Exhibit 2.1
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and among
▇▇▇▇▇/▇▇▇▇▇▇, INC.
and
▇▇▇▇▇/▇▇▇▇▇▇ CONSULTING, INC.
and
LONG, ▇▇▇▇▇▇ & ASSOCIATES, LLC
and
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ AND AUSA HOLDING COMPANY
September 25, 2002
TABLE OF CONTENTS
Page
Article 1 PURCHASE AND SALE OF MEMBERSHIP INTERESTS..................................................1
1.1 Purchase and Sale of Membership Interests......................................................1
1.2 Assets Upon Sale...............................................................................1
1.3 Excluded Assets................................................................................3
1.4 Assumption of Liabilities......................................................................4
1.5 Excluded Liabilities...........................................................................4
Article 2 CONSIDERATION FOR THE MEMBERSHIP INTERESTS.................................................4
2.1 Purchase Price.................................................................................4
2.2 Purchase Price Adjustment......................................................................5
2.3 Procedures for Final Determination of Net Current Asset Amount.................................5
2.4 Net Current Asset Amount Definitions...........................................................6
2.5 Stock Consideration............................................................................7
Article 3 REPRESENTATIONS AND WARRANTIES OF THE MEMBERS..............................................9
3.1 Organization and Power.........................................................................9
3.2 Subsidiaries...................................................................................9
3.3 Authorization; No Breach.......................................................................9
3.4 Financial Statements..........................................................................10
3.5 Absence of Undisclosed Liabilities............................................................10
3.6 No Material Adverse Changes...................................................................10
3.7 Absence of Certain Developments...............................................................10
3.8 Title and Condition of Properties.............................................................12
3.9 Tax Matters...................................................................................13
3.10 Contracts and Commitments.....................................................................14
3.11 Proprietary Rights............................................................................16
3.12 Litigation; Proceedings.......................................................................16
3.13 Brokerage.....................................................................................16
3.14 Governmental Consent, etc.....................................................................17
3.15 Employees.....................................................................................17
3.16 Employee Benefit Plans........................................................................17
i
TABLE OF CONTENTS
(continued)
Page
3.17 Insurance.....................................................................................19
3.18 Affiliated Transactions.......................................................................19
3.19 Compliance with Laws; Permits; Certain Operations.............................................20
3.20 Environmental Health and Safety...............................................................20
3.21 Product and Warranty Claims; Warranties.......................................................21
3.22 Disclosure....................................................................................22
3.23 Customers.....................................................................................22
3.24 Policy Representations........................................................................22
3.25 Representations...............................................................................25
Article 4 REPRESENTATIONS AND WARRANTIES OF CBI COMPANIES...........................................25
4.1 Corporate Organization and Power..............................................................25
4.2 Authorization.................................................................................25
4.3 No Violation..................................................................................25
4.4 Litigation....................................................................................25
4.5 No Brokerage..................................................................................26
4.6 Consents......................................................................................26
4.7 Issuance of CBI Stock.........................................................................26
4.8 Reports and Financial Statements..............................................................26
4.9 Representations...............................................................................26
Article 5 COVENANTS PRIOR TO CLOSING................................................................27
5.1 Affirmative Covenants.........................................................................27
5.2 Negative Covenants............................................................................28
5.3 Governmental Filings..........................................................................28
5.4 Financing Assistance..........................................................................28
Article 6 CONDITIONS TO CBI COMPANIES' OBLIGATION TO CLOSE..........................................29
6.1 Conditions to CBI Companies' Obligation.......................................................29
Article 7 CONDITIONS TO THE COMPANY'S AND MEMBERS' OBLIGATION TO CLOSE..............................31
7.1 Conditions to the Company's Obligations.......................................................31
ii
TABLE OF CONTENTS
(continued)
Page
Article 8 CLOSING TRANSACTIONS......................................................................32
8.1 The Closing...................................................................................32
8.2 Action to Be Taken at the Closing.............................................................32
8.3 Closing Documents.............................................................................32
8.4 Possession....................................................................................34
8.5 Nonassignable Contracts.......................................................................35
Article 9 INDEMNIFICATION...........................................................................35
9.1 Indemnification by Members....................................................................35
9.2 Indemnification by CBI Companies..............................................................35
9.3 Method of Asserting Claims....................................................................35
9.4 Escrow Amount.................................................................................36
9.5 Limitations on Indemnification................................................................37
9.6 Insurance Benefits; Tax Benefits..............................................................37
9.7 Exclusive Remedy..............................................................................37
9.8 Adjustment to Purchase Price..................................................................38
Article 10 TERMINATION...............................................................................38
10.1 Termination...................................................................................38
10.2 Effect of Termination.........................................................................38
10.3 Effect of Closing.............................................................................38
Article 11 ADDITIONAL AGREEMENTS.....................................................................38
11.1 Survival......................................................................................38
11.2 Mutual Assistance.............................................................................39
11.3 Press Release and Announcements...............................................................39
11.4 Expenses......................................................................................39
11.5 Further Transfers.............................................................................39
11.6 Transition Assistance.........................................................................39
11.7 Confidentiality...............................................................................39
11.8 Non-Compete; Non-Solicitation.................................................................40
11.9 Specific Performance..........................................................................41
iii
TABLE OF CONTENTS
(continued)
Page
11.10 Remittances...................................................................................41
11.11 Best Efforts To Consummate Closing Transactions...............................................41
11.12 Greensboro, N.C. Operation....................................................................42
11.13 ▇▇▇▇▇▇▇▇ Payment..............................................................................42
11.14 Post-Closing Cooperation, Licenses............................................................42
11.15 Operating Agreement...........................................................................42
11.16 Tax Matters...................................................................................42
11.17 AUSA Services Agreement.......................................................................42
11.18 COBRA Coverage................................................................................43
11.19 Termination of Money Purchase Pension Plan....................................................43
11.20 Assignment of Rights in any Commissions by Members............................................43
11.21 Payment of Liabilities........................................................................43
Article 12 MISCELLANEOUS.............................................................................43
12.1 Amendment and Waiver..........................................................................43
12.2 Notices.......................................................................................43
12.3 Assignment....................................................................................45
12.4 Severability..................................................................................45
12.5 No Third Party Beneficiaries..................................................................45
12.6 No Strict Construction........................................................................45
12.7 Captions......................................................................................45
12.8 Complete Agreement............................................................................45
12.9 Counterparts..................................................................................46
12.10 Governing Law.................................................................................46
12.11 Remedies Cumulative...........................................................................46
12.12 Arbitration...................................................................................46
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EXHIBITS*
Exhibit A -- Consideration Schedule
Exhibit B -- Form of Escrow Agreement
Exhibit C -- Form of Lease Assignment
Exhibit D -- Certificate of Members
Exhibit E -- Officer's Certificate of Purchasers
------------------------
* Intentionally omitted. A copy of intentionally omitted items will be
supplementally furnished to the Commission upon request.
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DISCLOSURE SCHEDULES*
Schedule 1.2(b) -- Accounts and Notes Receivable Schedule
Schedule 1.2(e) -- Tangible Property Schedule
Schedule 1.2(g) -- Intangibles and Intellectual Property Schedule
Schedule 1.2(i) -- Commissions Schedule
Schedule 1.2(j) -- COLI Schedule
Schedule 1.2(k) -- Customer List Schedule
Schedule 1.3(b) -- Excluded Assets Schedule
Schedule 1.4(c) -- Third Party Commissions Schedule
Schedule 3.7 -- Developments Schedule
Schedule 3.9 -- Tax Matters Schedule
Schedule 3.10(a) -- Contracts Schedule
Schedule 3.10(b) -- Contract Exception Schedule
Schedule 3.10(d) -- Customer Contracts Schedule
Schedule 3.11 -- Proprietary Rights Schedule
Schedule 3.12 -- Litigation Schedule
Schedule 3.14 -- Seller Consents Schedule
Schedule 3.15 -- Employees Schedule
Schedule 3.16 -- Employee Benefits Schedule
Schedule 3.17 -- Insurance Schedule
Schedule 3.18 -- Affiliated Transactions Schedule
Schedule 3.19(a) -- Compliance Schedule
Schedule 3.19(b) -- Permits Schedule
Schedule 3.21 -- Claims Schedule
Schedule 3.24 -- Policy Representations Schedule
Schedule 4.6 -- Purchasers' Consents Schedule
Schedule 6.1(j) -- Net Renewal Revenue Projections
------------------------
* Intentionally omitted. A copy of intentionally omitted items will be
supplementally furnished to the Commission upon request.
vi
MEMBERSHIP INTEREST PURCHASE AGREEMENT
--------------------------------------
MEMBERSHIP INTEREST PURCHASE AGREEMENT made as of September 25, 2002
(this "Agreement") by and among ▇▇▇▇▇/▇▇▇▇▇▇, INC., a Delaware corporation
("CBI"), and ▇▇▇▇▇/▇▇▇▇▇▇ CONSULTING, INC., a Delaware Corporation ("Purchaser"
or "Consulting") (CBI and Consulting shall collectively be referred to as "CBI
Companies"), LONG, ▇▇▇▇▇▇ & ASSOCIATES, LLC, a North Carolina limited liability
company (the "Company"), ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. ("Long"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
("▇▇▇▇▇▇"), ▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇.
▇▇▇ ("▇▇▇"), ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇") and AUSA
HOLDING COMPANY, a Maryland corporation ("AUSA") (Long, Miller, Norton, Twilley,
Lee, Stoehr, ▇▇▇▇ and AUSA are each individually referred to as a "Member" and
are collectively referred to as the "Members").
W I T N E S S E T H:
--------------------
WHEREAS, the Company is engaged in the business of designing,
administering and marketing life insurance policies, and related compensation,
salary and benefit plans (the "Business"); and
WHEREAS, on the terms and subject to the conditions of this Agreement,
Purchaser desires to acquire from the Members and the Members desire to sell to
Purchaser, all of the outstanding membership interests of the Company (the
"Interests").
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF MEMBERSHIP INTERESTS
-----------------------------------------
1.1 Purchase and Sale of Membership Interests. Subject to the
terms and conditions of this Agreement and in consideration of the obligations
of the CBI Companies herein provided, the Members hereby agree to sell, convey,
transfer, assign and deliver to Purchaser, and Purchaser hereby agrees to
purchase from the Members, at the closing provided for herein (the "Closing"),
all of the Interests in accordance with the terms and conditions of this
Agreement, free and clear of any and all liens, security interests, mortgages,
charges, restrictions, adverse claims, encumbrances and rights of other persons
of every nature and description whatsoever.
1.2 Assets Upon Sale. On the Closing Date, the assets of the
Company shall consist of all properties, assets, rights and interests of every
kind and nature, whether real or personal, tangible or intangible, and wherever
located and by whomever possessed, related to or used in, or otherwise
associated with, the Business, including, without limitation, all of the
following assets (but excluding all Excluded Assets as defined in Section 1.3
hereof):
(a) marketable securities and cash of the Company as of
the Closing Date;
(b) all accounts and notes receivable (whether
current or noncurrent as of the Closing Date), a list, description and aging as
of August 31, 2002 of those accounts and notes
receivable arising from commissions and fees payable with respect to bank-owned
life insurance policies, life insurance company-owned life insurance policies
and life insurance policies owned by other types of financial institutions
("BOLI") is set forth on Schedule 1.2(b);
(c) all prepayments, prepaid expenses (including,
without limitation, prepaid insurance premiums and reserves and deposits
relating to workmen's compensation, if any), deferred charges, advance payments
and security deposits as of the Closing Date;
(d) all interests in that certain Lease Agreement dated
as of April 4, 1995 between the Company and CP Venture Two, LLC, as amended (the
"Lease Agreement") (the "Seller Real Estate"), and all licenses, permits,
approvals and qualifications relating to the Seller Real Estate to the extent
assignable;
(e) all interests in equipment, fixtures, fittings,
automobiles and other vehicles, supplies and other tangible personal property,
whether owned, leased or otherwise (including, without limitation, items which
have been fully depreciated or expensed), including, without limitation, such
items as set forth on Schedule 1.2(e);
(f) all office furnishings, office supplies and related
assets;
(g) all intangible assets and intellectual property,
including the right to use the name "Long ▇▇▇▇▇▇ & Associates" and all
variations and permutations thereof (subject to Section 11.12 of the Agreement),
all publishing and distribution rights, and all associated goodwill; all
statutory, common law and registered copyrights; all patents, inventions,
know-how, trade secrets and confidential information; all registration
applications for any of the foregoing; all interests in and to telephone numbers
and all listings pertaining to the Company in all telephone books and other
directories; together with all rights to use all of the foregoing forever and
all other rights in, to, and under the foregoing in all countries, including,
without limitation, such items as set forth on Schedule 1.2(g);
(h) all discoveries, improvements, processes, data,
confidential information, specifications and ideas, whether patentable or not,
all licenses and other similar agreements, and all drawings, records, books or
other indicia, however evidenced, of the foregoing; all rights in and to any
products or other intellectual property rights under research or development
prior to or on the Closing Date related to the Business;
(i) all rights existing under contracts, leases,
licenses, permits, distribution arrangements, sales and purchase agreements and
orders, broker/dealer agreements, insurance carrier agreements, service
agreements, producer agreements, agency agreements, employee benefit plans,
trusts and other arrangements, employment and consulting agreements, fee
agreements, warranties, consents, orders, registrations, privileges, franchises,
memberships, certificates, approvals or other similar rights, and all other
agreements, arrangements and understandings, including, without limitation, all
rights existing under the contracts listed or described on the Contracts
Schedule and Customer Contracts Schedule (as defined in Section 3.10 hereto) and
all rights to commissions and service fees related to the Business (the
"Commissions"); provided, however, the Commissions listed on Schedule 1.2(i)
shall be limited to the Commissions payable on or prior to December 31, 2022
related to BOLI (the
2
"Commissions Schedule") and the Commissions listed on Schedule 1.2(j) shall be
limited to the Commissions paid during the twelve-month period ending December
31, 2001 related to Corporate-Owned Life Insurance (the "COLI Schedule");
(j) subject to Section 11.14, the right to receive all
mail and other communications addressed to the Company (including, without
limitation, mail and communications from customers, suppliers, distributors,
agents and others and accounts receivable payments), provided that Purchaser
agrees to forward any such mail and communications that are of a personal nature
to the officer or employee to which it pertains promptly after receipt;
(k) all lists, records and files pertaining to
customers, including past, present and prospective customers solicited over the
past five (5) years, including but not limited to those referenced in Schedule
1.2(k);
(l) all lists and records pertaining to suppliers,
distributors, carriers, personnel, customers and agents and all other books,
ledgers, files, documents, correspondence, business analysis, illustrations,
proposals and records of every kind and nature;
(m) all business and marketing plans and proposals and
pricing and cost information;
(n) all computer hardware, software and systems and
website, including licenses related thereto, proprietary or otherwise, including
related source codes, data and documentation;
(o) all creative materials (including, without
limitation, photographs, films, art work, color separations and the like)
advertising and promotional materials and all other printed or written
materials;
(p) all claims, refunds (other than any tax refunds
the rights to which shall remain the property of the Members), causes of action,
choses in action, rights of recovery and rights of set-off of every kind and
nature;
(q) all goodwill as a going concern and all other
intangible property; and
(r) all other property not referred to above which is
either represented on Company's Latest Balance Sheet (as defined in Section 3.4)
or acquired by the Company thereafter (except for such property which has been
sold or otherwise disposed of in the ordinary course of business) related to the
Business.
