closing Date, the Plan
Sponsor shall take all actions (including but not limited to, if appropriate,
amending the ESOP) that are necessary to give effect to the transaction
contemplated by this SECTION 5.08(f).
(g) PROFIT SHARING-RETIREMENT PLAN. Effective as of the day
immediately preceding the Closing Date, the Plan Sponsor shall terminate the
Profit Sharing-Retirement Plan,
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and the employees of the Company and each of the Subsidiaries shall be eligible
to participate in a profit sharing retirement plan as soon as administratively
practicable after the Effective Time.
5.09 EXCLUSIVITY.
(a) Until the termination of this Agreement, neither the Company, the
Subsidiaries nor the Shareholders nor any of their respective directors,
officers, employees, agents, representatives or shareholders (collectively, the
"COMPANY GROUP") shall initiate, solicit, entertain, negotiate, accept or
discuss, or encourage inquiries or proposals (each, an "ACQUISITION PROPOSAL")
with respect to, or furnish any information relating to or participate in any
negotiations or discussions concerning, or enter into any agreement with respect
to, any acquisition or purchase of all or a substantial portion of the business,
assets, properties, capital stock or capital stock equivalents of the Company or
any of the Subsidiaries (a "POTENTIAL SALE"), whether by merger, combination,
sale of stock, sale of assets, or otherwise, or enter into any agreement,
arrangement or undertaking requiring it to abandon, terminate or fail to
consummate the transactions contemplated by this Agreement. The Company and the
Shareholders shall, and shall cause each other member of the Company Group to,
immediately cease and cause to be terminated any existing activities, including
discussions or negotiations with any parties, other than Purchaser, conducted
prior to the date hereof with respect to any Acquisition Proposal. The Company
and the Shareholders shall (i) promptly inform Purchaser of any inquiries any
member of the Company Group receives after the date hereof concerning an
Acquisition Proposal or Potential Sale and provide Purchaser with copies of all
correspondence or other documents received in connection therewith and (ii)
inform the Persons sending such inquiries, requests or proposals that the
Company is bound by an exclusivity arrangement (without any reference to
Purchaser, or its potential financing sources). The Company represents that it
is not a party to or bound by any agreement with respect to an Acquisition
Proposal other than under this Agreement. The Company and the Subsidiaries shall
cause their officers, directors, agents and advisors to comply with this
SECTION 5.09.
(b) Each Shareholder further agrees that, except as contemplated by
this Agreement, without the prior written consent of the Purchaser, such holder
shall not, directly or indirectly, during the term of this Agreement (i) grant
or enter into any Encumbrance, power of attorney or other agreement or
arrangement with respect to the voting of such holder's shares of Company
Capital Stock, (ii) sell, assign, transfer, encumber or otherwise dispose of, or
enter into any Contract, option or other arrangement or understanding with
respect to the direct or indirect sale, assignment, transfer, encumbrance or
other disposition of any of such shares of Company Capital Stock or (iii) take
any other action that would in any way restrict, limit or interfere with the
performance of such Person's obligations hereunder or the transactions
contemplated hereby.
5.10 FINANCING COMMITMENTS.
(a) On or prior to 0 x.x. (Xxxxxx, Xxxxxxxxxxxxx time) on July 18,
2001 (the "Outside Financing Commitment Date"), the Purchaser will deliver to
the Company Financing Commitments that are in form and substance reasonably
satisfactory to the Company. If the Company has not received such Financing
Commitments from Purchaser by the Outside Financing Commitment Date, or if such
Financing Commitments are not reasonably satisfactory to the Company, the
Company may, at its option, within ten (10) days of the Outside Financing
34
Commitment Date, terminate this Agreement by written notice to Purchaser, in
which event, this Agreement shall forthwith terminate (except for the provisions
hereof which expressly survive such termination by their terms) and there shall
be no liability or obligation whatsoever on the part of any party hereto except
for the obligation of Purchaser to pay the Company Expenses as set forth in
SECTION 5.06.
(b) At reasonable intervals and at the Company's request, Purchaser
shall inform the Company of the status regarding Purchaser's efforts to secure
the Financing Commitments between the date hereof and the Outside Financing
Commitment Date.
5.11 APPOINTMENT OF SHAREHOLDER REPRESENTATIVE. By their execution of a
counterpart of this Agreement, each Shareholder hereby irrevocably constitutes
and appoints Xxxxxxx X. Xxxxxxx (the "SHAREHOLDER REPRESENTATIVE"), with full
power of substitution, as such Shareholder's true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead of such
Shareholder, for the purpose of (i) contesting, defending, disputing, settling,
compromising or otherwise disposing of any Losses asserted by any Purchaser
Indemnitee, (ii) resolving, disputing, receiving, agreeing to and collecting
(including, without limitation, instituting legal actions therefor), the amount
of the Post-Closing Adjustment Consideration and otherwise carry out the
provisions of SECTION 2.01(d), (iii) carrying out the other responsibilities of
the Shareholder Representative contained in the Agreement, and (iv) to take any
and all appropriate action and to execute any documents and instruments that may
be necessary or desirable to accomplish the purposes of any and all of the
foregoing, and the transactions, documents, instruments, agreements and
certificates contemplated thereby, including, to perform or make any waivers,
statements, restatements, modifications and supplements in the documents or
other agreements, instruments or documents that may be entered into in
connection therewith on such Shareholder's behalf, as from time to time may be
agreed upon by the Shareholder Representative; and such Shareholder
Representative shall be authorized on behalf of each Shareholder and in the name
of such Shareholder to execute, deliver and perform each of such documents and
agreements with such waivers, modifications, changes, deletions, supplements or
amendments as have been approved by the Shareholder Representative, such
approval to be conclusively evidenced by the Shareholder Representative's
execution and delivery thereof. Each Shareholder agrees that the power granted
by this SECTION 5.11 is coupled with an interest and irrevocable. In the event
of the death, incapacity, or resignation of, or if for any other reason Xxxxxxx
X. Xxxxxxx shall cease to serve as Shareholder Representative, then, and in such
event, S. Xxxxx Xxxxxxx shall, and without any further action on the part of the
Shareholders, immediately be the Shareholder Representative hereunder. In the
event of the death, incapacity or resignation of, or if for any other reason S.
