Exhibit 2.43
------------------------------
AMENDED AND RESTATED
MERGER AGREEMENT
by and among
CENTERPRISE ADVISORS, INC.,
▇▇▇▇▇▇▇ MERGERSUB INC.,
RA MERGERSUB LLC,
VERASOURCE MERGERSUB INC.,
THE ▇▇▇▇▇▇▇ COMPANY, INC.,
▇▇▇▇▇▇▇ ADMINISTRATORS, L.L.C. AND
VERASOURCE EXCESS RISK LTD.
September 24, 1999
------------------------------
TABLE OF CONTENTS
-----------------
ARTICLE I
THE MERGER........................................................2
1.1 Merger...................................................2
1.2 Effects of the Merger....................................3
1.3 Directors and Officers of the Surviving Corporation......3
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT...............................3
2.1 Merger Consideration.....................................3
2.1.1 Basic Purchase Consideration....................3
2.1.3 Cancellation of Company Stock...................4
2.1.4 Dissenting Shares ..............................4
2.1.5 Conversion of Mergersub Stock...................4
2.2 Exchange of Certificates for Consideration...............5
2.3 Purchase Price Adjustment................................5
2.4 Earnout Payments.........................................5
2.4.1 Net Value Contingent Payment....................5
2.4.2 Example.........................................7
2.4.3 Calculation of Earn-Out Contingent Payments.....8
2.4.4 Definitions.....................................9
2.4.5 Example........................................12
2.5 Collection of Accounts Receivable.......................12
2.6 Litigation..............................................12
ARTICLE III
THE CLOSING AND CONSUMMATION DATE................................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH OF THE COMPANIES..........13
4.1 Organization and Qualification..........................13
4.2 Company Subsidiaries....................................14
4.3 Authority; Non-Contravention; Approvals.................14
4.4 Capitalization..........................................15
4.5 Year 2000...............................................15
4.6 Financial Statements....................................16
4.7 Absence of Undisclosed Liabilities......................16
4.8 Accounts Receivable.....................................16
4.9 Absence of Certain Changes or Events....................17
4.10 Litigation..............................................19
4.11 Compliance with Applicable Laws.........................20
4.12 Licenses................................................20
4.13 Material Contracts......................................21
(i)
4.14 Properties..............................................23
4.15 Intellectual Property...................................25
4.16 Taxes...................................................25
4.17 Employee Benefit Plans; ERISA...........................26
4.18 Labor Matters...........................................28
4.19 Environmental Matters...................................29
4.20 Insurance...............................................29
4.21 Interest in Customers and Suppliers; Affiliate
Transactions............................................29
4.22 Business Relationships..................................30
4.23 Compensation............................................30
4.24 Bank Accounts...........................................31
4.25 Disclosure; No Misrepresentation........................31
4.26 Title to and Transfer of Insurance Expirations..........31
ARTICLE V
[RESERVED].......................................................31
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPRISE....................31
6.1 Organization And Qualification..........................31
6.2 Capitalization..........................................32
6.3 No Subsidiaries.........................................33
6.4 Authority; Non-Contravention; Approvals.................33
6.5 Absence of Undisclosed Liabilities......................34
6.6 Litigation..............................................34
6.7 Compliance with Applicable Laws.........................34
6.8 No Misrepresentation....................................34
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS................................35
7.1 Conduct of Business by the Companies Prior to the
Effective Time..........................................35
7.2 No-Shop.................................................37
7.3 Schedules...............................................38
7.4 Company Stockholder Meeting.............................38
ARTICLE VIII
ADDITIONAL AGREEMENTS............................................39
8.1 Access to Information...................................39
8.2 Registration Statements.................................39
8.3 Expenses and Fees.......................................41
8.4 Agreement to Cooperate..................................41
8.5 Public Statements.......................................41
8.6 [RESERVED...............................................41
8.7 Centerprise Covenants...................................41
8.8 Release of Guarantees...................................41
8.9 [RESERVED]..............................................42
8.10 Preparation and Filing of Tax Returns...................42
(ii)
8.11 Insurance...............................................42
8.12 Management by ▇▇▇▇▇▇ ▇. Driver Co., Inc.................42
8.13 Name of Companies.......................................42
8.14 Stockholder Representative..............................42
ARTICLE IX
[RESERVED].............................43
ARTICLE X
CLOSING CONDITIONS...............................................43
10.1 Conditions to Each Party's Obligation to Effect
the Merger..............................................43
10.2 Conditions to Obligation of the Companies to Effect
the Merger..............................................44
10.3 Conditions to Obligation of Centerprise to Effect
the Merger..............................................45
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER................................47
11.1 Termination.............................................47
11.2 Effect of Termination...................................48
11.3 Amendment...............................................48
11.4 Waiver..................................................49
ARTICLE XII
[RESERVED].......................................................49
ARTICLE XIII
NONCOMPETITION...................................................49
13.1 Centerprise Non-Solicitation............................49
ARTICLE XIV
[RESERVED].......................................................49
ARTICLE XV
GENERAL PROVISIONS...............................................49
15.1 Brokers.................................................49
15.2 Notices.................................................50
15.3 Interpretation..........................................51
15.4 Certain Definitions.....................................51
15.5 Entire Agreement; Assignment............................51
15.6 Applicable Law..........................................52
15.7 Counterparts............................................52
15.8 Parties in Interest.....................................52
(iii)
LIST OF SCHEDULES
-----------------
Schedule 2.1 Consideration
Schedule 2.3 Purchase Price Adjustment
Schedule 2.4 Earnout Payments
Schedule 4.2 Investments
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.5 Year 2000
Schedule 4.6 Financial Statements
Schedule 4.7 Liabilities
Schedule 4.8 Accounts Receivable
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
(iv)
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
Schedule 4.18 Labor Matters
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 4.26 Title to and Transfer of Insurance Expirations
Schedule 6.2 Centerprise's Capitalization
Schedule 6.5 Liabilities
Schedule 7.1 Conduct of Business
Schedule 7.1.3 Terminated Agreements
Schedule 8.8 Stockholders' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Stockholders and Their Counsel
(v)
LIST OF EXHIBITS
----------------
Exhibit 2.1(i)(a) Form of ▇▇▇▇▇▇▇ Note
Exhibit 2.1(i)(b) Form of Verasource Note
Exhibit 2.1(i)(c) Form of RA Note
Exhibit 10.2(c) Form of Opinion of Centerprise's Counsel
Exhibit 10.2(d) Forms of Employment Agreements with ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
Exhibit 10.2(f) Form of Stockholders' Agreement
Exhibit 10.2(i) Form of Letter Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Companies and
Stockholders
Exhibit 10.3(i) Form of Stockholders' Release
Exhibit 10.3(q) Form of Company Stockholder Agreement
(vi)
DEFINED TERMS
-------------
Actions...................................................Section 4.10.1
Affiliate...................................................Section 15.4
Affiliate Transactions......................................Section 4.21
Agreement...................................................Introduction
Business....................................................Introduction
Centerprise.................................................Introduction
Centerprise Common Stock.....................................Section 2.1
Centerprise Material Adverse Effect........................Section 6.4.3
Centerprise Representatives................................Section 8.1.1
Centerprise Required Statutory Approvals...................Section 6.4.3
Closing......................................................Article III
Closing Date.................................................Article III
Code........................................................Introduction
Companies...................................................Introduction
Company.....................................................Introduction
Company Equity...............................................Section 2.1
Company Material Adverse Effect............................Section 4.3.3
Company Representatives....................................Section 8.1.1
Company Stockholder Agreement............................Section 10.3(q)
Contracts...................................................Section 4.13
(vii)
Copyrights..................................................Section 4.15
DGCL.........................................................Section 1.1
Dissenting Shares..........................................Section 2.1.3
Driver......................................................Introduction
Earn-Out Contingent Payment ...............................Section 2.4.3
Effective Time...............................................Section 1.1
Employee Plan..........................................Section 4.17.5(a)
Environmental and Safety Requirements.......................Section 4.19
ERISA..................................................Section 4.17.5(b)
Excluded Receivables ........................................Section 2.5
Financial Statements.........................................Section 4.6
First Person...........................................Section 4.17.5(c)
Form S-1...................................................Section 4.3.3
Form S-4...................................................Section 4.3.3
Founding Companies..........................................Introduction
GAAP.......................................................Section 4.6.1
general increase............................................Section 4.23
Governmental Authority.....................................Section 4.3.2
Hazardous Materials.........................................Section 4.19
HSR Act ...................................................Section 4.3.3
Intellectual Property.......................................Section 4.15
(vii)
Intellectual Property Licenses..............................Section 4.15
IPO.........................................................Introduction
Knowledge...................................................Section 15.4
Latest Balance Sheet.........................................Section 4.6
Laws........................................................Section 4.11
Leased Property...........................................Section 4.14.1
Licenses....................................................Section 4.12
Liens......................................................Section 4.3.2
Liquidated Damages Amount....................................Section 7.3
Marks.......................................................Section 4.15
Material Contracts..........................................Section 4.13
Merger......................................................Introduction
Mergersub...................................................Introduction
Mergersub Stock............................................Section 6.2.1
Merger Documents.............................................Section 1.1
Net Amounts..................................................Section 2.5
Net Value Contingent Payment...............................Section 2.4.1
1933 Act...................................................Section 4.3.3
Notes......................................................Section 2.1.1
Organizational Documents.....................................Section 4.1
Other Agreements............................................Introduction
(ix)
Other Mergers...............................................Introduction
Owned Property............................................Section 4.14.1
Patents.....................................................Section 4.15
Person......................................................Section 15.4
Plan Affiliate.........................................Section 4.17.5(c)
RA..........................................................Introduction
RA Mergersub................................................Introduction
RA Note .....................................................Section 2.1
Real Property.............................................Section 4.14.1
Registration Statements....................................Section 4.3.3
▇▇▇▇▇▇▇.....................................................Introduction
▇▇▇▇▇▇▇ Mergersub...........................................Introduction
▇▇▇▇▇▇▇ Note ................................................Section 2.1
Returns...................................................Section 4.16.1
Schedules....................................................Section 7.3
SEC........................................................Section 4.3.3
Securities Act.............................................Section 4.3.3
Stockholders Agreement...................................Section 10.2(f)
Stockholder's Note and Stock Purchase Consideration .........Section 2.1
Surviving Corporation........................................Section 1.2
Taxes.....................................................Section 4.16.2
(x)
Trade Secrets...............................................Section 4.15
Underwriters...............................................Section 8.1.1
Verasource..................................................Introduction
VeraSource Mergersub........................................Introduction
VeraSource Note .............................................Section 2.1
(xi)
AMENDED AND RESTATED
MERGER AGREEMENT
THIS AMENDED AND RESTATED MERGER AGREEMENT (this "Agreement") is made
as of September 24, 1999, by and among Centerprise Advisors, Inc., a Delaware
corporation ("Centerprise"), ▇▇▇▇▇▇▇ Mergersub Inc., a Delaware corporation and
wholly-owned subsidiary of Centerprise ("▇▇▇▇▇▇▇ Mergersub"), RA Mergersub LLC,
a Delaware limited liability company and wholly-owned subsidiary of Centerprise
("RA Mergersub"), Verasource Mergersub Inc., a Delaware corporation and
wholly-owned subsidiary of Centerprise ("Verasource Mergersub") (▇▇▇▇▇▇▇
Mergersub, RA Mergersub and Verasource Mergersub, each, as the context requires,
"Mergersub" and collectively, the "Mergersubs"), The ▇▇▇▇▇▇▇ Company, Inc., a
Washington corporation ("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ Administrators, L.L.C., a Washington
limited liability company ("RA"), and VeraSource Excess Risk Ltd., a Washington
corporation ("Verasource"), (▇▇▇▇▇▇▇, ▇▇ and Verasource, each individually, a
"Company," and collectively, the "Companies"). As used in this Agreement, the
term referred to as a "Stockholder" and, collectively, the "Stockholders" shall
mean the stockholders and members of the Companies.
WITNESSETH:
WHEREAS, (i) ▇▇▇▇▇▇▇ is engaged in the marketing of employee benefits
insurance, primarily group medical and dental insurance; (ii) RA provides COBRA,
IRC Section 125, single billing and direct dental reimbursement administration
services; and (iii) Verasource primarily markets stop loss insurance to brokers
and third party administration (the business provided, as it pertains to each
Company, the "Business" and collectively the "Businesses");
WHEREAS, the Boards of Directors of the Companies, Centerprise and
Mergersubs deem it advisable and in the best interests of their respective
shareholders to approve and consummate the business combination transaction
provided for herein in which RA Mergersub would merge with RA, ▇▇▇▇▇▇▇ Mergersub
would merge with ▇▇▇▇▇▇▇ and Verasource Mergersub would merge with Verasource,
with RA, ▇▇▇▇▇▇▇ and Verasource being the surviving corporations or limited
liability company, as the case may be, in the mergers (each, a "Merger,"
collectively, the "Mergers");
WHEREAS, Centerprise is entering into other agreements (the "Other
Agreements") similar to this Agreement with each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
P.C., ▇▇▇▇▇▇ ▇. Driver Co., Inc. ("Driver"), ▇▇▇▇ Frankfort ▇▇▇▇▇ & ▇▇▇▇, P.C.,
Berry, Dunn, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, Chartered, ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ PC, Self Funded
Benefits, Inc. d/b/a Insurance Design Administrators, Grace & Company, P.C.,
Simione, Scillia, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLC and ▇▇▇▇▇▇▇ Rudzewicz & Co., P.C. (which
companies together with the Companies are collectively referred to herein as the
"Founding Companies"), which agreements provide for the merger of a wholly-owned
subsidiary
of Centerprise with each such Founding Company (the "Other Mergers")
simultaneously with the Merger;
WHEREAS, the Voting Agreement, dated as of March 31, 1999, among
Centerprise and certain of the Stockholders of the Companies has been terminated
and is no longer in force and effect;
WHEREAS, simultaneously with the consummation of the Merger,
Centerprise will close an initial public offering (the "IPO") of Centerprise
Common Stock (as defined in Section 2.1); and
WHEREAS, the parties intend the acquisition of Centerprise Common Stock
pursuant to the terms hereof to be tax-free under the provisions of Section 351
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, for and in consideration of the premises and of the
mutual representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. Upon the terms and subject to the conditions set forth in
this Agreement and in reliance upon the representations and warranties set forth
herein, (i) RA Mergersub shall be merged with and into RA, the result of which
will cause the separate corporate existence of RA Mergersub to cease and RA to
continue under the laws of the State of Washington, (ii) ▇▇▇▇▇▇▇ Mergersub shall
be merged with and into ▇▇▇▇▇▇▇, the result of which will cause the separate
corporate existence of ▇▇▇▇▇▇▇ Mergersub to cease and ▇▇▇▇▇▇▇ to continue under
the laws of the State of Washington, (iii) Verasource Mergersub shall be merged
with and into Verasource, the result of which will cause the separate corporate
existence of Verasource Mergersub to cease and Verasource to continue under the
laws of the State of Washington. As promptly as possible on the Closing Date,
the parties shall cause the Mergers to be completed by filing articles of merger
and certificates of merger, as applicable (the "Merger Documents"), with the
Secretary of State of the State of Washington, as provided in the Washington
Business Corporation Act, as amended and the Washington Limited Liability
Company Act, as amended and with the Secretary of State of the State of
Delaware, as provided in the General Corporation Law of the State of Delaware,
as amended (the "DGCL"). The Mergers shall become effective (the "Effective
Time") upon the filing of the Merger Documents with the Secretary of State of
the State of Washington and the Secretary of State of the State of Delaware or
at such later time, contemporaneously with the closing sale of the IPO, as
agreed by Centerprise and the Companies and specified in the Merger Documents.
