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EXHIBIT 2.2
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ASSET PURCHASE AGREEMENT
between
INSpire INSURANCE SOLUTIONS, INC.
and
ARROWHEAD GENERAL INSURANCE AGENCY, INC.
regarding the sale of a certain business and the assets related to such business
dated as of October 29, 1998
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TABLE OF CONTENTS
Page
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[to be completed only after the agreement
is substantially finalized]
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SCHEDULES AND EXHIBITS
Schedule Description
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Schedule 1.2............................................................Excluded Assets
Schedule 4.5(a)(1).......................................................Capitalization
Schedule 4.5(a)(2).........................................Exceptions to Capitalization
Schedule 4.5(b)............................................................Subsidiaries
Schedule 4.6(a)...........................................Year-End Financial Statements
Schedule 4.6(b)............................................Interim Financial Statements
Schedule 4.8..............................................Exceptions to Certain Changes
Schedule 4.12(a)....................................................Owned Real Property
Schedule 4.12(b)...................................................Leased Real Property
Schedule 4.13(a)................................................Owned Personal Property
Schedule 4.13(b)...............................................Leased Personal Property
Schedule 4.15.................................................................Insurance
Schedule 4.16........................................................Material Contracts
Schedule 4.17........................................................Litigation; Orders
Schedule 4.19...................................................................Permits
Schedule 4.20(a)................................................Owned Intangible Assets
Schedule 4.20(b).............................................Licensed Intangible Assets
Schedule 4.21(a)..............................................................Employees
Schedule 4.21(b).........................................Employment and Labor Contracts
Schedule 4.22(a)..................................................Welfare Benefit Plans
Schedule 4.22(b)..................................................Pension Benefit Plans
Schedule 4.22(c)..................................................Employee Arrangements
Schedule 4.24......................................Bank Accounts and Powers of Attorney
Schedule 4.26......................................Exceptions to Affiliate Transactions
Schedule 6.3(b)...................................Exceptions to Prohibited Transactions
Schedule 8.2(b).......................................................Required Consents
Schedule 8.3(b)........................................................Required Permits
Schedule 9.1(l).....................................................Restricted Software
Schedule 11.1........................................................Retained Employees
Schedule 13.8........................................................Notice Information
Exhibit Description
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Exhibit 2.2(b).................................................Form of Option Agreement
Exhibit 3.2(g)......................................Form of Opinion of Seller's Counsel
Exhibit 3.2(h)....................................Form of Registration Rights Agreement
Exhibit 3.3(d)...................................Form of Opinion of Purchaser's Counsel
Exhibit 9.1(k)(1)......................Form of Claims Administration Services Agreement
Exhibit 9.1(k)(2)......................Form of Policy Administration Services Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of October
29, 1998 (the "SIGNING DATE"), is made by and between Arrowhead General
Insurance Agency, Inc., a Minnesota corporation ("SELLER"), and INSpire
Insurance Solutions, Inc., a Texas corporation ("PURCHASER"). Seller and
Purchaser are sometimes collectively referred to as the "PARTIES," and
individually referred to as a "PARTY."
PRELIMINARY STATEMENTS
A. Seller is a general insurance agency that also provides third party
policy and claims administration services for property and casualty lines of
insurance (such third party policy and claims administration services being
herein referred to as the "BUSINESS," and that portion of Seller which conducts
the Business, the "DIVISION").
B. Seller desires to sell and assign to Purchaser, and Purchaser
desires to purchase and assume from Seller, all the Business and substantially
all of the assets of the Division, in each case on the terms and subject to the
conditions set forth in this Agreement.
C. Capitalized terms used in this Agreement are defined or indexed in
Appendix A for the convenience of the reader and in order to eliminate the need
for cross-references. Appendix A is incorporated herein by this reference.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties set forth in this
Agreement and for other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I.
IDENTIFICATION OF ASSETS AND LIABILITIES
Section 1.1 Sale of Purchased Assets. Subject to the terms and
conditions and in reliance upon the representations and warranties of Seller
contained in this Agreement, at the Closing Seller will (or Seller will cause
its Affiliates to) sell and transfer to Purchaser, and Purchaser will purchase
and receive from Seller, all the assets of Seller (except for Excluded Assets)
which are presently being used in the conduct of, or are reasonably related to,
the Business as they exist on the Closing Date, free and clear of all
Encumbrances other than Permitted Encumbrances (the "PURCHASED ASSETS"). Without
limiting the generality of the preceding sentence, the Purchased Assets include
all of the following assets which are presently being used in the conduct of, or
are reasonably related to, the Business:
(a) the leasehold or subleasehold interests of Seller in the Real
Property Leases;
(b) the Intangible Assets of Seller, whether owned or licensed, and all
goodwill attendant thereto;
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(c) furniture and fixtures of Seller;
(d) computer and other equipment of Seller;
(e) automobiles and other vehicles owned, leased or used by Seller;
(f) supplies and sundry items, including telephone numbers, keys and
lock combinations;
(g) contracts, agreements, leases, licenses, arrangements, commitments,
franchises, and understandings, whether written or oral, to which Seller is a
party;
(h) rights and claims under insurance policies for damage to Purchased
Assets to the extent that any damaged Purchased Assets have not been repaired or
replaced prior to Closing;
(i) Permits of Seller, including all Permits relating to operation and
ownership of the Purchased Assets;
(j) prepaid expenses, including monies held by third parties and loans
to employees;
(k) Books and Records;
(l) technical documentation owned by Seller, including material and
tooling specifications, purchasing specifications, invention records, research
records, inspection processes and equipment lists; and
(m) claims and causes of action of Seller relating to or arising out of
the Business, except to the extent that any claim or cause of action against
third parties can be used as a defense, counterclaim or offset against any suit
brought by third parties against Seller with respect to any Excluded
Liabilities.
Section 1.2 Excluded Assets. The term "EXCLUDED ASSETS" will mean the
assets of Seller specified on Schedule 1.2, and will not be construed to include
any assets of Seller not specifically listed on Schedule 1.2.
Section 1.3 Assumed Liabilities. Subject to the terms and conditions and in
reliance upon the representations and warranties of Seller contained in this
Agreement, at the Closing Seller will assign to Purchaser, and Purchaser will
assume from Seller, all the liabilities of Seller which (a) relate exclusively
to the ownership or conduct of the Business, and (b) are reflected on the
Year-End Balance Sheet or were incurred in the ordinary course of business since
the Balance Sheet Date, including obligations related to accrued vacation,
holiday and sick leave (collectively, the "ASSUMED LIABILITIES").
Section 1.4 Excluded Liabilities. Except for the Assumed Liabilities,
Purchaser has not agreed to pay, will not be required to assume and will have no
liability or obligation with respect to, any liability or obligation, direct or
indirect, absolute or contingent, of Seller or the Division, any subsidiary or
affiliate of Seller or the
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Division or any other Person (collectively, the "EXCLUDED LIABILITIES"), and
Seller agrees that it will take all actions and do all things necessary to
ensure that Purchaser is not liable for any Excluded Liabilities. Without
limiting the generality of the preceding sentence, the Excluded Liabilities
include all of the following:
(a) liabilities related to Taxes and Environmental Laws for all periods
prior to the Closing Date;
(b) liabilities related to any Action arising out of or in connection
with the ownership or conduct of the Business by Seller or the Division, whether
asserted before or after the Closing Date and whether known or unknown on the
Closing Date;
(c) liabilities related to any former or current employee or agent of
Seller or the Division, including any liabilities under or associated with any
Employee Benefit Plan, any Actions asserted by or on behalf of any former or
current employee or agent of Seller or the Division, any claims for wages,
overtime pay, bonuses, commissions or other forms of compensation, and any
claims under any policies of Seller or the Division related to its Employees;
provided, however, that the Excluded Liabilities does not include obligations
related to accrued vacation, holiday and sick leave; and
(d) liabilities, costs and expenses incurred by Seller or the Division
in connection with the negotiation, execution or performance of this Agreement
and the transactions contemplated hereby.
ARTICLE II.
PURCHASE PRICE AND RELATED TERMS
Section 2.1 Base Purchase Price. In addition to the assumption by Purchaser
of the Assumed Liabilities, the total consideration for the Purchased Assets
will be the sum of $13,500,000 (the "BASE PURCHASE PRICE"), minus the Adjustment
Amount calculated pursuant to Section 2.4 (the Base Purchase Price minus the
Adjustment Amount, the "FINAL PURCHASE PRICE").
Section 2.2 Payment of Base Purchase Price. On the Signing Date, Purchaser
will cause a duly authorized officer of Purchaser to provide Seller with written
documentation of a deposit by Purchaser of the Base Purchase Price into a
segregated bank account that is under the exclusive control of Purchaser (the
"SEGREGATED ACCOUNT"). At the Closing, Purchaser will (a) pay to Seller from the
Segregated Account an amount equal to $6,500,000 (or $6,500,000 minus the
Adjustment Amount if the Adjustment Amount is deemed final in accordance with
Section 2.4(b)) (such amount, the "CLOSING CASH PAYMENT") by wire transfer of
immediately available funds to the bank account set forth on a notice given by
Seller to Purchaser not later than three business days prior to the Closing Date
and (b) deliver to Seller an Option Agreement substantially in the form attached
as Exhibit 2.2(b) (the "OPTION AGREEMENT").
Section 2.3 Allocation of the Purchase Price. As soon as practicable, but
not later than 120 days after the Closing Date, the Parties will agree upon the
allocation of the Base Purchase Price (and all other capitalizable costs) among
the Purchased Assets and Assumed Liabilities, and will set forth such allocation
on a statement (the "ALLOCATION STATEMENT"). The Allocation
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Statement will be revised to reflect any changes in the Direct Written Premiums
shown on the Final Closing Premium Statement from the Direct Written Premiums
shown on the Closing Premium Statement, whether or not such changes result in an
adjustment to the Base Purchase Price. If the Parties fail to agree on the
allocation of the Purchase Price within 120 days after the Closing Date, then
the disagreement will be resolved as soon as practicable thereafter, but not
later than 180 days after the Closing Date, by one of the largest four national
accounting firms, which accounting firm will be jointly selected by the Parties.
The Parties acknowledge that the scope of such accounting firm's work will be
limited to resolving only those items to which the Parties do not agree
regarding the allocation of the Base Purchase Price. The decision of the
accounting firm will be final and binding upon the Parties. The Parties will
share equally the fees, costs and expenses of the accounting firm selected to
resolve any disagreements regarding the Allocation Statement. Each Party will
file all Tax returns, and execute such other documents as may be required by any
taxing authority, in a manner consistent with the Allocation Statement. Each
Party will prepare Internal Revenue Service Form 8594 pursuant to Section 1060
of the Code relating to the transactions contemplated by this Agreement based on
the Allocation Statement, and will deliver such form to each other. Each Party
will file such form with all relevant taxing authorities.
Section 2.4 Purchase Price Adjustment.
(a) Closing Premium Statement. As soon as reasonably practicable, but
not later than the later to occur of the Signing Date or November 13, 1998,
Seller will delivery to Purchaser a statement detailing the amount of Direct
Written Premiums recognized by Seller in the calendar months August 1998,
September 1998 and October 1998 (such statement, together with the supporting
workpapers, the "CLOSING PREMIUM STATEMENT"). The amount set forth on the
Closing Premium Statement will be calculated in accordance with GAAP; provided,
however, that the Closing Premium Statement will not be required to have any of
the notes to the financial statements as required by GAAP. Seller will give
Purchaser and its Representatives reasonable access to Seller's facilities and
the Books and Records so as to enable Purchaser to verify the amounts set forth
on the Closing Premium Statement.
(b) Review of Closing Premium Statement. As soon as practicable, but
not later than 30 days after the delivery of the Closing Premium Statement,
Purchaser will inform Seller in writing of any objection to the Closing Premium
Statement, which objection, if any, will set forth in reasonable detail
Purchaser's objections and the basis for those objections (the "OBJECTION
NOTICE"). If Purchaser so objects and the Parties do not resolve such objections
on a mutually agreeable basis within 45 days after the delivery of the Closing
Premium Statement, then the disagreement will be resolved as soon as practicable
thereafter, but not later than 75 days after the delivery of the Closing Premium
Statement, by one of the largest four national accounting firms, which
accounting firm will be selected jointly by the Parties. The Parties acknowledge
that the scope of such accounting firm's work will be limited to resolving the
objections set forth in the Objection Notice. The decision of such accounting
firm will be final and binding upon the Parties. The Closing Premium Statement
(as adjusted, if applicable, by the agreement of the Parties or the decision of
the accounting firm, the "FINAL CLOSING PREMIUM STATEMENT") and the amount of
Direct Written Premiums recognized by Seller in the calendar months August 1998,
September 1998 and October 1998 (the "WRITTEN PREMIUM AMOUNT") will
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be deemed final upon the earlier to occur of (i) the agreement of the Parties,
(ii) the decision of the accounting firm, or (iii) the failure of Purchaser to
deliver an Objection Notice to Seller within 30 days after the delivery of the
Closing Premium Statement. Each Party will bear the fees, costs and expenses of
its own accountants, will share equally the fees, costs and expenses of the
accounting firm selected by the Parties to resolve any disagreements regarding
the Objection Notice and will permit each other and each other's Representatives
reasonable access to the books and records necessary to perform the analysis
contemplated by this Section.
(c) Purchase Price Adjustment; Procedure. Upon the Final Closing
Premium Statement being deemed final in accordance with Section 2.4(b), the Base
Purchase Price will be adjusted, if at all, as follows: if the product of the
Written Premium Amount multiplied by four is less than $200,000,000, then the
Base Purchase Price will be reduced by an amount equal to the product of (i) the
Base Purchase Price multiplied by (ii) a fraction consisting of (A) a numerator
equal to the difference of $200,000,000 minus the product of the Written Premium
Amount multiplied by four and (B) a denominator equal to $200,000,000 (such
amount, together with interest thereon calculated at a rate equal to eight
percent (8.0%) compounded daily from the Closing Date to the date the Final
Closing Premium Statement is deemed final in accordance with Section 2.4(b), the
"ADJUSTMENT AMOUNT").