Xxxxx Xxxxxxx shall cease to serve as Shareholder Representative, then, and in
such event, the Persons (or in the case of any individual who is deceased at the
time of such action, then such Person's personal representative) who were the
holders of record of a majority of the Company Capital Stock which was
outstanding immediately prior to the Closing (on a one-Share-for-one-Share vote
basis) shall by written designation constitute and appoint a successor
Shareholder Representative and shall give notice of such action to the Purchaser
and to the other Shareholders of record.
5.12 TERMINATION OF CERTAIN AGREEMENTS. At or prior to the Closing, the
Company shall take all actions necessary if any, to terminate the Affiliate
Contracts.
35
5.13 MEETING OF SHAREHOLDERS. As promptly as practicable after the
Purchaser's full satisfaction of SECTION 5.10(a), the Company shall take all
actions necessary in accordance with applicable Law and its certificate of
incorporation and by-laws to duly call, give notice of, convene and hold a
meeting of the Shareholders or to solicit and obtain the written consent of the
Shareholders for the purpose of considering and voting upon or consenting to the
adoption and approval of this Agreement and the transactions contemplated
hereby. Subject to its fiduciary duties, the board of directors of the Company
shall recommend approval and adoption of this Agreement and the transactions
contemplated hereby by the Shareholders.
5.14 SHAREHOLDERS/VOTING ARRANGEMENT. Each Shareholder (other than the
ESOP) hereby agrees to vote all shares of Company Capital Stock that such
Shareholder (other than the ESOP) is entitled to vote at the time of any meeting
of the Shareholders or by written consent at which the approval and adoption of
this Agreement, the Merger and the transactions contemplated hereby are
submitted for the consideration and vote of the Shareholders, and at any
adjournment thereof, in favor of the approval and adoption of this Agreement,
the Merger and the transactions contemplated hereby. The Company and each
Shareholder (other than the ESOP) shall use its reasonable best efforts to cause
each other Shareholder to vote all shares of Company Capital Stock that such
other Shareholders are entitled to vote at the time of any meeting of the
Shareholders or by written consent at which the approval and adoption of this
Agreement, the Merger and the transactions contemplated hereby are submitted for
the consideration and vote of the Shareholders, and at any adjournment thereof,
in favor of the approval and adoption of this Agreement (or any amended
version), the Merger and the transactions contemplated hereby.
5.15 PROXY STATEMENT. As soon as reasonably practicable following the date
of this Agreement, the Company shall prepare and mail a proxy statement to the
ESOP Trustee, for distribution to the ESOP participants, soliciting such ESOP
participants' votes with respect to the Merger and the other transactions
contemplated by this Agreement. The Company covenants and agrees that the proxy
statement shall include the recommendation of the Company's board of directors,
subject to its fiduciary duties, that such ESOP participants vote to approve
this Agreement and the transactions contemplated hereby.
5.16 ASSIGNMENT. At or prior to the Effective Time and in consideration of
the transactions contemplated hereby, Xxxxxxx X. Xxxxxxx shall assign to the
Purchaser all of his right, title and interest in and to the capital stock of
the Company's Subsidiary, Safety Insurance Company, Inc. Xx. Xxxxxxx shall
represent and warrant to the Purchaser at the time of such assignment that the
capital stock so assigned is free and clear of any Encumbrances. Any failure of
Xx. Xxxxxxx to so assign such capital stock shall be deemed a material
non-compliance for purposes of SECTION 6.02(b) hereof.
ARTICLE VI
CLOSING CONDITIONS
6.01 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS TO
EFFECT THE TRANSACTIONS CONTEMPLATED HEREBY. The obligations of the Company and
Shareholders to effect
36
the transactions contemplated hereby shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions, any one or more of which
may be waived by the Company:
(a) The representations and warranties of the Purchaser and
Acquisition contained herein shall be true and correct in all material respects
as of the date hereof and at and as of the Closing Date as though such
representations and warranties were made at and as of such date.
(b) The Purchaser and Acquisition shall have performed and complied in
all material respects with all agreements, obligations, covenants and conditions
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date.
(c) No Law, preliminary or permanent injunction or restraining order
shall have been enacted, entered, promulgated or enforced by any Governmental
Entity which prohibits or restricts the consummation of the transactions
contemplated hereby. No action or proceeding by any Governmental Entity shall
have been commenced (and be pending) against the Company, any of the
Subsidiaries or any of their respective affiliates, associates, officers or
directors seeking to prevent or delay the transactions contemplated hereby or
challenging any of the terms or provisions of this Agreement or seeking material
damages in connection therewith.