2
1.2 Effects of the Merger. At the Effective Time (a) the separate
existence of Mergersubs shall cease and (i) RA Mergersub shall be merged with
and into RA, with RA being the surviving entity, (ii) ▇▇▇▇▇▇▇ Mergersub shall be
merged with and into ▇▇▇▇▇▇▇, with ▇▇▇▇▇▇▇ being the surviving corporation,
(iii) Verasource Mergersub shall be merged with and into Verasource, with
Verasource being the surviving corporation, (the surviving Company is sometimes
referred to herein as the "Surviving Corporation"), (b) the Certificates of
Incorporation and By-laws of the Surviving Corporation shall be amended in form
and substance acceptable to Centerprise and as specified in the Merger
Documents, (c) the Mergers shall have all the effects provided by applicable
law, and (d) the Company shall be a wholly-owned subsidiary of Centerprise.
1.3 Directors and Officers of the Surviving Corporation. From and after
the Effective Time, the directors and officers of each Mergersub shall be the
directors and officers of the Surviving Corporation until their successors are
duly elected and qualified.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Merger Consideration.
2.1.1 Basic Purchase Consideration. At the Closing, by virtue
of the Mergers and without any action on the part of the holders thereof:
(a) the outstanding shares of capital stock of ▇▇▇▇▇▇▇,
consisting of 500 shares of common stock, par value $1.00 per share, shall be
converted into the right to receive (i) that number of shares of common stock,
par value $.01 per share, of Centerprise ("Centerprise Common Stock") set forth
in line B1 of Schedule 2.1; provided, however, that if the actual public
offering price of the Centerprise Common Stock is below $11.90 per share, the
number of shares of Centerprise Common Stock received at Closing shall be
increased such that the value of the shares, using the initial public offering
price, equals the amount shown in line E1 of Schedule 2.1; (ii) a promissory
note (the "▇▇▇▇▇▇▇ Note") in the form of Exhibit 2.1(i)(a) and (iii) the right
to the contingent payment described in Section 2.4 (the "Net Value Contingent
Payment") for ▇▇▇▇▇▇▇;
(b) the outstanding shares of capital stock of Verasource,
consisting of 250 shares of common stock, par value $1.00 per share, shall be
converted into the right to receive (i) that number of shares of Centerprise
Common Stock set forth in line B2 of Schedule 2.1; provided, however, that if
the actual public offering price of the Centerprise Common Stock is below $11.90
per share, the number of shares of Centerprise Common Stock received at Closing
3
shall be increased such that the value of the shares, using the actual public
offering price, equals the amount shown in line E2 of Schedule 2.1; (ii) a
promissory note (the "Verasource Note") in the form of Exhibit 2.1(i)(b) and
(iii) the right to the Net Value Contingent Payment for Verasource;
(c) the outstanding equity of RA, consisting of 500 units of
ownership interest in RA (the outstanding shares of capital stock of ▇▇▇▇▇▇▇ and
Verasource and the outstanding equity of RA, collectively, the "Company
Equity"), shall be converted into the right to receive (i) that number of shares
of Centerprise Common Stock determined in accordance with the formula set forth
in line B3 of Schedule 2.1; provided, however, that if the actual public
offering price of the Centerprise Common Stock is below $11.90 per share, the
number of shares of Centerprise Common Stock received at Closing shall be
increased such that the value of the shares, using the actual public offering
price, equals the amount shown in line E3 of Schedule 2.1; (ii) a promissory
note (the "RA Note", along with the Verasource Note and the ▇▇▇▇▇▇▇ Note, the
"Notes") in the form of Exhibit 2.1(i)(c) and (iii) the right to the Net Value
Contingent Payment for RA;2.1.2
(d) in addition to the Stockholder's Note and Stock Purchase
Consideration (as hereinafter defined) and in consideration of the Merger, ▇▇▇
▇▇▇▇▇▇▇ will receive the right to the Earn-out Contingent Payments set forth in
Section 2.4.3.
The sum of (i) the value at Closing of the shares of Centerprise Common Stock
issued pursuant to Schedule 2.1(d) and (ii) the face amount of the Notes to be
issued to each Stockholder in respect of each Company is herein referred to as
the Stockholder's Note and Stock Purchase Consideration.
2.1.3 Cancellation of Company Stock. Each share of capital
stock of ▇▇▇▇▇▇▇ and Verasource held in treasury shall be canceled and retired
and no payment shall be made in respect thereof.
2.1.4 Dissenting Shares. Each outstanding share of capital
stock of ▇▇▇▇▇▇▇ and Verasource, the holder of which has perfected his right to
dissent under applicable law and has not effectively withdrawn or lost such
right as of the Effective Time (the "Dissenting Shares") shall not be converted
into the right to receive the consideration set forth in Section 2.1.1, and the
holder thereof shall be entitled only to such rights as are granted by
applicable law. ▇▇▇▇▇▇▇ and Verasource shall give Centerprise prompt notice upon
receipt by ▇▇▇▇▇▇▇ and Verasource of any such written demands for payment of
fair value of shares of capital stock of ▇▇▇▇▇▇▇ and Verasource and any other
instruments provided pursuant to applicable law. Any payments made in respect of
Dissenting Shares shall be made by the applicable Surviving Corporation.
2.1.5 Conversion of Mergersub Stock. At the Effective Time,
each share of Mergersub Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Mergers and without any action on the
part of the holder thereof, be converted into and
4
become one validly issued, fully paid and non-assessable share of the applicable
Surviving Corporation. Such newly issued shares shall thereafter constitute all
of the issued and outstanding capital stock of the applicable Surviving
Corporation.
2.2 Exchange of Certificates for Consideration. At the Closing,
Centerprise shall receive the original certificates representing the Company
Equity or other evidence of ownership in a form and substance acceptable to
Centerprise, duly endorsed in blank by the Stockholders or accompanied by blank
stock powers, in exchange for (i) Centerprise Common Stock certificates
representing the number of shares of Centerprise Common Stock determined in
accordance with Section 2.1, and (ii) delivery by Centerprise of the Notes. The
certificates representing Centerprise Common Stock to be delivered pursuant to
this Article II shall bear a restrictive legend. At the Closing, all shares or
membership interests of Company Equity shall be transferred and delivered to
Centerprise, and each of the Stockholders holding a certificate or other
evidence of ownership representing any such shares or membership interests of
Company Equity shall cease to have any rights with respect thereto, except the
right to receive the Stockholder's Note and Stock Purchase Consideration, the
Net Value Contingent Payment and the Earn-out Contingent Payments.
2.3 Purchase Price Adjustment. At Closing, the amount of capital
expenditures, not to exceed $600,000, made by the Companies for computer
hardware and software database and programming upgrades as well as tenant
improvement costs, new furniture and equipment costs, and relocation costs
associated with the expansion into the office space currently held by
ProBusiness Services, Inc. will be treated as working capital of the Companies
and to the extent that the working capital of the Companies at Closing is in
excess of $400,000, a cash payment equal to such excess amount shall be paid to
the Stockholders at Closing. The principal amount of the Notes may be adjusted
at the Closing in accordance with Schedule 7.1.3(a) and after the Closing in
accordance with the formula set forth in Schedule 2.3.
2.4 Earnout Payments.
2.4.1 Net Value Contingent Payment. In addition to the
Centerprise Common Stock and the Notes, the Stockholders shall be entitled to
receive from Centerprise the Net Value Contingent Payment, if any, for the
Calculation Period (as defined below) based on the formula set forth below which
payment shall be allocated among the Stockholders in accordance with their
ownership interest in each Company.
(a) Calculation of Net Value Contingent Payment. The Net Value
Contingent Payment, if any, shall be equal to the sum of (i) 25% x Target I Net
Value, (ii) 15% x Target II Net Value, and (iii) 10% x Target III Net Value.
(b) Definitions. For purpose of Section 2.4.1, the following
terms shall have the following meanings:
5
(i) "Baseline EBITDA" shall be equal to $4,705,000.
(ii) "Calculation Period" means the twelve month
period ending on the fourth anniversary of the last day of the month in which
the Closing falls.
(iii) "Driver" means The ▇▇▇▇▇▇ ▇. Driver Co., Inc.
(iv) "Driver EBITDA Percentage" means the ratio of
the Driver EBITDA compared to the Driver revenue for the Calculation Period
(which amounts shall include any portion of the Companies' EBITDA or Companies'
revenue to the extent any of the Companies are not part of Driver's operations
in the Calculation Period).
(v) "EBITDA" means earnings before interest, taxes,
depreciation and amortization, calculated in accordance with GAAP on a
consistent basis.
(vi) "EB Acquisition" means each entity or portion of
such entity acquired as part of Centerprise's employee benefits business after
December 9, 1998 (other than Driver, the Companies or Self-Funded Benefits,
Inc., d/b/a Insurance Design Administrators); provided that no such acquired
entity will be deemed to be an "EB Acquisition" if ▇▇▇ ▇▇▇▇▇▇▇ shall have
objected in writing to its inclusion in such calculation on or prior to the
acquisition closing for such EB Acquisition.
(vii) "EB Operations" means Centerprise's employee
benefits business, which shall consist of the current operations of the
Companies and of Driver (excluding Self-Funded Benefits, Inc., dba Insurance
Design Administrators) plus any EB Acquisition.
(viii) "EB Operations Revenue" means the revenue of
the EB Operations during the Calculation Period.
(ix) "EB Operations EBITDA" means EB Operations
Revenue multiplied by the Driver EBITDA Percentage.
(x) "EB Acquisitions Pro Forma EBITDA" means (a) the
pro forma annual EBITDA upon which the valuation was made for each EB
Acquisition (inclusive of a 7% compounded annual growth rate from the date of
each EB Acquisition closing through the end of the Calculation Period; provided
that if there is a Termination, only EB Acquisition closings occurring prior to
the Termination shall be included) less (b) the pro forma annual EBITDA upon
which the valuation was made for any portion of the EB Operations that was sold
by Centerprise or its affiliates prior to the end of the Calculation Period;
provided that if there is a Termination, only sales prior to the Termination
shall be included. In the case of any EB Acquisition occurring during the
Calculation Period, the pro forma annual EBITDA of that EB Acquisition for
purposes of clause (a) above shall be multiplied by a fraction, the numerator of
which is the number of days from the
6
EB Acquisition closing through the end of the Calculation Period and the
denominator of which is 365.
(xi) "Net EBITDA" means the result obtained by the
following formula:
EB Operations EBITDA - Baseline EBITDA - EB Acquisitions Pro Forma EBITDA
(xii) "Net Value" means the result obtained by
multiplying 7.0 times Net EBITDA. In the event of a sale of the entire EB
Operations, the Net Value Contingent Payment shall be payable as of the last day
of the third month following such sale.
(xiii) "Target I Net Value" shall mean all Net Value,
if any, between $2,400,000 and including $5,000,000.
(xiv) "Target II Net Value" shall mean all Net Value,
if any, between $5,001,000 and including $10,000,000.
(xv) "Target III Net Value" shall mean all Net Value,
if any, greater than $10,000,000.
(xvi) "Termination" shall mean the termination of ▇▇▇
▇▇▇▇▇▇▇ without Cause or upon Constructive Termination pursuant to the
Employment Agreement between ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ dated as of the Closing
Date.
2.4.2 Example
Net Value Contingent Payment
EB Operations EBITDA $6,105,000
Less: Baseline EBITDA ($4,705,000)
Less: EB Acquisitions Pro Forma EBITDA:
EB Acquisitions Pro Forma EBITDA $250,000
Compounded Growth Rate @ 7% for 3 years 1.225
-----------
Compounded EB Acquisition Pro Forma EBITDA $306,250
Pro Forma EBITDA of EB Acquisition sold ($ 41,429)
-----------
$264,821 ($ 264,821)
=========== ----------
Net EBITDA $1,135,179
Fixed EBITDA Multiple 7.0
Net Value $7,946,253
==========
Amount between $2,400,000 and $5,000,000 (25% x $2,600,000) $ 650,000
7
Amount between $5,000,001 and $10,000,000 (15% x $2,946,253) $ 441,938
Amount in excess of $10,000,000 $ 0
-----------
Amount of Net Value Contingent Payment $1,091,938
2.4.3 Calculation of Earn-Out Contingent Payments. ▇▇▇ ▇▇▇▇▇▇▇
shall be entitled to receive from Centerprise, contingent payments, if any, for
each of the twelve month periods ending on the first anniversary of the Closing
through the fifth anniversary of the Closing (each, an "Earn-Out Contingent
Payment").
(a) The Earn-Out Contingent Payment for the twelve months
ending on the first anniversary of the Closing shall be equal to the result
obtained by the following formula:
50% x (Companies' EBITDA 2000 - Companies' Pro Forma EBITDA XXXX - Required
Return) - ▇▇▇▇▇ ▇▇▇▇▇'▇ 2000 Bonus
(b) The Earn-Out Contingent Payment for the twelve months
ending on the second anniversary of the Closing shall be equal to the result
obtained by the following formula:
50% x (Companies' EBITDA 2001 - Companies' Pro Forma EBITDA XXXX - Required
Return) -▇▇▇▇▇ ▇▇▇▇▇'▇ 2001 Bonus
(c) The Earn-Out Contingent Payment for the twelve months
ending on the third anniversary of the Closing shall be equal to the result
obtained by the following formula:
50% x (Companies' EBITDA 2002 - Companies' Pro Forma EBITDA XXXX - Required
Return) -▇▇▇▇▇ ▇▇▇▇▇'▇ 2002 Bonus
(d) The Earn-Out Contingent Payment for the twelve months
ending on the fourth anniversary of the Closing shall be equal to the result
obtained by the following formula:
50% x (Companies' EBITDA 2003 - Companies' Pro Forma EBITDA XXXX - Required
Return) -▇▇▇▇▇ ▇▇▇▇▇'▇ 2003 Bonus
(e) The Earn-Out Contingent Payment for the twelve months
ending on the fifth anniversary of the Closing shall be equal to the result
obtained by the following formula:
50% x (Companies' EBITDA 2004 - Companies' Pro Forma EBITDA XXXX - Required
Return) -▇▇▇▇▇ ▇▇▇▇▇'▇ 2004 Bonus
(f) If there is a Termination at any time prior to the end of
the fifth anniversary of the Closing, ▇▇▇▇▇▇▇ shall continue to receive on each
date when any unpaid future Earn-Out Contingent Payment is due the amount of the
Earn-Out Contingent Payment then due in the manner calculated herein, except
that ▇▇▇▇▇▇▇ may elect, by written notice delivered to
8
Centerprise within 30 days of such Termination, to instead receive on each date
when any unpaid future Earn-Out Contingent Payment is due, an amount equal to
the most recent Earn-Out Contingent Payment received by ▇▇▇▇▇▇▇.