(d) Adjustment Procedure. Purchaser must first seek payment of the
Adjustment Amount from the Closing Cash Payment, thereafter pursuant to the
right of set-off under the Option Agreement and thereafter from Seller. Such
payment from Seller, if any, will be made within five business days after the
final determination of the number of Option Shares (as defined in the Option
Agreement) that vest pursuant to Section 2.4 of the Option Agreement.
Section 2.5 Delivery of Schedules. The Parties acknowledge that the
Schedules to be delivered pursuant to this Agreement will not be delivered on
the Signing Date. The Parties agree that all Schedules will be delivered no
later than November 6, 1998. If the Party to whom a particular Schedule is
delivered does not object in writing to the contents of such Schedule by
November 11, 1998, then that particular Schedule will be deemed final and the
disclosures made thereon will be deemed made as of the Signing Date. Any
Schedule to which a written objection is raised will be deemed final upon the
mutual agreement of the Parties as to the content of such Schedule and the
disclosures made thereon will be deemed made as of the Signing Date.
ARTICLE III.
CLOSING
Section 3.1 Closing. The consummation of the transactions contemplated by
this Agreement (the "CLOSING") will take place at the offices of Akin, Gump,
Strauss, ▇▇▇▇▇ and ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ on
the first business day following the date on which all of the conditions
contained in Article IX, to the extent not waived, are satisfied. The Closing
may be postponed to such other date as the Parties may mutually agree. The date
on which the Closing actually occurs is hereinafter referred to as the "CLOSING
DATE." The Parties anticipate that the Closing will occur within 35 days of the
filing of the initial notification required under the HSR Act.
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Section 3.2 Deliveries by Seller. At the Closing, Seller will deliver, or
cause to be delivered, to Purchaser the following:
(a) a ▇▇▇▇ of sale in form and substance reasonably acceptable to
Purchaser;
(b) a lease assignment and estoppel certificate with respect to each
Real Property Lease, each in recordable form;
(c) instruments of assignment with respect to the Intangible Assets,
each in recordable form;
(d) documents evidencing the transfers of all motor vehicles and
registrations;
(e) such other instruments of conveyance and transfer as will be
necessary to vest in Purchaser good and valid title to the Purchased Assets,
free and clear of all Encumbrances other than Permitted Encumbrances;
(f) the officers' certificates referred to in Sections 9.1(d) and
9.1(e);
(g) an opinion of counsel in substantially the form of Exhibit 3.2(g)
attached hereto;
(h) an executed Registration Rights Agreement in substantially the form
of Exhibit 3.2(h) attached hereto (the "REGISTRATION RIGHTS AGREEMENT");
(i) executed counterparts of all Required Consents and Required
Permits;
(j) all Books and Records;
(k) a certificate dated within ten business days of the Closing from
the Secretary of State of Minnesota (or other proper state official) certifying
as to Seller's good standing in such state;
(l) a receipt for the payment of the Closing Cash Payment and the
delivery of the Option Agreement; and
(m) all other previously undelivered documents, instruments and
writings required to be delivered by Seller to Purchaser at or prior to the
Closing pursuant to this Agreement.
Section 3.3 Deliveries by Purchaser. At the Closing, Purchaser will deliver
to Seller the following:
(a) federal or other immediately available funds by wire transfer to
Seller in an amount of the Closing Cash Payment;
(b) the Option Agreement;
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(c) the officer's certificates referred to in Sections 9.2(c) and
9.2(d);
(d) an opinion of counsel in substantially the form of Exhibit 3.3(d)
attached hereto;
(e) a certificate dated within ten business days of the Closing from
the Secretary of State of Texas (or other proper state official) certifying as
to Purchaser's good standing in such state;
(f) an instrument of assumption by Purchaser of the Assumed Liabilities
in form and substance reasonably acceptable to Seller;
(g) an executed Registration Rights Agreement; and
(h) all other previously undelivered documents, instruments and
writings required to be delivered by Purchaser to Seller at or prior to the
Closing pursuant to this Agreement.
Section 3.4 Simultaneous Deliveries. The delivery of the documents required
to be delivered at the Closing pursuant to this Agreement will be deemed to
occur simultaneously. No delivery will be effective until each Party has
received or waived receipt of all the documents that this Agreement entitles
such Party to receive.
Section 3.5 Bulk Sale; Sales and Transfer Taxes. The Parties agree not to
comply with the bulk transfer provisions of any jurisdiction in which any of the
Purchased Assets are located. Except for the Assumed Liabilities, Purchaser will
have no liability or obligation to Seller, to Seller's creditors or to others,
growing out of or arising from the sale by Seller of the Purchased Assets to
Purchaser under the provisions of this Agreement; nor will Purchaser be liable
for any Tax liabilities, including any sales tax or title transfer fee
attributable to the sale of the Purchased Assets. Any Taxes and any transfer,
recording or similar fees and charges arising out of or in connection with the
transfer of the Purchased Assets will be borne by Seller.
Section 3.6 Mail Received After Closing. On and after the Closing,
Purchaser may receive and open all mail addressed to Seller and deal with the
contents thereof in its discretion to the extent that such mail and the contents
thereof relate to the Business or any of the Purchased Assets or Assumed
Liabilities. Purchaser agrees to deliver or to cause to be delivered to Seller
all mail received by Purchaser which is addressed to Seller and does not relate
to the Business, the Purchased Assets or the Assumed Liabilities.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser that the statements made
in this Article IV are true, correct and complete:
Section 4.1 Organization; Good Standing; Delivery of Charter Documents.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Minnesota. Seller is duly qualified or licensed
as a foreign corporation in each jurisdiction in
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which the Purchased Assets are owned or leased by Seller, or the nature of the
Business makes such qualification or licensing necessary, except those
jurisdictions wherein the failure to so qualify could not have a Material
Adverse Effect on Seller. Prior to the Signing Date, Seller has delivered to
Purchaser true and complete copies of Seller's Charter Documents as in effect on
the Signing Date.
Section 4.2 Power and Authority. Seller has all requisite corporate power
and authority necessary to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby,
including the execution, delivery and performance of all documents and
instruments to be delivered by Seller pursuant to the terms hereof (such
documents and instruments, together with this Agreement, the "TRANSACTION
DOCUMENTS"). Seller has all requisite corporate power and authority necessary to
own, operate and lease the Purchased Assets and to carry on its Business as and
where conducted.
Section 4.3 Authorization; Execution and Validity. Each of the Transaction
Documents, when executed by Seller and delivered to Purchaser, will be duly
authorized, executed and delivered, and will constitute a valid, legal and
binding obligation of Seller, enforceable against Seller in accordance with the
terms of such Transaction Document, subject to any Law Affecting Creditors'
Rights.
Section 4.4 No Conflict; Seller Consents. The execution, delivery and
performance by Seller of each Transaction Document will not (a) violate any Law,
(b) violate any Charter Document of Seller, (c) violate any Order to which
Seller is a party or by which Seller or its assets is bound, (d) breach any
Material Contract, Real Property Lease or Personal Property Lease, (e) result in
the creation of any Encumbrance on any of the Purchased Assets, other than
Permitted Encumbrances, or require any Consent from any Person.
Section 4.5 Capitalization.
(a) Seller. Schedule 4.5(a)(1) lists the total number of authorized,
issued and outstanding shares of capital stock of Seller. All the outstanding
shares have been duly authorized and validly issued and are fully paid and
non-assessable. There are no issued and outstanding shares of capital stock of
Seller other than as listed on Schedule 4.5(a)(1). Except as listed on Schedule
4.5(a)(2), there is no authorized or outstanding option, subscription, warrant,
call, right, commitment or other agreement ("SUBSCRIPTION RIGHT") obligating
Seller to issue or sell any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock. None of the
shares were issued in violation of any preemptive or preferential rights of any
Person. Other than the capital stock of the Subsidiaries, Seller does not own
any shares of capital stock, partnership interests or other beneficial ownership
interests in any other Person. None of the Business is conducted in any
Subsidiary.
(b) Subsidiaries. Schedule 4.5(b) lists the name of each Person whose
capital stock, equity securities or Subscription Right that Seller owns, either
beneficially or of record (collectively, the "SUBSIDIARIES"), and the total
number of authorized, issued and outstanding shares of such capital stock,
equity securities or Subscription Right of each Subsidiary. All the shares of
capital stock of each Subsidiary have been duly authorized and validly issued
and are fully paid and non-assessable. Seller owns all issued and outstanding
shares of capital stock of each
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Subsidiary. There is no authorized or outstanding Subscription Rights obligating
any Subsidiary to issue or sell any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock.
None of the shares of any Subsidiary were issued or will be transferred pursuant
to this Agreement in violation of any preemptive or preferential rights of any
Person. No Subsidiary owns any shares of capital stock, partnership interests or
other beneficial ownership interests in any other Person.
Section 4.6 Financial Statements--Division.
(a) Year-End Financial Statements. Attached hereto as Schedule 4.6(a)
are the balance sheets of the Division as of December 31, 1997 (the "YEAR-END
BALANCE SHEET" and such date the "BALANCE SHEET DATE"), and December 31, 1996,
with the related statements of operations and cash flows for the fiscal years
ended on such dates and the accompanying notes (collectively, the "YEAR-END
FINANCIAL STATEMENTS"). The Year-End Financial Statements have been prepared in
accordance with GAAP (except as noted therein), and present fairly, in all
material respects, the financial position of the Division as of the dates
indicated and the results of its operations and cash flows for the periods then
ended.
(b) Interim Financial Statements. Attached hereto as Schedule 4.6(b)
are the unaudited balance sheet of the Division as of September 30, 1998 (the
"INTERIM BALANCE SHEET") and the related statement of operations and cash flows
for the eight month period ended on such date (collectively, the "INTERIM
FINANCIAL STATEMENTS"). The Interim Financial Statements have been prepared in
accordance with the Books and Records and with GAAP (except as noted therein and
the absence of detailed notes to such statements), and present fairly, in all
material respects, the financial position of the Division as of the date
indicated and the results of its operations and cash flows for the period then
ended, subject to normal year-end adjustments.
Section 4.7 No Undisclosed Liabilities. Except as described in the Year-End
Balance Sheet, the Purchased Assets and the Business are not subject to any
Claim of any nature, absolute or contingent, and no events have occurred or
circumstances exist that could give rise to any future Claim that could have a
Material Adverse Effect on the Purchased Assets or the Business, other than
Claims incurred since the Balance Sheet Date in the ordinary course of Seller's
business consistent with past practices.
Section 4.8 Absence of Certain Changes. Since the Balance Sheet Date,
Seller has conducted its business only in the ordinary course of business
consistent with past practices and, without limiting the generality of the
foregoing and except as listed on Schedule 4.8, there has been no (a) event or
occurrence that has caused or will cause a Material Adverse Change, (b)
amendment to the Charter Documents, (c) payment of any dividend or distribution
made with respect to Seller's capital stock, (d) redemption or purchase of any
of Seller's capital stock, (e) amendment, termination or receipt of notice of
termination of or entry into any contract, lease or license involving a total
commitment by or to Seller of $$10,000, (f) incurrence or guarantee of any debt,
other than trade and accounts payable incurred in the ordinary course of
business consistent with past practices, (g) loan to or transaction with any
officer, director or shareholder, other than in the ordinary course of business
consistent with past practices, (h) waiver of any material right or release of
any debt or claim, other than waivers or releases given in the ordinary course
of business consistent with past practices, (i) amendment or termination of any
Permit, (j)
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destruction, damage or other loss to any of the Purchased Assets other than
destruction, damage or other loss that is fully covered by insurance, (k)
adoption of or increase in the payments to or benefits under any Employee
Benefit Plan, (l) sale, lease, or other disposition of any assets used in the
Business, other than the Excluded Assets and assets sold, leased or otherwise
disposed of in the ordinary course of business consistent with past practices,
(m) imposition of any Encumbrance on any of the Purchased Assets, other than
Permitted Encumbrances, (n) purchase or lease any assets used in the Business,
other than assets purchased or leased in the ordinary course of business
consistent with past practice, (o) payment of any bonus or an increase in the
salary, bonus or other compensation payable to any employee of Seller, other
than payments or increases consistent with past practice, (p) change in any
accounting method, (q) acceleration related to the collection of accounts
receivable or delay related to the payment of accounts payable, or (r) agreement
or commitment to take any action described in this Section. Section 4.9
Sufficiency and Condition of and Title to the Purchased Assets.
(a) Sufficiency of the Purchased Assets. The Purchased Assets
constitute all of the assets, properties, licenses and other arrangements which
are presently being used or are reasonably related to the Business, and are
sufficient to operate the Business in a manner consistent with past practice and
at Seller's historic capacity.
(b) Condition of the Purchased Assets Each of the Purchased Assets
complies with Law and is in good and normal operating condition and repair,
structurally sound with no known defects (ordinary wear and tear excepted), and
suitable for its intended use.
(c) Title to the Purchased Assets. At the Closing, Seller will transfer
to Purchaser good, valid and indefeasible title to, or a valid leasehold
interest in, each of the Purchased Assets, free and clear of all Encumbrances,
other than Permitted Encumbrances.
Section 4.10 Accounts Receivable. All accounts receivable of Seller
reflected on the Interim Balance Sheet (the "ACCOUNTS RECEIVABLE") represent or
will represent valid obligations arising from sales made, commissions earned or
services performed in the ordinary course of business. Unless paid prior to the
Closing Date, the Accounts Receivable are current and collectible net of the
respective reserves shown on the Interim Balance Sheet (which reserves are
adequate and calculated consistent with past practice). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected
in full, without any set-off, within ninety days after the day on which it first
becomes due and payable. There is no contest, claim, or right of set-off under
any contract with any obligor of an Accounts Receivable relating to the amount
or validity of such Accounts Receivable.
Section 4.11 Intentionally Omitted.
Section 4.12 Real Property.
