Exhibit 7.a
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into
as of this 6th day of October, 2006, by and between Brooke Corporation, a Kansas
corporation ("Buyer"), and First American Capital Corporation, a Kansas
corporation ("Seller"). Buyer and Seller are referred to collectively herein as
the "Parties," and each individually as a "Party."
WHEREAS, pursuant to the terms and conditions set forth below, Buyer
desires to purchase from Seller, and Seller desires to sell to Buyer, certain
shares of common stock, par value $0.10 per share, of Seller ("common stock")
referred to herein as the Initial Shares (as defined below) and a warrant for
the purchase of common stock referred to herein as the Warrant (as defined
below) in exchange for payment of the consideration described in Section 1.2;
and
WHEREAS, Buyer and Seller desire to enter into certain other agreements, on
the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual promises
made herein, and in consideration of the representations, warranties, and
covenants contained herein, the Parties agree as follows:
Section 1. Purchase and Sale of the Stock.
1.1. Purchase and Sale of Stock and Issuance of Warrant.
(a) Subject to the terms and conditions of this Agreement, at the
Closing (as defined below), Buyer shall purchase from Seller, and Seller
shall sell to Buyer, three million seven hundred forty-two thousand nine
hundred forty-three (3,742,943) shares of common stock of Seller (the
"Initial Shares") equivalent to forty-six and seventy-nine one hundredths
percent (46.79%) of the outstanding shares of the common stock of Seller
issued immediately thereafter on a fully diluted basis, in exchange for the
First Payment (as defined below), and delivery of the Brokerage Agreement
(as defined below).
(b) Subject to the terms and conditions contained of this Agreement,
at the Closing, Seller shall deliver to Buyer a warrant in the form
attached hereto as Exhibit A (the "Warrant") to purchase an additional one
million six hundred forty-three thousand four hundred sixty (1,643,460)
shares of common stock of Seller (the "Warrant Shares") upon payment of an
exercise price by Buyer to Seller of Four Hundred Forty-Seven Thousand
Eight Hundred Eighteen Dollars ($447,818) (the "Second Payment"), which
Warrant Shares, in combination with the Initial Shares, will be equivalent
to fifty-five percent (55%) of the outstanding shares of common stock of
Seller then issued on a fully diluted basis.
1.2. Consideration. Subject to the terms and conditions of this Agreement,
and in consideration for the issuance of the Initial Shares and the Warrant, at
the Closing:
(a) Buyer shall pay to Seller an aggregate amount equal to Two Million
Five Hundred Fifty-Two Thousand One Hundred Eighty-Two Dollars ($2,552,182)
(the "First
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Payment") by wire transfer of immediately available funds to the bank
account designated by Seller not later than two (2) Business Days (as
defined below) prior to the Closing Date (the "Seller Account"); and
(b) Buyer shall cause its indirect wholly-owned subsidiary, CJD &
Associates, L.L.C. ("CJD") to execute and deliver to First Life Brokerage,
Inc., a wholly-owned subsidiary of Seller ("FLB"), the Brokerage Agreement
between CJD and FLB in the form attached hereto as Exhibit B (the
"Brokerage Agreement"); and
(c) Buyer shall execute and deliver to Seller that certain Servicing
Agreement attached hereto as Exhibit C (the "Servicing Agreement").
1.3. Information Statement; Special Meeting; Amendments; Exercise of
Warrant; Director Resignations and Replacements.
(a) To enable the Warrant to be exercised and facilitate the Listing
(as defined below), as soon as practicable after the signing of this
Agreement, Seller shall file with the Securities and Exchange Commission
("SEC") an information statement (the "Information Statement") and notice
of special meeting (together with the Information Statement, the "Special
Meeting Materials"), in preliminary form, regarding a special meeting of
stockholders ("Special Meeting") to be convened for purposes of approving
(x) amendments to the Articles of Incorporation of Seller in the form
attached hereto as Exhibit D (the "Amendments"), which will (i) increase
the number of shares of authorized common stock to 25,000,000, (ii)
increase the number of shares of authorized preferred stock to 1,550,000,
and (iii) reduce the par value of each share of common stock from $0.10 to
$0.01, and (y) a reverse stock split of the common stock whereby every
three (3) shares of common stock outstanding will be reverse split into one
(1) share and fractional shares will be cashed out at the equivalent of
$1.72 per whole share, payable in cash, effective after the exercise of the
Warrant (the approvals of the Amendments and the reverse stock split shall
be referred to collectively herein as the "Approvals"). Seller shall use
its reasonable efforts to cause the Special Meeting Materials (i) to be
approved by the SEC and to file the Special Meeting Materials in definitive
form as soon as practicable following the expiration of the ten (10)
calendar day period following the filing of the preliminary Special Meeting
Materials and (ii) to be mailed to stockholders in definitive form as soon
as practicable after the definitive Special Meeting Materials are filed
with the SEC. The date of the Special Meeting shall be scheduled for a day
following the Closing selected by mutual agreement of Buyer and Seller.
(b) At the Special Meeting, Buyer shall vote the Initial Shares in
favor of the Approvals. At the Closing, Buyer shall execute and deliver to
Seller an irrevocable proxy, coupled with an interest, to Xxxxxxx Xxxxxxx
or his designee, in the form attached hereto as Exhibit E (the "Buyer
Proxy"), with full right of substitution, to vote the Initial Shares in
favor of the Approvals in the event that Buyer breaches its covenant in the
prior sentence. Contemporaneously with the signing of this Agreement,
members of the Board of Directors of Seller ("Directors") who then hold or
control shares of common stock (the "Director Shares"), shall execute and
deliver to Buyer's designee an irrevocable proxy in the form attached
hereto as Exhibit F ("Director Proxy") to vote all Director Shares in favor
of the
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Approvals. Neither the Buyer nor any Director who has executed the Director
Proxy shall sell, transfer, pledge, hypothecate or otherwise dispose or
alienate his or her beneficial, record, dispositive or voting interest in
the Initial Shares or the Director Shares respectively prior to the
shareholder approval of the Approvals. If the Closing has not occurred by
the date set for the Special Meeting in the Special Meeting Materials and
if Seller has not terminated this Agreement as a result, then the Buyer and
Seller shall cause the Special Meeting to be adjourned until a date
selected by their mutual agreement after the new date projected for the
Closing. If such date is more than thirty days after the original date set
for the Special Meeting in the Special Meeting Materials, then Seller shall
send out new Special Meeting Materials as soon as practicable for the new
date for the Special Meeting.
(c) Once the Approvals are approved by stockholders, Seller shall
promptly take such actions (including filings with the Secretary of State
of Kansas) as are necessary to make the Amendments effective. As soon as
practicable after effectiveness of the Amendments, Buyer shall exercise the
Warrant and Seller shall issue the Warrant Shares to Buyer.
(d) At the Closing, all members of the Board of Directors of Seller
(except those as may be specifically and expressly designated by Buyer
prior to Closing) shall submit signed but undated resignations from the
Board of Directors of Seller (the "Director Resignations"). Upon exercise
of the Warrant by Buyer, and except to the extent Buyer may otherwise
direct Seller, in writing, all such Director Resignations shall be accepted
and dated such date of exercise and such directors shall be deemed to, and
be, resigned from the Board of Directors of Seller. The members of the
Board of Directors who do not resign at such time shall each vote in favor
of those directors nominated by Buyer to fill the director vacancies on the
Board of Directors.
1.4. Independent Directors and Approval of Certain Transactions. Until the
earlier of the date of listing of the common stock of Seller on an exchange
pursuant to Section 1.5 below or the date that is three (3) years after the date
on which the Warrant is exercised, Buyer shall cause (i) at least three (3)
members of the Board of Directors of Seller (the "Independent Directors") to be
"independent" (as that term is defined in the stock exchange listing rules) to
be elected as members of the Board of Directors of Seller; (ii) the Independent
Directors to be appointed as the sole members of an Independent Directors
Committee of the Board of Directors of Seller (the "Committee") and to be
granted the authority and power set forth in the Charter of the Independent
Directors Committee in the form attached hereto as Exhibit G hereto (the
"Charter"), and (iii) the Charter to be in full force and effect as the document
that governs the activities of the Committee. Buyer shall cause Seller, for not
less than five (5) years after the Closing, to continue to provide at Seller's
expense directors' and officers' liability insurance coverage covering the acts
and omissions of those officers and directors of Seller at the time of the
Closing who were officers and directors of Seller prior to the Closing and the
Independent Directors at coverage levels at least equal to those in place under
Seller's directors' and officers' liability insurance policy immediately prior
to the Closing.