2.4.4 Definitions. For purpose of Section 2.4.3, the following
terms shall have the following meanings:
(a) "Acquisition Overhead XXXX" means the expense allocated to
Overhead by each PNW Acquisition for the twelve months ending on the anniversary
date of the Closing in the applicable period, where "XXXX" is the applicable
year.
(b) "Companies' EBITDA XXXX" means the Companies' EBITDA,
including any PNW Acquisition EBITDA, for the twelve months ending on the
anniversary date of the Closing, in the applicable period, where "XXXX" is the
applicable year, as calculated in accordance with GAAP and consistent with past
practices. For purposes of calculating the Companies' EBITDA, the maximum
corporate overhead to be charged will be the lesser of (x) the Maximum Overhead
or (y) the Overhead for the Companies and the PNW Acquisitions for the relevant
period.
(c) "Companies' Overhead XXXX" means the expenses of the
Companies allocated to overhead for the twelve months ending on the anniversary
date of the Closing in the applicable year, where "XXXX" is the applicable year.
(d) "Companies' Pro Forma EBITDA XXXX" means the Companies'
EBITDA for the twelve months ending on the date of the Closing, as calculated in
accordance with GAAP and consistent with past practices, inclusive of the Growth
Rate Hurdle Percentage compounded annually from the date of the Closing through
the anniversary date of the Closing in the applicable year, where "XXXX" is the
applicable year.
(e) "Companies' Revenue XXXX" means the revenue of the
Companies for the twelve months ending on the anniversary date of the Closing in
the applicable year, where "XXXX" is the applicable year.
(f) "Driver EBITDA XXXX" means the Driver EBITDA for the
twelve months ending on the anniversary date of the Closing in the applicable
year, where "XXXX" is the applicable year.
(g) "Driver Revenue XXXX" means the Driver revenue for the
year ending on the anniversary date of the Closing in the applicable year, where
"XXXX" is the applicable year.
9
(h) "Earn-Out Base" shall mean the difference between
"Companies' EBITDA XXXX" and "Companies' Pro Forma EBITDA XXXX." Such amount
shall be reduced by the "Required Return", if any.
(i) "EBITDA" means earnings before interest, taxes,
depreciation and amortization, calculated in accordance with GAAP on a
consistent basis.
(j) "Growth Rate Hurdle Percentage" shall be determined based
upon the specified Trading Price per share of Centerprise Common Stock at the
conclusion of the sixtieth calendar day following the Closing. If (x) the public
offering price of Centerprise Common Stock at Closing or (y) the Specified
Trading Price of Centerprise Common Stock at the conclusion of the sixtieth day
of post-IPO trading is $14.00 or greater, the Growth Rate Hurdle Percentage
shall be 7%. If the Specified Trading Price of Centerprise Common Stock at the
conclusion of the sixtieth day of post-IPO trading is less than $14.00, the
Growth Rate Hurdle Percentage shall be determined as follows:
Specified Trading Growth Rate Hurdle
Price: Percentage:
----------------- ------------------
$13.75 6.65%
$13.50 6.29%
$13.25 5.93%
$13.00 5.57%
$12.75 5.21%
$12.50 4.84%
$12.25 4.46%
$12.00 4.06%
$11.75 or less 3.75%
In no event shall the Growth Rate Hurdle Percentage be less than 3.75%.
(k) "Maximum Overhead" shall be calculated based upon the
following formula: (Companies' Revenue XXXX + PNW Acquisition Revenue XXXX) x
(Companies' Overhead XXXX + Acquisition Overhead XXXX) / (Companies' Revenue
1999 + PNW Acquisition Pro Forma Revenue XXXX).
10
(l) "Overhead" means the dollar amount of overhead mutually
agreed to by Centerprise and the Stockholder Representative which shall consist
of information technology, human resources, accounting and finance, corporate
management, facilities, risk management and marketing. "Overhead" shall include
expenses incurred directly by the relevant companies and indirect expenses
reasonably allocated to the relevant companies.
(m) "PNW Acquisition" means each entity in the business of
insurance brokerage and related services within Driver's business, including
property and casualty, worker's compensation, employee benefits, surety,
personal lines and financial services (including 401(k) plans, life insurance
and annuity production) located in Washington, Montana, Idaho, Alaska and
northern Oregon (including Eugene and north of ▇▇▇▇▇▇) that was acquired as part
of Centerprise's business during the applicable period.
(n) "PNW Acquisition EBITDA XXXX" means the EBITDA earned by
each PNW Acquisition for the twelve months ending on the anniversary date of the
Closing in the applicable year, where "XXXX" is the applicable year.
(o) "PNW Acquisition Pro Forma Revenue XXXX" means the pro
forma revenue for valuation purposes allocable to each PNW Acquisition for the
twelve months ending on the anniversary date of the Closing in the applicable
year, where "XXXX" is the applicable year.
(p) "PNW Acquisition Revenue XXXX" means the revenue earned by
each PNW Acquisition for the twelve months ending on the anniversary date of the
Closing in the applicable year, where "XXXX" is the applicable year.
(q) "Purchase Price" means the sum of the purchase prices,
including contingent consideration, for each PNW Acquisition, if any, acquired
by Centerprise in or prior to the relevant twelve month period and not sold
prior to the end of such period.
(r) "Required Rate of Return" means 15% per annum. Pro rata
reductions in the percentage will be made for acquisitions made in the relevant
period.
(s) "Required Return" means the product of the "Required Rate
of Return" times the "Purchase Price". In no case shall the "Required Return"
exceed "PNW Acquisition Revenue".
(t) "▇▇▇▇▇ ▇▇▇▇▇'▇ XXXX Bonus" means any "Bonus" payable to
▇▇▇▇▇ ▇▇▇▇▇ by Verasource pursuant to Section 2.2 of his employment agreement
with Verasource dated the Closing Date with respect to the twelve month period
ending in the applicable year, where "XXXX" is the applicable year.
11
(u) "Specified Trading Price" means the average closing price
per share of Centerprise Common Stock for the five (5) consecutive trading days
prior to and including the sixtieth calendar day following the Closing, rounded
up or down to the nearest twenty-five (25) cent increment.
In the event of a sale of entire Companies' operations
prior to the fifth anniversary of the Closing, the required payment, if any,
shall be due in sixty days from the date of such sale. Such payment shall
represent the final payment due pursuant to Section 2.4.4.
2.4.5 Example. Earn Out Contingent Payment 2000 (assuming a
PNW Acquisition of $1,000,000 in the eighth month of the twelve month period
ending in 2000):
Companies' EBITDA 2000 $2,100,000
Less: Companies' Pro Forma EBITDA 2000 (assuming a Growth ($1,894,000)
Rate Hurdle Percentage of 7%)
Required Return (.15 x $1,000,000 x 4/12) ($ 50,000)
-----------
Earn-Out Base $ 156,000
Fixed Earn-Out Percentage 50%
-----------
Amount of Earn-Out Contingent Payment 2000 $ 78,000
Before ▇▇▇▇▇ ▇▇▇▇▇'▇ 2000 Bonus
▇▇▇▇▇ ▇▇▇▇▇'▇ 2000 Bonus $ 18,000
Amount of Earn-Out Contingent Payment 2000 $ 60,000
2.4.6 Procedure. The procedure for determining each Contingent
Payment is set forth in Schedule 2.4.
2.5 Collection of Accounts Receivable. The Stockholders shall be
entitled to receive any amounts collected by the Companies with respect to any
accounts receivable due to the Companies from any insurance companies, which
amounts are more than 45 days past due as of December 9, 1998 (the "Excluded
Receivables"), net of any commissions or taxes owed on the Excluded Receivables
or money spent on the collection of the Excluded Receivables (the "Net
Amounts"). To the extent such Excluded Receivables are collected on or prior to
the Closing, the Net Amounts shall be first used as a setoff against any
reduction that would otherwise be made in the principal amount of the Notes
pursuant to Section 2.3, and any remaining amount shall be used to increase the
principal amount of the Notes. If any Excluded Receivables are collected after
the Closing, the Net Amounts shall be paid by Centerprise to the Stockholders on
a quarterly basis. Centerprise covenants that after the Closing it will use
reasonable commercial efforts to collect any Excluded Receivables.
12
2.6 Litigation. The Stockholders of ▇▇▇▇▇▇▇ shall be entitled to the
proceeds, if any, received as a result of the resolution of the matter entitled
The ▇▇▇▇▇▇▇ Company, Inc. v. ▇▇▇▇ ▇. ▇▇▇▇▇, et al. (reflected on Schedule 4.10
attached hereto), net of all attorneys' fees and other costs incurred after the
Closing. Nothing in this Section 2.6 shall require ▇▇▇▇▇▇▇ to prosecute this
matter; any and all decisions regarding the matter and the resolution thereof
shall be in the discretion of Driver in consultation with management of ▇▇▇▇▇▇▇.
2.7 ChannelPoint Option. Following the Closing, ▇▇▇▇▇▇▇ and Driver
respectively shall transfer to ▇▇▇ ▇▇▇▇▇▇▇ (without cost to ▇▇▇ ▇▇▇▇▇▇▇) the
first 6,000 options to purchase shares of common stock of ChannelPoint, Inc., a
Delaware corporation ("ChannelPoint") earned by either (i) ▇▇▇▇▇▇▇ pursuant to
the Options for Performance Agreement executed in connection with the Broker
Partnership Agreement, dated [June 30, 1999], by and between ▇▇▇▇▇▇▇ and
ChannelPoint, or (ii) Driver pursuant to the Options for Performance Agreement
executed in connection with the Broker Partnership Agreement, dated June 30,
1999, by and between Driver and ChannelPoint. If no options or less than 6,000
options are earned by ▇▇▇▇▇▇▇ or Driver, no additional consideration other than
any options so earned will be owing to ▇▇▇ ▇▇▇▇▇▇▇ under this Section 2.7.
ARTICLE III
THE CLOSING AND CONSUMMATION DATE
The consummation of the Merger and the other transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇ & Zavis, Chicago, Illinois, contemporaneously with the closing of the
IPO, or at such other time and date as the parties hereto may mutually agree
(the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH OF THE COMPANIES
Each Company hereby represents and warrants to Centerprise, as of March
31, 1999, severally but not jointly, as to itself, as of the date hereof and,
subject to Section 7.3, as of the date on which Centerprise and the lead
Underwriter (as defined in Section 8.1.1) execute and deliver the Underwriting
Agreement related to the IPO and as of the Closing Date, as follows:
4.1 Organization and Qualification. Each of ▇▇▇▇▇▇▇ and Verasource is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington. RA is a limited liability company organized under
the laws of the State of Washington. The Company has the requisite power and
authority under state and federal law to
13
own, lease and operate its assets and properties and to carry on its business
(or Business) as it is now being conducted and is licensed or otherwise
authorized to transact or engage in the Business and is qualified to do business
and is in good standing in each jurisdiction in which the properties owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification, license or authorization necessary. True, accurate and
complete copies of the Company's Organizational Documents, in each case as in
effect on March 31, 1999, have heretofore been delivered to Centerprise or its
representatives. "Organizational Documents" means (a) the articles or
certificate of incorporation and the bylaws of a corporation (professional or
otherwise), (b) the partnership agreement and any statement of partnership of a
general partnership, (c) the limited partnership agreement and the certificate
of limited partnership of any limited partnership, (d) the operating or limited
liability company agreement and certificate of formation of any limited
liability company, (e) any charter or similar document adopted and filed in
connection with the creation, formation, organization or governance (as
applicable) of any Person and (f) any amendment to any of the foregoing.
4.2 Company Subsidiaries. The Company does not own, directly or
indirectly, securities or other interests having the power to elect a majority
of any such Person's board of directors or similar governing body, or otherwise
having the power to direct the business and policies of such Person. Except as
set forth in Schedule 4.2, the Company does not, directly or indirectly, own, of
record or beneficially, or control any capital stock, securities convertible
into capital stock or any other equity interest in any Person.
4.3 Authority; Non-Contravention; Approvals.
4.3.1 The Company has full right, power and authority to enter
into this Agreement and, subject to the approval of the Merger and the
transactions contemplated hereby by the Stockholders, to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company has been duly authorized by all necessary
corporate action on the part of the Company, subject to the approval of the
Merger and the transactions contemplated hereby by the Stockholders. This
Agreement has been duly executed and delivered by the Company, and, assuming the
due authorization, execution and delivery hereof by Centerprise, constitutes a
valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights generally
and (ii) general equitable principles.
4.3.2 The execution and delivery of this Agreement by the
Company does not violate, conflict with or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any claim, lien, privilege,
mortgage, charge, hypothecation, assessment, security interest, pledge or other
encumbrance, conditional sales contract, equity charge, restriction, or adverse
claim of interest of any kind or nature whatsoever
14
(each a "Lien" and collectively, the "Liens") upon the Business or any of the
properties or assets of the Company under, any of the terms, conditions or
provisions of (i) the Organizational Documents of the Company , (ii) any
statute, law, ordinance, rule, regulation, state or federal regulatory agency
bulletin, state attorney general opinion, judgment, decree, order, injunction,
writ, permit or license of any court or federal, state, provincial, local or
foreign government, or any subdivision, agency or authority of any thereof,
including any state's department of insurance ("Governmental Authority")
applicable to the Company, the Business, or properties or assets of each of the
Companies, or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which the Company is a party or by which the Company
or any of the properties or assets of the Company may be bound or affected. The
consummation by the Company of the transactions contemplated hereby will not
result in a violation, conflict, breach, right of termination, or creation or
acceleration of Liens under the terms, conditions or provisions of the items
described in clauses (i) through (iii) of the immediately preceding sentence,
subject, in the case of the terms, conditions or provisions of the items
described in clauses (ii) or (iii) above, to obtaining (prior to the Closing
Date) such consents required from third parties set forth on Schedule 4.3.2.
4.3.3 Except for (i) the declaration of effectiveness of a
registration statement on Form S-1 (the "Form S-1") and a post-effective
amendment to the registration statement on Form S-4 (the "Form S-4") (Form S-1
and Form S-4 are collectively the "Registration Statements") with the Securities
and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"or the "1933 Act"), and filings, if required, with
various state securities or "blue sky" authorities, (ii) any filing which may be
required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976, as
amended (the "HSR Act"), and (iii) the Washington Office of the Insurance
Commissioner, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any Governmental Authority is necessary
for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not,
individually or in the aggregate, have a "Company Material Adverse Effect,"
which, for purposes of this Agreement means a material adverse effect on the
operations, assets, condition (financial or other), operating results, employee
or client relations, or prospects of the Company.
4.4 Capitalization.
4.4.1 The authorized capital stock of ▇▇▇▇▇▇▇ consists of
50,000 shares of common stock, of which 500 shares are issued and outstanding.
The authorized ownership interest of RA consists of 500 units of ownership
interest, of which 500 units are issued and outstanding. The authorized capital
stock of Verasource consists of 50,000 shares of common
15
stock of which 250 shares are issued and outstanding. All of the issued and
outstanding shares of the Company are validly issued and are fully paid,
nonassessable and free of preemptive rights.