For purposes of the Agreement, the term "Closing Assets" means all properties,
assets and rights which the Company shall own on the Closing Date.
1.3 Excluded Assets. Notwithstanding the foregoing, the
following assets of the Company (the "Excluded Assets") are expressly excluded
from the Closing Assets on the Closing Date:
3
(a) furniture, accessories and personal effects of
employees which are located in the offices of the Company and which are not
owned by the Company and not reflected on Closing Balance Sheet; and
(b) such other assets as set forth on Schedule 1.3 (b)
hereof.
1.4 Assumption of Liabilities. Subject to the conditions
specified in this Agreement, on or prior to the Closing Date, the Company shall
have paid, performed, satisfied or otherwise discharged in full all liabilities
and obligations of the Company other than (i) liabilities reflected on the
Closing Balance Sheet (as hereinafter defined and prepared in accordance with
Sections 2.3 and 2.4), and (ii) the following liabilities and obligations
(collectively, the "Assumed Liabilities"):
(a) the Company's obligations and liabilities under the
Lease Agreement and under the contracts listed on the Contracts Schedule
(Schedule 3.10(a)) and on the Customer Contract Schedule (Schedule 3.10(d)) for
any activity following the Closing Date or for which the Company receives the
benefit of following the Closing;
(b) obligations of continued performance under
executory vendor purchase orders for the purchase of supplies, equipment or
services, entered into in the ordinary course of business and under which the
supplies, equipment or services subject thereto have not been received by the
Company prior to the Closing Date (the "Vender Orders"); and
(c) obligations for commissions and other payments
owed to independent producers and other similar third parties as listed on
Schedule 1.2(i) or Schedule 1.4(c) with respect to which the Company receives
the commissions or other payments following the Closing.
1.5 Excluded Liabilities. Notwithstanding anything to the
contrary contained in this Agreement, on the Closing Date the Company shall have
previously indefeasibly paid, performed, satisfied, transferred for value or
otherwise discharged in full all known liabilities or obligations of the Company
other than the Assumed Liabilities and the Members shall indemnify Purchaser
pursuant to Article 9 of this Agreement for all liabilities of the Company which
are not Assumed Liabilities (the "Excluded Liabilities"), including, but not
limited to, (i) the Company's portion of any chargebacks which arise after the
Closing and which relate to business sold by the Company prior to Closing
(provided such chargebacks shall be net of amounts recoverable from third
parties to the extent recovered and shall not be subject to any limitations on
indemnifications contained in Article 9) and (ii) any unfunded liabilities
arising out of the termination of any Benefit Plan as defined in Section 3.16
existing at the Closing Date. If amounts are owed by third parties on
chargebacks, each Member agrees to assist the Company, if requested, to recover
the third party's portion of such chargeback.
ARTICLE 2
CONSIDERATION FOR THE MEMBERSHIP INTERESTS
------------------------------------------
2.1 Purchase Price. The aggregate purchase price for the
Interests shall be an amount equal to FOUR HUNDRED MILLION DOLLARS
($400,000,000) as adjusted pursuant to
4
Section 2.2 hereof (the "Purchase Price") which shall be payable to the Members
on the Closing Date as follows:
(a) by wire transfer of immediately available funds to
such account or accounts as shall have been designated in writing by each Member
not less than three (3) days prior to the Closing Date in an amount equal to
THREE HUNDRED SEVENTY NINE MILLION FIVE HUNDRED THOUSAND DOLLARS ($379,500,000),
as adjusted pursuant to Section 2.2 hereof which the Company and the Members
agree shall be distributed as set forth in Exhibit A attached hereto;
(b) on the Closing Date, by wire transfer of
immediately available funds to that certain interest bearing Escrow Account in
an amount equal to FIVE HUNDRED THOUSAND DOLLARS ($500,000) with interest
payable to the Members for a period beginning on the Closing Date and ending on
the one year anniversary of the Closing Date pursuant to that certain Escrow
Agreement in the form of Exhibit B hereto, with such changes therein as the
Escrow Agent thereunder designated by Purchaser and the Members may request (the
"Escrow Agreement"); and
(c) by delivery of certificates, the number of
shares of CBI Common Stock determined and valued at approximately TWENTY MILLION
DOLLARS ($20,000,000) as set forth in Exhibit A attached hereto which the
Company and the Members agree shall be valued, determined and distributed as set
forth in said Exhibit A.
2.2 Purchase Price Adjustment. Within three (3) days prior to
the Closing Date, the Company shall notify Purchaser in writing of its good
faith estimate of the Net Current Asset Amount (as defined in Section 2.4 below)
as of the Closing Date determined in accordance with Section 2.4 below (the
"Estimated Net Current Asset Amount") and its estimated Closing Balance Sheet
(the "Estimated Closing Balance Sheet"). If the Estimated Net Current Asset
Amount is more than zero, the Purchase Price shall be increased by the amount of
such excess and the amount of such increase shall be allocated among and paid to
the Members in accordance with the Operating Agreement (as defined in Section
11.15 hereof) and a certificate executed by the Members and provided to the
Purchaser at Closing (the "Adjustment Allocation"). If the Estimated Net Current
Asset Amount is less than zero, the Purchase Price shall be decreased by the
amount of such deficiency and the consideration the Members receive shall be
adjusted in accordance with the Adjustment Allocation.
Upon the final determination of the Net Current Asset Amount
pursuant to Section 2.3 below, Purchaser and Members shall recompute the
Purchase Price based upon the Net Current Asset Amount as finally determined,
and within three (3) business days after such final determination, Members shall
pay Purchaser any amount due Purchaser, or Purchaser shall pay Members any
amount due Members, by wire transfer of immediately available funds.
2.3 Procedures for Final Determination of Net Current Asset
Amount. Within sixty (60) days after the Closing Date, Purchaser shall prepare
and deliver to ▇▇▇▇▇▇ and AUSA (the "Member Representatives") at Purchaser's
expense a balance sheet for the Company as of the opening of business on the
Closing Date (the "Closing Balance Sheet"), together with a statement setting
forth Purchaser's determination of the Net Current Asset Amount. In order for
5
the Member Representatives to take action, ▇▇▇▇▇▇ and AUSA must agree on such
action and in the event the Member Representatives are unable to agree on a
certain action, any such action taken by the Member Representatives shall be
null and void. Within thirty (30) days after receipt of such items, the Member
Representatives shall deliver to Purchaser a detailed written statement
describing their objections, if any, to such balance sheet and determination of
the Net Current Asset Amount. If the Member Representatives do not raise any
objections within the thirty (30) day period, the balance sheet and Purchaser's
determination of the Net Current Asset Amount shall become final and binding
upon all parties. Upon request by the Member Representatives at any time after
receipt of the aforementioned balance sheet and statement, Purchaser shall make
available to the Member Representatives and their accountants and other
representatives the work papers used in preparing the balance sheet and in
determining Purchaser's calculation of the Net Current Asset Amount and such
other documents as the Member Representatives may reasonably request in
connection with its review of the Net Current Asset Amount. If the Member
Representatives do raise any objections, Purchaser and the Member
Representatives shall use reasonable efforts to resolve any such disputes. If a
final resolution is not obtained within thirty (30) days after the Member
Representatives shall have submitted their objections to Purchaser, any
remaining disputes shall be resolved by an accounting firm mutually agreeable to
Purchaser and the Member Representatives. If Purchaser and the Member
Representatives are unable to mutually agree on such an accounting firm within
five (5) days after the expiration of said thirty (30) day period, a "big-four"
accounting firm shall be selected by lot after elimination of one firm
designated as objectionable by each of Purchaser and the Member Representatives.
The determination of the accounting firm so selected shall be set forth in
writing and shall be conclusive and binding upon the parties, and the fees and
expenses of such accounting firm shall be paid one-half by Purchaser and
one-half by the Members. The final balance sheet prepared in accordance with
this Section 2.3 and Section 2.4 below and the related statement setting forth
the final determination of the Net Current Asset Amount are referred to as the
"Closing Balance Sheet" and shall be compared to the Estimated Net Current Asset
Amount to determine any Purchase Price Adjustment. If a Purchase Price
Adjustment is required under this Section 2.3, the adjustment shall be allocated
among and paid to (or by) the Members in accordance with the Operating Agreement
and a Certificate provided by the Member Representatives to the Purchaser.
2.4 Net Current Asset Amount Definitions. For purposes hereof,
"Net Current Asset Amount" shall be determined as of the opening of business on
the Closing Date and shall be an amount equal to the excess of the Company's
current assets (other than Excluded Assets) net of any uncollectible amounts
(which shall be defined as any accounts or notes receivable which have not been
paid within 150 days of the invoice date (the "Old Receivables")) at such time
over the Company's current liabilities (other than Excluded Liabilities) at such
time. The Closing Balance Sheet shall be prepared, and the Net Current Asset
Amount shall be determined, in accordance with generally accepted accounting
principles applied in a manner consistent with those used in preparing the
Company's balance sheets as of December 31, 2001 (the "Latest Balance Sheet");
provided that (a) all proper accruals and reserves shall be recorded (including
but not limited to vacation pay, customer rebate accruals, bad debt reserves and
warranty expenses, taxes and utility charges prorated through the Closing Date),
(b) no assets shall be included in excess of their realizable value, (c) no
assets which have been fully expensed or depreciated on the books and records of
the Company in accordance with past practice shall be included, (d) no prepaid
expenses, intangible assets or other assets shall be included if they shall
6
not benefit Purchaser, (e) no accounts receivable or notes receivable shall be
included which are over 150 days old, and (f) all accounting entries (including
all liabilities and accruals) shall be taken into account regardless of their
amount and all errors and omissions shall be corrected and all adjustments made.
The Purchaser shall pay to the Members in accordance with the Adjustment
Allocation an amount equal to the proceeds of any Old Receivables collected by
Purchaser or the Company during the period from the Closing Date through a date
60 days from the Closing Date (the "Collection Period"). The payment with
respect to such collections shall be made within ten (10) business days
following the expiration of the Collection Period. Any payments to the Members
on the Old Receivables shall be added to the Purchase Price and allocated among
and paid to the Members in accordance with the Operating Agreement and a
Certificate provided by the Member Representatives to the Purchaser.
2.5 Stock Consideration.
(a) Each Member receiving Stock Consideration hereby
agrees that prior to receiving any such Stock Consideration, each of them
shall have executed and delivered an Investment Letter pursuant to which he or
it shall make customary investment representations satisfactory to the CBI
Companies.
(b) During the period beginning on the date of receipt
of any CBI Common Stock and ending on the one (1) year anniversary of receipt of
such stock consistent with Rule 144 (a "Restriction Period"), Members who
receive CBI Common Stock or their respective assignee, shall not sell, assign,
exchange, transfer, distribute or otherwise dispose of (in each case,
"transfer") any shares of CBI Common Stock received by him hereunder except in a
transaction exempt from the registration requirement of the Securities Act of
1933, as amended (the "1933 Act"). Following the Restriction Period, Members may
transfer their shares of CBI Common Stock so long as such transfer is in
accordance with the 1933 Act, including Rule 144 thereunder. The certificates
evidencing the CBI Common Stock delivered to Members pursuant to this Agreement
shall bear a legend substantially in the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED
(OTHER THAN IN CONNECTION WITH A PLEDGE), EXCHANGED, TRANSFERRED,
DISTRIBUTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT (OTHER THAN
IN CONNECTION WITH A PLEDGE), EXCHANGE, TRANSFER, DISTRIBUTION, OR
OTHER DISPOSITION OTHER THAN IN ACCORDANCE WITH SECTION 2.5 OF THAT
CERTAIN
MEMBERSHIP INTEREST PURCHASE AGREEMENT DATED AS OF SEPTEMBER
25, 2002, BY AND AMONG ▇▇▇▇▇/▇▇▇▇▇▇, INC., ▇▇▇▇▇/▇▇▇▇▇▇ CONSULTING,
INC. AND LONG, ▇▇▇▇▇▇ AND ASSOCIATES, LLC AND ITS MEMBERS.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION (COLLECTIVELY, THE "SECURITIES LAWS") AND MAY NOT BE SOLD,
DISPOSED OF OR
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OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION, EXCEPT IN
ACCORDANCE WITH AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF ANY APPLICABLE SECURITIES LAWS PROVIDED THAT
▇▇▇▇▇/▇▇▇▇▇▇, INC. AND ▇▇▇▇▇/▇▇▇▇▇▇ CONSULTING, INC. SHALL HAVE
RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THEM CONFIRMING THAT THE
REQUIREMENTS OF SUCH EXEMPTION HAVE BEEN SATISFIED.
(c) The Members shall not transfer any shares of the
CBI Common Stock at any time if such transfer would constitute a violation of
any federal or state securities or "blue sky" laws, rules or regulations
(collectively, "Securities Laws"), or a breach of the conditions to any
exemption from registration of the CBI Common Stock under any such Securities
Law on which the Members are relying at the time of the sale, or a breach of any
undertaking or agreement of the Members entered into with CBI pursuant to such
Securities Laws or in connection with obtaining an exemption thereunder.
(d) For purposes of this Agreement (and the restrictions
set forth in this Section 2.5), the term "CBI Common Stock" shall mean and
include (i) the shares of common stock of CBI issued, granted, conveyed and
delivered to certain Members pursuant to Section 2.1 hereof, and (ii) any and
all other additional shares of capital stock of CBI issued or delivered by it
with respect to the shares of CBI Common Stock described in clause (i) hereof,
including without limitation any shares of capital stock of CBI issued or
delivered with respect to such shares as a result of any stock split, stock
dividend, stock distribution, recapitalization or similar transaction.
(e) The CBI Companies agree to take the following
commercially reasonable actions so that each Member receiving any Stock
Consideration may transfer his shares of CBI Common Stock under Rule 144 (and
any other rule or regulation of the Securities and Exchange Commission (the
"Commission")) so long as any Member owns any share of the Stock Consideration
which are subject to restrictions on transfer thereby:
(i) making and keeping public information
available, as those terms are understood and defined in Rule 144;
(ii) filing with the Commission in a timely
manner all reports and other documents required under the 1933 Act and
the Securities Exchange Act of 1934, as amended (the "1934 Act"); and
(iii) furnishing to any Member, so long as such
Member owns any of the Stock Consideration, upon request, a copy of the
most recent annual or quarterly report of CBI and a written statement
that CBI has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE MEMBERS
---------------------------------------------
As an inducement to the CBI Companies to enter into this Agreement, the
Members hereby, jointly and severally, represent and warrant to the CBI
Companies as of the date hereof that:
3.1 Organization and Power. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
North Carolina. Neither the ownership of its properties or the conduct of its
business requires the Company to be qualified to transact business as a foreign
limited liability company in any jurisdiction where the failure to so qualify
would have a material adverse effect on the Company's Business or Closing Assets
taken as a whole. The Company has all requisite power and authority and all
material licenses, permits and other authorizations necessary to own and operate
its properties and to carry on its business as now conducted as they relate to
the Business. The copies of the duly filed articles of organization and the
current operating agreement of the Company which have been previously furnished
to Purchaser reflect all amendments made thereto at any time prior to the date
of this Agreement and are correct and complete in all material respects.
