1
EXHIBIT B
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STOCK PURCHASE AGREEMENT
between
FRONTIER ADJUSTERS OF AMERICA, INC.
and
UNITED FINANCIAL ADJUSTING COMPANY
dated as of
November 20, 1998
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TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS...................................................................................1
ARTICLE 2 PURCHASE AND SALE OF SHARES; CLOSING..........................................................6
Section 2.1 Purchase and Sale; Purchase Price....................................................6
Section 2.2 Closing; Termination.................................................................6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER..................................................6
Section 3.1 Organization and Qualification; Subsidiaries.........................................6
Section 3.2 Authority Relative to Agreements; Board Approval.....................................7
Section 3.3 Capital Stock........................................................................7
Section 3.4 No Conflicts; No Defaults; Required Filings and Consents.............................8
Section 3.5 SEC Matters and Absence of Undisclosed Liabilities...................................9
Section 3.6 Litigation; Compliance With Law......................................................9
Section 3.7 Absence of Certain Changes or Events................................................10
Section 3.8 Tax Matters.........................................................................10
Section 3.9 Compliance with Agreements..........................................................11
Section 3.10 Financial Records; Seller Articles and By-Laws; Corporate Records...................12
Section 3.11 Title to Assets, Liens..............................................................12
Section 3.12 Environmental Matters...............................................................12
Section 3.13 Employees and Benefit Plans.........................................................13
Section 3.14 Labor Matters.......................................................................13
Section 3.15 Proprietary Rights..................................................................14
Section 3.16 Insurance...........................................................................14
Section 3.17 Year 2000 Compliance................................................................14
Section 3.18 Proxy Statement.....................................................................14
Section 3.19 Franchise Matters...................................................................14
Section 3.20 Government Approvals; Compliance with Laws and Orders...............................16
Section 3.21 Takeover Statutes...................................................................16
Section 3.22 Brokers and Finders.................................................................16
Section 3.23 Knowledge Defined...................................................................16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER......................................................16
Section 4.1 Organization........................................................................16
Section 4.2 Due Authorization...................................................................17
Section 4.3 Conflicting Agreements and Other Matters............................................17
Section 4.4 Private Placement...................................................................17
Section 4.5 Proxy Statement.....................................................................18
Section 4.6 Brokers or Finders..................................................................18
Section 4.7 Violations..........................................................................18
Section 4.8 Labor Matters.......................................................................18
Section 4.9 Rights in Software..................................................................18
Section 4.10 Year 2000 Compliance................................................................19
Section 4.11 Government Approvals; Compliance with Laws and Orders...............................19
ARTICLE 5 COVENANTS RELATING TO THE CLOSING...................................................................19
Section 5.1 Taking of Necessary Action..........................................................19
Section 5.2 Public Announcement; Confidentiality................................................20
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Section 5.3 Conduct of Business.................................................................21
Section 5.4 Acquisition Proposal................................................................22
Section 5.5 Notification of Certain Matters.....................................................23
Section 5.6 Provision of Certain Documents......................................................23
Section 5.7 Registration Rights Agreement.......................................................23
Section 5.8 Service Agreement...................................................................23
Section 5.9 Agreement with Xxxxxxx Xxxxx........................................................23
Section 5.10 Agreement with Xxxx Xxxxxx..........................................................23
ARTICLE 6 CERTAIN ADDITIONAL COVENANTS........................................................................24
Section 6.1 Resale..............................................................................24
Section 6.2 Board Representation; Visitation Rights; Voting Agreements..........................24
Section 6.3 Listing.............................................................................24
Section 6.4 Disinterested Directors.............................................................25
Section 6.5 Tender Offer; Distribution..........................................................25
Section 6.6 Legends; Stop-Transfer Orders.......................................................26
Section 6.7 Access to Information...............................................................26
ARTICLE 7 CLOSING DELIVERIES..................................................................................27
Section 7.1 Seller Closing Deliveries...........................................................27
Section 7.2 Buyer Closing Deliveries............................................................28
ARTICLE 8 CONDITIONS TO CLOSING...............................................................................28
Section 8.1 Conditions to Purchase at Closing...................................................28
Section 8.2 Conditions of Sale at Closing.......................................................29
ARTICLE 9 SURVIVAL; INDEMNIFICATION...........................................................................30
Section 9.1 Survival............................................................................30
Section 9.2 Indemnification by Buyer or the Seller..............................................31
Section 9.3 Third-Party Claims..................................................................31
Section 9.4 Limitations on Indemnification; Survival............................................31
ARTICLE 10 TERMINATION.........................................................................................32
Section 10.1 Termination.........................................................................32
Section 10.2 Procedure and Effect of Termination.................................................33
Section 10.3 Expenses............................................................................33
ARTICLE 11 MISCELLANEOUS.......................................................................................33
Section 11.1 Counterparts........................................................................33
Section 11.2 Governing Law.......................................................................34
Section 11.3 Jurisdiction........................................................................34
Section 11.4 Entire Agreement....................................................................34
Section 11.5 Notices.............................................................................34
Section 11.6 Successors and Assigns..............................................................35
Section 11.7 Amendments and Waivers..............................................................35
Section 11.8 Interpretation; Absence of Presumption..............................................35
Section 11.9 Severability........................................................................36
Section 11.10 Further Assurances..................................................................36
Section 11.11 Specific Performance................................................................36
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SCHEDULES
Schedule 3.1(d) Subsidiaries
Schedule 3.3(a) Options and Option Plans
Schedule 3.3(c) Investments
Schedule 3.4(d) Conflicts or Defaults
Schedule 3.6(a) Litigation
Schedule 3.6(c) Known Material Violations
Schedule 3.7 Absence of Certain Changes or Events
Schedule 3.8(a) Tax Matters
Schedule 3.9(b) Unresolved Violations
Schedule 3.9(c) Joint Venture and Partnership Agreements
Schedule 3.9(d) Directory; Material Agreements
Schedule 3.9(e) Conflict Policies & Agreements; Waivers
Schedule 3.10(b) Corporate Records
Schedule 3.11 Real Property and Permitted Liens
Schedule 3.13(a) Employment Agreements
Schedule 3.13(b) Employee Benefit Plans
Schedule 3.14 Labor Matters
Schedule 3.15 Intellectual Property
Schedule 3.16 Insurance Policies
Schedule 3.17 Year 2000
Schedule 3.19(e) Franchisee and Licensee Litigation
Schedule 3.20(b) Compliance with Laws
Schedule 4.8 Buyer Labor Matters
Schedule 4.10 Year 2000 Compliance of Buyer Software
EXHIBITS
Exhibit A Terms of the Shares
Exhibit B Registration Rights Agreement
Exhibit C Service Agreement
Exhibit D Xxxxxxx Xxxxx Agreement
Exhibit E Xxxx Xxxxxx Agreement
Exhibit F Insider Support Agreement
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THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
November 20, 1998, is made between Frontier Adjusters of America, Inc, an
Arizona corporation (the "Seller"), and United Financial Adjusting Company, an
Ohio corporation (the "Buyer").
RECITALS:
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WHEREAS, Buyer wishes to purchase from the Seller, and the
Seller wishes to sell to Buyer, an aggregate of 5,258,513 shares of the Seller's
Series A Convertible Voting Preferred Stock, $.01 par value per share, having
the terms set forth on Exhibit A (the "Shares"), in exchange for the payment by
Buyer to Seller of $6,836,067 (the "Purchase Price"); and
WHEREAS, Buyer and the Seller are entering into this Agreement
to provide for such purchase and sale and to establish various rights and
obligations in connection with such transaction;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
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As used in this Agreement, the following terms have the
following respective meanings:
"ACQUISITION PROPOSAL" has the meaning set forth in Section
5.4.
"ADDITIONAL DOCUMENTS" has the meaning set forth in Section
9.1.
"ACTION" means any actual or, to the Seller's knowledge,
threatened action, claim, suit, litigation, arbitration, inquiry, proceeding or
investigation by or before any Government Authority.
"AFFILIATE" has the meaning ascribed thereto in Rule 12b-2
promulgated under the Exchange Act, as in effect on the date hereof.
"AGREEMENT" has the meaning set forth in the first paragraph
hereof.
"AMEX" means the American Stock Exchange, Inc.
"ACQUISITION PROPOSAL" means any of the following transactions
involving the Seller or any of its Subsidiaries, other than the transactions as
contemplated by this Agreement: (i) any merger, consolidation, share exchange,
reorganization, recapitalization, business combination, or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer, or
other disposition (whether in a single transaction or series of transactions),
of assets either constituting 10% or more of the assets of the Seller and its
Subsidiaries, taken as a whole, or which generate 10% or more of the
consolidated revenue of the Seller and its Subsidiaries; (iii) any tender offer
or exchange offer for 10% or more of the outstanding shares of capital stock of
the Seller or the filing of a registration statement under the Securities Act in
connection therewith; (iv) any person having acquired beneficial ownership or
the right to acquire beneficial
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ownership of, or any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder) having been
formed, which beneficially owns or has the right to acquire beneficial ownership
of, 10% or more of the then outstanding shares of capital stock of the Seller
(other than Persons or "groups" which beneficially own or have the right to
acquire beneficial ownership of 10% or more of the outstanding shares of capital
stock of the Seller as of the date of this Agreement); or (v) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
"BENEFICIAL OWNERSHIP" has the meaning set forth in Rule 13d-3
promulgated under the Exchange Act.
"BLUE SKY LAWS" has the meaning set forth in Section 3.4(e).
"BOARD OF DIRECTORS" means the Board of Directors of the
Seller.
"BUSINESS DAY" means any day other than a Saturday, a Sunday
or a bank holiday in Cleveland, Ohio or Phoenix, Arizona.
"BUYER" has the meaning set forth in the first paragraph
hereof.
"BUYER PERMITS" has the meaning set forth in Section 4.11.
"CERCLA" means the federal Comprehensive, Environmental
Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601 ET SEQ., as
amended.
"CLOSING" has the meaning set forth in Section 2.1.
"CLOSING DATE" has the meaning set forth in Section 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended,
and any successor thereto, including all of the rules and regulations
promulgated thereunder.
"COMMITMENT" means any commitment, contractual obligation,
agreement, borrowing, capital expenditure or transaction entered into by the
Seller or any of its Subsidiaries.
"COMMON SHARES" means the shares of common stock, $.01 par
value per share, of the Seller.
"CURRENT REPORTS" has the meaning set forth in Section 3.5(b).
"DEPOSITARY" has the meaning set forth in Section 6.5(a).
"DIRECTOR" means a member of the Board of Directors.
"DIRECTORY" has the meaning set forth in Section 3.9(d).
"DISINTERESTED DIRECTORS" has the meaning set forth in Section
6.4.
"EMPLOYEES" means all current, former and retired employees,
officers and directors of the Seller or any of its Subsidiaries, including
current, former and retired employees, officers and directors on disability,
layoff or leave status.
"ENVIRONMENTAL CLAIM" means any claim, investigation or notice
(written or oral) by any Person alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or fatalities, or penalties) arising out of, based on or resulting from (A) the
presence, generation, transportation, treatment, use, storage, disposal or
release of Materials of
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Environment Concern or the threatened release of Materials of Environmental
Concern at any location, or (B) activities or conditions forming the basis of
any violation, or alleged violation of, or liability or alleged liability under,
any Environmental Law.
"ENVIRONMENTAL LAWS" means any federal, state, or local
statute, law, ordinance, code, order, injunction, decree or ruling, and any
regulation promulgated thereunder, which regulates or controls (i) pollution,
contamination, or the condition of groundwater, surface water, soil, sediment or
air, or (ii) a spill, leak, emission, discharge, release or disposal into
groundwater, surface water, soil, sediment or air, including without limitation
CERCLA; the Federal Resource Conservation and Recovery Act, 42 U.S.C. sec. 6901
ET SEQ., as amended; the Hazardous Materials Transportation Act, 49 U.S.C. sec.
1801 ET SEQ., as amended; the Toxic Substances Control Act, 15 U.S.C. sec. 2601
ET SEQ., as amended; the Clean Air Act, 42 U.S.C sec. 7401 ET SEQ., as amended;
the Clean Water Act, 33 U.S.C. sec. 1251 ET SEQ., as amended; the Safe Drinking
Water Act, 42 U.S.C. sec. 300f ET SEQ., as amended; the Emergency Planning and
Community Right to Know Act, 42 U.S.C. sec. 11001 ET SEQ., as amended; the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. sec. 136 ET SEQ.,
as amended; the National Environmental Policy Act, 42 U.S.C. sec. 4321 ET SEQ.,
as amended; any similar state or local statutes or ordinances, and the
regulations promulgated thereunder.
"ERISA" means the Employee Income Security Act of 1974, as
amended, and any successor thereto, including all of the rules and regulations
promulgated thereunder.
"ERISA AFFILIATE" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same "controlled group" as the first entity, trade or business within the
meaning of Section 4001(a)(14) of ERISA.
"EXCHANGE ACT" has the meaning set forth in Section 3.4(e).
