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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of February 18, 1997,
among
Millers Integrated Claims Resources, Inc.
Millers Merger Corporation
Strategic Data Systems, Inc.
and the Management Shareholders
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TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 THE MERGER, EFFECTIVE TIME, PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation; Bylaws; Directors and Officers . . . . . . . . . . . . . . . . . 2
1.5 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Price and Payment of Cash for Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Escrow for Certain Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Shareholders' Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.9 Taking of Necessary Action; Further Action . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF
MILLERS AND MERGER SUB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE MANAGEMENT SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Organization, Good Standing, Power, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Authorized Capitalization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.8 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.10 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.11 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.12 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.14 Patents, Trademarks, Franchises, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.15 Loans, Notes, Accounts Receivable and Accounts Payable . . . . . . . . . . . . . . . . . . 19
3.16 Corporate Documents, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.17 Absence of Sensitive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.20 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.21 Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.22 Directors and Officers; Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.23 Ownership, Quality and Location of Material Assets . . . . . . . . . . . . . . . . . . . . 23
3.24 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.25 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.26 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.27 Shareholder Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.28 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.29 Credit Cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.30 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES
OF THE MANAGEMENT SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Power; Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.4 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 5 CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Conduct of Business by the Company Pending the Merger . . . . . . . . . . . . . . . . . . . 26
5.2 Conduct of Business by the Subsidiary Pending the Merger . . . . . . . . . . . . . . . . . 28
5.3 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6 COVENANTS OF THE COMPANY AND THE
MANAGEMENT SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.1 Shareholder Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.2 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3 No Shopping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.4 Approval of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.5 Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.6 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.7 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.8 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.9 Independent Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.10 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.11 Repayment of Shareholder Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.12 Shareholders' Agent Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.13 Employee Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 7 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.4 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.5 Information for Other Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 8 CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Conditions to Obligation of Each Party to Effect the Merger . . . . . . . . . . . . . . . . 35
8.2 Additional Conditions to the Obligation of the Company . . . . . . . . . . . . . . . . . . . 35
8.3 Additional Conditions to the Obligations of Millers and Merger Sub . . . . . . . . . . . . . 37
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 10 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.1 Indemnification for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Indemnification for Philadelphia Settlement Costs . . . . . . . . . . . . . . . . . . . . . 42
10.3 Indemnification for Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.5 Indemnification by Millers and Surviving Corporation . . . . . . . . . . . . . . . . . . . . 43
10.6 Shareholders Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.7 Procedures for Resolution and Payment of Claims for Indemnification . . . . . . . . . . . . . 44
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ARTICLE 11 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.1 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.6 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Schedules
Schedule 1.4 - Directors and Officers of Surviving Corporation
Schedule 3.3 - Partnerships and Joint Ventures
Schedule 3.4 - Effect of Agreement
Schedule 3.5 - Prepayment Penalties
Schedule 3.6 - Absence of Certain Changes or Events
Schedule 3.7 - Taxes
Schedule 3.8 - Real Property
Schedule 3.9 - Environmental Matters
Schedule 3.10 - Personal Property
Schedule 3.11 - Contracts
Schedule 3.12 - Legal Proceedings
Schedule 3.14 - Patents, Trademarks, Franchises, etc.
Schedule 3.18 - Insurance
Schedule 3.19 - Employees
Schedule 3.20 - Employee Plans
Schedule 3.21 - Transactions with Related Parties
Schedule 3.22 - Directors and Officers; Banks
Schedule 3.23 - Material Assets
Schedule 4.1 - Management Shareholders
Schedule 8.3(q) - Landlord Waivers and Estoppels
Schedule 8.3(u) - Copyright Assignments
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Exhibits
Exhibit A - Escrow Agreement
Exhibit B - Shareholders' Agent Agreement
Exhibit C - Form of Release
Exhibit D - Employment Agreements
Exhibit E - Form of Opinion for Millers
Exhibit F - Form of Opinion for Company
Exhibit G - Building Lease
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
18, 1997, is among Millers Integrated Claims Resources, Inc., a Texas
corporation ("Millers"), Millers Merger Corporation, a Wisconsin corporation
and a subsidiary of Millers ("Merger Sub"), Strategic Data Systems, Inc., a
Wisconsin corporation (the "Company"), and the shareholders of the Company set
forth on the signature page hereto which execute this Agreement (the
"Management Shareholders"). The Company and Merger Sub are hereinafter
collectively referred to as the "Constituent Corporations".
Whereas, Millers, as the sole shareholder of Merger Sub, and the
respective Boards of Directors of Merger Sub and the Company, have each
approved the merger of Merger Sub into the Company in accordance with the
Wisconsin Business Corporation Law (the "Wisconsin Law") and the provisions of
this Agreement; the Board of Directors of the Company has directed that the
Merger, as hereinafter defined, be submitted for approval by the shareholders
of the Company (the "Shareholders").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, Millers, Merger Sub, the Company and the Management
Shareholders hereby agree as follows:
ARTICLE 1
THE MERGER, EFFECTIVE TIME, PRICE
1.1 The Merger. At the Effective Time (as defined in Section 1.3
hereof), in accordance with this Agreement and the Wisconsin Law, Merger Sub
shall be merged (such merger being herein referred to as the "Merger") with and
into the Company, the separate existence of Merger Sub shall cease, and the
Company shall continue as the surviving corporation. The Company hereinafter
sometimes is referred to as the "Surviving Corporation."
1.2 Effect of the Merger. When the Merger has been effected, the
Surviving Corporation shall thereupon and thereafter possess all the rights,
privileges, powers and franchises of a public as well as of a private nature,
and be subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations; and all and singular, the rights, privileges, powers
and franchises of each of the Constituent Corporations and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, as well for stock subscriptions as all other things in
action or belonging to each of such corporations shall be vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the respective
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in any of such Constituent Corporations, shall not revert or be in
any way impaired by reason of the Merger; but all rights of creditors and all
liens upon any property of any of said Constituent Corporations shall be
preserved unimpaired, and all debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
1.3 Consummation of the Merger. As soon as is practicable after
the satisfaction or waiver of the conditions set forth in Article 8 hereof, the
parties hereto will cause the Merger to be consummated by filing with the
Department of Financial Institutions of Wisconsin an articles of
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merger and plan of merger in such form as required by, and executed in
accordance with, the relevant provisions of the Wisconsin Law (the time of such
filing being the "Effective Time" and the date of such filing being the
"Effective Date").
1.4 Articles of Incorporation; Bylaws; Directors and Officers.
The Articles of Incorporation and bylaws of the Surviving Corporation shall be
amended and restated to be identical with the Articles of Incorporation and
bylaws of the Merger Sub as in effect immediately prior to the Effective Time
until thereafter amended as provided therein and under the Wisconsin Law. The
initial directors of the Surviving Corporation shall be the persons listed on
Schedule 1.4 hereto. At the Effective Time, the officers of the Surviving
Corporation shall be the persons holding the respective offices listed on
Schedule 1.4 hereto. Such directors and officers shall serve in such
capacities until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and bylaws and the
Wisconsin Law.
1.5 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Millers, Merger Sub, the
Company or the holder of any of the shares (the "Shares") of common stock, no
par value (the "Common Stock") of the Company:
(a) Each Share issued and outstanding immediately prior
to the Effective Time (other than Dissenting Shares (as defined in Section
1.5(e)), shall be canceled and retired and be converted into and become a
right to receive cash in an amount equal to the Share Price, as defined in
Section 1.6 hereof.
(b) Each Share which is held in the treasury of the
Company or which is owned by any direct or indirect subsidiary of the
Company shall be canceled and retired, and no payment shall be made with
respect thereto.
(c) Each outstanding or authorized subscription, option,
warrant, call, right (including any preemptive right), commitment, or
other agreement of any character whatsoever which obligates or may
obligate the Company to issue or sell any additional shares of its capital
stock or any securities convertible into or evidencing the right to
subscribe for any shares of its capital stock or securities convertible
into or exchangeable for such shares, if any, shall be terminated, and no
payment shall be made with respect thereto.
(d) Each share of Common Stock, par value $0.01 per
share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully paid and,
subject to section 180.0622 of the Wisconsin Law, as interpreted,
nonassessable share of Common Stock, par value $0.01 per share, of the
Surviving Corporation.
(e) Each Share issued and outstanding immediately prior
to the Effective Time and held by a Shareholder who shall not have voted
in favor of the adoption of this Agreement and the approval of the Merger
and who has validly perfected dissenter's rights in accordance with the
Wisconsin Law shall not be converted into and become a right to receive
cash in an amount equal to the Share Price in accordance with the terms of
this Agreement (all such Shares are hereinafter referred to as "Dissenting
Shares"). The Company shall give Millers prompt notice upon receipt by
the Company of any written notice from any Shareholder who intends to
exercise dissenter's rights (a "Dissenting Shareholder"). The Company
agrees that prior to the Effective Time, it will not, except with prior
written consent of Millers, voluntarily make any payment with respect to,
or settle or offer to settle, any request for withdrawal pursuant to the
exercise of dissenter's
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rights. Each Dissenting Shareholder who becomes entitled, pursuant to the
provisions of applicable law, to payment for such Dissenting Shareholder's
shares of the Company shall receive payment therefor from the Surviving
Corporation (but only after the amount thereof shall be agreed upon or
finally determined pursuant to the provisions of applicable law). If any
Dissenting Shareholder shall fail to perfect or shall effectively withdraw
or lose such Dissenting Shareholder's right to receive the value of such
Dissenting Shareholder's Shares, each of such Dissenting Shareholder's
Shares shall thereupon be converted into a right to receive cash in an
amount equal to the Share Price in accordance with the terms of this
Agreement. The Surviving Corporation shall (i) assume the obligations, if
any, to pay the fair value of any Shares as to which the holders thereof
have perfected dissenters' rights under the Wisconsin Law and (ii) notify
the Disbursing Agent (hereinafter defined) of the names of the holders who
have, and the number of Shares with respect to which there are, perfected
statutory rights of dissenting shareholders. Persons who have perfected
statutory rights of dissenting shareholders as aforesaid shall not be paid
by the Disbursing Agent as provided in this Agreement except upon
instructions from the Surviving Corporation.
1.6 Price and Payment of Cash for Shares.
(a) The aggregate consideration for the Shares of the
Company shall be $18,000,000 multiplied by a fraction, the numerator of
which is the number of Shares to be converted under Section 1.5(a) and the
denominator of which is the number of Shares issued and outstanding
immediately prior to the Effective Date (the "Aggregate Share Price").
The "Share Price" shall be equal to the Aggregate Share Price divided by
the number of Shares to be converted under Section 1.5(a). At or prior to
the Effective Time, Millers shall deposit or cause to be deposited with
Norwest Bank Wisconsin, N.A. (the "Disbursing Agent") as agent for the
holders of Shares to be canceled pursuant to Section 1.5(a) (such holders
hereinafter referred to as the "Nondissenting Shareholders"), cash in an
amount (hereinafter referred to as the "First Installment") equal to (A)
the Aggregate Share Price less (B) the sum of (i) the aggregate amount of
the funds deposited in the escrow established pursuant to Section 1.7
hereof (the "Escrow Amount") and (ii) the amount, if any, of Shareholder
Expenses set forth in the Expense Notice as defined in Section 7.1 hereof.
The First Installment is designed to provide for an initial payment to the
Nondissenting Shareholders of their pro rata share of the Aggregate Share
Price net of the Escrow Amount and the amount of Shareholder Expenses set
forth in the Expense Notice (as defined in Section 7.1 hereof).
As soon as practicable after the Effective Time, but in any
event not later than seven days after the Effective Time, the Disbursing
Agent shall mail to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the
Effective Time represented Shares (individually, a "Certificate" and
collectively, the "Certificates"), a letter of transmittal and
instructions for use in effecting the surrender of the Certificates for
payment thereof. Upon surrender to the Disbursing Agent of a Certificate,
together with such duly executed letter of transmittal, the holder of such
Certificate shall, subject to the terms of Shareholders' Agent Agreement
(as defined in Section 1.8), receive in exchange therefor a check or wire
transfer in the amount equal to the difference between (i) the product of
(x) the First Installment and (y) a fraction, the numerator of which is
the number of Shares represented by such Certificate and the denominator
of which is the number of Shares to be converted pursuant to Section
1.5(a) and (ii) any amount required to be withheld under applicable
withholding Federal income tax regulations. No interest will be paid or
accrued on the amounts payable under this Section 1.6 upon surrender of
the Certificates. Until so surrendered and exchanged, each
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such Certificate shall, after the Effective Time, be deemed to represent
only the right to receive such amount along with the right to receive
amounts, if any, to be distributed pursuant to the Escrow Agreement
(hereinafter defined), and until such surrender and exchange no cash shall
be paid to the holder of such outstanding Certificate in respect thereof.
If payment is to be made to a person other than the person in whose name a
surrendered Certificate is registered, it shall be a condition to such
payment that the Certificate so surrendered shall be endorsed or shall be
otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of
such payment in a name other than that of the registered holder of the
Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation or the Disbursing Agent that such tax either has
been paid or is not payable. If any cash deposited with the Disbursing
Agent pursuant to this Section 1.6 for purposes of payment in exchange for
such Shares remains unclaimed following the expiration of six months after
the Effective Time, such cash shall be delivered to the Surviving
Corporation by the Disbursing Agent, and thereafter the surrender and
exchange shall be effected directly with the Surviving Corporation
(subject to abandoned property, escheat or other similar laws). No
interest shall accrue or be payable with respect to any amounts which any
holder shall be entitled to receive pursuant to Sections 1.5(a) and 1.6
hereof. The Surviving Corporation or the Disbursing Agent shall be
authorized to pay the cash attributable to any Certificate theretofore
issued which has been lost or destroyed upon receipt of satisfactory
evidence of ownership of the Shares represented thereby and of appropriate
indemnification. From and after the Effective Time, the holders of
Certificates evidencing ownership of Shares outstanding immediately prior
to the Merger shall cease to have any rights with respect to such Shares
except as otherwise provided herein or by the Wisconsin Law. Prior to the
Effective Time, the Company may distribute to its Shareholders letters of
transmittal and instructions for use in effecting surrender of
Certificates and such Shareholders may surrender their Certificates to the
Disbursing Agent; provided, however, the Disbursing Agent shall take no
action with respect to such Certificates until the Effective Time.
(b) After the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of any Shares
that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, certificates for Shares are presented to the Surviving
Corporation, they shall be canceled and exchanged for cash as provided in
this Section 1.6, subject to the Wisconsin Law and the provisions of
Section 1.5(e) hereof in the case of Dissenting Shares.
(c) If the holder of any Shares shall become entitled to
receive payment for such Shares pursuant to the Wisconsin Law, such
payment shall be made by the Disbursing Agent with respect to payments to
Nondissenting Shareholders or by the Surviving Corporation with respect to
payments to Dissenting Shareholders. The obligation of Millers or the
Surviving Corporation to pay for the Shares shall be satisfied by delivery
of the funds comprising the First Installment to the Disbursing Agent and
by delivery of funds comprising the Escrow Amount to the Escrow Agent (as
hereinafter defined). Neither Millers nor the Surviving Corporation shall
be responsible in any manner whatsoever for (i) any failure or inability
of the Shareholders' Agent or the Disbursing Agent to honor any provisions
of this Agreement, the Shareholders' Agent Agreement or the Escrow
Agreement, (ii) any instructions given by the Shareholders' Agent to the
Disbursing Agent or failure to give such instructions by the Shareholders'
Agent, (iii) the investment of funds held by the Shareholders' Agent or
the Disbursing Agent or (iv) the amount or timing of the disbursement of
funds by the Shareholders' Agent or the Disbursing Agent.