(a) Owned Real Property. Schedule 4.12(a) lists as of the Signing Date each
parcel of real property owned by Seller used in the Business, including the
street address of each property and a summary description of the buildings and
improvements thereon. Each parcel of real property listed on Schedule 4.12(a)
and any parcel of real property purchased after the
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Signing Date in accordance with Section 6.3 (collectively, the "OWNED REAL
PROPERTY") is (i) in compliance with all Laws, including the Americans with
Disabilities Act and any building, fire, land use, occupancy, safety, set-back,
or zoning Law, (ii) not burdened by any covenant, easement, encroachment,
restrictive covenant, right-of-way, or servitude, other than those specifically
referenced in the title insurance policies delivered pursuant to Section 3.2(b),
and (iii) not subject to any condemnation, eminent domain or similar Action.
(b) Leased Real Property. Schedule 4.12(b) lists all the leases of real
property to which Seller is a party and which are used in the Business and in
effect as of the Signing Date. All of the leases on Schedule 4.12(b) and any
leases of real property entered into after the Signing Date in accordance with
Section 6.3 (collectively, the "REAL PROPERTY LEASES") are valid, binding and in
full force and effect. Neither Seller nor, to Seller's Knowledge, any other
Person is in default under any Real Property Lease, nor is there any event which
with notice or lapse of time, or both, would constitute a default thereunder by
Seller or any other Person. Seller has received a nondisturbance agreement from
any lessor's lender under each of the Real Property Leases. True and complete
copies of all the Real Property Leases, any amendments thereto and the
nondisturbance agreements have been provided to Purchaser prior to the Signing
Date.
Section 4.13 Personal Property.
(a) Owned Personal Property. Schedule 4.13(a) lists as of the Signing
Date all of the personal property (including all machinery, equipment, vehicles,
structures, fixtures and furniture) owned by Seller and used in the Business,
located on its premises or shown on the Interim Balance Sheet or acquired after
the date thereof (except for inventory subsequently sold in the ordinary course
of business and consistent with past practice).
(b) Leased Personal Property. Schedule 4.13(b) lists as of the Signing
Date all the leases of personal property used in the Business to which Seller is
a party. All of the leases on Schedule 4.13(b) and any leases of personal
property entered into after the Signing Date in accordance with Section 6.3
(collectively, the "PERSONAL PROPERTY LEASES") are valid, binding and in full
force and effect. Neither Seller nor, to Seller's Knowledge, any other Person is
in default under any Personal Property Lease, nor is there any event which with
notice or lapse of time, or both, would constitute a default thereunder by
Seller or any other Person. True and complete copies of all the Personal
Property Leases and any amendments thereto have been provided to Purchaser prior
to the Signing Date.
Section 4.14 Compliance with Laws. To Seller's Knowledge, Seller has
complied with all Laws in the conduct of the Business. Seller has not received
any notice from any Governmental Authority or other Person asserting that Seller
has violated any Law.
Section 4.15 Insurance. Schedule 4.15 lists as of the Signing Date all
insurance policies to which Seller is a party or which insure the Business or
any of the Purchased Assets against loss (collectively, the "INSURANCE
POLICIES"), including each insurer's name, coverage deductible and limit,
expiration date and current premium. Each Insurance Policy is in full force and
effect, all premiums with respect thereto have been paid to the extent due, and
no notice of cancellation or termination has been received with respect to any
such policy, other than any policy that will be replaced or is intended to be
replaced prior to the expiration thereof by policies providing
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substantially the same coverage from an insurer that is financially sound and
reputable. The Insurance Policies provide Seller with adequate insurance
coverage against the risks involved in the conduct of the Business and ownership
of the Purchased Assets. The coverage provided by the Insurance Policies is not
less than the coverage customary in Seller's industry and will not in any way be
affected by or terminate or lapse by reason of the consummation of the
transactions contemplated by this Agreement. True and complete copies of all
Insurance Policies have been provided to Purchaser.
Section 4.16 Contracts. Schedule 4.16 lists as of the Signing Date all the
contracts relating to the Business, Purchased Assets or Assumed Liabilities or
by which any of the Purchased Assets is bound, pursuant to which the obligations
of any party thereto are, or are contemplated to be, in respect of any such
contract (a) in excess of $10,000 during any twelve month period the term
thereof, (b) not terminable prior to three month from the Signing Date, or
otherwise material to the Business. All of the contracts listed on Schedule 4.16
and any contracts entered into after the Signing Date in accordance with Section
6.3 (collectively, the "MATERIAL CONTRACTS") are valid and binding and in full
force and effect, subject to Laws Affecting Creditors' Rights. Neither Seller
nor, to Seller's Knowledge, any other Person is in default under any Material
Contract, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder by Seller or any other Person. Other than
the Material Contracts, Seller is not a party to any contract which (x) requires
the Consent of any Person in order to consummate the transactions contemplated
by this Agreement, (y) is in excess of the normal, ordinary and usual
requirements of the Business, or (z) is excessive in price or quantity. True and
complete copies of all the Material Contracts have been provided to Purchaser.
Section 4.17 Litigation; Orders. Schedule 4.17 lists and describes all
Actions pending, or to Seller's Knowledge, threatened against or affecting
Seller, the Business or any of the Purchased Assets. There is no Action pending
or, to Seller's Knowledge, threatened in writing affecting Seller, the Business
or any of the Purchased Assets which, if adversely determined, would have,
individually or in the aggregate, a Material Adverse Effect. Seller is not
subject to any Order. True and complete copies of all material pleadings in the
Actions listed on Schedule 4.17 have been provided to Purchaser.
Section 4.18 Environmental Matters.
(a) Compliance with Environmental Laws. The Business has been and is
operated in compliance with all Environmental Laws and all Permits related to
Environmental Laws.
(b) Hazardous Materials. To Seller's Knowledge, Seller has neither
caused nor allowed the generation, treatment, manufacture, processing,
distribution, use, storage, discharge, release, disposal, transport or handling
of any Hazardous Materials at any of the properties or facilities used in
connection with the Business, including the Owned Real Property and the premise
subject to the Real Property Leases, except in compliance with all Environmental
Laws. To Seller's Knowledge, no generation, treatment, manufacture, processing,
distribution, use, storage, discharge, release, disposal, transport or handling
of any Hazardous Materials has occurred at any of the properties or facilities
used in connection with
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the Business, including the Owned Real Property and the premises subject to the
Real Property Leases, except in compliance with all Environmental Laws.
(c) Existence of an Action. Seller has not received any notice from any
Governmental Authority or other Person alleging or concerning any Claim against
Seller under any Environmental Law, whether for personal injuries or property
damages. There is no Action pending or, to Seller's Knowledge, threatened
affecting Seller with respect to the Business alleging or concerning any Claim
under any Environmental Law, whether for personal injuries or property damages,
nor does Seller have any knowledge of any fact or condition that could give rise
to such a Claim.
(d) Environmental Permits. To Seller's Knowledge, Seller is in
possession of and in compliance with all Permits required under the
Environmental Laws with respect to the operation of the Business. There are no
Actions pending or, to Seller's Knowledge, threatened which seek to modify,
revoke or deny renewal of any of such Permit. Seller has no knowledge of any
fact or condition that is reasonably likely to give rise to any Action to
modify, revoke or deny renewal of any of such Permit. No Consent from any Person
is necessary for the transfer of any such Permit, and the consummation of the
transactions contemplated by this Agreement will not violate, alter, impair or
invalidate, in any respect, any such Permit.
(e) Miscellaneous. Without in any way limiting the generality of the
foregoing, to Seller's Knowledge (i) none of the off-site locations where Seller
has transported, released, discharged, stored, disposed or arranged for the
disposal of Hazardous Materials has been identified as a facility that is
subject to an existing Claim under any Environmental Law or is the subject of
any threatened Claim by any Person, (ii) no underground improvement regulated by
any Environmental Law, including any storage or treatment tank, is located on
the Owned Real Property or the premises subject to the Real Property Leases,
(iii) there is no asbestos contained in or forming part of any Purchased Assets,
and no polychlorinated biphenyls or polychlorinated biphenyls-containing items
are used or stored at the Owned Real Property or the premises subject to the
Real Property Leases.
Section 4.19 Permits. Schedule 4.19 lists all the Permits related to the
Purchased Assets or operation of the Business, and indicates those Permits for
which the Consent of any Person is required to assign such Permit. Seller has
obtained, maintains in effect, and complies with the terms and conditions of all
Permits required by Law. There is no Action pending or, to Seller's Knowledge,
threatened in writing to revoke or limit any Permit listed on Schedule 4.19.
Section 4.20 Intangible Assets.
(a) Owned Intangible Assets. Schedule 4.20(a) lists all the Intangible
Assets used in the Business and owned by Seller as of the Signing Date. With
respect to the Intangible Assets listed on Schedule 4.20(a) and all the
Intangible Assets obtained or developed prior to the Closing, (i) Seller owns
all right, title and interest in and to such Intangible Assets free and clear of
all Encumbrances, (ii) Seller has not sold, transferred, licensed, sub-licensed
or conveyed any interest in any of such Intangible Assets, and (iii) no Person
has infringed upon or misappropriated any of such Intangible Assets.
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(b) Licensed Intangible Assets. Schedule 4.20(b) lists all licenses and
contracts related to any Intangible Asset used by Seller in the Business as of
the Signing Date. Each license or contract listed on Schedule 4.20(b) and each
license or contract related to an Intangible Asset which is entered into after
the Signing Date in accordance with Section 6.3 is valid, binding and in full
force and effect. Seller has not infringed upon or misappropriated any
Intangible Asset owned by another Person.
Section 4.21 Employees.
(a) Employees. Schedule 4.21(a) lists the name, job title, date of
employment and current annual compensation (salary, bonus and all amounts paid
pursuant to an Employee Benefit Plan) for each employee of Seller employed in
the conduct of the Business as of the Signing Date (collectively, the
"EMPLOYEES"). All Employees are either United States citizens or resident aliens
specifically authorized to engage in employment in the United States in
accordance with all Laws. All sums due for employee compensation and benefits
and all vacation time owing to any employee of Seller (including all persons
whose employment by Seller terminated prior to the Signing Date) have been duly
and adequately accrued on the accounting Books and Records of Seller.
(b) Contracts. Schedule 4.21(b) lists each (i) contract between Seller
and an Employee, and (ii) collective bargaining agreement and other contract to
or with any labor union, employee representative or group of employees. Other
than the contracts listed on Schedule 4.21(b), Seller's employment of each
Employee is terminable at will without any penalty or severance obligation of
any kind on the part of Seller.
(c) Compliance with Labor Laws. Seller has complied and is presently
complying with all Laws respecting employment and employment practices, terms
and conditions of employment, and wages and hours, and is not engaged in any
unfair labor practice or unlawful employment practice.
(d) Labor Actions and Relations. There is no unfair labor practice
charge or complaint against Seller pending or threatened before the National
Labor Relations Board nor is there any grievance nor any arbitration proceeding
arising out of or under any collective bargaining agreement pending and, to
Seller's Knowledge, no basis for any such charge, complaint or grievance exists.
There is no labor strike, slowdown or work stoppage pending or threatened
against Seller. Seller has neither experienced any significant work stoppages
nor been a party to any Action before the National Labor Relations Board
involving any issue for the past three years nor been a party to any arbitration
proceeding arising out of or under any collective bargaining agreement for the
past three years. There is no charge or complaint pending or threatened against
Seller before the Equal Employment Opportunity Commission or the Department of
Labor or any state or local agency of similar jurisdiction.
Section 4.22 Employee Benefits.
(a) Welfare Benefit Plan. Schedule 4.22(a) lists, as of the Signing
Date, each Welfare Benefit Plan maintained by Seller or to which Seller
contributes or is required to contribute with respect to any Person. True,
correct and complete copies of the plan documents for each of
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Seller's Welfare Benefit Plans and all related summary plan descriptions have
been provided to Purchaser. Except as provided for in the Year-End Balance Sheet
(or in the footnotes thereto), as of the Signing Date Seller has no liability
for contributions or payments more than 30 days past due with respect to any of
its Welfare Benefit Plans or for any retiree benefits under any such Welfare
Benefit Plan to current or retired employees of Seller (other than as required
by Section 601 of ERISA).
(b) Pension Benefit Plans. Schedule 4.22(b) lists, as of the Signing
Date, each Pension Benefit Plan maintained by Seller or to which Seller
contributes or is required to contribute with respect to any Person. True,
correct and complete copies of the plan and related trust documents for each of
Seller's Pension Benefit Plan and all related summary plan descriptions have
been provided to Purchaser. Seller does not presently maintain and has never
maintained, nor has had any obligation of any nature (whether contingent or
otherwise) to contribute to, a "defined benefit plan" (as defined in Section
414(j) of the Code), without regard to whether such defined benefit plan met the
requirements of Section 401(a) of the Code. Except as provided for in the
Year-End Balance Sheet (or in the footnotes thereto), as of the Signing Date
Seller has no liability for contributions due with respect to its Pension
Benefit Plans, including any "individual account plan" (as defined in Section
3(34) of ERISA).
(c) Employee Arrangements. Schedule 4.22(c) lists each Employee Benefit
Plan not otherwise disclosed in Schedules 4.22(a) or 4.22(b) maintained by
Seller with respect to any past or present employee of Seller.
(d) Benefit Plan Compliance. All of Seller's Employee Benefit Plans and
any related trust agreements or annuity contracts (or any other funding
instruments) currently comply in all respects, and have so complied in the past,
both as to form and operation, with all applicable Laws, including ERISA and the
Code.
(e) No Title IV Liability. No liability under Title IV of ERISA has
been or will be incurred by Seller on or prior to the Closing Date.
(f) Effect of Consummation. The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee of Seller or any other individual to a bonus, severance pay,
unemployment compensation or similar payment, or (ii) otherwise accelerate the
time of payment or vesting, or increase the amount of any compensation due to
any current or former employee of Seller.
(g) WARN Act. Neither Seller nor any Person with whom Seller would be
treated as an "employer" for purposes of the Worker Adjustment and Retraining
Notification Act or any similar state law has incurred any liability or
obligation under such laws.
Section 4.23 Taxes.