"EXTENSION PERIOD" has the meaning set forth in Section6.5(d).
"FILINGS" has the meaning set forth in Section 3.4(e).
"FORM 10-K" has the meaning set forth in Section 3.5(a).
"GAAP" has the meaning set forth in Section 3.5(b).
"GOVERNMENT AUTHORITY" means any government or state (or any
subdivision thereof) of or in the United States or Canada, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any governmental court or tribunal.
"INDEMNIFIED PARTY" has the meaning set forth in Section 9.3.
"INDEMNIFYING PARTY" has the meaning set forth in Section 9.3.
"INDEMNITY THRESHOLD" has the meaning set forth in Section
9.4(a).
"INITIAL TENDER EXPIRATION DATE" has the meaning set forth in
Section 6.5(c).
"INSURANCE POLICIES" has the meaning set forth in Section
3.16.
"IRS" means the Internal Revenue Service or any successor
thereto.
"LIABILITIES" means, as to any Person, all debts, adverse
claims, liabilities and obligations, direct, indirect, absolute or contingent of
such Person, whether accrued, vested or otherwise.
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"LIENS" means all liens, mortgages, deeds of Seller or any of
its Subsidiaries, title retention arrangements, security interests, pledges,
claims, charges, easements and other encumbrances of any nature whatsoever.
"LOSS AND EXPENSE" has the meaning set forth in Section
9.2(a).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
the financial condition, results of operations, business or prospects of the
Seller and its Subsidiaries (to the extent of the Seller's interests therein),
taken as a whole.
"MATERIALS OF ENVIRONMENTAL CONCERN" means all chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum or any fraction
thereof, petroleum products and hazardous substances (as defined in Section
101(14) of CERCLA, 42 U.S.C. sec. 6601(14)), or solid or hazardous wastes as now
defined and regulated under any Environmental Laws.
"MATERIAL TRANSACTION" means any transaction between Buyer and
its Affiliates, on the one hand, and the Seller and its Affiliates, on the other
hand, that would be required to be disclosed in the Seller's reports or proxy
materials filed under the Exchange Act by Item 404 of Regulation S-K.
"NOTICE OF SUPERIOR ACQUISITION PROPOSAL" has the meaning set
forth in Section 5.4(c).
"OTHER FILINGS" has the meaning set forth in Section 5.1(b).
"PERSON" means any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
other form of business or legal entity or Government Authority.
"PERMITTED LIENS" means: (A) statutory liens for obligations
which are not overdue, or are being contested in good faith and are listed on
Schedule 3.11; (B) rights of way disclosed on an ALTA survey of the property;
and (C) items listed on Schedule 3.11.
"PROXY STATEMENT" has the meaning set forth in Section 5.1(b).
"PURCHASE PRICE" has the meaning set forth in the first
paragraph of the recitals to this Agreement.
"PURCHASED SHARES" means the Shares purchased by Buyer
pursuant to this Agreement, including all Common Shares issuable upon conversion
of the Shares, as adjusted for any share split, subdivision, combination,
merger, reclassification or share dividend related to the Common Shares
occurring at or prior to the time of such conversion.
"REAL PROPERTY" means the land owned, leased, or occupied by
the Seller or any of its Subsidiaries.
"REGISTRATION RIGHTS AGREEMENT" means a registration rights
agreement between Buyer and the Seller in substantially the same form as the
agreement attached hereto as Exhibit B.
"SEC" has the meaning set forth in Section 3.5(a).
"SECURITIES ACT" has the meaning set forth in Section 3.4(e).
"SECURITIES LAWS" has the meaning set forth in Section 3.5(a).
"SELLER" has the meaning set forth in the first paragraph
hereof.
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"SELLER ARTICLES" means the Articles of Incorporation of the
Seller as in effect on the date of this Agreement.
"SELLER PERMITS" has the meaning set forth in Section 3.20(a).
"SELLER PLANS" means, collectively, each of the Seller's or
any of its Subsidiaries' benefit, bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other employee benefit arrangements,
understandings or plans (whether under Section 414(b), (c), (m) or (o) of the
Code or otherwise) with regard to any Employee or any Person affiliated with the
Seller or any of its Subsidiaries.
"SELLER PROPERTIES" has the meaning set forth in Section 3.11.
"SELLER REPORTS" has the meaning set forth in Section 3.5(a).
"SERVICE AGREEMENT" means a Service Agreement between Buyer
and the Seller and its Subsidiaries, as applicable, in substantially the same
form as the agreement attached hereto as Exhibit C.
"SHAREHOLDERS" means the holders of all of the issued and
outstanding Common Shares.
"SHARE PURCHASE" has the meaning set forth in Section 6.5(d).
"SHARES" has the meaning set forth in the first paragraph of
the recitals to this Agreement.
"STATE REGISTRATIONS" has the meaning set forth in Section
3.19(b).
"SUBSIDIARY" means each entity of which the Seller, directly
or through one or more intermediary entities (i) has the right to elect a
majority of the board of directors or other governing body, (ii) owns a majority
of the issued and outstanding common stock, or (iii) has the right to receive
50% or more of the economic value of any business or activity in which such
entity is engaged.
"SUPERIOR ACQUISITION PROPOSAL" has the meaning set forth in
Section 5.4(a).
"TAX" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 54A), customs duties, capital stock, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not. The term "Tax" also
includes any amount payable pursuant to any tax sharing agreement pursuant to
which any relevant party is liable and any amount payable pursuant to any
similar contract.
"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.
"TENDER OFFER" has the meaning set forth in Section 6.5(a).
"TENDER OFFER MATERIALS" has the meaning set forth in Section
6.5(a).
"UFOC" has the meaning set forth in Section 3.19(b).
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ARTICLE 2
PURCHASE AND SALE OF SHARES; CLOSING
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Section 2.1 PURCHASE AND SALE; PURCHASE PRICE. On the
terms and subject to the conditions hereof, at the closing of the purchase of
the Shares (the "Closing"), the Seller shall issue and deliver the Shares to
Buyer, duly registered in the name of Buyer or its designee, in exchange for the
Purchase Price and Buyer shall deliver to the Seller the Purchase Price, by wire
transfer of immediately available funds, in exchange for the Shares.
Section 2.2 CLOSING; TERMINATION. The Closing shall take
place at 10:00 a.m., local time, at the offices of the Seller, 00 Xxxx Xxxxxxxx
Xxx, Xxxxxxx, Xxxxxxx 00000, on the Business Day following the satisfaction or
waiver of the last to be satisfied or waived of the conditions set forth in
Sections 8.1 and 8.2 (other than those conditions that are to be satisfied
concurrently with the Closing), or on such other date or at such other time and
place as the parties shall agree on in writing (the "Closing Date"). If the
Closing has not occurred on or before the first anniversary of this Agreement
and this Agreement has not been previously terminated under Article 10, this
Agreement shall terminate on such anniversary without further action by the
parties hereto, and this Agreement shall be null and void and have no further
effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
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The Seller hereby represents and warrants to Buyer as follows:
Section 3.1 ORGANIZATION AND QUALIFICATION;
SUBSIDIARIES. (a) The Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Arizona. The Seller has all
requisite power and authority to own, operate, lease and encumber its properties
and carry on its business as now conducted, and to enter into this Agreement and
to perform its obligations hereunder.
(b) Each Subsidiary of the Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, and has the corporate power
and authority to own, operate, lease and encumber its properties and carry on
its business as it is now being conducted.
(c) The Seller and each of its Subsidiaries is duly
qualified to do business and is in good standing in each jurisdiction in which
the ownership or lease of its properties or the conduct of its business requires
such qualification, except for any such failures to so qualify that would not,
individually or in the aggregate, have a Material Adverse Effect.
(d) Schedule 3.1(d) sets forth the name of each Subsidiary
(whether owned directly or indirectly through one or more intermediaries). All
of the outstanding shares of capital stock of, or other equity interests in,
each of the Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, and are owned, directly or indirectly, by the Seller free and
clear of all Liens, except as set forth in Schedule 3.1(d). The following
information for each Subsidiary is set forth in Schedule 3.1(d), if applicable:
(i) its name and jurisdiction of incorporation or organization; and (ii) the
type of and percentage interest held by the Seller in the
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Subsidiary and the names of and percentage interest held by the other interest
holders, if any, in the Subsidiary.
Section 3.2 AUTHORITY RELATIVE TO AGREEMENTS; BOARD
APPROVAL. (a) The execution, delivery and performance of this Agreement and of
all of the documents and instruments delivered in connection herewith by the
Seller are within the corporate power of the Seller. This Agreement has been
duly executed and delivered on behalf of the Seller. This Agreement is, and the
other documents and instruments required hereby will be, when executed and
delivered by the Seller, subject to approval by the Shareholders, the valid and
binding obligations of the Seller, enforceable against the Seller in accordance
with their respective terms, subject only to bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in effect affecting the
enforceability or right of creditors generally and to general equitable
principles which may limit the right to obtain equitable remedies.
(b) The Board of Directors and a committee of "disinterested
directors" (as defined in Chapter 23, Section 10-2741(d) of the Arizona
Corporate Takeover Statute) have approved this Agreement and the transactions
contemplated hereby and have determined to recommend that the Shareholders vote
in favor of and approve the issuance of the Purchased Shares pursuant to this
Agreement.
(c) The Purchased Shares to be issued pursuant to this
Agreement have been duly authorized, and upon issuance on the terms set forth in
this Agreement will be duly and validly issued, fully paid and nonassessable. At
Closing and subject to the restrictions described in Section 6.6, the Seller
will deliver to Buyer good and marketable title to the Purchased Shares, free
and clear of all Liens (other than Liens created as a result of actions of
Buyer). The Common Shares issuable upon conversion of the Shares will be duly
and validly issued, fully paid and nonassessable and, if converted immediately
after Closing or within 120 days thereafter, Buyer will own not less than 52% of
the outstanding Common Shares on a fully diluted basis and such Common Shares
will represent not less than 52% of the voting power on a fully diluted basis
entitled to be voted on any issue, whether at a meeting of the Shareholders or
otherwise.
(d) Neither the sale nor the conversion of the Purchased
Shares pursuant to this Agreement will give any Shareholder: the right to demand
payment for that Shareholder's Common Shares under the laws of the State of
Arizona; any appraisal or similar rights under the laws of the State of Arizona;
any dissenters' or similar rights under the laws of the State of Arizona; any
preemptive or similar right to purchase additional shares of the Seller's
capital stock; or any rights under any shareholders' rights, "poison pill" or
similar plan adopted by the Board of Directors or the Shareholders or contained
in the Seller Articles or other organizational documents of the Seller.
Section 3.3 CAPITAL STOCK. (a) The authorized capital
stock of the Seller on the date hereof consists of 100,000,000 Common Shares,
and 100,000,000 shares of preferred stock, $.01 per share. As of the date
hereof, there are 4,605,358 Common Shares issued and outstanding, and no shares
of preferred stock issued and outstanding. All such issued and outstanding
Common Shares are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. The Seller has no outstanding securities or bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities the holders of
which have the right to vote) with the Shareholders or separately with respect
to the transactions contemplated hereby. Other than options described in
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Schedule 3.3(a) which have heretofore been granted under the option plans also
described in Schedule 3.3(a), there are no existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Seller to issue, transfer or sell any shares of
capital stock or other equity interests of the Seller.
(b) No Subsidiary has issued or granted securities
convertible into or exchangeable for interests in the Seller or in any
Subsidiary and no Subsidiary is a party to any outstanding commitment of any
kind relating to, or any presently effective agreement or understanding with
respect to, interests in the Seller or in any Subsidiary, whether issued or
unissued.
(c) Except for its interests in the Subsidiaries, none of
the Seller or any of its Subsidiaries owns directly or indirectly any material
interest or investment (whether equity or debt) in any corporation, partnership,
joint business venture, trust or other legal entity (other than the list set
forth on Schedule 3.3(c), which is a list of all of the investments of the
Seller and its Subsidiaries).
Section 3.4 NO CONFLICTS; NO DEFAULTS; REQUIRED FILINGS
AND CONSENTS. Neither the execution and delivery by the Seller of this
Agreement, nor the consummation by the Seller of the transactions contemplated
hereby in accordance with the terms hereof, will:
(a) conflict with or result in a breach of any provisions
of the Seller Articles or By-laws of the Seller;
(b) result in a breach or violation of, a default under, or
the triggering of any payment or other obligation pursuant to, or accelerate
vesting or have any other consequence under, any Seller or Subsidiary stock
option plan, option plan or similar compensation plan or any grant or award made
under any of the foregoing, except for the accelerated vesting of stock options
granted under the Company's existing stock option plans, which options and plans
are listed on Schedule 3.3(a);
(c) violate or conflict with any statute, regulation,
judgment, order, writ, decree or injunction applicable to the Seller or to any
of its Subsidiaries;
(d) except as disclosed in Schedule 3.4(d), violate or
conflict with or result in a breach of any provision of, or constitute a default
(or any event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result in the
creation of any Lien upon any of the properties of the Seller or of any of its
Subsidiaries under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed or any franchise, license, permit, lease,
contract, agreement or other instrument, commitment or obligation to which the
Seller or any of its Subsidiaries is a party, or by which the Seller or any of
its Subsidiaries or any of their properties is bound or affected, except as
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect; or
(e) require any consent, approval or authorization of, or
declaration, filing or registration with, any Government Authority or private
organization, other than any filings required under the Securities Act of 1933,
as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), state securities laws ("Blue Sky Laws") or the
AMEX (collectively, the "Filings").
