EXHIBIT 4.1
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PAAC PURCHASE AGREEMENT
by and among
HALLMARK FINANCIAL SERVICES, INC.,
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, DONATE ▇. ▇▇▇▇▇▇▇▇▇,
and ▇▇▇▇▇ ▇. ▇▇▇▇▇
DATED AS OF NOVEMBER 23, 2005
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This Agreement is subject to arbitration under
the rules and regulations of the American
Arbitration Association as provided
in Article X hereof.
TABLE OF CONTENTS
Page
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ARTICLE I TERMS OF THE PURCHASE AND SALE......................... 1
Section 1.1 Sale of Shares................................ 1
Section 1.2 Purchase Price................................ 1
Section 1.3 Payment of the Purchase Price................. 1
Section 1.4 Effective Date of Purchase and Sale........... 2
ARTICLE II CLOSING .............................................. 2
Section 2.1 Closing....................................... 2
Section 2.2 Deliveries by the Sellers..................... 2
Section 2.3 Deliveries by Purchaser....................... 3
Section 2.4 Simultaneous Deliveries....................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS............ 3
Section 3.1 Title to Shares............................... 3
Section 3.2 Power and Authority........................... 3
Section 3.3 Execution and Validity........................ 3
Section 3.4 No Conflict; Consents......................... 4
Section 3.5 Company Organization; Good Standing; Delivery
of Charter Documents.......................... 4
Section 3.6 Corporate Power and Authority................. 4
Section 3.7 Capitalization................................ 4
Section 3.8 No Undisclosed Liabilities.................... 4
Section 3.9 Sufficiency and Condition of and Title to the
Company Assets................................ 4
Section 3.10 Real and Personal Property.................... 5
Section 3.11 Compliance with Laws.......................... 5
Section 3.12 Insurance..................................... 6
Section 3.13 Contracts..................................... 6
Section 3.14 Litigation; Orders............................ 6
Section 3.15 Permits....................................... 6
Section 3.16 Intangible Assets............................. 6
Section 3.17 Employees..................................... 7
Section 3.18 Employee Benefits............................. 7
Section 3.19 Taxes......................................... 9
Section 3.20 Bank Accounts; Powers of Attorney............. 9
Section 3.21 Affiliated Transactions....................... 9
Section 3.22 Books and Records............................. 10
Section 3.23 Full Disclosure............................... 10
Section 3.24 Brokers....................................... 10
Section 3.25 Absence of Sensitive Payment.................. 10
Section 3.26 Financial Statements.......................... 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER........... 11
Section 4.1 Organization; Good Standing; Delivery
of Charter Documents.......................... 11
Section 4.2 Power and Authority........................... 11
Section 4.3 Authorization; Execution and Validity......... 11
Section 4.4 No Conflict; Purchaser Consents............... 11
Section 4.5 Full Disclosure............................... 11
Section 4.6 Brokers....................................... 11
ARTICLE V COVENANTS OF SELLERS................................... 11
Section 5.1 Cooperation of the Sellers.................... 11
Section 5.2 Pre-Closing Access to Information............. 12
Section 5.3 Conduct of Business........................... 12
Section 5.4 No Business Changes........................... 12
Section 5.5 Permitted Actions............................. 12
Section 5.6 Supplements to Schedules...................... 13
Section 5.7 Standstill.................................... 13
Section 5.8 Discharge of Encumbrances..................... 13
Section 5.9 Non-Disclosure; Non-Competition;
Non-Solicitation.............................. 13
ARTICLE VI COVENANTS OF PURCHASER................................ 15
Section 6.1 Cooperation by Purchaser...................... 15
Section 6.2 Confidentiality Agreement..................... 15
ARTICLE VII MUTUAL COVENANTS..................................... 16
Section 7.1 Fees and Expenses............................. 16
Section 7.2 Governmental Consents......................... 16
Section 7.3 Consents to Assign Leases and Contracts....... 16
Section 7.4 Permits....................................... 16
Section 7.5 Further Assurances............................ 17
Section 7.6 Supplemental Agreements and Consents.......... 17
Section 7.7 Tax Matters................................... 17
Section 7.8 Employee Benefit Plans; Employment............ 17
ARTICLE VIII CONDITIONS PRECEDENT TO CLOSING..................... 18
Section 8.1 Conditions Precedent to Purchaser's
Obligations................................... 18
Section 8.2 Conditions Precedent to the Sellers'
Obligations................................... 19
ARTICLE IX TERMINATION PRIOR TO CLOSING.......................... 19
Section 9.1 Termination of Agreement...................... 19
Section 9.2 Procedure Upon Termination.................... 20
ARTICLE X INDEMNIFICATION AND OFFSET............................. 20
Section 10.1 Indemnification by Sellers.................... 20
Section 10.2 Indemnification by Buyer...................... 20
Section 10.3 Claims for Indemnification.................... 20
Section 10.4 Defense by Indemnifying Party................. 21
Section 10.5 Offset........................................ 21
ARTICLE XI ARBITRATION AND EQUITABLE REMEDIES.................... 22
Section 11.1 Settlement Meeting............................ 22
Section 11.2 Arbitration Proceedings....................... 22
Section 11.3 Place of Arbitration.......................... 22
Section 11.4 Discovery..................................... 22
Section 11.5 Equitable Remedies............................ 23
Section 11.6 Exclusive Jurisdiction........................ 23
Section 11.7 Judgments..................................... 23
Section 11.8 Expenses...................................... 23
Section 11.9 Cost of the Arbitration....................... 23
Section 11.10 Exclusivity of Remedies....................... 23
ARTICLE XII MISCELLANEOUS........................................ 23
Section 12.1 Amendment..................................... 23
Section 12.2 Counterparts.................................. 23
Section 12.3 Entire Agreement.............................. 24
Section 12.4 Expenses...................................... 24
Section 12.5 GOVERNING LAW................................. 24
Section 12.6 Consent to Service of Process................. 24
Section 12.7 No Assignment................................. 24
Section 12.8 No Third Party Beneficiaries.................. 24
Section 12.9 Notices....................................... 24
Section 12.10 Public Announcements.......................... 25
Section 12.11 Representation by Legal Counsel............... 26
Section 12.12 Schedules..................................... 26
Section 12.13 Severability.................................. 26
Section 12.14 Specific Performance.......................... 26
Section 12.15 Successors.................................... 26
Section 12.16 Time of the Essence........................... 26
Section 12.17 Waiver........................................ 26
SCHEDULES
Schedule 1.1 Shares
Schedule 3.7 Capitalization
Schedule 3.8 Undisclosed Liabilities
Schedule 3.10(b) Leased Real Property
Schedule 3.10(c) Owned Personal Property
Schedule 3.10(d) Leased Personal Property
Schedule 3.10(e) Personal Property Owned by Others
Schedule 3.12 Insurance
Schedule 3.13 Contracts
Schedule 3.14 Litigation
Schedule 3.15 Permits
Schedule 3.16(a) Owned Intangible Assets
Schedule 3.16(b) Licensed Intangible Assets
Schedule 3.17(a) Employees
Schedule 3.17(b) Employee Contracts
Schedule 3.18(a) Identification of Company Plans and Exceptions
Schedule 3.19(c) Taxes
Schedule 3.20 Bank Accounts; Powers of Attorney
Schedule 3.21 Affiliated Transactions
Schedule 3.26 Financial Statements
Schedule 5.8 Encumbrances Not Discharged
Schedule 7.3(b) Pre-Closing; Required Consents
Schedule 7.4(b) Pre-Closing; Required Permits
Schedule 7.8(a) Assumed Plans
PAAC PURCHASE AGREEMENT
THIS PAAC PURCHASE AGREEMENT (this "Agreement"), dated as of November
23, 2005 (the "Signing Date"), is made by and among Hallmark Financial
Services, Inc., a Nevada corporation ("Purchaser"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Donate ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇ (individually, a "Seller" and,
collectively, the "Sellers").
PRELIMINARY STATEMENTS
A. The Sellers collectively own all of the issued and outstanding
shares of the Class A common stock, no par value per share (the "Stock"),
of Pan American Acceptance Corporation, a Texas corporation ("PAAC" or the
"Company"), which shares constitute all the issued and outstanding equity
securities of PAAC.
B. Purchaser and the Sellers are collectively referred to herein as
the "Parties" or individually as a "Party."
C. The Sellers desires to sell, and the Purchaser desires to
purchase, all of the Stock on the terms and subject to the conditions set
forth in this Agreement.
E. Capitalized terms used in this Agreement and rules of construction
are defined or indexed in Appendix A for the convenience of the reader and
in order to eliminate the need for cross-references. Appendix A is
incorporated herein by this reference.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties set forth in this
Agreement and for other good, valid and binding consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties, intending to
be legally bound, hereby agree as follows:
ARTICLE I
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TERMS OF THE PURCHASE AND SALE
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Section 1.1 Sale of Shares. Subject to the terms and conditions and
in reliance upon the representations and warranties set forth in this
Agreement, at the Closing each Seller shall sell and assign to Purchaser,
and Purchaser shall purchase and acquire from each Seller, the number of
shares of the Stock listed on Schedule 1.1 opposite the name of such Seller
(collectively, the "Shares"), in each case free and clear of all
Encumbrances, for the Purchase Price set forth in Section 1.2 hereof. Such
Shares shall represent all of the issued and outstanding capital stock of
any class of PAAC.
Section 1.2 Purchase Price. The total consideration for the Shares
(the "Purchase Price") shall be $725,000.00.
Section 1.3 Payment of the Purchase Price. The Purchase Price shall
be payable to the Sellers at the Closing in proportion to their ownership of
the Stock, as set forth in Schedule 1.1.
Section 1.4 Effective Date of Purchase and Sale. The Parties
hereto agree that the effective date for the sale of the Shares shall be the
earlier of the Closing Date or January 1, 2006 (the "Effective Date").
ARTICLE II
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CLOSING
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Section 2.1 Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of ▇▇▇▇ ▇▇▇▇▇▇▇, P.C., ▇▇▇▇ ▇▇-▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ on the first business day of the calendar month following the
date on which all of the conditions set forth in Article VIII, to the extent
not waived, are satisfied. The Closing may be postponed to such other date
as the Parties may mutually agree. The date on which the Closing actually
occurs is hereinafter referred to as the "Closing Date."