(d) All consents and approvals of Governmental Entities necessary for
consummation of the transactions contemplated hereby shall have been obtained,
other than those which, if not obtained, would not have a Material Adverse
Effect or a Purchaser Material Adverse Effect.
(e) The Purchaser and Acquisition shall have furnished the Company
with such certificates of its officers and others to evidence its compliance
with the conditions set forth in SECTION 6.01(a) through (d) as may be
reasonably requested by the Company.
(f) Acquisition shall have executed and delivered the Certificate of
Merger.
(g) Any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired.
(h) The Company shall have received the written opinion of Xxxxx,
Xxxxx & Xxxxx, special legal counsel to each of the Purchaser and Acquisition,
in form and substance reasonably satisfactory to the Company.
6.02 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER AND ACQUISITION TO
EFFECT THE TRANSACTIONS CONTEMPLATED HEREBY. The obligations of the Purchaser
and Acquisition to effect the transactions contemplated hereby shall be further
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any one or more of which may be waived by the Purchaser:
(a) The representations and warranties of the Company contained herein
shall be true and correct in all material respects as of the date hereof and at
and as of the Closing Date as though such representations and warranties were
made at and as of such date.
37
(b) The Company shall have performed and complied in all material
respects with all agreements, obligations, covenants and conditions required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date.
(c) No Law, preliminary or permanent injunction or restraining order
shall have been enacted, entered, promulgated or enforced by any Governmental
Entity which prohibits or restricts the consummation of the transactions
contemplated hereby. No action or proceeding by any Governmental Entity shall
have been commenced (and be pending) against the Purchaser or Acquisition or any
of their affiliates, associates, officers, or directors seeking to prevent or
delay the transactions contemplated hereby or challenging any of the terms or
provisions of this Agreement or seeking material damages in connection
therewith.
(d) All consents and approvals required under the Contracts set forth
on Section 3.04 or Section 3.09(b) of the Disclosure Schedule and all consents
and approvals of Governmental Entities necessary for consummation of the
transactions contemplated hereby shall have been obtained, other than those
which, if not obtained, would not have a Material Adverse Effect or a Purchaser
Material Adverse Effect.
(e) The Company shall have furnished the Purchaser and Acquisition
with such certificates of the Company's officers and others to evidence their
compliance with the conditions set forth in this SECTION 6.02(a) through (d) as
may be reasonably requested by the Purchaser.
(f) The Company shall have executed and delivered the Certificate of
Merger.
(g) The Merger shall have been approved by the vote of the
Shareholders in accordance with applicable Law and the Company's organizational
documents, with at least ninety percent (90%) approval having been obtained with
respect to each class of Company Capital Stock, and the Company shall have
delivered to the Purchaser a certificate, dated as of the Closing Date, to such
effect.
(h) Any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired.
(i) The Purchaser shall have received the written opinions of
Xxxxxxxx, Xxxxxxx & Xxxxxxx, A Professional Corporation, legal counsel to the
Company and Xxxxxxxx, Xxxxxxx & Xxxxxx, LLP, insurance counsel to the Company,
in each case in form and substance reasonably satisfactory to the Purchaser, on
which the Purchaser's lenders may rely.
(j) On or prior to the Closing Date, the action required pursuant to
SECTION 5.08(e), (f) and (g) relating to the XSOP, the ESOP and the Profit
Sharing-Retirement Plan shall have been taken.
(k) The Purchaser shall have received cash proceeds, pursuant to the
Financing Commitments, in an amount necessary to consummate the Merger and other
transactions contemplated by this Agreement and to pay all fees and expenses in
connection therewith.
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(l) Xxxxxxx X. Xxxxxxx shall have entered into a Non-Competition
Agreement with Purchaser and Acquisition, substantially in the form of EXHIBIT B
attached hereto.
(m) During the period from the date hereof to the Closing Date, no
event shall have occurred or be continuing (including any litigation or change
in the financial or business condition of the Company and the Subsidiaries,
taken as a whole) which has or had a Material Adverse Effect.
(n) The Purchaser shall have received from the Company a duly executed
certificate in the form specified by Treasury Regulation Section 1.1445-2(b)(2).
(o) The ESOP shall have paid to the Company or the Company shall have
forgiven the payment of all amounts due and owing under the ESOP Note in full
satisfaction and release of the ESOP Note.
(p) The Company shall have paid to Fleet National Bank f/k/a The First
National Bank of Boston ("FNBB") all amounts due and owing as of the Closing
Date under the Loan Agreement, dated April 12, 1995, in the original principal
amount of $36,000,000, between the Company and FNBB, and the other documents
related thereto (the "LOAN DOCUMENTS") in full satisfaction and release of the
Loan Documents and FNBB shall have released any and all Encumbrances and filed
all appropriate UCC filings effecting such release.