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1.7 Escrow for Certain Liabilities. At or prior to the Effective
Time, Millers shall deposit or cause to be deposited in escrow with U.S. Trust
Company of Texas, N.A. (the "Escrow Agent") as escrow agent pursuant to the
terms of the Escrow Agreement (the "Escrow Agreement") substantially in the
form of Exhibit A hereto, cash in an amount equal to $2,500,000 (such amount
hereinafter referred to as the "Escrow Amount"). The aggregate Escrow Amount
shall be segregated into a "Millers Account" to be held in respect of
liabilities arising under Section 10.1 of this Agreement and a "Philadelphia
Account" to be held in respect of liabilities arising under Section 10.2 of
this Agreement as set forth in the Escrow Agreement. The Escrow Amount shall
be released to the Disbursing Agent or the Surviving Corporation, as
appropriate, pursuant to the provisions of the Escrow Agreement.
1.8 Shareholders' Agent. Approval of the Merger by the
Shareholders shall constitute the approval, designation and appointment by the
Shareholders of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ as the agent on behalf of all of the
Shareholders (the "Shareholders' Agent") pursuant to the terms of a
Shareholders' Agent Agreement (the "Shareholders' Agent Agreement") in the form
of Exhibit B hereto. The Shareholders' Agent shall be authorized to act on
behalf of all of the Shareholders in accordance with the terms of the
Shareholders' Agent Agreement and the actions of the Shareholders' Agent taken
pursuant to the Shareholders' Agent Agreement shall be binding upon all of the
Shareholders.
1.9 Taking of Necessary Action; Further Action. Each of Millers,
Merger Sub, the Management Shareholders and the Company shall use all
reasonable efforts to take all such actions as may be necessary or appropriate
in order to effectuate the Merger under the Wisconsin Law or federal law as
promptly as possible. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement
and to vest the Surviving Corporation with full right, title and possession to
all assets, property, rights, privileges, powers and franchises of either of
the Constituent Corporations, the officers and directors of the Surviving
Corporation are fully authorized in the name of their corporation or otherwise
to take, and shall take, all such lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
MILLERS AND MERGER SUB
Millers and Merger Sub represent and warrant the following:
2.1 Organization and Qualification. Each of Millers and Merger
Sub is a corporation duly organized and validly existing under the laws of the
state of its incorporation and has the requisite corporate power to carry on
its business as now conducted. Copies of the charter documents and bylaws of
Merger Sub heretofore delivered to the Company are accurate and complete as of
the date hereof. Millers is in good standing under the laws of the State of
Texas.
2.2 Authority Relative to Agreement. Each of Millers and Merger
Sub has the requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by Millers and Merger Sub and the consummation by Millers and
Merger Sub of the transactions contemplated hereby have been duly authorized by
the Boards of Directors of Millers and Merger Sub and by Millers as the sole
shareholder of Merger Sub as of the date of this Agreement, and no other
corporate proceedings on the part of Millers or Merger Sub are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Millers and Merger Sub and
(assuming that it has been duly executed and delivered by the Company and the
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Management Shareholders) constitutes a legal, valid and binding obligation of
each such company, enforceable against each such company in accordance with its
terms except as enforcement thereof may be limited by liquidation,
conservatorship, bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditor's rights generally from time to time
in effect and except that equitable remedies are subject to judicial
discretion. Other than in connection with or in compliance with the provisions
of the Wisconsin Law, and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976 (the "▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act"), no notice to, filing with, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Millers or Merger Sub of the transactions
contemplated by this Agreement.
2.3 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger based upon arrangements made by or on behalf of Millers or the Merger
Sub.
2.4 Effect of Agreement. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will conflict with, violate or result in a breach of any provision of the
charter documents or bylaws of Millers or Merger Sub or any law, rule,
regulation or ordinance applicable to Millers or Merger Sub or any agreement to
which Millers or Merger Sub is a party.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE MANAGEMENT SHAREHOLDERS
The Company and each of the Management Shareholders represent and warrant
to Millers and Merger Sub as follows:
3.1 Organization, Good Standing, Power, etc.
(a) The Company is a corporation duly organized and
validly existing under the laws of the State of Wisconsin, and has all
requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. The
Company is duly qualified as a foreign corporation to do business, and is
in good standing in the states of South Carolina, Maine and Massachusetts.
The Company is not required to be qualified or licensed to do business as
a foreign corporation in any other jurisdiction where the failure to be
qualified or licensed in any such other jurisdiction would have a material
adverse effect on the Company. Copies of the Articles of Incorporation
and bylaws of the Company heretofore delivered to Millers and Merger Sub
or their representatives by the Company are true and complete as of the
date hereof. Each of such Articles of Incorporation and bylaws is in
full-force and effect, and the Company is not in violation or breach of
any of the provisions of its Articles of Incorporation or bylaws.
(b) The Company has the requisite corporate power and
authority to enter into this Agreement and, subject to obtaining any
necessary shareholder approval of the Merger as required by the Wisconsin
Law, to perform its obligations hereunder. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company. No other corporate proceedings on the part of
the Company are necessary for the execution and delivery of this Agreement
by the Company and, subject to obtaining shareholder approval of the
Merger as required by the Wisconsin Law, the consummation by the Company
of the transactions contemplated hereby. This Agreement has been duly
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executed and delivered by the Company and the Management Shareholders and
(assuming that it has been duly executed and delivered by Millers and
Merger Sub), constitutes a legal, valid and binding obligation of the
Company and the Management Shareholders, enforceable against the Company
and the Management Shareholders in accordance with its terms except as
enforcement thereof may be limited by liquidation, conservatorship,
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditor's rights generally from time to time
in effect and except that equitable remedies are subject to judicial
discretion.
(c) Upon obtaining shareholder approval of the Merger as
required by the Wisconsin Law, the Shareholders' Agent Agreement and the
Escrow Agreement will be duly executed and delivered by the Shareholders'
Agent and, (assuming due execution and delivery by the other parties
thereto) will constitute a legal, valid and binding obligation of the
Shareholders' Agent, enforceable against the Shareholders' Agent in
accordance with their terms except as enforcement thereof may be limited
by liquidation, conservatorship, bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditor's rights
generally from time to time in effect and except that equitable remedies
are subject to judicial discretion.
3.2 Authorized Capitalization of the Company. The authorized
capital stock of the Company consists solely of 150,000 shares of common stock,
no par value, of which 117,013.64 shares are validly issued and outstanding,
fully paid and nonassessable (subject to section 180.0622 of the Wisconsin Law,
as interpreted), and 26,936 shares are held in the Company's treasury. There
are no outstanding or authorized subscriptions, options, warrants, calls,
rights (including any preemptive rights), commitments, or other agreements of
any character whatsoever which obligate or may obligate the Company to issue or
sell any additional shares of its capital stock or any securities convertible
into or evidencing the right to subscribe for any shares of its capital stock
or securities convertible into or exchangeable for such shares. There are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock of, or other
ownership interests in, the Company or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
other entity. There are no outstanding agreements or obligations of any
character obligating the Company to register any shares of its capital stock
under the Securities Act of 1933, as amended.
3.3 Subsidiaries.
(a) Other than Applied Quoting Systems, Inc., a Wisconsin
corporation (the "Subsidiary"), which is the only subsidiary of the
Company, the Company does not own any direct or indirect interest in any
corporation or business entity and except as set forth on Schedule 3.3,
the Company is not a participant in (i) any partnership or any joint
venture with any third party evidenced by a written agreement or (ii) any
oral partnership or joint venture involving the sharing of present or
future commissions, fees, income, profits, losses or expenses. Neither
the Company nor the Subsidiary owns any interest in Riverview Building,
LLC.
(b) The Subsidiary is a corporation duly organized and
validly existing under the laws of the State of Wisconsin, and has all
requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. The
Subsidiary is not required to be qualified or licensed to do business as a
foreign corporation in any jurisdiction where the failure to be qualified
or licensed would have a material adverse effect on the Subsidiary.
Copies of the Articles of Incorporation and bylaws of the
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Subsidiary heretofore delivered to Millers and Merger Sub or their
representatives by the Company are true and complete as of the date
hereof. Each of such Articles of Incorporation and bylaws is in
full-force and effect, and the Subsidiary is not in violation or breach of
any of the provisions of its Articles of Incorporation or bylaws. No
corporate proceedings or consent on the part of the Subsidiary is
necessary for the execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated
hereby.
(c) The Company owns 100% of the outstanding shares of
capital stock of the Subsidiary. The authorized capital stock of the
Subsidiary consists solely of 9,000 shares of common stock, par value
$0.01 per share, of which 100 shares are validly issued and outstanding,
fully paid and nonassessable (subject to section 180.0622 of the Wisconsin
Law, as interpreted). There are no outstanding or authorized
subscriptions, options, warrants, calls, rights (including any preemptive
rights), commitments, or other agreements of any character whatsoever
which obligate or may obligate the Subsidiary to issue or sell any
additional shares of its capital stock or any securities convertible into
or evidencing the right to subscribe for any shares of its capital stock
or securities convertible into or exchangeable for such shares. There are
no outstanding contractual obligations of the Company or the Subsidiary to
repurchase, redeem or otherwise acquire any outstanding shares of capital
stock of, or other ownership interests in, the Subsidiary or to provide
funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any other entity.
3.4 Effect of Agreement. Other than in connection with or in
compliance with the provisions of the Wisconsin Law and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act, the execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby
will not require any notice to, filing with, or the consent, approval or
authorization of any person or governmental authority. Except as set forth in
Schedule 3.4, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in the
acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any indenture, contract, lease,
sublease, loan agreement, note or other obligation or liability to which the
Company or the Subsidiary is a party or is bound or to which any of their
assets are subject, (ii) conflict with, violate or result in a breach of any
provision of the charter documents or bylaws of the Company or the Subsidiary,
(iii) conflict with or violate any law, rule, regulation, ordinance, order,
writ, injunction or decree applicable to the Company or the Subsidiary or by
which any of their properties or assets are bound or affected or (iv) conflict
with or result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or result in the
creation of any lien, charge or encumbrance on any of the properties or assets
of the Company or the Subsidiary pursuant to any of the terms, conditions or
provisions of any indenture, contract, lease, sublease, loan agreement, note,
permit, license, franchise, agreement or other instrument, obligation or
liability to which the Company or the Subsidiary is a party or by which the
Company or the Subsidiary or any of their assets is bound or affected.
3.5 Financial Statements.
(a) The Company has delivered to Millers and Merger Sub
or their representatives audited consolidated financial statements of the
Company and the Subsidiary as at December 31, 1995, and for the year then
ended, including, without limitation, a statement of consolidated balance
sheets and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended (the "1995
Financial
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Statements") which have been audited by KPMG Peat Marwick LLP, the
independent public accountants of the Company.
(b) The Company has also delivered to Millers and Merger
Sub or their representatives unaudited consolidated financial statements
of the Company and the Subsidiary as of September 30, 1996, and for the
9-month period then ended, consisting of a balance sheet and statement of
operations (the "Interim Financial Statements").
(c) The 1995 Financial Statements and the Interim
Financial Statements (collectively, the "Financial Statements") are in
accordance with the books and records of the Company. Except as set forth
therein (including the notes thereto), the 1995 Financial Statements have
been prepared in accordance with generally accepted accounting principles,
consistently applied throughout the periods involved. The 1995 Financial
Statements and the Interim Financial Statements (except for normal year
end entries and adjustments consistent with past practices) fairly
represent the financial condition of the Company and the Subsidiary and
the results of operations as at the dates and for the periods therein
specified.
(d) There are no liabilities of the kind required by
generally accepted accounting principles consistently applied to be
reflected, noted or reserved against on the balance sheet of the Company
and the Subsidiary as of December 31, 1995, except those which have been
reflected, noted or reserved against in such balance sheet. There are no
liabilities of the kind required in accordance with the past practices of
the Company to be reflected, noted or reserved against on the balance
sheet of the Company and the Subsidiary as of September 30, 1996 except
those which have been reflected, noted or reserved against on such balance
sheet and except for normal year end entries and adjustments consistent
with past practices. Neither the Company nor the Subsidiary is directly
or indirectly liable to or obligated to provide funds in respect of or to
guarantee or assume any obligation of any person except to the extent
reflected and fully reserved against in the Financial Statements. Except
as set forth on Schedule 3.5, all liabilities of the Company and the
Subsidiary can be prepaid without penalty at any time.
(e) The consolidated pretax net income of the Company (as
determined in accordance with past practices consistently applied) for the
year ended December 31, 1996 prior to up to $325,000 of Transaction
Expenses (as defined in Section 3.30 hereof) shall not be less than $1.9
million; provided however, that to the extent that the Company records a
write-off on its balance sheet at December 31, 1996 solely at the request
of Millers or with respect to accounts receivable from Millers, pretax net
income shall be determined prior to giving effect to such write-offs.