1.5. Listing; Tender Offer. As soon as is reasonably practicable after the
exercise of the Warrant, Seller shall, and Buyer shall use its reasonable best
efforts to cause Seller to, obtain a listing
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of the outstanding shares of common stock for trading on the American Stock
Exchange or the Nasdaq Capital Market, provided that such shares are eligible to
be so listed (the "Listing"). Seller and Buyer shall use commercially reasonable
efforts to cause such shares to be eligible for such Listing. Within three (3)
months after the Closing, Seller shall, and Buyer shall use its reasonable best
efforts to cause Seller to, commence a modified "Dutch auction" style tender
offer for outstanding shares of common stock on substantially the terms provided
in Exhibit H attached hereto (the "Dutch Auction Tender Offer"), in conformity
with all applicable laws, including, but not limited, to the provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated pursuant thereto. Any terms or conditions relating to the Dutch
Auction Tender Offer which are not specified by or consistent with Exhibit H
shall be approved by a majority of the members of the Committee. The Dutch
Auction Tender Offer shall be consummated within thirty (30) days after the
commencement thereof or longer if an extension of time is requested by Buyer and
is approved by the Committee. Pursuant to the Dutch Auction Tender Offer, Seller
shall repurchase any shares of the common stock that its holders (other than
Buyer) tender to Seller at a price determined as set forth in Exhibit H until a
maximum aggregate of at least Five Hundred Thousand Dollars ($500,000) has been
paid by Seller for such repurchases (less the amount that legal fees reasonably
incurred by Seller directly in connection with the Dutch Auction Tender Offer
exceed Fifty Thousand Dollars ($50,000)).
1.6. Contribution of Business Profits. At the Closing, Buyer and Seller
shall cause the Brokerage Agreement to be executed and delivered by all parties
thereto. Buyer agrees that, if Pretax Profits (as defined below) are not
realized by FLB according to the following schedule: (i) at least One Million
Five Hundred Thousand Dollars ($1,500,000) during the twelve-months ended
September 30, 2007, (ii) at least Two Million Dollars ($2,000,000) during the
twelve-months ended September 30, 2008, and (iii) at least Two Million Five
Hundred Thousand Dollars ($2,500,000) during the twelve-months ended September
30, 2009, Buyer will contribute to Seller, as additional consideration for the
issuance of the Initial Shares and the Warrant Shares (the "Additional
Contributions"), an amount equal to One Dollar ($1) for each One Dollar ($1) of
Pretax Profits that are not realized in accordance with such schedule with
respect to each such specified time period. The Additional Contributions shall
be determined by the separate review of the financial statements for FLB as a
part of the review by an independent accountant of the consolidated financial
statements of Seller for the relevant period. Buyer shall pay to Seller each of
the Additional Contributions by wire transfer of immediately available funds to
an account designated by Seller within thirty (30) days after the completion of
the review of the consolidated financial statements of Seller for each of the
specified time periods. "Pretax Profits" shall mean income before income tax
expense determined in accordance with generally accepted accounting principles.
1.7. Minimum Capitalization of Seller. Seller shall, and Buyer shall use
its reasonable best efforts to cause Seller to, have capital and surplus
reasonably sufficient to fund the projected capital needs of the parent company
operations of Seller at all times within the first three (3) years after the
Closing. Such projected capital needs shall be as initially described in the
capital plan attached hereto as Exhibit I, and Seller may, with the consent of
Buyer and the Committee if such Committee is then in existence, make such
reasonable adjustments to such plan as are reasonably necessary from time to
time during such three-year period. Any amounts provided by Seller pursuant to
this Section 1.7 shall either be (i) in the form of long-term debt at prevailing
market interest rates and terms or (ii) in the form of a purchase of common
stock of Seller at fair market value (as
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determined by then-current stock exchange trading information or, if the common
stock is not then trading on an exchange, based upon the book value of Seller).
Reasonably sufficient surplus shall mean that Seller has sufficient cash on hand
to pay twelve months of projected operating expenses based on the most recent
twelve months of actual operating expenses of Seller net of any projected cash
transferred to Seller from Subsidiaries (as described below). For projection
purposes, operating expenses shall include directors' and officers' liability
insurance premiums, shared services fees paid under the Servicing Agreement,
audit fees, legal fees, internal audit consultant fees, tax return preparation
fees, and expenses paid by Seller on behalf of Subsidiaries (as defined below)
for which it receives reimbursement from Subsidiaries and specifically excludes
legal settlements, capital contributions to subsidiaries, acquisitions, and
other extraordinary expenses not incurred in the normal course of business. In
no event shall the projected capital needs of the parent company operations of
Seller for which Buyer may be obligated hereunder include the amount of cash
that can be transferred to Seller from Subsidiaries as dividends, management
fees, tax payments or unsecured credit or other lawful means.
All amounts of the First Payment, the Second Payment, any Additional
Contribution, Business Profits, or other assets of Seller or its Subsidiaries
not necessary to satisfy the obligation of Buyer set forth above may be
contributed to the Subsidiaries as additional capital at the discretion of the
Board of Directors of Seller, subject to the obligations of Seller pursuant to
Section 1.5.
1.8. Transfer Restrictions. Until the date that is three (3) years after
the Closing:
(a) Buyer shall not sell any shares of common stock (other than in a
transaction that has been submitted to and approved by a majority of the
stockholders of Seller other than the Buyer and its affiliates) if, as a
result, Buyer would hold less than a majority of the then-outstanding
shares of common stock, unless Buyer first gives written notice to all
members of the Committee describing in detail the terms of such transaction
(the "Notice"). If a majority of the members of the Committee determine
that it is in the best interest of the stockholders of the Company other
than Buyer for such stockholders to have an opportunity to participate in
such transaction and delivers a written notice to that effect to Seller
within ten (10) days after delivery of the Notice, then Buyer shall not
sell such shares of common stock unless the purchaser thereof as described
in the Notice offers to purchase from the other holders of the common stock
the same percentage of their shares as it is offering to purchase from
Buyer (or such pro-rata portion of shares of Buyer and such other holders
as such purchaser's initially offered purchase price to Buyer would
purchase) on the same terms as it is offering to Buyer.
(b) Buyer shall not cause Seller to file a registration statement
under the Securities Act of 1933, as amended, covering resales of any
shares of common stock held by Buyer or its affiliates in an underwritten
secondary offering of those shares unless it offers to include in such
registration statement a proportionate amount of shares of the common stock
of other stockholders of Seller in any such offering.
1.9. Waiver of Provisions and Termination of Stock Repurchase Agreement and
Related Warrants. Seller hereby waives application to the execution, delivery
and performance of this Agreement of any of the restrictive covenants made by
Buyer in Article III of that certain Stock
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Repurchase Agreement dated March 2, 2005, between Buyer and Seller ("Stock
Repurchase Agreement"). Effective as of the Closing, all covenants contained in
said Article III of the Stock Repurchase Agreement shall be terminated and of no
further force or effect and the warrants dated March 2, 2005 for purchase of up
to 150,000 shares of common stock issued by Seller to Buyer pursuant to that
Stock Repurchase Agreement ("2005 Warrants") shall be deemed to be cancelled and
of no further force or effect. Buyer shall not exercise the 2005 Warrants prior
to the Closing.
1.10. Deliveries at Closing. At the Closing:
(a) Seller shall deliver to Buyer stock certificates, signed and in
proper form, representing the Initial Shares;
(b) Buyer shall deliver to Seller the First Payment;
(c) Seller shall execute and deliver to Buyer the Warrant;
(d) Buyer shall have caused CJD to execute and deliver, and Seller
shall have caused FLB to execute and deliver, the Brokerage Agreement;
(e) Buyer and Seller shall execute and deliver the Servicing
Agreement;
(f) The Directors shall execute and deliver to Buyer the Director
Resignations;
(g) Buyer shall execute and deliver to Seller the Buyer Proxy;
(h) Seller and Xxxxxxx Xxxx shall have executed and delivered that
certain Employment Agreement, in the form attached hereto as Exhibit J (the
"Xxxx Employment Agreement");
(i) Seller and Xxxx Xxx Xxxxxxx shall have executed and delivered that
certain Employment Agreement, in the form attached hereto as Exhibit K (the
"Xxx Xxxxxxx Employment Agreement");
(j) The Board of Directors of Seller shall have adopted the Charter;
(k) Seller shall execute and deliver to Buyer the various
certificates, instruments, and documents referred to in Section 6.1 below;
(l) Seller's legal counsel, Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP, shall
execute and deliver its legal opinion substantially in the form attached
hereto as Exhibit L;
(m) Buyer's legal counsel, Xxxxx Xxxx LLP, shall execute and deliver
its legal opinion substantially in the form attached hereto as Exhibit M;
(n) Buyer shall execute and deliver to Seller the various
certificates, instruments, and documents referred to in Section 6.2 below.
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1.11. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxxxxxx Xxxx &
Xxxxxxxxx LLP, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxxxxxxx, or at such
other place as the Parties may mutually agree, commencing at 9:00 a.m. Central
Time on the second (2nd) Business Day following the satisfaction or waiver of
all conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or on such other date as
Buyer and Seller may mutually determine in writing (the "Closing Date").