(q) Xxxxxxx X. Xxxxxxx and S. Xxxxx Xxxxxxx shall have paid to the
Company all amounts due and owing under the Amended and Restated Promissory
Note, dated July 15, 1996, in the original principal amount of $1,100,000.00.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.01 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual consent of the Purchaser and the Company;
(b) by the Company or by the Purchaser at any time after the date
which is (180) days after the date hereof, unless the approvals and consents
listed on Section 3.04 of the Disclosure Schedule have been applied for or
submitted but not received by such date, in which case either party may extend
such date by an additional ninety (90) days, PROVIDED, HOWEVER, that the right
to terminate this Agreement under this SECTION 7.01 shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur on or before
such date;
(c) by the Purchaser, if there has been (i) a material violation or
breach by the Company or Shareholder of any agreement, covenant, representation
or warranty contained in this Agreement or any violation or breach which has
rendered the satisfaction of any condition to
39
the obligations of the Purchaser impossible and (ii) such violation or breach
has not been waived by the Purchaser; or
(d) by the Company, if there has been (i) a material violation or
breach by the Purchaser or Acquisition of any agreement, covenant,
representation or warranty contained in this Agreement or any violation or
breach which has rendered the satisfaction of any condition to the obligations
of the Company impossible (ii) and such violation or breach has not been waived
by the Company.
7.02 PROCEDURE AND EFFECT OF TERMINATION. In the event of termination of
this Agreement and abandonment of the transactions contemplated hereby by any or
all of the parties pursuant to SECTION 7.01, written notice thereof shall
forthwith be given to the other parties and this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned, without further action
by any of the parties hereto. If this Agreement is terminated as provided
herein, this Agreement, other than the obligations of each party under
SECTIONS 5.02(b) and 5.06 hereof, shall forthwith become null and void, without
any liability on the part of any party hereto, or any subsidiaries or affiliates
of, or any officers, directors or employees of, any party; PROVIDED, HOWEVER,
that, nothing contained in this SECTION 7.02 shall relieve any party from
liability for a breach of any covenant, agreement, representation or warranty
contained in this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.01 SURVIVAL, REPRESENTATIONS AND WARRANTIES. The representations and
warranties provided for in this Agreement shall survive until the 540th day
following the Closing Date, except that (i) the representations and warranties
contained in SECTIONS 3.02, 3.03, 3.14 and 4.05 shall survive indefinitely and
(ii) the representations and warranties contained in SECTIONS 3.13, 3.18 and
3.19 shall survive until the third anniversary of the Closing Date. The
provisions of this SECTION 8.01 shall not limit any covenant or agreement of the
parties hereto which, by its terms, contemplates performance after the Closing
Date. The indemnification provisions contained in this ARTICLE VIII are the sole
and exclusive remedy of the parties hereto and are in lieu of any statutory,
equitable, or common law remedy any party hereto may otherwise have for any
breach of any representation, warranty, or covenant. The applicable survival
period of warranties, representations, agreements and covenants is referred to
herein as the "INDEMNIFICATION PERIOD". The termination of the Indemnification
Period shall not affect the rights of a party in respect of a claim made by such
party prior to the expiration of the Indemnification Period therefor. The
covenants and agreements in this ARTICLE VIII shall survive until such time as
any claim for indemnification is finally settled in accordance with the terms
hereof. No investigation by or knowledge of any of the parties hereto shall in
any way limit the representations and warranties of the parties or
indemnification rights hereunder.
40
8.02 INDEMNIFICATION OBLIGATION OF THE SHAREHOLDERS.
(a) Each of the Shareholders, severally (and not jointly or jointly
and severally) and only to the extent set forth herein, agrees from and after
the Closing to indemnify Purchaser and Acquisition and their respective
affiliates, stockholders, officers, directors, employees, agents,
representatives and successors and assigns (each a "PURCHASER INDEMNITEE" and,
collectively the "PURCHASER INDEMNITEES") in respect of, and save and hold each
Purchaser Indemnitee harmless against and pay on behalf of or reimburse each
Purchaser Indemnitee as and when incurred, any Losses which any Purchaser
Indemnitee suffers, sustains or becomes subject to as a result of or by virtue
of, without duplication:
(i) any facts or circumstances which constitute a misrepresentation or
breach of any representation or warranties made by the Company set forth in
this Agreement (including the Disclosure Schedule) or any certificate,
document or instrument to be delivered by the Company pursuant to this
Agreement; or
(ii) any nonfulfillment or breach of any covenant of the Company or
the Shareholders set forth in this Agreement.
(b) Notwithstanding the foregoing, the Shareholders shall not be
required to indemnify the Purchaser Indemnitees in respect of any Losses any
Purchaser Indemnitee suffers, sustains or becomes subject to as a result of or
by virtue of any of the occurrences referred to in SECTION 8.02(a)(i) above
unless and until the aggregate of all such Losses exceeds $1,000,000 (the
"MINIMUM THRESHOLD"; and, in such event, the Shareholders shall be responsible
only for the amount of such Losses which exceed the Minimum Threshold. In no
event shall (i) any Shareholder be obligated to indemnify the Purchaser
Indemnitees in respect of any Losses any Purchaser Indemnitee suffers, sustains,
or becomes subject to, as a result of or by virtue of any of the occurrences
referred to in SECTION 8.02(a) in excess of his Pro Rata Indemnification
Percentage (as defined below) thereof and (ii) the Shareholders collectively be
obligated to indemnify the Purchaser Indemnitees under this ARTICLE VIII in
respect of any Losses in excess of the aggregate amount of $10,000,000 (the
"INDEMNIFICATION CAP"). Notwithstanding any other provision of this SECTION
8.02, the Minimum Threshold and the Indemnification Cap shall not apply with
respect to breaches of SECTIONS 3.02, 3.03 or 3.14. As used herein, the term
"PRO RATA INDEMNIFICATION PERCENTAGE" shall mean for each Shareholder, a
fraction, the numerator of which is the Merger Consideration received by such
Shareholder and the denominator of which is aggregate amount of all Merger
Consideration received by all of the Shareholders.