3.2 Subsidiaries. Except for commission sharing arrangements
listed on Schedule 1.2(i), Schedule 1.4(c) and Schedule 3.10(a), the Company
owns no stock, partnership interest, joint venture interest or other security or
interest in any other corporation, organization or entity related to the
Business.
3.3 Authorization; No Breach. The execution, delivery and
performance of this Agreement and the other agreements contemplated hereby and
the transactions contemplated hereby and thereby have been duly and validly
authorized by the Company and each Member. No other corporate act or proceeding
on the part of the Company, its Managers or its Members is necessary to
authorize the execution, delivery or performance of this Agreement, any other
agreement contemplated hereby or the consummation of the transactions
contemplated hereby or thereby. This Agreement has been duly executed and
delivered by the Company and the Members and this Agreement constitutes and the
other agreements contemplated hereby upon execution and delivery by the Company
and the Members shall each constitute, a valid and binding obligation of the
Company and the Members, enforceable in accordance with their terms. Except as
set forth on Schedule 3.14 (Seller Consents Schedule), the execution, delivery
and performance of this Agreement and the other agreements contemplated hereby
by the Company and the Members and the consummation of the transactions
contemplated hereby and thereby do not and shall not (a) conflict with or result
in any breach of any of the provisions of, (b) constitute a default under,
result in a violation of, or cause the acceleration of any obligation under, (c)
result in the creation of any lien, security interest, charge or encumbrance
upon any of the Closing Assets under, or (d) require any authorization, consent,
approval, exemption or other action by or notice to any court, other
governmental body or other third party (including, without limitation, any
insurance carrier) under the provisions of the Company's articles of
organization, operating agreement, any indenture, mortgage, lease, loan
agreement, service agreement, agency agreement, agreement with any insurance
carrier or other agreement or instrument to which the Company or the Members are
bound or affected or any law, statute, rule, regulation, judgment,
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order or decree to which the Company or the Members are subject or by which any
of the Interests or Closing Assets are bound.
3.4 Financial Statements. The Company has furnished Purchaser
with copies of (a) its audited financial statements as of December 31, 2001,
December 31, 2000 and December 31, 1999 for the twelve-month periods then ended,
(b) its audited balance sheet as of December 31, 1998, and (c) unaudited
financial statements for the Company as at and for the seven month period ended
July 31, 2002. Each of the foregoing financial statements has been based upon
the information contained in the Company's books and records (which are accurate
and complete in all material respects) and fairly presents the financial
condition and results of operations of the Company as of the times and for the
periods referred to therein, and such financial statements contain proper
accruals and adequate reserves and have been prepared in accordance with
generally accepted accounting principles, consistently applied throughout the
periods indicated, except as otherwise noted therein and except that the
unaudited financial statements lack footnotes, are subject to normal year-end
adjustments and reflect an estimate of year-to-date depreciation. Members
represent that, based on a certificate from Ernst & Young, that Ernst & Young,
who have certified the foregoing financial statements, are independent public
accountants as required by the 1934 Act and the rules and regulations of the SEC
thereunder.
3.5 Absence of Undisclosed Liabilities. As of the Closing
(as defined in Section 8.1), the Company shall have no liabilities or
obligations whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to the Company or any of the Members, whether due or to
become due, arising out of or related to transactions entered into at or prior
to the Closing, or out of any action or inaction by the Company, any Member or
any employee, agent, licensee or contractor of any of them at or prior to the
Closing, or out of any state of facts existing at or prior to the Closing,
regardless of when any such liability or obligation is asserted, including,
without limitation, breaches of contract or warranty, obligations under employee
benefit plans, claims against officers or members of the Company, taxes with
respect to or based upon transactions or events occurring on or before the
Closing or any errors in billing by the Company with respect to transactions or
events occurring on or before the Closing, except (a) Assumed Liabilities, and
(b) liabilities and obligations which have arisen after the date of the
Company's Latest Balance Sheet in the ordinary course of business (none of which
is a liability related to a breach of contract, breach of warranty, tort,
negligence, malpractice or infringement claim or lawsuit or the subject of any
such pending or threatened claim or lawsuit).
3.6 No Material Adverse Changes. Since the date of the Latest
Balance Sheet, except for events and conditions of general application affecting
the markets in which the Company operates and which are not within the control
of the Company, there has been no material adverse change in the financial
condition, operating results, assets, operations, employee relations, customer
relations or business prospects of the Company.
3.7 Absence of Certain Developments. Except as set forth in the
"Developments Schedule" attached hereto as Schedule 3.7, since the date of the
Latest Balance Sheet, the Company has not:
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(a) borrowed or agreed to borrow any amount or incurred
or become subject to any material liabilities, except current liabilities
incurred in the ordinary course of business and liabilities under contracts
entered into in the ordinary course of business;
(b) discharged or satisfied, or agreed to discharge or
satisfy, any material lien or encumbrance or paid any material liability, other
than current liabilities paid in the ordinary course of business;
(c) mortgaged, pledged or subjected to any lien, charge
or any other encumbrance, any portion of the Closing Assets, except liens for
current property taxes not yet due and payable;
(d) sold, assigned or transferred, or agreed to do so
with respect to any of the Closing Assets, except in the ordinary course of
business or canceled without fair consideration any material debts or claims
owing to or held by it;
(e) sold, assigned, transferred, abandoned or
permitted to lapse any patents, trademarks, trade names, copyrights, trade
secrets or other intangible assets, or disclosed any material proprietary
confidential information to any person;
(f) made or granted, or agreed to make or grant, any
bonus or any wage or salary increase to any employee or group of employees or
made or granted any increase in any employee benefit plan or arrangement (except
in accordance with past custom and practice), or amended or terminated, or
agreed to terminate or amend, any existing employee benefit plan or arrangement
or employment agreement or adopted any new employee benefit plan or arrangement
or employment agreement;
(g) made, or agreed to make, any capital expenditures or
commitments therefore that individually exceed $10,000;
(h) made, or agreed to make, any loans or advances to, or
guarantees for the benefit of, any persons;
(i) suffered any extraordinary losses or waived any
rights of material value, whether or not in the ordinary course of business or
consistent with past practice;
(j) entered into, or agreed to enter into, any other
material transaction other than in the ordinary course of business;
(k) made, or agreed to make, any charitable contributions
or pledges;
(l) made any purchase commitment of services or goods in
excess of the normal, ordinary and usual requirements of its business or at any
price in excess of the then current market price or upon terms and conditions
more onerous than those usual and customary in the industry, or made any change
in its selling, pricing, advertising or personnel practice inconsistent with its
prior practice and prudent business practices prevailing in the industry;
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(m) failed to make any scheduled payment with respect to
any debt agreements or instruments;
(n) amended or terminated, or agreed to amend or
terminate, any existing producer or insurance carrier agreement or entered into
any new insurance carrier agreement; or
(o) suffered any material damage, destruction or casualty
loss to the Closing Assets, whether or not covered by insurance.
3.8 Title and Condition of Properties.
(a) The Company owns no real estate.
(b) The Lease Agreement (the "Lease") is in full force
and effect, and the Company holds a valid and existing leasehold interest under
the Lease for the term set forth therein. The Lease constitutes the only lease
under which the Company holds a leasehold interest in real estate. The Company
has delivered to Purchaser complete and accurate copies of the Lease, and such
Lease has not been modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Purchaser. The Company is
not in default under such Lease and all lease payments due and owing have been
made, and no other party to such Lease has the right to terminate, accelerate
performance under or otherwise modify such Lease, including upon the giving of
notice or the passage of time. To the best of the Company's knowledge, no third
party to such Lease is in default under such Lease.
(c) The real estate demised by the Lease constitutes all
of the real estate owned, used or occupied by the Company, and no other real
estate is necessary for the conduct of the Business as now being conducted.
(d) The Company owns good and marketable title, free and
clear of all liens, charges, security interests, encumbrances, encroachments and
claims of others, to all of the Closing Assets, except for liens of current
taxes not yet due and payable (which shall be prorated) and a lien held by AUSA
in the assets of the Company which shall be released upon Closing (the "AUSA
Lien") (collectively, the "Permitted Encumbrances"). At the Closing, the Company
shall own good and marketable title to all of the personal property included
within the Closing Assets, free and clear of all liens, security interests,
charges, encumbrances and claims of others, other than Permitted Encumbrances.
(e) The Company's leased premises, machinery, equipment
and other tangible assets are in good condition and repair in all material
respects, have been maintained in accordance with normal industry standards and
are usable in the ordinary course of business. The Company owns or leases under
valid leases all buildings, machinery, equipment and other tangible assets
necessary for the conduct of the Business.
(f) To the best knowledge of the Company and the Members,
the Company is not in violation of any applicable zoning, building, fire or
other ordinance or other law, regulation or requirement relating to the
operation of owned or leased properties, including, without limitation,
applicable environmental protection and occupational health and safety laws and
regulations. Within the three years prior to the date of this Agreement, the
Company has
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received no notice of any such violation or any condemnation proceeding with
respect to any properties owned, used or leased by the Company.
(g) The Closing Assets, together with the services and
arrangements described on the Contracts Schedule, comprise all assets and
services required for the continued conduct of the Business by the Company as
now being conducted. The Closing Assets, taken as a whole, constitute all the
properties and assets relating to or used or held for use in connection with the
Business during the past twelve months (except supplies utilized, cash disposed
of, accounts receivable collected, prepaid expenses realized, Contracts fully
performed, properties or assets replaced by equivalent or superior properties or
assets, in each case in the ordinary course of business). There are no assets or
properties (other than the Excluded Assets) used in the operation of the
Business and owned by any Person other than the Company that will not be leased
or licensed to the Purchaser under valid, current leases or license
arrangements.
3.9 Tax Matters.
(a) The Company has duly filed all federal, foreign,
state and local tax information and tax returns of any and every nature and
description (the "Returns") required to be filed (all such returns being
accurate and complete in all respects) and has duly paid or made provision for
the payment of all taxes and other governmental charges (including without
limitation any interest, penalty or additions to tax thereto) which have been
incurred or are shown to be due on said Returns or are claimed in writing to be
due or imposed with respect to the operations of the Company or its properties,
assets, income, franchises, leases, licenses, sales or use, by any federal,
state, local or foreign taxing authorities, including, but not limited to,
income taxes, back-up withholding taxes, social security and unemployment
insurance taxes or taxes collected from customers or others and all such taxes
which are payable by the Members under applicable law (collectively, the
"Taxes") other than Taxes which are being contested in good faith and by
appropriate proceedings. The Company has set aside on its books adequate
reserves for Taxes owed by the Company which are not yet due and payable. The
amounts accrued for Taxes on the Latest Balance Sheet are sufficient in the
aggregate for payment by the Company of all unpaid Taxes (including any interest
or penalties thereon) for the period ended as of the date of the Latest Balance
Sheet or for any year or period prior thereto. Neither the IRS nor any state,
local or foreign taxing authority has ever examined any income tax return or
information return of the Company, whether singly or as a member of an
affiliated group. There are no disputes pending, or claims asserted, for Taxes
with respect to the operations of the Company. The Company has not been required
to give any currently effective waivers extending the statutory period of
limitation applicable to any foreign, federal, state or local return or for any
period or agreed to an extension of time with respect to each Tax assessment or
deficiency. The Company does not have in effect any power of attorney or
authorization to anyone to represent it with respect to any such Taxes. No claim
has ever been made by an authority in a jurisdiction where the Company does not
file Returns that the Company is or may be subject to taxation by that
jurisdiction. The Company has not been a party to any tax allocation agreement
or arrangement pursuant to which it has any contingent or outstanding liability
to anyone. The Company has no liability for Taxes as a transferee of, or
successor to, any other person. The Company has provided to Purchaser or its
representatives complete and correct copies of its federal, state and local
income tax returns filed on or prior to the date hereof for each taxable year
beginning on or after January 1, 1996. Except as disclosed in Schedule 3.9,
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there exists no proposed assessment against the Company or any notice, whether
formal or informal, of any such deficiency or claim for additional Tax
(including, without limitation, interest, additions to tax or penalties).
(b) All monies required to be withheld from employees,
independent contractors, Members, or creditors of the Company for Taxes,
including, but not limited to, sales, use or other taxes, have been withheld or
collected and paid, when due, to the appropriate governmental authority, or if
such payment is not yet due, an adequate reserve has been established for such
Taxes.
(c) The Company has not made any payments, is not
obligated to make any payments, nor is a party to any agreement that could
obligate it to make any payments that will not be deductible under Code Section
280G.
3.10 Contracts and Commitments.
(a) Except as set forth in Section 3.16 or in the
"Commissions Schedule" attached hereto as Schedule 1.2(i) or in Schedule 1.4(c)
attached hereto or in the "Contracts Schedule" attached hereto as Schedule
3.10(a) or in the "Customer Contracts Schedule" attached hereto as Schedule
3.10(d), the Company is not a party to any:
(i) bonus, pension, profit sharing, retirement
or deferred compensation plan or stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal
or informal, or severance agreements or arrangements or contracts
requiring the Company to pay post-retirement medical benefits;
(ii) contract for the employment of any officer,
individual employee or other person on a full-time, part-time or
consulting basis;
(iii) mortgaging, pledging or otherwise placing a
lien on any of the Closing Assets or the Interests;
(iv) guarantee of any obligation for borrowed
money or otherwise, other than endorsements made for collection in the
ordinary course of business;
(v) agreement or commitment with respect to the
lending or investing of funds to or in other persons or entities;
(vi) license or royalty agreement related to the
Business;
(vii) lease or agreement related to the Business
under which it is lessee of or holds or operates any personal property
owned by any other party;
(viii) lease or agreement related to the Business
under which it is lessor of or permits any third party to hold or
operate any property, real or personal, owned or controlled by it;
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(ix) contract or group of related contracts
related to the Business with any customer for the purchase or sale of
products or services other than the Customer Contracts (as defined in
Section 3.10(d) hereof);
(x) other contract related to the Business with
any party continuing over a period of more than six months from the
date or dates thereof, not terminable by it on thirty (30) days' or
less notice without penalties;
(xi) contract which prohibits it from freely
engaging in business anywhere in the world;
(xii) contract relating to the distribution of its
products or the performance of services as it relates to the Business;
or
(xiii) other material agreements related to the
Business whether or not entered into in the ordinary course of
business.