4.4.2 Except as set forth on Schedule 4.4, there are no
outstanding subscriptions, options, calls, contracts, commitments, undertakings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock or membership interests of the Company or
obligating the Company to grant, extend or enter into any such agreement or
commitment or obligating the Company to convey or transfer any Company Equity.
As of the Closing Date, there will be no voting trusts, proxies or other
agreements or understandings to which the Company is a party or is bound with
respect to the voting of any shares of capital stock or other equity interests
of the Company.
4.5 Year 2000. Except as set forth on Schedule 4.5, to the Knowledge of
the Company, all of the computer software, computer firmware, computer hardware
(whether general or special purpose), and other similar or related items of
automated, computerized, and/or software system(s) that are used or relied on by
the Company in the conduct of the Business will not malfunction, will not cease
to function, will not generate incorrect data, and will not produce incorrect
results when processing, providing, and/or receiving (i) date-related data into
and between the twentieth (20th) and twenty-first (21st) centuries and (ii)
date-related data in connection with any valid date in the twentieth (20th) and
twenty-first (21st) centuries, except for any malfunctions or generations of
incorrect data or results that would not individually or in the aggregate have a
Company Material Adverse Effect. Nothing in this Section 4.5 is intended or
shall be construed as a representation or warranty with respect to embedded
systems.
4.6 Financial Statements. The Company has previously furnished to
Centerprise copies of the unaudited balance sheet of the Company as of December
31, 1997 and the audited combined balance sheet of the Companies as of December
31, 1998 (the "Latest Balance Sheet"), and the related unaudited statements of
income, shareholders' equity and cash flow of the Company for each of the years
in the three (3) year period ended December 31, 1997 and the related audited
combined statements of income, shareholders' equity and cash flow of the
Companies for the one year period ended December 31, 1998, including all notes
thereto (collectively, the "Financial Statements"). Except as set forth in
Schedule 4.6, the Financial Statements relating to the Company are accurate and
complete in all material respects, consistent with the books and records of the
Company, and fairly presents in all material respects the financial condition,
assets and liabilities of the Company as of its date and the results of
operations and cash flows for the periods related thereto, in each case in
accordance with generally accepted accounting principles applied on a consistent
basis ("GAAP").
4.7 Absence of Undisclosed Liabilities. Except as disclosed on Schedule
4.7, the Company has not, as of the date of the Latest Balance Sheet, nor has it
incurred since that
16
date, any liabilities or obligations of any nature (whether known or unknown,
absolute, contingent, accrued, direct, indirect, perfected, inchoate,
unliquidated or otherwise), except (i) to the extent clearly and accurately
reflected or accrued or fully reserved against in the Financial Statements or
(ii) liabilities and obligations which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business and consistent with past custom
and practices (none of which is a liability resulting from a breach of contract,
breach of warranty, tort, infringement claim, legal violation or lawsuit). Such
liabilities include, but are not limited to, any claim or potential claim
against the Company by any employee benefit plan, client or government agency
(including, but not limited to, the IRS or Department of Labor) related to the
Company's alleged failure to properly administer or advise any employee benefit
plan or related to the sale or brokerage of any products or services relating to
any employee benefit plans of current or former clients of the Company.
4.8 Accounts Receivable. Except as set forth on Schedule 4.8, all of
the accounts receivable reflected in the Latest Balance Sheet or arising from
the date thereof until the Closing Date have arisen or will arise in the
ordinary course of the Company's Business, are not and will not be subject to
any defense, counterclaim or setoff, subject to insureds' rights to cancel
insurance coverage and have been collected or are and will be collectible in the
ordinary course of business using normal collection practices and policies
employed by the Company as of the date of this Agreement, in each case subject
to any allowance for doubtful accounts determined in accordance with the
Company's past custom and practices.
4.9 Absence of Certain Changes or Events. Except as set forth on
Schedule 4.9, since the date of the Latest Balance Sheet, the Company has
conducted its business only in the ordinary course consistent with past custom
and practices. Except as set forth on Schedule 4.9, since the date of the Latest
Balance Sheet, there has not been any:
(a) material adverse change in the operations, condition
(financial or otherwise), operating results, assets, liabilities,
employee, client or policyholder relations or prospects of the Company;
(b) damage, destruction or loss of any property owned by the
Company , or used in the operation of the Business, whether or not
covered by insurance, having a replacement cost or fair market value in
excess of five percent (5%) of the amount of net property, plant and
equipment shown on the Latest Balance Sheet, in the aggregate;
(c) voluntary or involuntary sale, transfer, surrender,
cancellation, abandonment, waiver, release or other disposition of any
kind by the Company of any right, power, claim or debt, except the
collection of accounts in the ordinary course of business consistent
with past custom and practices;
17
(d) strike, picketing, boycott, work stoppage, union
organizational activity, allegation, charge or complaint of employment
discrimination or other labor dispute or similar occurrence that is
reasonably expected to adversely affect the Company or the Business;
(e) loan or advance by the Company to any Person, other than
as a result of services performed for, or expenses properly and
reasonably advanced for the benefit of, customers in the ordinary
course of business consistent with past custom and practices;
(f) notice (formal or otherwise) of any liability, potential
liability or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or
other distribution in respect of the Company's capital stock or other
equity interests or any direct or indirect redemption, purchase, or
other acquisition of the Company's capital stock or other equity
interests, or the payment of principal or interest on any note, bond,
debt instrument or debt to any Affiliate (as defined in Section 15.4)
of the Company, except bonuses and distributions to employees and the
Stockholders disclosed to Centerprise in writing that are consistent
with the Company's past custom and practices or as otherwise
contemplated by this Agreement;
(h) incurrence by the Company of debts, liabilities or
obligations except (i) current liabilities incurred in connection with
or for services rendered or goods supplied in the ordinary course of
business consistent with past custom and practices, (ii) liabilities on
account of taxes and governmental charges (but not penalties, interest
or fines in respect thereof), and (iii) obligations or liabilities
incurred by virtue of the execution of this Agreement;
(i) issuance by the Company of any notes, bonds, or other debt
securities or any equity securities or securities convertible into or
exchangeable for any equity securities;
(j) entry by the Company into, or amendment or termination of,
any material commitment, contract, agreement, or transaction, other
than in the ordinary course of business and other than expiration of
contracts in accordance with their terms, except the Company may amend
any such material commitment, contract, agreement or transaction
necessary to prevent the relevant commitment, contract, agreement or
transaction from terminating due to the transactions contemplated
herein, provided that all material terms of such commitment, contract,
agreement or transaction shall remain the same;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the
Company that accounted for revenues during
18
the last twelve months in excess of five percent (5%) of the
consolidated net revenues of the Company, or change in the relationship
of the Company with any client or Governmental Authority that is
reasonably expected to adversely affect the Company or the Business;
(l) change in accounting principles, methods or practices
(including, without limitation, any change in depreciation or
amortization policies or rates) utilized by the Company;
(m) discharge or satisfaction by the Company of any material
liability or encumbrance or payment by the Company of any material
obligation or liability, other than current liabilities paid in the
ordinary course of its business consistent with past custom and
practices;
(n) sale, lease or other disposition by the Company of any
tangible assets having an aggregate replacement cost or fair market
value in excess of five percent (5%) of the amount of net property,
plant and equipment shown on the Latest Balance Sheet other than in the
ordinary course of business, or the sale, assignment or transfer by the
Company of any trademarks, service marks, trade names, corporate names,
copyright registrations, trade secrets, lists of past and present
customers, lists of potential customers, insurance policy expiration
data or rights, research sales data, analyses, sales and marketing
materials, scheduling and service methods, sales and service manuals,
or other intangible assets or disclosure of any proprietary or
confidential information of the Company relating to or used in
connection with the Business to any Person other than an employee,
agent, attorney, accountant or other representative of the Company that
has agreed in writing to maintain the confidentiality of any such
proprietary confidential information;
(o) capital expenditures or commitments therefor by the
Company in excess of $50,000 individually or $100,000 in the aggregate;
(p) mortgage, pledge or other encumbrance of any asset of the
Company or creation of any easements, Liens or other interests against
or on any of the Real Property (as defined in Section 4.14.1);
(q) adoption, amendment or termination of any Employee Plan
(as defined in Section 4.17.5(a)) or increase in the benefits provided
under any Employee Plan, or promise or commitment to undertake any of
the foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through
(q) that has resulted or, based on information of which the Company has
Knowledge, is reasonably expected to result in a Company Material
Adverse Effect.
19
4.10 Litigation. Except as set forth on Schedule 4.10 (which shall
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
4.10.1 There is no suit, action, proceeding, investigation,
claim or order pending or, to the Knowledge of the Company, threatened against
the Company, or with respect to the Merger, or with respect to any Employee
Plan, any fiduciary of any such plan (or pending or, to the Knowledge of the
Company, threatened against any of the officers, directors, members, partners or
employees of the Company with respect to its business or proposed business
activities), or to which the Company is otherwise a party, or that is reasonably
expected to have a Company Material Adverse Effect, before any court, or before
any Governmental Authority (each an "Action" and collectively, the "Actions");
nor, to the Knowledge of the Company, is there any basis for any such Action.
4.10.2 The Company is not subject to any unsatisfied or
continuing judgment, order or decree of any court or Governmental Authority. The
Company is not, to its knowledge, exposed, from a legal standpoint, to any
liability or disadvantage that is reasonably expected to result in a Company
Material Adverse Effect, and the Company is not a party to any legal action to
recover monies due it or for damages sustained by it, other than collection of
past due charges for services rendered or expenses incurred by the Company.
4.10.3 Schedule 4.10 lists the insurer for each Action covered
by insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual and aggregate policy limits for the insurance
covering each insured Action and the applicable policy deductibles for each
insured Action.
4.10.4 Schedule 4.10 sets forth all material closed litigation
matters to which the Company was a party during the five (5) year period
preceding the Closing Date, the date such litigation was commenced and
concluded, and the nature of the resolution thereof (including amounts paid in
settlement or judgment).
4.11 Compliance with Applicable Laws. Except as set forth on Schedules
4.11 and 4.19, the Company and every person acting on behalf of the Company has
complied in all material respects with all laws, rules, regulations, regulatory
agency bulletins, attorney general opinions, writs, injunctions, decrees, and
orders (collectively, "Laws") applicable to the Company, and every person acting
on behalf of the Company in relation to the operation of the Business except
where failure to so comply would not result in a Company Material Adverse
Effect, and has not received any notice of any alleged claim or threatened
claim, violation of, citation for non-compliance with, or liability or potential
responsibility under, any such Law which has not heretofore been cured and for
which there is no remaining liability and, to the Knowledge of the Company, no
event has occurred or circumstances exist that (with or without notice or lapse
of time) is reasonably expected to constitute or result in a violation by the
Company or any Person acting on behalf of the Company of any Law or that gives
rise to any liability on the part of the
20
Company under any Law. The Company has not received notice of potential claims,
allegations, grievances or complaints against or pertaining to the Business,
including any consumer complaints from any state departments of insurance.
4.12 Licenses. Schedule 4.12 lists all Licenses maintained by the
Company and each Licensed Person that are material to the conduct of the
Business. "Licenses" means all notifications, licenses, permits, franchises,
certificates, approvals, exemptions, classifications, qualifications,
registrations and other similar documents and authorizations, and applications
therefor held by the Company and each Person acting on behalf of the Company
whose activities require Licenses ("Licensed Person") and issued or submitted to
the Company or any Licensed Persons by any Governmental Authority or other
Person. All such Licenses are valid, binding and in full force and effect.
Except as described on Schedule 4.12, the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby will
not adversely affect any such Licenses. To the Knowledge of the Company, the
Company has taken all necessary action to maintain such Licenses. Except as set
forth in Schedule 4.12, no loss or expiration of any such License is pending or,
to the Company's Knowledge, threatened or reasonably foreseeable. Except as set
forth in Schedule 4.12, no Person engages in or transacts the Business on behalf
of the Company or Licensed Person in any State without a License, nor does the
Company engage in or transact the Business in any State without a License.
4.13 Material Contracts. Except as listed or described on Schedule 4.13
(such contracts, or those which should have been listed on Schedule 4.13, are
herein referred to as the "Material Contracts"), as of or on the date hereof,
the Company is not a party to or bound by, any written or oral leases,
agreements or other contracts or legally binding contractual rights or
contractual obligations or contractual commitments (each a "Contract" and
collectively, the "Contracts") relating to or in any way affecting the operation
or ownership of the Business that are of a type described below and no such
agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which the Company is
to receive consulting services (other than consulting agreements that
may be terminated by the Company on not more than 30 days notice
without penalty), employment agreement, change-in-control agreement, or
collective bargaining arrangement with any labor union;
(b) any Contract for capital expenditures or the acquisition
or construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition,
or the sale or furnishing, of materials, supplies, merchandise,
machinery, equipment, parts or other property or services (except if
such Contract is made in the ordinary course of business and requires
aggregate future payments of less than $25,000);
21
(d) any Contract, other than trade payables in the ordinary
course of business, relating to the borrowing of money, or the guaranty
of another Person's borrowing of money, including, without limitation,
any notes, mortgages, indentures and other obligations, guarantees of
performance, agreements and instruments for or relating to any lending
or borrowing, including assumed indebtedness, other than any contract
with an insurance carrier under which the Company is responsible for
the payment of insurance premiums whether or not such premiums are
first collected by the Company;
(e) any Contract granting any Person a Lien on all or any part
of the assets of the Company;
(f) any Contract for the cleanup, abatement or other actions
in connection with Hazardous Materials (as defined in Section 4.19),
the remediation of any existing environmental liabilities or relating
to the performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first
refusal, first-offer or similar preferential right to purchase or
acquire any material assets of the Company;
(h) any Contract with any agent, distributor or representative
which is not terminable by the Company upon ninety (90) calendar days
or less notice without penalty;
(i) any Contract under which such Company is (A) a lessee or
sublessee of any machinery, equipment, vehicle or other tangible
personal property, or (B) a lessor of any tangible personal property
owned by such Company, in either case having an original purchase price
or requiring aggregate lease payments in excess of $50,000;
(j) any Contract under which the Company has granted or
received a license or sublicense or under which it is obligated to pay
or has the right to receive a royalty, license fee or similar payment,
in either case which provides for payments over the life of such
Contract in excess of $25,000, except such Contracts with insurance
companies whereby the Company is acting as an insurance producer and
has the right to receive any commission payments;
(k) any Contract concerning an Affiliate Transaction (as
defined in Section 4.21);
(l) any Contract providing for the indemnification or holding
harmless of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company of
any real property on which the Company conducts any aspect of the
Business, (B) granting any options to
22
lease or purchase all or any portion of the Real Property, or (C)
providing for labor, services or materials to the Real Property
(including, without limitation, brokerage or management services)
involving aggregate future payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the
Company from conducting business anywhere in the United States or
elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to
the Leased Property (as defined in Section 4.14.1);
(q) any Contract requiring prior notice, consent or other
approval upon a change of control in the equity ownership of the
Company, which, if amended, modified or terminated as a result of,
relating to or in connection with a failure to provide prior notice, or
gain such consent or approval, would result in a Company Material
Adverse Effect;
(r) any Contract under which the Company would be considered
an employee benefit plan "administrator" as such term is defined in
Section 3(16) of ERISA or a "fiduciary" as such term is defined in
Section 3(21) of ERISA; or
(s) any other Contract, whether or not made in the ordinary
course of business, which involves future payments by the Company in
excess of $25,000.