(c) Each Shareholder acknowledges that the agreement contained in this
ARTICLE VIII is an integral part of the transactions contemplated by this
Agreement and that, without such agreement, Purchaser would not enter into this
Agreement; accordingly, if any Shareholder fails to pay promptly any amounts due
by such Signing Shareholder pursuant to this Section 8.02 and in order to obtain
such amounts, the Purchaser commences a suit against such Signing Shareholder to
collect the amounts provided for herein, if the Purchaser succeeds on the merits
in such action or proceeding, such Shareholder shall pay to Purchaser its
reasonable costs and expenses (including reasonable attorneys' fees) in
connection with such suit; PROVIDED, HOWEVER, that should the Purchaser be the
losing party on the merits in any such action or proceeding, the
41
Purchaser shall pay to such Shareholder its reasonable costs and expenses
(including reasonable attorneys' fees) in connection with such suit.
8.03 INDEMNIFICATION OBLIGATION OF PURCHASER. Purchaser will indemnify the
Company and its affiliates, stockholders, officers, managers, directors,
employees, agents, representatives and successors and assigns, including,
without limitation, the Shareholders (collectively, the "SELLER INDEMNITEES") in
respect of, and save and hold each Seller Indemnitee harmless against any Losses
which such Seller Indemnitee suffers, sustains or becomes subject to as a result
of or by virtue of, without duplication:
(a) any facts or circumstances which constitute a misrepresentation or
breach of any representation or warranties by the Purchaser set forth in this
Agreement or any certificate document, or instrument to be delivered by the
Purchaser pursuant to this Agreement; or
(b) any nonfulfillment or breach of any covenant or agreement of the
Purchaser set forth in this Agreement.
8.04 INDEMNIFICATION PROCEDURES.
(a) Any Person making a claim for indemnification pursuant to SECTION
8.02 or 8.03 above (each, an "INDEMNIFIED PARTY") must give the party from whom
indemnification is sought (an "INDEMNIFYING PARTY") written notice of such claim
promptly after the Indemnified Party receives any written notice of any action,
lawsuit, proceeding, investigation or other claim (a "PROCEEDING") against or
involving the Indemnified Party by any Person or otherwise discovers the
liability, obligation or facts giving rise to such claim for indemnification;
PROVIDED, that the failure to notify or delay in notifying an Indemnifying Party
will not relieve the Indemnifying Party of its obligations pursuant to SECTION
8.02 or 8.03 above, as applicable, except to the extent that such failure or
delay actually xxxxx the Indemnifying Party.
(b) With respect to the defense of any Proceeding against or involving
an Indemnified Party in which any Person in question seeks only the recovery of
a sum of money (and not for injunctive or equitable relief) for which
indemnification is provided in SECTION 8.02 or 8.03 above, at its option an
Indemnifying Party may appoint as lead counsel of such defense any legal counsel
approved by the Indemnified Party, such approval not to be unreasonably withheld
or delayed.
(c) Notwithstanding SECTION 8.02(b) above: (i) the Indemnified Party
will be entitled to participate in the defense of such claim and to employ
counsel of its choice for such purpose at its own expense (provided that the
Indemnifying Party will bear the fees and expenses of such separate counsel
incurred prior to the date upon which the Indemnifying Party effectively assumes
control of such defense) and (ii) the Indemnifying Party will not be entitled to
assume control of the defense of such claim, and will pay the reasonable fees
and expenses of legal counsel retained by the Indemnified Party, if:
(x) an adverse determination of such Proceeding would be reasonably
likely to have a material and adverse effect upon the Indemnified Party's
business;
42
(y) the Indemnified Party reasonably believes that there exists a
conflict of interest which, under applicable principles of legal ethics,
could prohibit a single legal counsel from representing both the
Indemnified Party and the Indemnifying Party in such Proceeding; or
(z) the Indemnified Party reasonably believes that the Indemnifying
Party has failed or is failing to prosecute or defend vigorously such claim
following written notice and a 30 day opportunity to cure.
(d) the Indemnifying Party must obtain the prior written consent of
the Indemnified Party (which the Indemnified Party will not unreasonably
withhold, delay or condition) prior to entering into any settlement of such
claim or Proceeding or ceasing to defend such claim or Proceeding; PROVIDED that
any such settlement shall provide for the full release of all claims against
each Indemnified Party.
8.05 PAYMENT. Upon the determination of the liability under ARTICLE VIII or
otherwise between the parties or by judicial proceeding, the appropriate party
shall pay to the other, as the case may be, within ten (10) days after such
determination, the amount of any claim for indemnification made hereunder. All
amounts not paid when due under ARTICLE VIII will accrue interest, payable on
demand, at the rate of eighteen percent (18%) per annum from the date due until
paid in full and each paying party will pay the other party's reasonable and
documented out-of-pocket costs and expenses (including without limitation,
reasonable attorneys' fees and expenses) incurred in attempting to collect any
such amounts.