(a) Tax Returns. All Tax returns, reports, and declarations of
estimated Tax (collectively, "RETURNS") which were required to be filed by
Seller with any Governmental Authority have been timely filed. All Returns are
true and correct and accurately reflect the Tax liabilities of Seller. All Taxes
shown to be due pursuant to such Returns, other than Taxes being
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contested in good faith and for which adequate reserves are reflected on the
Interim Balance Sheet, have been paid.
(b) Statute of Limitations and Tax Actions. Seller has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes. There are no pending or, to Seller's
Knowledge, threatened Claims, assessments, notices, proposals to assess,
deficiencies or audits with respect to Taxes.
(c) Miscellaneous Tax Representations. Proper and accurate amounts have
been withheld and remitted by Seller from and in respect of all Persons from
whom it is required by applicable law to withhold for all periods in compliance
with the tax withholding provisions of all Laws. Neither Seller nor, to Seller's
Knowledge, any other corporation has filed an election under Section 341(f) of
Code that is applicable to Seller or any of the Purchased Assets. Seller is not
a party to any tax sharing agreement. There is no contract, plan or arrangement
covering any Person that, individually or collectively, would give rise to the
payment of any amount that would not be deductible by Seller by reason of
Section 280G of the Code. Seller is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Code. Seller has never been a member of any group that
filed a consolidated federal income tax return.
Section 4.24 Bank Accounts; Powers of Attorney. Schedule 4.24 lists the
names of (a) each bank, trust company and stock or other broker with which
Seller has an account, credit line or safe deposit box or vault, or otherwise
maintains relations (the "BANK ACCOUNTS"), (b) all Persons authorized to draw
on, or to have access to, each of the Accounts, and (c) all Persons authorized
by proxies, powers of attorney or other like instrument to act on behalf of
Seller in any matter concerning the Business. Each of the Accounts has a
positive cash balance. No proxies, powers of attorney or other like instruments
are irrevocable.
Section 4.25 Suppliers and Customers. The relationships of Seller with its
suppliers and customers are satisfactory. No such material customer or supplier
has canceled or otherwise terminated, or threatened to cancel or otherwise
terminate, its relationship with Seller, or to materially decrease its services
to Seller or its usage of the services of Seller.
Section 4.26 Affiliated Transactions. Since the Year-End Balance Sheet
Date, except as listed on Schedule 4.26 Seller has not paid, loaned or advanced
any amount to, or sold, transferred or leased any properties or assets (tangible
or intangible) to, or entered into any agreement or arrangement with, any of the
officers, directors or stockholders of Seller or any of its affiliates, except
for compensation to officers at rates not exceeding the rates of compensation
paid during the fiscal year ended on the Year-End Balance Sheet Date and routine
travel advances to officers and employees.
Section 4.27 Books and Records. The Books and Records of Seller, all of
which have been made available to Purchaser, are complete and correct and have
been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls.
Section 4.28 Full Disclosure. No representation or warranty of Seller made
in this Agreement, nor any written statement furnished to Purchaser pursuant
hereto or in connection
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with the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact which affects the Business or financial condition
of Seller, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading.
Section 4.29 Brokers. No Person is or will become entitled to receive any
brokerage or finder's fee, advisory fee or other similar payment for the
transactions contemplated by this Agreement by virtue of having been engaged by
or acted on behalf of Seller.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that the statements set
forth in this Article V are correct and complete.
Section 5.1 Organization; Good Standing; Delivery of Charter Documents.
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas. Purchaser is duly qualified or licensed as
a foreign corporation in each jurisdiction in which its assets are owned or
leased, or the nature of its business makes such qualification or licensing
necessary, except those jurisdictions wherein the failure to so qualify could
not have a Material Adverse Effect on Purchaser. Prior to the Signing Date,
Purchaser has delivered to Seller true and complete copies of Purchaser's
Charter Documents as in effect on the Signing Date.
Section 5.2 Power and Authority. Purchaser has all requisite corporate
power and authority necessary to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby, including the execution, delivery and performance of all the other
Transaction Documents to which Purchaser is a party. Purchaser has all requisite
corporate power and authority necessary to own, operate and lease its assets and
to carry on its business as and where conducted.
Section 5.3 Authorization; Execution and Validity. Each of the Transaction
Documents, when executed by Purchaser and delivered to Seller, will be duly
authorized, executed and delivered, and will constitute a valid, legal and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with the terms of such Transaction Document, subject to any Law Affecting
Creditors' Rights.
Section 5.4 No Conflict; Purchaser Consents. The execution, delivery and
performance by Purchaser of each Transaction Document to which it is a party
will not (a) violate any Law, (b) violate any Charter Document of Purchaser, (c)
violate any Order to which Purchaser is a party or by which Purchaser or its
assets is bound, or (d) require any Consent from any Person.
Section 5.5 Full Disclosure. No representation or warranty of Purchaser
made in this Agreement, nor any written statement furnished to Seller pursuant
hereto or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact which affects the business
or financial condition of Purchaser, or omits or will omit to state a
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material fact necessary to make the statements or facts contained herein or
therein not misleading.
Section 5.6 Brokers. No Person is or will become entitled to receive any
brokerage or finder's fee, advisory fee or other similar payment for the
transactions contemplated by this Agreement by virtue of having been engaged by
or acted on behalf of Purchaser.
ARTICLE VI.
COVENANTS OF SELLER
Section 6.1 Cooperation by Seller. From the Signing Date through the
Closing Date, Seller will use all reasonable efforts (a) to take all actions and
to do all things necessary or advisable to consummate the transactions
contemplated by this Agreement, (b) to cooperate with Purchaser in connection
with the foregoing, including using reasonable efforts to obtain all of the
Consents, and (c) subject to the other terms and conditions of this Agreement,
to cause all the conditions set forth in Section 9.1, the satisfaction of which
is in the reasonable control of Seller, to be satisfied on or prior to Closing.
Section 6.2 Pre-Closing Access to Information. From the Signing Date
through the Closing Date, Seller will afford to Purchaser its Representatives
access to the properties and the Books and Records of Seller.
Section 6.3 Conduct of Business.
(a) Ordinary Course. From the Signing Date through the Closing
Date, Seller, in connection with the conduct of the Business, will use all
reasonable efforts to (i) preserve substantially the relationships with its
Representatives, suppliers and customers, (ii) perform its obligations under all
contracts, leases and Permits in all material respects, (iii) comply with all
Laws, (iv) confer with Purchaser regarding operational matters of a material
nature, (v) report periodically to Purchaser regarding the status of the
Businesses and the results of operations of Seller, and (vi) conduct the
Businesses in the ordinary course and consistent with past practices.
(b) Prohibited Actions. Except as otherwise required or permitted by
this Agreement or listed on Schedule 6.3(b), from the Signing Date through the
Closing Date Seller will not, without the prior written consent of Purchaser,
take or fail to take any action as a result of which any of the changes or
events listed in Section 4.7 occur or become likely to occur.
Section 6.4 Supplements to Schedules. If, between the Signing Date and the
Closing Date, Seller becomes aware that any of its representations and
warranties in this Agreement or the schedules to this Agreement was inaccurate
when made or if during such period any event occurs or condition changes that
causes any of such representations and warranties to be inaccurate, then Seller
will notify Purchaser thereof in writing and supplement the schedules hereto to
account for any such inaccuracy, event or change. Any such supplement to the
schedules will not be deemed to have been disclosed as of the Signing Date or to
have cured any breach of a representations and warranties made in this
Agreement, unless so agreed to in writing by Purchaser.
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Section 6.5 Post-Closing Conduct of Business. Immediately following the
Closing, Seller will take all actions and do all things necessary to (a) cease
all activities which constitute the conduct of the Businesses (other than
matters related to the transition of the Businesses to Purchaser), (b) change
the name of Seller to a name that is not similar to its current corporate name,
and (c) terminate all of its assumed name filings.
Section 6.6 Standstill. Until the earlier to occur of the Closing or the
termination of this Agreement pursuant to Article X, Seller will not, nor will
Seller permit any of its Representatives to, (a) directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any Person (other than Purchaser
and its Representatives) concerning any merger, sale of securities, sale of
substantial assets, investment proposals or similar transaction involving
Seller, (b) entertain or discuss any acquisition or investment proposals
whatsoever, (c) disclose to any third party any non-published information
concerning Seller, the Business or Seller's financial condition, or (d) withdraw
Seller's intention to sell the Purchased Assets to Purchaser.
Section 6.7 Discharge of Encumbrances. Seller will take all actions and do
all things necessary to cause all Encumbrances other than Permitted Encumbrances
on any Purchased Assets to be terminated or otherwise discharged at or prior to
the Closing.
Section 6.8 Non-Disclosure; Non-Competition; Non-Solicitation.
(a) Non-Disclosure Agreement. Seller acknowledges, for itself and each
of its Affiliates, that it has and may have access to Confidential Information
and that such Confidential Information does and will constitute valuable,
special and unique property of Purchaser. At no time will Seller, and at no time
will Seller allow its Affiliates or its Representatives to, (i) use any
Confidential Information in any manner adverse to the business interests of
Purchaser, or (ii) disclose any such Confidential Information to any Person for
any reason or purpose whatsoever. Upon the request of Purchaser, Seller will,
and will cause its Affiliates and Representatives to, deliver to Purchaser 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 Seller, Affiliate or Representative.
(b) Non-Competition Agreement. Seller agrees, and will cause each of
its Affiliates, not to provide, either directly or indirectly, any of the
Restricted Services within the United States of America for so long as Purchaser
provides services to Seller or any Affiliate of Seller (such time period, the
"RESTRICTIVE PERIOD").
(c) Non-Solicitation Agreement. For a period equal to the Restrictive
Period, Seller will not, and will cause each of its Affiliates not to, either on
its own behalf or on behalf of any entity providing Restrictive Services,
directly or indirectly to the extent that Seller is prohibited in engaging in
such business pursuant to this Section, (i) solicit or induce, or in any manner
attempt to solicit or induce any person employed by, or an agent of, Purchaser
(including those Employees who accept employment with Purchaser pursuant to
Article XI) to terminate such person's employment or agency, as the case may be,
with Purchaser, or (ii) solicit, divert, or attempt to solicit or divert, or
otherwise accept as a supplier or customer, any Person which sells any products
and services of Purchaser, furnishes products or services to, or receives
products
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and services from, Purchaser, nor will Seller attempt to induce any such
supplier or customer to cease being (or any prospective supplier or customer not
to become) a supplier or customer of Purchaser.
(d) Independent Covenants. The covenants contained in this Section are
independent and separate, and in the event that any provision contained herein
is declared invalid or illegal, the other provisions hereof will not be affected
or impaired thereby and will remain valid and enforceable.
(e) Injunctive Relief. In the event of a breach or threatened breach by
Seller of any provision of this Section, Purchaser will be entitled to an
injunction to prevent irreparable injury to such Purchaser. Nothing herein will
be construed as prohibiting Purchaser from pursuing any other remedies available
to Purchaser for such breach or threatened breach, including the recovery of
damages from Seller.
(f) Acknowledgments of Seller. Seller acknowledges that (i) any public
disclosure of the Confidential Information will have an adverse effect on
Purchaser and the Business, (ii) Purchaser would suffer irreparable injury if
Seller breaches any of the terms of this Section, (iii) Purchaser will be at a
substantial competitive disadvantage if Purchaser fails to acquire and maintain
exclusive ownership of the Confidential Information or to abide by the
restrictions provided for in this Section, (iv) the scope of the protective
restrictions provided for in this Section are reasonable when taking into
account (A) the negotiations between the Parties and (B) that Seller is the
direct beneficiary of the Purchase Price paid pursuant to this Agreement, (v)
the consideration being paid to Seller pursuant to this Agreement is sufficient
inducement for Seller to agree to the terms hereof, (vi) the provisions of this
Section are reasonable and necessary to protect the Business, to prevent the
improper use or disclosure of the Confidential Information and to provide
Purchaser with exclusive ownership of all such Confidential Information and
(vii) the terms of this Section preclude Seller from providing the Restricted
Services. Without limiting the foregoing, in the event that a court of competent
jurisdiction determines that the Restriction Period exceeds the maximum
reasonable and enforceable time period or that the designated area exceeds the
maximum reasonable and enforceable area, the Restriction Period or designated
area shall be deemed to become and thereafter shall be the maximum time period
or area which such court deems reasonable and enforceable.
ARTICLE VII.
COVENANTS OF PURCHASER
Section 7.1 Cooperation by Purchaser. From the Signing Date through the
Closing Date, Purchaser will use all reasonable efforts (a) to take all actions
and to do all things necessary or advisable to consummate the transactions
contemplated by this Agreement, (b) to cooperate with Seller in connection with
the foregoing, including using reasonable efforts to obtain all of the Consents
and the Releases, and (c) subject to the other terms and conditions of this
Agreement, to cause all the conditions set forth in Section 9.2, the
satisfaction of which is in the reasonable control of Purchaser, to be satisfied
on or prior to Closing.
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Section 7.2 Pre-Closing Access to Information. Purchaser will refrain from
imposing any undue burden upon Seller and from interfering with the operations
and conduct of the Business.
Section 7.3 Purchasers' Consent. If Seller gives written notice to
Purchaser that Seller proposes to take any action for which Purchaser's consent
is required under Section 6.3 and if Purchaser has not delivered to Seller a
written objection to such proposed action within 10 business days of Seller's
notice, then Purchaser will be deemed to have consented to such proposed action.
Purchaser's consent to any such proposed action will not be unreasonably
withheld.
Section 7.4 Maintenance of the Segregated Account. Until the earlier to
occur of the Closing or the termination of this Agreement pursuant to Article X,
Purchaser will maintain in the Segregated Account a balance equal to the lesser
of the Base Purchase Price or the Final Purchase Price.
ARTICLE VIII.
MUTUAL COVENANTS
Section 8.1 Governmental Consents.
(a) HSR Filing. Within five business days after the Signing Date, each
Party will take all actions and do all things necessary to file the notification
required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"). The Parties will use all reasonable efforts to comply
as promptly as practicable with any request made pursuant to the HSR Act for
additional information. Purchaser will pay the statutory filing fees required by
the HSR Act. The Parties anticipate all applicable waiting periods under the HSR
Act to be expired or terminated within 30 days of the filing of the initial
notification required under the HSR Act.