Section 2. Representations and Warranties of Seller. Seller represents and
warrants to Buyer that the statements contained in this Section 2 are true,
correct and complete as of the date of this Agreement and will be true, correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 2) with respect to itself, except as set forth in the disclosure
schedule attached hereto as Exhibit N (the "Disclosure Schedule").
2.1. Organization, Qualification, and Corporate Power. Seller and each of
its Subsidiaries is a corporation duly organized, validly existing, and in good
standing as a corporation under the laws of the State of Kansas. Seller and each
of its Subsidiaries is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required. Seller and each of its Subsidiaries has full corporate power and
authority to carry on the business in which it is engaged and to own and use the
properties owned and used by it. Section 2.1 of the Disclosure Schedule lists
the jurisdictions in which the Seller and each of its Subsidiaries is qualified
to do business as a foreign corporation.
2.2. Authorization; Enforceability. Seller has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement, all other
agreements contemplated hereby and the consummation of the transactions
contemplated by this Agreement have been duly and validly approved by the Board
of Directors of Seller. This Agreement constitutes the valid and legally binding
obligation of Seller, enforceable in accordance with its respective terms and
conditions. Seller need not give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement and all other agreements
contemplated hereby have been duly authorized by Seller.
2.3. Capitalization. The authorized capital stock of Seller consists of
Eight Million (8,000,000) shares of common stock, of which Four Million Two
Hundred Fifty-Seven Thousand Fifty-Seven (4,257,057) are currently issued and
outstanding and Five Hundred Fifty Thousand (550,000) shares of preferred stock,
none of which are currently issued and outstanding. All of the issued and
outstanding capital stock of Seller has been duly authorized, validly issued,
fully paid, and non-assessable. Except for the 2005 Warrants, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Seller to issue, sell, or otherwise cause to become
outstanding any capital stock or any other equity ownership (collectively,
"Options"). There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to
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an economic interest in Seller or Seller's capital stock. None of the issued and
outstanding capital stock of the Seller is subject to preemptive rights,
cumulative voting rights or rights of first refusal created by statute, the
charter, bylaws or other organizational documents of the Seller or any agreement
to which the Seller is a party or is bound, and all issued and outstanding
capital stock of the Seller have been offered, issued and sold by Seller in
compliance with all applicable securities laws. The Seller has no obligation or
right (contingent or otherwise) to purchase, redeem, or otherwise acquire any
capital stock of the Seller or to pay any dividend or any distribution in
respect thereof. Except for the Stock Repurchase Agreement, there are not any
stockholders' agreements, stock transfer restriction agreements, voting trusts
and other agreements or understandings among any Persons and/or the Seller
regarding the capital stock of the Seller, voting, purchase rights or sales
restrictions relating thereto and/or the governance of the Company. Except for
the Subsidiaries, the Company does not own any equity or other securities in any
Person nor does it hold any options or other rights to acquire any of same.
2.4. Non-contravention. To the Knowledge (as defined below) of Seller,
neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
Seller is subject or any provision of the charter or bylaws of Seller or any of
its Subsidiaries; or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Seller is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Lien upon any of its assets). To the
Knowledge of Seller, Seller need not give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
2.5. Subsidiaries. Each of Seller's Subsidiaries is listed on Section 2.5
of the Disclosure Schedule. All of the issued and outstanding capital stock of
the Subsidiaries has been duly authorized and is validly issued, fully paid, and
non-assessable. Seller holds of record and owns beneficially all of the
outstanding capital stock of the Subsidiaries. There are no outstanding or
authorized Options with respect to any Subsidiary's capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to an economic interest in any
Subsidiary or any Subsidiary's capital stock. None of the issued and outstanding
capital stock of the Subsidiaries are subject to preemptive rights or rights of
first refusal created by statute, the charter, bylaws or other organizational
documents of the Subsidiaries or any agreement to which the Subsidiaries are a
party or is bound, and all issued and outstanding capital stock of the
Subsidiaries have been offered, issued and sold by each of the Subsidiaries in
compliance with all applicable securities laws. The Seller and the Subsidiaries
have no obligation or right (contingent or otherwise) to purchase, redeem, or
otherwise acquire any capital stock of the Subsidiaries or to pay any dividend
or any distribution in respect thereof. Except for the capital stock of the
Subsidiaries, neither Seller nor the Subsidiaries own or has any right to
acquire, directly or indirectly, any outstanding capital stock of, or other
equity, joint venture or other ownership interests in, any Person (as defined
below).
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2.6. Financial Statements. Attached to Section 2.6 of the Disclosure
Schedules are the following financial statements: (i) audited consolidated
balance sheets and statements of income, changes in stockholders' equity, and
cash flow of the Seller on a consolidated basis as of and for the fiscal years
ended December 31, 2003, December 31, 2004, and December 31, 2005 (the "Annual
Financial Statements"); (ii) unaudited consolidated balance sheets and
statements of income, changes in stockholders' equity, and cash flow of the
Seller on a consolidated basis as of and for the three months ended March 31,
2006 (the "First Quarter Financial Statements"); (iii) unaudited consolidated
balance sheets and statements of income, changes in stockholders' equity, and
cash flow of the Seller on a consolidated basis (the "Most Recent Financial
Statements") as of and for the three months and six months ended June 30, 2006
(the "Most Recent Fiscal Month End") and (iv) annual and quarterly financial
statements of First Life America Corporation ("FLAC") filed and prepared on a
statutory accounting basis, as filed with the Kansas DOI for the fiscal years
ended December 31, 2003, December 31, 2004, and December 31, 2005 and the
quarterly periods ended March 31, 2006 and June 30, 2006 (the "Kansas DOI
Financials"). The Annual Financial Statements, the First Quarter Financial
Statements and the Most Recent Financial Statements (including the notes
thereto) have been prepared in accordance with GAAP (as defined below)
throughout the periods covered thereby and present fairly the financial
condition of Seller as of such dates and the results of operations of Seller for
such periods, are correct and complete, and are consistent with the books and
records of Seller (which books and records are correct and complete); provided,
however, that the First Quarter Financial Statements and the Most Recent
Financial Statements are subject to normal year-end adjustments and, as
permitted by SEC rules and regulations, lack footnotes and other presentation
items. The Kansas DOI Financials are presented, in all material respects, in
accordance with the statutory accounting principles prescribed or permitted by
the Kansas DOI.
2.7. Undisclosed Liabilities. Seller and each of its Subsidiaries has no
Liability (as defined below), and there is no Basis (as defined below) Known to
Seller for, any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet (as defined below) (rather than in any notes thereto)
and (ii) Liabilities that have arisen after the Most Recent Fiscal Month End in
the Ordinary Course of Business (as defined below). To the Knowledge of Seller,
Seller is not: (i) subject to any outstanding injunction, judgment, order,
decree, ruling, or charge; or (ii) is not a party to any action, suit,
arbitration, mediation, proceeding, hearing, or investigation of, in, or before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction, or any arbitrator or mediator.
2.8. Events Subsequent to Most Recent Fiscal Month End. Since the Most
Recent Fiscal Month End, Seller and each of its Subsidiaries has conducted its
businesses in the Ordinary Course of Business and there has not been any
Material Adverse Change (as defined below).
2.9. Legal Compliance. To the Knowledge of Seller, Seller and each of its
Subsidiaries has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of Federal, state, local, and foreign governments (and any
and all agencies thereof), except where the failure to comply would not have a
Material Adverse Effect and has been disclosed in writing to Buyer. Seller,
Subsidiaries and each of
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their respective shareholders, directors, officers and
employees required by law to do so has obtained and currently maintains in good
standing all required licenses, permits, approvals, registrations and
certifications from the Kansas Insurance Department and all other similar
agencies in other states or jurisdictions by which they are required to be
licensed (the "Licenses"). Section 2.9 of the Disclosure Schedule contains an
accurate list of the Licenses, including the number of each License.
2.10. Tax Matters.
(a) All Income Tax Returns that Seller or any Subsidiary was required
to file have been filed by Seller or the applicable Subsidiary on a
consolidated basis, and Seller and the applicable Subsidiary has paid all
Income Taxes (as defined below) shown thereon as owing;
(b) Seller has delivered to Buyer correct and complete copies of all
Income Tax Returns filed, examination reports received, and statements of
deficiencies assessed against or agreed to by Seller or any Subsidiary
since December 31, 2003;
(c) Neither Seller nor any Subsidiary has waived any statute of
limitations in respect of Income Taxes or agreed to any extension of time
with respect to an Income Tax assessment or deficiency;
(d) Neither Seller nor any Subsidiary has received a notice of audit
or assessment with respect to any Taxes as to which the audit has not been
concluded or the assessment paid or abated; and
(e) Seller is not a party to any Income Tax allocation or sharing
agreement.