3.6 Absence of Certain Changes or Events. Except as disclosed in
Schedule 3.6, since September 30, 1996:
(a) neither the Company nor the Subsidiary has incurred
any obligation or liability in excess of $50,000 (contingent or
otherwise), except current liabilities incurred in the ordinary course of
business and Transaction Expenses (as defined herein);
(b) neither the Company nor the Subsidiary has discharged
or satisfied any lien or encumbrance or paid any obligation or liability
(contingent or otherwise) in excess of $50,000, except current liabilities
outstanding on the applicable date set forth above, current liabilities
incurred since such date in the ordinary course of business, obligations
and
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liabilities under contracts in the ordinary course of business and
Transaction Expenses;
(c) neither the Company nor the Subsidiary has mortgaged,
pledged or subjected to lien, charge, security interest or other
encumbrance any of its assets or properties, except in the ordinary course
of business;
(d) neither the Company nor the Subsidiary has sold,
transferred, leased or otherwise disposed of any of its assets or
properties, except in the ordinary course of business and for a fair
consideration;
(e) neither the Company nor the Subsidiary has canceled
or compromised any debt owed to it or claim by it, except in the ordinary
course of business;
(f) neither the Company nor the Subsidiary has knowingly
and expressly waived or released any rights of substantial value;
(g) except in the ordinary course of business, neither
the Company nor the Subsidiary has sold, assigned, transferred or granted
any rights under any licenses, franchises, patents, inventions,
trademarks, service marks, trade names, or copyrights or rights with
respect to any know-how or other intangible assets, which sale,
assignment, transfer or grant would have an adverse effect on it;
(h) neither the Company nor the Subsidiary has amended or
terminated any contract, franchise, agreement or license to which it is a
party, which amendment or termination would have an adverse effect on it;
(i) neither the Company nor the Subsidiary has knowingly
disposed of or permitted to lapse any rights for the use of any patent,
trademark, service ▇▇▇▇, trade name or copyright or knowingly disposed of
or disclosed to any person not an employee, supplier, broker, distributor
or customer any trade secret, process or know-how not theretofore a matter
of public knowledge, which dispositions or disclosures would have an
adverse effect on it;
(j) neither the Company nor the Subsidiary has terminated
the employment of any department head or officer of either the Company or
the Subsidiary or entered into (i) any written employment agreement or
(ii) any oral employment agreement not terminable without penalty by any
party thereto upon 60 days notice;
(k) neither the Company nor the Subsidiary has increased
the rate of compensation or bonus payments payable or to become payable to
any of its officers or directors (including, without limitation, any
payment of or promise to pay any bonus or special compensation) except for
increases and bonuses payable in the ordinary course of business
consistent with past practices;
(l) neither the Company nor the Subsidiary has declared
any dividend or made any payment or distribution to its Shareholders;
(m) Except for the issuance by the Company of 1,500
Shares to ▇▇▇▇▇▇ ▇▇▇▇▇▇ upon exercise of all vested stock options, neither
the Company nor the Subsidiary has purchased, redeemed, issued, sold or
otherwise acquired or disposed of any of its shares of capital stock or
other equity securities, or agreed to do so, or granted any options,
warrants
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or other rights to purchase or convert any obligation into any shares of
its capital stock or any evidence of indebtedness or other securities;
(n) neither the Company nor the Subsidiary has entered
into any other transaction, contract or commitment other than in the
ordinary course of business (other than the transaction contemplated by
this Agreement);
(o) neither the Company nor the Subsidiary has agreed to
do any of the things described in the preceding clauses (a) through (n);
(p) there has not been any material adverse change in the
financial condition, operating results, assets, operations, business,
employee relations or customer or supplier relations of the Company or the
Subsidiary, or to the knowledge of the Company or the Management
Shareholders, in the business prospects of the Company or the Subsidiary;
(q) there has not been any damage, destruction or loss,
whether or not covered by insurance, materially and adversely affecting
the property or business of the Company or the Subsidiary; and
(r) there has not been any material change in the
operation of the business of the Company or the Subsidiary or any material
transactions entered into, except such changes and transactions occurring
in the ordinary course of business and not otherwise required to be
disclosed pursuant to this Section 3.6.
3.7 Taxes. Except as disclosed in Schedule 3.7 hereto, the
Company and the Subsidiary have timely filed or caused to be timely filed
(including allowable extensions) all federal, state, local foreign and other
tax returns for income taxes, sales taxes, withholding taxes, employment taxes,
property taxes, franchise taxes and all other taxes of every kind whatsoever
which are required by law to have been filed. The Company and the Subsidiary
have paid or caused to be paid all taxes, assessments, fees, penalties and
other governmental charges which have become due pursuant to said returns and
all other taxes, assessments, fees, penalties and other governmental charges
which have become due and payable. Neither the Company nor the Subsidiary has
filed or entered into any election, consent or extension agreement that extends
the applicable statute of limitations with respect to its liability for taxes,
except as set forth in Schedule 3.7 hereto. The provisions for income and
other taxes reflected in the balance sheet included in the 1995 Financial
Statements and the Interim Financial Statements make adequate provision for all
accrued and unpaid taxes of the Company, whether or not disputed, and the
Company has made and will continue to make adequate provision for such taxes on
its books and records until the Effective Time. Except as set forth in
Schedule 3.7 hereto, neither the Company nor the Subsidiary is a party to any
action or proceeding pending or, to the Company's or Management Shareholders'
knowledge, threatened by any governmental authority for assessment or
collection of taxes; no unresolved claim for assessment or collection of such
taxes has been asserted against the Company or the Subsidiary, and no audit or,
to the Company's or Management Shareholders' knowledge, investigation by state
or local government authorities is under way. Except for liabilities asserted,
or which may be asserted, in actions or proceedings or as a result of audits or
investigations listed in Schedule 3.7 hereto, there is and will be no further
liability for any such taxes for periods prior to the Effective Date, whether
by future deficiency assessments or otherwise, and no interest or penalties
accrued or accruing with respect thereto. The Company has delivered or made
available to Millers and Merger Sub or their representatives copies of the
federal income and state franchise tax returns of the Company and the
Subsidiary for the taxable years ended in 1993, 1994 and 1995 and all state
sales tax reports and returns of the Company and the Subsidiary for the period
between
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January 1, 1993 and the date of this Agreement, and the taxes paid and payable,
as reflected in all such returns and reports, state accurately the total tax
payable for the periods designated.
3.8 Real Property.
(a) Schedule 3.8 contains a complete and accurate list of
all real property owned or leased by the Company or the Subsidiary (the
"Schedule 3.8 property"), and the Company has supplied or made available
to Millers and Merger Sub or their representatives copies of all surveys
conducted on behalf of and all title insurance policies issued in favor of
the Company or the Subsidiary with respect to the owned real property.
Except as otherwise disclosed in Schedule 3.8 and except for liens for
taxes not yet due and payable, the Schedule 3.8 property owned in fee by
either the Company or the Subsidiary is free and clear of all liens,
mortgages, pledges, security interests, conditional sales agreements,
charges, encumbrances and other adverse claims or interests of any nature
whatsoever. To the knowledge of the Company or the Management
Shareholders, all improvements on the Schedule 3.8 property are in good
condition and repair, reasonable wear and tear excepted.
(b) Except as disclosed in Schedule 3.8, there are no
existing leases, subleases, tenancies, licenses, contracts or other
agreements relating to the Schedule 3.8 property to which the Company or
the Subsidiary is a party (the "Leases"), and the Company has delivered or
made available to Millers and Merger Sub or their representatives true and
complete copies of all of the Leases of the Schedule 3.8 property.
(c) Except as disclosed in Schedule 3.8, (i) to the
knowledge of the Company or the Management Shareholders, each of the
Leases to the Company or the Subsidiary of the Schedule 3.8 property is a
valid and binding obligation of the parties thereto, (ii) neither the
Company nor the Subsidiary, nor to the knowledge of the Company or the
Management Shareholders, any other party thereto, is in default
thereunder, nor is there any event which with notice or lapse of time, or
both, would constitute a default thereunder by the Company or the
Subsidiary or, to the knowledge of the Company or the Management
Shareholders, any other party thereto and (iii) the Company has not
received notice that any party to any Lease intends to cancel, terminate
or refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder.
(d) Each of the Company and the Subsidiary has all
easements of ingress and egress necessary for all operations conducted by
it from the real properties referred to in Schedule 3.8; and none of such
properties has been condemned, requisitioned or otherwise taken by any
public authority, and to the knowledge of the Company or the Management
Shareholders, no such action is threatened or contemplated.
3.9 Environmental Matters. Except as set forth on Schedule 3.9:
(a) None of the Schedule 3.8 property has ever been used
by either the Company or the Subsidiary or, to the knowledge of the
Company or the Management Shareholders, by any previous owners and/or
operators to generate, manufacture, refine, produce, store, handle,
transfer, process or transport any Hazardous Materials (as hereinafter
defined).
(b) (i) The Schedule 3.8 property owned or previously
owned by the Company or the Subsidiary is and has been during the
Company's or the Subsidiary's ownership or occupancy thereof in material
compliance with all applicable Environmental Laws (as
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hereinafter defined); (ii) there are no Hazardous Materials stored or
otherwise located in, on or under any of the Schedule 3.8 property owned
by the Company or the Subsidiary including the groundwater; and (iii) to
the knowledge of the Company or the Management Shareholders, there have
been no releases or threatened releases of Hazardous Materials in, on or
under any property adjoining any of the Schedule 3.8 property owned or
previously owned by the Company or the Subsidiary.
(c) To the knowledge of the Company or the Management
Shareholders, (i) the Schedule 3.8 property leased by the Company or the
Subsidiary is and has been in material compliance with all applicable
Environmental Laws; (ii) there are no Hazardous Materials stored or
otherwise located in, on or under any of the Schedule 3.8 property leased
by the Company or the Subsidiary including the groundwater; and (iii)
there have been no releases or threatened releases of Hazardous Materials
in, on or under any property adjoining any of the Schedule 3.8 property
leased by the Company or the Subsidiary.
(d) None of the Schedule 3.8 property owned or previously
owned by the Company or the Subsidiary is the subject of any pending, or
the knowledge of the Company or the Management Shareholders, threatened
federal, state or local investigation evaluating whether (i) any remedial
action is needed to respond to a release or threatened release of any
Hazardous Materials into the environment or (ii) any release or threatened
release of any Hazardous Materials into the environment is in
contravention of any Environmental Law.
(e) To the knowledge of the Company or the Management
Shareholders, none of the Schedule 3.8 property leased by the Company or
the Subsidiary is the subject of any federal, state or local investigation
evaluating whether (i) any remedial action is needed to respond to a
release or threatened release of any Hazardous Materials into the
environment or (ii) any release or threatened release of any Hazardous
Materials into the environment is in contravention of any Environmental
law.
(f) Neither the Company nor the Subsidiary has received
any notice or claim, nor are there pending, or to the knowledge of the
Company or the Management Shareholders, threatened or reasonably
anticipated lawsuits or proceedings against them, with respect to
violations of an Environmental Law or in connection with the presence of
or exposure to any Hazardous Materials in the environment or any release
or threatened release of any Hazardous materials into the environment. To
the knowledge of the Company or the Management Shareholders, neither the
Company nor the Subsidiary is or was the owner or operator of any property
which (i) pursuant to any Environmental Law has been placed on any list of
Hazardous Materials disposal sites, including without limitation, the
"National Priorities List" or "CERCLIS List," (ii) has or had any
subsurface storage tanks located thereon; or (iii) has ever been used as
or for a waste disposal facility, a mine, a gasoline service station or a
petroleum products storage facility.
(g) Neither the Company nor the Subsidiary has any
present or contingent liability in connection with the presence either on
or off the Schedule 3.8 property owned or previously owned by the Company
or the Subsidiary of any Hazardous Materials in the environment or any
release or threatened release of any Hazardous Materials into the
environment.
(h) To the knowledge of the Company or the Management
Shareholders, neither the Company nor the Subsidiary has any present or
contingent liability in connection with
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the presence either on or off the Schedule 3.8 property leased by the
Company or the Subsidiary of any Hazardous Materials in the environment or
any release or threatened release of any Hazardous Materials into the
environment.
(i) "Environmental Laws" means any federal, state,
territorial, provincial or local law, common law doctrine, rule, order,
decree, judgment, injunction, license, permit or regulation relating to
environmental matters, including those pertaining to land use, air, soil,
surface water, ground water (including the protection, cleanup, removal,
remediation or damage thereof), public or employee health or safety or any
other environmental matter, together with any other laws (federal, state,
territorial, provincial or local) relating to emissions, discharges,
releases or threatened releases of any pollutant or contaminant including,
without limitation, medical, chemical, biological, biohazardous or
radioactive waste and materials, into ambient air, land, surface water,
groundwater, personal property or structures, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, discharge or handling of any contaminant, including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act as amended by the Superfund Amendments and
Reauthorization Act of 1986 (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C. Section 1801 et seq.) the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.),
the Federal Water Prevention and Control Act (33 U.S.C. Section 1251 et
seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.), and the
Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), as
such laws have been, or are, amended, modified or supplemented heretofore
or through the Effective Date. "Hazardous Materials" means those
substances which are regulated by or form the basis of liability under any
Environmental Laws, including, without limitation, petroleum products,
radon and asbestos.
3.10 Personal Property.
(a) Schedule 3.10 contains a complete and accurate list
as of September 30, 1996, of (i) all capitalized fixed assets owned by
either the Company or the Subsidiary and (ii) all personal property
subject to any lease, license, rental agreement, contract of sale or other
agreement to which the Company or the Subsidiary is a party ("Leased
Personal Property"). The personal property set forth on Schedule 3.10,
other than personal property disposed of in the ordinary course of
business since September 30, 1996, all other personal property acquired by
the Company or the Subsidiary since September 30, 1996 and all Leased
Personal Property is hereafter referred to as the "Schedule 3.10
property".
(b) Except as otherwise described in Schedule 3.10, the
Schedule 3.10 property owned by the Company or the Subsidiary is free and
clear of all liens, other than liens for taxes not yet due and payable,
mortgages, pledges, security interests, conditional sales agreements,
charges, encumbrances and other adverse claims or interests of any nature
whatsoever. The knowledge of the Company or the Management Shareholders,
the Schedule 3.10 property is in good operating condition and repair,
reasonable wear and tear excepted and taken as a whole, is reasonably fit
and usable for the purposes for which it is being used, reasonably
sufficient for all current operations and business of the Company and the
Subsidiary, and conforms in all material respects with all applicable
ordinances, regulations and laws. To the knowledge of the Company or the
Management Shareholders, each lease, license, rental agreement, contract
of sale or other agreement to which the Leased Personal Property is
subject is a valid and binding obligation of the parties thereto. Neither
the Company, the Subsidiary nor, to the knowledge of the Company or the
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Management Shareholders, any other party thereto is in default thereunder,
nor is there any event which with notice or lapse of time, or both, would
constitute a default thereunder by the Company, the Subsidiary or, to the
knowledge of the Company or the Management Shareholders, any other party
thereto. Neither the Company nor the Subsidiary has received notice that
any party to any such lease, license, rental agreement, contract of sale
or other agreement intends to cancel, terminate or refuse to renew the
same or to exercise or decline to exercise any option or other right
thereunder.
3.11 Contracts. Schedule 3.11 contains a complete and accurate
list of (i) all oral contracts the performance of which is required by any
party thereto as a result of the consummation of the transactions contemplated
by this Agreement, (ii) all oral contracts involving a present or future
obligation by any party of an amount in excess of $20,000 individually or in
the aggregate with respect to multiple contracts of the same type and which are
not terminable without penalty by any party thereto upon 60 days notice and
(iii) all written contracts, involving a present or future obligation by any
party of an amount in excess of $20,000 individually or in the aggregate with
respect to multiple contracts of the same type (except as otherwise specified
below), to which the Company or the Subsidiary is a party, true and complete
copies or summaries of each of which have been delivered or made available to
Millers and Merger Sub or their representatives by the Company, including,
without limitation, any:
(a) mortgage, security agreement, chattel mortgage or
conditional sales agreement or any similar instrument or agreement,
involving a present or future obligation of an amount in excess of
$20,000;
(b) agreement, commitment, note, indenture or other
instrument relating to the borrowing of money, or the guaranty of any such
obligation for the borrowing of money;
(c) joint venture or other agreement with any person,
firm, corporation or unincorporated association doing business either
within or outside the United States relating to sharing of present or
future commissions, fees or other income or profits, excluding vending
machine revenue sharing agreements with the site operator;
(d) sales, distribution or franchise agreements;
(e) noncompetition agreements;
(f) broker or distributorship contracts;
(g) advertising, marketing and promotional agreements
(including, but not limited to, any agreements providing for discounts
and/or rebates), involving a present or future obligation of an amount in
excess of $20,000;
(h) agreements with suppliers, involving a present or
future obligation of an amount in excess of $20,000;
(i) assignment, license, indemnification or similar
agreement with respect to any intangible property;
(j) warranty agreement with respect to its services
rendered or its products sold or leased; or
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(k) agreement under which it has granted any person any
registration rights (including, without limitation, demand and piggyback
registration rights).