(b) Other Governmental Consents. Promptly after the Signing Date, each
Party will take all actions and do all things necessary to obtain all Consents
required by any Governmental Authority to consummate the transactions
contemplated hereby. Each Party will reasonably cooperate with the other Parties
in obtaining the Consents specified in this Section.
Section 8.2 Consents to Assign Leases and Contracts.
(a) Cooperation and Reasonable Efforts. Each Party hereby agrees to use
reasonable efforts, to take reasonable actions (including Purchaser's delivery
to third parties of its financial statements) and to cooperate with each other
as may be necessary to obtain Consents to transfer and assign the Encumbered
Instruments. Except as expressly provided herein, neither Party will be required
to pay any sum, to incur any obligation or to agree to any amendment of any
Encumbered Instrument in order to obtain any such Consent to transfer and assign
the Encumbered Instrument.
(b) Pre-Closing; Required Consents. Schedule 8.2(b) lists the
Encumbered Instruments to which a Consent to transfer and assign must be
obtained from the appropriate
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third party prior to Closing (collectively, the "REQUIRED CONSENTS"). Except for
the Required Consents, the obtaining of any Consents related to the Encumbered
Instruments will not be a condition to Closing, and Closing will occur
irrespective of whether any such Consent has been obtained.
(c) Post-Closing Efforts to Obtain Consents. In the event any Consent
necessary to effect the transfer and assignment of any Encumbered Instrument is
not obtained on or prior to Closing, each Party will, for a period of one year
following the Closing Date, (i) abide by the requirements of Section 8.2(a), and
(ii) cooperate with each other in any lawful and reasonable arrangement to
provide that Purchaser will receive the benefits under any Encumbered Instrument
not assigned and transferred at the Closing by reason of the failure to obtain
such Consent (a "NON-TRANSFERRED INSTRUMENT"), including, if necessary, at the
request and expense (unless any such failure of performance by a third party is
due to the failure to obtain the Consent of such third party to the transfer and
assignment of the Non-Transferred Instrument) of Seller, enforcing performance
by any third party of its obligations in respect of such Non-Transferred
Instrument; provided that, to the extent the Parties are successful in providing
the material benefits of any Non-Transferred Instrument to Purchaser, such
Purchaser will pay, honor and discharge when due all liabilities of Seller
related thereto to the extent the liabilities were incurred after the Closing
Date. Seller will immediately transfer and assign to Purchaser any
Non-Transferred Instrument for which a Consent has been received.
(d) No Assignment. Notwithstanding anything to the contrary in this
Agreement, Seller will not transfer or assign any interest in any Encumbered
Instrument, and Purchaser will not assume any liability arising thereunder or
resulting therefrom, if an assignment or transfer or an attempt to make an
assignment or transfer of such Encumbered Instrument without the Consent of a
third party would constitute a breach or violation thereof or a violation of
Law, or affect adversely the rights of Purchaser or Seller thereunder, until
such Consent has been obtained.
Section 8.3 Permits.
(a) Cooperation and Reasonable Efforts. Each Party hereby agrees to use
reasonable efforts, to take reasonable actions (including Purchaser's delivery
to any Governmental Authority of its financial statements) and to cooperate with
each other as may be necessary to transfer to Purchaser, or assist Purchaser in
obtaining, all Permits required to conduct the Business. On or as soon as
practicable after the Signing Date, each Party will file, separately or jointly
with the other Party, as the case may be, all applications necessary to transfer
or obtain the Permits. Each Party will use reasonable efforts to resolve such
objections, if any, as may be asserted by any Governmental Authority with
respect to the applications contemplated hereby. Seller and Purchaser will each
pay one-half of the fees and expenses incurred in connection with transferring
or obtaining all Permits.
(b) Pre-Closing; Required Permits. Schedule 8.3(b) lists the Permits
which must be transferred to or obtained by Purchaser prior to Closing (the
"REQUIRED PERMITS"). Except for the Required Permits, the transfer or issuance
to Purchaser of any Permit will not be a condition to Closing, and Closing will
occur irrespective of whether any such Permit has been transferred or obtained.
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(c) Post-Closing Efforts to Obtain Permits. In the event any Permit is
not obtained on or prior to Closing, each Party will, for a period of one year
following the Closing Date, (i) abide by the requirements of Section 8.3(a), and
(ii) cooperate with each other in any lawful and reasonable arrangement to
provide that Purchaser will receive the benefits under any Permit not
transferred to or obtained by Purchaser at the Closing (a "NON-TRANSFERRED
PERMIT"); provided that, to the extent the Parties are successful in providing
the material benefits of any Non-Transferred Permit to Purchaser, Purchaser will
pay, honor and discharge when due all liabilities of Seller related thereto to
the extent the liabilities were incurred after the Closing Date. Seller will
immediately transfer and assign to Purchaser any Non-Transferred Permit for
which a Consent has been received.
(d) No Assignment. Notwithstanding anything to the contrary in this
Agreement, Seller will not transfer or assign any interest in any Permit, and
Purchaser will not assume any liability arising thereunder or resulting
therefrom, if an assignment or transfer or an attempt to make an assignment or
transfer of such Permit without the Consent of a Governmental Authority would
constitute a breach or violation thereof or a violation of Law, or affect
adversely the rights of Purchaser or Seller thereunder, until such Consent has
been obtained.
Section 8.4 Taxes. The Parties will provide each other with such assistance
as may reasonably be requested by them in connection with the preparation of any
Return, any Tax audit or other examination by any Governmental Authority, or any
judicial or administrative proceedings related to liability for Taxes. The
Parties will retain and provide each other with any records or information which
may be relevant to such preparation, audit, examination, proceeding or
determination. Such assistance will include making employees available on a
mutually convenient basis to provide and explain such records and information,
and will include providing copies of any relevant Returns and supporting work
schedules. The Party requesting assistance hereunder will reimburse the other
for reasonable out-of-pocket expenses incurred in providing such assistance.
Section 8.5 Books and Records.
(a) Access. For a period of six years after Closing, each Party will
provide the other Party with reasonable access during normal business hours to
its Books and Records relating to the Business (other than books and records
protected by the attorney-client privilege) to the extent that they relate to
the condition or operation of the Business prior to Closing and are requested by
such Party to prepare its Returns, to respond to third party Claims or for any
other legitimate purpose specified in writing. Each Party will have the right,
at its own expense, to make copies of any such Books and Records.
(b) Destruction. For a period of six years after the Closing (unless
otherwise required by Law) no Party will dispose of or destroy any Books and
Records relating to the Business to the extent that they relate to the condition
or operation of the Business prior to the Closing without first offering to turn
over possession thereof to the other Party by written notice at least 30 days
prior to the proposed date of disposition or destruction.
(c) Confidentiality. Each Party may take such action as it deems
reasonably appropriate to separate or redact information unrelated to the
Business from documents and other
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materials requested and made available pursuant to this Section and may
condition the other Party's access to documents and other materials that it
deems confidential to the execution and delivery of an agreement by the other
Party not to disclose or misuse such information.
(d) Assistance. Each Party will, upon written request and at the
requesting Party's expense, make personnel available to assist in locating and
obtaining any Books and Records relating to the Business to the extent that they
relate to the condition or operation of the Business prior to Closing and make
personnel available whose assistance, participation or testimony is reasonably
required in anticipation of, preparation for or the prosecution or defense of
any third party Claim in which the other Party does not have any adverse
interest.
Section 8.6 Further Assurances. Subject to the other terms and conditions
of this Agreement, at any time and from time to time, whether before or after
Closing, each Party will execute and deliver all instruments and documents and
take all other action that the other Party may reasonably request to consummate
or to evidence the consummation of the transactions contemplated by this
Agreement.
ARTICLE IX.
CONDITIONS PRECEDENT TO CLOSING
Section 9.1 Conditions Precedent to Purchaser's Obligations. The obligation
of Purchaser to consummate the transactions contemplated by this Agreement will
be subject to the satisfaction of the following conditions, any of which may be
waived in writing by Purchaser.
(a) Accuracy of Representations and Warranties. The representations and
warranties made by Seller in this Agreement will have been true and complete as
of the Signing Date and as of the Closing Date as though made as of the Closing
Date, except to the extent such representations or warranties made as of a
specific date will have been correct and complete as of the specified date.
(b) Performance of Covenants. Seller will have performed and complied
with all agreements, covenants and obligations required by this Agreement to be
performed by Seller prior to or at the Closing.
(c) Consents. Seller will have received and delivered to Purchaser all
the Required Consents and the Required Permits, each in form and substance
satisfactory to Purchaser, and will have given all notices required to be given
to any Persons prior to the consummation of the transactions contemplated by
this Agreement.
(d) Closing Certificate. An executive officer of Seller will have
delivered to Purchaser a certificate confirming the satisfaction of the
conditions set forth in Sections 9.1(a) and 9.1(b), and the continuing force and
effect of the Required Consents and Required Permits.
(e) Secretary's Certificate. Seller will have delivered to Purchaser a
certificate executed by the Secretary or an Assistant Secretary of Seller
certifying as to (i) Seller's Charter Documents, (ii) Seller's good standing,
(iii) the resolutions in which Seller's board of directors approved this
Agreement and the transactions contemplated hereby, and
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(iv) the incumbency of Seller's officers who execute any documents on behalf of
Seller in connection with this Agreement.
(f) Legal Opinion. Seller will have delivered to Purchaser the legal
opinion referred to in Section 3.2(h).
(g) Deliveries. Seller will have delivered to Purchaser the documents
required by Section 3.2 and such other documents as Purchaser may reasonably
require.
(h) Compliance with HSR Act. All applicable waiting periods under the
HSR Act will have expired or been terminated.
(i) No Order or Action. No Order will be in effect forbidding or
enjoining the consummation of the transactions contemplated hereby. No Action
will be pending or threatened before any court or other Governmental Authority
seeking to enjoin the Closing or seeking damages against Purchaser or any of its
Representatives as a result of any of the transactions contemplated by this
Agreement, provided that neither Purchaser nor any of its affiliates instituted
such Action.
(j) Consummation of Stock Purchase. The consummation of the
transactions set forth in that certain Stock Purchase Agreement, dated the
Signing Date, between Purchaser, Arrow Claims Management, Inc. and all the
shareholders of Arrow Claims Management, Inc.
(k) Claims and Policy Administration Services Agreements. The execution
and delivery by each of Arrowhead Management Company, Inc., Arrowhead General
Insurance Agency, Inc. and the transferee of the Transferred Assets of (i) a
Claims Administration Services Agreement in substantially the form attached
hereto as Exhibit 9.1(k)(1) and (ii) a Policy Administration Services Agreement
in substantially the form attached hereto as Exhibit 9.1(k)(2).
(l) Establishment of a Ethical Wall. Company and each of Arrowhead
Management Company, Inc. and Arrowhead General Insurance Agency, Inc. will have
agreed to the establishment of written procedures related to the use by Company
of the software applications listed on Schedule 9.1(l).
(m) No Material Adverse Change. Seller has not undergone any Material
Adverse Change since the Signing Date.
Section 9.2 Conditions Precedent to Seller's Obligations. The obligation of
Seller to consummate the transactions contemplated by this Agreement will be
subject to the satisfaction of the following conditions, any of which may be
waived in writing by Seller.
(a) Accuracy of Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement will have been true and complete
as of the Signing Date and as of the Closing Date as though made as of the
Closing Date, except to the extent such representations or warranties made as of
a specific date will have been correct and complete as of the specified date.
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(b) Performance of Covenants. Purchaser will have performed and
complied with all agreements, covenants and obligations required by this
Agreement to be performed by Purchaser prior to or at the Closing.
(c) Closing Certificate. An executive officer of Purchaser will have
delivered to Seller a certificate confirming the satisfaction of the conditions
set forth in Sections 9.2(a) and 9.2(b).
(d) Secretary's Certificate. Purchaser will have delivered to Seller a
certificate executed by the Secretary or an Assistant Secretary of Purchaser
certifying as to (i) Purchaser's Charter Documents, (ii) Purchaser's good
standing, (iii) the resolutions in which Purchaser's board of directors approved
this Agreement and the transactions contemplated hereby, and (iv) the incumbency
of Purchaser's officers who execute any documents on behalf of Purchaser in
connection with this Agreement.
(e) Legal Opinion. Purchaser will have delivered to Seller the legal
opinion referred to in Section 3.3(d).
(f) Deliveries. Purchaser will have delivered to Seller the documents
required by Section 3.3 and such other documents as Seller may reasonably
require.
(g) Compliance with HSR Act. All applicable waiting periods under the
HSR Act will have expired or been terminated.
(h) Consummation of Stock Purchase. The consummation of the
transactions set forth in that certain Stock Purchase Agreement, dated the
Signing Date, between Purchaser, Arrow Claims Management, Inc. and all the
shareholders of Arrow Claims Management, Inc.
(i) No Order. No Order will be in effect forbidding or enjoining the
consummation of the transactions contemplated hereby. No Action will be pending
or threatened before any court or other Governmental Authority seeking to enjoin
the Closing or seeking damages against Seller or any of its Representatives as a
result of any of the transactions contemplated by this Agreement, provided that
neither Seller nor any of its affiliates instituted such Action.
Section 9.3 If Conditions Not Satisfied. In the event that any of the
conditions set forth in this Article IX are not satisfied, and the Parties
nevertheless consummate the transactions contemplated by this Agreement to take
place at the Closing, the Parties will not be deemed to have waived any Claim
for damages or other relief arising from or in connection with such
non-satisfaction.
ARTICLE X.
TERMINATION PRIOR TO CLOSING
Section 10.1 Termination of Agreement. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual agreement of the Parties;
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(b) by Purchaser at any time after the occurrence of a Material Adverse
Change in Seller; or
(c) by Purchaser or Seller at any time on or after December 31, 1998 if
any of the conditions provided for in Section 9.1 or 9.2, respectively, will not
have been met or waived in writing prior to such date.