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Section 3.5 SEC MATTERS AND ABSENCE OF UNDISCLOSED
LIABILITIES. (a) The Seller has delivered or made available to Buyer the
Seller's Annual Report on Form 10-K for the fiscal year ended June 30, 1998
filed by the Seller with the Securities and Exchange Commission ("SEC") and all
exhibits, amendments and supplements thereto, including all documents
incorporated by reference therein (collectively, the "Form 10-K"), and each
registration statement, report, proxy statement or information statement and all
exhibits thereto prepared by or relating to the Seller for the three years prior
to the date of this Agreement, each in the form (including exhibits and any
amendments thereto) filed with the SEC (collectively the "Seller Reports"). The
Seller Reports were filed with the SEC in a timely manner and constitute all
forms, reports and documents required to be filed by the Seller under the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder (the "Securities Laws"). As of their respective dates, the Seller
Reports (i) complied as to form in all material respects with the applicable
requirements of the Securities Laws and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. To the Seller's
knowledge, there is no unresolved violation asserted by any Government Authority
with respect to any of the Seller Reports.
(b) Each of the balance sheets (including the related notes
and schedules) included in or incorporated by reference into the Form 10-K and
each Exchange Act report filed between the date such annual report was filed
with the SEC and the Closing Date (the Form 10-K and such reports collectively,
the "Current Reports") fairly and accurately present the consolidated financial
position of the Seller and its Subsidiaries as of its date and each of the
statements of operations, shareholders' equity (deficit) and cash flows included
in or incorporated by reference into the Current Reports (including any related
notes and schedules) fairly and accurately present the consolidated results of
operations, retained earnings or cash flows, as the case may be, of the Seller
and its Subsidiaries for the period covered thereby, in each case in accordance
with United States generally accepted accounting principles consistently applied
during the periods involved ("GAAP") and in accordance with Regulation S-X
promulgated by the SEC, except as may be noted therein and except, in the case
of the unaudited statements, for normal recurring year-end adjustments which
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect. All such balance sheets and statements are free of
material errors, omissions and misstatements. None of the receivables of the
Seller and its Subsidiaries are materially overstated, and no payables and other
liabilities of the Seller and its Subsidiaries are materially understated, on
any such balance sheet or statement.
(c) Except as and to the extent set forth in the Current
Reports or in any Schedule hereto, to the Seller's knowledge, none of the Seller
or any of its Subsidiaries has any material Liabilities, nor do there exist any
circumstances that would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
Section 3.6 LITIGATION; COMPLIANCE WITH LAW. (a)
Schedule 3.6(a) sets forth a list and a brief description of all pending Actions
involving the Seller or any of its Subsidiaries of which the Seller or any of
its Subsidiaries have notice, in which the amount of damages prayed for in any
complaint or pleading exceeds $10,000 or which is reasonably likely to result in
damages of $10,000 or more.
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(b) Except as set forth on Schedule 3.6(a), there are no
Actions pending or, to the knowledge of the Seller threatened, against the
Seller or any of its Subsidiaries (or any Seller Plan), or any property
(including proprietary rights) of the Seller or any of its Subsidiaries in any
court or other forum or before any arbitrator of any kind or before or by any
Governmental Authority of which the Seller or any of its Subsidiaries have
notice, in which the amount of damages prayed for in any complaint or pleading
exceeds $10,000 or which is reasonably likely to result in damages of $10,000 or
more.
(c) To the knowledge of the Seller, none of the Seller or
any of its Subsidiaries is in material violation of any statute, rule,
regulation, order, writ, decree or injunction of any Government Authority or any
body having jurisdiction over them or any of their respective properties.
Schedule 3.6(c) sets forth all such violations known to the Seller or its
Subsidiaries.
Section 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except
as disclosed in Schedule 3.7 or in any other Schedule hereto, since July 1,
1998, the Seller and each of its Subsidiaries has conducted its business only in
the ordinary course of such business, and there has not been (a) any change,
circumstance or event that had or that could reasonably be expected to have a
Material Adverse Effect, or (b) any change in the Seller's accounting
principles, practices or methods, except as required by changes in GAAP.
Section 3.8 TAX MATTERS. (a) The Seller and each of its
Subsidiaries has timely filed with the appropriate taxing authority all Tax
Returns required to be filed by it or has timely requested extensions and any
such request has been granted and has not expired. Each such Tax Return is
complete and accurate in all material respects and all information shown thereon
is correct in all material respects. All Taxes required to have been paid by the
Seller or any of its Subsidiaries have been paid when due, except for Taxes
contested in good faith and for which adequate reserves as required by GAAP have
been taken and which are listed on Schedule 3.8(a). The Seller and each of its
Subsidiaries have properly accrued its liability for all Taxes for periods
subsequent to the periods covered by such Tax Returns as required by GAAP. None
of the Seller or any of its Subsidiaries has executed or filed with the IRS or
any other taxing authority any agreement now in effect extending the period for
assessment or collection of any Tax. Except as set forth on Schedule 3.8(a),
none of the Seller or any of its Subsidiaries is a party to any pending action
or proceeding by any taxing authority for assessment or collection of any Tax,
and no claim for assessment or collection of any Tax has been asserted against
it. Except as set forth on Schedule 3.8(a), no claim has been made by any
authority in a jurisdiction where the Seller or any of its Subsidiaries does not
file Tax Returns that it is or may be subject to taxation or reporting in that
jurisdiction. There is no dispute or claim concerning any information, reporting
or tax liability of the Seller or of any of its Subsidiaries, (i) claimed or
raised by any taxing authority in writing or (ii) as to which the Seller or any
of its Subsidiaries has knowledge. Except as set forth on Schedule 3.8(a),
neither the Seller nor any of its Subsidiaries has had its tax returns audited
by any Government Authority within the last four years.
(b) No amount or other entitlement that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated hereby by any Employee of the Seller or of any of
its Subsidiaries or of any of their Affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.28OG-1) under any employment, severance or termination agreement, other
compensation
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arrangement or plan currently in effect would be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(2) of the Code).
Section 3.9 COMPLIANCE WITH AGREEMENTS. (a) Neither the
Seller nor any of the Subsidiaries is in default under or in violation of any
provision of its articles of incorporation or by-laws or any similar
organizational document.
(b) Each of the Seller and its Subsidiaries has filed all
material reports, registrations, documents and statements, together with any
amendments and supporting materials required with respect thereto, that it was
required to file with any Government Authority and all other material reports,
documents, materials and statements required to be filed by it, and has paid all
fees or assessments due and payable in connection therewith. Except as disclosed
on Schedule 3.8(a) or 3.9(b), there is no unresolved violation asserted by any
Government Authority of which the Seller or any of its Subsidiaries has received
notice.
(c) Neither the Seller nor any of the Subsidiaries is in
default, and, to the Seller's knowledge, no event has occurred which, with the
giving of notice or the lapse of time or both, would constitute a default, in
any material respect, under any Commitment to which the Seller or any of its
Subsidiaries are bound, whether as a party or otherwise or in respect of any
payment obligations thereunder. Except as set forth in Schedule 3.9(c), neither
the Seller nor any of its Subsidiaries is a party to any joint venture or
partnership agreements. For purposes of this Section 3.9(c), license agreements,
franchise agreements and group services arrangements with purchasers of
adjusting services shall not be deemed to be joint venture or partnership
agreements. To the Seller's knowledge, there is no condition with respect to the
Seller or any of its Subsidiaries that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.
(d) The Seller has delivered to Buyer the Seller's most
current directory of its franchisees and licensees (the "Directory"). Schedule
3.9(d) sets forth all additions and deletions of franchisees or licensees
between the date of the Directory and the date of this Agreement. The franchise
and license agreements listed in the Directory, as supplemented by Schedule
3.9(d), sets forth a complete and accurate list of all material agreements to
which the Seller or any Subsidiary is a party as of the date hereof which are
not listed in any other Schedule hereto. Each agreement with the parties, and
for the geographic areas, listed in the Directory (as modified by Schedule
3.9(d)) and each additional agreement listed on Schedule 3.9(d) is in full force
and effect and no payments thereunder, if any, are delinquent, no notice of
default thereunder has been sent or received by the Seller or any of the
Subsidiaries, and, to the Seller's knowledge, no event has occurred which, with
notice or lapse of time or both, would constitute such a default, except for any
such defaults or events that would not, individually or in the aggregate, have a
Material Adverse Effect.
(e) Schedule 3.9(e) sets forth a complete and accurate list
of all material agreements and written policies of the Seller or any of its
Subsidiaries in effect on the date hereof relating to transactions with
Affiliates and potential conflicts of interest. Each agreement or policy listed
on Schedule 3.9(e) is in full force and effect, and the Seller, each of the
Subsidiaries and, to the Seller's knowledge, the other parties thereto, are in
compliance with such agreements or policies. Solely for purposes of this Section
3.9(e), material agreements shall mean agreements that involve an expense to the
Seller or any of its Subsidiaries of over $5,000 per month or $25,000 in the
aggregate.
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Section 3.10 FINANCIAL RECORDS; SELLER ARTICLES AND
BY-LAWS; CORPORATE RECORDS. (a) The books of account and other financial records
of the Seller and of each of the Subsidiaries are true and complete in all
material respects, have been maintained in accordance with GAAP, and are
accurately reflected in all material respects in the financial statements
included in the Seller Reports.
(b) The Seller has delivered or made available to Buyer
true and complete copies of the Seller Articles and the By-laws of the Seller,
as amended to date, and the charter, by-laws, organizational documents and joint
venture agreements of the Seller and each of its Subsidiaries, and all
amendments thereto. For purposes of this Section 3.10(b), license agreements,
franchise agreements and group services arrangements with the purchasers of
adjusting services shall not be deemed to be joint venture agreements. All such
documents are listed in Schedule 3.10(b).
(c) The corporate minute books and other records of
proceedings of the Seller and of its Subsidiaries contain accurate records of
all meetings and consents of the equity holders, directors and other governing
bodies thereof and accurately reflect in all material respects all other
corporate action of the directors and shareholders and any committees of the
board of directors of the Seller and its Subsidiaries.
Section 3.11 TITLE TO ASSETS; LIENS. The Seller or a
Subsidiary has good and marketable title (insurable and indefeasible fee simple
title in the case of owned Real Property), to all of their respective property,
equipment and other assets, including those reflected as owned in the Seller
Reports or on Schedule 3.11 (the "Seller Property"), and such assets are free
and clear of any and all mortgages, liens, security interests, charges,
encumbrances or title defects of any nature whatsoever other than Permitted
Liens, except for any lease of office equipment made in the ordinary course of
business of the Seller or any of its Subsidiaries requiring payments of less
than $10,000 annually. Schedule 3.11 contains a complete and accurate list of
each parcel of Real Property owned, leased or used by the Seller or any
Subsidiary in the conduct of its business. The Seller has provided Buyer with a
complete and accurate legal description of each parcel of Real Property owned,
leased or used by the Seller or any Subsidiary in the conduct of its business
and a complete and accurate description of the Permitted Liens. There are no
pending or, to the best knowledge of the Seller, threatened zoning, condemnation
or eminent domain proceedings, building, utility or other moratoria, or
injunctions or court orders which would materially effect such continued
operation. The current use of the owned Real Property is permissible and in
material compliance with all applicable zoning ordinances and other regulations
of any Government Authority.
Section 3.12 ENVIRONMENTAL MATTERS. (a) The Seller's and
each of its Subsidiaries ownership, operation and use of its respective property
have been and currently are in compliance in all material respects with all
applicable Environmental Laws.
(b) No Environmental Claim with respect to the operations
or the businesses of the Seller or of its Subsidiaries, or with respect to any
Real Property, has been asserted or, to the Seller's knowledge, threatened, and,
to the Seller's knowledge, no circumstances exist with respect to the Seller or
any of its Subsidiaries or any Real Property that would reasonably be expected
to result in any Environmental Claim being asserted, in any such case, against
(i) the Seller or any of its Subsidiaries, or (ii) any Person whose liability
for any Environmental Claims the Seller or any of its Subsidiaries has or may
have retained or assumed either contractually or by operation of law.