Section 2.2 Deliveries by the Sellers. At the Closing, the Sellers
or each Seller, as the case may be, shall deliver the following:
(a) the closing and secretary's certificates referred to in Section
8.1(e) and Section 8.1(f);
(b) certificates representing the number of Shares of the Stock listed
on Schedule 1.1 opposite the name of each Seller, in each case duly endorsed
in blank or accompanied by duly executed stock transfer powers in favor of
Purchaser dated the Effective Date;
(c) a certificate dated within ten (10) business days prior the
Closing Date from the Secretary of State of the State of Texas certifying as
to the Company's valid existence and good standing in such jurisdiction;
(d) the recorded Charter Documents of the Company, recently certified
by the Secretary of State of the State of Texas;
(e) all Books and Records of the Company;
(f) executed counterparts of all Required Consents and Required
Permits;
(g) a receipt for the payment of the Purchase Price;
(h) each of the agreements referred to in Section 7.6(a) to which any
Seller is a party, each executed by the appropriate Seller(s);
(i) each of the consents referred to in Section 7.6(b);
(j) a written opinion of counsel to the Sellers addressed to the
Purchaser confirming that the representations and warranties contained in
Section 3.1 through Section 3.7 hereof are true, correct and complete and
that, to the best of such counsel's knowledge, the Sellers' other
representations and warranties are true, correct and complete, which opinion
shall be in form and substance reasonably satisfactory to the Purchaser and
its counsel; and
(k) all other previously undelivered documents, instruments and
writings required to be delivered by the Sellers to Purchaser at or prior to
the Closing pursuant to this Agreement and such other documents, instruments
and certificates as Purchaser may reasonably request in connection with the
transactions contemplated by this Agreement.
Section 2.3 Deliveries by Purchaser. At the Closing, Purchaser
shall deliver, or cause to be delivered, to the Sellers the following:
(a) the Purchase Price;
(b) the closing and secretary's certificates referred to in Sections
8.2(d) and 8.2(e);
(c) each of the agreements referred to in Section 7.6(a) to which
Purchaser is a party, each executed by Purchaser;
(d) all other previously undelivered documents, instruments and
writings required to be delivered by Purchaser to the Sellers at or prior to
the Closing pursuant to this Agreement and such other documents, instruments
and certificates as the Sellers may reasonably request in connection with
the transactions contemplated by this Agreement.
Section 2.4 Simultaneous Deliveries. The delivery of the documents
required to be delivered at the Closing pursuant to this Agreement shall be
deemed to occur simultaneously. No delivery shall be effective until each
Party has received, or waived receipt of, all the documents that this
Agreement entitles such Party to receive.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF SELLERS
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Each Seller, jointly and severally, hereby represents and warrants to
Purchaser that the statements made in this Article III are true, correct and
complete.
Section 3.1 Title to Shares. Each Seller is the record and
beneficial owner of the number of Shares of the Stock listed on Schedule 1.1
opposite the name of such Seller, free and clear of all Encumbrances. At
the Closing, each Seller will transfer to Purchaser its entire right, title
and interest in and to the Shares free and clear of all Encumbrances.
Section 3.2 Power and Authority. Each Seller has the requisite
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby, including the execution, delivery and performance of all of the
Transaction Documents to which such Seller is a party.
Section 3.3 Execution and Validity. Each of the Transaction
Documents, when executed by each Seller and delivered to Purchaser, will
constitute a valid, legal and binding obligation of such Seller, enforceable
against such Seller in accordance with the terms of such Transaction
Document, subject to any Law Affecting Creditors' Rights.
Section 3.4 No Conflict; Consents. The execution, delivery and
performance by each Seller of each Transaction Document will not (a) violate
any Law, (b) violate any of the Charter Documents of any of the Companies,
(c) violate any Order to which such Seller or the Company is a party or by
which such Seller, the Company or any of their respective assets are bound,
(d) result in the creation of any Encumbrance on any of the Shares, or (e)
require any Consent from any Person that will not be obtained and delivered
on or before the Closing.
Section 3.5 Company Organization; Good Standing; Delivery of Charter
Documents. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas. The Company is
duly qualified or licensed as a foreign corporation in each jurisdiction in
which the nature of the Company's business makes qualification or licensing
necessary. Prior to the Signing Date, the Company has delivered, or caused
to be delivered, to Purchaser true and complete copies of the Charter
Documents of the Company as in effect on the Signing Date.
Section 3.6 Corporate Power and Authority. The Company has all
the requisite corporate power and authority necessary to own, operate and
lease its assets and to carry on its business as and where conducted.
Section 3.7 Capitalization. Schedule 3.7 lists the total number
of authorized, issued and outstanding shares of all classes of the capital
stock of the Company and the record holder(s) of all such issued and
outstanding shares. All issued and outstanding shares of the Company have
been duly authorized and validly issued and are fully paid and
nonassessable. There is no authorized or outstanding option, subscription,
warrant, call, preemptive right, commitment or other right or agreement
(each, a "Subscription Right") obligating the Company to issue or sell any
shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock. None of the shares of the
Company were issued or will be transferred pursuant to this Agreement in
violation of any preemptive or preferential rights or rights of first
refusal of any Person. Other than as reflected in Schedule 3.7, the Company
does not have any subsidiaries or own any shares of capital stock,
partnership interests or other beneficial ownership interests in any other
Person.
Section 3.8 No Undisclosed Liabilities. Except as set forth in
Schedule 3.8, the Company is not subject to any Claim of any nature,
absolute or contingent, and no events have occurred or circumstances exist
that could give rise to any future Claim, that could have a Material Adverse
Effect on the assets or business of the Company.
Section 3.9 Sufficiency and Condition of and Title to the Company
Assets.
(a) Sufficiency of the Company Assets. The assets reflected on the
Books and Records of the Company (collectively, the "Company Assets")
constitute all the assets, properties, licenses and other arrangements which
are presently being used or are reasonably related to the business of the
Company, and are sufficient to operate such business in a manner consistent
with past practice and historic capacity.
(b) Condition of the Company Assets. Each of the Company Assets
complies with Law and is in good and normal operating condition and repair,
structurally sound with no known defects (ordinary wear and tear excepted),
and suitable for its intended use.
(c) Title to the Company Assets. At the Closing, the Company will
hold good, valid and indefeasible title to, or a valid leasehold interest
in, each of the Company Assets, free and clear of all Encumbrances, other
than Permitted Encumbrances.
(d) No Transfers. Except as expressly provided herein, during the six
month period preceding the Closing Date, the Company has not transferred any
Company Assets to a Seller or affiliate of any Seller nor has the Company
made any distribution of cash to any Seller or affiliate of any Seller,
except for salaries and expense reimbursement in the ordinary course of
business.
Section 3.10 Real and Personal Property.
(a) Owned Real Property. The Company does not own any interest in
real property.
(b) Leased Real Property. Schedule 3.10(b) lists, as of the Signing
Date, all leases of real property (collectively, the "Real Property Leases")
to which the Company is a party. As of the Signing Date, all of the Real
Property Leases are valid, binding and in full force and effect. Neither
the Company nor, to the Sellers' Knowledge, any other Person is in default
under any of the Real Property Leases, nor is there any event or
circumstance which with notice or lapse of time, or both, would constitute a
default thereunder by the Company or any other Person.
(c) Owned Personal Property. Schedule 3.10(c) lists, as of the
Signing Date, all of the depreciable personal property (including all
machinery, equipment, vehicles, structures, fixtures and furniture) owned by
the Company and used in the business of the Company or located on its
premises.
(d) Leased Personal Property. Schedule 3.10(d) lists, as of the
Signing Date, all leases of personal property (collectively, the "Personal
Property Leases") to which the Company is a party. As of the Signing Date,
all of the Personal Property Leases are valid, binding and in full force and
effect. Neither the Company nor, to the Sellers' Knowledge, any other
Person is in default under any of the Personal Property Leases, nor is there
any event or circumstance which with notice or lapse of time, or both, would
constitute a default thereunder by the Company or any other Person.
(e) Personal Property Owned by Others. Schedule 3.10(e) lists, as of
the Signing Date, all artwork, memorabilia and other personal property
routinely located on the premises of the Company which is not owned by the
Company, together with the name(s) of the owner(s) of such personal
property.
Section 3.11 Compliance with Laws. The Company has complied with
all Laws in the conduct of its business. The Company has not received any
notice from any Governmental Authority or other Person asserting that the
Company has violated any Law. No events have occurred or, to Sellers'
Knowledge, circumstances exist that could cause the Company to violate any
Law in the future.
Section 3.12 Insurance. Schedule 3.12 lists, as of the Signing
Date, all insurance policies which insure the business of the Company or any
of the assets of the Company against loss (collectively, the "Insurance
Policies"), including each insurer's name, coverage deductible and limit,
expiration date and current premium. Each Insurance Policy is in full force
and effect, all premiums with respect thereto have been paid to the extent
due, and no notice of cancellation or termination has been received with
respect to any such policy, other than any policy that will be replaced or
is intended to be replaced prior to the expiration thereof by policies
providing substantially the same coverage from an insurer that is
financially sound and reputable. The Insurance Policies provide the Company
with adequate insurance coverage against the risks involved in the conduct
of the business of the Company and ownership of the assets of the Company.
The coverage provided by the Insurance Policies will not in any way be
affected by, or terminate or lapse by reason of, the consummation of the
transactions contemplated by this Agreement. True and complete copies of
all Insurance Policies have been provided to Purchaser.
Section 3.13 Contracts. Schedule 3.13 lists, as of the Signing
Date, all contracts relating to the business and assets of the Company or by
which any of the assets of the Company is bound, pursuant to which the
obligations of any party thereto are, or are contemplated to be, with
respect to any such contract (a) in excess of $10,000 during any twelve
month period during the term thereof, (b) not terminable prior to 90 days
after the Signing Date, or (c) otherwise material to the business of the
Company. All of the contracts listed on Schedule 3.13 and any contracts
entered into after the Signing Date in accordance with Section 5.3
(collectively, the "Material Contracts") are or will be valid and binding
and in full force and effect, subject to Laws Affecting Creditors' Rights.
Neither the Company nor, to the Sellers' Knowledge, any other Person is in
default under any Material Contract, nor is there any event or circumstance
which with notice or lapse of time, or both, would constitute a default
thereunder by the Company or any other Person. The Company is not a party
to any contract which (x) requires the Consent of any Person in order to
consummate the transactions contemplated by this Agreement, except as
otherwise stated on Schedule 3.13, (y) is in excess of the normal, ordinary
and usual requirements of the business of the Company, or (z) is excessive
in price or quantity. True and complete copies of all the Material
Contracts have been provided to Purchaser.
Section 3.14 Litigation; Orders. Except as set forth in Schedule
3.14, there are no Actions pending, or to the Sellers' Knowledge, threatened
against or affecting the Company, its business or any of its assets as of
the Signing Date. The Company is not subject to any Order.