Section 10.2 Procedure Upon Termination. In the event of termination
pursuant to Section 10.1, written notice thereof will be immediately given to
the other Party and the transactions contemplated by this Agreement will be
terminated, without any further action by either Party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(a) each Party will return all documents, work papers and other
materials of the other party, whether obtained before or after the execution
hereof, to the party furnishing the same; and
(b) such termination will not in any way limit, restrict or relieve any
Party of liability for any breach of this Agreement.
ARTICLE XI.
EMPLOYEE MATTERS
Section 11.1 Offer of Employment. Effective as of the Closing Date,
Purchaser will offer those Employees specified on Schedule 11.1 an employment at
will position with such Purchaser in connection with the Business (collectively,
the "RETAINED EMPLOYEES"). Each Retained Employee will be offered employment
with Purchaser at substantially the same position and salary at which such
Retained Employee is employed by Seller as of the Closing Date.
Section 11.2 Benefit Plans, Accrued Benefits, etc. The Parties acknowledge
that Purchaser is not under any obligation whatsoever to provide any benefits to
the Retained Employees other than those benefits currently offered or provided
to the employees of Purchaser in a comparable position. The Parties further
acknowledge that Purchaser is not assuming any obligation of Seller under any
Employee Benefit Plans or under any policy of Seller related to its Employees,
including any obligations related to overtime pay.
Section 11.3 COBRA.
(a) COBRA Liability. Seller agrees to provide any and all continuation
coverage to Employees (other than Retained Employees) and their qualified
beneficiaries (as defined in Section 4980B(g)(1) of the Code) that may be
required under Section 4980B of the Code or Part 6 of Title I of ERISA as a
result of any events that occur on or prior to the Closing Date, including the
consummation of the transactions contemplated by this Agreement.
(b) COBRA Information. Seller agrees to use its best efforts to provide
expeditiously to Purchaser or its Representatives all information that such
Person deems necessary to determine whether there has been any failure to comply
with the continuation health
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care requirements of Section 4980B of the Code and Part 6 of Title I of ERISA as
such requirements have applied to any group health plan maintained by or for
Seller which failure occurred with respect to any current or former employee of
Seller or any spouse, former spouse, dependent child, or former dependent child
of any such employee, on or prior to the Closing Date. Seller further agrees to
use its best efforts to provide expeditiously to Purchaser or its
Representatives all information that such Person deems necessary to correct any
failures to comply with such continuation health care coverage requirements.
Such information will include the identification of all covered employees (as
defined in Section 4980(B)(f)(7) of the Code) and their qualified beneficiaries
(as defined in Section 4980B(g)(1) of the Code), the identification of all
qualifying events with respect to such covered employees or qualified
beneficiaries (as defined in Section 4980B(f)(3) of the Code) and information
otherwise demonstrating compliance with all of the continuation health coverage
requirements of Section 4980B of the Code and Part 6 of Title I of ERISA.
ARTICLE XII.
INDEMNIFICATION
Section 12.1 Indemnification of Purchaser. Seller will indemnify, defend,
and hold Purchaser harmless from any and all Claims directly or indirectly
related or arising with respect to:
(a) Breaches of Representations and Warranties. Any inaccuracy in any
representation or warranty of Seller under this Agreement;
(b) Breaches of Covenants. Any failure to perform or observe any
covenant or agreement to be performed by Seller set forth in this Agreement or
any document delivered to Purchaser pursuant to this Agreement, including the
agreement of Seller contained in Section 11.3(a); or
(c) Failure to Pay or Perform Excluded Liabilities. Any failure of
Seller to pay or perform any of the Excluded Liabilities.
(d) Failure to Comply with Laws. Any failure of Seller to comply with
all Laws in the conduct of the Business on or prior to the Closing Date.
Section 12.2 Indemnification of Seller. Purchaser will indemnify, defend,
and hold Seller harmless from any and all Claims directly or indirectly related
or arising with respect to:
(a) Breaches of Representations and Warranties. Any inaccuracy in any
representation or warranty of Purchaser under this Agreement;
(b) Breaches of Covenants. Any failure to perform or observe any
covenant or agreement to be performed by Purchaser set forth in this Agreement
or any document delivered to Seller pursuant to this Agreement; or
(c) Failure to Pay or Perform Assumed Liabilities. Any failure of
Purchaser to pay or perform any of the Assumed Liabilities.
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Section 12.3 Indemnification Procedure. The indemnification obligations
under this Agreement will be subject to the following procedures:
(a) Defense of Claim. Within five days after a Party entitled to
indemnification (an "INDEMNITEE") receives a notice of any Claim that may give
rise to an indemnification obligation under this Agreement, the Indemnitee will
give the Party responsible for providing indemnification with respect to such
Claim (the "INDEMNITOR") notice of such Claim, together with a copy of all
documents relating to such Claim that the Indemnitee possesses. The Indemnitor
will then immediately undertake the defense of such Claim by representatives of
its own choosing, provided that the Indemnitee will have the right to control
and undertake such defense by representatives of its own choosing if the Claim
could have a continuing effect upon the Indemnitee or involves any Environmental
Law or Hazardous Material. The Indemnitor will notify the Indemnitee of the
Indemnitor's undertaking of the defense of a Claim promptly after receiving the
notice of the Claim. Similarly, the Indemnitee will notify the Indemnitor of the
Indemnitee's election of its right to control such defense under the
circumstances described above. The failure to give notice of a Claim within the
period described above will not affect the Indemnitee's rights to
indemnification under this Agreement unless such delay prejudices the
Indemnitor.
(b) Participation of the Indemnitee. If ten days after delivering
notice of a Claim to the Indemnitor or such shorter period necessary to prevent
judgment by default in favor of the Person asserting the Claim, the Indemnitor
has not begun to defend against such Claim, the Indemnitee will have the right
to defend or settle such Claim on behalf of the Indemnitor. Notwithstanding
whether the Indemnitor commences at any time to defend against a Claim, the
Indemnitee will have the right to participate in such defense by representatives
of its own choosing. The Indemnitee will bear any expense of such participation
if the Indemnitor is defending against the Claim unless defenses exist to the
Indemnitee that are unavailable to the Indemnitor or the Indemnitor otherwise
possesses a conflict of interest with respect to the Indemnitee. Under such
circumstances, the Indemnitor will reimburse the Indemnitee for the Indemnitee's
reasonable attorneys' fees and expenses. In addition, the Indemnitor will
reimburse the Indemnitee for the Indemnitee's reasonable attorneys' fees and
expenses incurred during the period when the Indemnitor did not defend against
the Claim and in connection with Claims that Purchaser possesses the right to
defend. Notwithstanding whether the Claim involves a purported breach of the
Indemnitor's representations and warranties, the Indemnitor's obligation to
reimburse such fees and expenses will not be subject to the Indemnitor's Basket.
The Indemnitor will make such reimbursement payments to the Indemnitee upon the
Indemnitee's submission of periodic invoices describing such fees and expenses
in reasonable detail.
(c) Settlement of Claims. The Indemnitor may settle any Claim at its
own expense, provided that the Indemnitor will not settle any Claim or consent
to the entry of any judgment without the consent of the Indemnitee if such
settlement or judgment (i) includes any admission of wrongdoing by the
Indemnitee or any of the Indemnitee's Representatives, (ii) includes any consent
to any type of injunctive relief affecting the Indemnitee or any of the
Indemnitee's Representatives, (iii) excludes an unconditional release by the
Person asserting the Claim of the Indemnitee and the Indemnitee's
Representatives from all liability with respect to such Claim, or (iv) requires
the Indemnitee or any of the Indemnitee's Representatives.
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(d) Reimbursement. If an Indemnitor undertakes the defense of any Claim
or settles any Claim and such Claim was not within the scope of the Indemnitor's
indemnification obligations under this Agreement, the Indemnitee will promptly
reimburse the Indemnitor for all expenses with respect to such defense or
settlement, including the Indemnitor's reasonable attorneys' fees and expenses.
(e) Cooperation. In connection with any indemnity obligation, the
Indemnitee will cooperate with all reasonable requests of the Indemnitor.
(f) Payment--Net of Insurance Proceeds. The amount of any damage or
indemnification payable pursuant to this Article XII will be net of any
insurance proceeds actually received by the Indemnitee in connection with the
circumstances giving rise to the Claim. The calculation of net insurance
proceeds will give effect to all costs incurred by the Indemnitee for such
insurance recovery, including all costs associated with retrospective premium
adjustments, experienced-based premium adjustments, and indemnification
obligations. Nothing in this section will be construed or interpreted as a
guaranty of any level or amount of insurance recovery with respect to any Claim
hereunder.
(g) Payment--Net of Tax Benefit and Detriment. The Parties will treat
any payment or receipt of damages or indemnification hereunder as an adjustment
to the Final Purchase Price on all Tax Returns, except for the interest
component of any such payment, which the Parties will treat as interest income
or expense, as the case may be. To the extent that any damage or indemnification
payment exclusive of the interest component constitutes taxable income to the
Indemnitee, the amount of such damage or indemnification payment will be
increased by the amount of any income Tax attributable to such payment and the
reimbursement of any related income Taxes. To the extent that any damage or
indemnification payment exclusive of the interest component constitutes a
reduction of taxable income to the Indemnitee, the amount of such damage or
indemnification payment will be decreased by the amount of any income Tax
attributable to such reduction of taxable income.
Section 12.4 Meritless Third Party Claims, If a third party makes a Claim
against the Indemnitee that ultimately proves to be meritless, the Indemnitee
may nevertheless require the Indemnitor to defend such Claim and reimburse the
Indemnitee for its reasonable attorneys' fees and expenses in connection with
such Claim if such Claim was within the scope of the Indemnitor's
indemnification obligations under this Agreement.
Section 12.5 Assignment of Claims. If any amounts for which the Indemnitor
is responsible are recoverable from a third party, the Indemnitee will assign
any rights that it may have to recover such amounts to the Indemnitor.
Section 12.6 Other Indemnitees. Upon Purchaser's request, Seller will
indemnify any of Purchaser's Representatives to the same extent as Purchaser.
Conversely, upon Seller's request Purchaser will indemnify any of Seller's
Representatives to the same extent as Seller. No Representative of any Party,
however, will be a third party beneficiary of the indemnification provisions
contained in this Agreement. In addition, a Party may release or waive any Claim
to which such Party previously requested another Party to indemnify such Party's
Representatives, and such Representatives will have no recourse against the
Party releasing or waiving such
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Claim. To the extent that a Party requests another Party to indemnify such
Party's Representatives, such Party will cause its Representatives to comply
with the indemnification provisions and abide by the indemnification limitations
set forth in this Agreement.
Section 12.7 Contribution. If the indemnity obligations provided for in
this Agreement are held unenforceable in whole or in part for any reason, each
Party will perform such indemnity obligations to the extent enforceable. To the
extent that such indemnity obligations are unenforceable, the Party that would
have been the Indemnitor with respect to a Claim except for such
unenforceability will contribute to such Claim in such proportion as appropriate
to reflect the relative fault of such Party as opposed to the relative fault of
the Person who would have been the Indemnitee, as well as any other relevant
equitable considerations.
Section 12.8 Damages Without Indemnification. A Party may assert a Claim
for damages against another Party for a breach of this Agreement even though the
Party seeking such damages has not incurred a liability or made a payment to
another Person.
Section 12.9 Basket. The Parties acknowledge that all the representations
and warranties contained in this Agreement are without qualification as to
materiality and that the provisions of this Section regarding the Basket are
intended to serve as the exclusive standard of materiality for purposes of this
Agreement. No Party will be liable for any Claim for damages or indemnification
with respect to a breach of such Party's representations and warranties under
this Agreement until the aggregate amount of such Claims for damages and
indemnification for which such Party would otherwise be responsible concerning
breaches of its representations and warranties exceeds $10,000 (the "BASKET").
If the aggregate amount of such Claims for which a Party is responsible exceeds
the Basket, such Party will then only be responsible for the amount of such
excess.
Section 12.10 Liability Not Limited to Set-Off Under the Option Agreement.
Each Party acknowledges and agrees that (a) the value of the Option Shares (as
defined in the Option Agreement) is not intended to be, nor will that amount be
construed as, Seller's maximum amount of damages or indemnification with respect
to any Claim for a breach of representations and warranties under this Agreement
and (b) Purchaser may pursue any rights or remedies available at law or in
equity in connection with this Agreement notwithstanding the availability of the
right of set-off under the Option Agreement.
Section 12.11 Liabilities for Special Indemnities and Breaches of
Covenants. Seller's Basket will be inapplicable with respect to any Claim for
damages or indemnification concerning Seller's breach of any representation and
warranty that the indemnities pursuant to Sections 12.1(c) and 12.1(d) cover.
Any damages or indemnification with respect to any such Claims will not count
toward Seller's Basket. A Party's Basket will be inapplicable with respect to
any Claim for damages or indemnification concerning such Party's breach of any
of its covenants under this Agreement or any other terms of this Agreement
applicable to such Party, other than the representations and warranties to which
such Party's Basket apply.
Section 12.12 Consequential Damages. A Party will be (a) liable for any
consequential, incidental, punitive, or special damages with respect to any
breach of this Agreement, and (b) responsible for indemnifying an Indemnitee for
any consequential, incidental, punitive, or
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special damages that such Indemnitee incurs if within the scope of such Party's
indemnification obligation.
Section 12.13 Interest. A Party will pay interest computed at the then
current prime rate on (a) any Claim for damages with respect to such Party's
breach of this Agreement from the date of the breach through the date that the
Party pays such damages, and (b) any Claim for indemnification under this
Agreement for which such Party is the Indemnitor from the date of the
Indemnitee's indemnifiable out-of-pocket expenditure through the date that the
Party pays such Claim.
Section 12.14 Notice of Breach. If before the Closing a Party notifies
another Party of its breach of this Agreement, such notification will neither
prevent such other Party from seeking damages for such breach nor decrease or
mitigate such damages if such other Party still closes the transactions
contemplated by this Agreement.
Section 12.15 Discovery of Breach. If before the Closing a Party discovers
that another Party has breached this Agreement, such discovery will neither
prevent such Party from seeking damages for such breach nor decrease or mitigate
such damages if such Party still closes the transactions contemplated by this
Agreement.