Except as disclosed in Schedule 3.11, to the knowledge of the
Company or the Management Shareholders all contracts and leases referred
to in Schedule 3.11 are valid, binding and enforceable against the parties
thereto in accordance with their respective terms. Each of the Company
and the Subsidiary has performed all material obligations imposed upon it
thereunder, and neither the Company nor the Subsidiary, nor, to the
knowledge of the Company or the Management Shareholders, any other party
thereto, is in default thereunder, nor is there any event which with
notice or lapse of time, or both, would constitute a default thereunder by
the Company or the Subsidiary, or, to the knowledge of the Company or the
Management Shareholders, any other party thereto. Neither the Company nor
the Subsidiary has any present expectation or intention of not fully
performing all its obligations under the contracts required to be listed
on Schedule 3.11. Except as set forth on Schedule 3.11, neither the
Company, the Subsidiary nor the Management Shareholders have knowledge of
any material breach or notice of anticipated material breach by the other
parties to any contract required to be listed on Schedule 3.11; neither
the Company, the Subsidiary nor the Management Shareholders have any
knowledge that any other party to any contract required to be listed on
Schedule 3.11 intends to terminate such contract prior to the expiration
of the maximum stated term of such contract; neither the Company, the
Subsidiary nor the Management Shareholders have any knowledge that any
other party to a contract required to be listed on the Schedule 3.11 does
not intend to renew such contract upon the expiration of the term of such
contract; and neither the Company, the Subsidiary nor the Management
Shareholders have any knowledge of any dispute relating to any contract
required to be listed on Schedule 3.11, or has any knowledge of any fact
or facts that might give rise to any such dispute.
3.12 Legal Proceedings. Except as set forth in Schedules 3.9 and
3.12, there are no claims, actions, suits, arbitrations, grievances,
proceedings or investigations pending or, to the knowledge of the Company or
the Management Shareholders, threatened against the Company or the Subsidiary,
at law, in equity, or before any federal, state, municipal or other
governmental or nongovernmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign. There are no outstanding or
unsatisfied judgments, orders, decrees or stipulations to which the Company or
the Subsidiary is a party, which involve the transactions contemplated herein
or which would have an adverse effect upon the business, business prospects,
assets or financial condition of the Company. Except as set forth in Schedule
3.12, neither the Company nor the Subsidiary is presently engaged in or
contemplating any legal action to recover moneys due to it or damages sustained
by it. Neither the Company nor the Subsidiary is in violation of or in default
with respect to any applicable judgment, order, writ, injunction or decree, the
effect of which may be adverse to the Company or the Subsidiary.
3.13 Labor Matters. There are no controversies pending or, to the
knowledge of the Company or the Management Shareholders, threatened between the
Company or the Subsidiary and any of their employees. The Company and the
Subsidiary have complied in all material respects with all laws relating to the
employment of labor, including any provisions thereof relating to wages, hours,
collective bargaining, safety and the payment of withholding and social
security and similar taxes, and neither the Company nor the Subsidiary has any
liability for any arrears of wages or taxes or penalties for failure to comply
with any of the foregoing.
3.14 Patents, Trademarks, Franchises, etc. Schedule 3.14 sets
forth a true and complete list of (i) all patents, patent applications, patent
agreements, license arrangements relating to
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patents, consulting agreements relating to patents, trademark registrations and
applications therefor, trade names, service marks and copyright registrations
and applications therefor, and franchises and franchise agreements to which the
Company or the Subsidiary is a party or which are used in its business and are
owned by or licensed to the Company or the Subsidiary and (ii) any interference
actions or adverse claims made or, to the knowledge of the Company or the
Management Shareholders, threatened in respect thereof and any claims made or,
to the knowledge of the Company or the Management Shareholders, threatened for
alleged infringement thereof. All patents and trademarks listed on Schedule
3.14 as being owned by the Company or the Subsidiary and registered in the U.S.
Patent Office have been duly issued or registered therein and all such
registrations have been validly issued and all are in full force and effect.
Neither the Company nor the Subsidiary in their operations infringes any valid
patent, trademark, trade name, service ▇▇▇▇ or copyright of any other person or
entity. To the knowledge of the Company or the Management Shareholders all
agreements listed in Schedule 3.14 are valid and enforceable. Each of the
Company and the Subsidiary has performed all material obligations imposed upon
it thereunder, and neither the Company nor the Subsidiary nor, to the knowledge
of the Company or the Management Shareholders, any other party thereto is in
default thereunder, nor is there any event which with notice or lapse of time,
or both, would constitute a default thereunder by the Company or the
Subsidiary, or, to the knowledge of the Company or the Management Shareholders,
any other party thereto. Neither the Company nor the Subsidiary has received
notice that any party to any such agreement intends to cancel, terminate or
refuse to renew the same or to exercise or decline to exercise any option or
other right thereunder.
3.15 Loans, Notes, Accounts Receivable and Accounts Payable. The
loans, notes and accounts receivable reflected in the Financial Statements and
all such loans, notes and accounts receivable arising after the applicable
dates of such Financial Statements arose, and have arisen, from bona fide
transactions of the Company and the Subsidiary. Accounts payable of the
Company and the Subsidiary reflected in such Financial Statements and all
accounts payable arising after the applicable dates of such Financial
Statements arose, and have arisen, from bona fide transactions.
3.16 Corporate Documents, Books and Records. The Company has
furnished or made available to Millers and Merger Sub or their representatives
for their examination true, correct and complete copies of (i) the Articles of
Incorporation and bylaws of the Company and the Subsidiary, including all
amendments thereto; (ii) the minute book of the Company and the Subsidiary; and
(iii) the stock transfer book of the Company and the Subsidiary.
3.17 Absence of Sensitive Payment. Neither the Company nor the
Subsidiary has made or maintained (i) any contributions, payments or gifts of
its funds or property to any governmental official, employee or agent where
either the payment or the purpose of such contribution, payment or gift was or
is illegal under the laws of the United States or any state thereof, or any
other jurisdiction (foreign or domestic); or (ii) any contribution, or
reimbursement of any political gift or contribution made by any other person,
to candidates for public office, whether federal, state, local or foreign,
where such contributions by the Company or the Subsidiary were or would be a
violation of applicable law.
3.18 Insurance. All of the policies of insurance and bonds
presently in force with respect to either the Company or the Subsidiary
including, without limitation, fire, liability and other insurance, are listed
in Schedule 3.18, and valid policies for such insurance as are shown to be in
effect on the date of this Agreement will be outstanding and duly in force at
the Effective Time. The Company has delivered or made available to Millers and
Merger Sub or their representatives true and complete copies of each insurance
policy listed in Schedule 3.18. No notice needs to be given to any insurer
under any policy of insurance maintained by the Company or the Subsidiary
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due to the Merger, and the Merger will not terminate or permit any insurer to
terminate any policy of insurance maintained by the Company or the Subsidiary.
3.19 Employees.
(a) Schedule 3.19 includes (i) a payroll census for the
Company for the payroll period ended December 30, 1996, together with a
listing of departments, (ii) a payroll census for the Subsidiary for the
payroll period ended December 20, 1996 together with a listing of
departments and (iii) an organization chart of the Company.
(b) Except as disclosed in Schedule 3.19, neither the
Company nor the Subsidiary is a party to any:
(i) management, employment or other contract
providing for the employment or rendition of executive
services;
(ii) contract for the employment of any employee
which is not terminable by the Company or the Subsidiary on 30
days' notice;
(iii) bonus, incentive, deferred compensation,
severance pay, pension, profit sharing, retirement, stock
purchase, stock option, employee benefit or similar plan,
agreement or arrangement (including without limitation
Christmas bonuses and similar year end bonuses);
(iv) collective bargaining agreement or other
agreement with any labor union or other employee organization
and no such agreement is currently being requested by, or is
under discussion by management with, any group of employees or
others; or
(v) any other employment contract or other
compensation agreement or arrangement affecting or relating to
current or former employees of the Company or the Subsidiary.
(c) Except as set forth on Schedule 3.19, the employees
of the Company and the Subsidiary have executed confidentiality agreements
pursuant to which the employees have agreed not to disclose or use
confidential information of the Company or the Subsidiary in any
unauthorized manner.
3.20 Employee Plans.
(a) Schedule 3.20 sets forth all employee pension benefit
plans (as such term is defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA")) which are maintained by the Company
or the Subsidiary and designed to be qualified under Section 401(a) of the
Internal Revenue Code (the "Code").
(b) Neither the Company nor the Subsidiary has maintained
an employee pension benefit plan other than the plans described in
Schedule 3.20 which is designed to be qualified under Section 401(a) of
the Code. To the knowledge of the Company or the Management Shareholders,
each of the Company and the Subsidiary is and has at all times been in
compliance with all applicable provisions of ERISA, all regulations
promulgated under ERISA or the Code and other federal and state statutes
and regulations relating to
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such employee pension benefit plans. No event has occurred or, to the
knowledge of the Company or the Management Shareholders, is threatened or
about to occur that would constitute a reportable event within the meaning
of Section 4043(b) of ERISA, and no notice of termination has been filed
by a plan administrator pursuant to Section 4041 or 4041A of ERISA or
issued by the Pension Benefit Guaranty Corporation ("PBGC") pursuant to
Section 4042 of ERISA with respect to any employee pension benefit plan of
the Company or the Subsidiary subject to ERISA. The plans identified in
Schedule 3.20 have been determined by the Internal Revenue Service to
constitute plans qualified under Section 401(a) of the Code, and nothing
has occurred since the date of any such determination that has adversely
affected such qualification.
(c) Either full payment has been made or appropriate
accruals have been recorded of all amounts that each of the Company and
the Subsidiary is required under the terms of all employee pension benefit
plans to pay as contributions to such plans, and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists with respect to any such plan. Each
of the Company and the Subsidiary has paid all premiums (and interest
charges and penalties for late payment, if applicable) due the PBGC with
respect to each employee pension benefit plan and each plan year thereof
for which such premiums are required.
(d) As of the Effective Date all employee pension benefit
plans which are designed to meet the requirements of Section 401(a) of the
Code will be sufficiently funded so that no funding liability would result
if such plans were terminated as of such date. The funding method used in
connection with each employee pension benefit plan is acceptable under
ERISA, the actuarial assumptions used in connection with funding such
employee pension benefit plan in the aggregate are reasonable (taking into
account the experience of such employee pension benefit plan and
reasonable expectations).
(e) Schedule 3.20 lists all employee pension benefit
plans maintained by the Company or the Subsidiary which are not designed
to be qualified under Section 401(a) of the Code. The participants in
such plans, the actuarially determined present value at the date set forth
on Schedule 3.20 of then vested benefits, and the actuarial assumptions
and calculations used to determine such present value are listed on
Schedule 3.20 hereto. Neither the Company nor the Subsidiary is
delinquent in any payments under any of such plans. Each of the Company
and the Subsidiary is and has at all times been in compliance with all
applicable provisions of ERISA, the Code, and all regulations promulgated
under ERISA or the Code and other federal and state statutes relating to
such employee pension benefit plans.
(f) The Company and the Subsidiary maintains employee
welfare benefit plans (as such term is defined in Section 3(1) of ERISA)
as listed on Schedule 3.20. The name of each plan, participants or class
of participants and description of benefits are listed on Schedule 3.20
hereto. Each of the Company and the Subsidiary is and at all times has
been in compliance with all applicable provisions of ERISA, the Code, and
all regulations promulgated under ERISA or the Code, and other federal and
state statutes and regulations relating to such employee welfare benefit
plans. Full payment has been made of all amounts that the Company and the
Subsidiary are required under the terms of such employee welfare benefit
plans to have paid as contributions to such plans or as benefits under
such plans except claims for benefits which are currently under
administrative review pursuant to reasonable and consistent administrative
procedures established for the operation of such plans.
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(g) Schedule 3.20 lists all other fringe benefits or
payment practices maintained by the Company or the Subsidiary and not
otherwise identified in this section.
(h) Copies of all documents constituting the plans or
written agreement describing any employee benefit plan, letter agreement,
compensation arrangement or other program maintained by each of the
Company and the Subsidiary have been previously furnished or made
available to Millers and Merger Sub or their representatives including any
filings with any government office relating thereto, any contracts
relating to assets of any such plans, and any actuarial or other
calculations relating to the amount of benefits payable under such plans.
(i) No event has occurred and no condition exists
relating to any employee benefit plan (i) that could result in the
imposition of an excise tax on the Company or the Subsidiary, (ii) that
would justify the attachment of a lien on the assets of the Company or the
Subsidiary, or (iii) that could result in fiduciary liability being
imposed on the Company or the Subsidiary under Section 404 of ERISA.
(j) There are no pending or, to the knowledge the Company
or the Management Shareholders, threatened claims, suits, or other
proceedings involving any employee benefit plan or compensation
arrangement other than ordinary and usual claims for participants and
beneficiaries.
(k) The transactions contemplated by this Agreement will
not result in any employee, former employee, or other person being
entitled to any severance benefit other than the severance benefits
described on Schedule 3.20 hereto.
3.21 Transactions with Related Parties. Except for transactions
disclosed in Schedule 3.21, there are no outstanding loans or other
transactions between either the Company or the Subsidiary and any officer,
director, shareholder or affiliate of the Company or the Subsidiary or any
spouse or child of any such person. Except as disclosed in Schedule 3.21,
neither the Company, the Subsidiary any officer, director, shareholder or
affiliate of the Company or the Subsidiary nor any spouse or child of any such
person owns or has any interest in, directly or indirectly, any real or
personal property owned by or leased to the Company or the Subsidiary. Except
as otherwise provided in the Employment Agreement of ▇▇▇▇▇▇ ▇▇▇▇▇▇ attached
hereto as Exhibit D-2 with respect to Employer Advances made under the
Insurance Agreement referenced therein, not later than the Effective Time, all
loans between either of the Company and the Subsidiary and affiliates,
directors and officers, shall have been paid, and each affiliate, Management
Shareholder director and officer of the Company or the Subsidiary shall have
released the Company and the Subsidiary from any and all claims pursuant to a
release substantially in the form of Exhibit C and such releases shall have
been delivered to the Company.
3.22 Directors and Officers; Banks. Schedule 3.22 contains a true
and complete list showing (i) the names of all the officers and directors of
the Company and the Subsidiary; (ii) the name of each bank in which either the
Company or the Subsidiary has an account or a safety deposit box and the names
of the persons authorized to draw thereon or having access thereto; and (iii)
the name of each person holding a general or limited power of attorney from the
Company or the Subsidiary and the extent of such power.
3.23 Ownership, Quality and Location of Material Assets. Except as
set forth on Schedule 3.23, neither the Company nor the Subsidiary utilizes in
its business any assets that are
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not owned or leased by the Company or the Subsidiary, including franchises,
licenses, trademarks and tradenames. Each of the Company and the Subsidiary
has good and marketable title to, or a valid leasehold interest in, the
properties and assets owned or leased by them. To the knowledge of the Company
or the Management Shareholders each of the Company and the Subsidiary owns, or
has a valid leasehold interest in, all properties and assets necessary for the
conduct of their respective businesses as presently conducted. Except as set
forth on Schedule 3.23, all properties and assets of the Company or the
Subsidiary are in the possession and control of the Company and the Subsidiary,
as the case may be. Except as set forth on Schedule 3.23, as of the date
hereof, no physical assets of any value (other than employee personal effects)
are on the premises at the locations operated by the Company which do not
belong to or are not leased by the Company.