(b) Except as specifically disclosed on Schedule 3.10(b)
(the Contract Exception Schedule), (i) no contract or commitment related to the
Business has been breached in any respect by the Company or, to the best
knowledge of the Company and the Members, breached or canceled by the other
party, (ii) since December 31, 1999, no carrier of the Business has notified the
Company that it shall stop or decrease in any material respect the rate or
volume of business done with the Company, (iii) the Company has in all material
respects performed all the obligations required to be performed by it to the
date of this Agreement and is not in receipt of any claim of default under any
material lease, contract, commitment or other agreement related to the Business
to which it is a party; (iv) no event has occurred which with the passage of
time or the giving of notice or both would result in a material breach or
material default under any lease, contract, instrument or other agreement
related to the Business to which the Company is a party (for purposes of this
Section 3.10(b)(iv) "material" shall mean any loss resulting from such breach or
default equal to or greater than $1,000); and (v) the Company is not a party to
any contract which contains restrictions, covenants or other limitations on the
operations of the Business which are likely to be materially adverse to the
Business's operations as presently conducted, financial condition, operating
results or business prospects.
(c) Purchaser has been supplied with a true and correct
copy of all written contracts which are referred to on the Contracts Schedule
and Customer Contracts Schedule, together with all amendments, waivers or other
changes thereto.
(d) Except as set forth on Schedule 3.10(b), the Company
and the Members have no knowledge of any (i) pending or threatened termination,
cancellation, limitation, modification or change in any of the Company's
business relationship with any customer, carrier, producer or group of customers
related to the Business or (ii) changes or pending changes in any law, rule,
regulation, technology, or business relationship or other circumstance related
to the Business that could result in the loss of any customers, carriers or
producers after the date hereof (other than changes and pending changes of
general application to the markets in which the Company operates). Each
contract, agreement or lease with customers of the Company relating to the
Business ("Customer Contracts") are listed on the "Customer Contract
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Schedule" attached hereto as Schedule 3.10(d) and each such contract has been
provided to Purchaser. Except as indicated on the Customer Contract Schedule,
(A) each of the Customer Contracts is valid, enforceable and in full force and
effect in accordance with the terms thereof, (B) there is no existing default by
the Company or event or condition which, with notice or lapse of time or both,
would constitute an event of default by the Company under any Customer Contract
or, to the best knowledge of the Company or the Members, there is no existing
default by any third party or event or condition which, with notice or lapse of
time or both, would constitute an event of default by any third party under any
Customer Contract, (C) no Customer Contract has been amended, modified,
supplemented or otherwise altered orally, in writing or by course of conduct,
and (D) each Customer Contract complies with all applicable laws, rules and
regulations.
3.11 Proprietary Rights. Set forth on the "Proprietary Rights
Schedule" attached hereto as Schedule 3.11 is a list and summary description of
all patents, patent applications, trademarks, service marks, trade names,
corporate names and copyrights owned by the Company which are related to the
Business or used by the Company in the conduct of the Business. The Company owns
and possesses all right, title and interest in and to the proprietary rights
necessary to conduct the Business as now being conducted. The Company has not
received any notices of infringement, misappropriation, invalidity or conflict
from any third party with respect to such proprietary rights. The Company has
not infringed, misappropriated or otherwise conflicted with any proprietary
rights of any third parties and, to the best knowledge of the Company and the
Members, the Company's proprietary rights have not been infringed by any third
parties.
3.12 Litigation; Proceedings. Except as disclosed on the
"Litigation Schedule" attached hereto as Schedule 3.12, there are no actions,
suits, proceedings, orders or investigations pending or, to the best knowledge
of the Company and the Members, threatened against or affecting the Company at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and there is no basis known to the Company or any of the
Members for any of the foregoing. No Member, manager or employee or agent of the
Company has been or is authorized to make or receive, and neither the Company
nor any Member knows of any such person making or receiving, any bribe, kickback
or other illegal payment at any time. Within the three years preceding the date
hereof, the Company has not received any opinion or legal advice in writing to
the effect that the Company is exposed from a legal standpoint to any liability
which may be material to the Business as previously or presently conducted.
Notwithstanding anything else herein to the contrary, the Company has not
received any opinion or legal advice from any legal counsel that any of its
activities or conduct constitutes a basis for, or will expose the Company to,
liability, including liability for misrepresentations or false statements,
concerning the cost, performance, tax treatment or results to be expected with
respect to any of the plans or policies placed by the Company.
3.13 Brokerage. Except for the payment described in Section 11.13
hereof, there are no claims for brokerage commissions, finders fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of the Company.
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3.14 Governmental Consent, etc.
(a) No permit, consent, approval or authorization of,
or declaration to or filing with, any governmental or regulatory authority is
required in connection with the execution, delivery or performance of this
Agreement by the Company, or the consummation by the Company of any of the
transactions contemplated hereby and thereby, except as disclosed on the "Seller
Consents Schedule" attached hereto as Schedule 3.14 and except as required under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇").
(b) The Seller Consents Schedule attached hereto as
Schedule 3.14 sets forth all governmental approvals or third-party consents
necessary for, or otherwise material to, the conduct of the Business, including
but not limited to, all consents and assignments required to permit the
continuation of payment to the Company or any Member, or their respective
assigns, following the Closing of all fees, bonuses and commissions paid by
insurance carriers, customers and broker/dealers.
3.15 Employees. Except as set forth on Schedule 3.15, to the best
knowledge of the Company and the Members, no key employee, nor group of the
Company's employees related to the Business, has any plans to terminate
employment with the Company. The Company has complied in all material respects
with all applicable laws relating to the employment of labor and independent
contractors related to the Business, including provisions thereof relating to
wages, hours, equal opportunity, immigration, collective bargaining,
disabilities, family leave and the payment of social security and other taxes.
Except as disclosed on the "Employees Schedule" attached hereto as Schedule
3.15, the Company has no existing relationships with any union or employee
representative or any labor relations problems, and there has been no union
organization efforts with respect to the Business within the last five years.
Neither the Company nor any Member has any reason to believe that the services
of any of the present key employees of the Company related to the Business
(other than Long and ▇▇▇▇▇▇ who will no longer be employees of the Company after
Closing) will not be available for continued conduct of the Business after the
Closing on substantially the same terms as now conducted.
3.16 Employee Benefit Plans.
(a) The "Employee Benefits Schedule" attached hereto as
Schedule 3.16, contains a list of each and every employee benefit plan, within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), which the Company and/or any corporation,
partnership or other trade or business that is or would be a member of a
controlled group of corporations, group of trades or business under common
control, or an affiliated service group including the Company, under the
provisions of Code Section 414(b), (c), (m) or (o) (each an "ERISA Affiliate")
maintains, to which the Company or any ERISA Affiliate contributes, or is
obligated to contribute, or under which any employee or former employee, officer
or former officer, director, or former director, shareholders or former
shareholder of the Company or any ERISA Affiliate (collectively,
"Participants"), or any beneficiary of any Participant, is covered or has
benefit rights and pursuant to which any liability of the Company or any ERISA
Affiliate exists or is reasonably likely to occur, and each other arrangement,
program or plan pursuant to which any benefit is or shall be provided by the
Company or any ERISA Affiliate to any Participant or any Participant's
beneficiary, whether
17
formal or informal, including, without limitation, those providing any form of
medical, health or dental insurance, life, disability and accidental death and
dismemberment insurance, severance pay or benefits continuation, nonqualified
deferred compensation, relocation assistance, vacation pay, tuition aid,
apprenticeship benefits or matching gifts for charitable contributions to
educational or cultural institutions (collectively, the "Benefit Plans"). A true
and correct copy of each of the Benefit Plans, including all amendments thereto,
has been delivered to Purchaser. Except as set forth on the "Employee Benefits
Schedule", neither the Company nor any ERISA Affiliate maintains or has entered
into any Benefit Plan or other document, plan or agreement which contains any
change in control provisions which would cause an increase or acceleration of
benefits or benefit entitlements to Participants or their beneficiaries, or
other provisions, which would cause an increase in liability of the Company or
to Purchaser as a result of the transactions contemplated by this Agreement or
any related action thereafter. Each of such plans that is an employee pension
benefit plan within the meaning of Section 3(2) of ERISA that is intended to be
a qualified plan under Section 401(a) of the Code has been amended to comply in
all material respects with current law as required and each such plan has
obtained a favorable determination letter with respect to such amendment.
Neither the Company nor the Members are aware of any facts or circumstances that
might jeopardize the qualified status of any such Benefit Plan.
(b) Except as set forth in the "Employee Benefits
Schedule", all accrued contributions and other payments to be made by the
Company or any ERISA Affiliate to any Benefit Plan through the date of the
Latest Balance Sheet have been made or reserves adequate for such purposes as of
the date of the Latest Balance Sheet have been set aside therefor and reflected
on the Latest Balance Sheet. In addition, all contributions and other payments
to be made by the Company or any ERISA Affiliate to any Benefit Plan through the
Closing Date shall be made or accrued for on the Closing Balance Sheet. Neither
the Company nor any ERISA Affiliate is in default in performing any of its
contractual obligations under any of the Benefit Plans or any related trust
agreement or insurance contract, and there are no outstanding liabilities of any
Benefit Plan other than liabilities for benefits to be paid to Participants and
beneficiaries in such Benefit Plan in the ordinary course of business.
(c) There is no pending litigation or, to the best
knowledge of the Company, overtly threatened litigation or pending claim (other
than benefit claims made in the ordinary course) by or on behalf of or against
any of the Benefit Plans (or with respect to the administration of any of the
Benefit Plans) now or heretofore maintained by the Company or any ERISA
Affiliate which allege violations of applicable state or federal law.
(d) Each Benefit Plan is and has been in compliance in
all material respects with, and each such Plan is and has been operated in
accordance with the applicable laws, rules and regulations governing such Plan,
including, without limitation, the rules and regulations promulgated by the
Department of Labor, the Pension Benefit Guaranty Corporation ("PBGC") and the
IRS under ERISA, the Code or any other applicable law.
(e) None of the Benefit Plans is or ever has been subject
to Title IV of ERISA, and neither the Company nor any ERISA Affiliate is or has
been required to contribute to an employee benefit plan that is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA nor has been so required
during the five-year period ending on the Closing Date.
18
(f) All reporting and disclosure requirements of ERISA
and the Code applicable to the Benefit Plans have been satisfied in all material
respects.
(g) Neither the Company nor any ERISA Affiliate has any
liability on account of any accumulated funding deficiency (as defined in
Section 412 of the Code) or on account of any failure to make contributions to
or pay benefits under any Benefit Plan, nor is the Company aware of any claim
pending or threatened to be brought by any party regarding such matters. No
prohibited transaction has occurred with respect to any Benefit Plan that would
result, directly or indirectly, in the imposition of any excise tax under
Section 4975 of the Code.
(h) None of the Benefit Plans provides for (or has ever
provided for) medical or health care or benefits for any former employee of the
Company or any ERISA Affiliate, except to the extent required by Section 4980B
of the Code or Part 6 of Title I of ERISA.
(i) The Company and all of its ERISA Affiliates have
complied in all material respects with the requirements of Part 6 of Title I of
ERISA and Code Section 4980B.
(j) Neither the Company nor any ERISA Affiliate is in
possession of any facts which would indicate that any insurance company which
has issued an insurance policy or policies under any of the Benefit Plans is in
danger of becoming insolvent, within the meaning of applicable state law.
(k) The transactions contemplated by this Agreement will
not entitle any Participant or any Participant's beneficiary in any Benefit Plan
to any severance benefit under the terms of any Benefit Plan or any personnel or
employment policy of the Company or any ERISA Affiliate.
3.17 Insurance. The "Insurance Schedule" attached hereto as
Schedule 3.17 lists and briefly describes each insurance policy maintained by
the Company with respect to the Closing Assets. The Company has delivered to the
Purchaser complete and correct copies of all such policies together with all
riders and amendments thereto. All of such insurance policies are in full force
and effect, and the Company is not and never has been in material default with
respect to its obligations under any of such insurance policies. During the
three-year period ending on the date hereof, the Company has never been refused
any insurance coverage for which it has applied or had any insurance policy
canceled. The Members shall provide at their expense tail coverage consistent
with current levels on the Company's errors and omissions insurance policies
listing the Company, Purchaser and the Members as beneficiaries for a period of
three (3) years from the date hereof to cover any claims following the Closing
Date arising from acts, errors or omissions prior to Closing.
3.18 Affiliated Transactions. Except as set forth on the
"Affiliated Transaction Schedule" attached hereto as Schedule 3.18, no Member or
affiliate of the Company or any person related by blood or marriage to any such
person or any entity in which any such person owns any beneficial interest is a
party to any agreement, contract, commitment or transaction related to the
Business with the Company or has any interest in any property used by the
Company.
19
3.19 Compliance with Laws; Permits; Certain Operations.
(a) The Company and its Members, managers, agents,
producers and employees have complied in all material respects with all
applicable laws and regulations of foreign, federal, state and local governments
and all agencies thereof which materially affect the Business or the Closing
Assets or the failure to comply with which would have a material adverse effect
on the Company's Business or the Closing Assets, and no claims have been filed
against the Company alleging a violation of any such law or regulation, except
as set forth on the "Compliance Schedule" attached hereto as Schedule 3.19(a).
In particular, but without limiting the generality of the foregoing, the Company
has not violated, or received a notice or charge asserting any violation and
neither the Company nor the Members have knowledge or any violation, of the
Immigration Reform and Control Act of 1986, the Occupational Safety and Health
Act of 1970, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the
Toxic Substances Control Act of 1976, the Americans With Disabilities Act, or
any other state or federal act (including rules and regulations thereunder)
regulating or otherwise affecting the employment of aliens, employee health and
safety, the environment, zoning, building, fire or other ordinances or any other
aspect of the Business.
(b) Except as set forth on Schedule 3.19(b), the Company
holds all of the permits, licenses, certificates and other authorizations of
foreign, federal, state and local governmental agencies required for the conduct
of the Business all of which are set forth in the "Permits Schedule" attached
hereto as Schedule 3.19(b). The Company has not received any notice (and the
Company and the Members have no reason to believe) that revocation is being
considered with respect to any of such licenses, permits, certificates or
authorizations, or that the Company is in violation of any such license, permit,
certificate or authorization.
(c) The Company and the Members represent that the
Company has complied in all material respects with all laws and regulations with
respect to life insurance policy illustrations and disclosures provided to
customers by the Company, its agents and its producers. The Company and the
Members represent that the Company includes and has included in all material
respects all required disclosures and disclaimers with respect to illustrations
in sales materials. As part of the sales process, the Company, its agents and
its producers have disclosed in all material respects, as required by applicable
laws and regulations, to customers that the illustrations are based on
assumptions, that any change in assumptions will affect future results, that
actual results will differ from the illustrations and are determined by various
factors including premium payments, interest rates, actual mortality and expense
charges, that cash values are not guaranteed, that a change in the investment
return is inherent in the applicable policy as it relates to variable insurance
products only, and that the customer should consult its own counsel or advisers
for legal, tax or other financial advice.