Section 12.16 Survival of Terms. The agreements, covenants, indemnity
obligations, representations and warranties, and other terms of this Agreement,
Purchaser's closing certificate, Seller's closing certificate, and any other
documents contemplated under this Agreement will survive the Closing and any
investigation or notice by any Party, provided that the representations and
warranties of each Party under this Agreement will expire 30 days after the
expiration of the applicable statute of limitations, as such statutory period
may be extended from time to time. Notwithstanding the general expiration of
each Party's representations and warranties described above, Seller's
representations and warranties contained in Sections 4.2 (Power and Authority),
4.3 (Authorization; Execution and Validity), 4.4 (No Conflict), 4.9(c) (Title to
Purchased Assets), 4.28 (Full Disclosure) and 4.29 (Brokers) will survive
forever, subject to all defenses available under Law, including the expiration
of any applicable statute of limitations. A Party will not be responsible with
respect to any Claim for damages or indemnification with respect to any
inaccuracy in any of such Party's representations or warranties unless such
Party receives notice of the Claim with respect to such inaccuracy before such
representation and warranty expires. With respect to any such Claim received
before the expiration of a particular representation or warranty, the Party
responsible for such representation or warranty will remain responsible for any
damage or indemnification amounts claimed notwithstanding the subsequent
expiration of such representation or warranty.
Section 12.17 Negligence and Strict Liability. THE PROVISIONS OF THIS
AGREEMENT CONCERNING CLAIMS FOR DAMAGES AND INDEMNIFICATION WILL APPLY WHETHER
OR NOT THE PARTY OR OTHER PERSON CLAIMING SUCH DAMAGES OR INDEMNIFICATION WAS
NEGLIGENT, GROSSLY NEGLIGENT, OR STRICTLY LIABLE IN CONNECTION WITH THE EVENTS
GIVING RISE TO SUCH CLAIM.
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ARTICLE XIII.
MISCELLANEOUS
Section 13.1 Amendment. No amendment of this Agreement will be effective
unless in a writing signed by the Parties.
Section 13.2 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original agreement, but all
of which will constitute one and the same agreement. Any Party may execute and
deliver this Agreement by an executed signature page transmitted by a facsimile
machine. If a Party transmits its signature page by a facsimile machine, such
Party will promptly thereafter deliver an originally executed signature page to
the other Party, provided that any failure to deliver such an originally
executed signature page will not affect the validity, legality, or
enforceability of this Agreement.
Section 13.3 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the Parties and supersedes all prior
agreements and understandings, both written and oral, with respect to the
subject matter of this Agreement.
Section 13.4 Expenses. Each Party will bear its own expenses with respect
to the negotiation and preparation of this Agreement and the Closing, including
any fees and expenses of its Representatives, provided that if a Party
terminates this Agreement because of another Party's breach of this Agreement,
the non-breaching Party will be entitled to seek reimbursement of its expenses
as part of its damages with respect to such breach. Seller will bear any Tax
imposed in connection with the transfer of the Purchased Assets to Purchaser
pursuant to this Agreement.
Section 13.5 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF
THE STATE OF DELAWARE REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.
Section 13.6 No Assignment. No Party may assign its benefits or delegate
its duties under this Agreement without the prior consent of the other Party.
Any attempted assignment or delegation without such prior consent will be void.
Notwithstanding the foregoing, after the Closing Purchaser may assign its rights
under this Agreement to a purchaser of all of the assets or equity of Purchaser
without Seller's consent, and any such purchaser and any subsequent purchasers
of all of the assets or equity of Purchaser may similarly assign such rights.
Section 13.7 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the Parties and no other Person will have any right, interest, or
claim under this Agreement.
Section 13.8 Notices. All claims, consents, designations, notices, waivers,
and other communications in connection with this Agreement will be in writing.
Such claims, consents, designations, notices, waivers, and other communications
will be considered received (a) on the day of actual transmittal when
transmitted by facsimile with written confirmation of such transmittal, (b) on
the next business day following actual transmittal when transmitted by a
nationally recognized overnight courier, or (c) on the third business day
following actual
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transmittal when transmitted by certified mail, postage prepaid, return receipt
requested; in each case when transmitted to a Party at its address set forth on
Schedule 13.8 (or to such other address to which such Party has notified the
other Parties in accordance with this Section to send such claims, consents,
designations, notices, waivers, and other communications).
Section 13.9 Public Announcements. The Parties will agree on the terms of
any press releases or other public announcements related to this Agreement, and
will consult with each other before issuing any press releases or other public
announcements related to this Agreement; provided, however, that any Party may
make a public disclosure if in the opinion of such party's counsel it is
required by Law or the rules of the New York Stock Exchange or the Nasdaq
National Market to make such disclosure. The parties agree, to the extent
practicable, to consult with each other regarding any such public announcement
in advance thereof.
Section 13.10 Representation by Legal Counsel. Each Party is a
sophisticated Person that was advised by experienced legal counsel and other
advisors in the negotiation and preparation of this Agreement.
Section 13.11 Schedules. All references in this Agreement to schedules will
mean the schedules identified in this Agreement, which are incorporated into
this Agreement and will be deemed a part of this Agreement for all purposes.
Each Section of this Agreement that refers to a schedule will have a separate
schedule. In addition, any disclosure under a particular section's schedule will
be made under the heading of any relevant subsection of such section. A
disclosure of an item in a schedule for a particular section or under a heading
in a schedule corresponding to a particular subsection will not be a disclosure
under any other section's schedule or any other subsection, unless so noted
specifically on such schedule. Seller has delivered to Purchaser a correct and
complete copy of each document described on each schedule to this Agreement and
a correct and complete written description of each unwritten arrangement or
other item described on each such schedule.
Section 13.12 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will not invalidate the
remaining provisions of this Agreement or affect the validity or enforceability
of such provision in any other jurisdiction. In addition, any such prohibited or
unenforceable provision will be given effect to the extent possible in the
jurisdiction where such provision is prohibited or unenforceable.
Section 13.13 Successors. This Agreement will be binding upon and will
inure to the benefit of each Party and its heirs, legal representatives,
permitted assigns, and successors, provided that this Section will not permit
the assignment or other transfer of this Agreement, whether by operation of law
or otherwise, if such assignment of other transfer is not otherwise permitted
under this Agreement.
Section 13.14 Time of the Essence. Time is of the essence in the
performance of this Agreement and all dates and periods specified in this
Agreement.
Section 13.15 Waiver. No provision of this Agreement will be considered
waived unless such waiver is in writing and signed by the Party that benefits
from the enforcement of such provision. No waiver of any provision in this
Agreement, however, will be deemed a waiver of a
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subsequent breach of such provision or a waiver of a similar provision. In
addition, a waiver of any breach or a failure to enforce any term or condition
of this Agreement will not in any way affect, limit, or waive a Party's rights
under this Agreement at any time to enforce strict compliance thereafter with
every term and condition of this Agreement.
Section 13.16 Attorney's Fees. In the event of any Action among the Parties
seeking enforcement of any of the terms and conditions of this Agreement, the
prevailing party in such Action will be awarded its reasonable costs and
expenses, including its court costs and reasonable attorneys' fees.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by a duly authorized officer as of the Signing Date.
SELLER: ARROWHEAD GENERAL INSURANCE AGENCY, INC.
By:
------------------------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇, President
PURCHASER: INSpire INSURANCE SOLUTIONS, INC.
By:
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III, President
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APPENDIX A
DEFINITIONS AND RULES OF INTERPRETATION
Definitions. Unless the context otherwise requires, the terms defined in
this Appendix will have the meanings specified below for all purposes of this
Agreement:
(a) "ACCOUNTS RECEIVABLE" will have the meaning set forth in Section
4.10.
(b) "ACTION" means any action, arbitration proceeding, cause of action,
charge, counterclaim, cross claim, inquiry, investigation, legal action,
litigation, Order, proceeding, or suit.
(c) "AFFILIATE" means with respect to a Person means any other Person
that directly or indirectly controls, is controlled by, or is under common
control with such Person. For the purposes of this definition, control means the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise. Control shall be presumed by an individual that is a director,
executive officer, general partner, manager, or similar functionary of a Person,
or a Person that beneficially owns more than 10% of any class of securities of
such Person having general voting rights. For purpose of this Agreement, each of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and Arrowhead Management Company, Inc., and each Affiliate of
such Person shall be considered an Affiliate of each Seller.
(d) "AGREEMENT" will have the meaning set forth in the first paragraph.
(e) "ALLOCATION STATEMENT" will have the meaning set forth in Section
2.3.
(f) "ASSUMED LIABILITIES" will have the meaning set forth in Section
1.3.
(g) "BALANCE SHEET DATE" will have the meaning set forth in Section
4.5(a).
(h) "BANK ACCOUNTS" will have the meaning set forth in Section 4.24.
(i) "BASE PURCHASE PRICE" will have the meaning set forth in Section
2.1.
(j) "BASKET" will have the meaning set forth in Section 12.9.
(k) "BOOKS AND RECORDS" will mean all the books and records maintained
by or for Seller, including all accounting records, minute books, stock records,
computerized records and storage media and the software used in connection
therewith.
(l) "BUSINESS" will have the meaning set forth in Recital A.
(m) "CHARTER DOCUMENTS" will mean (i) in the case of a corporation, its
articles or certificate of incorporation and its bylaws, (ii) in the case of a
partnership, its partnership certificate and its partnership agreement, and
(iii) in the case of any other Person, its organic and governing documents; in
each case as such document has been amended or supplemented from time to time
prior to the Signing Date.
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(n) "CLAIM" will mean any arbitration award, assessment, charge,
citation, claim, damage, demand, directive, expense, fine, interest, joint or
several liability, Lawsuit, notice, obligation, payment, penalty, or summons of
any kind or nature whatsoever, including any damages incurred because of the
claimant's negligence or gross negligence or any strict liability imposed upon
the claimant, any consequential or punitive damages, and any reasonable
attorneys' fees and expenses. A Claim will be considered to exist even though it
may be conditional, contingent, indirect, potential, secondary, unaccrued,
unasserted, unknown, unliquidated, or unmatured.
(o) "CLOSING" will have the meaning set forth in Section 3.1.
(p) "CLOSING CASH PAYMENT" will have the meaning set forth in Section
2.2.
(q) "CLOSING DATE" will have the meaning set forth in Section 3.1.
(r) "CLOSING PREMIUM STATEMENT" will have the meaning set forth in
Section 2.4(a).
(s) "CODE" will mean the Internal Revenue Code of 1986, as amended.
(t) "CONFIDENTIAL INFORMATION" means any proprietary information, and
any information which Purchaser reasonably considers to be proprietary,
pertaining to each of Seller's and Purchaser's past, present or prospective
business secrets, methods or policies, earnings, finances, security holders,
lenders, key employees, nature of services performed by such entity's sales
personnel, procedures, standards and methods, information relating to
arrangements with suppliers, the identity and requirements of arrangements with
customers, the type, volume or profitability of services or products for
customers, drawings, records, reports, documents, manuals, techniques, ratings,
information, data, statistics, trade secrets and all other information of any
kind or character relating to each of the Parties, whether or not reduced to
writing.
(u) "CONFIDENTIALITY AGREEMENT" will have the meaning set forth in
Section 6.2.
(v) "CONSENT" will mean a consent, approval, order, authorization or
waiver from, notice to or declaration, registration or filing with any Person.
(w) "DIRECT WRITTEN PREMIUMS" means the aggregate amount of premiums
paid to Seller by insureds. For purposes of calculating Direct Written Premiums,
a lump-sum premium payment will be prorated equally over the term of the policy
pursuant to which such premium payment was made.
(x) "DIVISION" will have the meaning set forth in Recital A.
(y) "EMPLOYEE BENEFIT PLAN" will mean any (i) Pension Benefit Plan,
(ii) Welfare Benefit Plan, (iii) accident, dental, disability, health, life,
medical, or vision plan or insurance policy, (iv) bonus, executive, incentive or
deferred compensation plan, (v) change in control plan, (vi) fringe benefits and
perquisites, (vii) holiday, sick pay, leave, vacation, moving or tuition
reimbursement or other similar policy, (viii) stock option, stock purchase,
phantom
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stock, restricted stock or stock appreciation plan, (ix) severance plan, or (x)
other employee arrangement, commitment, custom, policy or practice.
(z) "EMPLOYEES" will have the meaning set forth in Section 4.21(a).
(aa) "ENCUMBERED INSTRUMENT" will mean any the contract and lease to be
assigned by Seller and assumed by Purchaser pursuant to the terms of this
Agreement that by its terms require Consent from a third party in order to
transfer and assign the rights and obligations thereunder.
(bb) "ENCUMBRANCE" will mean any title defect or objection, mortgage,
lien, deed of trust, equity, judgment, claim, restrictive covenant, use
restriction, charge, pledge, security interest or other encumbrance of any
nature whatsoever, including all leases, chattel mortgages, conditional sales
contracts, collateral security arrangements and other title or interest
retention arrangements.
(cc) "ENVIRONMENTAL LAW" will mean (i) the Clean Air Act (42 U.S.C.
Section 7401 et seq.), (ii) the Clean Water Act (33 U.S.C. Section 1251 et
seq.), (iii) 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.), (iv) the Federal Water Pollution Control
Act (33 U.S.C. Section 1251 et seq.), (v) the Hazardous Materials Transportation
Act (49 U.S.C. Section 5101 et seq.), (vi) the National Environmental Policy Act
(42 U.S.C. Section 4321 et seq.), (vii) the Oil Pollution Act of 1990 (33 U.S.C.
Section 2701 et seq.), (viii) the Resource Conservation and Recovery Act, as
amended by the Hazardous and Solid Waste Amendments of 1984 (42 U.S.C. Section
6901 et seq.), (ix) the Safe Drinking Water Act (42 U.S.C. Section 300f et
seq.), (x) the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.),
(xi) any state, local, tribal, or foreign law, ordinance, regulation, or statute
analogous to any of the foregoing statutes, or (xii) any other federal, state,
local, tribal, or foreign law, ordinance, regulation, or statute prohibiting,
regulating, or restricting the disposal, generation, handling, placement,
recycling, release, storage, or treatment of any contaminant, liquid, mass,
material, matter, pollutant, solid, substance, or waste classified or considered
to be hazardous or toxic to human health or the environment or otherwise related
to environmental protection or health and safety.