8.06 ADJUSTMENT TO INDEMNITIES. The amount of indemnity payable under
SECTION 8.02 or SECTION 8.03 shall be treated by the Purchaser and the Company
as an adjustment to the Merger Consideration, and shall be (i) calculated after
giving effect to any proceeds actually received from insurance policies covering
the Loss that is the subject of the claim for indemnity, net of any increase in
premium as a result of such claim, (ii) reduced (but not below zero) by an
amount equal to the Tax Benefit, if any, to the Indemnified Party or one or more
of its Affiliates resulting from the Loss that is the subject of the indemnity
payment, and (iii) in the case of an indemnity payment relating to Taxes,
reduced (but not below zero) by the Tax Benefit, if any to the Indemnified Party
and/or one or more of its Affiliates, attributable to (or arising out of) the
adjustment giving rise to the indemnity payment, including, but not limited to,
any corresponding adjustments relating to any period ended after the Closing
Date, and whether or not realized, calculated on a present value basis as set
forth in the definition of Tax Benefit.
8.07 PAYMENT OF TAXES.
(a) The Purchaser shall cause to be prepared and filed all Tax Returns
for the Company and its Subsidiaries for all Tax periods ending on or prior to
the Closing Date which are required to be filed after the Closing, and shall
also cause to be prepared and filed any Tax Returns for the Company and its
Subsidiaries for all Tax periods that begin prior to and end after the Closing
Date. In the case of any Tax payable for a Tax period including (but not ending
on) the Closing Date, the portion of such Tax relating to the portion of the Tax
period ending on the Closing Date shall be deemed to equal the following
applicable amount, PROVIDED, HOWEVER, that in no event shall any Tax be
allocated to the portion of a Tax period ending on the Closing Date
43
to the extent such Tax relates to a transaction (including, but not by way of
limitation, the acquisition of property) occurring on or after the Closing: (i)
if such Tax is not based upon or related to income or receipts, the portion of
such Tax equal to the entire Tax multiplied by a fraction, the numerator of
which is the number of days in the Tax period through the Closing Date and
denominator of which is the number of days in the entire Tax period, and (ii) if
such Tax (including sales and use Taxes) is based on or related to income or
receipts, the amount that would have been due had the Tax period ended on the
Closing Date, PROVIDED, HOWEVER, that any such Tax arising under Section 338 of
the Code shall be treated as arising in a period after the Closing Date.
(b) The Purchaser shall permit the Shareholders, at least thirty (30)
days in advance of the filing thereof, to review and comment on all Tax Returns
to be filed for the Company and its Subsidiaries for any period for which the
Shareholders may have an indemnification obligation under this Agreement, and
shall make such revisions to such Tax Returns as are reasonably requested by the
Shareholder Representative. The Shareholders shall be entitled to participate in
the preparation of such Tax Returns. Such Tax Returns shall be prepared
consistent with past practices, except as provided in the next sentence. No
position shall be taken on the Tax Returns that could reasonably be expected to
give rise to an indemnification obligation of the Shareholders hereunder without
the prior written consent of the Shareholders, which shall not be unreasonably
withheld.
(c) In the event any Tax authority informs or is deemed to inform the
Purchaser or any of its Affiliates, including the Company, of any notice of
proposed audit, claim, assessment, or other dispute concerning an amount of
Taxes with respect to which the Shareholders may incur liability hereunder, the
Purchaser shall promptly notify, or shall cause the party so informed promptly
to notify, the Shareholders in writing of such matter. Such notice shall contain
factual information (to the extent known) describing any asserted Tax liability
in reasonable detail and shall be accompanied by copies of any notice or other
documents received from any Tax authority with respect to such matter. If an
Indemnified Party fails to provide, or cause to be provided to, the Indemnifying
Party prompt notice of such asserted Tax liability and such failure to provide
the required notice results in a monetary detriment to the Indemnifying Party,
then the Indemnified Party shall promptly pay over to the Indemnifying Party the
amount of such detriment or the amount of the indemnity will be reduced by such
detriment.
(d) With respect to any examination, audit, contest, appeal, or other
proceeding relating to Taxes of the Company or its Subsidiaries that could give
rise to indemnification obligations of the Shareholders hereunder, the
Shareholders shall have the right to control the contest and settlement of any
such proceeding, PROVIDED, HOWEVER, that the Shareholders shall not settle any
such proceeding without the prior written consent of the Purchaser, which shall
not be unreasonably withheld. The Purchaser, on behalf of itself and each of its
Affiliates, including the Company, shall cooperate with the Shareholders and
shall provide the Shareholders with access to its accountants, accountant's work
papers, Tax Returns, books and records, and other relevant information and shall
execute any necessary powers of attorney relevant to the Shareholders' authority
hereunder. In the event that the Shareholders elect not to control such contest
and settlement, the Shareholders shall have the right to participate in such
contest and settlement, and the Purchaser shall not settle, and shall not permit
any of its Affiliates, including
44
the Company, to settle, any audit or proceeding without the prior written
consent of the Shareholders, which shall not be unreasonably withheld.