2.11. Real Property. Section 2.11 of the Disclosure Schedule sets forth all
real property owned in fee by Seller and each of its Subsidiaries (the "Owned
Real Property"). Seller and each of its Subsidiaries owns and has good and
marketable title to the Owned Real Property, in each case free and clear of all
Liens. Section 2.11 of the Disclosure Schedule lists all leases relating to the
Owned Real Property (the "Leases"). The Leases are in full force and effect as
of the date hereof and no party thereto is in material breach of any provision
thereof as of the date of this Agreement.
2.12. Other Tangible Assets. Seller and each of its Subsidiaries has good
title to, or a valid leasehold interest in, the material machinery, equipment,
and other tangible assets necessary for the conduct of its business as presently
conducted. Except as to title, Seller makes no other warranties to Buyer of any
kind (whether express, implied, statutory or otherwise), including, but not
limited to, warranties of merchantability or fitness for a particular purpose or
any other warranty or representation regarding the material machinery, equipment
or other tangible assets owned by Seller with respect to their condition,
status, operating capacity, reliability or quality. There are no mortgages,
Liens, pledges, security interests or other encumbrances to which any real
property or personal property of Seller or any Subsidiary is subject.
2.13. Intellectual Property.
(a) Except for the Licensed Intellectual Property (as defined below)
that is described on Section 2.13 of the Disclosure Schedule, all of the
Intellectual Property that is
10
material to the conduct of the business and operations of the Seller as
currently conducted and operated is Owned Intellectual Property (as defined
below). Other than the Owned Intellectual Property and the Licensed
Intellectual Property, there is no other Intellectual Property used or
necessary for use for the conduct of the business and operations of the
Seller and the Subsidiaries.
(b) The Intellectual Property that is owned by any of the Seller or
the Subsidiaries is referred to herein as the "Owned Intellectual
Property." Section 2.13 of the Disclosure Schedule sets forth a complete
list of all patents and patent applications, registered trademarks and
applications to register trademarks, Internet domain name registrations,
registered copyrights and the Software (as defined below) products
currently marketed, or used in the provision of services, by the Seller and
the Subsidiaries. The seller (or the Subsidiaries, as applicable) owns good
and valid title in and to all of the Owned Intellectual Property material
to the conduct of their business and operations as currently conducted and
operated, including the items listed on Section 2.13 of the Disclosure
Schedule, free and clear of any Liens. Neither the Seller nor any
Subsidiary nor, to Seller's Knowledge, the other party, is in material
breach of or default under any contract relating to the Owned Intellectual
Property. Neither the Seller nor any Subsidiary is in material breach of or
default under any applicable law relating to the Owned Intellectual
Property. The Owned Intellectual Property was not developed as part of the
performance of any obligation for any third party which would require the
taking of any action, whether or not actually taken, in order for all
rights to the Owned Intellectual Property to become vested in, or retained
by, the Seller or any applicable Subsidiary.
(c) All copyrights comprising the Owned Intellectual Property material
to the conduct of the Business and operations as currently conducted and
operated, including the applicable items listed on Section 2.13 of the
Disclosure Schedule, consist exclusively of (i) "works made for hire" as
that term is used in Title 17 of the United States Code and (ii) works
developed by independent contractors or consultants engaged by the Seller
(or any Subsidiary) which have assigned to the Seller (or any Subsidiary)
their entire right, title and interest in and to the work or works
produced, pursuant to a valid and enforceable written contracts. The Owned
Intellectual Property does not include any Intellectual Property in which
any Person other than the seller (or any Subsidiary) has or may acquire any
right of ownership, control or compensation.
(d) Neither the Seller nor the Subsidiary has granted to any Person or
obligated itself to grant to any Person any license, option, or other right
in or with respect to any of the Owned Intellectual Property, whether or
not requiring payment to the Seller or any Subsidiary. No Person has in
writing or, to Seller's Knowledge, orally, either asserted any rights in or
offered to grant the Seller (or any Subsidiary) a license or any other
right of use with respect to the Owned Intellectual Property. Neither the
Seller nor any Subsidiary has any obligation to compensate any Person for
any development, license, use, sale, distribution or modification of any of
the Owned Intellectual Property.
(e) Section 2.13 of the Disclosure Schedule sets forth a complete list
of all written contracts ("Intellectual Property Licenses") that provide
for the license of Intellectual
11
Property to the Seller or any Subsidiary ("Licensed Intellectual
Property"). Neither the Seller nor any Subsidiary nor, to Seller's
Knowledge, any other party, is in breach of or default under any
Intellectual Property Licenses relating to the Licensed Intellectual
Property and no act or event has occurred which, with notice or lapse of
time or both or other action required to be taken by the other party as a
prerequisite to exercising its rights, would constitute a breach or default
on the part of the Seller or any Subsidiary under any Intellectual Property
License. Neither the Seller nor any Subsidiary is in breach of or default
under any Applicable Law relating to the Licensed Intellectual Property. To
Seller's Knowledge, each Intellectual Property License is valid and in full
force and effect. All of the Licensed Intellectual Property that is
Software is maintained and supported under software support and maintenance
agreements by the respective software vendors. Each Intellectual Property
License for Software has an adequate number of licensed seats for the
business as presently conducted. The Seller (or a Subsidiary) has obtained
from all third party developers and/or owners of any material software
programs utilized by it in connection with the operation of its business
any licenses that may be necessary for it to permit any customer, client or
other business relationship thereof to utilize such software programs at a
Seller (or Subsidiary) site on a Seller (or Subsidiary) computer and at a
non-Seller (or Subsidiary) site or on a non-Seller (or Subsidiary) computer
to the extent such software programs actually are being used by such
persons at such locations.
(f) Except pursuant to the terms of any of the contracts disclosed on
the Schedules, neither the Seller nor any Subsidiary has agreed to
indemnify any Person against any charge of infringement or other violation
with respect to any Intellectual Property. Neither the Seller nor any
Subsidiary has infringed, misappropriated or otherwise violated the
Intellectual Property rights of any Person. Neither the Seller nor any
Subsidiary has received any written assertion, complaint, demand or any
notice whatsoever alleging any such infringement, misappropriation or other
violation. None of the Owned Intellectual Property infringes upon,
misappropriates or otherwise violates the intellectual property rights of
any Person.
(g) There is no legal proceeding pending, or to Seller's Knowledge
threatened, with respect to, and no outstanding official action concerning
(i) the Owned Intellectual Property or (ii) right of the Seller to develop,
license, use, sell, distribute or modify the Company Software.
(h) The Seller has taken reasonable measures to protect for its own
sole use and benefit the confidential and proprietary nature of the Trade
Secrets and other confidential information material to the business of the
Seller.
2.14. Contracts. Section 2.14 of the Disclosure Schedule lists all of the
Material Contracts in effect as of the date of this Agreement, to which Seller
or any of its Subsidiaries is a party or, in the event of a terminated contract,
was a party and to which Seller or any of its Subsidiaries has post-termination
obligations. For purposes of this Section 2.14, "Material Contract" shall mean
any non-life insurance contract which, from and after the Closing Date (i)
requires payments by or to Seller or any Subsidiary of $10,000 or more in the
aggregate, (ii) restricts the ability of Seller or any Subsidiary to compete in
any line of business or any geographic area with any Person from and after,
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or (iii) commits Seller or any Subsidiary to continue any line of business.
Seller has delivered or made available to Buyer a correct and complete copy of
each Material Contract (as amended to date) listed in Section 2.14 of the
Disclosure Schedule. Seller and each of its Subsidiaries and, to the Knowledge
of Seller, each other party to each Material Contract has performed each term,
covenant, and condition of each Material Contract which is to be performed by
them at or before the date hereof and neither Seller nor its Subsidiaries is in
default under any Material Contract. Each of the Material Contracts is in full
force and effect and constitutes the legal and binding obligation of Seller or
any applicable Subsidiary, and, to the Knowledge of Seller, the other parties
thereto, and there exists no default or event of default or event, occurrence,
condition or act, with respect to Seller and each of its Subsidiaries or, to the
Knowledge of Seller, with respect to any other contracting party or otherwise,
that, with or without the giving of notice, the lapse of the time or the
happening of any other event or condition, would reasonably be expected to
become a default or event of default under or breach or violation of any
Material Contract. Seller has provided Buyer with true and accurate copies of
the form insurance agreements for which FLAC is the insurance provider, a
description of these agreements is attached to Section 2.14 of the Disclosure
Schedule. No Person has a power of attorney to act on behalf of Seller or any
Subsidiary.
2.15. Employee Benefits.
(a) Section 2.15 of the Disclosure Schedule lists each Employee
Benefit Plan (as defined below) that Seller or any of its Subsidiaries
maintains or to which Seller or any of its Subsidiaries contributes.