3.24 Absence of Undisclosed Liabilities. As of the date hereof and
as of the Effective Date, neither the Company nor the Subsidiary have
liabilities of any nature, whether accrued, absolute, contingent, unliquidated
or otherwise, whether or not known to the Company or the Subsidiary, not
disclosed elsewhere herein or in the Schedules hereto or adequately reflected
or reserved against in the Financial Statements, other than current liabilities
incurred in the ordinary course of business since September 30, 1996.
3.25 Brokerage. Other than a fee in the amount of $225,000 payable
to KPMG Peat Marwick LLP (the "KPMG Fee"), neither the Company nor the
Shareholders have agreed to pay any brokerage fee or retained any broker or
finder in connection with the transactions contemplated by this Agreement. If
any broker or finder asserts a claim for a fee as a result of such transactions
(other than the KPMG Fee), based upon a contract, written or oral, with either
the Company and/or any of the Shareholders, such claim shall be payable by the
Shareholders.
3.26 Permits. Each of the Company and the Subsidiary has all
licenses, clearances, permits, franchises, grants, authorizations, easements,
consents, certificates and orders necessary to conduct its business and to
operate its properties and assets, and such licenses, clearances, permits,
franchises, grants, authorizations, easements, consents, certificates and
orders are in full force and effect; (b) no violations exist in respect of any
license, clearance, permit, franchise, grant, authorization, easement, consent,
certificate or order of the Company or the Subsidiary; (c) no proceeding is
pending or, to the knowledge of the Company or the Management Shareholders,
threatened looking toward the revocation or limitation of any such license,
clearance, permit, franchise, grant, authorization, easement, consent,
certificate or order and there is no basis or ground for any such revocation or
limitation. Each of the Company and the Subsidiary has complied with all laws,
rules, regulations, ordinances, codes, licenses, clearances, permits,
franchises, grants, authorizations, easements, consents, certificates and
orders relating to any of its properties or applicable to its business,
including, but not limited to, labor, equal employment opportunity,
occupational safety and health, consumer protection, securities and antitrust
laws and regulations. Neither the Company nor the Subsidiary is in violation
of any applicable zoning or building regulation, ordinance or other law, order,
regulation, restriction or requirement relating to its operations or
properties, whether such properties are owned or leased, and no governmental
body or other person has notified the Company that any such violation exists,
or called attention to the need for any work, repairs, construction,
alterations or installation on or in connection with the properties of the
Company and the Subsidiary. Neither the Company nor the Management
Shareholders have knowledge of any pending or threatened action or proceeding
which could result in a modification or termination of the zoning laws which
modification or termination would adversely affect the Company or the
Subsidiary or any of their property. No representations are made under this
Section 3.26 with respect to environmental matters.
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3.27 Shareholder Information. None of the information to be
distributed to Shareholders of the Company in connection with the Merger nor
any amendments or supplements of or to any of the foregoing (collectively, the
"Shareholder Information"), will between the date the Shareholder Information
is first mailed to Shareholders and the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it is made,
will be false or misleading with respect to any fact, or will omit to state any
fact necessary in order to make the statements therein not false or misleading.
No notice to, filing with, or authorization, consent or approval of any
governmental entity including without limitation the Securities and Exchange
Commission, is necessary for the preparation, finalization or distribution of
the Shareholder Information or the solicitation of proxies or written consents
related thereto. The Company is not subject to any of the reporting or filing
requirements of the Securities Exchange Act of 1934, as amended.
3.28 Full Disclosure. Neither this Agreement, any of the exhibits
or schedules hereto or any information furnished, or to be furnished, by either
the Company, the Subsidiary or any of the Shareholders to Millers or Merger Sub
or their representatives in connection with this Agreement (including, but not
limited to, the Financial Statements and all information in the Schedules
hereto) contains, or will contain, any untrue statement of a material fact or
omits, or will omit, a material fact necessary to make each statement contained
herein or therein not misleading. There is no fact which the Company has not
disclosed to Millers or Merger Sub in writing and of which any of its officers,
directors or executive employees is aware (other than general economic
conditions) and which has had or would reasonably be expected to have a
material adverse effect upon the existing or expected financial condition,
operating results, assets, customer or supplier relations, employee relations
or business prospects of the Company or the Subsidiary.
3.29 Credit Cards. No reimbursements are now due to the Company
from any officer, employee, agent or other person authorized to use the
Company's American Express Corporate Credit Card and no unauthorized charges
have been made or are currently existing for which the Company is liable to pay
or reimburse any person using such credit card. The Company has no liability
for charges incurred by any person using the Company's American Express
Corporate Credit Card. The Company has no other corporate credit cards issued
to, or held by, any officer, employee, agent or other person.
3.30 Expenses. The aggregate amount of expenses of whatever kind
and nature, including, without limitation, legal fees, accounting fees, the
KPMG Fee and any other brokerage or other fees (collectively, "Transaction
Expenses") incurred by the Company in connection with this Agreement and the
transactions contemplated hereby shall not exceed $325,000.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE MANAGEMENT SHAREHOLDERS
Each of the Management Shareholders hereby represents and warrants to
Millers and Merger Sub with respect to such Management Shareholder, and not
with respect to any other Management Shareholder, as follows:
4.1 Title to Shares. Each Management Shareholder owns the Shares
set forth opposite his name in Schedule 4.1 hereto free and clear of any lien,
encumbrance, adverse claim, restriction on sale or transfer (other than
restrictions imposed by applicable securities laws), preemptive right,
limitations on voting rights or option, and has the authority to dispose of
such Shares pursuant to this Agreement and to grant the proxy pursuant to
Section 6.5.
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4.2 Power; Binding Agreement. Each Management Shareholder has the
full legal right, power and authority to enter into and perform all of such
Management Shareholder's obligations under this Agreement. The execution,
delivery, and performance of this Agreement by each Management Shareholder and
the consummation by such Management Shareholder of the transactions
contemplated by this Agreement will not violate any other agreement to which
the Management Shareholder is a party including, without limitation, any voting
agreement, shareholders agreement, voting trust or proxy. This Agreement has
been duly executed and delivered by the Management Shareholder and constitutes
the legal, valid, and binding agreement of the Management Shareholder,
enforceable against the Management Shareholder in accordance with its terms
except as enforcement thereof may be limited by liquidation, conservatorship,
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally from time to time in effect and
except that equitable remedies are subject to judicial discretion.
4.3 No Conflicts. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in the acceleration or termination of, or the creation in any party of
the right to accelerate, terminate, modify or cancel, any indenture, contract,
lease, sublease, loan agreement, note or other obligation or liability to which
any Management Shareholder is a party or is bound or to which any of the
Management Shareholder's assets are subject, (ii) conflict with, violate or
result in a breach of any provision of the charter documents or trust agreement
of any Management Shareholder which is not a natural person or (iii) conflict
with or violate any law, rule, regulation, ordinance, order, writ, injunction
or decree applicable to any Management Shareholder or by which any of their
respective properties or assets is bound or affected.
4.4 Legal Proceedings. There are no claims, actions, suits,
arbitrations, grievances or proceedings pending or, to the knowledge of each
Management Shareholder threatened or any investigation pending or, to the
knowledge of each Management Shareholder, threatened, against such Management
Shareholder, at law, in equity, or before any federal, state, municipal or
other governmental or nongovernmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, involving the transactions
contemplated hereby.
4.5 Consents. No consent of, notice to, order of, filing with, or
approval or authorization of any court or governmental body or other person is
required in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated herein by each Management
Shareholder.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, prior to the Effective Time, unless Millers
and Merger Sub shall otherwise agree in writing or as otherwise expressly
contemplated by this Agreement:
(a) Except for such matters undertaken by employees of
the Company in connection with this Agreement and the transactions
contemplated hereby, the business of the Company shall be conducted only
in, and the Company shall not take any action except in the ordinary
course of business and consistent with past practices, and the Company
shall use its best efforts to maintain and preserve its business
organization, assets, prospects, employees and business relationships;
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(b) The Company shall not, directly or indirectly, do any
of the following: (i) authorize for issuance, issue, sell, pledge,
deliver, or agree or commit to issue, sell, pledge or deliver (whether
through the issuance or grant of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any capital stock of the
Company or the Subsidiary or securities or rights convertible into or
exchangeable for, shares of capital stock or securities convertible into
or exchangeable for such shares or (ii) pledge, dispose of or encumber,
except in the ordinary course of business, any assets of the Company or
the Subsidiary (including any indebtedness owed to it or any claims held
by it); (iii) amend or propose to amend its charter or bylaws or similar
organizational documents; (iv) split, combine or reclassify any shares of
its capital stock or declare, set aside or pay any dividend or
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock; (v) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any capital stock of the
Company; (vi) transfer any assets or liabilities to any subsidiary except
for transfers of cash in the ordinary course of business;
(c) The Company shall not, directly or indirectly, (i)
acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division
thereof or make any investment either by purchase of stock or securities,
contributions to capital, property transfer or purchase of any amount of
property or assets of any other individual or entity; (ii) acquire any
assets for a value in excess of $10,000 other than in the ordinary course
of business; (iii) dispose of any assets with a value in excess of $10,000
other than in the ordinary course of business; (iv) except for
indebtedness under the Company's line of credit, incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee,
endorse or otherwise as an accommodation become responsible for, the
obligations of any other individual or entity, make any loans or advances
or enter into any other transaction, except in the ordinary course of
business and consistent with past practice; (v) authorize, recommend or
propose any change in its capitalization or, except in the ordinary course
of business, any release or relinquishment of any contract right; or (vi)
authorize or propose any of the foregoing or enter into or modify any
contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(d) The Company shall not enter into or adopt any new, or
amend any existing, severance or termination benefit arrangements,
consulting agreements, any employment benefit plans, or arrangement;
(e) Except for arrangements existing prior to September
30, 1996 or as noted in Schedule 3.20, the Company (except for salary
increases or other employee benefit arrangements in the ordinary course of
business) shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, plan, fund or
other arrangement for the benefit or welfare of any employee or increase
or pay any bonus or benefit not required by any existing plan and
arrangement;
(f) The Company shall not, pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the Company's
Financial Statements or incurred in the ordinary course of business and
consistent with past practice;
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(g) The Company shall not, waive, release, grant or
transfer any franchises, franchise agreements, patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights
or know-how or modify or change in any respect any existing license,
lease, contract franchise, franchise agreement or other document, other
than in the ordinary course of business and consistent with past practice;
(h) The Company shall use its best efforts to preserve
its business organization intact, to keep available the services of its
current officers and key employees and to maintain satisfactory
relationships with licensors, licensees, suppliers, contractors,
distributors, customers and others having significant business
relationships with the Company;
(i) The Company shall not make capital expenditures in
the aggregate in excess of $50,000; or
(j) The Company shall not authorize or propose any of the
foregoing or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
5.2 Conduct of Business by the Subsidiary Pending the Merger. The
Company covenants and agrees that, prior to the Effective Time, unless Millers
and Merger Sub shall otherwise agree in writing or as otherwise expressly
contemplated by this Agreement:
(a) The business of the Subsidiary shall be conducted
only in, and the Subsidiary shall not take any action except in the
ordinary course of business and consistent with past practices, and the
Company shall use its best efforts to cause the Subsidiary to maintain and
preserve its business organization, assets, prospects, employees and
business relationships; and
(b) The Subsidiary shall not directly or indirectly take
any action with respect to the Company or the Subsidiary which the Company
is prohibited from taking with respect to the Company or the Subsidiary
pursuant to Section 5.1 hereof.
5.3 Affirmative Covenants. The Company covenants and agrees that,
prior to the Effective Time, unless Millers and Merger Sub shall otherwise
agree in writing or as otherwise expressly contemplated by this Agreement, the
Company shall, and shall cause the Subsidiary to:
(a) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence and all material
licenses, authorizations and permits necessary to the conduct of its
businesses;
(b) maintain and keep its properties in good repair,
working order and condition (normal wear and tear excepted) consistent
with past practices;
(c) pay and discharge when payable all taxes, assessments
and governmental charges imposed upon its properties or upon the income or
profits therefrom (in each case before the same becomes delinquent and
before penalties accrue thereon) and all material claims for labor,
materials or supplies which if unpaid would by law become a lien upon any
of its property unless and to the extent that the same are being contested
in good faith and by appropriate proceedings and establish or maintain
adequate reserves with respect thereto in a manner consistent with past
practices;
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(d) comply with all other material obligations which it
incurs pursuant to any contract or agreement, whether oral or written,
express or implied, as such obligations become due unless and to the
extent that the same are being contested in good faith and by appropriate
proceedings and establish or maintain adequate reserves with respect
thereto in a manner consistent with past practices;
(e) comply in all material respects with all applicable
material laws, rules and regulations of all governmental authorities;
(f) apply for and continue in force its existing
insurance coverages; and
(g) maintain proper books of record and account which
present fairly in all material respects its financial condition and
results of operations and make provisions on its financial statements for
all such proper reserves consistent with past practices.
ARTICLE 6
COVENANTS OF THE COMPANY AND THE MANAGEMENT SHAREHOLDERS
6.1 Shareholder Information. As soon as practicable, the Company
shall prepare and promptly thereafter shall mail to its Shareholders, the
Shareholder Information. Millers and Merger Sub shall furnish all information
concerning Millers and Merger Sub as the Company may reasonably request for
inclusion in the Shareholder Information. Subject to the fiduciary duties of
the Board of Directors of the Company under applicable law, the Shareholder
Information shall contain the recommendation of the Board of Directors of the
Company in favor of the Agreement and Plan of Merger and the Board of Directors
shall recommend that the Shareholders of the Company approve and consent to the
Merger.
6.2 Shareholders' Meeting. The Company shall use its best efforts
to take all action necessary, in accordance with the Wisconsin Law and its
Articles of Incorporation and bylaws, to cause a special meeting of its
Shareholders to be duly called and held as promptly as reasonably practicable
after the date of this Agreement for the purpose of approving and adopting the
Merger and this Agreement. Upon approval of the Merger by holders of not less
than a majority of the outstanding Shares, the Company shall, in accordance
with the Wisconsin Law, send to each of its Shareholders, at each Shareholder's
address as it appears on the Company's records, by certified or registered
mail, return receipt requested, notice as to the Effective Date and the
availability of appraisal rights. The Company shall use its best efforts to
solicit from Shareholders of the Company votes or consents in favor of such
adoption and approval and to take all other action necessary or helpful to
secure the vote or consent of Shareholders required by law to effect the
Merger.