Section 3.15 Permits. Schedule 3.15 lists all of the Permits
related to the assets of the Company or operation of the business of the
Company, and indicates those Permits for which the Consent of any Person is
required to assign such Permit. The Company has obtained, maintains in
effect, and complies with the terms and conditions of all Permits required
by Law. There is no Action pending or, to the Sellers' Knowledge,
threatened in writing to revoke or limit any Permit listed on Schedule 3.15.
The Company has all Permits necessary for the business of the Company as
presently conducted.
Section 3.16 Intangible Assets.
(a) Owned Intangible Assets. Schedule 3.16(a) lists all of the
Intangible Assets owned by the Company as of the Signing Date. With respect
to the Intangible Assets listed on Schedule 3.16(a) and all of the
Intangible Assets obtained or developed prior to the Closing, (i) the
Company owns all right, title and interest in and to such Intangible Assets
free and clear of all Encumbrances, (ii) the Company has not sold,
transferred, licensed, sub-licensed or conveyed any interest in any of such
Intangible Assets, and (iii) to Sellers' Knowledge, no Person has infringed
upon or misappropriated any of such Intangible Assets.
(b) Licensed Intangible Assets. Schedule 3.16(b) lists all licenses
and contracts related to any Intangible Asset used by the Company as of the
Signing Date. Each license or contract listed on Schedule 3.16(b) and each
license or contract related to an Intangible Asset which is entered into
after the Signing Date in accordance with Section 5.3 is valid, binding
and in full force and effect. The Company has not infringed upon or
misappropriated any Intangible Asset owned by another Person.
Section 3.17 Employees.
(a) Employees. Schedule 3.17(a) lists the name, job title, date of
employment and current annual compensation (salary, bonus and participation
in any non-qualified deferred or incentive compensation arrangement) for
each employee of the Company employed as of the Signing Date (collectively,
the "Employees"). All Employees are either United States citizens or
otherwise authorized to engage in employment in the United States in
accordance with all Laws. All sums due for Employee compensation and
benefits and all vacation time owing to any Employee (including all persons
whose employment by the Company is terminated prior to the Signing Date)
have been duly and adequately accrued on the accounting Books and Records of
the Company.
(b) Contracts. Except as set forth in Schedule 3.17(b), the Company
is not a party to (i) any contract for employment between the Company and an
Employee of the Company that cannot be terminated at will without cost, or
(ii) any collective bargaining agreement or other contract to or with any
labor union, Employee representative or group of Employees. The Company's
employment of an Employee of the Company is terminable at will without any
penalty or severance obligation of any kind on the part of the Company.
(c) Compliance with Labor Laws. The Company has complied and is
presently complying with all Laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and is
not engaged in any unfair labor practice or unlawful employment practice.
Section 3.18 Employee Benefits.
(a) Identification of Company Plans. Schedule 3.18(a) sets forth a
list of all Employee Benefit Plans which provide compensation or benefits to
employees, officers, directors or consultants of the Company including,
without limitation, all Employee Benefit Plans and all employment or
executive compensation agreements (collectively, the "Company Plans").
Sellers have delivered to Purchaser true and complete copies of: (i) each of
the Company Plans and any related funding agreements thereto (including
insurance contracts) including all amendments, all of which are legally
valid and binding and in full force and effect and there are no defaults
thereunder, (ii) the currently effective Summary Plan Description pertaining
to each of the Company Plans, (iii) the three most recent annual reports for
each of the Company Plans, (iv) the most recent IRS determination letter for
each Company Plan which is intended to constitute a qualified plan under
Section 401 of the Code, and (v) financial statements for each funded
Company Plan. Notwithstanding any statement or indication in this Agreement
to the contrary, except as disclosed on Schedule 3.18(a), there are no
Company Plans which the Company or Purchaser will not be able to terminate
(or in which the Company will not be able to terminate the participation of
its employees) immediately after the Closing in accordance with their terms
and ERISA, and without incurring any expenses (including, but not limited
to, loads or termination charges imposed with respect to insurance policies
or mutual funds used to fund such Company Plans), other than administrative
expenses in connection with such termination and benefits accrued as of the
date of termination.
(b) Compliance with Applicable Laws. All Company Plans comply with
and are and have been operated in material compliance with each applicable
provision of ERISA, the Code, other federal statutes, state Law (including,
without limitation, state insurance Law) and the regulations and rules
promulgated pursuant thereto or in connection therewith. Neither the
Company nor any member of the same controlled group of businesses as the
Company within the meaning of Section 4001(a)(14) of ERISA (an "ERISA
Affiliate") has failed to make any material contributions or to pay any
material amounts due and owing as required by the terms of any Company Plan.
Other than routine claims for benefits under the Company Plans, there are no
pending or, to Sellers' Knowledge, threatened investigations, proceedings,
claims, lawsuits, disputes, actions, audits or controversies involving the
Company Plans or the fiduciaries, administrators, or trustees of any of the
Company Plans or any ERISA Affiliate as the employer or sponsor under any
Company Plan, with any of the IRS, the Department of Labor, the Pension
Benefit Guaranty Corporation, any participant in or beneficiary of any
Company Plan or any other Person whomsoever. To Sellers' Knowledge, there
is no reasonable basis for any such claim, lawsuit, dispute, action or
controversy.
(c) Pension Benefit Plans. Neither the Company nor any ERISA
Affiliate is or ever has been a sponsor or obligated to contribute to any
plan covered by Title IV of ERISA or Section 412 of the Code, or any
"multiemployer plan," within the meaning of Section 3(37) of ERISA. Each of
the Company Plans which is intended to be a qualified plan under Section
401(a) of the Code has received a favorable determination letter from the
IRS, and has been operated substantially in accordance with its terms and
with the provisions of the Code.
(d) Welfare Benefit Plans. Each Company Plan which is required to
comply with the provisions of Part 6 of Title I of ERISA, Section 601 et
seq., and Code Section 4980B and the provisions of Part 7 of Title I of
ERISA, Section 701 et seq., and Code Section 4980D has complied in all
material respects. Except as required by such Sections of the Code, no
Company Plan which is a Welfare Benefit Plan provides for any post-
employment benefits.
(e) Effect of Consummation. The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee of the Company or any other individual to a bonus, severance pay,
unemployment compensation or similar payment by the Company, (ii) otherwise
accelerate the time of payment or vesting, or increase the amount of any
compensation due to any current or former employee of the Company, (iii)
result in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available, or (iv) in
any way result in any liability of the Company with respect to any Employee
Benefit Plan of any Person. The Company is not a party or subject to any
agreement, contract or other obligation which would require the making of
any payment, other than payments as contemplated by this Agreement, to any
employee of the Company, Sellers or to any other Person as a result of the
consummation of the transactions contemplated herein.
Section 3.19 Taxes.
(a) Tax Returns. All Tax returns (including amended returns and
claims for refund), reports, and declarations of estimated Tax
(collectively, "Returns") which were required to be filed by the Company
with any Governmental Authority have been timely filed. All Returns are
true and correct and accurately reflect the Tax liabilities of the Company.
All Taxes shown to be due pursuant to such Returns have been paid in full.
(b) Statute of Limitations and Tax Actions. The Company has not
executed any presently effective waiver or extension of any statute of
limitations against assessments and collection of Taxes. There are no
pending or, to the Sellers' Knowledge, threatened Claims, assessments,
notices, proposals to assess, deficiencies or audits with respect to Taxes.
(c) Miscellaneous Tax Representations. Proper and accurate amounts
have been withheld and remitted by the Company from and with respect to all
Persons from whom it is required by applicable law to withhold for all
periods in compliance with the tax withholding provisions of all Laws.
Neither the Company nor, to the Sellers' Knowledge, any other corporation
has filed an election under Section 341(f) of the Code that is applicable to
the Company or any of the assets of the Company. Except as listed on
Schedule 3.19(c), the Company is not a party to any tax sharing agreement.
There is no contract, plan or arrangement covering any Person that,
individually or collectively, would give rise to the payment of any amount
that would not be deductible by the Company by reason of Section 162(m) or
Section 280G of the Code. The Company is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Code. Except as listed on Schedule
3.19(c), the Company has never been a member of any group that filed a
consolidated federal income tax return.
Section 3.20 Bank Accounts; Powers of Attorney. Schedule 3.20
lists the names of (a) each bank, trust company and stock or other broker
with which the Company has an account, credit line or safe deposit box or
vault, or otherwise maintains relations (the "Bank Accounts"), (b) all
Persons authorized to draw on, or to have access to, each of the Bank
Accounts, and (c) all Persons authorized by proxies, powers of attorney or
other like instruments to act on behalf of the Company in any matter
concerning the business of the Company. Each of the Bank Accounts has a
positive cash balance. No proxies, powers of attorney or other like
instruments are irrevocable.
Section 3.21 Affiliated Transactions. Except as set forth on
Schedule 3.21, there are no outstanding loans or other transactions between
the Company and any Seller, officer, director, shareholder, consultant or
affiliate of the Company or any spouse or child of any such person. No
Seller, officer, director, shareholder, consultant or affiliate of the
Company nor any spouse or child of any such person owns or has any interest
in, directly or indirectly, any real or personal property owned by or leased
to the Company.
Section 3.22 Books and Records. The Books and Records of the
Company, all of which have been made available to Purchaser prior to the
Signing Date, are true, correct and complete and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls.
Section 3.23 Full Disclosure. No representation or warranty of any
Seller made in this Agreement, nor any written statement furnished to
Purchaser pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact which affects the business or financial condition of any
Company, or omits or will omit to state a material fact necessary to make
the statements or facts contained herein or therein not misleading.
Section 3.24 Brokers. Sellers have engaged ▇▇▇▇▇ ▇▇▇▇▇ & Company
to advise them with respect to this Transaction. The Sellers will pay all
fees of ▇▇▇▇▇ ▇▇▇▇▇ & Company pursuant to their agreement with funds other
than those of the Company. No other person is or will become entitled to
receive any brokerage or finder's fee, advisory fee or other similar payment
for the transactions contemplated by this Agreement by virtue of having been
engaged by or acted on behalf of any Seller or the Company. Sellers agree
to indemnify and defend the Purchaser and to hold Purchaser harmless from
any claim by any individual or entity asserting a broker or agency
relationship relative to this Transaction.
Section 3.25 Absence of Sensitive Payment. The Company has not
made or maintained (i) any contributions, payments or gifts of its funds or
property to any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift was or is
illegal under the laws of the United States or any state thereof, or any
other jurisdiction (foreign or domestic); or (ii) any contribution, or
reimbursement of any political gift or contribution made by any other
person, to candidates for public office, whether federal, state, local or
foreign, where such contributions by the Company were or would be a
violation of applicable law.