(i) to the Knowledge of Seller, each such Employee Benefit Plan
(and each related trust, insurance contract, or fund) has been
maintained, funded and administered in accordance with the terms of
such Employee Benefit Plan and complies in form and in operation in
all respects with the applicable requirements of ERISA (as defined
below) and the Code (as defined below), except where the failure to
comply would not have a Material Adverse Effect and has been disclosed
in writing to Buyer;
(ii) all contributions (including all employer contributions and
employee salary reduction contributions) that are due have been made
to each such Employee Benefit Plan that is an Employee Pension Benefit
Plan (as defined below), and all premiums or other payments that are
due have been paid with respect to each such Employee Benefit Plan
that is an Employee Welfare Benefit Plan (as defined below); and
(iii) Neither Seller nor its Subsidiaries sponsor any Employee
Benefit Plan subject to Title IV of ERISA.
(b) With respect to each Employee Benefit Plan that any of Seller and
any ERISA Affiliate (as defined below) maintains, or has maintained during
the prior three (3) years or to which any of them contributes, or has been
required to contribute during the prior three (3) years:
13
(i) to the Knowledge of Seller, no action, suit, proceeding,
hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than
routine claims for benefits) is pending; and
(ii) as of the last day of the most recent prior plan year, the
market value of assets under each such Employee Benefit Plan that is
an Employee Pension Benefit Plan (other than any Multiemployer Plan
(as defined below)) equaled or exceeded the present value of
liabilities thereunder (determined in accordance with then current
funding assumptions).
(c) Other than pursuant to any Employee Benefit Plan, there are no
obligations of Seller or any Subsidiary to any retired, laid-off,
terminated or other former employee of Seller or any Subsidiary.
2.16. Environmental, Health and Safety Matters.
(a) Seller and each of its Subsidiaries has complied and is in
compliance in all material respects with all Environmental, Health and
Safety Requirements (as defined below);
(b) Without limiting the generality of the foregoing, Seller and each
of its Subsidiaries has obtained, have complied, and is in compliance with
in all material respects, all material permits, licenses and other
authorizations that are required pursuant to Environmental, Health and
Safety Requirements for the occupation of their facilities and the
operation of their business; a list of all such material permits, licenses
and other authorizations is set forth on Section 2.16 of the Disclosure
Schedule;
(c) Seller and each of its Subsidiaries has not received any written
or oral notice, report or other information regarding any actual or alleged
material violation of Environmental, Health and Safety Requirements, or any
material liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any material
investigatory, remedial or corrective obligations, relating to any of them
or their facilities arising under Environmental, Health and Safety
Requirements;
(d) Seller and each of its Subsidiaries has not treated, stored,
disposed of, arranged for or permitted the disposal of, transported,
handled, manufactured, distributed, or released any substance, including
without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by
any such substance) so as to give rise to any current or future material
liabilities, including any material liability for fines, penalties,
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorneys' fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA") or the Solid Waste Disposal Act, as amended ("SWDA") or any
other Environmental, Health and Safety Requirements;
14
(e) Neither this Agreement nor the consummation of the transactions
that are the subject of this Agreement will result in any material
obligations for site investigation or cleanup, or notification to or
consent of government agencies or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible property transfer"
Environmental, Health and Safety Requirements; and
(f) Seller has furnished to Buyer all environmental audits, reports
and other material environmental documents relating to Seller's and each of
its Subsidiaries' or its respective predecessors' or Affiliates' past or
current properties, facilities, or operations that are in their possession
or under their reasonable control.
2.17. Certain Business Relationships with Subsidiaries. Seller has not been
involved in any material business arrangement or relationship with the
Subsidiaries within the past twelve (12) months and as of the date of this
Agreement. Seller does not own any material asset, tangible or intangible, that
is used in the business of the Subsidiaries.
2.18. SEC Filings. The Seller has timely filed all forms, reports and
documents with the SEC required to be filed by it pursuant to the federal
securities laws, all of which complied as of their respective dates in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder. As of their
respective dates, the Seller's SEC Reports did not, and all such documents filed
with the SEC after the date hereof will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Except as set forth in
the Seller's SEC Reports, the Seller has made all certifications and statements
required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002, as amended,
and the related rules and regulations promulgated thereunder with respect to the
Seller's filings pursuant to the Exchange Act. The Seller has established and
maintains disclosure controls and procedures (as defined in Rule 13a-15 under
the Exchange Act) designed to ensure that material information relating to the
Seller, including its Subsidiaries, is made known on a timely basis to the
individuals responsible for the preparation of the Seller's filings with the SEC
and other public disclosure documents. Without limiting the generality of the
foregoing, (a) the Seller has established and maintains a system of internal
accounting control over financial reporting sufficient to comply with all legal
and accounting requirements applicable to the Seller, (b) the Seller has
disclosed, based on its most recent evaluation of internal controls, to the
Seller's auditors and its audit committee, (i) any significant deficiencies and
material weaknesses in the design or operation of its internal accounting
controls which are reasonably likely to materially and adversely affect the
Seller's ability to record, process, summarize and report financial information,
and (ii) any fraud known to the Seller that involves management or other
employees who have a significant role in internal controls, and (c) the Seller
has not received any complaint, allegation, assertion or claim in writing
regarding the accounting practices, procedures, methodologies or methods of the
Seller or its internal accounting controls over financial reporting, including
any such complaint, allegation, assertion or claim that the Seller has engaged
in questionable accounting or auditing practices.
2.19. Insurance. Section 2.19 of the Disclosure Schedule contains a true
and complete list of all insurance policies, and formal self-insurance programs,
other forms of insurance and all fidelity bonds held by or applicable to the
Seller and each Subsidiary and their respective assets and
15
operations pursuant to which the Seller or any of its Subsidiaries are insureds.
Section 2.19 of the Disclosure Schedule describes (a) whether each insurance
policy is occurrence-based or claims made-based and (b) each pending claim
thereunder for more than $25,000. All insurance policies listed on Section 2.19
of the Disclosure Schedule have been made available to Buyer and are subject to
the deductibles or retentions described on Section 2.19 of the Disclosure
Schedule. The Seller and each Subsidiary maintains insurance in coverages and
amounts reasonably believed by the Seller to be customary in the industry and
adequate for the business. Neither the Seller nor any Subsidiary is in material
default with respect to any provision in any current insurance policy maintained
by the Seller or any Subsidiary and all such policies are in full force and
effect. To the Seller's Knowledge, neither the Seller nor any Subsidiary has
received any notice of cancellation or non-renewal of any such insurance policy.
Neither the Seller nor any Subsidiary has failed to give any notice or present
any claim for more than $25,000 under any of the policies in due and timely
fashion. Neither the Seller nor any Subsidiary has been refused any insurance
coverage with respect to its assets, properties or businesses, nor has any
insurance coverage been materially limited by any insurance carrier to which the
Seller or any Subsidiary has applied for any such insurance or with which the
Seller or any Subsidiary has carried insurance during the last three years.
Except as set forth on Section 2.19 of the Disclosure Schedule, no further
payments of premiums will be due following the Closing Date by the Seller or any
Subsidiary with respect to insurance coverage relating to periods occurring
prior to the Closing Date.
2.20. Absence of Certain Practices or Activities.
(a) To the Knowledge of Seller, neither it nor any of the Subsidiaries
nor their directors, officers, employees or agents, nor any person acting
on their behalf, has, directly or indirectly within the past five (5)
years, given or agreed to give any gift, kickback or similar benefit to any
customer, supplier, governmental employee or other person who is or may be
in a position to help or hinder its business or assist it in connection
with any actual or proposed transaction that (i) might likely subject the
Seller to any material damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) would reasonably be expected to
have a Material Adverse Effect (as defined below) on the business,
reputation or standing of the Seller or (iii) is in contravention of any
Seller or Subsidiary policy or procedure then or now in effect.
(b) Except with respect to the transactions contemplated by this
Agreement, neither the Seller, any Subsidiary nor any director, officer,
investment bank or other person acting on their behalf is now soliciting,
negotiation, discussing or providing information to any third party with
respect to a transaction, not in the ordinary course of business, involving
the sale, merger, tender offer, change of control, or any sale of stock or
assets of, Seller or any Subsidiary.
2.21. Private Offering. No form of general solicitation or advertising was
used by Seller or its representatives in connection with the offer or sale of
the Initial Shares or the Warrant Shares. No registration of the Initial Shares
or Warrant Shares pursuant to the provisions of the Securities Act or any state
securities or "blue sky" laws will be required by the offer, sale or issuance of
the Initial Shares or the Warrant Shares pursuant to this Agreement, assuming
the accuracy of the Buyer's representations.