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(c) (i) None of the Seller nor any of the Subsidiaries has
been notified or has reason to anticipate being notified of potential
responsibility in connection with any site that has been placed on, or proposed
to be placed on, the National Priorities List or its state or foreign equivalent
pursuant CERCLA., or analogous state or foreign laws, (ii) no Materials of
Environmental Concern are present on, in or under any Real Property, (iii) none
of the Seller, any Subsidiary or any tenant of any Real Property has released or
arranged for the release of any Materials of Environmental Concern at or on any
Real Property, (iv) no underground storage tanks, surface disposal areas, pits,
ponds, lagoons or open trenches are present at any Real Property, (v) no
transformers, capacitors or other equipment containing fluid with more than 50
parts per million polychlorinated biphenyls are present at, on or under any Real
Property, except for any such transformers, capacitation or other equipment
owned by any utility company, and (vi) to the Seller's knowledge, no employee,
agent, contractor, subcontractor or tenant of the Seller or of any of the
Subsidiaries is now or has in the past been exposed to friable asbestos or
asbestos-containing material at any Real Property whether now or previously
owned or occupied by the Seller or any of its Subsidiaries.
Section 3.13 EMPLOYEES AND BENEFIT PLANS. (a) Schedule
3.13(a) sets forth a complete and accurate list of all employment agreements
with Employees of the Seller or of any of its Subsidiaries. Except for the
Employees who are parties to such employment agreements, all of the Employees of
the Seller and of each of its Subsidiaries are employed in an at-will status
(except for restrictions or limitations on the at-will status of such employees
imposed by general principles of law or equity).
(b) Schedule 3.13(b) sets forth a complete and accurate
list of each of the Seller Plans. Since July 1, 1998, there has been no
adoption, modification, amendment or alteration of any Seller Plan by the Seller
or any of its Subsidiaries. All Seller Plans, including any such plan that is an
"employee benefit plan" as defined in Section 3(3) of ERISA, are in compliance,
in all material respects, with all applicable requirements of law, including
ERISA and the Code, and neither the Seller nor any of its Subsidiaries has any
liabilities or obligations with respect to any Seller Plan, whether accrued,
contingent or otherwise (other than obligations to make contributions and pay
benefits and administrative costs incurred in the ordinary course that are
accrued in the balance sheet included in the Form 10-K or, as to such
obligations incurred after June 30, 1998, that do not, individually or in the
aggregate, exceed $10,000 annually).
Section 3.14 LABOR MATTERS. Except as disclosed in
Schedule 3.14, there are no pending or, to the knowledge of the Seller,
threatened Actions or work stoppages relating to any Employee. Neither the
Seller nor any of its Subsidiaries is a party to any collective bargaining
agreement with respect to employees, and, to the knowledge of the Seller, there
are no activities of any labor union seeking to represent or organize the
employees of the Seller or any of its Subsidiaries. No unfair labor practice or
labor arbitration, or race, sex, age, disability or other discrimination
complaint is pending, nor is any such complaint, to the knowledge of the Seller,
threatened against the Seller or any of its Subsidiaries before the National
Labor Relations Board, Equal Employment Opportunity Commission, Department of
Labor or any other Governmental Authority, and no grievance is pending, nor is
any grievance, to the knowledge of the Seller, threatened against the Seller or
any of its Subsidiaries. The Seller and its Subsidiaries are in compliance in
all material respects with all applicable federal, state and local laws relating
to employment, including without limitation, the provisions thereof relating to
wages, non-discriminatory hiring and employment practices, collective
bargaining, and payment of Social
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Security and Unemployment Compensation taxes or similar taxes, and neither the
Seller nor any of its Subsidiaries is liable for any arrears of wages or subject
to any liabilities or penalties for failure to comply with any of the foregoing
laws.
Section 3.15 PROPRIETARY RIGHTS. The Seller has provided
Buyer with copies of all relevant materials pertaining to (a) the registration
of all trademarks, service marks or trade names, and all pending applications
for any such registration, (b) the registration of all patents and copyrights
and all pending applications therefor, and (c) all other trademarks, service
marks or trade names, whether or not registered (the items in clauses (a), (b)
and (c) collectively, the "Proprietary Rights"), that are owned or used by the
Seller or any of its Subsidiaries. To the knowledge of the Seller, the use of
any of the Proprietary Rights by the Seller or any of its Subsidiaries has not
infringed, is not infringing upon, and is not otherwise violating the rights of
any Person or other entity in or to such Proprietary Rights or the asserted
Proprietary Rights of others. No notices have been received by the Seller or any
of its Subsidiaries that the use of the Proprietary Rights by the Seller or any
of its Subsidiaries infringes upon or otherwise materially violates any rights
of a person or other entity in or to such Proprietary Rights or the proprietary
rights of others. Except as disclosed in Schedule 3.15, to the knowledge of the
Seller, no person or other entity is infringing on the Proprietary Rights owned
by the Seller or any of its Subsidiaries.
Section 3.16 INSURANCE. The Seller maintains insurance
policies covering the assets, business, equipment, properties, operations and
Employees of the Seller and of each of its Subsidiaries (collectively, the
"Insurance Policies") which are of a type and in amounts customarily carried by
Persons similar in size to the Seller and its Subsidiaries conducting businesses
similar to those of the Seller and its Subsidiaries. Schedule 3.16 sets forth a
list of all insurance coverages or policies currently maintained by the Seller
or its Subsidiaries. All such coverages or policies shall be maintained in full
force and effect until the Closing. There is no material claim by the Seller or
by any of its Subsidiaries pending under any of the Insurance Policies as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies.
Section 3.17 YEAR 2000 COMPLIANCE. Schedule 3.17
describes the year 2000 computer problem compliance efforts of the Seller and
its Subsidiaries and sets forth the current status of such efforts.
Section 3.18 PROXY STATEMENT. The Proxy Statement and all
of the information included or incorporated by reference therein (other than any
information supplied or to be supplied by Buyer for inclusion or incorporation
by reference therein) will not, as of the date such Proxy Statement is first
made available to the Shareholders and as of the time of the meeting of the
Shareholders in connection with the transactions contemplated hereby, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder.
Section 3.19 FRANCHISE MATTERS. (a) The Seller and its
Subsidiaries have obtained and maintain valid and effective registrations in
each and every jurisdiction wherein registration is required in connection with
the offering or sale of franchises, business opportunities or similar
arrangements of the type offered by the Seller and its Subsidiaries. The
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Seller and each of its Subsidiaries are and have been in material compliance
with all applicable federal and state franchise laws and have no knowledge of
any circumstance that may prevent or interfere with such compliance in the
future.
(b) The Seller and its Subsidiaries have delivered or made
available to Buyer, the Seller's Uniform Franchise Offering Circular ("UFOC")
and all exhibits, amendments and supplements thereto and each registration
statement and all exhibits thereto filed with any state franchise authority
("State Registrations"). The UFOC and State Registrations (i) comply as to form
and in all material respects with the applicable requirements of all federal and
state laws, and (ii) do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) Other than routine claims in the ordinary course of
business of the Seller or any of its Subsidiaries that the Seller reasonably
believes will not result in the incurrence of liability of $20,000 or more,
neither the Seller nor any of its Subsidiaries has received any claims,
deficiency notices, complaints, orders, notice of violation or threat of legal
action from any Governmental Authority or by or on behalf of any Person with
respect to the offering and sale of franchises or licenses or the operation of
its franchise or license system.
(d) The franchise or license agreement with each party
listed in the Directory, as updated by Schedule 3.9(d), is in compliance, in all
material respects, with all applicable laws, ordinances, rules and regulations
and is in full force and effect, and no event has occurred which, with notice or
lapse of time or both, would constitute a material default under any such
agreement by the Seller or any of its Subsidiaries or, to the knowledge of the
Seller, by any other party thereto, except as are not, individually or in the
aggregate, likely to have a Material Adverse Effect.
(e) Except as set forth on Schedule 3.19(e), neither the
Seller nor any of its Subsidiaries is a party to any Action by, against or
involving any of its current or former franchisees or licensees. Except as set
forth on Schedule 3.19(e), the Seller has not been threatened with any
litigation or other proceeding by any current or former franchisee or licensee
and is not aware of any facts or circumstances that might reasonably be expected
to give rise to any such threat, litigation or other proceeding, other than
matters which, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect. The Seller's relationship with each of its
franchisees and licensees is defined by a franchise or license agreement, as
applicable, substantially in the form heretofore furnished to Buyer, between the
Seller or a Subsidiary and such franchisee or licensee, as applicable. Neither
the Seller nor any of its Subsidiaries, nor, to the knowledge of the Seller, any
franchisee or licensee is currently in default in any material respect of any of
its/his/her obligations under any such franchise or license agreement and each
such agreement complies in all material respects with all federal, state and
other franchise and license or other laws promulgated by any Government
Authority, and all rules and regulations which are applicable to the
relationship between the Seller and any of its franchisees and licensees, except
for any such defaults and incidents of noncompliance which, individually or in
the aggregate, have not had, and are not reasonably likely to have, a Material
Adverse Effect. The Seller has no knowledge of any proposed or contemplated
termination, revision or amendment of any such agreement or any material adverse
change in the relationship between the Seller and any of its Subsidiaries and
any of its franchisees or licensees, other than the normal expiration of
franchise or license agreements in accordance with their terms.
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Section 3.20 GOVERNMENT APPROVALS; COMPLIANCE WITH LAWS
AND ORDERS.
(a) The Seller and each of its Subsidiaries has obtained
from the appropriate Government Authority which is charged with regulating or
supervising any business conducted by the Seller or any of its Subsidiaries all
permits, variances, exemptions, orders, approvals, certificates of authority and
licenses necessary for the conduct of its business and operations as and to the
extent currently conducted (the "Seller Permits"), which Seller Permits are
valid and remain in full force and effect. The Seller and its Subsidiaries are
in compliance in all material respects with the terms of all such Seller
Permits.
(b) Except as set forth on Schedule 3.20(b), neither the
Seller nor any of its Subsidiaries has received notice of or, to the knowledge
of the Seller, is subject to any Action, order or any complaint, proceeding or
investigation of any Government Authority which is charged with regulating or
supervising any business conducted by the Seller or any of its Subsidiaries,
which is pending or threatened, which affects or which could affect the
effectiveness or validity of any such Seller Permit or which could impair the
renewal thereof or which is likely to result in any such Action, agreement,
consent decree or order or in any fine, penalty or other liability in excess of
$20,000 or the forfeiture of the certificate of authority of the Seller or any
of its Subsidiaries. As of the date hereof, neither the Seller nor any of its
Subsidiaries is a party or subject to any Action, agreement, consent decree or
order, or other understanding or arrangement with, or any directive of, any
Government Authority that is charged with regulating or supervising any business
conducted by the Seller or any of its Subsidiaries which imposes any material
restrictions on or otherwise affects in any material way the conduct of the
business of the Seller and its Subsidiaries, as currently conducted (taken as a
whole).
Section 3.21 TAKEOVER STATUTES. No "fair price,"
"moratorium," "business combination," "control share acquisition" or other
anti-takeover statute or similar statute or regulation enacted by the State of
Arizona applies to the transactions contemplated by this Agreement. All actions
have been taken to ensure that no statute or regulation of the State of Arizona,
including the "business combination act," limits Buyer's ability to engage in
further transactions with the Sellers and its Subsidiaries.
Section 3.22 BROKERS AND FINDERS. No agent, broker,
investment banker or other Person, including any of the foregoing that is an
Affiliate of the Seller or any of its Subsidiaries, is or will be entitled to
any broker's or finder's fee or any other commission or similar fee agreed to or
arranged by the Seller in connection with this Agreement or any of the
transactions contemplated hereby.
Section 3.23 KNOWLEDGE DEFINED. As used herein, the
phrase "to the Seller's knowledge" (or words of similar import) means the
knowledge, after reasonable inquiry, of any of the officers or inside directors
of the Seller or its Subsidiaries.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
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Buyer hereby represents and warrants to the Seller as follows:
Section 4.1 ORGANIZATION. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Ohio.
Buyer has all requisite corporate power
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and authority to own, operate, lease and encumber its properties and carry on
its business as now conducted, and to enter into this Agreement and to perform
its obligations hereunder. Buyer is a wholly-owned subsidiary of The Progressive
Corporation, an Ohio corporation.
Section 4.2 DUE AUTHORIZATION. The execution, delivery
and performance of this Agreement and of all of the documents and instruments
delivered in connection herewith by Buyer has been duly and validly authorized
by all necessary corporate action on the part of Buyer. This Agreement has been
duly executed and delivered on behalf of Buyer. This Agreement is, and the other
documents and instruments required hereby will be, when executed and delivered
by Buyer, the valid and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms, subject only to bankruptcy,
insolvency, reorganization, moratorium or similar laws at the time in effect
affecting the enforceability or right of creditors generally and to general
equitable principles which may limit the right to obtain equitable remedies.
Section 4.3 CONFLICTING AGREEMENTS AND OTHER MATTERS.
Neither the execution and delivery of this Agreement nor the performance by
Buyer of its obligations hereunder will conflict with, result in a breach of the
terms, conditions or provisions of, constitute a default under, result in the
creation of any mortgage, security interest, encumbrance, lien or of any kind
upon any of the properties or assets of Buyer pursuant to, or require any
consent, approval or other action by or any notice to or filing with any
Government Authority pursuant to, the organizational documents of Buyer or any
agreement, instrument, order, judgment, decree, statute, law, rule or regulation
by which Buyer is bound, except for any filings required by Sections 13(d) and
16 of the Exchange Act.