3.20 Environmental Health and Safety.
(a) To the best knowledge of the Company and the Members,
the Company and its predecessors and affiliates has complied with, and is
currently in compliance in all material respects with all Environmental, Health
and Safety Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been
20
threatened, filed or commenced against it alleging any failure so to comply,
alleging any liability under any Environmental, Health and Safety Laws or
requesting any investigation related thereto. No condition exists or event has
occurred which, with or without notice or the passage of time, would constitute
a violation of or give rise to a lien under any Environmental, Health and Safety
Laws. Without limiting the generality of the preceding sentences, to the best
knowledge of the Company and the Members, the Company, and its predecessor and
affiliates, has obtained and been in compliance, and is currently in compliance,
in all material respects, with all of the terms and conditions of all permits,
licenses and other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables which are
contained in, all Environmental Health and Safety Laws. For purposes hereof,
"Environmental, Health and Safety Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976 and the Occupational Safety and Health Act of 1970, each as
amended, together with all other laws (including statutes, rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof) relating to fines, injunctions, penalties, damages, liability,
contribution, cost recovery, compensation losses or injuries concerning
pollution or protection of the environment, natural resources, public health and
safety, or employee health and safety, or the protection of human, plant or
animal welfare or health, including laws relating to use, emissions, discharges,
releases, or threatened releases of Hazardous Materials, Extremely Hazardous
Substances, pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into or onto ambient air, surface water, ground water,
or lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of Hazardous
Materials, Extremely Hazardous Substances, pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes. For purposes
hereof, "Extremely Hazardous Substance" means such term as set forth in ss.302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
For purposes hereof, "Hazardous Materials" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or substance as
defined in, regulated by or governed by any Environmental, Health, and Safety
Laws, federal, state, local or foreign law, statute, code, ordinance,
regulation, rule or other requirement relating to such substance or otherwise
relating to the environment or human health or safety, including without
limitation any waste, material, substance, pollutant or contaminant that might
cause any injury to human health or safety or to the environment or might
subject the Company to any imposition of penalties, fines, orders, decrees,
licenses, permits, judgments, costs or liability under any Environmental, Health
or Safety Laws.
(b) To the Company's knowledge, all properties and
equipment used in the Business of the Company, its predecessors and affiliates,
have been free of asbestos, PCB's, methylene chloride, trichlorethylene, 1, 2 -
trans-dichloroethylene, dioxins, dibenzofurans and other hazardous substances.
3.21 Product and Warranty Claims; Warranties. Except as disclosed
in the "Claims Schedule" attached hereto as Schedule 3.21, the Company and the
Members have no knowledge of and have not received during the past five (5)
years any claim or notice with respect to any occurrences arising out of the use
of, or related to, the products, policies and benefit plans or programs (the
"Products") designed, sold, implemented, monitored or serviced by or on behalf
of the Company related to the Business, which has resulted in such claims or
notices that any such
21
Products do not conform to any agreement, representation or warranty made by the
Company (or implied by law) with respect to such Products. The Company is
covered against damages, liability and expenses for any claims based upon
Products designed, sold, implemented, monitored or serviced by or on behalf of
the Company (including, but not limited to, costs of investigation and
attorneys' fees and expenses) in amounts provided for under the policies of
insurance described on the Insurance Schedule, except as to claims for breach of
any agreement, representation or warranty made with respect to such Products
against which the Company has established good and sufficient reserves therefor
on their books and records.
3.22 Disclosure. Neither this Agreement nor any of the schedules,
attachments or exhibits hereto contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading.
There is no material fact related to the Company which has not been disclosed in
writing to Purchaser of which the Company or any Member, manager, or key
employee of the Company is aware and which materially adversely affects or could
reasonably be anticipated to materially adversely affect the Business or the
Closing Assets (other than facts of general application to the markets in which
the Company operates).
3.23 Customers. The Company has delivered to Purchaser an accurate
list (which is set forth on Schedule 1.2(j) of all customers of the Company,
including any customers with respect to which any transactions are pending as of
the date hereof.
3.24 Policy Representations.
(a) Characteristics of Commissions. (A) Except as set
forth in Schedule 3.24(a), each Commission listed on Schedule 1.2(i) has been
originated in connection with the purchase of a policy of insurance issued (or
to be issued pursuant to a binder agreement) by an insurance carrier (the
"Carriers") as listed on Schedule 1.2(i) and was originated by the Company in
the ordinary course of the Company's business and the Company (or at least one
of the Members) had (x) all necessary insurance licenses and approvals required
by any insurance carrier obligated to make payments in respect of any Commission
or required by any applicable jurisdiction and (y) all other necessary licenses
and approvals in all jurisdictions where the failure to do so would materially
and adversely affect (i) the validity or enforceability of the Commissions or
(ii) the Company's ability to perform its obligations hereunder and under the
Related Documents (as hereinafter defined) to which Company or a Member is a
party; and (B) as of August 31, 2002, except as provided for on Schedule 1.2(b),
no payment with respect to any Commission is more than 120 days overdue.
(b) Characteristics of Carriers. To the best knowledge
of the Company and the Members, each Carrier (other than ManuLife, Sun Life of
Canada and Great West Life) is incorporated in the United States of America and,
as of June 30, 2002, no Carrier (A) to the best knowledge of the Members, was
the subject of any federal, state or other bankruptcy, insolvency,
rehabilitation, liquidation or receivership or similar proceeding, or (B) was
the subject of a judgment in favor of the Company.
(c) Location of Commission Files. Except as set forth in
Schedule 3.24(c), a complete Commission File with respect to each Commission
containing the original contract
22
and, if applicable, a case specific commission schedule, related to such
Commission, or a copy thereof, between the Carrier and the Company (or the
Carrier and one or more of the Members), together with any written agreements
amending, modifying or waiving the terms of such contract prior to the Closing
Date shall be delivered to the Purchaser by the Company at Closing.
(d) Schedule of Commissions. To the best knowledge of
the Company and the Members, based on the assumptions used in the preparation
thereof, the information with respect to the Commissions set forth in Schedule
1.2(i), Schedule 1.2(j), and Schedule 1.4(c) is true and correct as of the close
of business on June 30, 2002. Purchaser acknowledges and agrees that any change
in assumptions will affect future results, that actual results are determined by
actual mortality and expense charges and that, with respect to variable
products, investment performance of the investment portfolio selected by
participants are not guaranteed, a change in the investment return is inherent
in each policy, and the customer may have the right to select the investment
portfolio and change it in the future.
(e) Compliance with Law. To the best knowledge of the
Company and the Members, none of the contracts related to any Commission, at the
time such Commission was originated, contravened and, at the execution of this
Agreement contravenes, any requirements of applicable federal, state and local
laws, and regulations.
(f) No Government Carrier. None of the Commissions is
due from the United States of America or any state or from any agency,
department, or instrumentality of the United States of America or any state.
(g) Carrier and Purchaser Contracts. Each contract,
agreement or arrangement with Carriers is listed on the Commissions Schedule
attached hereto as Schedule 1.2(i) or Schedule 3.10(a) (the "Commission
Contracts") and each contract, agreement or arrangement with independent
producers or other similar third parties is listed on Schedule 1.2(i) or
Schedule 1.4(c) ("Producer Contracts") and each such Commission Contract and
Producer Contract has been provided to Purchaser prior to Closing. Except as
indicated on Schedule 1.2(i) or Schedule 1.4(c), each agreement related to a
Commission Contract or Producer Contract is valid, enforceable and in full force
and effect in accordance with the terms thereof.
(h) Commissions in Force. Except as set forth in
Schedule 3.24(h) or Schedule 1.2(i) or Schedule 1.4(c) and other than the AUSA
Lien which shall be terminated at Closing, no Commission has been satisfied,
terminated, pledged or assigned since June 30, 2002 other than payment in the
ordinary course of business, and the Company has not done anything to convey any
right to any person that would result in such person, corporation or other
entity ("Person") having a right to payments in respect of any Commission or
otherwise to impair the rights of the Company.
(i) No Amendments. Except as set forth in Schedule 3.24,
no payment extensions on any Commission has been granted, and no Commission
Contract or Producer Contract has been amended or modified since a copy of such
contract has been provided to Purchaser and none of the provisions of any
Commission Contract or Producer Contract have been waived.
23
(j) No Defenses. Except as set forth in Schedule
3.24(j), no right of rescission, setoff, counterclaim or defense exists as of
the date hereof or has been asserted or threatened with respect to any
Commission or any Commission Contract related thereto where the Company is paid
directly by the Carrier. To the best knowledge of the Company and the Members,
except as set forth in Schedule 3.24(j), no right of rescission, setoff,
counterclaim or defense exists as of the date hereof or has been asserted or
threatened with respect to any Commission or any Commission Contract related
thereto where the Company is not paid directly by the Carrier.
(k) No Fraud or Misrepresentation. Each Commission
originated by the Company or the Members was originated without fraud, deceit or
misrepresentation on the part of the Company, Members, its agents or its
producers.
(l) Commissions Not Assumable. Except as set forth in
Schedule 3.24(l), no Commission or any contract related thereto is assumable by
another Person in a manner which would release the Carrier thereof from such
Carrier's obligations to the Company with respect to payments in respect of such
Commission.
(m) No Default. No default, breach or violation under
the terms of any Commission Contract or Producer Contract has occurred by the
Company or any Member; and no event or continuing condition exists with respect
to the Company that with notice or the lapse of time would constitute a default,
breach, violation or give any right to a third party to terminate, under the
terms of any Commission Contract or Producer Contract. To the best knowledge of
the Member, no default, breach or violation under the terms of any Commission
Contract or Producer Contract has occurred by any Carrier and no event or
continuing condition exists with respect to any Carrier or Producer that with
notice or the lapse of time would constitute a default, breach, violation or
give any right to such Carrier or Producer to terminate, under the terms of any
Commission Contract or Producer Contract.
(n) Title. Except as set forth in Schedule 3.24(n) and
other than as a result of the AUSA Lien, immediately prior to the Closing, the
Company had good and marketable title to each Commission, and was the sole owner
thereof, free and clear of all liens, claims, encumbrances, security interests,
and rights of others and, upon the transfer of the Interests, the Company shall
have good and marketable title to each such Commission, and will be the sole
owner thereof, free and clear of all liens, encumbrances, security interests,
and rights of others.
(o) Valid and Binding Obligation of Carrier. To the best
knowledge of the Company and the Members, each Commission and each Commission
Contract is the legal, valid and binding obligation of the Carrier thereunder
and is enforceable in accordance with its terms, except only as such enforcement
may be limited by principles of equity and by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally; and all parties
to such contract had full legal capacity to execute and deliver such contract
and all other documents related thereto.
(p) Persistency. Based on the assumptions set forth in
Schedule 3.24(p), since the inception of the oldest existing BOLI policy
included in the Commissions on Schedule 1.2(i), the premium in force for the
BOLI policies included in the Commissions has at all times been at
24
least 99% of the premium in force for all BOLI policies then or theretofore
originated by the Company, and the number of BOLI policies included in the
Commissions has at all times been at least 99% of the total number of BOLI
policies then or theretofore originated by the Company.
3.25 Representations. All of the representations and warranties
of the Company and the Members in this Article 3 and elsewhere in this Agreement
and all information delivered in any schedule, attachment or exhibit hereto or
in any certificate delivered to Purchaser are true and correct in all respects
on the date of this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CBI COMPANIES
-----------------------------------------------
CBI Companies hereby jointly and severally represent and warrant to the
Members as of the date hereof and as of the Closing Date that:
4.1 Corporate Organization and Power. Each of Purchaser and CBI
is a corporation duly organized and validly existing under the laws of the State
of Delaware with full corporate power and authority to enter into this Agreement
and the other agreements contemplated hereby and perform its obligations
hereunder and thereunder. Purchaser is a wholly owned subsidiary of CBI.
4.2 Authorization. The execution, delivery and performance by the
CBI Companies of this Agreement and the other agreements contemplated hereby and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all requisite corporate action, and no other
corporate proceedings on the part of the CBI Companies are necessary to
authorize the execution, delivery or performance of this Agreement or the other
agreements contemplated hereby. This Agreement constitutes and, upon execution
and delivery by the CBI Companies, the other agreements contemplated hereby
shall each constitute a valid and binding obligation of the CBI Companies
enforceable against the CBI Companies in accordance with their respective terms.
4.3 No Violation. The CBI Companies are not subject to or
obligated under its articles of incorporation, any applicable law, rule or
regulation of any governmental authority, or any agreement or instrument, or any
license, franchise or permit, or subject to any order, writ, injunction or
decree which would materially, adversely affect its ability to perform this
Agreement or the other agreements contemplated hereby.
4.4 Litigation. There are no actions, suits, proceedings, orders
or investigations pending or, to the best of the CBI Companies' knowledge,
threatened against or affecting the CBI Companies, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
would materially adversely affect the CBI Companies' performance under this
Agreement, the consummation of the transactions contemplated hereby or the
financial condition of the CBI Companies taken as a whole.
25
4.5 No Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the CBI Companies.
4.6 Consents.
(a) No permit, consent, approval or authorization of, or
declaration to or filing with, any governmental or regulatory authority is
required in connection with the execution, delivery or performance of this
Agreement by the CBI Companies, or the consummation by the CBI Companies of any
of the transactions contemplated hereby and thereby, except as required under
the HSR Act.
(b) The Purchasers' Consents Schedule attached hereto as
Schedule 4.6 sets forth all governmental approval or third-party consents
necessary for, or otherwise material to, completing the transaction contemplated
hereunder. All such governmental approvals and consents have been duly obtained
and are in full force and effect, and the CBI Companies are in compliance with
each of such governmental approvals and consents.
4.7 Issuance of CBI Stock. The CBI Stock will, when issued, be
duly authorized, validly issued, fully paid and nonassessable.
4.8 Reports and Financial Statements. As of their respective
dates, CBI's Form 10-K for the period ended December 31, 2001, and all other
reports filed by it with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended, since
January 1, 2002, including but not limited to the Form 10-Q filed for the fiscal
quarter ended June 30, 2002 (collectively, the "Reports") complied in all
material respects with the then applicable published rules and regulations of
the Commission with respect thereto and, when considered together, did not or
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of the date hereof, no additional filings or amendments to
previously filed Reports are required pursuant to such rules and regulations.
Each of the audited consolidated financial statements and unaudited interim
financial statements included in CBI's Reports has been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and fairly presents
the financial position of the entity or entities to which it relates as at its
date or the results of operations, stockholders' equity and cash flows of such
entity or entities (subject, in the case of unaudited statements, to the absence
of footnote disclosure and in the case of unaudited interim statements to
year-end adjustments).