16
2.22. Listing Applications. Seller has not applied for listing of any of
its securities on any stock exchange or quotation system or otherwise attempted
to list any of its securities on any stock exchange or quotation system.
2.23. Brokers' Fees. Seller has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
2.24. Disclaimer of Other Representations and Warranties. Except as
expressly set forth in Section 2, Seller makes no representation or warranty,
express or implied, at law or in equity, in respect of the Seller or its assets,
liabilities or operations, including with respect to merchantability or fitness
for any particular purpose, and any such other representations or warranties are
hereby expressly disclaimed.
Section 3. Buyer's Representations and Warranties. Buyer represents and warrants
to Seller that the statements contained in this Section 3 are true, correct and
complete as of the date of this Agreement and will be true, correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3).
3.1. Organization of Buyer. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Kansas.
3.2. Authorization of Transaction. Buyer has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement, all other
agreements contemplated hereby and the consummation of the transactions
contemplated by this Agreement have been duly and validly approved by the Board
of Directors of Buyer. This Agreement constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with its respective terms and
conditions. Except for filings with the approval of the Kansas DOI (as defined
below), any other Departments of Insurance of the jurisdictions set forth on
Schedule 2.1 and the Office of Thrift Supervision, Buyer need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby have
been duly authorized by Buyer.
3.3. Non-contravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
charter, bylaws, or other governing documents; or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Buyer is a party or by which it is bound or to which any of
its assets is subject.
3.4. Brokers' Fees. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement that would become the obligation of Seller.
17
3.5. Financing. As of the date hereof, Buyer does not know of any fact or
circumstance which will result in its not being able to have sufficient funds on
hand to provide Buyer with funds to pay the First Payment at the Closing, the
Exercise Price of the Warrant, and the Additional Contributions, and to take all
other steps necessary to consummate the transactions contemplated hereby and to
perform its obligations hereunder.
3.6. Purchase for Own Account. The Initial Shares and the Warrant Shares
are being acquired by Buyer for its own account and with no intention of
distributing or reselling such shares or any part thereof in a transaction that
would be in violation of the securities laws of the United States or any state,
without prejudice. Buyer is an "accredited investor" within the meaning of the
Securities Act. Buyer acknowledges that Seller has afforded Buyer's
representatives and Buyer's advisors the opportunity to discuss an investment in
Seller and ask questions of representatives of Seller concerning the terms an
conditions of the purchase of the Initial Shares and the Warrant Shares and such
representatives have provided answers to all such questions. Buyer and its
advisors have examined or have had the opportunity to examine this Agreement and
all information that Buyer or any advisor deems to be material to an
understanding of Seller, the proposed business of Seller, and the purchase of
the Initial Shares and the Warrant Shares. The nature and amount of the
investment is suitable for Buyer and consistent with its overall investment
program and financial condition. Buyer has carefully evaluated the merits and
risks of an investment in the Seller and has evaluated Buyer's financial
resources and investment position, and Buyer has decided that it is able to bear
the economic risks of purchasing the Initial Shares and Warrant Shares. Buyer
agrees to the imprinting of a legend on all certificates representing the
Initial Shares and the Warrant Shares to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED FOR SALE OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS
CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH, THE PROVISIONS OF A STOCK PURCHASE AND SALE
AGREEMENT DATED OCTOBER 6, 2006. A COPY OF THE ABOVE REFERENCED
AGREEMENT IS ON FILE AT THE OFFICE OF THE COMPANY AT 0000 XX
XXXXX XXXXXXXX XXXXX XXXXXX, XXXXXX 00000.
Section 4. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
18
4.1. General. Each of the Parties will use its reasonable best efforts to
take all actions and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the Closing conditions set forth in Section 6
below).
4.2. Notices and Consents. Seller shall give any notices to third parties,
and shall use its reasonable best efforts to obtain any third party consents,
referred to in Section 2.2 above and the items set forth in Section 2.2 of the
Disclosure Schedule. Each of the Parties will give any notices to, make any
filings with, and use its reasonable best efforts to obtain the third party
consents required in connection with the matters referred to in Section 2.2.
4.3. Insurance Filings and Other Government Matters. Buyer and Seller shall
make the requisite filings with and do all things reasonably necessary to
receive (i) the approval of the Kansas Commissioner of Insurance pursuant to
Section 40-3304 of the Kansas Insurance Code; (ii) any approval required by the
laws of any of the jurisdictions set forth on Schedule 2.1; (iii) any approval
of the Office of Thrift Supervision necessary in connection with Buyer's
application to become a federal savings and loan holding company, in each case,
to consummate the transactions contemplated by this Agreement; and (iv) any
other authorizations, consents, and approvals of governments and governmental
agencies as may be required to consummate the transactions contemplated
hereunder. Buyer agrees to keep Seller apprised of all material communications
relating to, and the status of, the process of obtaining consents and approvals
related to this paragraph.
4.4. Operation of Business. Except as approved in advance by Buyer, which
approval will not be unreasonably withheld, Seller will (and will cause each of
its Subsidiaries to) (i) conduct its business and operations diligently in the
Ordinary Course of Business; (ii) not change its methods of management,
accounting or operation; (iii) not enter into any lease, contract or commitment
for a term of longer than one year or engage in any other transaction except in
the Ordinary Course of Business; (iv) not sell or dispose of any assets
appearing on Seller's balance sheet as of the date hereof or hereafter acquired,
or enter into any contract or commitment to do such, other than in the Ordinary
Course of Business or as permitted under Section 4.7 herein; (v) not make any
capital expenditure or other expenditure other than in the Ordinary Course of
Business; (vi) not amend its Articles of Incorporation or Bylaws or make any
changes in authorized or issued capital stock; (vii) keep in force and renew
with substantially the same kind, type and amount of coverage all insurance
policies in effect on the date hereof; (viii) use its reasonable best efforts
(without making any commitments on behalf of Buyer) to preserve its business
organizations intact, to preserve its present relationships with customers,
consultants and others with which it has business relationships; (ix) duly
comply with all applicable laws, federal, state or local, pertaining to the
operation of its business; (x) not do any act or omit to do any act which will
cause or permit a breach by it of any material contract, commitment or
obligation; (xi) continue to pay its payables and collect its receivables in a
manner consistent with past practices; and (xii) not distribute any cash or
other assets to any stockholder of Seller.
4.5. Full Access. Seller will permit representatives of Buyer (including
legal counsel and accountants) to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of Seller
and each of its Subsidiaries, to all premises, properties,
19
personnel, books, records (including tax records), contracts, and documents of
or pertaining to Seller and each of its Subsidiaries. Buyer will treat and hold
as such any Confidential Information (as defined below) it receives from Seller
in the course of the reviews contemplated by this Section 4.5, in accordance
with the Confidentiality Agreement between the Parties dated July 2006, which
the Parties hereby agree remains in full force and effect until Closing and in
accordance with its terms if Closing does not occur.
4.6. Notice of Developments.
(a) Seller may elect at any time to notify Buyer of any development
causing a breach of any of the representations and warranties in Section 2
above. Unless Buyer has the right to terminate this Agreement pursuant to
Section 7.1(b) below by reason of the development and exercises that right
within the period of ten (10) Business Days referred to in Section 7.1(b)
below, the written notice pursuant to this Section 4.6(a) will be deemed to
have amended the Disclosure Schedule, to have qualified the representations
and warranties contained in Section 2 above, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development; and
(b) Each Party will give prompt written notice to the others of any
material adverse development causing a breach of any of its own
representations and warranties. No disclosure by any Party pursuant to this
Section 4.6(b), however, shall be deemed to amend or supplement the
Disclosure Schedule or to prevent or cure any misrepresentation or breach
of warranty.