Section 4.4 PRIVATE PLACEMENT. (a) Buyer acknowledges
that the Seller is relying on exemptions from the registration requirements of
the Securities Act and on applicable state statutes and regulations. Buyer
hereby affirms that it is an "accredited investor" as defined in Regulation D
promulgated by the SEC under the Securities Act.
(b) Buyer (i) can bear the economic risk of the purchase of
the Shares, including the total loss of Buyer's investment; and (ii) has such
knowledge and experience in business and financial matters as to be capable of
evaluating the merits and risks of an investment in the Shares.
(c) Buyer warrants that any financial information relating
to Buyer which is provided herewith by Buyer, or is subsequently submitted by
Buyer at the request of the Seller, does or will fairly and accurately reflect
Buyer's financial condition as of the date thereof with respect to which Buyer
does not anticipate any material adverse change.
(d) Buyer has been provided the opportunity to ask
questions with respect to the business, operations and financial condition of
the Seller, and the terms and conditions of the purchase of the Shares.
(e) Buyer understands that the Shares have not been
registered under the Securities Act, or the securities laws of any state and are
subject to certain restrictions on transfer.
(f) Buyer acknowledges that the Shares being acquired are
being acquired for Buyer's own account without a view to public distribution or
resale and that Buyer has no contract, undertaking, agreement, or arrangement to
sell or otherwise transfer or dispose of the Shares or any portion thereof to
any other person or entity.
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(g) Buyer agrees that Buyer will not sell or otherwise
transfer or dispose of the Shares or the Common Shares underlying the Shares, or
any portion thereof, unless such Shares or Common Shares, are registered under
the Securities Act and any applicable state securities laws or the Buyer obtains
an opinion of reputable securities counsel that such Shares, or Common Shares,
may be sold in reliance on an exemption from such registration requirements.
(h) Buyer understands that no federal or state agency
including the SEC, the Arizona Corporation Commission or the securities
commission or authorities of any other state has approved or disapproved the
Shares, passed upon or endorsed the merits of the offering or the adequacy of
the disclosure given in connection with the offering, or made any finding or
determination as to the fairness of the Shares for investment.
Section 4.5 PROXY STATEMENT. None of the information
supplied or to be supplied by Buyer for inclusion or incorporation by reference
in the Proxy Statement, as of the date the Proxy Statement is mailed to the
Shareholders and as of the time of the meeting of the Shareholders in connection
with the transactions contemplated hereby, will contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 4.6 BROKERS OR FINDERS. No agent, broker,
investment banker or other firm or Person, including any of the foregoing that
is an Affiliate of Buyer, is or will be entitled to any broker's or finder's fee
or any other commission or similar fee agreed to or arranged by Buyer in
connection with this Agreement or any of the transactions contemplated hereby.
Section 4.7 VIOLATIONS. To the knowledge of Buyer, Buyer
is not in material violation of any statute, rule, regulation, order, writ,
decree or injunction of any Government Authority or any body having jurisdiction
over Buyer or any of its properties.
Section 4.8 LABOR MATTERS. Except as set forth on
Schedule 4.8, there are no present or, to the knowledge of Buyer, threatened
Actions or work stoppages relating to any employee of Buyer. Buyer is not a
party to any collective bargaining agreement with respect to employees, and, to
the knowledge of Buyer, there are no activities of any labor union seeking to
represent or organize the employees of Buyer. Except as set forth in Schedule
4.8, no unfair labor practice or labor arbitration, or race, sex, age,
disability or other discrimination complaint is pending, nor is any such
complaint, to the knowledge of Buyer, threatened against Buyer before the
National Labor Relations Board, Equal Employment Opportunity Commission,
Department of Labor or any other Governmental Authority, and no grievance is
pending, nor is any grievance, to the knowledge of Buyer, threatened against
Buyer. Buyer is in compliance, in all material respects, with all applicable
federal, state and local laws relating to employment, including without
limitation, the provisions thereof relating to wages, non-discriminatory hiring
and employment practices, collective bargaining, and payment of Social Security
and Unemployment Compensation taxes or similar taxes, and Buyer is not liable
for any arrears of wages or subject to any liabilities or penalties for failure
to comply with any of the foregoing laws.
Section 4.9 RIGHTS IN SOFTWARE. To the knowledge of
Buyer, the software to be provided by Buyer to the Seller, its Subsidiaries, and
their respective licensees and franchisees, and the provision of such software
to the Seller, its Subsidiaries, and their respective licensees and franchisees,
has not infringed, is not infringing upon, and is not otherwise violating the
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proprietary rights of any Person or other entity in or to such software or the
asserted proprietary rights of others in such software. No notices have been
received by Buyer that the use of such software infringes upon or otherwise
materially violates any rights of a person or other entity in or to such
software or the proprietary rights of others. To the knowledge of Buyer, no
person or other entity is infringing on the proprietary rights of Buyer in such
software.
Section 4.10 YEAR 2000 COMPLIANCE. Schedule 4.10
describes the year 2000 computer problem compliance efforts of Buyer related to
the software to be provided by Buyer to the Seller, its Subsidiaries, and their
respective licensees and franchisees, and sets forth the current status of such
efforts.
Section 4.11 GOVERNMENT APPROVALS; COMPLIANCE WITH LAWS
AND ORDERS.
(a) Buyer has obtained from the appropriate Government
Authority which is charged with regulating or supervising any business conducted
by Buyer all permits, variances, exemptions, orders, approvals, certificates of
authority and licenses necessary for the conduct of its business and operations
as and to the extent currently conducted (the "Buyer Permits"), which Buyer
Permits are valid and remain in full force and effect. Buyer is in compliance in
all material respects with the terms of all such Buyer Permits.
(b) Buyer has not received notice of or, to the knowledge
of Buyer, is not subject to any Action, order or any complaint, proceeding or
investigation of any Government Authority which is charged with regulating or
supervising any business conducted by Buyer, which is pending or threatened,
which affects or which could affect the effectiveness or validity of any such
Buyer Permit or which could impair the renewal thereof or which is likely to
result in any such Action, agreement, consent decree or order or in any fine,
penalty or other liability in excess of $20,000 or the forfeiture of the
certificate of authority of authority of Buyer. As of the date hereof, Buyer is
not a party or subject to any Action, agreement, consent decree or order, or
other understanding or arrangement with, or any directive of, any Government
Authority that is charged with regulating or supervising any business conducted
Buyer which imposes any material restrictions on or otherwise affects in any
material way the conduct of the business of Buyer.
ARTICLE 5
COVENANTS RELATING TO THE CLOSINGS
----------------------------------
Section 5.1 TAKING OF NECESSARY ACTION. (a) Each party
hereto agrees to use its commercially reasonable best efforts promptly to take
or cause to be taken all action and promptly to do or cause to be done all
things reasonably necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the terms and conditions of this Agreement.
(b) As promptly as practicable after the execution of this
Agreement, the Seller shall prepare and file with the SEC a preliminary proxy
statement by which the Shareholders will be asked to approve, in accordance with
the rules of the AMEX and any applicable laws, the issuance and sale to Buyer of
the Purchased Shares. The preliminary proxy statement, as initially filed with
the SEC, as it may be amended and refiled with the SEC, and the definitive proxy
statement filed with the SEC and mailed to the Shareholders (such definitive
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proxy statement, the "Proxy Statement"), shall be in form and substance
reasonably satisfactory to Buyer. The Seller shall respond to any comments of
the SEC, and mail the Proxy Statement to the Shareholders and shall cause any
meeting of the Board of Directors or the Shareholders required to be held to
consider the approval of the issuance and sale to Buyer of the Purchased Shares
and the transactions contemplated hereby at the earliest practicable time. As
promptly as practicable after the date hereof, the Seller shall prepare and file
any other filings required under the Exchange Act, the Securities Act or any
other federal, state or local laws relating to this Agreement and the
transactions contemplated hereby, including any state takeover laws (the "Other
Filings"). The Seller will notify Buyer promptly of the receipt of any comments
from the SEC or its staff or any other governmental official and of any request
by the SEC or its staff or any other government official for amendments or
supplements to the Proxy Statement or any Other Filing or for additional
information and will supply Buyer with copies of all correspondence between the
Seller or any of its representatives, on the one hand, and the SEC or its staff
or any other government official, on the other hand, with respect to the Proxy
Statement or any Other Filing. The Seller shall cause the Proxy Statement and
any Other Filing to comply in all material respects with all applicable
requirements of law. Buyer shall provide the Seller all information about Buyer
required to be included or incorporated by reference in the Proxy Statement or
any Other Filing and shall otherwise cooperate with the Seller in taking the
actions described in this Section 5.1(b). Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Proxy Statement or
any Other Filing, the Seller or Buyer, as applicable, shall promptly inform the
other party of such occurrence and cooperate in the preparation and filing with
the SEC or its staff or any other government officials, or mailing to the
Shareholders, as required, such amendment or supplement. Subject to the
provisions of Section 5.4, the Proxy Statement shall include the recommendation
of the Board of Directors that the Shareholders vote in favor of the issuance
and sale to Buyer of the Purchased Shares pursuant to this Agreement.
Section 5.2 PUBLIC ANNOUNCEMENT; CONFIDENTIALITY. (a)
For as long as this Agreement is in effect, neither the Seller nor Buyer shall
issue or cause the publication of any press release or any other announcement
with respect to this Agreement, the Registration Rights Agreement, or the
transactions contemplated hereby or thereby without the consent of the other
(which consent shall not be unreasonably withheld or delayed), except when, in
the reasonable judgment of the Seller, such release or announcement is required
by applicable law or pursuant to any listing agreement with, or the rules or
regulations of, any securities exchange or any other regulatory requirement.
(b) Buyer agrees that all information provided to Buyer or
any of its representatives pursuant to this Agreement shall be kept
confidential, and Buyer shall not disclose such information to any Persons other
than the directors, officers, employees, financial advisors, legal advisors,
accountants, consultants and affiliates of Buyer who reasonably need to have
access to the confidential information and who are advised of the confidential
nature of such information, but the foregoing obligation of Buyer shall not (i)
relate to any information that (A) is or becomes generally available other than
as a result of unauthorized disclosure by Buyer or by Persons to whom Buyer has
made such information available, (B) is or becomes available to Buyer on a
nonconfidential basis from a third party that is not, to Buyer's knowledge,
bound by any other confidentiality agreement with the Seller, or (C) is
independently developed or already known to Buyer prior to disclosure by the
Seller, or (ii) prohibit disclosure of any information if required by law, rule,
regulation, court order or other legal or governmental process.
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Section 5.3 CONDUCT OF BUSINESS. Except as agreed to by
Buyer, during the period from the date of this Agreement to the Closing Date:
(i) the Seller will, and will cause each of its Subsidiaries to, conduct its
business only in the ordinary course consistent with past practice, (ii) the
Seller will not, and the Seller will cause each of its Subsidiaries not to, take
any action or enter into any material transaction other than in the ordinary
course of business consistent with past practice, and (iii) to the extent
consistent with the foregoing, the Seller will, and will cause each of its
Subsidiaries to, use its commercially reasonable best efforts to preserve intact
its current business organization and reputation, existing relationships with
customers, franchisees, licensees, suppliers, government officials, regulatory
authorities and others having business dealings with it or regulatory authority
over it and shall comply in all material respects with all laws and orders of
each Governmental Authority and regulatory authority having jurisdiction over
it. Without limiting the generality of the foregoing and except as otherwise
expressly permitted in this Agreement, prior to the Closing Date, the Seller
will not, and will not permit any of its Subsidiaries to, without the prior
written consent of Buyer:
(a) (i) issue, deliver or sell, or authorize or enter into
any agreement or commitment to issue, deliver or sell (y) any additional shares
of its capital stock of any class, or any securities or rights which are
convertible into, exchangeable for, or evidencing the right to subscribe for any
shares of its capital stock, or any rights, warrants, options, calls,
commitments or any other agreements to purchase or acquire any shares of its
capital stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of its capital stock, or (z)
any other securities of the Seller or any of its Subsidiaries; (ii) split,
combine, subdivide, reclassify, redeem, repurchase or otherwise acquire or take
similar action with respect to any shares of its capital stock, or (iii)
declare, set aside for payment or pay any dividend, or make any other
distribution in respect of any shares of its capital stock or other outstanding
securities or make any payments to shareholders in their capacity as such, other
than in a manner and amount consistent with prior business practices and the
distribution provided for in Section 6.5 (e);
(b) (i) create, increase the benefits payable or accruing
under, or modify in any manner any Seller Plan or the compensation, pension,
welfare, medical or fringe benefits of any of its directors, officers or
Employees, except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the Seller and its
Subsidiaries, taken as a whole, or (ii) enter into any new, or amend any
existing, employment, severance, "golden parachute" or other similar agreement
with any such director, officer or Employee, except as may be approved in
writing by Buyer;
(c) make any acquisition, by means of merger,
consolidation, purchase of a substantial equity interest in or a substantial
portion of the assets of, or otherwise, of any business or corporation,
partnership, association or other business organization or division thereof
(except as herein contemplated);
(d) adopt any amendments to its articles of incorporation,
bylaws or similar organizational documents, or alter through merger with any
entity, liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of the Seller or of any Subsidiaries, or
encumber, dispose of, sell or lease any material amount of the assets of the
Seller or any of its Subsidiaries except as herein authorized;
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(e) enter into any contract, arrangement or understanding
requiring the expenditure of greater than $50,000;
(f) in the event that a claim is made for damages during
the period prior to the Closing Date, which is reasonably likely to have a
Material Adverse Effect, fail to promptly notify Buyer of the pendency of such
claim; or
(g) authorize, recommend, propose or announce an intention
to do any of the foregoing, or enter into any agreement, contract or commitment
to do any of the foregoing.