6.3 No Shopping. Until termination of this Agreement, neither the
Company nor the Management Shareholders will, directly or indirectly, through
any officer, director, agent, representative or otherwise, (i) solicit,
initiate or encourage submission of proposals or offers from any person (other
than Millers and Merger Sub), relating to any acquisition or purchase of all or
substantially all of the assets of, or any equity interest in, the Company or
any merger, consolidation, or business combination with the Company, or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person (other than Millers and Merger Sub) any information with respect to, any
of the foregoing, or (iii) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. The Company shall promptly notify
Millers and Merger Sub if it receives any such proposal or offer or any inquiry
or contact with respect thereto. Until termination of this Agreement, the
Management Shareholders will not, directly or indirectly, (i)
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sell, transfer, pledge, encumber, assign or otherwise dispose of, or enter into
any contract, option or other arrangement or understanding with respect to the
sale, transfer, pledge, encumbrance, assignment or other disposition of, any of
the Shares, or (ii) grant any proxies, deposit any Shares into a voting trust
or enter into a voting agreement with respect to the Shares (except for proxies
granted to the Shareholders' Agent hereunder).
6.4 Approval of Merger. Each of the Management Shareholders
agrees to vote all Shares held by such Management Shareholder in favor of the
Merger at a special meeting of the Company's Shareholders duly called and held
for the purpose of acting upon the proposal to approve the Merger.
6.5 Proxy. Each of the Management Shareholders hereby irrevocably
appoints Millers and Merger Sub and each of them, with full power of
substitution and resubstitution (or any other designees of Millers), as proxies
for the Management Shareholder to vote, and the Management Shareholder
personally agrees to vote, all Shares that the Management Shareholder is
entitled to vote, for and in the name, place, and stead of the Management
Shareholder at any meeting of the holders of shares of Common Stock or any
adjournments or postponements thereof or pursuant to any consent in lieu of a
meeting, or otherwise, with respect only to the approval of this Agreement, the
transactions contemplated by this Agreement, any matters related to or in
connection with the Merger, and any corporate action the consummation of which
would violate, frustrate the purposes of, prevent, or delay the consummation of
the transactions contemplated by this Agreement (including, without limitation,
any proposal to amend the Articles of Incorporation or bylaws of the Company or
approve any merger, consolidation, sale or purchase of any assets, issuance of
Common Stock or any other equity security of the Company (or a security
convertible into an equity security of the Company), reorganization,
recapitalization, liquidation, winding up of or by the Company, or any similar
transaction). The Management Shareholders agree that the foregoing proxy is
coupled with an interest sufficient in law to support an irrevocable proxy.
This proxy shall revoke any other proxy granted by any Management Shareholder
at any time with respect to the Shares and no subsequent proxies will be given
with respect thereto by any Management Shareholder.
6.6 Release. Each of the Management Shareholders, in the capacity
as shareholders of the Company, hereby agrees to execute and deliver on the
Effective Date a release of the Company from any and all claims resulting from
or related to any matter arising prior to the Effective Date in the form of
Exhibit C hereto.
6.7 Consents. The Company and the Management Shareholders hereby
covenant and agree to use their best efforts to obtain all material consents,
waivers, authorizations and approvals as may be required with respect to the
consummation of the transactions contemplated hereby, including the change of
control of the Company, under (i) any indenture, contract, lease, sublease,
loan agreement, note or other agreement of which the Company is a party or
pursuant to which the assets of the Company are subject or (ii) any law, rule,
regulation, ordinance, order, writ, injunction, decree, license or permit
applicable to the Company or by which any of its assets or properties are bound
or affected.
6.8 Confidential Information.
(a) For purposes of this Agreement, "Confidential
Information" shall mean any proprietary information, and any information
which the Surviving Corporation reasonably considers to be proprietary,
pertaining to the Surviving Corporation's past, present or prospective
business secrets, methods or policies, earnings, finances, security
holders,
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lenders, key employees, nature of services performed by the Surviving
Corporation's sales and maintenance personnel, quality control procedures
or standards, procedures and methods of cost or installation of the
Surviving Corporation's products or components, information relating to
arrangements with suppliers, the identity and requirements of arrangements
with customers, and the type, volume or profitability of work for such
customers, drawings, records, reports, documents, manuals, techniques,
procedures, formulae, ratings, design information, data, statistics, trade
secrets and all other information of any kind or character relating to the
Surviving Corporation, whether or not reduced to writing.
(b) Each Management Shareholder acknowledges that such
Management Shareholder has and may have access to Confidential Information
and that such Confidential Information constitutes valuable, special and
unique property of the Surviving Corporation. At no time shall such
Shareholder (i) use any Confidential Information in any manner adverse to
the business interests of the Surviving Corporation, or (ii) disclose any
such Confidential Information to any person or entity for any reason or
purpose whatsoever; provided that a Management Shareholder may provide
such Confidential Information in response to judicial or administrative
process or applicable governmental laws, rules, regulations orders or
ordinances, but only that portion of the documents or information which,
on the advise of counsel, is legally required to be furnished, and
provided that such Management Shareholders notifies the Surviving
Corporation of his obligation to provide such Confidential Information
prior to such disclosure and fully cooperates with the Surviving
Corporation to protect the confidentiality of such Confidential
Information under applicable law. Upon the request of the Surviving
Corporation, each Management Shareholder shall deliver to the Surviving
Corporation all letters, notes, computer disks, software, notebooks,
reports and other materials which contain Confidential Information and
which are in the possession or under the control of such Management
Shareholder, whether or not prepared by such Shareholder.
(c) All records and documents embodying any Confidential
Information or pertaining to the existing or contemplated scope of the
Surviving Corporation's business, which have been conceived, prepared or
developed by a Management Shareholder in connection with his ownership
interest in the Company, employment by the Company or otherwise, either
alone or with others (herein called "Work Product"), shall be the sole
property of the Surviving Corporation. Upon request of the Surviving
Corporation, such Management Shareholder shall deliver all Work Product to
the Surviving Corporation.
6.9 Independent Covenants. The covenants contained herein are
independent and separate, and in the event that any provision contained herein
is declared invalid or illegal, the other provisions hereof shall not be
affected or impaired thereby and shall remain valid and enforceable.
6.10 Injunctive Relief. In the event of a breach or threatened
breach by a Management Shareholder of the provisions of this Article 6, the
Surviving Corporation shall be entitled to an injunction to prevent irreparable
injury to the Surviving Corporation. Nothing herein shall be construed as
prohibiting the Surviving Corporation from pursuing any other remedies
available to the Surviving Corporation for such breach or threatened breach,
including the recovery of damages from such Management Shareholder.
6.11 Repayment of Shareholder Loans. Except as otherwise provided
in the Employment Agreement of ▇▇▇▇▇▇ ▇▇▇▇▇▇ attached hereto as Exhibit D-2
with respect to Employer Advances made under the Insurance Agreement referenced
therein, at or prior to the Effective Time, the
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Management Shareholders shall repay all outstanding loans owed by the
Management Shareholders to the Company.
6.12 Shareholders' Agent Agreement. Each of the Management
Shareholders agrees to enter into the Shareholders' Agent Agreement and to vote
his shares to authorize and appoint ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ as the Shareholders'
Agent on behalf of the Shareholders of the Company to take such actions and
exercise such powers on behalf of the Shareholders as set forth in such
Shareholders' Agent Agreement with respect to this Agreement, the Escrow
Agreement and the transactions contemplated hereby and thereby.
6.13 Employee Compensation Plans. At or prior to the Effective
Time, the following actions shall be taken with respect to existing employee
compensation plans:
(a) The Employment Agreement between the Company and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ shall provide for the amendment of the existing Deferred
Compensation Plan to the amount currently vested and no further vesting
shall occur.
(b) The Employment Agreement between the Company and
▇▇▇▇▇▇ ▇▇▇▇▇▇ shall provide for the manner and timing of the repayment of
all amounts loaned or advanced by the Company to ▇▇▇▇▇▇ ▇▇▇▇▇▇ or on his
behalf to fund the annuity pursuant to the Split-Dollar Insurance
Agreement and the amendment of the Split-Dollar Insurance Agreement.
(c) Any outstanding rights to acquire shares of the
Company shall be terminated at the Effective Time.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 Expenses. All expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses whether or not the Merger is consummated. The amount,
if any, by which the aggregate Transaction Expenses exceed $325,000 shall be
deemed "Shareholder Expenses." Not less than two business days prior to the
Effective Date, the Company shall provide written notice (the "Expense Notice")
to Millers of the amount of all Transaction Expenses (including the portion
thereof, if any, constituting Shareholder Expenses) paid, incurred or expected
to be incurred by the Company as of the Effective Date. The amount of
Shareholder Expenses set forth in the Expense Notice shall be deducted from the
Aggregate Share Price as provided in Section 1.6(a) hereof as an offset against
Shareholder Expenses paid or payable by the Company. The Surviving Corporation
shall be reimbursed from the Escrow Amount for any additional Shareholder
Expenses not deducted from the Aggregate Share Price. All expenses of the
Company in connection with the consummation of this Agreement incurred after
the Effective Time and the fees and expenses of the Disbursing Agent will be
paid by the Shareholders. The fees and expenses of the Escrow Agent will be
paid as set forth in the Escrow Agreement. The filing fees associated with
filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act will be paid by Millers.
7.2 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees (i) to use all reasonable
efforts to take, or cause to be taken, all action and (ii) to use all
reasonable efforts to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement and to cooperate with each other in
connection with the foregoing, (iii) to use all reasonable efforts to obtain
all necessary waivers, consents and approvals from other
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parties to material loan agreements, leases and other contracts and to notify
each of the other parties hereto of any request for prepayment with respect
thereto; provided however, all reasonable efforts with respect to obtaining
waivers, consents and approvals under loan agreements does not obligate the
parties hereto to make any prepayment on any such loan, (iv) to use all
reasonable efforts to obtain all necessary consents, approvals and
authorizations as are required to be obtained under any federal, state, local
or foreign law or regulations, (v) to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby, (vi) to use all reasonable efforts to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, and (vii) to
use all reasonable efforts to effect all necessary registrations and filings
and submissions of information required or requested by governmental
authorities.
7.3 Notification of Certain Matters. Each party will promptly
give written notice to the other parties upon becoming aware of the occurrence
or failure to occur, or impending or threatened occurrence or failure to occur,
of any event that would cause or constitute, or would be likely to cause or
constitute, a breach of any of its representations, warranties or covenants
contained in this Agreement and will use all reasonable efforts to prevent or
promptly remedy the occurrence or failure. No such notification shall limit or
affect the representations, warranties, covenants or conditions or remedies of
the parties hereunder.
7.4 Access to Information.
(a) The Company shall, and shall cause the Subsidiary and
the Company's officers, directors, employees and agents to, afford the
officers, employees and agents of Millers and Merger Sub complete access
at all reasonable times to its officers, employees, agents, properties,
facilities, books, records and contracts and shall furnish Millers and
Merger Sub all financial, operating and other data and information as
Millers and Merger Sub through their officers, employees or agents, may
reasonably request. Millers and Merger Sub will hold and will cause their
respective representatives to hold in strict confidence all documents and
information concerning the Company furnished to Millers or Merger Sub in
connection with the transactions contemplated by this Agreement (except to
the extent that such information can be shown to have been (i) previously
known by Millers or Merger Sub (or their respective affiliates) prior to
its disclosure to Millers or Merger Sub by the Company, (ii) in the public
domain through no fault of Millers or Merger Sub or (iii) later lawfully
acquired by Millers or Merger Sub (or their respective affiliates) from
other sources and will not release or disclose such information to any
other person, except in connection with this Agreement to (i) their
respective auditors, attorneys, financial advisors and other consultants
or advisors, and (ii) responsible financial institutions, partnerships and
individuals after Millers or Merger Sub, as the case may be, has made
reasonable efforts to cause such financial institutions, partnerships and
individuals to agree to be bound by the provisions of this Section 7.4 as
if the reference to Millers or Merger Sub herein were to them (it being
understood that such persons shall be informed by Millers or Merger Sub of
the confidential nature of such information and shall be directed by
Millers or Merger Sub to treat such information confidentially); provided
that Millers, Merger Sub and their respective representatives may provide
such documents and information in response to judicial or administrative
process or applicable governmental laws, rules, regulations, orders or
ordinances, but only that portion of the documents or information which,
on the advice of counsel, is legally required to be furnished, and
provided that Millers or Merger Sub, as the case may be, notifies the
Company of its obligation to provide such information prior to such
disclosure and fully cooperates with the Company to protect the
confidentiality of such documents and information under applicable
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law. If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except to the extent such
information can be shown to have been (i) previously known by Millers,
Merger Sub or their respective affiliates, prior to its disclosure to
Millers or Merger Sub by the Company, (ii) in the public domain through no
fault of Millers or Merger Sub, or (iii) later lawfully acquired by
Millers, Merger Sub or their respective affiliates, from other sources,
and, if requested by the Company, Millers or Merger Sub will destroy or
return to the Company all copies of written information furnished by the
Company to Millers, Merger Sub or their respective affiliates, agents,
representatives or advisers.
(b) No investigation pursuant to this Section 7.4 shall
affect any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto; provided however,
that no party hereto shall intentionally withhold notice to the other
parties hereto of any breach of representation or warranty by such other
parties or failure by such other parties to perform their obligations
hereunder; provided further, that the failure by any party to provide such
notice shall not be deemed a waiver of any condition, right or remedy
hereunder.
7.5 Information for Other Filings. The parties represent to each
other that the information provided and to be provided by Millers, Merger Sub
and the Company, respectively, for use in any document to be filed with any
other governmental agency or authority in connection with the transactions
contemplated hereby shall, at the respective times such documents are filed
with the governmental agency or authority and on the Effective Date be true and
correct in all material respects and shall not omit to state any material fact
required to be stated therein or necessary in order to make such information
not false or misleading, and the Company, Millers and Merger Sub each agree to
so correct any such information provided by it for use in such documents that
shall have become false or misleading.
ARTICLE 8
CONDITIONS
8.1 Conditions to Obligation of Each Party to Effect the Merger.
The obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) the Merger shall have been approved and adopted by
the requisite vote of the shareholders of the Company required by the
Wisconsin Law;
(b) any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act shall have expired or been terminated and all filings required to be
made prior to the Effective Time with, and all consents, approvals,
permits, and authorizations required to be obtained prior to the Effective
Time from, governmental and regulatory authorities in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement will have been made or
obtained (as the case may be); and
(c) no preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission nor any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority shall be in effect that would make the acquisition
or holding directly or indirectly by Millers of the shares of Common Stock
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of the Surviving Corporation illegal or otherwise prevent the consummation
of the Merger.
8.2 Additional Conditions to the Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the
fulfillment at or prior to the Effective Time of the following conditions
(unless waived):
(a) each of Millers and Merger Sub shall in all material
respects have performed each obligation and agreement and complied with
each covenant to be performed and complied with by it hereunder on or
prior to the Effective Time;
(b) the representations and warranties of Millers and
Merger Sub in this Agreement shall be true and correct in all material
respects when made and at the Effective Time with the same force and
effect as though made at such time, except as affected by the transactions
contemplated hereby;
(c) Millers and Merger Sub shall have furnished to the
Company a certificate, dated the Effective Date, signed by a responsible
officer of each of Millers and Merger Sub, to the effect that all
conditions set forth in Section 8.2(a) and (b) have been satisfied; and
(d) the Company and the Management Shareholders shall
have received an opinion dated the Effective Date of counsel to Millers
and Merger Sub, substantially in the form of Exhibit E hereto, which
opinion shall be satisfactory to counsel for the Company.