4.7. Exclusivity. Neither the Seller nor any Subsidiary of the Seller nor
any of their respective officers, directors or employees shall, and the Seller
shall direct and cause its and such Subsidiaries' officers, directors and
employees not to, directly or indirectly, (a) initiate, solicit, encourage or
otherwise take any action to facilitate any inquiries or the making of any
proposal or offer with respect to an Acquisition Proposal or (b) engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, or afford access to any of the properties, assets or
books and records of the Seller or any of its Subsidiaries to, or enter into any
agreement, commitment or arrangement with, any Person relating to an Acquisition
Proposal; provided, however, that, so long as the Seller has not breached in any
material respect any of its obligations under this Agreement, nothing contained
in this Agreement shall prevent the Seller, its directors, officers, or
representatives, prior to the shareholder approval of the Amendments, from (i)
providing information in response to a request therefor by a third party who has
made an unsolicited written bona fide Acquisition Proposal to acquire all or
more than fifty percent (50%) of the issued and outstanding Seller common stock
or newly issued shares of Seller's common stock that would constitute more than
fifty percent (50%) of the then outstanding shares after consummation of such
transaction, or all or substantially all of the Seller's assets, if the Board of
Directors of the Seller receives from the third party so requesting such
information an executed confidentiality agreement and contemporaneously provides
such information to Buyer; (ii) engaging in any negotiations or discussions with
any third party who has made an Acquisition Proposal described in clause (i)
above; or (iii) withdrawing or modifying in a manner adverse to Buyer its
recommendation in favor of the Amendments or recommending to the stockholders of
the Seller an Acquisition Proposal described in clause (i) above if, in each
such case referred to in clause (i) or
20
clause (ii) above, the Board of Directors of the Seller determines in good faith
(after consultation with outside legal counsel of national reputation) that
taking such action is required in order to comply with the fiduciary duties of
the members of the Board of Directors of the Seller under applicable law, and in
each such case referred to in clause (iii) above, (A) the Board of Directors of
the Seller determines in good faith (after consultation with outside legal
counsel of national reputation) that taking such action is required in order to
comply with the fiduciary duties of the members of the Board of Directors of the
Seller under applicable Law and (B) the Board of Directors of the Seller
determines in good faith (after consultation with its financial advisor) that
such Acquisition Proposal referred to in clause (iii) above constitutes a
Superior Proposal (as defined below). The Seller shall immediately cease and
cause to be terminated any existing activities, discussions or negotiations by
the Seller or any Subsidiary of the Seller, or any of their respective officers,
directors or Employees with any parties conducted heretofore with respect to any
Acquisition Proposal. The Seller shall (x) as promptly as reasonably practicable
(but in no event later than the day after receipt) notify Buyer if any such
inquiries, proposals or offers are received by, any such information is
requested from, or any such discussions or negotiations are sought to be
initiated or continued with, any such third party and (y) identify the terms and
conditions of any Acquisition Proposal (including any subsequent changes,
modifications and amendments thereto) and the identity of the third party making
such Acquisition Proposal. Nothing contained in this Agreement shall prohibit
the Seller or the Board of Directors of the Seller from taking and disclosing to
the Seller's stockholders a position with respect to a tender offer or exchange
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act with respect to any Acquisition Proposal. During the period
from the date of this Agreement through the exercise of the Warrant, the Seller
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which it or any of its Subsidiaries is a party.
4.8. No Dilution. Seller shall not issue, nor obligate itself in any way to
issue, any shares of common stock or Options, except to Buyer pursuant to this
Agreement.
Section 5. Post-Closing Covenants.
The Parties agree as follows with respect to the period following the
Closing:
5.1. General. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party.
5.2. Until Exercise of Warrant. Until the Warrant is exercised, the Parties
shall continue to comply with the covenants set forth in Sections 4.4, 4.5, 4.6,
4.7 and 4.8 hereof.
5.3. Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving Seller, each of the other Parties shall cooperate with him, her, or it
and its counsel in the defense or contest, make available its
21
personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the defense or contest, all at the sole
cost and expense of the contesting or defending Party.
5.4. Transition. Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of Seller from maintaining the same
business relationships with Seller after the Closing as it maintained with
Seller prior to the Closing.
Section 6. Conditions to Obligation to Close.
6.1. Conditions to Buyer's Obligation. Buyer's obligation to consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(a) The representations and warranties set forth in Section 2 above
shall be true and correct in all material respects at and as of the Closing
Date;
(b) Seller shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
(c) No court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or arbitrator shall have
issued an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement; (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation; (C)
prohibit the Buyer from owning the stock and controlling Seller; or (D)
adversely affect the right of Seller or any of its Subsidiaries to own its
assets and to operate its business (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(d) Seller shall have delivered to Buyer a certificate to the effect
that each of the conditions specified above in Section 6.1(a)-(c) is
satisfied in all respects;
(e) All actions to be taken by Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to Buyer;
(f) Buyer shall have received the approval of the Kansas Commissioner
of Insurance pursuant to Section 40-3304 of the Kansas Insurance Code and
any other approvals required under the insurance laws of the jurisdictions
set forth on Section 2.1 of the Disclosure Schedule; and
(g) Buyer's application to the Office of Thrift Supervision to become
a federal savings and loan holding company has been approved by the Office
of Thrift Supervision or Buyer has received notice from the Office of
Thrift Supervision that consummation of the transactions contemplated by
this Agreement will not preclude or delay such approval
22
beyond the expiration date of Buyer's Stock Purchase Agreement with Kansas
City Life Insurance Company under which Buyer or one of its subsidiaries
would acquire Generations Bank.
Buyer may waive any condition specified in this Section 6.1 if it
executes a writing so stating at or prior to the Closing.
6.2. Conditions to Seller's Obligation. Seller's obligation to consummate
the transactions to be performed by them in connection with the Closing is
subject to satisfaction of the following conditions:
(a) The representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the Closing
Date;
(b) Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(c) No court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or arbitrator shall have
issued an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement; (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation; (C)
prohibit the Buyer from owning the stock and controlling Seller; or (D)
adversely affect the right of Seller to own its assets and to operate its
business (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(d) Buyer shall have delivered to Seller a certificate to the effect
that each of the conditions specified above in Section 6.2(a)-(c) is
satisfied in all respects; and
(e) All actions to be taken by Buyer in connection with the
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to Seller.
Seller may waive any condition specified in this Section 6.2 if it
executes a writing so stating at or prior to the Closing.
Section 7. Termination.
7.1. Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(a) Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing in the event (A) Seller has within
the then previous ten (10)
23
Business Days given Buyer any notice pursuant to Section 4.6(a) above and
(B) the development that is the subject of the notice has had a Material
Adverse Effect;
(c) Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing (A) in the event Seller has
breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, Buyer has notified Seller of the
breach, and the breach has continued without cure for a period of ten (10)
Business Days after the notice of breach; or (B) if the Closing shall not
have occurred on or before December 31, 2006, by reason of the failure of
any condition precedent under Section 6.1 hereof (unless the failure
results primarily from Buyer itself breaching any representation, warranty,
or covenant contained in this Agreement);
(d) Seller may terminate this Agreement if, prior to the approval of
the Amendments at the Special Meeting, the Board of Directors of the Seller
authorizes the Seller to enter into a definitive acquisition, merger, sale
or similar agreement with respect to any Superior Proposal; provided,
however, that the Seller may not terminate this Agreement pursuant to this
Section 7.1(d) unless (A) three (3) business days shall have elapsed after
delivery to Buyer of a written notice of such authorization by the Board of
Directors of the Seller and, during such three (3) business day period, the
Seller shall have reasonably cooperated with Buyer, including informing
Buyer of the terms and conditions of such Superior Proposal and the
identity of the Person or group making such Superior Proposal, with the
intent of enabling Buyer to agree to a modification of the terms and
conditions of this Agreement so that the transactions contemplated
thereunder, or reasonable substitutions thereof, may be effected, and (B)
at the end of such three (3) business day period, the Board of Directors of
the Seller shall continue reasonably to believe that such Acquisition
Proposal constitutes a Superior Proposal, and promptly thereafter, the
Seller shall enter into a definitive acquisition, merger or similar
agreement to effect such Superior Proposal; and provided, further, that the
Seller may only exercise its right to terminate this Agreement pursuant to
this Section 7.1(d) only if the Seller has complied with its obligations
under Section 4.7 and simultaneously paid the amounts payable under Section
7.2; and
(e) Seller may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing (A) in the event Buyer has breached
any material representation, warranty, or covenant contained in this
Agreement in any material respect, Seller has notified Buyer of the breach,
and the breach has continued without cure for a period of ten (10) Business
Days after the notice of breach; or (B) if the Closing shall not have
occurred on or before December 31, 2006, by reason of the failure of any
condition precedent under Section 6.2 hereof (unless the failure results
primarily from Seller breaching any representation, warranty, or covenant
contained in this Agreement).
7.2. Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7.1 above, all rights and obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party who has breached a covenant herein and only for breach of
such covenant); provided, however, that the confidentiality provisions contained
in Section 4.5 above and the Confidentiality Agreement between the Parties dated
July 2006 shall survive termination. However, in the event Seller terminates
this Agreement pursuant to Section 7.1
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(d), Seller shall pay Buyer Five Hundred Thousand Dollars ($500,000) as a break
up fee. Said payment will be paid to Buyer upon Seller's notice to Buyer of
termination under Section 7.1(d).
Section 8. Miscellaneous.
8.1. Definitions. Except as otherwise defined above, for purposes of this
Agreement, the term:
"Acquisition Proposal" shall mean any proposal or offer with respect to a
merger, reorganization, recapitalization, share exchange, consolidation, sale,
purchase, tender offer, exchange offer or similar transaction involving any
class of equity securities (or any securities exercisable or exchangeable for or
convertible into such equity securities) issued by the Seller or any of its
Subsidiaries, or any of the Seller's or any such Subsidiary's assets.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act (as defined below).