Section 5.4 ACQUISITION PROPOSAL. (a) Unless and until
this Agreement shall have been terminated by either party in accordance with
Article 10, the Seller shall not, nor shall it permit any of its Subsidiaries
to, nor shall it authorize or permit any Employee, investment banker, attorney,
accountant or other advisor or representative of the Seller or any of its
Subsidiaries to, directly or indirectly: (i) solicit, initiate, or encourage the
submission of any proposal or offer from any other person or entity relating to
any Acquisition Proposal; (ii) cooperate with, or furnish or cause to be
furnished any non-public information concerning its business, properties or
assets or the business, properties or assets of any of its Subsidiaries to, any
other person or entity in connection with any Acquisition Proposal; (iii)
participate in any discussions or negotiations regarding, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or which may reasonably be expected to lead to, any Acquisition
Proposal; or (iv) enter into any agreement or understanding with any other
Person or entity with the intent to effect any Acquisition Proposal.
Notwithstanding the foregoing, nothing contained in this Section 5.4 shall, on
or after the date of this Agreement, prohibit the Seller or its Board of
Directors, to the extent required by its fiduciary duties under applicable law
(based upon the advice of counsel selected by the Seller), from (1) providing
information to, or participating in discussions or negotiations with any Person
or entity that makes an unsolicited inquiry with respect to the Seller if the
Board of Directors reasonably believes that such Person or entity may propose an
Acquisition Proposal on terms that, for the Shareholders, are superior from a
financial point of view to the terms of the transactions contemplated hereby (a
"Superior Acquisition Proposal"), or (2) subject to Section 5.4(c), entering
into an agreement with respect to a Superior Acquisition Proposal after receipt
by Buyer of the notices required under Section 5.4(c).
(b) The Board of Directors shall not, except in compliance
with the requirements of this Section 5.4: (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Buyer, the Board of Directors'
approval or recommendation and support of this Agreement and the transactions
contemplated hereby, (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal, (iii) enter into any agreement with respect
to any Acquisition Proposal, or (iv) terminate this Agreement, unless the Seller
receives an unsolicited, written, bona fide Acquisition Proposal that is not
subject to any material contingency relating to financing, and the Board of
Directors determines in good faith (following consultation with both financial
advisors and counsel selected by the Seller with the prior written consent of
Buyer, provided that such consent shall not be unreasonably withheld), that in
order to comply with its fiduciary duties to the Shareholders under applicable
law, it is necessary for the Board of Directors to withdraw or modify its
approval or recommendation of this Agreement and the transactions contemplated
hereby, approve or recommend such Acquisition Proposal, enter into an agreement
with respect to such Acquisition Proposal, or terminate this Agreement. Nothing
contained in this Section 5.4 shall prohibit the Seller from taking and
disclosing to the Shareholders a position contemplated by Rule 14d-9 or Rule
14e-2 promulgated under the
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Exchange Act or from making any disclosure to the Shareholders, which, in the
good faith judgment of the Board of Directors (based on the advice of counsel)
is required under applicable law.
(c) The Seller shall notify Buyer orally (within one
Business Day) and in writing (as promptly as practicable) of all of the relevant
details relating to all inquiries beyond preliminary inquires and all proposals
of substance which it or any of its Subsidiaries or of any Employee, investment
banker, financial advisor, attorney, accountant or other representative of the
Seller or any Subsidiary, to the extent of the Seller's knowledge of any such
inquiry or proposal, may receive relating to any Acquisition Proposal and if
such Acquisition Proposal is in writing, the Seller shall deliver to Buyer a
copy of such inquiry or proposal (within one Business Day after the receipt of
any such inquiry or proposal). The Seller may terminate this Agreement at any
time after the third Business Day following notice to Buyer (a "Notice of
Superior Acquisition Proposal") advising Buyer that the Board of Directors has
received a Superior Acquisition Proposal and specifying the structure and
material terms of such Superior Acquisition Proposal, but only if a proposal
continues to be a Superior Acquisition Proposal in light of any changes that
Buyer proposes in the transactions contemplated hereby prior to the end of that
three Business Day period.
Section 5.5 NOTIFICATION OF CERTAIN MATTERS. Each of
Buyer and the Seller shall notify the other party in writing of its discovery of
any matter that would render any of such party's or the other party's
representations and warranties contained herein untrue or incorrect in any
material respect, but the failure of either party to so notify the other party
of the inaccuracy of that other party's representations and warranties does not
constitute a breach of this Agreement.
Section 5.6 PROVISION OF CERTAIN DOCUMENTS. The Seller
shall, upon reasonable request by Buyer, deliver true and complete copies of any
documents related to the Seller or any of its Subsidiaries that are reasonably
requested by Buyer to Buyer within five Business Days after the date of such
request.
Section 5.7 REGISTRATION RIGHTS AGREEMENT. The Seller
and Buyer agree to enter into the Registration Rights Agreement at the Closing.
If any of the individuals listed in Section 6.2(e) are beneficial owners of
restricted Common Shares, such shares will be included in any registration
statement effected pursuant to the Registration Rights Agreement if not then
registered on a registration statement on Form S-8.
Section 5.8 SERVICE AGREEMENT. The Seller and its
Subsidiaries, as applicable, and Buyer agree to enter into the Service Agreement
at the Closing.
Section 5.9 AGREEMENT WITH XXXXXXX XXXXX. At the
Closing, the Seller shall deliver to Buyer an agreement between Xxxxxxx Xxxxx
and the Seller in substantially the same form as the agreement attached hereto
as Exhibit D.
Section 5.10 AGREEMENT WITH XXXX XXXXXX. At the Closing,
the Seller shall deliver to Buyer an agreement between Xxxx Xxxxxx and the
Seller in substantially the same form as the agreement attached hereto as
Exhibit E.
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ARTICLE 6
CERTAIN ADDITIONAL COVENANTS
----------------------------
Section 6.1 RESALE. Buyer acknowledges and agrees that
the Purchased Shares will not, as of the Closing Date, be registered under the
Securities Act or the Blue Sky Laws of any state and that they may be sold or
otherwise disposed of only in one or more transactions registered under the
Securities Act and, where applicable, such Blue Sky Laws or as to which an
exemption from the registration requirements of the Securities Act and, where
applicable, such Blue Sky Laws is available.
Section 6.2 BOARD REPRESENTATION; VISITATION RIGHTS;
VOTING AGREEMENTS.
(a) Immediately upon the Closing, the Seller shall take
such actions as are necessary to cause the Board of Directors to consist of a
majority of nominees named by Buyer.
(b) At any meeting of the Shareholders thereafter held to
elect Directors, Buyer shall be entitled to nominate such number of Directors as
determined in accordance with this Section 6.2(b). For purposes of this Section
6.3(b), any determination of the percentage of Common Shares held by Buyer shall
be determined as if the Shares held by Buyer had been converted into Common
Shares, both for purposes of determining the number of issued and outstanding
Common Shares and for determining Buyer's ownership of such Shares. So long as
Buyer holds a number of Common Shares that is greater than a simple majority of
the Common Shares then issued and outstanding, Buyer shall be entitled to
nominate at least a simple majority of the candidates for the Board of
Directors. The Seller shall cause such nominees to be included in the slate of
nominees recommended by the Board of Directors to the Shareholders for election
as Directors, and the Seller shall use its reasonable best efforts to cause the
election of such nominees.
(c) If any nominee of Buyer shall cease to serve as a
Director for any reason, other than by reason of Buyer not being entitled to
nominate a nominee as provided in Section 6.2(b), the Seller shall use its
reasonable best efforts to cause the vacancy resulting thereby to be filled by a
nominee of Buyer, including by taking the actions specified in the last sentence
of Section 6.2(b).
(d) If the Board of Directors of the Seller establishes
committees from time to time, to the extent not precluded by the AMEX or other
applicable rules and regulations, the nominees of Buyer shall have the right to
serve on each such committee in the same ratio (as closely as practicable) as
such nominees represent of the entire Board of Directors.
(e) On or before the date hereof, the Seller shall have
delivered to Buyer Insider Support Agreements, each in the substantially the
same form attached hereto as Exhibit F, duly executed by each of Xxxxxx X. Xxxx,
Xxxxxxx X. XxXxxxx, Xxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxx, Xxx X. Xxxxxx, Xxxxx X.
Xxxxx, Xxxxxxx X. Xxxxx, Xxxxxx Xxxxx, Xxxx X. Xxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx
X. Xxxxxxx, Xxxxxxx X. Strawthers, Jr., Xxxxxxxx X. Strawthers and R. Xxxxx
Xxxxxxx, or the entities, individuals or accounts represented by such entities
or individuals.
Section 6.3 LISTING. The Seller shall apply for listing
of the Common Shares issuable upon the conversion of the Shares purchased by
Buyer pursuant to this Agreement to be
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approved for listing on the AMEX (subject to official notice of issuance) prior
to the Closing Date.
Section 6.4 DISINTERESTED DIRECTORS. Buyer and its
Affiliates will not engage in any Material Transaction with the Seller without
the prior approval of a majority of the Directors, excluding the representatives
of Buyer serving as Directors (the Directors other than those representatives of
Buyer, the "Disinterested Directors"). Buyer and the Seller agree that the
approval of such transaction or any agreement providing therefor by a majority
of the Disinterested Directors shall, subject to applicable law, satisfy the
requirements of any provision of this Agreement requiring the approval of a
majority of the Directors if the transaction requiring such approval would
constitute a Material Transaction.
Section 6.5 TENDER OFFER; DISTRIBUTION. (a) The Seller
agrees that prior to the Closing, the Seller, at its sole cost and expense,
shall take all action, make all necessary registrations and filings and prepare
all materials (the "Tender Offer Materials") required in connection with making
a tender offer (the "Tender Offer") to the Shareholders, pursuant to which the
Seller shall offer to purchase up to 1,000,000 Common Shares at a price of $2.90
per Common Share and shall make such Tender Offer as soon as reasonably
practicable after the Closing. The Seller shall deliver the Tender Offer
Materials to Buyer for its review and comment not less than five Business Days
prior to filing the Tender Offer Materials with the SEC and not less than two
Business Days prior to distributing the Tender Offer Materials to the
Shareholders. All Common Shares tendered as part of the Tender Offer shall be
held by US Stock Transfer Corp. or such other entity as the Seller may designate
prior to making the Tender Offer, as depositary (the "Depositary"), until all
conditions to the Tender Offer have been satisfied or waived. If the conditions
to the Tender Offer have not been satisfied or waived as of the Initial Tender
Expiration Date, as the same may be extended under Section 6.5(d), then Common
Shares tendered to the Depositary shall be returned by the Depositary to the
Shareholders that tendered such Common Shares. If more than 1,000,000 Common
Shares are tendered, the number purchased will be prorated among those
Shareholders who have tendered Common Shares.
(b) The Tender Offer shall be conditioned upon the closing
of the share purchase contemplated by this Agreement.
(c) All initial filings required under the Securities Laws
in connection with the Tender Offer shall be made no later than 10 Business Days
after the date of Shareholder approval of the transactions contemplated by this
Agreement. The Seller shall use commercially reasonable efforts to commence the
Tender Offer no later than 10 Business Days following the Closing, and,
thereafter, shall use commercially reasonable efforts to complete the Tender
Offer on the terms and subject to the conditions set forth herein and in the
Tender Offer Materials. The Tender Offer shall initially expire no later than 45
calendar days after the commencement of the Tender Offer (the "Initial Tender
Expiration Date"). The timeframes set forth in this Section 6.5(c) and in
Section 6.5(d) hereof may be changed by mutual agreement of Buyer and the
Seller.
(d) In the sole discretion of the Seller, if less than
500,000 Common Shares have been tendered on or prior to the Initial Tender
Expiration Date, the Seller may extend the Tender Offer for a period of up to 30
calendar days from the Initial Tender Expiration Date (the "Extension Period").