4.9 Representations. All of the representations and warranties of
CBI Companies contained in this Article 4 and elsewhere in this Agreement and
all information delivered in any schedule, attachment or exhibit hereto or in
any certificate delivered to the Company is true and correct in all respects as
of the date of this Agreement.
26
ARTICLE 5
COVENANTS PRIOR TO CLOSING
5.1 Affirmative Covenants. Prior to the Closing, the Company and
the Members shall:
(a) conduct the Business only in the usual and ordinary
course of business in accordance with past custom and practice;
(b) keep in full force and effect its corporate existence
and all material rights, franchises and intellectual property;
(c) use best efforts to retain its employees and sales
agents and preserve its present business relationships and continue to
compensate such employees and sales agents in accordance with past custom and
practice;
(d) maintain the Closing Assets in good and customary
repair, order and condition and maintain insurance reasonably comparable to that
in effect on the date of this Agreement; replace in accordance with past
practice its inoperable, worn out and obsolete assets with assets of comparable
quality; in the event of any casualty, loss or damage to any of the Closing
Assets prior to Closing, either repair or replace such assets with assets of
comparable quality or, if Purchaser agrees, transfer to Purchaser at Closing the
proceeds of any insurance recovery with respect thereto;
(e) maintain its books, accounts and records in
accordance with past custom and practice as used in the preparation of the
financial statements described in Section 3.4 hereof and file with the
appropriate taxing authorities any and all returns required to be filed by them
for the periods covered thereby;
(f) permit Purchaser and its employees, agents,
accounting and legal representatives and potential lenders and their
representatives to have access to its books, records, invoices, contracts,
leases, key personnel, independent accountants, property, facilities, equipment
and other things reasonably related to the Business or the Closing Assets;
(g) use its best efforts to obtain all consents and
approvals necessary or desirable to consummate the transactions contemplated
hereby and to cause the other conditions to CBI Companies' obligation to close
to be satisfied;
(h) pay accounts payable and other obligations of the
Business when they become due and payable in the ordinary course of business
consistent with prior practice;
(i) promptly inform Purchaser in writing of any variances
from the representations and warranties contained in Article 3 hereof; and
(j) contribute to each Benefit Plan that is intended to
be a qualified plan under Code Section 401(a) an amount sufficient to satisfy
any benefit or expense obligation that will have accrued thereunder as of the
Closing Date and as to which they have not, as of the Closing
27
Date, made a full and complete contribution, whether or not the legal deadline
for making a contribution has then yet arrived.
5.2 Negative Covenants. Prior to the Closing, without the prior
written consent of CBI Companies, the Company and the Members shall not:
(a) directly or indirectly (including through any agent,
broker, finder or other third party), offer to sell, merge, consolidate or
otherwise dispose of, negotiate for the sale, merger, consolidation or other
disposition of, initiate or continue discussions concerning the sale, merger,
consolidation or other disposition of, the Company as a whole, or the sale or
other disposition of any of the Interests or any of the Closing Assets (other
than inventory in the ordinary course of business);
(b) take or omit to take any action, or permit its
affiliates to take or omit to take any action, which would reasonably be
anticipated to have a material adverse effect upon the Business or the Closing
Assets or result in a breach or violation of any provision in Section 3 hereof;
or
(c) declare, set aside, or pay any dividend or make any
distribution with respect to its Interests or redeem, purchase or otherwise
acquire any of its capital stock other than as disclosed to the CBI Companies;
provided, however, that the Company may pay any distribution of cash without
obtaining the CBI Companies' prior written consent so long as the Company will
have an amount equal to or greater than Five Hundred Thousand ($500,000) in cash
at Closing.
5.3 Governmental Filings. Prior to Closing, the CBI Companies
and the Company will prepare and make their initial filings with any
governmental authority whose acquiescence or consent is necessary in order for
the transactions hereby to be consummated, including, without limitation, notice
required under the HSR Act. The Company and the CBI Companies will cooperate in
responding promptly to any Second Request or other request for further
information from a governmental authority, and will in good faith promptly
furnish all materials reasonably required in connection with such filings and
any other requests. The CBI Companies and the Company will in good faith use
reasonable efforts to demonstrate that the transactions contemplated hereby
should not be opposed by such governmental authority, and shall use reasonable
efforts to eliminate as promptly as practicable any objection any such
governmental authority may have to the transactions contemplated hereby. The
Company and the CBI Companies (i) will jointly approve the content and manner of
presentation of all information to be provided to such governmental authorities
in connection with such filings regarding markets and the relevant industry and
(ii) will consult with each other from time to time regarding the status of such
filings and all strategies and action taken in connection therewith. If the
transaction contemplated hereunder is completed, the Members and the CBI
Companies agree to share equally the $125,000 filing fee required under the HSR
Act.
5.4 Financing Assistance. Prior to the Closing, the Company and
the Members shall take such action and shall execute and deliver such documents
with respect to the Commissions and related agreements as may be reasonably
requested by the Purchaser to enable Purchaser to
28
establish, securitize and fund, as of the Closing, a special purpose vehicle
established by Purchaser as part of a financing related to the transactions
contemplated by this Agreement.
ARTICLE 6
CONDITIONS TO CBI COMPANIES' OBLIGATION TO CLOSE
6.1 Conditions to CBI Companies' Obligation. The obligation of
the CBI Companies to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of the following conditions on or before the
Closing Date:
(a) the representations and warranties set forth in
Article 3 hereof shall be true and correct in all material respects at and as of
the Closing as though then made and as though the Closing Date was substituted
for the date of this Agreement, without taking into account any disclosures made
by the Company to the CBI Companies pursuant to Section 5.1(i) hereof;
(b) The Company shall have performed in all material
respects all of the covenants and agreements required to be performed by it
under this Agreement prior to the Closing;
(c) there shall have been no material adverse change in
the operations, financial condition, operating results, assets or business
prospects of the Business, and there shall have been no material casualty loss
or damage to the Closing Assets, taken as a whole, whether or not covered by
insurance;
(d) except for consents relating to the Company's
Corporate-Owned Life Insurance Business, all consents by third parties that are
required for the transfer of the Interests to Purchaser as contemplated hereby,
that are required for the consummation of the transactions contemplated hereby
or that are required to prevent a breach of, or a default under or a termination
or modification of any instrument, contract, license, lease or other agreement
to which the Company is a party or to which any of the Closing Assets are
subject, and releases of all liens, charges, security interests, encumbrances
and claims of others on or with respect to the Closing Assets shall have been
obtained on terms and conditions reasonably satisfactory to Purchaser;
(e) no action or proceeding before any court or
government body, including, without limitation, any proceedings with respect to
the HSR Act filing relating to the transactions contemplated by this Agreement,
shall be pending or threatened which, in the judgment of Purchaser, made in good
faith and upon the advice of counsel, makes it inadvisable or undesirable to
consummate the transactions contemplated hereby by reason of the probability
that the action or proceeding shall result in a judgment, decree or order which
would prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement, cause such transactions to be rescinded or materially and adversely
affect the value or use of the Closing Assets or Business;
(f) CBI Companies shall have received from (i) the
counsel for the Company, Long, Miller, Norton, Twilley, Lee, ▇▇▇▇▇▇ and ▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ P.L.L.C., an opinion addressed to the CBI
Companies and dated the Closing Date, in form and
29
substance reasonably satisfactory to the CBI Companies, and (ii) from AUSA's
counsel, Lord, Bissell & Brook, an opinion addressed to the CBI Companies and
dated the Closing Date, in form and substance reasonably satisfactory to the CBI
Companies;
(g) not less than five (5) business days prior to the
Closing Date, the Company shall have provided the CBI Companies, at the
Company's expense, with UCC search reports ("UCC Searches") of the Company
disclosing no liens or encumbrances against the Closing Assets or the Interests,
other than the Permitted Encumbrances. If the UCC Searches disclose any title
encumbrances, defects, liens, encumbrances or matters other than Permitted
Encumbrances, the Company shall have caused the same to be removed;
(h) all proceedings to be taken by the Company and the
Members in connection with the consummation of the Closing and the other
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to effect the transactions contemplated hereby
requested by the CBI Companies shall be reasonably satisfactory in form and
substance to the CBI Companies and their counsel;
(i) Purchaser and the landlord of the property covered
by the Lease (the "Landlord") shall have entered into that certain Assignment of
Lease regarding the lease of such property (the "Lease Assignment"), the form of
which is attached hereto as Exhibit C;
(j) Purchaser has verified and received carrier
confirmations and either conditional assignment or assignments of at least 90%
of the inforce revenues of the Company as projected in the May 6, 2002
spreadsheet entitled "Net Renewal Revenue Projections" attached hereto as
Schedule 6.1(j) and all associated work-in-process;
(k) Long and ▇▇▇▇▇▇ have entered into agreements
satisfactory to Purchaser to assist Purchaser with transitioning of the
Company's clients for six (6) months following the Closing Date without
compensation, including a seven (7) year noncompetition and nondisclosure
agreement with respect to the sale, development or administration of
employer-owned or employer-sponsored life insurance products;
(l) ▇▇▇ and ▇▇▇▇▇▇ have entered into employment
agreements satisfactory to Purchaser for a term of five (5) years with base
salary and bonuses substantially equal to their respective current compensation,
including a two (2) year noncompetition and nondisclosure agreement, with
respect to the sale, development or administration of employer-owned or
employer-sponsored life insurance products;
(m) ▇▇▇▇ shall have entered into an agreement with the
Purchaser containing substantially the same noncompetition and nondisclosure
provisions by which he is bound under the Company's Amended and Restated
Operating Agreement, except that ▇▇▇▇ shall not be required to make the payments
described in Section 3.2(c)(v) of the Company's Amended and Restated Operating
Agreement;
(n) Norton and ▇▇▇▇▇▇▇ shall have entered into employment
agreements satisfactory to Purchaser containing terms and conditions similar to
the Company's standard producer agreements (excluding any existing profit
sharing or profit distribution agreements) which contain a five (5) year
noncompetition and nondisclosure agreement with respect to the
30
sale, development or administration of employer-owned or employer-sponsored life
insurance products;
(o) ▇▇▇▇▇ ▇▇▇▇ ("▇▇▇▇") and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇")
shall have entered into employment agreements satisfactory to Purchaser
containing terms and conditions similar to the Company's standard producer
agreements (excluding any existing profit sharing or profit distribution
arrangements);
(p) The Members receiving CBI Common Stock shall have
entered into Investment Letters containing customary investment representations
satisfactory to Purchaser as provided in Section 2.5(a);
(q) The Company shall have a positive Net Asset Amount as
of the Closing Date as provided for on the Estimated Closing Balance Sheet and
for purposes hereof "Net Asset Amount" shall be an amount equal to the excess of
the Company's assets (other than the Excluded Assets) at such time over the
Company's liabilities (other than the Excluded Liabilities) at such time; and
(r) CBC Insurance Revenue Securitization, LLC shall have
sold notes resulting in net proceeds to the Purchaser in an aggregate amount of
not less than $305,000,000 pursuant to an offering memorandum substantially in
the form of the draft offering memorandum dated September 26, 2002.
Any conditions specified in this Section 6.1 may be waived by Purchaser;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Purchaser, except as otherwise provided in Section 10.3.
ARTICLE 7
CONDITIONS TO THE COMPANY'S AND MEMBERS' OBLIGATION TO CLOSE
------------------------------------------------------------
7.1 Conditions to the Company's Obligations. The obligation of
the Company and the Members to consummate the transactions contemplated by this
Agreement are subject to the satisfaction of the following conditions on or
before the Closing Date:
(a) the representations and warranties set forth in
Article 4 hereof shall be true and correct in all material respects at and as of
the Closing as though then made and as though the Closing Date was substituted
for the date of this Agreement throughout such representations and warranties;
(b) CBI Companies shall have performed in all material
respects all the covenants and agreements required to be performed by it under
this Agreement prior to the Closing;
(c) the Members shall have received from Purchaser's
counsel, Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, an opinion addressed to the Members
and dated the Closing Date, in form and substance reasonably satisfactory to the
Company; and
31
(d) all proceedings to be taken by the CBI Companies in
connection with the consummation of the Closing and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby reasonably
requested by the Company shall be reasonably satisfactory in form and substance
to the Company and its counsel.
Any condition specified in this Section 7.1 may be waived by the Company;
provided that no such waiver shall be effective against the Company unless it is
set forth in a writing executed by the Company, except as otherwise provided in
Section 10.3.
ARTICLE 8
CLOSING TRANSACTIONS
--------------------
8.1 The Closing. Subject to the conditions contained in this
Agreement, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
at 10:00 a.m. local time on October 22, 2002, or at such other place or on such
other date as may be mutually agreeable to the parties. The date and time of the
Closing are referred to herein as the "Closing Date."
8.2 Action to Be Taken at the Closing. The sale, conveyance and
assignment of the Interests and delivery of the Closing Assets and the payment
of the Purchase Price pursuant to the terms of this Agreement shall take place
at the Closing, and, simultaneously, the other transactions contemplated by this
Agreement shall take place by the delivery of all of the closing documents set
forth in Section 8.3.
8.3 Closing Documents.
(a) The Company and the Members shall deliver to the CBI
Companies at the Closing the following documents, duly executed by the Company
and the Members where necessary to make them effective:
(i) a certificate of each Member in the form set
forth in Exhibit D attached hereto, stating that the preconditions
specified in Section 6.1(a) through (q) have been satisfied and that
all representations and warranties of the Members and Company are true
and correct in all material respects as of the Closing;
(ii) copies of all necessary third party and
governmental consents, approvals, releases and filings required in
order to effect the transactions contemplated by this Agreement;
(iii) such instruments of sale, transfer,
assignment, conveyance and delivery, as are required in order to
transfer to Purchaser good and marketable title to the Interests, free
and clear of all liens, charges, security interests and other
encumbrances, except for Permitted Encumbrances;
(iv) such estoppel certificates and assignment
with respect to the Lease as Purchaser may reasonably request;
32
(v) certified copies of the resolutions duly
adopted by the Managers and Members of the Company authorizing the
execution, delivery and performance of this Agreement and each of the
other agreements contemplated hereby, and the consummation of all other
transactions contemplated by this Agreement;
(vi) all of the Company's contracts and
commitments, files, books, records and other data relating to the
Business and the Closing Assets (except Excluded Assets);
(vii) copies of good standing certificates in all
jurisdictions where the Company is qualified to do business in which
ownership of the Interests, Closing Assets or the conduct of the
Business requires the Company to be so qualified;
(viii) a certificate of a Manager of the Company,
certifying as to the correctness and completeness of the Articles of
Organization and Operating Agreement of the Company, as appropriate,
and all amendments thereto;
(ix) the Escrow Agreement and Lease Assignment;
(x) the assistance and noncompetition agreements
of Long and ▇▇▇▇▇▇ referred to in Section 6.1(k);
(xi) the employment agreement of ▇▇▇ and ▇▇▇▇▇▇
referred to in Section 6.1(l);
(xii) the noncompetition agreement of ▇▇▇▇
referred to in Section 6.1(m);
(xiii) the employment agreements of Norton and
▇▇▇▇▇▇▇ referred to in Section 6.1(n).