Section 3.26 Financial Statements. The Sellers have delivered to
the Purchaser copies of the financial statements of the Company described on
Schedule 3.26 (collectively, the "Financial Statements"). To the best of
Sellers' knowledge, the Financial Statements were prepared in accordance
with GAAP applied on a consistent basis and fairly present the financial
position of the Company as of their respective dates and the results of
operations and cash flows of the Company for the respective periods covered
thereby in accordance with GAAP (subject, in the case of unaudited
statements, to normal, recurring adjustments, consistently applied, none of
which, individually or in the aggregate, is material). Except as set forth
in Schedule 3.26, the Company does not have any material liability or
obligation of any kind or nature (fixed or contingent) which is not
reflected, reserved against or disclosed in the Financial Statements and
accompanying footnotes.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to the Sellers that the
statements set forth in this Article IV are correct and complete.
Section 4.1 Organization; Good Standing; Delivery of Charter
Documents. Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada. Purchaser is duly
qualified as a foreign corporation in the State of Texas.
Section 4.2 Power and Authority. Purchaser has all requisite
corporate power and authority necessary to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby, including the execution, delivery and
performance of all of the Transaction Documents to which Purchaser is a
party.
Section 4.3 Authorization; Execution and Validity. Each of the
Transaction Documents, when executed and delivered by Purchaser, will be
duly authorized, executed and delivered, and will constitute a valid, legal
and binding obligation of Purchaser, enforceable against Purchaser in
accordance with the terms of such Transaction Document, subject to any Law
Affecting Creditors' Rights.
Section 4.4 No Conflict; Purchaser Consents. The execution, delivery
and performance by Purchaser of each Transaction Document to which it is
a party will not (a) violate any Law, (b) violate any Charter Document
of Purchaser, (c) violate any Order to which Purchaser is a party or by
which Purchaser or its assets is bound, or (d) require any Consent from any
Person.
Section 4.5 Full Disclosure. No representation or warranty of
Purchaser made in this Agreement, nor any written statement furnished to the
Sellers pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact
which affects the business or financial condition of Purchaser, or omits or
will omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading.
Section 4.6 Brokers. No Person is or will become entitled to
receive any brokerage or finder's fee, advisory fee or other similar payment
for the transactions contemplated by this Agreement by virtue of having been
engaged by or acted on behalf of Purchaser. Purchaser agrees to indemnify
and defend Sellers and to hold Sellers harmless from any claim by any
individual or entity asserting a broker or agency relationship with
Purchaser relating to this Transaction.
ARTICLE V
---------
COVENANTS OF SELLERS
--------------------
Section 5.1 Cooperation of the Sellers. From the Signing Date
through the Closing Date, the Sellers shall use all reasonable efforts (a)
to take all actions and to do all things necessary or advisable to
consummate the transactions contemplated by this Agreement, (b) to cooperate
with Purchaser in connection with the foregoing, including using reasonable
efforts to obtain all of the Consents, and (c) subject to the other terms
and conditions of this Agreement, to cause all the conditions set forth in
Section 8.1, the satisfaction of which is in the reasonable control of such
Seller, to be satisfied on or prior to Closing.
Section 5.2 Pre-Closing Access to Information. From the Signing
Date through the Closing Date, the Sellers shall afford to Purchaser and its
Representatives access to the properties and the Books and Records of the
Company.
Section 5.3 Conduct of Business. From the Signing Date through
the Closing Date, the Sellers shall, and shall cause the Company to, use all
reasonable efforts to (i) preserve substantially the relationships with its
Representatives, suppliers and customers, (ii) perform its obligations under
all contracts, leases and Permits in all material respects, (iii) comply
with all Laws, (iv) confer with Purchaser regarding operational matters of a
material nature, (v) report periodically to Purchaser regarding the status
of its business and the results of its operations, and (vi) conduct its
business in the ordinary course and consistent with past practices.
Section 5.4 No Business Changes. From the Signing Date through
the Closing Date, the Sellers shall not, and shall cause the Company not to,
without the express written consent of the Purchaser: (i) enter into any
material agreement relating to the assets, properties or business of the
Company, other than in the ordinary course of business; (ii) incur or
discharge any material obligation or liability, except in the ordinary
course of business; (iii) commit to make or make any capital expenditures;
(iv) cancel or fail to renew any Permit; (v) impose any lien, pledge or
encumbrance upon the Shares or any of the assets of the Company; (vi) make
any change or authorize to be made any change to the Charter Documents of
the Company; (vii) declare, set aside, or pay any dividend or make any
distribution with respect to the Shares (whether in cash or in kind) or
redeem, purchase, or otherwise acquire any of the Shares; (viii) issue,
deliver or sell any shares of the capital stock of any class of the Company
or split, combine or reclassify any of the capital stock of the Company;
(ix) incur any indebtedness for borrowed money; (x) forgive or cancel any
indebtedness owing to the Company or waive any claims or rights of value
belonging to the Company, (xi) sell, lease, license or otherwise dispose of
any of the assets or properties of the Company, other than in the ordinary
course of business; (xii) pay or increase the rate or terms of compensation
or benefits payable to or to become payable to any of the directors,
officers, employees, consultants or agents of the Company above the amounts
reflected in Schedule 3.17(a); (xiii) amend or otherwise make any changes to
any of the Company Plans or increase the rate or terms of any benefits
payable under the Company Plans; (xiv) make any other change in the terms of
employment of any Employee, other than in the ordinary course of business;
(xv) make or rescind any express or deemed election relating to any Tax; or
(xvi) commit pursuant to a legally binding agreement to do any of the
foregoing.
Section 5.5 Permitted Actions. Notwithstanding the provisions of
Section 5.3 and Section 5.4, after the Signing Date but prior to the
Closing Date, the Sellers shall be permitted to cause PAAC to declare and
pay to Sellers (or such other employees of PAAC as the Sellers may
determine) cash bonus compensation in an amount equal to the lesser of: (i)
the net income of PAAC for the nine months ended September 30, 2005, as
reflected in the interim Financial Statements for such period prepared on a
consistent basis with past practice; or (ii) 110% of the net income of PAAC
for the nine months ended September 30, 2004, as reflected in the interim
Financial Statements for such period prepared on a consistent basis with
past practice.
Section 5.6 Supplements to Schedules. If, between the Signing
Date and the Closing Date, any Seller becomes aware that any of its
representations and warranties in this Agreement or the schedules to this
Agreement was inaccurate when made or if during such period any event occurs
or condition changes that causes any of such representations and warranties
to be inaccurate, then such Seller shall notify Purchaser thereof in writing
and supplement the schedules hereto to account for any such inaccuracy,
event or change. Any such supplement to the schedules shall not be deemed
to have been disclosed as of the Signing Date, or to have cured any breach
of a representation and warranty made in this Agreement, unless so agreed in
writing by Purchaser.
Section 5.7 Standstill. Until the earlier to occur of the Closing
or the termination of this Agreement pursuant to Article IX, each Seller
shall not, nor shall any Seller permit the Company or any of its
Representatives to, (a) directly or indirectly encourage, solicit, initiate
or participate in discussions or negotiations with, or provide any
information or assistance to, any Person (other than Purchaser and its
Representatives) concerning any merger, sale of securities, sale of
substantial assets, investment proposals or similar transaction involving
the Company, (b) entertain or discuss any acquisition or investment
proposals whatsoever with respect to the Company, (c) except as required by
law after not less than five days notice to Purchaser, disclose to any third
party any non-published information concerning the Company, the business of
the Company or the Company's financial condition, or (d) withdraw such
Seller's intention to sell its Shares to Purchaser. Each Seller shall, and
shall cause the Company to, promptly notify Purchaser if it receives any
such proposal or offer or any inquiry or contact with respect thereto.
Until termination of this Agreement, no Seller will, directly or indirectly,
(i) sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any of its Shares, or (ii) grant any proxies, deposit any
Shares into a voting trust or enter into a voting agreement with respect to
such Shares.
Section 5.8 Discharge of Encumbrances. Except as set forth in
Schedule 5.8, the Company and each Seller shall take all actions and do all
things necessary to cause all Encumbrances, other than Permitted
Encumbrances, on any of the Shares or the assets of the Company to be
terminated or otherwise discharged at or prior to the Closing.
Section 5.9 Non-Disclosure; Non-Competition; Non-Solicitation.
(a) Non-Disclosure Agreement. Sellers acknowledge that the
Confidential Information obtained or possessed by them will be the property
of Purchaser and the Company from and after the Closing Date. Therefore,
Sellers each agree that they will not (i) disclose to any person, either
directly or indirectly, any Confidential Information, unless and solely to
the extent that such Confidential Information is required to be disclosed by
law or pursuant to a final judicial order or decree, (ii) use for its own
account or use, cause, facilitate or allow any third party to use
Confidential Information in any way, or (iii) remove any Confidential
Information or any copy, summary or compilation of any kind of any
Confidential Information from the premises of the Company or the premises of
the Company's customers following the Closing Date. Sellers further agree
to deliver to Purchaser all memoranda, notes, plans, records, reports and
other documents (and copies thereof) relating to the Company or the conduct
of the Company's business that they may possess or have under control at the
Closing Date.
(b) Work Product. All records and documents embodying any
Confidential Information or pertaining to the existing or contemplated scope
of the Company's business, which have been conceived, prepared or developed
by a Seller in connection with his ownership interest in the Company, use by
the Company or otherwise, either alone or with others (herein called "Work
Product"), shall be the sole property of the Company. At or prior to the
Closing Date, such Seller shall deliver all Work Product to the Company.
(c) Non-Competition Agreement. For a period of five (5) years after
the Closing, no Seller shall, directly or indirectly, without the express
written consent of the Purchaser, (i) own, engage in, manage, operate, join,
control, or participate in the ownership, management, operation, or control
of, or be connected as a stockholder, director, officer, employee, agent,
partner, joint venturer, member, beneficiary, or otherwise with, in any
"Competing Business" (defined below) anywhere in the "Restricted
Territories" (defined below); (ii) induce any customers of the Company to
patronize any Competing Business; (iii) solicit or accept any Competing
Business from any customer of the Company; (iv) request or advise any
customers of the Company to withdraw, curtail or cancel such customer's
business with the Company; or (v) disclose to any other person, firm or
corporation engaged in any Competing Business the names or addresses of any
of the customers of the Company. For purposes of this Agreement, the term
"Competing Business" is defined to mean any activity or business that is or
would be competitive with the business conducted by the Company at any time
prior to the Closing. The term "Restricted Territories" is defined to mean
the states of Arkansas, Louisiana, New Mexico, Oklahoma, and Texas.