During the Extension Period, all Common Shares previously tendered and not
accepted for payment will remain subject to the Tender Offer. Subject to the
terms and conditions of the Tender Offer, all Common Shares previously tendered
and
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not accepted for payment: (i) may be accepted for payment by the Seller (or its
designee), in its sole and absolute discretion, at any time during the Extension
Period, and (ii) shall be accepted for payment by the Seller (or its designee)
at such time during the Extension Period as (A) more than 250,000 Common Shares
have been validly tendered and (B) Buyer shall have demanded, in writing, that
the Seller accept such Common Shares for payment (each, a "Share Purchase").
(e) The Seller shall declare and pay a distribution in the
amount of $1.60 per Common Share on each Common Share not tendered in the Tender
Offer or not accepted by the Seller if tendered in the Tender Offer, within 60
days after the final expiration of the Tender Offer. Buyer shall not convert any
of the Shares into Common Shares prior to the earlier of: the record date for
the payment of the distribution described in this paragraph, or the date that is
180 days from the date of this Agreement. Buyer shall not tender any Shares or
Common Shares in the Tender Offer.
(f) Buyer at its cost shall cooperate with the Seller in
connection with the Seller's obligations under this Section, including, without
limitation, by providing information to the Seller relating to Buyer for
inclusion in the Tender Offer materials to be delivered to the Shareholders.
Section 6.6 LEGENDS; STOP-TRANSFER ORDERS. (a) The
certificates for the Purchased Shares will bear legends in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES ACT AND ARE "RESTRICTED SECURITIES"
WITHIN THE MEANING OF SUCH ACTS. THE SHARES MAY NOT BE SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE DISTRIBUTED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION UNDER SUCH ACTS OR THE
RECEIPT OF AN OPINION OF REPUTABLE SECURITIES COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER, UPON REQUEST
AND WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS,
PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF THE SHARES OF
EACH CLASS AUTHORIZED TO BE ISSUED.
(b) The certificates for the Purchased Shares may also bear
any legend required by any applicable Blue Sky Laws.
(c) The Seller may impose appropriate stop-transfer
instructions relating to the restrictions set forth herein.
Section 6.7 ACCESS TO INFORMATION. From the date of this
Agreement, until the Closing, the Seller shall provide Buyer and its
representatives, with such financial and other information regarding the
Seller's or any of its Subsidiaries' business, operations, properties and
financial statements as Buyer or its representatives shall reasonably request
and shall provide Buyer or its representatives access to all of the properties,
assets, books, records, tax returns, contracts and personnel during the normal
business hours of the Seller and its Subsidiaries.
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ARTICLE 7
CLOSING DELIVERIES
------------------
Section 7.1 SELLER CLOSING DELIVERIES. At the Closing,
the Seller shall deliver, or cause to be delivered, to Buyer each of the
following:
(a) certificates representing the Shares, bearing the
legends described in Section 6.6, free and clear of all Liens (other than Liens
created as a result of actions of Buyer), duly issued in the name of Buyer or
its designee, with all necessary stock powers, share transfer and other
documentary stamps attached;
(b) the certificates, dated the Closing Date and validly
executed on behalf of the Seller, required by each of Sections 8.1(a), (d), (f)
and (h);
(c) resolutions of the Board of Directors, certified by the
Secretary of the Seller, authorizing the execution and delivery of this
Agreement, the Registration Rights Agreement, the Service Agreement and the
transactions contemplated hereby and thereby, including the creation of the
Shares, the issuance and sale to Buyer of the Shares and the issuance of the
Common Shares issuable upon the conversion of the Shares;
(d) the legal opinion of the Seller's counsel required by
Section 8.1(g);
(e) evidence or copies of any consents, approvals, orders,
qualifications or waivers required by Section 8.1;
(f) the Registration Rights Agreement and the Service
Agreement, each duly executed on behalf of the Seller and its Subsidiaries, as
applicable;
(g) (i) the agreement contemplated by Section 5.9 between
Xxxxxxx Xxxxx and the Seller duly executed on behalf of the Seller and Xx.
Xxxxx, and (ii) the agreement contemplated by Section 5.10 between Xxxx Xxxxxx
and the Seller duly executed on behalf of the Seller and Xx. Xxxxxx ;
(h) supplemental listing application executed by the Seller
and the AMEX authorizing the listing of the Common Shares issuable upon
conversion of the Shares (subject to official notice of issuance);
(i) the Insider Support Agreements duly executed on behalf
of each party thereto;
(j) the articles of incorporation or similar organizational
documents of the Seller and each of its Subsidiaries, each certified as of a
recent date by a duly authorized official of the Arizona Corporation Commission
or a duly authorized official of the jurisdiction of its incorporation or
organization, and the by-laws or similar organizational documents of the Seller
and each of its Subsidiaries, each certified as of a recent date by the
Secretary or similar officer of the Seller or the Subsidiary;
(k) certificates of a duly authorized official of the
Arizona Corporation Commission or a duly authorized official of the jurisdiction
of its organization, dated as of a recent date, as to the good standing of the
Seller and each of its Subsidiaries in Arizona or the jurisdiction of its
organization or incorporation;
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(l) if not previously delivered to Buyer, all other
certificates and instruments and documents required pursuant this Agreement to
be delivered by the Seller to Buyer at or prior to the Closing; and
(m) such other instruments reasonably requested by Buyer as
may be necessary or appropriate to confirm or carry out the provisions of this
Agreement.
Section 7.2 BUYER CLOSING DELIVERIES. At the Closing,
Buyer shall deliver, or cause to be delivered, to the Seller the following:
(a) the Purchase Price in immediately available funds;
(b) the certificate, dated the Closing Date and validly
executed on behalf of Buyer, required by Section 8.2(a);
(c) the legal opinion of Buyer's counsel required by
Section 8.2(e);
(d) the Registration Rights Agreement and the Service
Agreement, each duly executed on behalf of Buyer;
(e) the articles of incorporation and code of regulations
of Buyer, each certified as of a recent date by the Secretary of State of the
State of Ohio and the Secretary of Buyer, respectively;
(f) a certificate of the Secretary of State of the State of
Ohio dated as of a recent date as to the good standing of Buyer in Ohio;
(g) if not previously delivered to the Seller, all other
certificates, documents, instruments and writings required pursuant to this
Agreement to be delivered by or on behalf of Buyer at or before the Closing; and
(h) such other instruments reasonably requested by the
Seller as may be necessary or appropriate to confirm or carry out the provisions
of this Agreement.
ARTICLE 8
CONDITIONS TO CLOSING
---------------------
Section 8.1 CONDITIONS TO PURCHASE AT CLOSING. The
obligations of Buyer to purchase and pay for the Shares at the Closing are
subject to the satisfaction or waiver of each of the following conditions
precedent:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of the Seller contained herein that are not
qualified as to materiality shall have been true and correct in all material
respects on and as of the date hereof, and shall be true and correct in all
material respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date,
and the representations and warranties already qualified with respect to
materiality shall have been true and correct in all respects at each such date
without regard to the materiality qualification contained in this Section
8.1(a). The covenants and agreements of the Seller to be performed on or before
the Closing Date in accordance with this Agreement shall have been duly
performed in all material respects. The Seller shall have delivered to Buyer at
the Closing a certificate of an appropriate officer in form and substance
satisfactory to Buyer dated the Closing Date to such effect.
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(b) NO MATERIAL ADVERSE CHANGE. Since June 30, 1998, there
shall not have been any change, circumstance or event which has had or could
reasonably be expected to have a Material Adverse Effect.
(c) NO LIMITATION. There is (i) no Action, suit,
investigation or proceeding instituted (x) by any Government Authority or any
Person which seeks to prevent the consummation of the transactions contemplated
hereby or (y) which is reasonably likely to result in material damages to Buyer
or the Seller in connection with the transactions contemplated hereby, which, in
either case, continues to be outstanding and (ii) no injunction or restraining
order (temporary or permanent) in effect to stay, prevent or delay the
consummation of the transactions provided for herein, which continues to be
outstanding.
(d) SHAREHOLDER APPROVAL. The Shareholders shall have
approved this Agreement and the transactions contemplated hereby by the
requisite vote, including the issuance and sale to Buyer of the Shares and the
issuance of the Common Shares issuable upon the conversion of such Shares. The
Seller shall have delivered to Buyer at the Closing a certificate of the
Secretary of the Seller in form and substance satisfactory to Buyer dated the
Closing Date to such effect.
(e) PROCEEDINGS. All corporate and other proceedings to be
taken by the Seller in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably satisfactory to
Buyer and Buyer shall have received all such counterpart originals or other
copies of such documents as it has reasonably requested.
(f) DIRECTORS. At the Closing, Buyer shall have nominated a
majority of the Directors and such nominees shall have been appointed to the
Board of Directors. The Seller shall have delivered to Buyer at the Closing a
certificate of the Secretary of the Seller in form and substance satisfactory to
Buyer dated the Closing Date to such effect.
(g) OPINION OF COUNSEL. Buyer shall have received a legal
opinion from X'Xxxxxx, Cavanagh, Anderson, Xxxxxxxxxxxxx and Xxxxxxxx, counsel
to the Seller, dated the Closing Date concerning, the Seller's organization,
authority, capitalization, SEC filings (excluding financial and statistical data
contained therein), contractual relationships, compliance with law, and
confirming that the Shares issued pursuant to this Agreement are, and the Common
Shares issuable upon conversion of the Shares when issued will be, validly
issued, fully paid and nonassessable, and such other legal matters within the
scope of the Report of the State Bar of Arizona, Corporate, Banking and Business
Law Section Subcommittee on Rendering Legal Opinions in Business Transactions,
dated February 1, 1989 (the "Arizona Bar Opinion Report"), as Buyer may request,
in form and substance reasonably satisfactory to Buyer.
(h) RESERVATION OF COMMON SHARES. The Seller shall have
reserved 5,258,513 Common Shares for issuance upon the conversion of the Shares.
The Seller shall have delivered to Buyer at the Closing a certificate of the
Secretary of the Seller in form and substance satisfactory to Buyer dated the
Closing Date to such effect.
Section 8.2 CONDITIONS OF SALE AT CLOSING. The
obligation of the Seller to sell the Purchased Shares at the Closing is subject
to the satisfaction or waiver of each of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Buyer contained herein that are not qualified
as to materiality shall have been true
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and correct in all material respects on and as of the date hereof, and shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date, and the representations and warranties already qualified
with respect to materiality shall have been true and correct in all respects at
each such date without regard to the materiality qualification contained in this
Section 8.2(a). The covenants and agreements of Buyer to be performed on or
before the Closing Date in accordance with this Agreement shall have been duly
performed in all material respects. Buyer shall have delivered to the Seller at
the Closing a certificate of an appropriate officer in form and substance
reasonably satisfactory to the Seller dated the Closing Date to such effect.
(b) NO LIMITATION. There is (i) no Action, suit,
investigation or proceeding instituted (x) by any Government Authority or any
Person which seeks to prevent the consummation of the transactions contemplated
hereby or (y) which is reasonably likely to result in material damages to Buyer
or the Seller in connection with the transactions contemplated hereby, which, in
either case, continues to be outstanding and (ii) no injunction or restraining
order (temporary or permanent) in effect to stay, prevent or delay the
consummation of the transactions provided for herein, which continues to be
outstanding.
(c) SHAREHOLDER APPROVAL. The Shareholders shall have
approved this Agreement and the transactions contemplated hereby by the
requisite vote, including the issuance and sale to Buyer of the Shares and the
issuance of the Common Shares issuable upon the conversion of such Shares.
(d) PROCEEDINGS. All corporate and other proceedings to be
taken by Buyer in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Seller and the Seller shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
(e) OPINION OF COUNSEL. The Seller shall have received a
legal opinion from Xxxxx & Xxxxxxxxx LLP, counsel to Buyer, dated the Closing
Date, concerning, Buyer's organization, capitalization and authority, and such
other legal matters within the scope of the the Arizona Bar Opinion Report, as
the Seller may request, in form and substance reasonably satisfactory to the
Seller.
ARTICLE 9
SURVIVAL; INDEMNIFICATION
-------------------------
Section 9.1 SURVIVAL. Subject to the limitations set
forth in this Article 9 and notwithstanding any investigation conducted at any
time by or on behalf of Buyer or the Seller, all representations, warranties,
covenants and agreements of Buyer or the Seller (as applicable) in this
Agreement and in any Schedule or Exhibit hereto, or any certificate, document or
other instrument delivered in connection herewith ("Additional Documents"),
shall survive the execution, delivery and performance of this Agreement and
shall be deemed to have been made again by Buyer or the Seller (as applicable)
at and as of the Closing. All statements contained in any Exhibit, Schedule or
Additional Document shall be deemed representations and warranties of Buyer or
the Seller (as applicable) set forth in this Agreement within the meaning of
this Article 9. Without duplication of Loss and Expense (as hereinafter
defined), Buyer or the Seller,
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as the case may be, shall be deemed to have suffered Loss and Expense arising
out of or resulting from the matters referred to herein if the same shall be
suffered by any parent, subsidiary or affiliate of Buyer or the Seller.