(xiv) the employment agreements of ▇▇▇▇ and
▇▇▇▇▇▇▇ referred to in Section 6.1(o);
(xv) the investment letters referred to in
Section 6.1(p);
(xvi) such other documents or instruments,
including, without limitation, such documents as are necessary to
enable Purchaser to establish, securitize and fund a special purpose
vehicle established by Purchaser as part of a financing, as CBI
Companies may reasonably request to effect the transactions
contemplated hereby.
All of the foregoing documents in this Section 8.3(a) shall be
reasonably satisfactory in form and substance to CBI Companies and shall be
dated the Closing Date.
(b) CBI Companies shall deliver to the Company and the
Members at the Closing the following items, duly executed by CBI Companies where
necessary to make them effective:
33
(i) the amount of the Purchase Price payable at
Closing as provided in Section 2.1;
(ii) the CBI Common Stock to be delivered at
Closing as provided in Section 2.1;
(iii) an officer's certificate in the form set
forth as Exhibit E attached hereto, stating that the preconditions
specified in Section 7.1 (a) through (d) hereof have been satisfied and
that all representations and warranties of the CBI Companies are true
and correct in all material respects as of the Closing;
(iv) copies of all necessary third party and
governmental consents, approvals, releases and filings required in
order for Purchasers to effect the transactions contemplated by this
Agreement;
(v) the assistance and noncompetition agreement
of Long and ▇▇▇▇▇▇ referred to in Section 6.1(k);
(vi) the employment agreement of ▇▇▇ and ▇▇▇▇▇▇
referred to in Section 6.1(l);
(vii) the noncompetition agreement of ▇▇▇▇
referred to in Section 6.1(m);
(viii) the producer agreements of Norton, ▇▇▇▇▇▇▇
and all of the Company's other producers referred to in Section 6.1(n);
(ix) the employment agreements of ▇▇▇▇ and
▇▇▇▇▇▇▇ referred to in Section 6.1(o);
(x) the investment letters referred to in
Section 6.1(p);
(xi) the Escrow Agreement and Lease Assignment;
(xii) an agreement executed by CBI Companies, Long
and AUSA regarding the Board of Directors; and
(xiii) such other documents or instruments as the
Company reasonably may request to effect the transactions contemplated
hereby.
All of the foregoing documents in this Section 8.3(b) shall be
reasonably satisfactory in form and substance to the Company and shall be dated
as of the Closing Date.
8.4 Possession. Simultaneously with the Closing, the Company and
the Members shall take such steps as may be requisite or desirable to put
Purchaser in actual possession and operating control of the Company Business and
the Closing Assets.
34
8.5 Nonassignable Contracts. Without in any way limiting the
Company's obligation to obtain those consents required hereunder for the sale,
transfer, assignment and delivery of the Interests, if any such consent is not
obtained or if the Company is unable to retain the benefit of the Closing Assets
following the Closing for reasons other than the Company's post-closing action,
the Members shall cooperate with the Purchaser in any reasonable arrangement
designed by Purchaser to provide Purchaser with the rights and benefits of the
Interests and Closing Assets, and, if requested by Purchaser, the Members shall
act as an agent on behalf of Purchasers or as Purchasers shall otherwise
reasonably require, in each case at Members' cost.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Members. The Members, severally but not
jointly, agree to and shall indemnify in full the CBI Companies and their
respective officers, directors, employees, and agents (collectively, the
"Purchasers Indemnified Parties") and defend and hold them harmless against any
loss, liability, deficiency, damage, expense or cost (including reasonable legal
expenses), that Purchasers Indemnified Parties may suffer, sustain or become
subject to, as a result of (a) any misrepresentation in any of the
representations or breach of any of the warranties of the Company or the Members
contained in this Agreement or in any exhibits, schedules, certificates or other
agreements or documents delivered or to be delivered pursuant to the terms of
this Agreement or otherwise incorporated in this Agreement (collectively, the
"Related Documents"), (b) any breach of, or failure to perform, any agreement or
covenant of the Company or the Members contained in this Agreement or any of the
Related Documents, or (c) the Excluded Liabilities (collectively, "Purchasers
Losses"). In the event any Purchaser Indemnified Party incurs any Purchasers
Losses, the CBI Companies, in addition to all other rights and remedies
available to them, shall have the right to collect such Purchasers Losses from
the amount of the Purchase Price which is held in an interest bearing escrow
pursuant to the Escrow Agreement.
9.2 Indemnification by CBI Companies. CBI Companies agree to
indemnify in full the Members (the "Seller Indemnified Parties") and hold them
harmless against any losses, loss, liability, deficiency, damage, expense or
cost (including reasonable legal expenses), which the Seller Indemnified Parties
may suffer, sustain or become subject to as a result of (a) any
misrepresentation in any of the representations or breaches of any of the
warranties of CBI Companies contained in this Agreement or in any of the Related
Documents, (b) any breach of, or failure to perform, any agreement of CBI
Companies contained in this Agreement or any of the Related Documents, or (c)
the Assumed Liabilities (collectively, "Seller Losses") (Purchasers Losses and
Seller Losses shall collectively be referred to as the "Losses").
9.3 Method of Asserting Claims. As used herein, an "Indemnified
Party" shall refer to a "Purchasers Indemnified Party" or "Seller Indemnified
Party," as applicable, the "Notifying Party" shall refer to the party hereto
whose Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
35
(a) In the event that any of the Indemnified Parties is
made a defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for the liability or the costs or
expenses of which are Seller Losses or Purchasers Losses, as the case may be
(any such third party action or proceeding being referred to as a "Claim"), the
Notifying Party shall give the Indemnifying Party prompt notice thereof. The
failure to give such notice shall not affect any Indemnified Party's ability to
seek reimbursement unless such failure has materially and adversely affected the
Indemnifying Party's ability to defend successfully a Claim. The Indemnifying
Party shall be entitled to contest and defend such Claim; provided, that the
Indemnifying Party (i) has a reasonable basis for concluding that such defense
may be successful and (ii) diligently contests and defends such Claim. Notice of
the intention so to contest and defend shall be given by the Indemnifying Party
to the Notifying Party within twenty (20) business days after the Notifying
Party's notice of such Claim (but, in all events, at least five (5) business
days prior to the date that an answer to such Claim is due to be filed). Such
contest and defense shall be conducted by reputable attorneys employed by the
Indemnifying Party. The Notifying Party shall be entitled at any time, at its
own cost and expense (which expense shall not constitute a Loss unless the
Notifying Party reasonably determines that the Indemnifying Party is not
adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties), to participate
in such contest and defense and to be represented by attorneys of its or their
own choosing. If the Notifying Party elects to participate in such defense, the
Notifying Party shall cooperate with the Indemnifying Party in the conduct of
such defense. Neither the Notifying Party nor the Indemnifying Party may
concede, settle or compromise any Claim without the consent of the other party,
which consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, in the event the Indemnifying Party fails or is not entitled to
contest and defend a claim, the Notifying Party shall be entitled to contest,
defend and settle such Claim.
(b) In the event any Indemnified Party should have a
claim against any Indemnifying Party that does not involve a Claim, the
Notifying Party shall deliver a notice of such claim with reasonable promptness
to the Indemnifying Party. If the Indemnifying Party notifies the Notifying
Party that it does not dispute the claim described in such notice or fails to
notify the Notifying Party within thirty (30) days after delivery of such notice
by the Notifying Party whether the Indemnifying Party disputes the claim
described in such notice, the Loss in the amount specified in the Notifying
Party's notice shall be conclusively deemed a liability of the Indemnifying
Party and the Indemnifying Party shall pay the amount of such Loss to the
Indemnified Party on demand. If the Indemnifying Party has timely disputed its
liability with respect to such claim, a representative of each of the
Indemnifying Party and the Notifying Party (or their respective designees) shall
proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through the negotiations of such representatives or designees within
sixty (60) days after the delivery of the Notifying Party's notice of such
claim, such dispute (except for any such dispute which gives rise or could give
rise to equitable relief under this Agreement) shall be resolved fully and
finally in Chicago,
Illinois by arbitration in accordance with Section 12.12.
9.4 Escrow Amount. Members agree that in addition to any other
rights or remedies available to CBI Companies, CBI Companies may draw upon the
Escrow Account pursuant to the Escrow Agreement, including, without limitation,
(i) any of the obligations of Members or
36
any of them under Section 9.1 of this Agreement (as limited by Section 9.5), and
(ii) any amount due from the Members in connection with the final determination
of Current Net Asset Amount.
9.5 Limitations on Indemnification. The indemnification provided
for in this Article 9 (except as otherwise provided hereunder) shall be subject
to the following limitations:
(a) Deductible Amount. Subject to Section 9.5(c), CBI
Companies shall have no right to receive any indemnification from the Members
with respect to Purchasers Losses until the sum of such Purchasers Losses
exceeds, in the aggregate, $500,000 (the "Deductible Amount"), and then only in
the amount by which Purchasers Losses exceed such Deductible Amount. Subject to
Section 9.5(c), Members shall have no right to receive any indemnification from
CBI Companies with respect to Seller Losses until the sum of such Seller Losses
exceeds, in the aggregate, $500,000, and then only in the amount by which Seller
Losses exceed such amount.
(b) Ceiling on Indemnified Losses. Subject to Section
9.5(c), the liability of the Members to CBI Companies under Section 9.1 hereof
for all Purchasers Losses shall not exceed, in the aggregate, $40,000,000.
Subject to Section 9.5(c), the liability of CBI Companies to the Members under
Section 9.2 hereof for all Seller Losses shall not exceed, in the aggregate,
$40,000,000;
(c) No Limitations. The parties acknowledge and agree
that there shall be no limits on indemnification with respect to (i) any amount
due from the Members in connection with the final determination of the Net
Current Asset Amount, (ii) any amount due from the Purchasers in connection with
the final determination of the Net Current Asset Amount, (iii) any Purchasers
Losses as a result of any chargebacks related to any commissions, (iv) any
Assumed Liability described in Section 1.4(c) hereof, and (v) any Claim related
to a breach of a representation or warranty where a Member had actual knowledge
of such breach at Closing and intentionally and willfully failed to disclose
such breach.
(d) Pro Rata Amount of Losses. Each Member shall only be
liable for his or its pro rata share of any Purchasers Losses in accordance with
the percentages for each Member pursuant to Exhibit A.
9.6 Insurance Benefits; Tax Benefits. The amount of loss to which
either party shall be entitled to indemnification under this Article 9 shall be
limited to the amount by which the losses exceed the amounts received by an
Indemnified Party under its insurance plans. Any indemnification payment made
hereunder shall also be net of any tax benefits the Indemnified Party receives
and is able to utilize to reduce its taxes. The Indemnifying Party shall pay any
Claim in full and shall be reimbursed by the Indemnified Party for any insurance
proceeds received or any tax benefits obtained. If any amounts are owed the
Indemnifying Party by the Indemnified Party hereunder, such amount shall be paid
within fifteen (15) days of receipt of the benefit to the Indemnified Party.
9.7 Exclusive Remedy. Except as provided for in Section 11.7
hereof, the parties acknowledge and agree that the foregoing provisions of this
Article 9 shall be the exclusive
37
remedy of CBI Companies and the Members with respect to any dispute or claim
arising out of this Agreement.
9.8 Adjustment to Purchase Price. The parties agree that, to the
extent allowable under relevant tax authorities, the payment of any
indemnification hereunder shall be treated for tax purposes as an adjustment to
the Purchase Price paid by Purchaser.
ARTICLE 10
TERMINATION
-----------
10.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent of CBI Companies and the
Company;
(b) by either CBI Companies or the Company if there has
been a material misrepresentation or breach of warranty or breach of covenant on
the part of the other party in the representations and warranties or covenants
set forth in this Agreement and any such misrepresentation or breach, if capable
of cure, is not cured within fifteen (15) days after written notice thereof to
such other party, or if events have occurred which have made it impossible to
satisfy a condition precedent to the terminating party's obligations to
consummate the transactions contemplated hereby (other than as a result of any
willful act or omission by the terminating party); or
(c) by either CBI Companies or the Company if the
transactions contemplated hereby have not been consummated by October 25, 2002;
provided, that neither CBI Companies nor the Company shall be entitled to
terminate this Agreement pursuant to this subsection (c) if such party's willful
breach of this Agreement, respectively, has prevented the consummation of the
transactions contemplated hereby.
10.2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void, and
there shall be no liability on the part of the Company or CBI Companies, except
for willful breaches of this Agreement prior to the time of such termination and
except for the provisions of Section 11.7.
10.3 Effect of Closing. The Company and the Members shall be
deemed to have waived their respective rights to terminate this Agreement upon
the completion of the Closing. No such waiver shall constitute a waiver of any
other rights arising from the non-fulfillment of any condition precedent set
forth in Article 6 or 7 unless such waiver is made in writing.
ARTICLE 11
ADDITIONAL AGREEMENTS
---------------------
11.1 Survival. The representations and warranties set forth in
this Agreement or in any writing delivered to the CBI Companies or to the
Company or the Members in connection with this Agreement shall survive the
Closing Date for a period of two years and the consummation of the transactions
contemplated hereby and shall not be affected during that two-year period by
38
any examination made for or on behalf of the CBI Companies or the Company or the
Members, the knowledge of any of the CBI Companies or Company or Members,
managers, employees or agents, or the acceptance by the CBI Companies or the
Company or any Member of any certificate or opinion; provided, however, that the
two-year limitation on survival shall not apply to any Claim of which notice is
given within two years following the Closing Date or any Claim for a breach of a
representation or warranty where a Member had actual knowledge of such breach at
Closing and intentionally and willfully failed to disclose such breach.
11.2 Mutual Assistance. Subsequent to the Closing, the Company and
the Members on the one hand and CBI Companies on the other, at their own cost,
shall assist each other (including making records available) in the preparation
of their respective tax returns and the filing and execution of tax elections,
if required, as well as any audits or litigation that may ensue as a result of
the filing thereof, to the extent that such assistance is reasonably requested.
11.3 Press Release and Announcements. No press release related to
this Agreement or the transactions contemplated hereby, or other announcements
to the employees, customers or suppliers of the Company, shall be issued without
the joint approval of CBI Companies and the Company. No other public
announcement related to this Agreement or the transactions contemplated hereby
shall be made by either party, except as required by law, in which event the
parties shall consult as to the form and substance of any such announcement
required by law.
11.4 Expenses. Each party shall pay all of its expenses in
connection with the negotiation of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated by
this Agreement. The Members shall pay, if any, the cost of recording all
documents necessary to place record title to the Interests in the condition
warranted by or required of Members by this Agreement.