(e) Employment Agreements in the forms attached as
Exhibits D-1 and D-2 shall have been executed and delivered to the
appropriate parties by the Surviving Corporation.
(f) The Company shall have received a copy of the
resolutions of the Boards of Directors of Millers and Merger Sub
authorizing the execution, delivery and performance of the Agreement and
the consummation of the transactions contemplated hereby and a copy of the
resolutions of Millers as the sole shareholder of Merger Sub approving the
Merger, all certified by the secretaries of Millers and Merger Sub on the
Effective Date. Such certificates shall state that the resolutions set
forth therein have not been amended, modified, revoked or rescinded as of
the date of such certificates;
(g) The Company shall have received a certificate of the
secretary of Millers and Merger Sub dated the Effective Date, as to the
incumbency and signature of the officers of Millers and Merger Sub
executing this Agreement and any certificate, agreement or other documents
to be delivered pursuant hereto, together with evidence of the incumbency
of such secretary;
(h) The Company shall have received (i) a copy, certified
as of a date reasonably close to the Effective Date by the Department of
Financial Institutions of Wisconsin, of the Articles of Incorporation,
together with all amendments thereto, of Merger Sub, (ii) a copy,
certified as of the Effective Date by the secretary or an assistant
secretary of Merger Sub, of the bylaws of Merger Sub in effect on the
Effective Date, (iii) a certificate or telex confirmation as of the
Effective Date from the Department of Financial Institutions of Wisconsin
as to the existence of Merger Sub as a Wisconsin corporation, and (iv) a
certificate dated the Effective Date from the secretary of assistant
secretary of Merger Sub to the effect that the documents delivered
pursuant to (i) are true and correct copies of such documents as are on
file with the Department of Financial Institutions of Wisconsin
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and no action has been taken to amend, modify or repeal such documents,
the same being in full force and effect in such form on the Effective
Date.
(i) Millers and Merger Sub shall have delivered to the
Company all necessary consents, waivers, authorizations and approvals so
that the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not (i) conflict with, violate
or result in a breach of any provision of the charter documents or bylaws
of Millers or Merger Sub, (ii) conflict with or violate any law, rule,
regulation, ordinance, order, writ, injunction, decree, license or permit
applicable to Millers or Merger Sub or by which any of their properties or
assets is bound or effected.
(j) The Escrow Agreement shall have been executed and
delivered by the Surviving Corporation and the Escrow Agent.
8.3 Additional Conditions to the Obligations of Millers and Merger
Sub. The obligations of Millers and Merger Sub to effect the Merger are also
subject to the fulfillment at or prior to the Effective Time of the following
conditions (unless waived):
(a) the Company shall in all material respects have
performed each obligation and agreement and complied with each covenant to
be performed and complied with by it hereunder on or prior to the
Effective Time;
(b) the representations and warranties of the Company and
the Management Shareholders in this Agreement shall be true and correct in
all material respects when made and at the Effective Time with the same
force and effect as though made at such time, except as affected by the
transactions contemplated hereby;
(c) the Company shall have furnished to Millers and
Merger Sub a certificate, dated the Effective Date, signed by a
responsible officer of the Company, to the effect that all conditions set
forth in Section 8.3(a) and (b) have been satisfied;
(d) all of the members of the Company's Board of
Directors, except for those directors listed in Schedule 1.4 hereto, shall
have irrevocably tendered their resignations effective as of the Effective
Time and the Company shall have accepted such resignations;
(e) Millers and Merger Sub shall have received an opinion
dated the Effective Date of counsel to the Company, substantially in the
form of Exhibit F hereto, which opinion shall be satisfactory to counsel
for Millers and Merger Sub;
(f) Except as otherwise provided in the Employment
Agreement of ▇▇▇▇▇▇ ▇▇▇▇▇▇ attached hereto as Exhibit D-2 with respect to
Employer Advances made under the Insurance Agreement referenced therein,
all outstanding loans owed by any Shareholder, officer or director of the
Company shall have been repaid in full to the Company and the releases
described in Section 3.21 shall have been delivered to the Company;
(g) Millers and Merger Sub shall have received a copy of
the resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of the Agreement and the consummation
of the transactions contemplated hereby and a copy of the resolutions of
the Shareholders of the Company approving the Merger (including the
Shareholders' Agent Agreement and the Escrow Agreement), all certified by
the Secretary of the Company on the Effective Date. Such certificates
shall state that the resolutions set
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forth therein have not been amended, modified, revoked or rescinded as of
the date of such certificates;
(h) Millers and Merger Sub shall have received a
certificate of the Secretary of the Company dated the Effective Date, as
to the incumbency and signature of the officers of the Company executing
this Agreement and any certificate, agreement or other documents to be
delivered pursuant hereto, together with evidence of the incumbency of
such Secretary;
(i) Millers and Merger Sub shall have received (i) a
copy, certified as of a date reasonably close to the Effective Date by the
Department of Financial Institutions of Wisconsin, of the Articles of
Incorporation, together with all amendments thereto, of the Company, (ii)
a copy, certified as of a date reasonably close to the Effective Date by
the Department of Financial Institutions of Wisconsin, of the Articles of
Incorporation, together with all amendments thereto, of the Subsidiary,
(iii) a copy, certified as of the Effective Date by the Secretary or an
Assistant Secretary of the Company, of the bylaws of the Company in effect
on the Effective Date, (iv) a copy, certified as of the Effective Date by
the Secretary or an Assistant Secretary of the Subsidiary, of the bylaws
of the Subsidiary in effect on the Effective Date, (v) a certificate or
telex confirmation as of the Effective Date from the Department of
Financial Institutions of Wisconsin as to the existence of the Company as
a Wisconsin corporation, (vi) a certificate or telex confirmation as of
the Effective Date from the Department of Financial Institutions of
Wisconsin as to the existence of the Subsidiary as a Wisconsin
corporation, (vii) a certificate or telex confirmation as of not more than
five business days prior to the Effective Date from the office of the
Secretary of State, Comptroller or other appropriate public official in
each state in which the Company is qualified to conduct business
certifying that the Company is in good standing in each such state, (viii)
a certificate dated the Effective Date from the Secretary or Assistant
Secretary of the Company to the effect that the documents delivered
pursuant to (i) are true and correct copies of such documents as on file
with the Department of Financial Institutions of Wisconsin and no action
has been taken to amend, modify or repeal such documents, the same being
in full force and effect in such form on the Effective Date, and (ix) a
certificate dated the Effective Date from the Secretary or Assistant
Secretary of the Subsidiary to the effect that the documents delivered
pursuant to (ii) are true and correct copies of such documents as on file
with the Department of Financial Institutions of Wisconsin and no action
has been taken to amend, modify or repeal such documents, the same being
in full force and effect in such form on the Effective Date;
(j) The Company shall have delivered to Millers and
Merger Sub all necessary consents, waivers, authorizations and approvals
so that the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby (including the change of control
of the Company) will not (i) result in the acceleration or termination of,
or the creation in any party of the right to accelerate, terminate, modify
or cancel, any indenture, contract, lease, sublease, loan agreement, note
or other obligation or liability to which the Company or the Subsidiary is
a party or is bound or to which any of their assets are subject, (ii)
conflict with, violate or result in a breach of any provision of the
charter documents or bylaws of the Company or the Subsidiary, (iii)
conflict with or violate any law, rule, regulation, ordinance, order,
writ, injunction, decree, license or permit applicable to the Company or
the Subsidiary or by which any of their properties or assets is bound or
affected or (iv) conflict with or result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would
become a default) under, or result in the creation of any lien, charge or
encumbrance on any of the properties or assets
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of the Company or the Subsidiary pursuant to any of the terms, conditions
or provisions of any indenture, contract, lease, sublease, loan agreement,
note, permit, license, franchise, agreement or other instrument,
obligation or liability to which the Company or the Subsidiary is a party
or by which the Company or the Subsidiary or any of their assets is bound
or affected;
(k) All schedules to be prepared and provided by the
Company shall have been delivered to Millers and Merger Sub prior to the
Effective Time in form and substance acceptable to Millers and Merger Sub
in their sole discretion;
(l) The Shareholders' Agent Agreement shall have been
fully executed and delivered by all parties thereto;
(m) The Escrow Agreement shall have been executed and
delivered by the Shareholders' Agent and the Escrow Agent;
(n) The Board of Directors of the Company shall have
terminated the Company's Performance Share Plan;
(o) Employment Agreements in the forms attached as
Exhibits D-1 and D-2 shall have been executed and delivered to the
Surviving Corporation by each employee named therein.
(p) The Company shall have delivered to Millers and
Merger Sub a letter from CUNA Mutual Insurance Society ("CUNA") confirming
that no defaults exist under the Restated License Agreement dated November
30, 1994 between the Company and CUNA;
(q) The Company shall have delivered to Millers and
Merger Sub landlord waivers and estoppel letters, in form satisfactory to
Millers, from each lessor of real estate leased by the Company set forth
on Schedule 8.3(q);
(r) The Company shall have delivered to Millers and
Merger Sub a waiver and letter of estoppel from The City of Sheboygan, in
form satisfactory to Millers, stating that the conditions to improvements
required for certificate of completion under the Contract for Sale of Land
for Private Development dated November 1, 1988 between the Company and The
Redevelopment Authority of Sheboygan, Wisconsin have been satisfied;
(s) the holders of not more than 1% of the shares of
Common Stock outstanding immediately prior to the vote by the Shareholders
to approve and adopt the Merger and this Agreement shall have exercised
dissenters' rights under the Wisconsin Law;
(t) the Company shall have received and delivered to
Millers and Merger Sub the written agreement of Norwest Bank Wisconsin
N.A. in form and substance acceptable to Millers and Merger Sub (i)
consenting to the change of control of the Company contemplated by the
Merger (ii) consenting to the pledge of assets of the Company to
NationsBank of Texas, N.A. ("Millers' Lender") in connection with
financing provided by Millers' Lender and (iii) entering into such
intercreditor or similar agreements as may be required by Millers' Lender;
(u) The Company shall have received and delivered to
Millers and Merger Sub assignments of rights from the present or former
employees or consultants set forth on Schedule 8.3(u) with respect to the
software programs set forth on Schedule 8.3(u);
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(v) The Company shall have conveyed and transferred the
Schedule 3.8 property owned by the Company (the "Transferred Property") to
Riverview Building, LLC pursuant to a contract of sale and a deed in form
and substance approved by Millers and fully executed copies of which shall
have been delivered to Millers and Merger Sub;
(w) Riverside Building, LLC shall have paid or refinanced
without recourse to the Company all indebtedness of the Company secured by
the Transferred Property and the Company shall have received and delivered
to Millers and Merger Sub evidence of the satisfaction and payment of all
indebtedness of the Company secured by the Transferred Property;
(x) The Company and Riverside Building, LLC shall have
each executed and delivered a Building Lease in the form of Exhibit G
hereto pursuant to which the Company shall lease the Transferred Property
from Riverside Building, LLC; and
(y) The Company shall have received and delivered to
Millers and Merger Sub a Nondisturbance Agreement in form and substance
approved by Millers from any lender to Riverside Building, LLC whose loan
is secured by the Transferred Property; and
(z) The Company shall have received and filed in all
applicable jurisdictions a UCC-3 termination statement terminating the
lien on the Company's assets heretofore filed by ITT Commercial Finance
Corp.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of the Boards of Directors
of Millers, Merger Sub and the Company;
(b) by either of the Boards of Directors of Merger Sub or
the Company if the Effective Time shall not have occurred on or before
March 31, 1997; provided, however, that the right to terminate under this
Section 9.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such
date;
(c) if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued an
order, decree or ruling or taken any other action (which order, decree or
ruling the parties hereto shall use all reasonable efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable; or
(d) by Millers and Merger Sub if, subsequent to the date
hereof and prior to the Effective Date, there is any material adverse
change in the condition (financial or otherwise), business, operations,
liquidity, property, assets, liabilities, obligations or prospects of the
Company; or
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(e) By Millers or the Company (i) if there has been a
breach in any material respect of any representation, warranty, covenant
or agreement on the part of Millers and Merger Sub, on the one hand, or
the Company and Management Shareholders, on the other hand, respectively,
set forth in this Agreement or (ii) if any representation or warranty of
Millers or Merger Sub, on the one hand, or the Company and Management
Shareholders, on the other hand, respectively, shall be discovered to have
become untrue in any material respect in either case which breach or other
condition has not been cured within ten business days following receipt by
the nonterminating party of notice of such breach or other condition.
9.2 Effect of Termination. Except as set forth in Sections 7.1
and 7.4(a), upon the termination of this Agreement pursuant to Section 9.1,
this Agreement shall forthwith become null and void, except that nothing herein
shall relieve any party from liability for any breach of this Agreement prior
to such termination.
9.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9.4 Waiver. At any time prior to the Effective Time, any term,
provision or condition of this Agreement may be waived in writing (or the time
for performance of any of the obligations or other acts of the parties hereto
may be extended) by the party that is entitled to the benefits thereof.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification for Costs. Subject to the terms of this
Article 10, the Shareholders shall indemnify and hold harmless Millers and the
Surviving Corporation, their officers, directors, employees and controlling
persons from any liability, damage, deficiency, loss, penalty, cost or expense,
including reasonable attorneys fees and costs of investigating and defending
against lawsuits, complaints, actions or other pending or threatened litigation
(being hereafter referred to in this Article 10 as "Millers Costs"), arising
from or attributable to (i) any breach of any representation, warranty or
agreement made by the Company or the Management Shareholders hereunder or in
any certificate delivered in connection with the transactions contemplated
herein, (ii) Millers Costs incurred as a result of any failure to timely file
Forms 5500 or similar filings as referenced in Schedule 3.20 or (iii) Millers
Costs incurred as a result of any failure to timely make the Top Hat filing
required by Department of Labor Regulation Section 2520.104-23 as referenced in
Schedule 3.20. Notwithstanding any other provisions of this Agreement or any
other agreement, instrument or document to the contrary, no indemnification
pursuant to this Section 10.1 shall be payable pursuant to the Escrow Agreement
unless and until the Millers Costs exceed $100,000.00 in the aggregate. At
such time as Millers Costs exceed $100,000.00 in the aggregate, the
Shareholders shall, to the extent of the amount in the Millers Account (as
defined in the Escrow Agreement), be liable to Millers and the Surviving
Corporation for all Millers Costs in excess of $100,000.00.