The Company has provided Centerprise or its counsel with a true and
complete copy of each written Material Contract and a true and complete summary
of each oral Material Contract, in each case including all amendments or other
modifications thereto. Except as set forth on Schedule 4.13, each Material
Contract is a valid and binding obligation of, and enforceable in accordance
with its terms against the Company and, to the Knowledge of the Company, the
other parties thereto, and is in full force and effect, subject only to
bankruptcy, reorganization, receivership and other laws affecting creditors'
rights generally and equitable principles. Except as set forth on Schedule 4.13,
the Company has performed in all material respects all obligations required to
be performed by it as of the date hereof and will have performed in all material
respects all obligations required to be performed by it as of the Closing Date
under each Material Contract and the Company has not, nor, to the Knowledge of
the Company, no other party to any Material Contract is in breach or default
thereunder, and, to the Knowledge of the Company, there exists no condition
which would, with or without the lapse of time or the giving of notice, or both,
constitute a breach or default thereunder. The Company has not been notified
that any party to any Material Contract intends to cancel, terminate, not renew,
or exercise an option under any Material Contract, whether in connection with
the transactions contemplated hereby or otherwise.
23
4.14 Properties.
4.14.1 Schedule 4.14.1-1 is a correct and complete list, and a
brief description of, all real estate in which the Company has an ownership
interest (the "Owned Property") and all real property leased by the Company (the
"Leased Property"). Except as lessee of Leased Property, the Company is not a
lessee under or otherwise a party to any lease, sublease, license, concession or
other agreement, whether written or oral, pursuant to which another Person has
granted to the Company the right to use or occupy all or any portion of any real
property.
The Company has good and marketable fee simple title to the Owned
Property and, assuming good title in the Landlord, a valid leasehold interest in
the Leased Property (the Owned Property and the Leased Property being sometimes
referred to herein as "Real Property"), in each case free and clear of all
Liens, assessments or restrictions (including, without limitation, inchoate
liens arising out of the provision of labor, services or materials to any such
real estate) other than (a) mortgages shown on the Financial Statements as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) Liens for current taxes not yet due, (c) (i) minor
imperfections of title, including utility and access easements depicted on
subdivision plats for platted lots that do not impair the intended use of the
property, if any, none of which materially impairs the current operations of the
Company or the Business, and (ii) zoning laws and other land use restrictions or
restrictive covenants that do not materially impair the present use of the
property subject thereto, and (d) Liens, assessments, and restrictions pursuant
to and by virtue of the terms of the lease of the Leased Property. The Real
Property constitutes all real properties reflected on the Financial Statements
or used or occupied by the Company in connection with the Business or otherwise.
With respect to the Owned Property, except as reflected on Schedule
4.14.1-2(a):
(a) the Company is in exclusive possession thereof and no
easements, licenses or rights are necessary to conduct the Business
thereon in addition to those which exist as of the date hereof;
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority
materially adverse to the Owned Property and, to the Knowledge of the
Company, there is no threatened condemnation or proceeding with respect
thereto;
(c) there is no violation of any covenant, condition,
restriction, easement or agreement of any Governmental Authority that
affects the Owned Property or the ownership, operation, use or
occupancy thereof;
24
(d) no portion of any parcel of the Owned Property is subject
to any roll-back tax, dual or exempt valuation tax and no portion of
any Owned Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on
such Owned Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
4.14.1-2(b):
(i) the Company is in exclusive, peaceful and
undisturbed possession thereof and, to the Knowledge of each of the
Companies, no easements, licenses or rights are necessary to conduct
the Business thereon in addition to those which exist as of the date
hereof; and
(ii) to the Knowledge of the Company, no portion
thereof is subject to any pending condemnation proceeding or proceeding
by any public or quasi-public authority materially adverse to the
Leased Property and there is no threatened condemnation or proceeding
with respect thereto.
4.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect
all material tangible personal property owned by each of the Companies, except
as sold or otherwise disposed of or acquired in the ordinary course of business.
Except as set forth on Schedule 4.14.2, the Company has good and marketable
title to, or a valid leasehold interest in, or valid license of, such personal
property (including, without limitation, machinery, equipment and computers), in
each case free and clear of any Liens (other than Liens that are part of such
leasehold or license), and each such asset is in working order and has been
maintained in a commercially reasonable manner and does not contain, to the
Knowledge of the Company, any material defect. Except as set forth on Schedule
4.14.2, no personal property (including, without limitation, software and
databases maintained on off-premises computers) used by the Company in
connection with the Business is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement or
is located other than on the Real Property.
4.15 Intellectual Property. The (i) patents, patent applications,
inventions and discoveries that may be patentable (collectively, the "Patents"),
(ii) registered and unregistered trademarks, trade names, company names, assumed
business names and service marks (collectively, the "Marks"), (iii) copyrights
(the "Copyrights"), and (iv) know how, trade secrets, confidential information,
software, technical information, data, process technology, plans and drawings,
lists of past and present customers, lists of potential customers, insurance
expiration data and rights, business plans, performance standards, catalogues,
research sales data, analyses, and programs, sales and marketing materials,
scheduling and service methods, sales and service manuals and all other
proprietary, confidential and other similar information (in whatever form
25
or medium) relating to or used in connection with the Business (collectively,
the "Trade Secrets"), and the business and goodwill of the Company as a going
concern owned, used or licensed by the Company (collectively, the "Intellectual
Property") are all those necessary to enable the Company to conduct and to
continue to conduct the Business substantially as it is currently conducted.
Schedule 4.15 contains a complete and accurate list of all material Patents,
Marks and Copyrights and a brief description of all material Trade Secrets
owned, used by or directly licensed to the Company, and a list of all material
license agreements and arrangements with respect to any of the Intellectual
Property to which the Company is a party, whether as licensee, licensor or
otherwise (collectively, the "Intellectual Property Licenses"). Except as set
forth on Schedule 4.15, (i) all of the Intellectual Property is owned, or to the
Knowledge of the Company used under a valid Intellectual Property License, by
the Company and is free and clear of all Liens and other adverse claims; (ii)
the Company has not received any written notice that it is or has infringed on,
misappropriated or otherwise conflicted with, and otherwise has no Knowledge
that it is infringing on, misappropriating, or otherwise conflicting with the
intellectual property rights of any third parties; (iii) there is no claim
pending or, to the Knowledge of the Company, threatened against the Company with
respect to the alleged infringement or misappropriation by the Company of, or a
conflict with, any intellectual property rights of others; (iv) the operation of
any aspect of the Business in the manner in which it has heretofore been
operated or is presently operated does not give rise to any such infringement or
misappropriation; and (v) there is no infringement or misappropriation of the
Intellectual Property by a third party or claim, pending or, to the Knowledge of
the Company, threatened against any third party with respect to the alleged
infringement or misappropriation of the Intellectual Property.
4.16 Taxes.
26
4.16.1 Except as set forth on Schedule 4.16.1-1, the Company
has timely and accurately prepared and filed or will timely and accurately
prepare and file all federal, state (including any state premium filings), local
and foreign returns, declarations and reports, information returns and
statements (collectively, the "Returns") for Taxes (as defined in Section
4.16.2) required to be filed by or with respect to the Company before the
Closing Date, and has paid or caused to be paid, or has made adequate provision
or set up an adequate accrual or reserve for the payment of, all Taxes required
to be paid in respect of the periods for which Returns are due on or prior to
the Closing Date, and will establish an adequate accrual or reserve for the
payment of all Taxes payable in respect of the period, including portions
thereof, subsequent to the last of said periods required to be so accrued or
reserved, in each case in accordance with GAAP up to and including the Closing
Date. All such Returns are or will be true and correct in all material respects.
The Company has delivered to Centerprise true and complete copies of all Returns
referred to in the first sentence of this Section 4.16.1 (including any
amendments thereof) for the five (5) most recent taxable years. The Company is
not delinquent in the payment of any Tax, and no material deficiencies for any
Tax, assessment or governmental charge have been threatened, claimed, proposed
or assessed. No waiver or extension of time to assess any Taxes has been given
or requested. No written claim, or any other claim, by any taxing authority in
any jurisdiction where the Company does not file Tax returns is pending pursuant
to which the Company is or may be subject to taxation by that jurisdiction. The
Company's Returns were last audited by the Internal Revenue Service or
comparable state, local or foreign agencies on the dates set forth on Schedule
4.16.1-2.
4.16.2 For purposes of this Agreement, the term "Taxes" shall
mean all taxes, charges, withholdings, fees, levies, penalties, additions,
interest or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, employment, withholding, social security,
occupation, use, service, service use, license, payroll, franchise, transfer and
recording taxes, fees and charges, windfall profits, severance, customs, import,
export, employment or similar taxes, charges, fees, levies or other assessments,
imposed by the United States, or any state (including any state premium tax
filings), local, foreign or provincial government or subdivision or any agency
thereof, whether computed on a separate, consolidated, unitary, combined or any
other basis.
4.17 Employee Benefit Plans; ERISA.
4.17.1 Other than any liability for payment of benefits in the
ordinary course of plan operation under any plan or policy listed on Schedule
4.17.1 or as otherwise described on Schedule 4.17.1, the Company has not and is
not reasonably expected to have any liability (including contingent liability)
whether direct or indirect (and regardless of whether it would be derived from a
current or former Plan Affiliate as defined in Section 4.17.5(c)) with respect
to any of the following (whether written, unwritten or terminated): (i) any
employee welfare benefit plan, as defined in Section 3(1) of "ERISA," including,
but not limited to, any medical plan, life insurance plan, short-term or
long-term disability plan or dental plan; (ii) any "employee pension
27
benefit plan," as defined in Section 3(2) of ERISA (as defined in Section
4.17.5(b)), including, but not limited to, any excess benefit plan, top hat plan
or deferred compensation plan or arrangement, nonqualified retirement plan or
arrangement, qualified defined contribution or defined benefit arrangement; or
(iii) any other benefit plan, policy, program, arrangement or agreement,
including, but not limited to, any material fringe benefit plan or program,
personnel policy, bonus or incentive plan, stock option, restricted stock, stock
bonus, holiday pay, vacation pay, sick pay, bonus program, service award, moving
expense, reimbursement program, tool allowance, safety equipment allowance,
deferred bonus plan, salary reduction agreement, change-of-control agreement,
employment agreement or consulting agreement.
4.17.2 A complete copy of each written Employee Plan (as
defined in Section 4.17.5(a)) as amended to the Closing, together with audited
financial statements, if any, for the three (3) most recent plan years; a copy
of each trust agreement or other funding vehicle with respect to each such plan;
a copy of any and all determination letters, rulings or notices issued by a
Governmental Authority with respect to such plan; a copy of the Form 5500 Annual
Report for the three (3) most recent plan years; and a copy of each and any
general explanation or communication which was required to be distributed or
otherwise provided to participants in such plan and which describes all or any
relevant aspect of each plan, including summary plan descriptions and/or summary
of material modifications, have been delivered or made available to Centerprise.
A description of each unwritten Employee Plan, including a description of
eligibility, participation, benefits, funding arrangements and assets or other
relevant aspects of the obligation, is set forth on Schedule 4.17.2.
4.17.3 Except as is not reasonably expected to give rise to
any liability (including contingent liability), whether direct or indirect, to
the Company, each Employee Plan (i) has been and is operated and administered in
compliance with its terms; (ii) has been and is operated, administered,
maintained and funded in compliance with the applicable requirements of the Code
in such a manner as to qualify, where appropriate and intended, for both Federal
and state purposes, for income tax exclusions, tax-exempt status, and the
allowance of deductions and credits with respect to contributions thereto; (iii)
where appropriate, has received a favorable determination letter from the
Internal Revenue Service upon which the sponsor of the plan may currently rely;
(iv) has been and currently complies in form and in operation in all respects
with all applicable requirements of ERISA and the Code and any applicable
reporting and disclosure requirements of Federal and state laws, including but
not limited to the requirement of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code. With respect to each Employee Plan, no Person has:
(i) entered into any nonexempt "prohibited transaction," as such terms are
defined in ERISA or the Code; (ii) breached a fiduciary obligation or (iii) any
liability for any failure to act or comply in connection with the administration
or investment of the assets of such plan; and no Employee Plan has any liability
and there is no liability in connection with any Employee Plan, other than a
liability (i) which is expressly and adequately reflected in the Latest Balance
Sheets, (ii) which is discretionary or terminable at will by the Company without
incurring any such liability, or (iii) which is adequately funded under a
funding arrangement separate from
28
the assets of the Company or a Plan Affiliate (and only to the extent of such
funding). Any contribution made or accrued with respect to any Employee Plan is
fully deductible by the Company or a Plan Affiliate.
4.17.4 Neither the Company nor a Plan Affiliate has ever
sponsored, maintained, contributed to or been required to contribute to, or has
any liability, whether direct or indirect, with respect to any Employee Plan
which is or has ever been (i) a "multiemployer plan" as defined in Section 4001
of ERISA, (ii) a "multiemployer plan" within the meaning of Section 3(37) of
ERISA, (iii) a "multiple employer plan" within the meaning of Code Section
413(c), (iv) a "multiple employer welfare arrangement" within the meaning of
Section 3(40) of ERISA, (v) subject to the funding requirements of Section 412
of the Code or to Title IV of ERISA, or (vi) provides for post-retirement
medical, life insurance or other welfare-type benefits other than any benefits
required under Section 4980B of the Code.
4.17.5 As used in this Agreement, the following terms shall
have the following respective meanings:
(a) the term "Employee Plan" shall mean any plan, policy,
program, arrangement or agreement described in Section 4.17.1, whether
or not scheduled;
(b) the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; and
(c) with respect to any Person ("First Person"), the term
"Plan Affiliate" shall mean any other Person with whom the First Person
constitutes or has constituted all or part of a controlled group, or
which would be treated or have been treated with the First Person as
under common control or whose employees would be or have been treated
as employed by the First Person, under Section 414 of the Code or
Section 4001(b) of ERISA and any regulations, administrative rulings
and case law interpreting the foregoing.
4.18 Labor Matters. Except as set forth on Schedule 4.18, there is no,
and within the last three (3) years the Company has not experienced any, strike,
picketing, boycott, work stoppage or slowdown or other similar labor dispute,
union organizational activity, allegation, charge or complaint of unfair labor
practice, employment discrimination or other matters relating to the employment
of labor pending or, to the Knowledge of the Company, threatened against the
Company, or which might affect the Company; nor, to the Knowledge of the
Company, is there any basis for any such allegation, charge, or complaint. There
is no request for representation pending and, to the Knowledge of the Company,
no question concerning representation has been raised. There is no grievance
pending that is reasonably expected to result in a Company Material Adverse
Effect nor any arbitration proceeding arising out of a union agreement. To the
Knowledge of the Company, no key employee and no group of employees has
announced or otherwise indicated any plans to terminate employment with the
Company. The
29
Company has complied with all applicable laws relating to the employment of
labor, including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes. The
Company is not liable for any arrears of wages or any taxes or penalties for
failure to comply with any such laws, ordinances or regulations.