(d) Non-Solicitation Agreement. For a period of five (5) years after
the Closing each Seller shall not, either on its own behalf or on behalf of
any business competing with Purchaser, directly or indirectly (i) solicit or
induce, or in any manner attempt to solicit or induce any person employed
by, or an agent of, the Company or Purchaser to terminate such person's
employment or agency, as the case may be, with such entity, or (ii) solicit,
divert, or attempt to solicit or divert, or otherwise accept as a supplier
or customer, any Person which sells or furnishes any products or services
to, or receives any products or services from, the Company or Purchaser, nor
will such Seller attempt to induce any such supplier or customer to cease
being (or any prospective supplier or customer not to become) a supplier or
customer of the Company or Purchaser.
(e) Modification of Restrictions. Sellers agree that if an arbitrator
or a court of competent jurisdiction determines that the length of time or
any other restriction, or portion thereof, set forth in this Section 5.8 is
overly restrictive and unenforceable, the arbitrator or court shall reduce
or modify such restrictions to those which it deems reasonable and
enforceable under the circumstances, and as so reduced or modified, the
Parties agree that the restrictions of this Section 5.8 shall remain in full
force and effect. Sellers further agree that if an arbitrator or court of
competent jurisdiction determines that any provision of this Section 5.8 is
invalid or against public policy, the remaining provisions of this
Section 5.8 and the remainder of this Agreement shall not be affected
thereby, and shall remain in full force and effect.
(f) Injunctive Relief. In the event of any pending, threatened or
actual breach of any of the covenants or provisions of this Section 5.8, as
determined by an arbitrator or a court of competent jurisdiction, it is
understood and agreed by Sellers that the remedy at law for a breach of any
of the covenants or provisions of this Section 5.8 may be inadequate and,
therefore, the Purchaser and the Company shall be entitled to a restraining
order or injunctive relief in addition to any other remedies at law and in
equity, as determined by an arbitrator or a court of competent jurisdiction.
The Sellers waive any bond, surety, or other security that might be required
of the Purchaser or the Company as a condition of any such restraining order
or injunctive relief.
(g) Acknowledgments of Sellers. Each Seller acknowledges that (i) any
public disclosure of the Confidential Information will have an adverse
effect on the Company, Purchaser and the business of the Company, (ii) the
Company and Purchaser would suffer irreparable injury if a Seller breaches
any of the terms of this Section 5.8, (iii) the Company and Purchaser will
be at a substantial competitive disadvantage if such entity fails to acquire
and maintain exclusive ownership of the Confidential Information or to abide
by the restrictions provided for in this Section 5.8, (iv) the scope of the
protective restrictions provided for in this Section 5.8 are reasonable when
taking into account (A) the negotiations between the Parties and (B) that
the Sellers are the direct beneficiary of the Purchase Price paid pursuant
to this Agreement, (v) the consideration being paid to the Sellers pursuant
to this Agreement is sufficient inducement for the Sellers to agree to the
terms hereof, (vi) the provisions of this Section 5.8 are reasonable and
necessary to protect the business of the Company, to prevent the improper
use or disclosure of the Confidential Information and to provide the Company
and Purchaser with exclusive ownership of all such Confidential Information
and (vii) the terms of this Section 5.8 preclude the Sellers from engaging
in the conduct of the business of the Company for a reasonable period.
(h) Release. Each Seller, in the capacity as a shareholder, director,
officer and/or employee of the Company, as applicable, hereby agrees to
execute and deliver on the Closing Date, in a form reasonably satisfactory
to the Purchaser, a written release of the Company from any and all claims
resulting from or related to any matter arising prior to the Closing Date,
except as provided in this Agreement.
ARTICLE VI
----------
COVENANTS OF PURCHASER
----------------------
Section 6.1 Cooperation by Purchaser. From the Signing Date
through the Closing Date, Purchaser shall use all reasonable efforts (a) to
take all actions and to do all things necessary or advisable to consummate
the transactions contemplated by this Agreement, (b) to cooperate with the
Company and each Seller in connection with the foregoing, including using
reasonable efforts to obtain all of the Consents and the Releases, and (c)
subject to the other terms and conditions of this Agreement, to cause all
the conditions set forth in Section 8.2, the satisfaction of which is in the
reasonable control of Purchaser, to be satisfied on or prior to Closing.
Section 6.2 Confidentiality Agreement. The Purchaser acknowledges
and agrees that, through the Closing Date, the Purchaser remains bound by
that certain Confidentiality Agreement with Texas General Agency, Inc. dated
May 25, 2005.
ARTICLE VII
-----------
MUTUAL COVENANTS
----------------
Section 7.1 Fees and Expenses. Each Party hereto will be
responsible for and bear all its own costs and expenses incurred at any time
in connection with pursuing, negotiating or consummating this Agreement and
all other agreements contemplated by the Transaction Documents, including
without limitation the preparation, negotiation and execution of the Letter
of Interest related hereto. Such costs and expenses incurred by Sellers
will be paid by Sellers with funds other than those of the Company.
Section 7.2 Governmental Consents. Promptly after the Signing
Date, each Party shall take all actions and do all things necessary to
obtain all Consents required by any Governmental Authority to consummate the
transactions contemplated hereby.
Section 7.3 Consents to Assign Leases and Contracts.
(a) Cooperation and Reasonable Efforts. Each Party hereby agrees to
use reasonable efforts, to take reasonable actions (including Purchaser's
delivery to third parties of its audited financial statements) and to
cooperate with each other as may be necessary to obtain Consents to transfer
and assign the Encumbered Instruments. Except as expressly provided herein,
no Party shall be required to pay any sum, to incur any obligation or to
agree to any amendment of any Encumbered Instrument in order to obtain any
such Consent to transfer and assign the Encumbered Instrument.
(b) Pre-Closing; Required Consents. Schedule 7.3(b) lists the
Encumbered Instruments to which a Consent to transfer and assign must be
obtained from the appropriate third party prior to Closing (collectively,
the "Required Consents"). Except for the Required Consents, the obtaining
of any Consents related to the Encumbered Instruments shall not be a
condition to Closing, and Closing shall occur irrespective of whether any
such Consent has been obtained.
Section 7.4 Permits.
(a) Cooperation and Reasonable Efforts. Each Party hereby agrees to
use reasonable efforts, to take reasonable actions and to cooperate with
each other as may be necessary to transfer to Purchaser, or assist Purchaser
in obtaining, all Permits required to conduct the business of the Company.
On or as soon as practicable after the Signing Date, each Party shall file,
separately or jointly with any other Party, as the case may be, all
applications necessary to transfer or obtain the Permits. Each Party shall
use reasonable efforts to resolve such objections, if any, as may be
asserted by any Governmental Authority with respect to the applications
contemplated hereby. The Sellers, as a group, and Purchaser shall each pay
one-half of the fees and expenses incurred in connection with transferring
or obtaining all Permits.
(b) Pre-Closing; Required Permits. Schedule 7.4(b) lists the Permits
which must be transferred to or obtained by Purchaser prior to Closing (the
"Required Permits"). Except for the Required Permits, the transfer or
issuance to Purchaser of any Permit shall not be a condition to Closing, and
Closing shall occur irrespective of whether any such Permit has been
transferred or obtained.
Section 7.5 Further Assurances. Subject to the other terms and
conditions of this Agreement, at any time and from time to time, whether
before or after Closing, each Party shall execute and deliver all
instruments and documents and take all other action that the other Parties
may reasonably request to consummate or to evidence the consummation of the
transactions contemplated by this Agreement.
Section 7.6 Supplemental Agreements and Consents.
(a) At or prior to the Closing, the Sellers shall execute the releases
required pursuant to Section 5.8(h).
(b) Prior to the Closing, the Sellers shall have obtained the Required
Consents, in form and substance reasonably satisfactory to Purchaser, to the
transactions contemplated by the Transaction Documents.
Section 7.7 Tax Matters.
(a) All federal, state, local and foreign income, ad valorem, excise,
sales, use, payroll, unemployment, and other taxes and assessments ("Taxes")
that are due and payable by the Company or by any Seller on behalf of the
Company have been properly computed, duly reported, fully paid, and
discharged. There are no unpaid Taxes that are or could become a lien on
the property or assets of the Company or require payment by the Company,
except for current Taxes not yet due and payable . All current Taxes not yet
due and payable by the Company have been properly accrued on the balance
sheet of the Company. The Company has not incurred any liability for
penalties, assessments, or interest under the Internal Revenue Code. No
unexpired waiver executed by or on behalf of the Company with respect to any
Taxes is in effect.
(b) Tax Audits. Whenever any Taxing Authority asserts a claim, makes
an assessment, or otherwise disputes the amount of Taxes of the Company for
which the Sellers are or may be liable under this Agreement, Purchaser will
promptly notify the Sellers and the Sellers shall fully cooperate with
Purchaser and the Company in connection with any disputes, proceedings or
determinations relating to any Taxes to the extent such proceedings or
determinations affect the amount of Taxes for which the Sellers are liable
under this Agreement.
Section 7.8 Employee Benefit Plans; Employment.
(a) Employee Benefit Plans. From and after the Effective Date, the
Company shall elect to continue as a participating employer in the Company
Plans listed on Schedule 7.8(a) (the "Assumed Plans") and the coverage of
the Employees under all the Assumed Plans shall remain in effect in
accordance with the terms of the Assumed Plans. Purchaser may elect in its
sole discretion at any time to become the plan administrator and sponsoring
employer with the sole authority to designate the plan administrator or
amend or terminate any Assumed Plan.
(b) No Representations. Without the written consent of Purchaser,
neither Sellers nor the Company will make any promises or commitments to any
employee of the Company with regard to his or her employment status with
Purchaser or the Company, or the terms or conditions upon which such
employment might occur or be continued.
ARTICLE VIII
------------
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
Section 8.1 Conditions Precedent to Purchaser's Obligations. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction of the following conditions,
any of which may be waived in writing by Purchaser.
(a) Accuracy of Representations and Warranties. The representations
and warranties made by each Seller in this Agreement shall have been true
and complete as of the Signing Date and as of the Closing Date as though
made as of the Closing Date, except to the extent such representations or
warranties made as of a specific date shall have been correct and complete
as of the specified date.
(b) Performance of Covenants. The Company and each Seller shall have
performed and complied with all agreements, covenants and obligations
required by this Agreement to be performed by such party prior to or at the
Closing.
(c) No Material Adverse Change. The Company has not undergone any
Material Adverse Change since the Signing Date.
(d) Consents. The Company and each Seller, as the case may be, shall
have received and delivered to Purchaser all the Required Consents and the
Required Permits, each in form and substance satisfactory to Purchaser, and
shall have given all notices required to be given to any Persons prior to
the consummation of the transactions contemplated by this Agreement.
(e) Closing Certificate. Each Seller and an executive officer of the
Company shall have delivered to Purchaser a certificate confirming (i) the
satisfaction of the conditions set forth in Sections 8.1(a), 8.1(b) and
8.1(c) and (ii) the continuing force and effect of the Required Consents and
Required Permits.