(e) The Shareholders, on the one hand, shall cooperate and the
Purchaser, on the other hand, shall cooperate and cause each of its Affiliates,
including the Company, to cooperate with each other and with each other's
agents, including accounting firms and legal counsel, in connection with Tax
matters relating to the Company and its Subsidiaries, including (i) the
preparation and filing of Tax Returns, (ii) determining the liability and amount
of any Taxes due or the right to and amount of any refund of Taxes, (iii)
examinations of Tax Returns, and (iv) any administrative or judicial proceeding
in respect of Taxes assessed or proposed to be assessed. Such cooperation shall
include each such party making all relevant information and documents in its
possession or, in the case of the Purchaser, in its possession or the possession
of its accountants and/or Affiliates available to the other party. The parties
shall retain, and the Purchaser shall cause each of its Affiliates, including
the Company to retain, all Tax Returns, schedules, and work papers, and all
material records and other documents relating thereto, until the expiration of
the applicable statute of limitations (including, to the extent notified by any
party, any extension thereof) of the Tax period to which such Tax Returns and
other documents and information relate. Each of such parties shall also make
available to the other party, as reasonably requested and available, personnel
(including officers, directors, employees, and agents) responsible for
preparing, maintaining, and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or for purposes of
providing information or documents in connection with any administrative or
judicial proceedings relating to Taxes.
(f) The Purchaser shall not amend or permit to be amended any Tax
Returns of the Company or any of its Subsidiaries for Tax periods ending on or
prior to the Closing Date, or file a claim for refund of Taxes attributable to a
Tax period ending on or prior to the Closing Date, without the prior written
consent of the Shareholders, which shall not be unreasonably withheld.
(g) For the purposes of this Agreement, the Indemnified Party shall
not be treated as having incurred a Loss related to Taxes until such time as
there has been a final disposition relating to the Tax at issue.
(h) The Shareholders shall have no indemnification obligation under
this Agreement with respect to Taxes attributable to, arising out of or relating
to any and all transactions occurring after the Closing Date or on the Closing
Date, but after the Closing. Should, by reason of the Merger, the Company and
its Subsidiaries become members of a new consolidated group of which the
Purchaser is a member, then the Purchaser, on behalf of itself and on behalf of
the Company and its Subsidiaries, agrees to report all transactions not in the
Ordinary Course of Business that occur on the Closing Date as occurring after
the event resulting in the change in the consolidated group status of the
Company and each of its Subsidiaries, unless precluded from doing so under
Treasury Regulations Section 1.1502-76(b)(1)(ii)(B).
45
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01 AMENDMENT AND MODIFICATION. Subject to applicable Law, this Agreement
may be amended, modified or supplemented only by written agreement of the
Company and the Purchaser with respect to any of the terms contained herein.
9.02 WAIVER OF COMPLIANCE; CONSENTS. Any failure of any of the parties to
comply with any obligation, covenant, agreement or condition contained herein
may be waived by the party entitled to the benefits thereof, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
9.03 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by confirmed facsimile transmission,
confirmed courier service, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
If to the Purchaser or Acquisition:
Safety Holdings, Inc.
c/o The Jordan Company, LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: A. Xxxxxxx Xxxxxx, Xx.
Facsimile No.: 000-000-0000
46
with a copy to:
Xxxxx, Xxxxx & Xxxxx
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: 000-000-0000
If to the Company:
Xxxxxx Xxxxx Corporation
00 Xxxxxx Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
Facsimile No.: 000-000-0000
with copies to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx and
Xxxx X. Xxxxxxxx
Facsimile No.: 000-000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(PROVIDED that notice of any change of address shall be effective only upon
receipt thereof).
9.04 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other party, nor is this Agreement
intended to confer upon any other person except the parties hereto any rights or
remedies hereunder; PROVIDED, HOWEVER, that Purchaser may assign any or all of
its rights, interests and obligations hereunder to any direct or indirect wholly
owned subsidiary of Purchaser or Acquisition; and PROVIDED, further, that
Purchaser may assign its rights and delegate its obligations hereunder to any
(i) Person in connection with a sale of all or substantially all assets of the
Purchaser, (ii) Person who acquires all of the capital stock of Purchaser, and
(iii) Person providing financing to Purchaser or its Affiliates. This Agreement
shall inure to the benefit of, and be binding upon, the parties hereto and their
successors and permitted assigns.
9.05 JURISDICTION; FORUM. By the execution and delivery of this Agreement,
the Purchaser and Acquisition (i) submit to the personal jurisdiction of any
state or federal court in the Commonwealth of Massachusetts in any suit or
proceeding arising out of or relating to this Agreement and (ii) agrees that
service of process upon it at its address set forth in this
47
Agreement shall be deemed in every respect effective service of process upon the
Purchaser in any such suit or proceeding.
9.06 GOVERNING LAW. This Agreement shall be governed by the laws of The
Commonwealth of Massachusetts (regardless of the laws that might otherwise
govern under applicable Massachusetts principles of conflicts of law) as to all
matters, including but not limited to matters of validity, construction, effect,
performance and remedies.
9.07 COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.08 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
9.09 ENTIRE AGREEMENT. This Agreement, including the documents, schedules,
certificates and instruments referred to herein, embody the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
by this Agreement. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein or therein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such transactions, other
than the Confidentiality Agreement.
48
IN WITNESS WHEREOF, the Purchaser, Acquisition, and the Company have caused
this
Merger Agreement to be signed by their duly authorized officers as of the
date first above written.
PURCHASER:
SAFETY HOLDINGS, INC.
By:/s/A. Xxxxxxx Xxxxxx, Xx.