11.5 Further Transfers. After the Closing, the Members shall, and
shall cause its affiliates to, execute and deliver such further instruments of
conveyance and transfer and take such additional action as Purchaser may
reasonably request to effect, consummate, confirm or evidence the transfer to
Purchaser of the Interests. Members shall execute such documents as may be
necessary to assist Purchaser (or its designees) in preserving or perfecting its
rights in the Closing Assets.
11.6 Transition Assistance. From the date hereof and until five
(5) years after the Closing, the Members shall not in any manner take any action
which is designed, intended or might be reasonably anticipated to have the
effect of discouraging customers, suppliers, lessors, employees, sales agents
and other business associates from maintaining the same business relationships
with Purchaser and the Company after the date of this Agreement as were
maintained with the Company prior to the date of this Agreement.
11.7 Confidentiality. If the transactions contemplated by this
Agreement are not consummated, the CBI Companies shall maintain the
confidentiality of all information and materials received by it reasonably
designated by the Company as confidential, and the CBI Companies shall return to
the Company or destroy any materials (and copies thereof) obtained from the
Company in connection with the transactions contemplated hereby. Whether or not
the transactions contemplated hereby are consummated, the Company and the
Members shall
39
maintain the confidentiality of all information and materials regarding
the CBI Companies and their affiliates, reasonably designated as confidential by
the CBI Companies. If the transactions contemplated by this Agreement are
consummated, the Members shall maintain the confidentiality of all proprietary
and other non-public information regarding the Company, the Business and the
Closing Assets and shall turn over to CBI Companies all such materials in their
possession.
11.8 Non-Compete; Non-Solicitation.
(a) Although it is understood among the parties that each
of Long, Miller, Norton, Twilley, Lee, and ▇▇▇▇▇▇ (the "Individual Members")
desire to no longer engage in business operations similar to that of the
Business, other than as an employee of the Purchaser (except for Long and ▇▇▇▇▇▇
who will not become employees of Purchaser), as an additional inducement to CBI
Companies to enter into and to perform their obligations under this Agreement,
(i) Norton and ▇▇▇▇▇▇▇ each agrees that, for a period of five (5) years after
the Closing Date, and ▇▇▇ and ▇▇▇▇▇▇ each agrees that, for a period of two (2)
years after the Closing Date (the "Non-Competition Period"), no such Individual
Member (other than on behalf of the Purchaser, if applicable) shall accept
employment with or render services for compensation (including without
limitation, consultation or research) to, or acquire any kind of ownership in,
or otherwise assist in any manner, any person or entity which is engaged in the
design, development, marketing, sale, administration or support of any
employer-owned or employer-sponsored life insurance product or service similar
to those of the Business which are sold to third-parties in the United States;
provided, however, that nothing herein shall prohibit the ownership by such
Individual Member of less than 5% of the capital stock of any corporation having
a class of securities registered pursuant to the 1934 Act; and (ii) Long and
▇▇▇▇▇▇ each agrees that, for a period of seven (7) years after the Closing Date
(the "Non-Competition Period"), no such Individual Member (other than on behalf
of the Purchaser, if applicable) shall accept employment with or render services
for compensation (including without limitation, consultation or research) to, or
acquire any kind of ownership in, or otherwise assist in any manner, any person
or entity which is engaged in the design, development, marketing, sale,
administration or support of any employer-owned or employer-sponsored life
insurance product or service similar to those of the Business which are sold to
third-parties in the United States if the relationship between the Individual
Member and any such person or entity includes any responsibilities by the
Individual Member whatsoever with respect to any employer-owned or
employer-sponsored life insurance product or service sold to third parties in
the United States; provided, however, that nothing herein shall prohibit the
ownership by such Individual Member of less than 5% of the capital stock of any
corporation having a class of securities registered pursuant to the 1934 Act.
(b) Each of Norton and ▇▇▇▇▇▇▇ agrees that for a period
of five (5) years after the Closing, each of Long and ▇▇▇▇▇▇ agrees that for a
period of seven (7) years after the Closing and each of ▇▇▇ and ▇▇▇▇▇▇ agrees
that for a period of two (2) years after Closing, he shall not directly or
indirectly offer employment to or hire any current or future employee or sales
agent of the Company without the prior written consent of the Company; provided,
however, that either Long or ▇▇▇▇▇▇ may hire ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at any time after
the first anniversary of the Closing.
40
(c) If, at the time of enforcement of this Section 11.8,
a court shall hold that the duration, scope or area restrictions stated herein
are unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area.
(d) Each Individual Member recognizes and affirms that in
the event of breach by him of any of the provisions of this Section 11.8 money
damages would be inadequate and the CBI Companies would not have any adequate
remedy at law. Accordingly, the Individual Members agree that the CBI Companies
shall have the right, in addition to any other rights and remedies existing in
their favor, to enforce their rights and the obligations under this Section 11.8
by an action or actions for specific performance, injunction and/or other
equitable relief without posting any bond or security to enforce or prevent any
violations, whether anticipatory, continuing or future, of the provisions of
this Section 11.8, including, without limitation, the extension of the
Non-Competition Period by a period equal to (i) the length of the violation of
this Section 11.8 plus (ii) the length of any court proceedings necessary to
stop such violation. In the event of a breach or violation by any Individual
Member of any of the provisions of this Section 11.8, the running of the
Non-Competition Period, but not of such Individual Member's obligations under
this Section 11.8, shall be tolled during the period during which the occurrence
of any such breach or violation is investigated and during the continuance of
any such breach or violation.
11.9 Specific Performance. The Company and the Members
acknowledge that the Company, the Business and the Closing Assets are unique and
recognize and affirm that in the event of a breach of this Agreement by the
Company or the Members, money damages would be inadequate and the CBI Companies
would have no adequate remedy at law. Accordingly, the Company and the Members
agree, jointly and severally, that the CBI Companies shall have the right, in
addition to any other rights and remedies existing in their favor, to enforce
their rights and the Company's and the Members' obligations hereunder by an
action or actions for specific performance, injunction and/or other equitable
relief, without posting any bond or security.
11.10 Remittances. All remittances, mail and other communications
relating to the Closing Assets or the Business received by the Members or any
employee of the Company, at any time after the Closing Date shall be immediately
turned over to, or as directed by, the CBI Companies by such parties. Members
shall cooperate with the CBI Companies, and take such actions as the CBI
Companies reasonably requests, to assure that customers of the Business send
their remittances directly to, or as directed by, the CBI Companies or the
Company, and to assure that remittances from customers of the Business which are
improperly sent to Members are not commingled with the Members' assets and are
turned over to, or as directed by, the CBI Companies.
11.11 Best Efforts To Consummate Closing Transactions. On the terms
and subject to the conditions contained in this Agreement, the Members and the
CBI Companies agree to use their best efforts to take, or to cause to be taken,
all reasonable actions, and to do, or to cause to be done, all reasonable
things, necessary, proper or advisable under applicable laws and regulations to
consummate, as soon as reasonably practicable, the Closing, including the
satisfaction of all conditions thereto set forth herein.
41
11.12 Greensboro, N.C. Operation. The operations of the Company
shall become part of Consulting's Banking Practice. The cases related to the
Commissions shall continue to be administered on a day-to-day basis out of
Greensboro, North Carolina for five (5) years following the Closing Date.
Insofar as it is practicable to do so, the use of the business name "Long,
▇▇▇▇▇▇ & Associates, LLC" will be discontinued within one (1) year following the
Closing and will only be used during such period to transition ownership of the
Company from the Members to the Purchaser.
11.13 ▇▇▇▇▇▇▇▇ Payment. In recognition of his assistance, Members
agree to pay ▇▇▇ ▇▇▇▇▇▇▇▇ $300,000 on the Closing Date.
11.14 Post-Closing Cooperation, Licenses.
(a) CBI Companies and Members agree that after the
Closing, upon the reasonable request of Members or CBI Companies, as applicable,
it shall make available, and shall cause any successors or assigns to make
available, during normal business hours and in a manner that will not interfere
with the normal business operations of CBI Companies, such books and records
relating to the Company, the Closing Assets or the Members as maybe reasonably
requested from time to time by the CBI Companies or the Members, as applicable.
(b) ▇▇▇▇▇▇, Long and ▇▇▇▇▇▇▇ agree to maintain all their
insurance licenses for a period not to exceed five (5) years as requested by the
CBI Companies and at the CBI Companies' expense, following the Closing Date and
agree to take any reasonable steps requested of such Member in order to transfer
any and all rights he has to the Commissions, if any, to the Company or its
assigns.
11.15 Operating Agreement. The Members hereby agree that following
the Closing, no Member shall have any right or obligation under that certain
Amended and Restated Operating Agreement dated as of July 1, 2001 (the
"Operating Agreement").
11.16 Tax Matters. Members and the CBI Companies acknowledge that
the purchase of the Interests shall be treated as a purchase of the Company's
assets by the Purchaser for tax purposes. Accordingly, the Members hereby
covenant and agree that the Company shall be deemed to have been terminated for
federal income tax purposes as of the Closing Date and the Members shall be
responsible for the filing of the Company's final tax returns for any period up
through and including the Closing Date. Any Taxes of the Company which relate to
any period on or prior to the Closing Date and which are not reflected on the
Closing Balance Sheet shall be the responsibility of the Members and Members
shall indemnify and hold harmless the CBI Companies for any such Taxes relating
to periods on or prior to the Closing Date.
11.17 AUSA Services Agreement. Each Member and the Company
acknowledge that the Company shall have no rights under that certain
Administrative Services Agreement dated September 25, 2002 among Life Insurance
Company of America, Transamerica Life Insurance Company and the Company ("AUSA
Services Agreement") on or prior to the Closing and that such agreement shall
not be effective until the Closing.
42
11.18 COBRA Coverage. Following the Closing, the CBI Companies
shall provide COBRA continuation coverage to Long, Miller, Mann, ▇▇▇▇ ▇▇▇▇▇▇▇
and any other employee of the Company who terminates employment prior to or in
connection with the Closing.
11.19 Termination of Money Purchase Pension Plan. The Company shall
take the necessary steps to terminate its Money Purchase Pension Plan upon
execution of this Agreement.
11.20 Assignment of Rights in any Commissions by Members. Each
Member hereby agrees to and does hereby assign any and all rights it has in the
Commissions to the Company and any agreements related thereto and agrees to take
such additional action as Purchaser may reasonably request to effect,
consummate, confirm or evidence such assignment.
11.21 Payment of Liabilities. Subject to the indemnification
provisions of Article 9, on or before their respective due dates, CBI Companies
shall pay and satisfy in full (or cause to be paid and satisfied in full) all of
the Assumed Liabilities, and the Members shall pay and satisfy in full (or cause
to be paid and satisfied in full) all of the Excluded Liabilities.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Amendment and Waiver. This Agreement may be amended, and any
provision of this Agreement may be waived; provided that any such amendment or
waiver, unless otherwise provided for hereunder, shall be binding on the Company
and each of the Members only if such amendment or waiver is set forth in a
writing executed by the Company and each of the Members and that any such
amendment or waiver shall be binding upon the CBI Companies only if such
amendment or waiver is set forth in a writing executed by the CBI Companies. No
course of dealing between or among any persons having any interest in this
Agreement shall be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any person under or by reason of
this Agreement.
12.2 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when personally delivered,
mailed by first class mail, return receipt requested or delivered by a
nationally recognized courier service. Notices, demands and communications to
the Company, Members or the CBI Companies shall, unless another address is
specified in writing in accordance herewith, be sent to the address indicated
below:
43
Notices to Members
------------------
AUSA Holding Company
c/o Life Investors Insurance Company of America
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
---------------
Lord, Bissell & Brook
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ P.L.L.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Notices to CBI Companies
------------------------
▇▇▇▇▇/▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
44
with a copy to:
---------------
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Block, Esq.
Lane ▇. ▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
12.3 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legatees, personal representatives, successors and permitted
assigns, as the case may be, but neither this Agreement nor any of the rights,
interests or obligations hereunder of the Company or any Member shall be
assignable by the Company or any Member without the prior written consent of the
CBI Companies. CBI Companies may assign this Agreement without restriction to
any of its affiliates, existing as of the date hereof or in the future; provided
the CBI Companies unconditionally guarantees to the Company and the Members at
the time of such assignment the prompt and complete performance of all of such
affiliates' obligations hereunder.
12.4 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
12.5 No Third Party Beneficiaries. Exceptfor ▇▇▇ ▇▇▇▇▇▇▇▇ under
Section 11.13, nothing in this Agreement, whether express or implied, is
intended to confer any rights or remedies under or by reason of this Agreement
on any other persons other than the parties hereto and their respective
successors, permitted assigns, heirs, legatees and personal representatives, as
the case may be, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any party, nor
shall any provision give any third parties any right of subrogation or action
over or against any party.
12.6 No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
person.
12.7 Captions. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
12.8 Complete Agreement. This document and the documents referred
to herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
45
12.9 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument.
12.10 Governing Law. The internal law, not the law of conflicts,
of the State of
Illinois shall govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement. The parties consent to the jurisdiction
of the courts of the State of
Illinois and any federal court located in such
state in connection with any action or proceeding arising out of this Agreement.
The parties waive any objection they may have to the laying of venue in the
state or federal courts located in Chicago,
Illinois of any action or proceeding
arising out of this letter agreement.
12.11 Remedies Cumulative. All remedies of the parties provided
herein shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any thereof or of any other remedies available to the parties, by
judicial proceedings or otherwise, to enforce the performance or observance of
the covenants and agreements contained herein, and every remedy given herein or
by law to any party hereto may be exercised from time to time, and as often as
shall be deemed expedient, by such party.
12.12 Arbitration. Except as provided for in Section 2.3 hereof,
without limiting the right of any party to seek equitable relief to prevent
irreparable injury, any dispute arising out of or relating to this Agreement or
the breach, termination or validity thereof, which has not been resolved by
agreement within 60 days after written notice thereof by the affected party
shall be settled by arbitration in accordance with the then current Center for
Public Resources Rules for Non-Administered Arbitration of Business Disputes, by
three arbitrators with experience in the life insurance industry. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. ss.
1-16, and judgment upon the award rendered by the arbitrator may be entered by
any court having jurisdiction thereof. The place of arbitration shall be
Chicago,
Illinois. The arbitrator is not empowered to award damages in excess of
compensatory damages and each party hereby irrevocably waives any right to
recover such damages with respect to any dispute resolved by arbitration.
[SIGNATURE PAGES FOLLOW]
46
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
▇▇▇▇▇/▇▇▇▇▇▇, INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
----------------------------------
Its: CEO
----------------------------------
▇▇▇▇▇/▇▇▇▇▇▇ CONSULTING, INC. LONG, ▇▇▇▇▇▇ & ASSOCIATES, LLC
By: /s/ ▇.▇. ▇▇▇▇▇▇▇ By: /s/
-------------------------------- ----------------------------
Its: CEO Its: Member
-------------------------------- ----------------------------
MEMBERS
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ AUSA Holding Company
-----------------------------------
AUSA Holding Company
47