10.2 Indemnification for Philadelphia Settlement Costs. The
Company is a party to that certain License Agreement dated April 6, 1995 (as
amended, modified, or supplemented from time to time, the "Philadelphia
Contract") between the Company and the Philadelphia Contributionship for the
Insurance of Houses from Loss by Fire ("Philadelphia") under which Philadelphia
has asserted certain claims against the Company with respect to products or
services purchased by
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Philadelphia under the Philadelphia Contract. Subject to the limitations set
forth in this Section 10.2 and notwithstanding any disclosure of disputes under
the Philadelphia Contract referenced in the Schedules hereto, the Shareholders
shall indemnify and hold harmless Millers and the Surviving Corporation, their
officers, directors, employees and controlling persons from any and all
Philadelphia Settlement Costs (as hereinafter defined). For the purposes of
this Agreement, "Philadelphia Settlement Costs" shall mean the aggregate of (i)
the amount of all unpaid services rendered by the Surviving Corporation after
the Effective Date to seek to remedy claims under the Philadelphia Contract at
the rates set forth in the December 31, 1996 system budget with respect to the
Philadelphia Contract or, to the extent that the rate for any services are not
set forth therein, at rates generally charged by the Company for such services
to other customers, (ii) the amount of any receivables from Philadelphia that
have been written off by the Company or that may be written off by the
Surviving Corporation in connection with the Philadelphia Contract, (iii) any
amounts paid in settlement of claims asserted by Philadelphia under the
Philadelphia Contract, and (iv) all other liability, damage, deficiency, loss,
penalty, cost or expense, including reasonable attorney fees and costs incurred
by the Surviving Corporation in connection with investigating, asserting,
initiating and pursuing any claims by the Company or the Surviving Corporation
against Philadelphia and investigating, responding to, defending and settling
claims asserted under the Philadelphia Contract. Notwithstanding any other
provisions of this Agreement or any other agreement, instrument or document to
the contrary, no indemnification pursuant to this Section 10.2 shall be payable
pursuant to the Escrow Agreement unless and until the Philadelphia Settlement
Costs exceed $250,000.00 in the aggregate. At such time as Philadelphia
Settlement Costs exceed $250,000.00 in the aggregate, the Shareholders shall,
to the extent of the amount in the Philadelphia Account (as defined in the
Escrow Agreement), be liable to Millers and the Surviving Corporation for all
Philadelphia Settlement Costs in excess of $250,000.00.
10.3 Indemnification for Tax Liabilities. Notwithstanding any
other provisions of this Agreement or any other agreement, instrument or
document to the contrary, no indemnification pursuant to Section 10.1 shall be
payable pursuant to the Escrow Agreement with respect to (i) any breach of
Section 3.7 hereof, (ii) Millers Costs incurred as a result of any failure to
timely file Forms 5500 or similar filings as referenced on Schedule 3.20 or
(iii) Millers Costs incurred as a result of any failure to timely make the Top
Hat filing required by the Department of Labor Regulation Section 2520.104-23
as referenced on Schedule 3.20; provided that adequate reserves of up to
$300,000.00 have been established on the balance sheet of the Company as of
December 31, 1996 for any such tax or Department of Labor liability relating to
any period prior to December 31, 1996.
10.4 Remedies. Notwithstanding any other provisions of this
Agreement or any other agreement, instrument or document to the contrary, the
Shareholder's indemnity obligations pursuant to Section 10.1 shall be limited
to the amount of the Millers Account established pursuant to the Escrow
Agreement and the Shareholders' indemnity obligations pursuant to Section 10.2
shall be limited to the amount of the Philadelphia Account established pursuant
to the Escrow Agreement.
10.5 Indemnification by Millers and Surviving Corporation. Millers
and the Surviving Corporation shall indemnify and hold harmless the
Shareholders from any liability, damage, deficiency, loss, penalty, cost or
expense, including reasonable attorneys' fees and reasonable costs of
investigating and defending against any lawsuits, complaints, actions or other
pending or threatened litigation (being hereinafter referred to in this Section
10.5 as "Shareholder Costs"), arising from or attributable to any breach of any
representation, warranty or agreement made by Millers or Merger Sub hereunder,
or in any certificate delivered in connection with the transaction contemplated
herein. Notwithstanding any other provisions of this Agreement or any other
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agreement, instrument or document to the contrary, no indemnification pursuant
to this Section 10.5 shall be payable to any Shareholders unless and until the
Shareholders Costs exceed $100,000.00 in the aggregate. At such time as
Shareholders Costs exceed $100,000.00 in the aggregate, Millers and the
Surviving Corporation shall be liable to the Shareholders for all Shareholder
Costs in excess of $100,000.00 provided, however, that in no event shall the
aggregate liability of Millers and the Surviving Corporation for Shareholders
Costs exceed $1,000,000.00.
10.6 Shareholders Remedies. Any claims by the Shareholders for
indemnification hereunder shall be made solely by the Shareholders' Agent on
behalf of the Shareholders. The liability of Millers and the Surviving
Corporation for all indemnification claims made in connection with this
Agreement pursuant to Section 10.5 shall be satisfied solely by payment to the
Disbursing Agent on behalf of all Shareholders. Neither Millers nor the
Surviving Corporation shall have any obligation or liability for the payment of
any indemnification amounts directly to any Shareholder or for the disbursement
of any funds paid by Millers or the Surviving Corporation to the Disbursing
Agent on behalf of the Shareholders. To the extent that all or any portion of
the Escrow Amount becomes payable to the Shareholders, such payment shall be
made by the Escrow Agent to the Disbursing Agent for disbursement to the
Shareholders in accordance with the instructions of the Shareholders' Agent.
Neither Millers nor the Surviving Corporation shall be responsible in any
manner whatsoever for (i) any failure or inability of the Shareholders' Agent
or the Disbursing Agent to honor any provisions of this Agreement, the
Shareholders' Agent Agreement or the Escrow Agreement, (ii) any instructions
given by the Shareholders' Agent to the Disbursing Agent or failure to give
such instructions by the Shareholders' Agent, (iii) the investment of funds
held by the Shareholders' Agent or the Disbursing Agent or (iv) the amount or
timing of the disbursement of funds by the Shareholders' Agent or the
Disbursing Agent.
10.7 Procedures for Resolution and Payment of Claims for
Indemnification.
(a) If a party entitled to be indemnified under this
Article 10 (the "Indemnitee") shall incur any Millers Costs, Philadelphia
Settlement Costs or Shareholders Costs, as the case may be (Millers Costs,
Philadelphia Settlement Costs and Shareholders Costs hereinafter referred
to as "Costs") or determine that it is likely to incur any Costs,
including without limitation claims by third parties, and believes that it
is entitled to be indemnified against such Costs by another party
hereunder (the "Indemnitor"), such Indemnitee shall deliver to the
Indemnitor a certificate (an "Indemnity Certificate") signed by the
Indemnitee which Indemnity Certificate shall:
(i) state that the Indemnitee has paid or
properly accrued Costs, or anticipates that it will incur
liability for Costs for which such Indemnitee is entitled to
indemnification pursuant to this Agreement; and
(ii) specify in reasonable detail each individual
item of Cost included in the amount so stated, the date such
item was paid or properly accrued, the basis for any
anticipated liability, the nature of the misrepresentation,
breach of warranty or breach of covenant to which each such
item is related and the computation of the amount to which
such Indemnitee claims to be entitled hereunder.
(b) In case the Indemnitor shall object to the
indemnification of an Indemnitee in respect of any claim or claims
specified in any Indemnity Certificate, the Indemnitor shall within 30
days after receipt by the Indemnitor of such Indemnity Certificate deliver
to the Indemnitee a written notice to such effect and the Indemnitor and
the Indemnitee shall, within the 30-day period beginning on the date of
receipt by the Indemnitee of such written
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objection, attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims to which the
Indemnitor shall have so objected. If the Indemnitee and the Indemnitor
shall succeed in reaching agreement on their respective rights with
respect to any of such claims, the Indemnitee and the Indemnitor shall
promptly prepare and sign a memorandum setting forth such agreement. If
Indemnitee and the Indemnitor are unable to agree as to any particular
item or items or amount or amounts, then Indemnitee and the Indemnitor
shall arbitrate such dispute pursuant to Section 11.5 hereof.
(c) Claims for Costs specified in any Indemnity
Certificate to which an Indemnitor shall not object in writing, claims for
Costs covered by a memorandum of agreement of the nature described in
paragraph (b), claims for Costs the validity and amount of which have been
the subject of arbitration as described in paragraph (b) and claims for
Costs the validity and amount of which shall have been the subject of a
final judicial determination are hereinafter referred to, collectively, as
"Agreed Claims".
(d) Promptly after the assertion by any third party of
any claim against any Indemnitee that, in the judgment of such Indemnitee,
may result in the incurrence by such Indemnitee of Costs for which such
Indemnitee would be entitled to indemnification pursuant to this
Agreement, such Indemnitee shall deliver to the Indemnitor a written
notice describing in reasonable detail such claim and such Indemnitor may,
at its option, assume the defense of the Indemnitee against such claim
(including the employment of counsel, who shall be satisfactory to such
Indemnitee, and the payment of expenses). Any Indemnitee shall have the
right to employ separate counsel in any such action or claim and to
participate in the defense thereto, but the fees and expenses of such
counsel shall not be at the expense of the Indemnitor unless (i) the
Indemnitor shall have failed, within a reasonable time after having been
notified by the Indemnitee of the existence of such claim as provided in
the preceding sentence, to assume the defense of such claim, (ii) the
employment of such counsel has been specifically authorized by the
Indemnitor, or (iii) the named parties to any such action (including any
impleaded parties) include both such Indemnitee and the Indemnitor and
such Indemnitee shall have been advised in writing by such counsel that
there may be one or more legal defenses available to it which are
different from or additional to those available to Indemnitor. No
Indemnitor shall be liable to indemnify any Indemnitee for any settlement
of any such action or claim effected without the consent of the
Indemnitor, but if settled with the written consent of the Indemnitor, or
if there be a final judgment for the plaintiff in any such action, then
the Indemnitor shall, subject to the terms of this Agreement, indemnify
and hold harmless each Indemnitee from and against any loss or liability
by reason of such settlement of judgment. If an Indemnitor assumes the
defense of an Indemnitee against a claim asserted hereunder, the
Indemnitee shall give the Indemnitor access to the Surviving Corporation's
books and records as necessary to conduct such defense and cooperate in
such defense.
(e) In the event that an Indemnitee subsequently recovers
any or all of the amount of an Agreed Claim from a party other than the
Indemnitor, the Indemnitee shall reimburse immediately to the Indemnitor,
in cash, an amount equal to the amount of such previously paid Agreed
Claim which shall have been recovered.
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ARTICLE 11
GENERAL PROVISIONS
11.1 Public Statements. So long as this Agreement is in effect,
neither the Company nor Millers shall, or shall permit any of its subsidiaries
to, issue or cause the publication of any press release or other announcement
with respect to the Merger or this Agreement without consulting with and
obtaining the consent of the other parties; provided, however, that such
consent shall not be required where such release or announcement is required by
applicable law.
11.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally, mailed by certified mail (return receipt requested) or sent by Fed
Ex or other nationally recognized overnight delivery service or facsimile
transmission (if also sent by personal delivery, certified mail or overnight
delivery service) to the parties at the following addresses or at such other
addresses as shall be specified by the parties by like notice:
(a) if to Millers or Merger Sub:
Millers Integrated Claims Resources, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇, III
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, the Management Shareholders or the
Shareholders Agent:
Strategic Data Systems, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Van Deuren ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, S.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Notice so given shall (in the case of notice so given by mail) be deemed to be
given and received in the fourth calendar day after posting, in the case of
notice so given by overnight delivery service on the date of actual delivery
and, in the case of notice so given by facsimile transmissions or personal
delivery, on the date of actual transmission or, as the case may be, personal
delivery.
11.3 Representations and Warranties. The representations and
warranties of Millers and Merger Sub shall survive the Merger for a period of
18 months after the Effective Date
41
47
notwithstanding any investigations which may have been made by any of the
parties prior thereto. The respective representations and warranties of the
Company and the Management Shareholders shall survive the Merger for a period
of 18 months after the Effective Date notwithstanding any investigations which
may have been made by any of the parties prior thereto.
11.4 Closing. The Closing of the transactions contemplated by this
Agreement shall take place at the offices of Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇,
L.L.P. in Dallas, Texas or such other place as the parties may agree, as soon
as practicable after the satisfaction or waiver of the conditions set forth in
Section 8.
11.5 Arbitration. In the event of any dispute with respect to
indemnification rights under Section 10.7(b) of this Agreement, then the
parties to such dispute shall select a mutually agreeable arbitrator to settle
such disputed item or claims and the amounts thereof and the decision of the
arbitrator shall be binding on the parties. In the event that an arbitrator
cannot be mutually agreed upon, such arbitrator shall be selected in accordance
with the rules of the American Arbitration Association. The opinion of the
arbitrator shall be made in writing and mailed to each party. The arbitrator
so selected shall proceed in accordance with the rules of the American
Arbitration Association and the costs of such arbitration, including the fees
of the arbitrator, shall be paid in accordance with the decision of the
arbitrator, provided that the arbitrator shall assess all costs against any
party if he finds such party did not act in good faith. Any such arbitration
shall be conducted in Chicago, Illinois.
11.6 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof; is not
intended to confer upon any other person any rights or remedies hereunder,
shall not be assigned; and shall be governed in all respects, including
validity, interpretation and effect, by the internal laws of the State of
Wisconsin without giving effect, to the principles of conflict of laws thereof.
This Agreement may be executed in one or more counterparts which together shall
constitute a single agreement. If any provision of this Agreement shall be
held to be illegal, invalid or unenforceable under any applicable law, then
such contravention or invalidity shall not invalidate the entire Agreement.
Such provision shall be deemed to be modified to the extent necessary to render
it legal, valid and enforceable, and if no such modification shall render it
legal, valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties shall be construed and enforced accordingly.
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48
AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE
IN WITNESS WHEREOF, Millers, Merger Sub, the Company and the Management
Shareholders have caused this Agreement to be executed as of the date first
above written.
MILLERS INTEGRATED CLAIMS STRATEGIC DATA SYSTEMS, INC.
RESOURCES, INC.
By: /s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇, III By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------- ------------------------------------
F. ▇▇▇▇▇▇ ▇▇▇▇▇▇, III, President ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Chief Executive
Officer
MILLERS MERGER CORPORATION
By:
----------------------------------
F. ▇▇▇▇▇▇ ▇▇▇▇▇▇, III, President
MANAGEMENT SHAREHOLDERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------- -------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------- -------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------- -------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇ ▇. SANTA
------------------------------------- -------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇ ▇. Santa
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. & ▇▇▇▇▇▇▇▇ ▇.
------------------------------------- ▇▇▇▇▇▇▇ Revocable Trust
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ 1997 Charitable Remainder
Unitrust
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, Trustee
49
EXHIBIT 2.1
The following list sets forth the schedules to the Agreement and Plan of Merger
that have been omitted from this Exhibit 2.1. The Company agrees to furnish
supplementally a copy of any omitted schedule to the Securities and Exchange
Commission upon request.
Schedule
1.4 Directors and Officers of Surviving Corporation
3.3 Partnerships and Joint Ventures
3.4 Effect of Agreement
3.5 Prepayment Penalties
3.6 Absence of Certain Change or Events
3.7 Taxes
3.8 Real Property
3.9 Environmental Matters
3.10 Personal Property
3.11 Contracts
3.12 Legal Proceeding
3.14 Patents, Trademarks, Franchises, etc.
3.18 Insurance
3.19 Employees
3.20 Employee Plans
3.21 Transactions with Related Parties
3.22 Directors and Officers; Banks
3.23 Material Assets
4.1 Management Shareholders
8.3(q) Landlord Waivers and Estoppels
8.3(u) Copyright Assignments