4.19 Environmental Matters. Other than as disclosed on Schedule 4.19,
(i) the Company is operating and has operated its business in compliance with
all applicable Environmental and Safety Requirements (as defined later in this
Section); (ii) to the actual knowledge of the senior officers of the Company,
without any duty to inquire (notwithstanding the definition of "Knowledge" in
Section 15.4), there are no Hazardous Materials (as defined later in this
Section) present at, on or under any real property currently or formerly owned,
leased or used by the Company (other than those present in office supplies and
cleaning/maintenance materials) for which the Company is or is reasonably
expected to be responsible, or otherwise have any liability, for response costs
under any Environmental and Safety Requirements; (iii) the Company has disposed
of all waste materials generated by the Company at any real property currently
or formerly owned, leased or used by the Company in compliance with applicable
Environmental and Safety Requirements; and (iv) there are and have been no
facts, events, occurrences or conditions at or related to any real property
currently or formerly owned, leased or used by the Company that is reasonably
expected to cause or give rise to liabilities or response obligations of the
Company under any Environmental and Safety Requirements. The term "Environmental
and Safety Requirements" means any federal, state and local laws, statutes,
regulations or other requirements relating to the protection, preservation or
conservation of the environment or worker health and safety, all as amended or
reauthorized. The term "Hazardous Materials" means "hazardous substances," as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq., "hazardous wastes," as defined by the
Resource Conservation Recovery Act, 42 U.S.C. Section 6901 et seq., asbestos in
any form or condition, polychlorinated biphenyls and any other material,
substance or waste to which liability or standards of conduct may be imposed
under any Environmental and Safety Requirement.
4.20 Insurance. The Company has in full force and effect commercially
reasonable amounts of insurance (including, but not limited to, errors and
omissions insurance up to $1,000,000 in the aggregate for each of RA and
Verasource and up to $1,250,000 in the aggregate for ▇▇▇▇▇▇▇) to protect the
Company's ownership or interest in, and operation of, its assets against the
types of liabilities, customarily insured against in connection with operations
similar to the Business, and all premiums due on such policies have been paid.
To the Company's Knowledge, the Company has complied with the provisions of all
such policies and is not in default under any of such policies. Schedule 4.20
contains a complete and correct list of all such insurance policies. The Company
has not received any notice of cancellation or nonrenewal, or intent to cancel
or nonrenew, or increase premiums with respect to such insurance policies.
Schedule 4.20 also contains a list of all claims or asserted claims reported to
insurers under such policies relating to the ownership or interest in the
Company's assets, or operation of the Business,
30
including all errors and omissions claims and similar types of claims, actions
or proceedings asserted against the Company arising out of the Business at any
time within the past three (3) years.
4.21 Interest in Customers and Suppliers; Affiliate Transactions.
Except as described on Schedule 4.21, and except for ownership as an investment
of not more than one percent (1%) of any class of capital stock of any
publicly-traded company, the Company nor any Affiliate of the Company (i)
possesses, directly or indirectly, any financial interest in, or is a director,
officer, employee or affiliate of any Person that is a client, supplier,
customer, lessor, lessee or competitor of the Company , (ii) owns, directly or
indirectly, in whole or in part, or has any interest in any tangible or
intangible property used in the conduct of the Business, or (iii) is a party to
an agreement or relationship, that involves the receipt by such Person of
compensation or property from the Company other than through a customary
employment relationship or through distributions made with respect to the
Company Equity (provided such distributions have been made consistent with the
Company's past custom and practices). Schedule 4.21 sets forth the parties to
and the date, nature and amount of each transaction during the last five years
involving the transfer of any cash, property or rights to or from the Company
from, to or for the benefit of any Affiliates (other than customary employment
relationships or distributions made with respect to the Company Equity)
("Affiliate Transactions"), and any existing commitments of the Company to
engage in the future in any Affiliate Transactions. Except as disclosed, each
Affiliate Transaction and each transaction with former Affiliates of the Company
was effected on terms equivalent to those that have been established in an
arm's-length transaction.
4.22 Business Relationships. Schedule 4.22 lists all clients of the
Company representing one percent (1%) or more of the Company's revenues for the
twelve (12) months ended December 31, 1998. Except as set forth on Schedule
4.22, since December, 31, 1998, none of such clients has canceled or
substantially reduced its business with the Company nor are any of such clients
threatening to do so. To the Knowledge of the Company, no policyholders, current
clients or customers, retail producers, licensed agents and brokers, bona-fide
associations and/or groups, or insurance carriers that accounts for one percent
(1%) or more of the Company's consolidated net revenue or supplier of the
Company, will cease to do business with, or substantially reduce its business
with, the Company after the consummation of the transactions contemplated
hereby.
4.23 Compensation. Schedule 4.23 is a complete list setting forth the
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners, of each Person who earned from the Company in 1998 total
compensation in excess of $100,000. Except as set forth in Schedule 4.23, no
Person listed thereon has received any bonus or increase in compensation and
there has been no "general increase" in the compensation or rate of compensation
payable to any employees, partners, members or owners of the Company since the
date of the Latest Balance Sheet, other than in the Company's ordinary course of
business, consistent with past custom and
31
practices nor since that date has there been any oral or written promise to
employees, partners, members or owners of any bonus or increase in compensation,
other than in the Company's ordinary course of business, consistent with past
custom and practices. The term "general increase" as used herein means any
increase generally applicable to a class or group, but does not include
increases granted to individuals for merit, length of service or change in
position or responsibility made on the basis of the custom and past practices of
the Company. Schedule 4.23 includes the date and amount of the last bonus or
similar distribution or increase in compensation for each listed individual.
4.24 Bank Accounts. Schedule 4.24 is a true and complete list of each
bank in which the Company has an account or safe deposit box, the number of each
such account or box, and the names of all Persons authorized to draw thereon or
to have access thereto.
4.25 Disclosure; No Misrepresentation. No representation or warranty of
the Company contained in this Agreement or in any of the certification,
schedules, lists, documents, exhibits, or other instruments delivered or to be
delivered to Centerprise as contemplated by any provision hereof contains any
untrue statement regarding a material fact or omits to state a material fact
necessary in order to make the statements made herein or therein not misleading.
To the Knowledge of the Company, there is no fact or circumstance that has not
been disclosed to Centerprise herein that has or is reasonably expected to have
a Company Material Adverse Effect.
4.26 Title to and Transfer of Insurance Expirations. Except as set
forth on Schedule 4.26, as of the effective date of this Agreement, the Company
has good and valid rights, free and clear of any known restrictions, to
Insurance Expirations (as hereinafter defined). For the purpose of this Section
4.26, "Insurance Expirations" is defined as the right to service, continue and
renew, and collect all commissions and other amounts on, all insurance policies
of every type and description produced or placed by or through the Company,
including all of (i) the expiration data relating to such policies of insurance
produced or placed by or through the Company, (ii) all books, records and files
pertaining to all insurance policies, including, without limitation, all
computerized data records and all other records and files regardless of the
media in or on which such data, records or files are maintains, and (iii) the
customer and prospective customer lists used by the Company.
ARTICLE V
[RESERVED]
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPRISE
Centerprise represents and warrants to each of the Companies as of
March 31, 1999 and, subject to Section 7.3, as of the date on which Centerprise
and the lead Underwriter execute and deliver the Underwriting Agreement related
to the IPO and as of the Closing Date as follows:
6.1 Organization And Qualification. Each of Centerprise and each
Mergersub is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. True, accurate and complete copies of
each of Centerprise's and Mergersub's Certificate of Incorporation and By-laws,
as in effect on the date hereof, including all amendments thereto, have
heretofore been delivered to each of the Companies.
6.2 Capitalization.
6.2.1 The authorized capital stock of Centerprise consists of
20,000 shares of Centerprise Common Stock, of which 17,500 shares were
outstanding as of the date hereof. All of the issued and outstanding shares of
Centerprise Common Stock are validly issued and are fully paid, nonassessable
and free of preemptive rights. Immediately prior to the Closing Date, the
authorized capital stock of Centerprise will consist of 50,000,000 shares of
Centerprise Common Stock, of which the number of shares set forth in the Form
S-1 will be issued and outstanding, and 10,000,000 shares of Preferred Stock,
par value $0.01 per share, none of which will be issued and outstanding. Other
than (i) shares of Centerprise Common Stock issued pursuant to a split of the
shares outstanding as of the date of this Agreement, (ii) shares of Centerprise
Common Stock issued in accordance with the Merger and the Other Mergers, and
(iii) shares of Centerprise Common Stock that may be issued to new members of
management in lieu of shares previously issued to current members of management,
but which will not increase the number of shares of outstanding Centerprise
Common Stock, no shares of Centerprise Common Stock will be issued prior to the
consummation of the IPO. Each Mergersub's authorized capital stock consists
solely of 100 shares of common stock, par value $.01 per share (the "Mergersub
Stock"), all of which are issued and outstanding, are owned free and clear of
any Liens by Centerprise , and are fully paid, nonassessable and free of
pre-emptive rights.
6.2.2 Except as set forth on Schedule 6.2, as of the date
hereof, there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement obligating Centerprise to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of the capital stock
of Centerprise or obligating Centerprise to grant, extend or enter into any such
agreement or commitment. There
33
are no voting trusts, proxies or other agreements or understandings to which
Centerprise is a party or is bound with respect to the voting of any shares of
capital stock of Centerprise. The shares of Centerprise Common Stock issued to
the Stockholders in the Merger will at the Closing Date be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights and
issued pursuant to an effective registration statement as required by the 1933
Act or an exemption thereof.
6.2.3 The Notes have been duly authorized and when duly
executed, authenticated, issues and delivered will be duly and validly issued
and outstanding and will constitute the valid and legally binding obligations of
Centerprise enforceable in accordance with their terms.
6.3 No Subsidiaries. Except for Centerprise's ownership of 100% of the
capital stock of Professional Service Group, Inc., a Delaware corporation and
Mergersubs (and similar entries created for similar purposes with respect to
other Agreements), Centerprise has no subsidiaries and it does not own any
capital stock of any corporation or any equity or other interest of any nature
whatsoever in any Person.
6.4 Authority; Non-Contravention; Approvals.
6.4.1 Each of Centerprise and each Mergersub has all requisite
right, power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the Board
of Directors of Centerprise and each Mergersub, and no other corporate
proceedings on the part of Centerprise or each Mergersub are necessary to
authorize the execution and delivery of this Agreement or the consummation by
Centerprise and each Mergersub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Centerprise and each Mergersub
and, assuming the due authorization, execution and delivery hereof by each of
the Companies constitutes a valid and legally binding agreement of Centerprise
and each Mergersub, enforceable against each of them in accordance with its
terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
6.4.2 The execution and delivery of this Agreement by
Centerprise and each Mergersub do not violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Lien upon any of the properties or assets of Centerprise or any Mergersub under
any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-laws of Centerprise or any Mergersub, (ii) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any court or Governmental Authority applicable to Centerprise or
any Mergersub or any of their respective properties or assets, or (iii) any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which Centerprise or any Mergersub is now a party or by which
Centerprise, each Mergersub or any
34
of their respective properties or assets, may be bound or affected. The
consummation by Centerprise or any Mergersub of the transactions contemplated
hereby will not result in any violation, conflict, breach, right of termination
or acceleration or creation of Liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the
immediately preceding sentence, subject, in the case of the terms, conditions or
provisions of the items described in clause (ii) above, to obtaining (prior to
the Closing Date) Centerprise Required Statutory Approvals (as defined in
Section 6.4.3) and, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Closing Date)
consents required from commercial lenders, lessors or other third parties.
6.4.3 Except with respect to (i) the declaration of the
effectiveness of the Registration Statements by the SEC and filings, if
required, with various state securities or blue sky authorities, and (ii) any
filing which may be required under the HSR Act (the filings and approvals
referred to in clauses (i) through (iii) are collectively referred to as the
"Centerprise Required Statutory Approvals") no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by Centerprise or any Mergersub or the consummation
by Centerprise or any Mergersub of the transactions contemplated hereby, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be, are
not reasonably expected to, in the aggregate, have a material adverse effect on
the business operations, properties, assets, condition (financial or other),
results of operations or prospects of Centerprise and its subsidiaries, taken as
a whole (a "Centerprise Material Adverse Effect").
6.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
6.5, neither Centerprise nor any Mergersub has incurred any liabilities or
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither Centerprise nor any Mergersub has engaged in any
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
6.6 Litigation. There are no claims, suits, actions or proceedings
pending or, to the Knowledge of Centerprise or Mergersub, threatened against,
relating to or affecting Centerprise, before any court, Governmental Authority
or any arbitrator that seek to restrain or enjoin the consummation of the Merger
or the IPO or which could reasonably be expected, either alone or in the
aggregate with all such claims, actions or proceedings, to have a Centerprise
Material Adverse Effect. Centerprise is not subject to any unsatisfied or
continuing judgment, order or decree of any court or Governmental Authority.
Centerprise is not a party to any legal action to recover monies due it or for
damages sustained by it.
35
6.7 Compliance with Applicable Laws. Each of Centerprise and each
Mergersub has complied in all material respects with all Laws applicable to it,
and has not received any notice of any alleged claim or threatened claim,
violation of or liability or potential responsibility under any such Law which
has not heretofore been cured and for which there is no remaining liability and,
to the Knowledge of Centerprise, no event has occurred or circumstances exist
that (with or without notice or lapse of time) may constitute or result in a
violation by Centerprise or each Mergersub of any Law or may give rise to any
liability on the part of the Centerprise or any Mergersub under any Law.