(dd) "ERISA" will mean the Employee Retirement Income Security Act of
1974, as amended.
(ee) "EXCLUDED ASSETS" will have the meaning set forth in Section 1.2.
(ff) "EXCLUDED LIABILITIES" will have the meaning set forth in Section
1.4.
(gg) "FINAL CLOSING PREMIUM STATEMENT" will have the meaning set forth
in Section 2.4(b).
(hh) "FINAL PURCHASE PRICE" will have the meaning set forth in Section
2.1.
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(ii) "GAAP" will mean generally accepted accounting principles in
effect in the United States of America as of the Signing Date.
(jj) "GOVERNMENTAL AUTHORITY" will mean any federal, state, local,
tribal, foreign or other governmental agency, department, branch, commission,
board, bureau, court, instrumentality or body.
(kk) "HAZARDOUS MATERIAL" will mean (i) any contaminant, liquid, mass,
material, matter, pollutant, solid, substance, or waste for which any
Environmental Law limits, prohibits, or regulates its disposal, generation,
handling, placement, recycling, release, storage, or treatment, (ii) any
carcinogenic, corrosive, explosive, flammable, infectious, mutagenic,
radioactive, or toxic substance, (iii) any diesel fuel, gasoline, or other
petroleum product in an unconfined manner, (iv) any substance that contains
polychlorinated biphenyls, (v) any substance that contains asbestos, (vi) any
substance that contains urea formaldehyde foam installation, (vii) any substance
that constitutes a nuisance upon any property, or (viii) any substance that
imposes a hazard to the health or safety of any individual.
(ll) "HSR ACT" will have the meaning set forth in Section 8.1.
(mm) "INDEMNITEE" will have the meaning set forth in Section 12.3(a).
(nn) "INDEMNITOR" will have the meaning set forth in Section 12.3(a).
(oo) "INSURANCE POLICIES" will have the meaning set forth in Section
4.15.
(pp) "INTANGIBLE ASSET" will mean any patent, trademark, trademark
license, computer software, trade name, masthead, brand name, slogan, copyright,
reprint right, franchise, license, process, authorization, invention, know-how,
formula, trade secret and other intangible asset, together with any pending
application, continuation-in-part or extension therefor.
(qq) "INTERIM BALANCE SHEET" will have the meaning set forth in Section
4.5(b).
(rr) "LAW" will mean any applicable code, statute, law, common law,
rule, regulation, order, ordinance, judgment, decree, order, writ or injunction
of any Governmental Authority.
(ss) "LAW AFFECTING CREDITORS' RIGHTS" will mean any bankruptcy,
fraudulent conveyance or transfer, insolvency, moratorium, reorganization, or
other law affecting the enforcement of creditors' rights generally, and any
general principles of equity.
(tt) "MATERIAL ADVERSE CHANGE" will mean, with respect to a Person,
that such Person has (i) breached a Material Contract, (ii) incurred a Claim or
become a party to an Action that could have a significant and detrimental effect
upon it, (iii) suffered a Material Adverse Effect, or (iv) violated any Law or
Order to which it or any of its assets is subject or bound.
(uu) "MATERIAL ADVERSE EFFECT" will mean, with respect to a Person, the
occurrence of an event or the existence of a circumstance that has a material
adverse effect on such Person's assets, business, cash flows, financial
condition, liabilities, operations, prospects,
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or relationships, including the occurrence of any event or the existence of any
circumstance that could cause such an effect in the future.
(vv) "MATERIAL CONTRACTS" will have the meaning set forth in Section
4.16.
(ww) "NON-TRANSFERRED INSTRUMENT" will have the meaning set forth in
Section 8.2(c).
(xx) "NON-TRANSFERRED PERMIT" will have the meaning set forth in
Section 8.3(c).
(yy) "OBJECTION NOTICE" will have the meaning set forth in Section
2.4(b).
(zz) "OPTION AGREEMENT" will have the meaning set forth in Section 2.2.
(aaa) "ORDER" will mean any consent decree, decree, determination,
injunction, judgment, order, or writ of any arbitrator or Governmental
Authority.
(bbb) "OWNED REAL PROPERTY" will have the meaning set forth in Section
4.12(a).
(ccc) "PARTY" will have the meaning set forth in the first paragraph.
(ddd) "PENSION BENEFIT PLAN" will mean an "employee pension benefit
plan" as defined in Section 3(2) of ERISA, and a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA.
(eee) "PERMIT" will mean any license, approval, certificate, franchise,
registration, permit or authorization issuable by any Governmental Authority.
(fff) "PERMITTED ENCUMBRANCE" will mean any Encumbrance directly
related to (i) Taxes that are not yet due and payable or Taxes that are being
contested in good faith by an appropriate proceeding, and in each case as to
which adequate reserves have been established in accordance with GAAP, (ii)
Encumbrances shown on the Interim Balance Sheet as securing specified Claims
with respect to which no breach or default exists, (iii) workers', repairmen's
and similar Encumbrances imposed by Law that have been incurred in the ordinary
course of business, (iv) retention of title agreements with suppliers entered
into in the ordinary course of business, and (v) the rights of others to
customer deposits.
(ggg) "PERSON" will mean any association, bank, business trust,
corporation, estate, general partnership, Governmental Authority, individual,
joint stock company, joint venture, labor union, limited liability company,
limited partnership, non-profit corporation, professional association,
professional corporation, trust, or any other organization or entity.
(hhh) "PERSONAL PROPERTY LEASES" will have the meaning set forth in
Section 4.13(b).
(iii) "PLAN" will mean any bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance, hospitalization or other
medical, life or
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other insurance, supplemental unemployment benefit, profit sharing, pension, or
retirement plan, program, agreement or arrangement.
(jjj) "PURCHASED ASSETS" will have the meaning set forth in Section
1.1.
(kkk) "PURCHASER" will have the meaning set forth in first paragraph.
(lll) "REAL PROPERTY LEASES" will have the meaning set forth in Section
4.12(a).
(mmm) "REGISTRATION RIGHTS AGREEMENT" will have the meaning set forth
in Section 3.2(i).
(nnn) "REPRESENTATIVES" will mean, with respect to a Person, such
Person's directors, employees, officers, agents, accountants, affiliates,
consultants, investment bankers, attorneys, lenders, representatives and
shareholders.
(ooo) "REQUIRED CONSENT" will have the meaning set forth in Section
8.2(b).
(ppp) "REQUIRED PERMIT" will have the meaning set forth in Section
8.3(b).
(qqq) "RESTRICTED SERVICES" means any actions directly or indirectly
related to providing or soliciting third party administrator services in
connection with property and casualty insurance lines.
(rrr) "RESTRICTION PERIOD" will have the meaning set forth in Section
6.8(b).
(sss) "RETAINED EMPLOYEES" will have the meaning set forth in Section
11.1.
(ttt) "RETURNS" will have the meaning set forth in Section 4.23(a).
(UUU) "SEGREGATED ACCOUNT" will have the meaning set forth in Section
2.2.
(vvv) "SELLER" will have the meaning set forth in the first paragraph.
(www) "SELLER'S KNOWLEDGE" will mean the actual knowledge as of the
date that a specific representation or warranty is made or deemed made, after
reasonable inquiry, of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
(xxx) "SIGNING DATE" will have the meaning set forth in the first
paragraph.
(yyy) "TAX" will mean any assessment, charge, duty, fee, impost, levy,
tariff, or tax of any nature whatsoever imposed by any Governmental Authority or
payable pursuant to any tax sharing agreement, including any income, payroll,
withholding, excise, gift, alternative minimum, capital gain, added value,
social security, sales, use, real and personal property, use and occupancy,
business and occupation, mercantile, real estate, capital stock, and franchise
tax or charge, together with any related interest, penalties or additions
thereon.
(zzz) "TRANSACTION DOCUMENTS" will have the meaning set forth in
Section 4.2.
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(aaaa) "INTERIM FINANCIAL STATEMENTS" will have the meaning set forth
in Section 4.5(b).
(bbbb) "WELFARE BENEFIT PLAN" will mean an "employee welfare benefit
plan" as defined in Section 3(1) of ERISA, including an employee welfare benefit
plan which is a "multiemployer welfare plan" as defined in Section 3(37) of
ERISA and a "multiple employer welfare arrangement" as defined in Section 3(40)
of ERISA.
(cccc) "WRITTEN PREMIUM AMOUNT" will have the meaning set forth in
Section 2.4(b).
(dddd) "YEAR-END BALANCE SHEET" will have the meaning set forth in
Section 4.5(a).
(eeee) "YEAR-END FINANCIAL STATEMENTS" will have the meaning set forth
in Section 4.5(a).
Accounting Terms. Except as otherwise provided in this Agreement, all
accounting terms defined in this Agreement, whether defined in this Article or
otherwise, will be construed in accordance with GAAP on a consolidated basis.
Articles, Sections, Exhibits and Schedules. Except as specifically stated
otherwise, references to Articles, Sections, Exhibits and Schedules refer to the
Articles, Sections, Exhibits and Schedules of this Agreement.
Attorneys' Fees. Whenever this Agreement refers to a Person's "attorneys'
fees and expenses," such reference also will include any fees and expenses of
accountants, experts, investigators, and other professional advisors whose
services such Person's attorney considered advisable in connection with the
prosecution or defense of the particular matter.
Breach. The term "breach" with respect to any contract or instrument means
any breach or violation of, or default under, such contract or instrument, any
conflict with another contract or instrument or any emergence of a right of
another party to such contract or instrument to accelerate, cancel, modify or
terminate such contract or instrument, including any such breach, violation,
default, conflict, or right that will arise after notice or lapse of time.
Disclosure Thresholds. The establishment of any monetary thresholds for the
disclosure of particular items will not create a materiality standard under this
Agreement.
Drafting. Neither this Agreement nor any provision contained in this
Agreement will be interpreted in favor of or against either Party because such
Party or its legal counsel drafted this Agreement or such provision. No prior
draft of this Agreement or any provision contained in this Agreement will be
used when interpreting this Agreement or its provisions.
Headings. Article and section headings are used in this Agreement only as a
matter of convenience and will not have any effect upon the construction or
interpretation of this Agreement.
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Include. The term "include" or any derivative of such term does not mean
that the items following such term are the only types of such items.
Or. The term "or" will not be interpreted as excluding any of the items
described.
Plural and Singular Words. Whenever the plural form of a word is used in
this Agreement, that word will include the singular form of that word. Whenever
the singular form of a word is used in this Agreement, that word will include
the plural form of that word.
Predecessors. Any of Seller's representations and warranties concerning any
Claim against Seller, any liability or obligation of Seller, or any violation of
Law by Seller will include any Claims with respect to each predecessor of
Seller, including all direct and indirect predecessors of any such predecessor.
Pronouns. Whenever a pronoun of a particular gender is used in this
Agreement, if appropriate that pronoun also will refer to the other gender and
the neuter. Whenever a neuter pronoun is used in this Agreement, if appropriate
that pronoun also will refer to the masculine and feminine gender.
Representations and Warranties. Seller's representations and warranties
under this Agreement will mean the representations and warranties contained in
Article IV and the reaffirmation of Seller's representations and warranties in
Seller's Closing Certificate. Purchaser's representations and warranties under
this Agreement will mean the representations and warranties contained in Article
V and the reaffirmation of those representations and warranties in Purchaser's
Closing Certificate.
Statutes. Any reference to Law or any specific statute will include any
changes to such law or statute after the Signing Date, any successor law or
statute, and any regulations and rules promulgated under such law or statute and
any successor law or statute, whether promulgated before or after the Signing
Date.
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The following list sets forth the schedules to the Asset Purchase Agreement that
have been omitted from this Exhibit 2.2. The Company agrees to furnish
supplementally a copy of any omitted schedule to the Securities and Exchange
Commission upon request.
Schedule Description
-------- -----------
Schedule 1.1................................................................................Ownership of the Shares
Schedule 4.1.........................................................................Jurisdictions of Incorporation
Schedule 4.5(a)(1)...................................................................................Capitalization
Schedule 4.5(a)(2).....................................................................Exceptions to Capitalization
Schedule 4.5(b)........................................................................................Subsidiaries
Schedule 4.6(a).......................................................................Year-End Financial Statements
Schedule 4.6(b)........................................................................Interim Financial Statements
Schedule 4.8..........................................................................Exceptions to Certain Changes
Schedule 4.12(a)................................................................................Owned Real Property
Schedule 4.12(b)...............................................................................Leased Real Property
Schedule 4.13(a)............................................................................Owned Personal Property
Schedule 4.13(b)...........................................................................Leased Personal Property
Schedule 4.15.............................................................................................Insurance
Schedule 4.16....................................................................................Material Contracts
Schedule 4.17....................................................................................Litigation; Orders
Schedule 4.17(1)...................................................................Exceptions to Litigation; Orders
Schedule 4.19...............................................................................................Permits
Schedule 4.20(a)............................................................................Owned Intangible Assets
Schedule 4.20(b).........................................................................Licensed Intangible Assets
Schedule 4.21(a)..........................................................................................Employees
Schedule 4.21(b).....................................................................Employment and Labor Contracts
Schedule 4.22(a)..............................................................................Welfare Benefit Plans
Schedule 4.22(b)..............................................................................Pension Benefit Plans
Schedule 4.22(c)..............................................................................Employee Arrangements
Schedule 4.24..................................................................Bank Accounts and Powers of Attorney
Schedule 4.26..................................................................Exceptions to Affiliate Transactions
Schedule 6.3(b)...............................................................Exceptions to Prohibited Transactions
Schedule 6.8.....................................................................................Transferred Assets
Schedule 8.2(b)...................................................................................Required Consents
Schedule 8.3(b)....................................................................................Required Permits
Schedule 9.1(m).................................................................................Restricted Software
Schedule 12.8....................................................................................Notice Information