(f) Secretary's Certificate. The Company shall have delivered to
Purchaser a certificate executed by the secretary or an assistant secretary
of the Company certifying as to (i) the Company's Charter Documents, (ii)
the Company's good standing, (iii) the resolutions in which the Company's
board of directors approved the Transaction Documents to which the Company
is a party and the transactions contemplated thereby, and (iv) the
incumbency of the Company's officers who execute any documents on behalf of
the Company in connection with this Agreement.
(g) Deliveries. The Company and each Seller, as the case may be,
shall have delivered the documents required by Sections 2.2 and such other
documents as Purchaser may reasonably require.
(h) No Order or Action. No Order shall be in effect forbidding or
enjoining the consummation of the transactions contemplated hereby. No
Action shall be pending or threatened before any court or other Governmental
Authority seeking to enjoin the Closing or seeking damages against Purchaser
or any of its Representatives as a result of any of the transactions
contemplated by this Agreement, provided that neither Purchaser nor any of
its affiliates instituted such Action.
(i) Contemporaneous Closing. The transactions contemplated by that
certain Purchase Agreement dated November 9, 2005, by and among the
Purchaser, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Donate ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ with
respect to the purchase of all of the issued and outstanding equity
securities of Texas General Agency, Inc. and TGA Special Risk, Inc., each a
Texas corporation, shall have previously been or contemporaneously be
consummated.
Section 8.2 Conditions Precedent to the Sellers' Obligations. The
obligation of each Seller to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of the following
conditions, any of which may be waived in writing by the Sellers.
(a) Accuracy of Representations and Warranties. The representations
and warranties made by Purchaser in this Agreement shall have been true and
complete as of the Signing Date and as of the Closing Date as though made as
of the Closing Date, except to the extent such representations or warranties
made as of a specific date shall have been correct and complete as of the
specified date.
(b) Performance of Covenants. Purchaser shall have performed and
complied with all agreements, covenants and obligations required by this
Agreement to be performed by Purchaser prior to or at the Closing.
(c) Closing Certificate. An executive officer of Purchaser shall have
delivered to the Sellers a certificate confirming the satisfaction of the
conditions set forth in Sections 8.2(a) and 8.2(b).
(d) Secretary's Certificate. Purchaser shall have delivered to the
Sellers a certificate executed by the secretary or an assistant secretary of
Purchaser certifying as to (i) the resolutions in which Purchaser's board of
directors approved this Agreement and the transactions contemplated hereby,
and (ii) the incumbency of Purchaser's officers who execute any documents on
behalf of Purchaser in connection with this Agreement.
(e) Deliveries. Purchaser shall have delivered the documents required
by Section 2.3 and such other documents as the Sellers may reasonably
require.
(f) No Order or Action. No Order shall be in effect forbidding or
enjoining the consummation of the transactions contemplated hereby. No
Action shall be pending or threatened before any court or other Governmental
Authority seeking to enjoin the Closing or seeking damages against the
Company or any Seller or any of their Representatives as a result of any of
the transactions contemplated by this Agreement, provided that neither the
Company nor any Seller nor any of their affiliates instituted such Action.
ARTICLE IX
----------
TERMINATION PRIOR TO CLOSING
----------------------------
Section 9.1 Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual agreement of Purchaser and the Sellers;
(b) by Purchaser at any time after the occurrence of a Material
Adverse Change in the Company; or
(c) by Purchaser or any Seller at any time on or after March 30, 2006,
if any of the conditions provided for in Section 8.1 or 8.2, respectively,
shall not have been met or waived in writing prior to such date.
Section 9.2 Procedure Upon Termination. In the event of termination
pursuant to Section 9.1, written notice thereof shall be immediately
given to the other Parties and the transactions contemplated by this
Agreement shall be terminated, without any further action by any Party. If
the transactions contemplated by this Agreement are terminated as provided
herein:
(a) each Party shall return all documents, work papers and other
materials of the other parties, whether obtained before or after the
execution hereof, to the party furnishing the same; and
(b) such termination shall not in any way limit, restrict or relieve
any Party of liability for any breach of this Agreement.
ARTICLE X
---------
INDEMNIFICATION AND OFFSET
--------------------------
Section 10.1 Indemnification by Sellers. Sellers, jointly and
severally, shall indemnify and hold harmless Purchaser, the Company, and
their respective directors, officers, employees, agents, attorneys and
shareholders (collectively, the "Purchaser Group") in respect of any and all
Claims incurred by the Purchaser Group, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by the Sellers
in this Agreement; and
(b) The breach of any covenant, agreement or obligation of Sellers
contained in this Agreement or any other instrument delivered at the
Closing, including, without limitation, the agreement and covenants of
Sellers set forth in Section 5.8 of this Agreement.
Section 10.2 Indemnification by Buyer. Purchaser shall indemnify and
hold harmless Sellers in respect of any and all Claims reasonably incurred
by Sellers, in connection with each and all of the following:
(a) Any breach of any representation or warranty made by Purchaser in
this Agreement; and
(b) The breach of any covenant, agreement or obligation of Purchaser
contained in this Agreement or any other instrument delivered at the
Closing.
Section 10.3 Claims for Indemnification. Whenever any Claim shall
arise for indemnification hereunder, the party entitled to indemnification
(the "Indemnified Party") shall promptly notify the other party (the
"Indemnifying Party") of the Claim and, when known, the facts constituting
the basis for such Claim. In the event of any Claim for indemnification
hereunder resulting from or in connection with any Claim or legal
proceedings by a third party, the notice to the Indemnifying Party shall
specify, if known, the amount or an estimate of the amount of the liability
potentially arising therefrom. The Indemnified Party shall not settle or
compromise any Claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of the
Indemnifying Party.
Section 10.4 Defense by Indemnifying Party. In connection with any
Claim giving rise to indemnity hereunder resulting from or arising out of
any Claim or legal proceeding by a Person who is not a party to this
Agreement, the Indemnifying Party at its sole cost and expense may, upon
written notice to the Indemnified Party given within twenty (20) days after
delivery of the written notice referred to in Section 10.3 hereof assume the
defense of any such Claim or legal proceeding if it acknowledges to the
Indemnified Party in writing its obligations to indemnify the Indemnified
Party with respect to all elements of such Claim. Without the prior written
consent of the Indemnified Party, the Indemnifying Party will not enter into
any settlement of any third-party claim which would lead to liability or
create any financial or other obligation on the part of the Indemnified
Party for which the Indemnified Party is not entitled to indemnification
hereunder, or which provides for injunctive or other non-monetary relief
applicable to the Indemnified Party, or does not include an unconditional
release of all Indemnified Parties. The Indemnified Party shall be entitled
to participate in (but not control) the defense of any such action, with its
own counsel and at its own expense. If the Indemnifying Party does not
assume the defense of any such Claim or litigation resulting therefrom with
counsel reasonably satisfactory to the Indemnified Party, (a) the
Indemnified Party may defend against such Claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling
such Claim or litigation, after giving notice of the same to the
Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate, and (b) the Indemnifying Party shall be entitled to participate
in (but not control) the defense of such action, with its counsel and at its
own expense. If the Indemnifying Party thereafter seeks to question the
manner in which the Indemnified Party defended such third party Claim or the
amount or nature of any such settlement, the Indemnifying Party shall have
the burden to prove by a preponderance of the evidence that the Indemnified
Party did not defend or settle such third party Claim in a reasonably
prudent manner as a prudent businessman would if his own funds were subject
to such suit.
Section 10.5 Offset. The Indemnified Party shall have the right to
offset any amounts for which it is entitled to indemnification under this
Article X against any amounts otherwise payable by the Indemnified Party to
the Indemnifying Party under this Agreement. The Purchaser shall further
have the right to offset against any amounts otherwise payable to the
Sellers any liabilities arising from any Claim described in Schedule 3.8, as
well as any other amount expressly permitted under this Agreement.
ARTICLE XI
----------
ARBITRATION AND EQUITABLE REMEDIES
----------------------------------
Section 11.1 Settlement Meeting. The Parties shall attempt in good
faith to resolve promptly through negotiations any Claim or dispute under
this Agreement. If any such Claim or dispute should arise, the Parties
shall meet at least once to attempt to resolve the matter (the "Settlement
Meeting"). Any Party may request the other Parties to attend a Settlement
Meeting at a mutually agreed time and place within ten days after delivery
of a notice of a Claim or dispute. The occurrence of a Settlement Meeting
with respect to a Claim or dispute shall be a condition precedent to seeking
any arbitration or judicial remedy, provided that if a Party refuses to
attend a Settlement Meeting the other Parties may proceed to seek such
remedy.
Section 11.2 Arbitration Proceedings. If the Parties have not
resolved a monetary Claim or dispute at the Settlement Meeting, any Party
may submit the matter to arbitration. A panel of three arbitrators shall
conduct the arbitration proceedings in accordance with the provisions of the
Federal Arbitration Act (99 U.S.C. Section 1 et seq.) and the Commercial
Arbitration Rules of the American Arbitration Association (the "Arbitration
Rules"). The decision of a majority of the panel shall be the decision of
the arbitrators.
(a) Arbitration Notice. To submit a monetary Claim or dispute to
arbitration, a Party shall furnish the other Parties and the American
Arbitration Association with a notice (the "Arbitration Notice") containing
(i) the name and address of such Party, (ii) the nature of the monetary
Claim or dispute in reasonable detail, (iii) the Party's intent to commence
arbitration proceedings under this Agreement, and (iv) the other information
required under the Federal Arbitration Act and the Arbitration Rules.
(b) Selection of Arbitrators. Within ten days after delivery of the
Arbitration Notice, Purchaser and Sellers, as a group, shall each select one
arbitrator from the list of the American Arbitration Association's National
Panel of Commercial Arbitrators. Within ten days after the selection of the
last of those two arbitrators, those two arbitrators shall select the third
arbitrator from such list. If the first two arbitrators cannot select a
third arbitrator within such ten day period, the American Arbitration
Association shall select such third arbitrator from the list. Each
arbitrator shall be an individual not subject to disqualification under Rule
No. 19 of the Arbitration Rules with experience in settling complex
litigation involving mergers and acquisitions.
(c) Arbitration Final. The arbitration of the matters in controversy
and the determination of any amount of damages or indemnification shall be
final and binding upon the Parties to the maximum extent permitted by Law,
provided that any Party may seek any equitable remedy available under Law as
provided in this Agreement. This agreement to arbitrate is irrevocable.
Section 11.3 Place of Arbitration. Any arbitration proceedings
shall be conducted in San Antonio, Texas or at such other location as the
Parties may agree. The arbitrators shall hold the arbitration proceedings
within sixty (60) days after the selection of the third arbitrator.