6.8 No Misrepresentation. None of the representations and warranties of
Centerprise set forth in this Agreement or in any of the certificates,
schedules, lists, documents, exhibits, or other instruments delivered or to be
delivered to any of the Companies as contemplated by any provision hereof
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading. To the Knowledge of Centerprise, there is no fact or circumstance
that has not been disclosed to the Companies herein that has or is reasonably
expected to have a Centerprise Material Adverse Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
7.1 Conduct of Business by the Companies Prior to the Effective Time.
7.1.1 Except as otherwise contemplated by this Agreement and
Schedule 7.1, after the date hereof and prior to the Closing Date or earlier
termination of this Agreement, unless Centerprise shall otherwise agree in
writing, each of the Companies shall:
(a) in all material respects conduct its businesses in the
ordinary and usual course and consistent with past customs and
practices;
(b) not (i) amend its Organizational Documents, (ii) split,
combine or reclassify its outstanding capital stock or (iii) declare,
set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise except dividends or distributions which (A) are
consistent with past customs and practices and (B) do not result in a
Company Material Adverse Effect;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of (i) any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of, its
capital stock or equity interests of any class, (ii) any debt with
36
voting rights or (iii) any debt or equity securities convertible into
or exchangeable for, or any rights, warrants, calls, subscriptions, or
options to acquire, any such capital stock, debt with voting rights or
convertible securities;
(d) not (i) incur or become contingently liable with respect
to any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business in a manner consistent with past customs
and practices, (B) borrowings to refinance existing indebtedness on
commercially reasonable terms, or (C) liability related to placing
insurance with insurance companies and collecting premiums therefor in
the ordinary course of business, (ii) redeem, purchase, acquire or
offer to purchase or acquire any shares of its capital stock or equity
interests or any options, warrants or rights to acquire any of its
capital stock or equity interests or any security convertible into or
exchangeable for its capital stock or equity interests, (iii) sell,
pledge, dispose of or encumber any assets or businesses other than
dispositions in the ordinary course of business in a manner consistent
with past customs and practices or (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use commercially reasonable efforts to (i) preserve intact
its business organizations and goodwill, (ii) keep available the
services of its present officers and key employees, and (iii) preserve
the goodwill and business relationships with clients and others having
business relationships with it and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of Centerprise to report operational matters of
materiality and the general status of ongoing operations;
(g) not (i) increase in any manner the base compensation of,
or enter into any new bonus or incentive agreement or arrangement with,
any of its employees, partners, members or owners, except in the
ordinary course of business in a manner consistent with past customs
and practices of such Company, as applicable, (ii) pay or agree to pay
any additional pension, retirement allowance or other employee benefit
under any Employee Plan to any such Person, whether past or present,
(iii) enter into any new employment, severance, consulting, or other
compensation agreement with any of its existing employees, partners,
members or owners, (iv) amend or enter into a new Employee Plan (except
as required by Law) or amend or enter into a new collective bargaining
agreement, or (v) engage in any new Affiliate Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or
indirectly, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest
37
in or substantial portion of the assets of, or by any other manner, any
businesses or any Person or division thereof or otherwise acquire or
agree to acquire any assets in each case which are material to it other
than in the ordinary course of business in a manner consistent with
past customs and practices;
(j) not sell, lease, license, encumber or otherwise dispose
of, or agree to sell, lease, license, encumber or otherwise dispose of,
any of its assets;
(k) maintain with financially responsible insurance companies
the insurance described in Section 4.20 herein;
(l) except as may be permitted by Section 7.1.1(b), maintain a
level of working capital consistent with historic levels and past
customs and practices; and
(m) collect and ▇▇▇▇ receivables in the ordinary and usual
course and consistent with past custom and practices.
7.1.2 Notwithstanding the fact that such action might
otherwise be permitted pursuant to this Article, the Companies shall not take
any action that would or is reasonably likely to result in any of the
representations or warranties of the Companies set forth in this Agreement being
untrue or in any of the conditions to the consummation of the transactions
contemplated hereunder set forth in Article X not being satisfied.
7.1.3 Prior to the Closing, the Companies, shall terminate,
without any liability to the Companies, all agreements relating to the voting of
the Companies' capital stock, and all agreements and obligations of the
Companies relating to borrowed money and/or involving payments to or for the
benefit of a present or former Stockholder of the Companies, or an Affiliate or
family member of a present or former Stockholder of the Companies, including
without limitation, those set forth on Schedule 7.1.3(a), but excluding (A)
those listed on Schedule 7.1.3(b), and (B) items approved by Centerprise in
writing.
38
7.2 No-Shop.
(a) After the date hereof and prior to the Closing Date or
earlier termination of this Agreement, each of the Companies shall (i)
not, and each of the Companies shall use its diligent efforts to cause
any officer, director or employee of, or any attorney, accountant,
investment banker, financial advisor or other agent retained by any
Company not to, initiate, solicit, negotiate, encourage, or provide
non-public or confidential information to facilitate, any proposal or
offer to acquire all or any substantial part of the business and
properties of any Company, or any capital stock or other equity
interest of any Company, whether by merger, purchase of assets or
otherwise, whether for cash, securities or any other consideration or
combination thereof, or enter into any joint venture or partnership or
similar arrangement, and (ii) promptly advise Centerprise of the terms
of any communications any Company may receive or become aware of
relating to any bid for part or all of any Company. Notwithstanding the
foregoing, if the underwriters' internal sales force presentation or
"road show" for the IPO has not started by October 15, 1999, then from
and after such date, any Company may (through its authorized agents)
conduct limited discussions with potential acquirers of the Company for
the sole purpose of assessing the potential terms and conditions of an
acquisition proposal involving the Company. Notwithstanding the
preceding sentence, the Company shall not (i) disclose any non-public
or confidential information regarding the Company to any such third
party or (ii) enter into any agreement (including a letter of intent or
term sheet) with such third party unless this Agreement has been
terminated pursuant to Article XI.
(b) The Company (i) acknowledges that a breach of any of their
covenants contained in this Section 7.2 will result in irreparable harm
to Centerprise which will not be compensable in money damages; and (ii)
agrees that such covenant shall be specifically enforceable and that
specific performance and injunctive relief shall be a remedy properly
available to the other party for a breach of such covenant.
7.3 Schedules. Each party hereto agrees that with respect to the
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the "Schedules") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
however, that no amendment or supplement to a Schedule that constitutes or
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
or Schedule 8.8 may be made unless Centerprise and a majority of the Founding
Companies consent to such amendment or supplement. No amendment or supplement to
a Schedule shall be made later than three (3) business days prior to the
anticipated effectiveness of the Form S-1. For all purposes of this Agreement,
including, without limitation, for purposes of determining whether the
conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) any Company seeks to amend
or
39
supplement a Schedule pursuant to this Section 7.3, (ii) such amendment or
supplement constitutes or reflects a Company Material Adverse Effect or affects
Schedule 4.2, Schedule 4.4 or Schedule 8.8, and (iii) Centerprise and a majority
of the Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to a breach of a representation or warranty as
of March 31, 1999, in which case the Companies shall pay to Centerprise as
Centerprise's exclusive remedy (notwithstanding anything to the contrary) and as
liquidated damages, and not as a penalty, an amount equal to $2,000,000 (the
"Liquidated Damages Amount"). Each of the Companies agrees that in the case of
such termination, Centerprise and the Founding Companies will sustain immediate
and irreparable economic harm and loss of goodwill and that actual losses
suffered by such parties will be difficult, if not impossible, to ascertain, but
the Liquidated Damages Amount set forth herein is reasonable and has been
arrived at after a good faith effort to estimate such losses. Payment of the
Liquidated Damages Amount shall be made in cash to Centerprise within thirty
(30) days of a termination pursuant to this Section 7.3 in connection with an
amendment of or supplement to a Schedule relating to a breach of a
representation or warranty as of the date of this Agreement.
7.4 Company Stockholder Meeting. The Company shall take all action in
accordance with applicable laws and its Organizational Documents necessary to
duly call, give notice of, convene and hold a meeting of the Stockholders to be
held on the earliest practicable date determined in consultation with
Centerprise to consider and vote upon approval of the Merger, this Agreement and
the transactions contemplated hereby by the Stockholders, and the Company's
Board of Directors or Managers shall recommend approval of the Merger, this
Agreement and the transactions contemplated hereby by the Stockholders. If the
Merger, this Agreement and the transactions contemplated hereby are approved by
the Stockholders, the Companies shall not call, give notice of, convene or hold
any other meeting of its Stockholders to rescind or modify such approval or
consider any other transaction.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Access to Information.
8.1.1 Each of the Companies shall afford to Centerprise and
its accountants, counsel, financial advisors and other representatives,
including without limitation the underwriters engaged in connection with the IPO
(each an "Underwriter" and collectively, the "Underwriters") and their counsel
(collectively, the "Centerprise Representatives"), and to the Founding Companies
and their accountants, counsel, financial advisors and other representatives,
40
and Centerprise shall afford to each of the Companies and its accountants,
counsel, financial advisors and other representatives (the "Company
Representatives"), upon reasonable notice, full access during normal business
hours throughout the period prior to the Closing Date to all of its respective
properties, books, contracts, commitments and records (including, but not
limited to, financial statements and Tax Returns) and, during such period, shall
furnish promptly to one another all due diligence information requested by the
other party. Centerprise shall hold and shall use its best efforts to cause the
Centerprise Representatives to hold, and each of the Companies shall hold and
shall use its best efforts to cause the Company Representatives to hold, in
strict confidence all non-public information furnished to it in connection with
the transactions contemplated by this Agreement, except that each of Centerprise
and each of the Companies may disclose any information that it is required by
law or judicial or administrative order to disclose. In addition, Centerprise
will cause each of the other Founding Companies and their members and
stockholders to enter into a provision similar to this Section 8.1 requiring
each such Founding Company to keep confidential any information obtained by such
Founding Company in connection with the transactions contemplated by this
Agreement.
8.1.2 In the event that this Agreement is terminated in
accordance with its terms, each party shall promptly return to the disclosing
party all non-public written material provided pursuant to this Section 8.1 or
pursuant to the Other Agreements and shall not retain any copies, extracts or
other reproductions of such written material. In the event of such termination,
all documents, memoranda, notes and other writings prepared by Centerprise or
any Company based on the information in such material shall be destroyed (and
Centerprise and each of the Companies shall use their respective reasonable best
efforts to cause their advisors and representatives to similarly destroy such
documents, memoranda and notes), and such destruction (and reasonable best
efforts) shall be certified in writing by an authorized officer supervising such
destruction.
8.2 Registration Statements.
41
8.2.1 Centerprise has filed the Registration Statements with
the SEC and shall use all reasonable efforts to have the Registration Statements
declared effective by the SEC as promptly as practicable. Centerprise shall also
take any action required to be taken under applicable state "blue sky" or
securities laws in connection with the issuance of Centerprise Common Stock.
Centerprise and each of the Companies shall promptly furnish to each other all
information, and take such other actions, as may reasonably be requested in
connection with making such filings. All information provided and to be provided
by Centerprise and each of the Companies, respectively, for use in the
Registration Statements shall be true and correct in all material respects
without omission of any material fact which is required to make such information
not false or misleading as of the date thereof and in light of the circumstances
under which given or made. Each of the Companies agrees promptly to advise
Centerprise if at any time during the period in which a prospectus relating to
the offering of the Merger is required to be delivered under the Securities Act,
any information contained in the prospectus concerning each of the Companies
becomes incorrect or incomplete in any material respect, and to provide the
information needed to correct such inaccuracy or remedy such incompletion.
8.2.2 Centerprise agrees that it will provide to the Companies
and its counsel copies of drafts of the Registration Statements (and any
amendments thereto) containing material changes to the information therein as
they are prepared and will not (i) file with the SEC, (ii) request the
acceleration of the effectiveness of or (iii) circulate any prospectus forming a
part of, the Registration Statements (or any amendment thereto) unless the
Companies and their counsel (x) have had at least two days to review the revised
information contained therein (which changes shall be highlighted by computer
generated marks indicating the additions and deletions made from the prior draft
reviewed by the Companies' counsel) and (y) have not objected to the substance
of the information contained therein. Any objections posed by the Companies or
their counsel shall be in writing and state with specificity the material in
question, the reason for the objection, and the Companies' proposed alternative.
If the objection is founded upon a rule promulgated under the Securities Act,
the objection shall cite the rule. Notwithstanding the foregoing, during the
five (5) business days immediately preceding the date scheduled for the filing
of the Registration Statements and any amendment thereto, the Companies and
their counsel shall be obligated to respond to proposed changes electronically
transmitted to them within two (2) hours from the time the proposed changes (in
the case of the initial filing of the Registration Statements, from the last
circulated draft of the Registration Statements; and, in the case of any
subsequent filing of the Registration Statements or any amendment thereof, from
the most recently filed Registration Statements or amendment thereof) are
transmitted to the Companies' counsel; provided, that, Centerprise has provided
to the Companies or their counsel reasonable advance notice of such proposed
changes; provided, further, that such changes are highlighted by computer
generated marks indicating the additions and deletions made from the prior draft
reviewed by the Companies' counsel.
8.2.3 Centerprise will advise the Stockholder Representative
of the effectiveness of the Registration Statements, advise the Stockholder
Representative of the entry
42
of any stop order suspending the effectiveness of the Registration Statements or
the initiation of any proceeding for that purpose, and, if such stop order shall
be entered, use its best efforts promptly to obtain the lifting or removal
thereof. Upon the written request of any Company, Centerprise will furnish to
such Company a reasonable number of copies of the final prospectus associated
with the IPO.
8.3 Expenses and Fees. Centerprise shall pay the fees and expenses of
the independent public accountants and legal counsel to Centerprise and all
filing, printing and other reasonable, documented fees and expenses associated
with the IPO and Form S-4. The Companies and their Stockholders will not be
liable for any portion of the above expenses in the event the IPO is not
completed. Centerprise shall also pay the underwriting discounts and commissions
payable in connection with the sale of Centerprise Common Stock in the IPO.
Subject to Sections 8.11 and 11.2, all other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses; provided, however, that Centerprise
shall pay the fees and expenses of ▇▇▇▇▇ Capital Advisors, LLC described in
Schedule 15.1 in connection with the Merger.
8.4 Agreement to Cooperate. Subject to the terms and conditions herein
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
8.5 Public Statements. Except as may be required by law, no party
hereto nor any Affiliate of any party hereto shall issue any press release or
any written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of Centerprise and each of the Companies.
8.6 [RESERVED]
8.7 Centerprise Covenants. After the date hereof and prior to the
Closing Date or earlier termination of this Agreement in accordance with its
terms, Centerprise shall comply in all material requests with all applicable
laws. Centerprise shall not take any action that would or is reasonably likely
to result in any of the representations or warranties of Centerprise set forth
in this Agreement being untrue or in any of the conditions to the consummation
of the transactions contemplated hereunder set forth in Article X not being
satisfied.
8.8 Release of Guarantees. Centerprise shall use all commercially
reasonable efforts and good faith to have the Stockholders released from any and
all guarantees on any indebtedness and leases that they personally guaranteed
for the benefit of the Company as set forth on Schedule 8.8, with all such
guarantees on indebtedness and leases being assumed by Centerprise, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full
43
with proceeds from the IPO and the Stockholders' guarantees thereafter shall
have no further force and effect, then Centerprise shall not be obligated to use
any efforts to obtain release of such guarantee. In the event that Centerprise
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, Centerprise agrees to indemnify, defend and
hold harmless the Stockholders against any and all claims made by lenders or
landlords under such guarantees.
8.9 [RESERVED]
8.10 Preparation and Filing of Tax Returns.
8.10.1 Each Company shall be responsible for causing the
timely filing of the final pre-Closing Returns for such Company; provided
however, that Centerprise and its advisors shall have the right to review and
approve such returns prior to filing, which approval shall not be unreasonably
withheld. Centerprise shall, and shall cause its Affiliates to, provide to each
Company such cooperation and information as any of them reasonably requested in
filing any return, amended return or claim for refund, determining a liability
for Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. Each Company shall bear all costs of filing such
returns.
8.10.2 Each of the Company and Centerprise shall comply with
the tax reporting requirements of Section 1.351-3 of the Treasury Regulations
promulgated under the Code, and shall treat the transaction as subject to the
provisions of Section 351 of the Code.