Section 9.2 INDEMNIFICATION BY BUYER OR THE SELLER. (a)
Subject to Section 9.4, from and after the Closing Date, Buyer shall indemnify,
defend and hold harmless the Seller, its successors and assigns, from and
against any and all damages, claims, losses, expenses, costs, obligations and
Liabilities, including Liabilities for all reasonable attorneys' fees and
expenses (including attorney and expert fees and expenses incurred to enforce
the terms of this Agreement) (collectively, "Loss and Expense"), suffered,
directly or indirectly, by the Seller by reason of, or arising out of, (i) any
breach of any representation or warranty made by Buyer in or pursuant to this
Agreement, or (ii) any failure by Buyer to perform or fulfill any of its
covenants or agreements set forth herein.
(b) Subject to Section 9.4, from and after the Closing
Date, the Seller shall indemnify, defend and hold harmless Buyer, its successors
and assigns, from and against any and all Loss and Expense, suffered, directly
or indirectly, by Buyer by reason of, or arising out of, (i) any breach of any
representation or warranty made by the Seller in or pursuant to this Agreement,
(ii) any failure by the Seller to perform or fulfill any of its covenants or
agreements set forth herein, (iii) any Liabilities of the Seller or any of its
Subsidiaries arising out of any matter or event prior to the Closing Date that
are not fully reflected in the June 30, 1998 financial statements in the Seller
Reports, except for Liabilities incurred in the ordinary course of business
after that date which are fully reflected in the books and records of the Seller
or its Subsidiaries.
Section 9.3 THIRD-PARTY CLAIMS. If a claim by a third
party is made against a party and if such party intends to seek indemnity with
respect thereto under this Article, such party (the "Indemnified Party") shall
promptly notify the party required to provide such indemnity (the "Indemnifying
Party") in writing of such claim setting forth such claim in reasonable detail.
The Indemnifying Party shall have 10 days after receipt of such notice to
undertake, through counsel of its own choosing and at its own expense, the
settlement or defense thereof, and the Indemnified Party shall cooperate with it
in connection therewith, but the Indemnified Party may participate in such
settlement or defense through counsel chosen by such Indemnified Party, so long
as the fees and expenses of such counsel are borne by that Indemnified Party.
The Indemnified Party shall not pay or settle any claim which the Indemnifying
Party is diligently contesting, as herein required, without the prior written
consent of the Indemnifying Party. Notwithstanding the foregoing, the
Indemnified Party shall have the right to pay or settle any such claim without
such consent, but in such event it shall waive any right to indemnity therefor
by the Indemnifying Party. However, if the Indemnifying Party does not notify
the Indemnified Party within 10 days after the receipt of the Indemnified
Party's notice of a claim for indemnity hereunder that it elects to undertake
the defense thereof or if the Indemnifying Party fails to undertake or
diligently pursue the defense, the Indemnified Party shall have the right to
contest or compromise and may settle or pay the claim and no such contesting,
compromise, settlement or payment will constitute a waiver of any right to
indemnity therefor pursuant to this Agreement.
Section 9.4 LIMITATIONS ON INDEMNIFICATION; SURVIVAL.
Rights to indemnification under this Agreement are subject to the following
limitations:
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(a) Neither party shall be entitled to indemnification
hereunder with respect to any Loss and Expense (or if more than one claim for
indemnification is asserted, with respect to all such Loss and Expense), until
the cumulative aggregate amount of all Loss and Expense incurred by such party
with respect to such claim or claims exceeds $200,000 (the "Indemnity
Threshold"), in which case the Indemnifying Party shall then be liable for the
full amount of all such Loss and Expense, without regard to the Indemnity
Threshold.
(b) The obligation of indemnity provided for in this
Agreement with respect to the representations and warranties set forth in
Sections 3.2, 3.3 and 3.11 has no expiration or termination date.
(c) The obligation of indemnity provided for with respect
to the representations and warranties contained in Sections 3.8, 3.12 and 3.13
shall terminate 31 days after the expiration of the statute of limitation
applicable to each such representation and warranty, but the obligation of
indemnity described in this Section 9.4(c) shall continue after that termination
date until such claim is resolved if the Indemnified Party provided notice of
such claim to the Indemnifying Party prior to that termination date.
(d) Except as otherwise provided in Sections 9.4(b) and
(c), the obligation of indemnity provided for in this Agreement resulting with
respect to the representations and warranties contained in this Agreement shall
terminate 24 months after the Closing Date, but the obligation of indemnity
described in this Section 9.4(d) shall continue after that termination date
until such claim is resolved if the Indemnified Party provided notice of such
claim to the Indemnifying Party prior to that termination date.
(e) Except with respect to third-party claims being
defended in good faith or claims for indemnification with respect to which there
exists a good faith dispute, the Indemnifying Party shall satisfy its
obligations hereunder within 30 days of receipt of a notice of claim under this
Article 9.
(f) All Loss and Expense shall be computed net of any tax
benefit actually received by the Indemnified Party with respect thereto;
provided, however, that in all cases, the timing of the realization of such tax
benefit by the Indemnified Party shall be taken into account in determining the
amount of such reduction of Loss and Expense. The aggregate liability of either
Buyer or the Seller, as applicable, under this Article 9, shall not exceed
$1,400,000.
(g) The indemnification provisions of this Article 9 shall
be the sole monetary remedy available to each of the Buyer and the Seller.
Equitable remedies shall remain available to each of Buyer and the Seller,
provided that no unjust enrichment results from the enforcement of such
remedies.
ARTICLE 10
TERMINATION
-----------
Section 10.1 TERMINATION. This Agreement and the
transactions contemplated hereby may be terminated at any time prior to the
Closing either by the operation of the last sentence of Section 2.2 or by:
(a) the written consent of each of the Seller and Buyer;
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(b) Buyer (if it is not in breach of any of its obligations
hereunder) in the event of a breach by the Seller of any representation,
warranty, covenant or agreement by the Seller contained in this Agreement, which
has not been, or cannot be, cured within 30 days after written notice of such
breach is given to the Seller;
(c) the Seller (if it is not in breach of any of its
obligations hereunder) in the event of a breach by Buyer of any representation,
warranty, covenant or agreement by Buyer contained in this Agreement which has
not been, or cannot be, cured within 30 days after written notice of such breach
is given to Buyer;
(d) the Seller, if terminated in accordance with Section
5.4, so long as the Seller shall have paid any amounts required under this
Agreement;
(e) Buyer, if on or prior to the date 240 days after the
date of this Agreement, the Closing shall not have occurred, unless the failure
of such occurrence has been caused by the failure of Buyer to perform or observe
any covenant or agreement set forth herein required to be performed or observed
by Buyer;
(f) Buyer, if the Board of Directors shall have withdrawn,
modified or failed to make or refrained from making its recommendation that the
Shareholders approve the issuance of the Purchased Shares pursuant to this
Agreement as provided for in Section 3.2(b) and Section 5.1(b), or if the Board
of Directors at any time refuses to reaffirm, at Buyer's request, such
recommendation and its determination to make such recommendation to the
Shareholders; or
(g) Buyer or the Seller if the Shareholders fail to approve
the transaction contemplated hereby by the requisite vote.
Section 10.2 PROCEDURE AND EFFECT OF TERMINATION. In the
event of termination of this Agreement by the Seller or Buyer pursuant to
Section 10.1, written notice thereof shall forthwith be given by the terminating
party to the other party hereto, and this Agreement shall thereupon be and
become void and have no effect, and the transactions contemplated hereby shall
be abandoned without further action by the parties hereto, except that the
provisions of Sections 5.2 (Public Announcements), 10.3 (Expenses), 11.2
(Governing Law), and 11.4 (Notices) shall survive the termination of this
Agreement, and no termination of this Agreement shall relieve any party hereto
of any liability for any breach of this Agreement. In addition, the
Confidentiality Agreements executed by each of the parties hereto prior to the
date hereof shall survive any termination of this Agreement in accordance with
their terms.
Section 10.3 EXPENSES. Except as otherwise set forth in
this Agreement, whether or not the purchase of any Purchased Shares is
consummated, all legal and other costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses.
ARTICLE 11
MISCELLANEOUS
Section 11.1 COUNTERPARTS. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other party. Copies of executed
counterparts transmitted by telecopy, telefax or other
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electronic transmission service shall be considered original executed
counterparts for purposes of this Section, provided receipt of copies of such
counterparts is confirmed.
Section 11.2 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE THE LAWS OF THE STATE OF ARIZONA WITHOUT
REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 11.3 JURISDICTION. Each party to this Agreement
hereby irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
may be brought only in a United States District Court sitting in Phoenix,
Arizona, or in the United States District that encompasses Phoenix, Arizona, and
hereby expressly submits to the personal jurisdiction and venue of any such
court of proper jurisdiction for the purposes thereof and expressly waives any
claim of improper venue and any claim that such court is an inconvenient forum.
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH
PARTY HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF
OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE.
Section 11.4 ENTIRE AGREEMENT. This Agreement (including
the agreements incorporated or referred to herein and prior confidentiality
agreements between the parties hereto) and the Schedules and Exhibits hereto
contain the entire agreement between the parties with respect to the subject
matter hereof and there are no agreements, understandings, representations or
warranties between the parties other than those set forth or referred to herein.
This Agreement is not intended to confer upon any Person not a party hereto (and
their successors and assigns) any rights or remedies hereunder.
Section 11.5 NOTICES. All notices and other
communications hereunder shall be sufficiently given for all purposes hereunder
if in writing and delivered personally, sent by documented overnight delivery
service or, to the extent receipt is confirmed, telecopy, telefax or other
electronic transmission service to the appropriate address or number as set
forth below, unless and until either of such parties notifies the other in
accordance with this section of a change of address or change of telecopy
number:
If to Buyer: United Financial Adjusting Company
000 Xxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxx, President
Telecopy Number: (000) 000-0000
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with a copy to: Xxxxx & Xxxxxxxxx LLP
3200 National City Center
0000 Xxxx 0xx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Attention: R. Xxxxxx Xxxxxxx
Telecopy Number: (000) 000-0000
If to the Seller: Frontier Adjusters of America, Inc.
00 Xxxx Xxxxxxxx Xxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Chief Executive Officer
Telecopy Number: (000) 000-0000
with a copy to: X'Xxxxxx, Cavanagh, Anderson,
Xxxxxxxxxxxxx and Xxxxxxxx
Xxx Xxxx Xxxxxxxxxx Xxxx. Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopy Number: (000) 000-0000
Section 11.6 SUCCESSORS AND ASSIGNS. This Agreement 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 may be assigned by either of
the parties hereto without the prior written consent of the other party.
Section 11.7 AMENDMENTS AND WAIVERS. This Agreement may
not be modified or amended except by an instrument in writing signed by the
party against whom enforcement of any such modification or amendment is sought.
Either party hereto may, only by an instrument in writing, waive compliance by
the other party hereto with any term or provision hereof on the part of such
other party hereto to be performed or complied with. The waiver by any party
hereto of a breach of any term or provision hereof shall not be construed as a
waiver of any subsequent breach thereof.
Section 11.8 INTERPRETATION; ABSENCE OF PRESUMPTION. (a)
For the purposes hereof, (i) words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
gender as the context requires, (ii) the terms "hereof," "herein," and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of the Schedules
and Exhibits hereto) and not to any particular provision of this Agreement, and
Article, Section, paragraph, Exhibit and Schedule references are to the
Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement unless
otherwise specified, (iii) the word "including" and words of similar import when
used in this Agreement shall mean "including, without limitation," unless
otherwise specified, and (iv) the word "or" shall not be exclusive, but shall be
interpreted as "and/or."
(b) As used herein, the phrase "the transactions
contemplated hereby" (or words of similar import) shall include, but not be
limited to, the conversion, whether before or
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after the Tender Offer, of any or all of the Shares issued pursuant to this
Agreement into Common Shares.
(c) This Agreement will be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
Section 11.9 SEVERABILITY. If any provision of this
Agreement is held to be unenforceable for any reason, it shall be adjusted by a
court of competent jurisdiction rather than voided, if possible, in order to
achieve the intent of the parties to this Agreement to the fullest extent
possible. In any event, all other provisions of this Agreement shall be deemed
valid and enforceable to the fullest extent permitted.
Section 11.10 FURTHER ASSURANCES. The Seller and Buyer
agree that, from time to time, whether before, at or after the Closing Date,
each of them will execute and deliver such further instruments and take such
other actions as may be necessary to carry out the purposes and intents hereof.
Section 11.11 SPECIFIC PERFORMANCE. Buyer and the Seller
each acknowledge that, in view of the uniqueness of the Purchased Shares, the
parties hereto would not have an adequate remedy at law for money damages if
this Agreement were not performed in accordance with its terms, and therefore
agree that the parties hereto shall be entitled to specific enforcement of the
terms hereof in addition to any other remedy to which the parties hereto be
entitled at law or in equity.
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IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto as of the date first above written.
BUYER:
UNITED FINANCIAL ADJUSTING COMPANY,
an Ohio corporation
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: President
SELLER:
FRONTIER ADJUSTERS OF AMERICA, INC.,
an Arizona corporation
By: /s/ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
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