Section 11.4 Discovery. During the period beginning with the
selection of the third arbitrator and ending upon the conclusion of the
arbitration proceedings, the arbitrators shall have the authority to permit
the Parties to conduct such discovery as the arbitrators consider
appropriate.
Section 11.5 Equitable Remedies. Notwithstanding anything else in
this Agreement to the contrary, after the Settlement Meeting a Party shall
be entitled to seek any equitable remedies available under Law, including an
injunction prohibiting a breach of the provisions of Section 5.8 or an Order
requiring a Seller to perform this Agreement. Any such equitable remedies
shall be in addition to any damages or indemnification rights that such
Party may assert in an arbitration proceeding.
Section 11.6 Exclusive Jurisdiction. The Parties agree that any
claim for equitable relief relating to this Agreement shall be instituted in
a federal or state court sitting in San Antonio, Texas, which courts and
their respective appellate courts shall be the exclusive venue for any such
claim. Each Party waives any objection that it may have to the laying of
such venue, and irrevocably submits to the jurisdiction of any such court
with respect to any such claim. Any service of process and other notice in
any such case shall be effective against a Party when transmitted in
accordance with Section 12.9, provided that a Party also may serve process
in any manner permitted by Law.
Section 11.7 Judgments. Any arbitration award under this Agreement
shall be final and binding. Any court having jurisdiction may enter
judgment on such arbitration award upon application of a Party.
Section 11.8 Expenses. If any Party commences arbitration proceedings
or court proceedings seeking equitable relief with respect to this
Agreement, the prevailing Party in such arbitration proceedings or case may
receive as part of any award or judgment reimbursement of such Party's
reasonable attorneys' fees and expenses to the extent that the arbitrators
or court considers appropriate.
Section 11.9 Cost of the Arbitration. The arbitrators shall assess
the costs of the arbitration proceedings, including their fees, to the
Parties in such proportions as the arbitrators consider reasonable under the
circumstances.
Section 11.10 Exclusivity of Remedies. To the extent permitted by
Law, the arbitration and judicial remedies set forth in this Article XI
shall be the exclusive remedies available to the Parties with respect to any
dispute under this Agreement or Claim for damages under this Agreement.
ARTICLE XII
-----------
MISCELLANEOUS
-------------
Section 12.1 Amendment. No amendment of this Agreement shall be
effective unless in a writing signed by Purchaser and each Seller.
Section 12.2 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original
agreement, but all of which shall constitute one and the same agreement.
Any Party may execute and deliver this Agreement by an executed signature
page transmitted by a facsimile machine. If a Party transmits its signature
page by a facsimile machine, such Party shall promptly thereafter deliver an
originally executed signature page to the other Parties, provided that any
failure to deliver such an originally executed signature page shall not
affect the validity, legality, or enforceability of this Agreement.
Section 12.3 Entire Agreement. This Agreement constitutes the
entire agreement and understanding between the Parties and supersedes all
prior agreements and understandings, both written and oral, with respect to
the subject matter of this Agreement.
Section 12.4 Expenses. Each Party shall bear its own expenses with
respect to the negotiation and preparation of this Agreement and the
Closing, including any fees and expenses of its Representatives, provided
that if a Party terminates this Agreement because of another Party's breach
of this Agreement, the non-breaching Party shall be entitled to seek
reimbursement of its expenses as part of its damages with respect to such
breach. The Sellers, as a group, shall bear any Tax imposed in connection
with the transfer of the Shares to Purchaser pursuant to this Agreement.
Section 12.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF TEXAS, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.
Section 12.6 Consent to Service of Process. Each Party waives any
objection that such party may now or hereafter have to the laying of venue
of any such Action, and irrevocably submits to the jurisdiction of any such
court in any such Action. Any and all service of process and any other
notice in any such Action shall be effective against such Party when
transmitted in accordance with Section 12.9. Nothing contained herein shall
be deemed to affect the right of any Party to serve process in any manner
permitted by Law.
Section 12.7 No Assignment. No Party may assign its benefits or
delegate its duties under this Agreement without the prior written consent
of all of the other Parties. Any attempted assignment or delegation without
such prior consent shall be void. Notwithstanding this prohibition against
assignment and delegation, Purchaser may assign its rights and delegate its
duties under this Agreement to a wholly-owned subsidiary of Purchaser
without the Sellers' consent. Upon Purchaser's assignment of its benefits
and delegation of its duties under this Agreement to such a wholly owned
subsidiary, Purchaser shall be released from any obligations under this
Agreement. In addition, after the Closing, Purchaser may assign its rights
under this Agreement to a purchaser of all of the assets or equity of
Purchaser without the Sellers' consent, and any such purchaser and any
subsequent purchasers of all of the assets or equity of Purchaser may
similarly assign such rights.
Section 12.8 No Third Party Beneficiaries. This Agreement is solely
for the benefit of the Parties and no other Person shall have any right,
interest, or claim under this Agreement.
Section 12.9 Notices. All claims, consents, designations, notices,
waivers, and other communications in connection with this Agreement shall be
in writing. Such claims, consents, designations, notices, waivers, and
other communications shall be considered received (i) on the day of actual
transmittal when transmitted by facsimile with written confirmation of such
transmittal, (ii) on the next business day following actual transmittal when
transmitted by a nationally recognized overnight courier, or (iii) on the
third business day following actual transmittal when transmitted by
certified mail, postage prepaid, return receipt requested; in each case when
transmitted to a Party at its address set forth below (or to such other
address to which such Party has notified the other Parties in accordance
with this Section to send such claims, consents, designations, notices,
waivers, and other communications):
Purchaser: Hallmark Financial Services, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Sellers: Pan American Acceptance Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇-▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇▇
Section 12.10 Public Announcements. The Parties shall agree on the
terms of any press releases or other public announcements related to this
Agreement, and shall consult with each other before issuing any press
releases or other public announcements related to this Agreement; provided,
however, that any Party may make a public disclosure if in the opinion of
such Party's counsel it is required by Law or the rules of the Securities
Exchange Commission, American Stock Exchange or other regulatory agency to
make such disclosure. The Parties agree, to the extent practicable, to
consult with each other regarding any such public announcement in advance
thereof.
Section 12.11 Representation by Legal Counsel. Each Party is a
sophisticated Person that was advised by experienced legal counsel and other
advisors in the negotiation and preparation of this Agreement.
Section 12.12 Schedules. All references in this Agreement to
schedules shall mean the schedules identified in this Agreement, which are
incorporated into this Agreement and shall be deemed a part of this
Agreement for all purposes. Each Section of this Agreement that refers to a
schedule shall have a separate schedule. In addition, any disclosure under
a particular Section's schedule shall be made under the heading of any
relevant subsection of such Section. A disclosure of an item in a schedule
for a particular Section or under a heading in a schedule corresponding to a
particular subsection shall not be a disclosure under any other Section's
schedule or any other subsection, unless so noted specifically on such
schedule. The Sellers have delivered to Purchaser a correct and complete
copy of each document described on each schedule to this Agreement and a
correct and complete written description of each unwritten arrangement or
other item described on each such schedule.
Section 12.13 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions of this Agreement or affect the validity or
enforceability of such provision in any other jurisdiction. In addition,
any such prohibited or unenforceable provision shall be given effect to the
extent possible in the jurisdiction where such provision is prohibited or
unenforceable.
Section 12.14 Specific Performance. Each Seller acknowledges that
the benefits that Purchaser will derive from the transactions contemplated
by this Agreement are unique and irreplaceable. Accordingly, if such Seller
improperly abandons or terminates this Agreement, Purchaser would not have
an adequate remedy at law. Purchaser therefore shall be entitled to a court
order requiring such Seller to perform this Agreement. No Seller shall be
entitled to specific performance of this Agreement.
Section 12.15 Successors. This Agreement shall be binding upon and
shall inure to the benefit of each Party and its heirs, legal
representatives, permitted assigns, and successors, provided that this
Section shall not permit the assignment or other transfer of this Agreement,
whether by operation of law or otherwise, if such assignment of other
transfer is not otherwise permitted under this Agreement.
Section 12.16 Time of the Essence. Time is of the essence in the
performance of this Agreement and all dates and periods specified in this
Agreement.
Section 12.17 Waiver. No provision of this Agreement shall be
considered waived unless such waiver is in writing and signed by the Party
that benefits from the enforcement of such provision. No waiver of any
provision in this Agreement, however, shall be deemed a waiver of a
subsequent breach of such provision or a waiver of a similar provision. In
addition, a waiver of any breach or a failure to enforce any term or
condition of this Agreement shall not in any way affect, limit, or waive a
Party's rights under this Agreement at any time to enforce strict compliance
thereafter with every term and condition of this Agreement.
IN WITNESS WHEREOF, each Party executed, or caused a duly authorized
officer to execute, this Agreement as of the Signing Date.
PURCHASER: HALLMARK FINANCIAL SERVICES, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
SELLERS:
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
Donate ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
APPENDIX A
DEFINITIONS AND RULES OF INTERPRETATION
Definitions. Unless the context otherwise requires, the terms defined
in this Appendix shall have the meanings specified below for all purposes of
this Agreement:
"Action" means any action, arbitration proceeding, cause of
action, charge, counterclaim, cross claim, inquiry, investigation, legal
action, litigation, Order, proceeding, or suit.
"Agreement" shall have the meaning set forth in the Preamble.
"Arbitration Notice" shall have the meaning set forth in Section
11.2(a).
"Arbitration Rules" shall have the meaning set forth in Section
11.2.
"Assumed Plans" shall have the meaning set forth in Section
7.8(a).
"Bank Accounts" shall have the meaning set forth in Section 3.20.
"Books and Records" shall mean all the books and records
maintained by or for any Person, including all accounting records, minute
books, stock records, computerized records and storage media and the
software used in connection therewith.
"Charter Documents" shall mean (i) in the case of a corporation,
its articles or certificate of incorporation and its bylaws, (ii) in the
case of a partnership, its partnership certificate and its partnership
agreement, and (iii) in the case of any other Person, its organic and
governing documents; in each case as such document has been amended or
supplemented from time to time prior to the Signing Date.
"Claim" shall mean any arbitration award, assessment, charge,
citation, claim, damage, demand, directive, expense, fine, interest, joint
or several liability, lawsuit, notice, obligation, payment, penalty, or
summons of any kind or nature whatsoever, including any damages incurred
because of the claimant's negligence or gross negligence or any strict
liability imposed upon the claimant, any consequential or punitive damages,
and any reasonable attorneys' fees and expenses. A Claim shall be
considered to exist even though it may be conditional, contingent, indirect,
potential, secondary, unaccrued, unasserted, unknown, unliquidated, or
unmatured.
"Closing" shall have the meaning set forth in Section 2.1.