8.11 Insurance. Each Company covenants and agrees that all insurance
policies listed, or required to be listed, on Schedule 4.20 will be maintained
in full force and effect through the Closing Date. Each Company will purchase
directors' and officers' liability and errors and omissions insurance (or
maintain its existing insurance) for the Company and its Stockholders for a
period of five (5) years after the Closing Date or provide comparable coverage
providing at least the same benefits as those coverage amounts and deductibles
for other agencies similarly situated in the insurance industry. Centerprise
shall cause ▇▇▇▇▇▇ ▇. Driver Co., Inc. to bear one-half of the expense of such
insurance.
8.12 Management by ▇▇▇▇▇▇ ▇. Driver Co., Inc. Each of the Companies
acknowledges that its day-to-day management and operations shall be governed and
supervised by ▇▇▇▇▇▇ ▇. Driver Co., Inc. or as otherwise provided by
Centerprise.
8.13 Name of Companies. Centerprise shall cause the Companies to be
operated under a name in which "▇▇▇▇▇▇▇" is equally as prominent or more
prominent than "Driver" if the name "Driver" is used to describe the Company.
44
8.14 Stockholder Representative. Each Company appoints ▇▇▇ ▇▇▇▇▇▇▇ (the
"Stockholder Representative") as its agent and representative with full power
and authority to agree, contest or settle any claim or dispute affecting the
Company made under Article II and to otherwise act on behalf of the Company and
its Stockholders in accordance with the terms of this Agreement.
ARTICLE IX
[RESERVED]
ARTICLE X
CLOSING CONDITIONS
10.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) the Underwriting Agreement related to the IPO shall have
been executed and the closing of the sale of Centerprise Common Stock
to the Underwriters pursuant thereto shall have occurred simultaneously
with the Closing hereunder;
(b) the closings of the transactions contemplated under each
of the Other Agreements shall have occurred simultaneously with the
Closing hereunder, unless terminated in accordance with Section 7.3 of
the applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in
effect and no proceeding for that purpose shall have been instituted by
the SEC or any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or
decree shall be pending or issued by any federal or state court which
seeks to prevent or prevents the consummation of the IPO, the Merger or
any of the Other Mergers shall have been issued and remain in effect;
(e) the minimum price condition set forth on line F of
Schedule 2.1 shall have been satisfied.
45
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government
or governmental agency in the United States which would prevent the
consummation of the Merger or any of the Other Mergers or make the
consummation of the Merger or any of the Other Mergers illegal;
(g) all material governmental and third party waivers,
consents and approvals required for the consummation of the Merger or
any of the Other Mergers and the transactions contemplated hereby and
by the Other Agreements (including, without limitation, any consents
listed on Schedules 4.3.2 or 4.12) shall have been obtained and be in
effect;
(h) No action, suit or proceeding with respect to the Merger
has been filed or threatened by a third party and remains threatened or
remains pending before any court, Governmental Authority or regulatory
Person;
(i) This Agreement, the Merger and the transactions
contemplated hereby shall have been approved and adopted by the
Stockholders in the manner required by any applicable Law and each
Company's Organizational Documents and such approval shall remain in
full force and effect; and
(j) Centerprise shall have entered into one or more credit
facilities providing for aggregate commitments of not less than $75
million.
10.2 Conditions to Obligation of the Companies to Effect the Merger.
Unless waived by the Companies, the obligation of the Companies to effect the
Merger shall be subject to the fulfillment at or prior to the Closing of the
following additional conditions:
(a) Centerprise, Mergersub and each of the Founding Companies
shall have performed in all material respects their agreements
contained in this Agreement and each Other Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of Centerprise contained in this Agreement and each Other
Agreement shall be true and correct in all material respects on and as
of the date made and on and as of the Closing Date as if made at and as
of such date, and the Companies shall have received a certificate of
the Chief Executive Officer or President of Centerprise to that effect;
(b) no Governmental Authority shall have promulgated or
formally proposed any statute, rule or regulation which, when taken
together with all such promulgations, would materially impair the value
to the Companies of the Merger;
(c) the Companies shall have received an opinion from ▇▇▇▇▇▇
▇▇▇▇▇▇ & Zavis, dated as of the Closing Date, containing the
substantive opinions set forth in
46
Exhibit 10.2(c), the final form of such opinion to be in form and
substance reasonably acceptable to the Companies;
(d) Each of ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ shall
have been afforded the opportunity to enter into an employment
agreement (the "Employment Agreement") with one of the Companies
substantially in the form attached hereto as Exhibit 10.2(d);
(e) Centerprise shall have delivered to the Companies a
certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State, showing
that Centerprise is in good standing;
(f) each of the Stockholders, the partners, the members and
the stockholders, partners and members of the Founding Companies who
are to receive shares of Centerprise Common Stock pursuant to the Other
Agreements, and the other stockholders of Centerprise other than those
acquiring stock in the IPO shall have entered into an agreement (the
"Stockholders Agreement") substantially in the form attached hereto as
Exhibit 10.2(f);
(g) all conditions to the Mergers of the Founding Companies,
on substantially the same terms as provided herein, shall have been
satisfied or waived by the applicable party and the Companies; and
(h) the Companies shall have received an opinion of ▇▇▇▇▇▇
▇▇▇▇▇▇ & Zavis, dated as of the Closing Date and based upon certain
factual representations and assumptions that for federal income tax
purposes there will be no gain or loss recognized with respect to the
Centerprise Common Stock received for their Company Equity in the
Merger pursuant to Section 351 of the Code, the final form of such
opinion to be in form and substance reasonably acceptable to the
Companies.
(i) Driver shall have signed and delivered to the Stockholders
the Letter Agreement between the Stockholders and Driver substantially
in the form attached hereto as Exhibit 10.2(i).
10.3 Conditions to Obligation of Centerprise to Effect the Merger.
Unless waived by Centerprise, the obligation of Centerprise and Mergersub to
effect the Merger shall be subject to the fulfillment at or prior to the Closing
of the additional following conditions:
(a) each of the Companies shall have performed in all material
respects its agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of each of the Companies contained in this Agreement shall
be true and correct in all material respects on and as of the date
47
made and on and as of the Closing Date as if made at and as of such
date, and Centerprise and the Underwriters shall have received a
Certificate of the Chief Executive Officer or President of each of the
Companies to that effect;
(b) Reserved;
(c) Centerprise and the Underwriters shall have received an
opinion from ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP and/or ▇▇▇▇ ▇▇▇▇▇▇▇,
counsel to each of the Companies, dated the Closing Date, in the form
attached hereto as Exhibit 10.3(c), the final form of such opinion to
be in form and substance reasonably acceptable to the Underwriters and
Centerprise;
(d) each of ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ shall
have executed and delivered the Employment Agreement referred to in
Section 10.2(d);
(e) Centerprise and the Underwriters shall have received
"Comfort" letters in customary form from each of the Companies'
independent public accountants, dated the effective date of the Form
S-1 and the Closing Date (or such other date reasonably acceptable to
Centerprise), with respect to certain financial statements and other
financial information included in the Form S-1 and any subsequent
changes in specified balance sheet and income statement items,
including total assets, working capital, total stockholders' equity,
total revenues and the total and per share amounts of net income;
(f) each of the Companies shall have delivered to Centerprise
and the Underwriters a certificate, dated as of a date no later than
ten days prior to the Closing Date, duly issued by the appropriate
Governmental Authority in the state of organization of each Company,
unless waived by Centerprise, in each state in which each Company is
authorized to do business, showing such Company (as applicable) is in
good standing, authorized to do business and/or in compliance with all
laws and regulations, whichever is applicable;
(g) no Governmental Authority shall have promulgated or
formally proposed any statute, rule, regulation or bulletin, or
otherwise promulgated a policy pursuant to its authority under any
statute, which, when taken together with all such promulgations, would
materially impair the value to Centerprise of the Merger;
(h) the Stockholders shall have executed the Stockholders
Agreement;
(i) Reserved;
(j) Reserved;
48
(k) each of the Companies shall have terminated or have caused
the termination of any voting trusts, proxies or other agreements or
understandings to which any such Company or is a party or is bound with
respect to any shares of capital stock or other equity interests of
such Company and shall have provided Centerprise evidence of such
termination that is acceptable to Centerprise's counsel;
(l) to the extent any of the Companies' contracts and
agreements with insurance carriers, referring agents and insurance
producers (collectively referred to as "Insurance Entities") will be
terminated as a result of this Agreement or the transactions
contemplated herein, each of the Companies shall have: (i) entered into
new contracts with each of the Insurance Entities under the same
material terms and conditions as the previous contracts and agreements
terminated as a result of this Agreement or the transactions
contemplated herein; or (ii) obtained amendments or waivers of the
contracts and agreement with each of Insurance Entities such that the
contracts and agreements will not terminate as a result of this
Agreement or the transactions contemplated herein, provided that such
amendments or waivers do not modify the material terms of such
contracts or agreements, except where the failure to have entered into
such contracts or to have obtained such amendments or waiver would not
have a Company Material Adverse Effect;
(m) each of the Companies has provided to Centerprise
certified copies of all licenses and registrations necessary for such
Company to conduct their Business, and each of the Companies has
modified or amended the information given the relevant Government
Authorities in obtaining such licenses and registrations necessary to
prevent this Agreement or the transactions contemplated herein from
canceling or terminating such licenses and registrations;
(n) the Company shall have presented evidence satisfactory to
Centerprise of its compliance with the provisions of Section 7.1.3
hereof;
(o) as applicable, the Companies shall have delivered to
Centerprise a payoff letter including a statement of per diem interest
amounts and other applicable release documents from all such lenders or
creditors regarding the payment in full of such indebtedness (which
will be paid in accordance with Schedule 7.1.3(a) at Closing) in each
case in form and substance satisfactory to Centerprise (including,
without limitation, applicable UCC-3 termination statements);
(p) the secretary of the Companies shall have delivered
certified copies of the resolutions of the board of directors and
shareholders of the Company approving execution and delivery of this
Agreement, the Merger and the other actions, agreements and documents
necessary or desirable to complete the transactions contemplated
herein; and
49
(q) the Stockholders shall have executed and delivered the
Company Stockholder Agreement in the form of Exhibit 10.3(q) attached
hereto.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) pursuant to Section 7.3;
(b) by all of the Companies,
(i) if the Merger is not completed by November 15,
1999 other than on account of delay or default on the part of
any of the Companies or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final,
unappealable court order not entered at the request or with
the support of each of the Companies or any of its affiliates
or associates;
(iii) if Centerprise (A) fails to perform in any
material respect any of its material covenants in this
Agreement and (B) does not cure such default in all material
respects within thirty (30) days after written notice of such
default is given to Centerprise; or
(c) by Centerprise,
(i) if the Merger is not completed by November 15,
1999 other than on account of delay or default on the part of
Centerprise or any of its stockholders or any of their
affiliates or associates;
(ii) if the Merger is enjoined by a final,
unappealable court order not entered at the request or with
the support of Centerprise or any of its stockholders or any
of their affiliates or associates;
(iii) if any Company (A) fails to perform in any
material respect any of its material covenants in this
Agreement and (B) does not cure such default in all material
respects within thirty (30) days after written notice of such
default is given to such Company by Centerprise; or
50
(d) by mutual consent of all of the Boards of Directors
or Managers of the Companies and the Board of Directors of Centerprise.
11.2 Effect of Termination. In the event of termination of this
Agreement by either Centerprise or the Companies, as provided in Section 11.1,
this Agreement shall forthwith become void and there shall be no further
obligation on the part of the Companies, Centerprise, Mergersub or their
respective officers or directors (except the obligations set forth in this
Section 11.2 and in Sections 8.1, 8.3, and 8.5, all of which shall survive the
termination). Nothing in this Section 11.2 shall relieve any party from
liability for any breach of this Agreement.
11.3 Amendment. This Agreement may not be amended except by action
taken by the Boards of Directors of Centerprise and the Company or duly
authorized committees thereof and then only by an instrument in writing signed
on behalf of each of the parties hereto and in compliance with applicable law.
11.4 Waiver. At any time prior to the Closing Date, the parties hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XII
[RESERVED]
ARTICLE XIII
NONCOMPETITION
13.1 Centerprise Non-Solicitation. Centerprise will not, for a period
of two (2) years following the date hereof, for any reason whatsoever, directly
or indirectly, for themselves or on behalf of or in conjunction with any other
Person, solicit to employ any Person who is an employee of any of the companies
(and with whom Centerprise had contact or with which such employee was
specifically identified to Centerprise during its due diligence investigation of
the Companies) for the purpose or with the intent of enticing such employee away
from or out of the employee of any of the Companies or hire such Person.
51
ARTICLE XIV
[RESERVED]
ARTICLE XV
GENERAL PROVISIONS
15.1 Brokers. Each of the Companies represents and warrants that no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee (except for any fee described in Schedule 15.1) or commission in
connection with the Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. Centerprise
represents and warrants that no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Centerprise or its stockholders (other than
underwriting discounts and commission to be paid in connection with the IPO).
15.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
15.2.1 If to Centerprise or Mergersub, to:
Centerprise Advisors, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
52
15.2.2 If to the Companies, to:
The ▇▇▇▇▇▇▇ Company, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
15.2.3 If to the Stockholder Representative, addressed to the
addresses set forth on Schedule 15.2.3. with copies to such
counsel as set forth on such schedule 15.2.3.
15.3 Interpretation. The table of contents and headings contained in
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
15.4 Certain Definitions. As used in this Agreement, (i) the term
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity, firm,
association, organization or other business in any form whatsoever or government
(whether Federal, state, county, city or otherwise, including, without
limitation, any instrumentality, division, agency or department thereof), (ii)
the term "Affiliate" shall have the meaning given for that term in Rule 405
under the Securities Act, and shall include each past and present Affiliate of a
Person and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "Knowledge" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course
53
of conducting a reasonably comprehensive investigation concerning the existence
of such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"Knowledge" of a particular fact or other matter if any Person who is a partner,
member or shareholder of such Person or who is otherwise serving, or who has
served, as a director, officer or trustee (or any capacity) of such Person has,
or at any time had, knowledge of such fact or other matter.
15.5 Entire Agreement; Assignment. This Agreement (including the
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof including, without limitation, the Letter of Intent dated December
28, 1998 and the Merger Agreement dated as of March 31, 1999, and (b) shall not
be assigned by operation of law or otherwise, except that Centerprise may assign
this Agreement to any wholly-owned subsidiary of Centerprise.
15.6 Applicable Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
15.7 Counterparts. This Agreement may be executed via facsimile or
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
15.8 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and their respective
successors, permitted assigns, heirs, legal representatives and executors and
except as expressly set forth in herein, nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
* * *
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54
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first written above.
CENTERPRISE ADVISORS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
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Its:
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▇▇▇▇▇▇▇ MERGERSUB INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:
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Its:
-------------------------------
RA MERGERSUB LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:
------------------------------
Its:
-------------------------------
VERASOURCE MERGERSUB INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:
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Its:
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THE ▇▇▇▇▇▇▇ COMPANY, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name:
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Its:
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▇▇▇▇▇▇▇ ADMINISTRATORS, L.L.C.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name:
------------------------------
Its:
-------------------------------
VERASOURCE EXCESS RISK LTD.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
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Name:
------------------------------
Its:
-------------------------------