"Asbestos Liabilities" means any Liabilities arising from, relating to, or
based on the presence or alleged presence of asbestos or asbestos-containing
materials in any product or item designed, manufactured, sold, marketed,
installed, stored, transported, handled, or distributed at any time, or
otherwise based on the presence or alleged presence of asbestos or
asbestos-containing materials at any property or facility or in any structure,
including without limitation, any Liabilities arising from, relating to or based
on any personal or bodily injury or illness.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Business Day" shall mean any day other than Saturday or Sunday on which
banks in New York, New York, are open to conduct general business.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" has the meaning set forth in the Confidentiality
Agreement between the Parties dated July 2006.
"Damages" shall mean any loss, damage, injury, liability, claim, demand,
amounts paid in settlement, judgment, award, fine, penalty, tax, fee (including
reasonable attorneys' fees), charge, cost (including costs of investigation),
amount due or reasonable expense of any type, nature or description.
"Employee Benefit Plan" means any "employee benefit plan" (as such term is
defined in ERISA Section 3(3)) and any other material employee benefit plan,
program or arrangement.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
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"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental, Health and Safety Requirements" means all federal, state,
local, and foreign statutes, regulations, and ordinances concerning public
health and safety, worker health and safety, pollution, or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances, or wastes,
as such requirements are enacted and in effect on or prior to the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity that is treated as a single employer
with Seller for purposes of Code ss. 414.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time, consistently applied.
"Income Tax" means any federal, state, local, or foreign income tax
measured by or imposed on net income, including any stock, penalty, or addition
thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto.
"Intellectual Property" shall mean patent rights, trademark rights,
copyrights, know-how, Software, trade secrets, inventions and includes without
limitation, internet domain name registrations, content contained on internet
sites, designs, blueprints, drawings, proprietary right or other intellectual
property right or intangible asset or right to use or exploit any of the
foregoing.
"Kansas DOI" means the Kansas Department of Insurance.
"Knowledge" or "Known" means, with respect to any matter in question,
knowledge of any officer of the entity in question with respect to such matter
after making due inquiry of officers and other employees charged with senior
administrative or operational responsibility of such matters; provided, however,
that the knowledge of any Person who becomes or continues as a director,
officer, employee, agent, or independent contractor of Buyer of Seller after the
Closing shall not be imputed as the knowledge of Seller unless such Person has
expressly disclosed such information to Seller in writing pursuant to Section
8.8 below as soon as reasonably possible after such Person becomes aware of such
information, but in no event effective later than the second (2nd) Business Day
prior to the Closing.
"Liability" means any liability or obligation of whatever kind or nature
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for Taxes, loans,
borrowings, credit agreements, lines of credit, promissory notes or other
evidences of indebtedness, or guarantees, indemnity undertakings, indentures or
security agreements.
26
"Lien" means any mortgage, pledge, lien, encumbrance, charge, or other
security stock .
"Material Adverse Effect" or "Material Adverse Change" means any effect or
change that would be materially adverse to the business of Seller, the present
value (using a commercially reasonable discount rate) of the negative impact of
which on the business of Seller can reasonably be projected to exceed an amount
equal to ten percent (10%) of the First Payment, or to the ability of any Party
to consummate timely the transactions contemplated hereby; provided that none of
the following shall be deemed to constitute, and none of the following shall be
taken into account in determining whether there has been, a Material Adverse
Effect or Material Adverse Change: (a) any adverse change, event, development,
or effect arising from or relating to (1) general business or economic
conditions, including such conditions related to the business of Seller, (2)
national or international political or social conditions, including the
engagement by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or
terrorist attack upon the United States, or any of its territories, possessions,
or diplomatic or consular offices or upon any military installation, equipment
or personnel of the United States, (3) financial, banking, or securities markets
(including any disruption thereof and any decline in the price of any security
or any market index), (4) changes in United States generally accepted accounting
principles, (5) changes in laws, rules, regulations, orders, or other binding
directives issued by any governmental entity, or (6) the taking of any action
contemplated by this Agreement and the other agreements contemplated hereby; (b)
the announcement of the Agreement, the identity of Buyer or any of its
affiliates, or the business plans of Buyer or its affiliates; (c) any existing
event, occurrence, or circumstance with respect to which Buyer has knowledge as
of the date hereof; and (d) any adverse change in or effect on the business of
Seller that is cured by Seller before the earlier of (1) the Closing Date and
(2) the date on which this Agreement is terminated pursuant to Section 7 hereof.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business of
Seller consistent with past custom and practice (including with respect to
quantity and frequency).
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity or a
governmental entity (or any department, agency, or political subdivision
thereof).
"SEC Reports" means all proxy statements, registration statements, annual,
quarterly, current or other reports and other documents filed or required to be
filed by Seller with the Securities and Exchange Commission pursuant to the
Securities Act or the Securities Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended. "Securities
Exchange Act" means the Securities Exchange Act of 1934, as amended.
27
"Software" shall mean (i) any and all computer software, including all
source code and object code, (ii) machine readable databases and compilations,
including any and all data and collections of data and (iii) associated
documentation.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association, or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), a majority of the partnership or other similar stock
ownership thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons own a majority ownership stock in such
a business entity (other than a corporation) if such Person or Persons shall be
allocated a majority of such business entity's gains or losses or shall be or
control any managing director or general partner of such business entity (other
than a corporation). The term "Subsidiary" shall include all Subsidiaries of
such Subsidiary.
"Superior Proposal" shall mean any unsolicited written bona fide
Acquisition Proposal made by a third party to acquire more than fifty percent
(50%) of the issued and outstanding Seller common stock, or to purchase newly
issued shares of the Seller's common stock that would constitute more than fifty
percent (50%) of the outstanding shares after the consummation of such
transaction, or all or substantially all of the Seller's assets, on terms which
the Board of Directors of the Seller determines in good faith, after
consultation with its financial advisor, to be more favorable from a financial
point of view to the Seller and its stockholders (including taking into account
the financing thereof) than the transactions with Buyer contemplated by this
Agreement.
"Tax" or "Taxes" 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 ss. 59A),
customs duties, capital stock, franchise, 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 stock, penalty, or
addition thereto, whether disputed or not.
"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.
8.2. Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of Buyer
and Seller; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other
Parties prior to making the disclosure).
28
8.3. No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
8.4. Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
8.5. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of Buyer and Seller.
8.6. Counterparts. This Agreement may be executed in two or more
counterparts (including by means of facsimile), each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
8.7. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.8. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) when
delivered personally to the recipient, (ii) one (1) Business Day after being
sent to the recipient by reputable overnight courier service (charges prepaid),
(iii) one (1) Business Day after being sent to the recipient by facsimile
transmission or electronic mail, or (iv) four (4) Business Days after being
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid, and addressed to the intended recipient as set
forth below:
If to Seller: Copy to:
Xxxxxxx X. Xxxxxxx Xxxxx X. Xxxxxxx, Esq.
First American Capital Corporation Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP
0000 X.X. First American Place 0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxx 00000 Xxxxxx Xxxx, Xxxxxxxx 00000
If to Buyer: Copies to:
Xxxxxx X. Xxx Xxxxx X. Xxxxxxxx, Esq.
Brooke Corporation Brooke Corporation
00000 Xxxxxxxxx Xxxxx, Xxxxx 000 00000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxx 00000 Xxxxxxxx Xxxx, Xxxxxx 00000
and
00
Xxxxxxx X. Xxxxxxx, Xxx.
Xxxxx Xxxx XXX
0000 One Kansas City Place
0000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Any Party may change the address to which notices, copies, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
8.9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF KANSAS WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
KANSAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF KANSAS.
8.10. No Consequential Damages. In no case shall any Damages (as defined
above) awardable to any Party include special, consequential, exemplary or
punitive damages or awards.
8.11. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. No waiver by any Party of any provision of this Agreement or any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver, nor shall such waiver be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
8.12. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
8.13. Expenses. Except as expressly set forth herein, each of Buyer and
Seller will bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. Without limiting the generality of the foregoing, all transfer,
documentary, sales, use, stamp, registration and other such Taxes, and all
conveyance fees, recording charges and other fees and charges (including any
penalties and stock) incurred in connection with the consummation of the
transactions contemplated by this Agreement shall be paid by Buyer when due, and
Buyer shall, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes, fees and charges, and, if required
by applicable law, the Parties will, and will cause their Affiliates to, join in
the execution of any such Tax Returns and other documentation.
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8.14. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
8.15. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
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IN WITNESS WHEREOF, the Parties and the Directors hereto have executed this
Agreement on the date first above written.
FIRST AMERICAN CAPITAL CORPORATION
By:
Name:
-------------------------------------
Title:
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BROOKE CORPORATION
By:
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Name: Xxxxx X. Xxxxxx
-------------------------------------
Title: President and Chief Operating Officer
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