"Closing Date" shall have the meaning set forth in Section 2.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in Recital A.
"Company Assets" shall have the meaning set forth in Section
3.9(a).
"Company Plans" shall have the meaning set forth in Section
3.18(a).
"Competing Business" shall have the meaning set forth in Section
5.8(c).
"Confidential Information" means any proprietary information, and
any information which Purchaser reasonably considers to be proprietary,
pertaining to the Company's and Purchaser's past, present or prospective
business secrets, methods or policies, earnings, finances, security holders,
lenders, key employees, nature of services performed by such entity's sales
personnel, procedures, standards and methods, information relating to
arrangements with suppliers, the identity and requirements of arrangements
with customers, all policyholder information of policyholders, the type,
volume or profitability of services or products for customers, drawings,
records, reports, documents, manuals, techniques, ratings, information,
data, statistics, trade secrets and all other information of any kind or
character relating to each of the Parties, whether or not reduced to
writing.
"Consent" shall mean a consent, approval, order, authorization or
waiver from, notice to or declaration, registration or filing with any
Person.
"Effective Date" shall mean shall have the meaning set forth in
Section 1.4.
"Employee Benefit Plan" shall mean any (i) Pension Benefit Plan,
(ii) Welfare Benefit Plan, (iii) accident, dental, disability, health, life,
medical, or vision plan or insurance policy, (iv) bonus, executive,
incentive or deferred compensation plan, (v) change in control plan, (vi)
fringe benefits and perquisites, (vii) holiday, sick pay, leave, vacation,
moving or tuition reimbursement or other similar policy, (viii) stock
option, stock purchase, phantom stock, restricted stock or stock
appreciation plan, (ix) severance plan, or (x) other employee arrangement,
commitment, custom, policy or practice.
"Employees" shall have the meaning set forth in Section 3.17(a).
"Encumbered Instrument" shall mean any contract or lease that by
its terms requires Consent from a third party by reason of the transactions
contemplated by the Transaction Documents.
"Encumbrance" shall mean any title defect or objection, mortgage,
lien, deed of trust, equity, judgment, claim, restrictive covenant, use
restriction, charge, pledge, security interest or other encumbrance of any
nature whatsoever, including all leases, chattel mortgages, conditional
sales contracts, collateral security arrangements and other title or
interest retention arrangements.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
3.18(b).
"Financial Statements" shall have the meaning set forth in Section
3.26.
"GAAP" shall mean generally accepted accounting principles in
effect in the United States of America as of the Signing Date.
"Governmental Authority" shall mean any federal, state, local,
tribal, foreign or other governmental agency, department, branch,
commission, board, bureau, court, instrumentality or body.
"Indemnified Party" shall have the meaning set forth in
Section 10.3.
"Indemnifying Party" shall have the meaning set forth in
Section 10.3.
"Insurance Policies" shall have the meaning set forth in Section
3.12.
"Intangible Asset" shall mean any patent, trademark, trademark
license, servicemark, servicemark license, computer software, trade name,
masthead, brand name, slogan, copyright, reprint right, franchise, license,
process, authorization, invention, know-how, formula, trade secret and other
intangible asset, together with any pending application, continuation-in-
part or extension therefor.
"Law" shall mean any applicable code, statute, law, common law,
rule, regulation, order, ordinance, judgment, decree, order, writ or
injunction of any Governmental Authority.
"Law Affecting Creditors' Rights" shall mean any bankruptcy,
fraudulent conveyance or transfer, insolvency, moratorium, reorganization,
or other law affecting the enforcement of creditors' rights generally, and
any general principles of equity.
"Material Adverse Change" shall mean, with respect to a Person,
that such Person has (i) breached a Material Contract, (ii) incurred a Claim
or become a party to an Action that could have a significant and detrimental
effect upon it, (iii) suffered a Material Adverse Effect, or (iv) violated
any Law or Order to which it or any of its assets is subject or bound.
"Material Adverse Effect" shall mean, with respect to a Person,
the occurrence of an event or the existence of a circumstance that has a
material adverse effect on such Person's assets, business, cash flows,
financial condition, liabilities, operations, prospects, or relationships,
including the occurrence of any event or the existence of any circumstance
that could cause such an effect in the future in an amount of $100,000.00 or
more.
"Material Contracts" shall have the meaning set forth in Section
3.13.
"Order" shall mean any consent decree, decree, determination,
injunction, judgment, order, or writ of any arbitrator or Governmental
Authority.
"PAAC" shall have the meaning set forth in Recital A.
"Parties" and "Party" shall have the meaning set forth in Recital
B.
"Pension Benefit Plan" shall mean (i) an "employee pension benefit
plan" as defined in Section 3(2) of ERISA, and (ii) a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA.
"Permit" shall mean any license, approval, certificate, franchise,
registration, qualification, permit or authorization issuable by any
Governmental Authority or industry self-regulating organization.
"Permitted Encumbrance" shall mean any Encumbrance directly
related to (i) workers', repairmen's and similar Encumbrances imposed by Law
that have been incurred in the ordinary course of business, (ii) retention
of title agreements with suppliers entered into in the ordinary course of
business, and (iii) the rights of others to customer deposits.
"Person" shall mean any association, bank, business trust,
corporation, estate, general partnership, Governmental Authority,
individual, joint stock company, joint venture, labor union, limited
liability company, limited partnership, non-profit corporation, professional
association, professional corporation, trust, or any other organization or
entity.
"Personal Property Leases" shall have the meaning set forth in
Section 3.10(d). .
"Purchase Price" shall have the meaning set forth in Section 1.2.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser Group" shall have the meaning set forth in Section
10.1.
"Real Property Leases" shall have the meaning set forth in Section
3.10(b).
"Representatives" shall mean, with respect to a Person, such
Person's directors, employees, officers, agents, accountants, affiliates,
consultants, investment bankers, attorneys, lenders, representatives and
shareholders.
"Required Consents" shall have the meaning set forth in Section
7.3(b).
"Required Permits" shall have the meaning set forth in Section
7.4(b).
"Restricted Territories" shall have the meaning set forth in
Section 5.8(c).
"Returns" shall have the meaning set forth in Section 3.19(a).
"Sellers" shall have the meaning set forth in the Preamble.
"Sellers' Knowledge" shall mean the actual knowledge as of the
date that a specific representation or warranty is made or deemed made,
after reasonable inquiry, of an individual Seller.
"Settlement Meeting" shall have the meaning set forth in Section
10.1.
"Shares" shall have the meaning set forth in Section 1.1.
"Signing Date" shall have the meaning set forth in the Preamble.
"Stock" shall have the meaning set forth in Recital A.
"Subscription Right" shall have the meaning set forth in Section
3.7.
"Tax" shall mean any assessment, charge, duty, fee, impost, levy,
tariff, or tax of any nature whatsoever imposed by any Governmental
Authority or payable pursuant to any tax sharing agreement, including any
income, payroll, withholding, excise, gift, alternative minimum, capital
gain, added value, social security, sales, use, real and personal property,
use and occupancy, business and occupation, mercantile, real estate, capital
stock, and franchise tax or charge, together with any related interest,
penalties or additions thereon.
"Taxing Authority" shall mean the Internal Revenue Service and any
other domestic or foreign Governmental Authority responsible for the
administration of any Tax.
"Transaction Documents" shall mean this Agreement, the
Supplemental Agreements, and all other documents and instruments executed
and delivered pursuant to or in furtherance of this Agreement.
"Welfare Benefit Plan" shall mean an "employee welfare benefit
plan" as defined in Section 3(1) of ERISA, including an employee welfare
benefit plan which is a "multiemployer welfare plan" as defined in Section
3(37) of ERISA and a "multiple employer welfare arrangement" as defined in
Section 3(40) of ERISA.
"Work Product" shall have the meaning set forth in Section 5.8(b).
Accounting Terms. Except as otherwise provided in this Agreement, all
accounting terms defined in this Agreement, whether defined in this Article
or otherwise, shall be construed in accordance with GAAP on a consolidated
basis.
Articles, Sections, Exhibits and Schedules. Except as specifically
stated otherwise, references to Articles, Sections, Exhibits and Schedules
refer to the Articles, Sections, Exhibits and Schedules of this Agreement.
Attorneys' Fees. Whenever this Agreement refers to a Person's
"attorneys' fees and expenses," such reference also shall include any fees
and expenses of accountants, experts, investigators, and other professional
advisors whose services such Person's attorney considered advisable in
connection with the prosecution or defense of the particular matter.
Breach. The term "breach" with respect to any contract or instrument
means any breach or violation of, or default under, such contract or
instrument, any conflict with another contract or instrument or any
emergence of a right of another party to such contract or instrument to
accelerate, cancel, modify or terminate such contract or instrument,
including any such breach, violation, default, conflict, or right that will
arise after notice or lapse of time.
Drafting. Neither this Agreement nor any provision set forth in this
Agreement shall be interpreted in favor of or against any Party because such
Party or its legal counsel drafted this Agreement or such provision. No
prior draft of this Agreement or any provision set forth in this Agreement
shall be used when interpreting this Agreement or its provisions.
Headings. Article and Section headings are used in this Agreement only
as a matter of convenience and shall not have any effect upon the
construction or interpretation of this Agreement.
Include. The term "include" or any derivative of such term does not
mean that the items following such term are the only types of such items.
Or. The term "or" shall not be interpreted as excluding any of the
items described.
Plural and Singular Words. Whenever the plural form of a word is used
in this Agreement, that word shall include the singular form of that word.
Whenever the singular form of a word is used in this Agreement, that word
shall include the plural form of that word.
Predecessors. Any of the Sellers' representations and warranties
concerning any Claim against the Company, any liability or obligation of the
Company, or any violation of Law by the Company shall include any Claims
with respect to each predecessor of the Company, including all direct and
indirect predecessors of any such predecessor.
Pronouns. Whenever a pronoun of a particular gender is used in this
Agreement, if appropriate that pronoun also shall refer to the other gender
and the neuter. Whenever a neuter pronoun is used in this Agreement, if
appropriate that pronoun also shall refer to the masculine and feminine
gender.
Representations and Warranties. The Sellers' representations and
warranties under this Agreement shall mean the representations and
warranties set forth in Article III and the reaffirmation of the Sellers'
representations and warranties in certificates delivered pursuant to Article
II. Purchaser's representations and warranties under this Agreement shall
mean the representations and warranties set forth in Article IV and the
reaffirmation of those representations and warranties in the certificates
delivered pursuant to Article II.
Statutes. Any reference to Law or any specific statute shall include
any changes to such law or statute after the Signing Date, any successor law
or statute, and any regulations and rules promulgated under such law or
statute and any successor law or statute, whether promulgated before or
after the Signing Date.