------------------------------
Name: A. Xxxxxxx Xxxxxx, Xx.
Title: Vice President
ACQUISITION:
SAFETY ACQUISITION, INC.
By:/s/A. Xxxxxxx Xxxxxx, Xx.
------------------------------
Name: A. Xxxxxxx Xxxxxx, Xx.
Title: Vice President
COMPANY:
XXXXXX XXXXX CORPORATION
By:/s/Xxxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman of the Board
SHAREHOLDERS:
/s/Xxxxxxx X. Xxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxx
/s/Xxxxxx X. Xxxxx
---------------------------------
Xxxxxx X. Xxxxx
The Xxxxxx X. Xxxxxxx Family Trust
By:/s/Xxxxxx X. Xxxxxxx
------------------------------
Xxxxxx X. Xxxxxxx, Trustee
By:/s/Xxxxxxx X. Xxxxxx
------------------------------
Xxxxxxx X. Xxxxxx, Trustee
By:/s/Xxxxxxx X. Xxxx
------------------------------
Xxxxxxx X. Xxxx, Trustee
The Xxxxx X. Xxxxxxx Family Trust
By:/s/Xxxxx X. Xxxxxxx
------------------------------
Xxxxx X. Xxxxxxx, Trustee
By:/s/Xxxxxxx Xxx
------------------------------
Xxxxxxx Xxx, Trustee
2
The Xxxxx X. Xxxxxxx Family Trust II
By:/s/Xxxxx X. Xxxxxxx
------------------------------
Xxxxx X. Xxxxxxx, Trustee
By:/s/Xxxxxxx Xxx
------------------------------
Xxxxxxx Xxx, Trustee
The Safety Insurance Employee Stock
Option Plan
By:/s/Xxxxxxx X. Xxxxxxx
------------------------------
Xxxxxxx X. Xxxxxxx, Trustee
The Xxxxxx X. Xxxxxx 1996 Irrevocable Trust
By:/s/Xxxxxxx Xxxxx
------------------------------
Xxxxxxx Xxxxx, Trustee
By:/s/Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx, Trustee
The Xxxxxxxxx X. Xxxxxx 1996 Irrevocable
Trust
By/s/Xxxxxxx Xxxxx
------------------------------
Xxxxxxx Xxxxx, Trustee
By:/s/Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx, Trustee
3
The Xxxxxx X. Xxxxxx 1996 Irrevocable Trust
By:/s/Xxxxxxx Xxxxx
------------------------------
Xxxxxxx Xxxxx, Trustee
By:/s/Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx, Trustee
The Xxxxxx X. Xxxxx 1996 Irrevocable Trust
By:/s/Xxxxxxx Xxxxx
------------------------------
Xxxxxxx Xxxxx, Trustee
By:/s/Xxxxxx X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx, Trustee
The Xxxxxx X. Xxxxx 2000 Grantor Retained
Annuity Trust
By:/s/Xxxxxx X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx, Trustee
4
The Xxxxxx X. Xxxxxx Family Trust of 2001
By:/s/Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx, Trustee
Beacon Fiduciary Advisors, Inc., Trustee
By:/s/Xxxxxxxxx Xxxxxx
------------------------------
Name: Xxxxxxxxx Xxxxxx
Title: President
The Xxxxxxxxx X. Xxxxxx Family Trust of 2001
By:/s/Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx, Trustee
Beacon Fiduciary Advisors, Inc., Trustee
By:/s/Xxxxxxxxx Xxxxxx
------------------------------
Name: Xxxxxxxxx Xxxxxx
Title: President
The Xxxxxx X. Xxxxxx Family Trust of 2001
By:/s/Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx, Trustee
Beacon Fiduciary Advisors, Inc., Trustee
By:/s/Xxxxxxxxx Xxxxxx
--------------------------------
Name: Xxxxxxxxx Xxxxxx
Title: President
5
The Simches 2001 Charitable Remainder Annuity
Trust dated April 3, 2001
By:/s/Xxxxxxx X. Xxxxxxx
------------------------------
Xxxxxxx X. Xxxxxxx, Trustee
By:/s/S. Xxxxx Xxxxxxx
------------------------------
S. Xxxxx Xxxxxxx, Trustee
By:/s/Xxxxxxx Xxx
------------------------------
Xxxxxxx Xxx, Trustee
6
LIST OF EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B - Form of Non-competition Agreement.
LIST OF SCHEDULES
Schedule 2.01 - Merger Consideration
DISCLOSURE SCHEDULES
Section 3.01 Corporate Organization
Section 3.02 Capitalization
Section 3.04 Consents and Approvals; No Violations
Section 3.07 Absence of Certain Changes
Section 3.08 Compliance with Law
Section 3.09 Material Contracts
Section 3.10 Undisclosed Liabilities
Section 3.11 Defaults
Section 3.12 Litigation
Section 3.13 Taxes
Section 3.15 Title To Properties
Section 3.16 Intellectual Property
Section 3.17 Insurance
Section 3.18 Environmental Matters
Section 3.19 Employee Benefits
Section 3.20 Insurance Business
Section 3.21 Real Property
Section 3.22 Permits
Section 3.25 Management Agreements and Bonuses
Section 3.26 Accuracy of Information
Schedule 4.03 Consents and Approvals; No Violation
Schedule 5.08 Employee Benefit Matters
