Exhibit 2(a)
EXECUTION COPY
PLAN AND AGREEMENT OF MERGER
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.....................................................................................2
SECTION 2. MERGER..........................................................................................8
2.1 GENERAL.........................................................................................8
2.2 CLOSING.........................................................................................8
2.3 ACTIONS AT CLOSING..............................................................................8
2.4 EFFECT OF MERGER................................................................................8
2.5 ANTI-DILUTION..................................................................................10
2.6 ADDITIONAL ACTIONS.............................................................................10
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY...........................................11
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES...................................................11
3.2 CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.............................................12
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT...........................................................13
3.4 GAAP FINANCIAL STATEMENTS......................................................................13
3.5 CONSENTS AND APPROVALS; NO VIOLATIONS..........................................................14
3.6 NO DEFAULT.....................................................................................14
3.7 NO UNDISCLOSED LIABILITIES.....................................................................15
3.8 ABSENCE OF CERTAIN DEVELOPMENTS................................................................15
3.9 LITIGATION.....................................................................................18
3.10 COMPLIANCE WITH APPLICABLE LAW; LICENSES.......................................................18
3.11 ERISA..........................................................................................19
3.12 ENVIRONMENTAL LAWS AND REGULATIONS.............................................................21
3.13 INTELLECTUAL PROPERTY; SOFTWARE................................................................22
3.14 CERTAIN BUSINESS PRACTICES.....................................................................22
3.15 LABOR MATTERS..................................................................................23
3.16 ACCOUNTS RECEIVABLE............................................................................23
3.17 BOOKS AND RECORDS..............................................................................23
3.18 INSURANCE......................................................................................23
3.19 REINSURANCE....................................................................................24
3.20 POLICIES OF INSURANCE WRITTEN BY FFG...........................................................24
3.21 BROKERS' FEES..................................................................................24
3.22 SUPPLIERS AND CUSTOMERS........................................................................25
3.23 CERTAIN CONTRACTS..............................................................................25
3.24 TAX MATTERS....................................................................................25
3.25 RELATED PARTY TRANSACTIONS.....................................................................27
3.26 RESTRICTIONS ON BUSINESS ACTIVITIES............................................................27
3.27 REAL ESTATE....................................................................................28
3.28 PERSONAL PROPERTY..............................................................................29
-i-
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS...........................................29
4.1 ORGANIZATION AND CORPORATE POWER...............................................................29
4.2 AUTHORIZATION OF MERGER........................................................................29
4.3 NO CONFLICTS...................................................................................29
4.4 SELLER SHARES..................................................................................30
4.5 SECURITIES LAW ISSUES..........................................................................30
4.6 DISCLOSURE.....................................................................................30
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING BUYER AND MERGER SUB..................................30
5.1 ORGANIZATION...................................................................................30
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT...........................................................31
5.3 CONSENTS AND APPROVALS; NO VIOLATIONS..........................................................31
5.4 BROKERS........................................................................................32
5.5 CAPITALIZATION OF BUYER AND ITS SUBSIDIARIES...................................................32
5.6 SEC REPORTS; FINANCIAL STATEMENTS..............................................................32
5.7 INTERIM OPERATIONS OF MERGER SUB...............................................................33
5.8 NYSE REQUIREMENTS..............................................................................33
SECTION 6. COVENANTS......................................................................................33
6.1 GENERAL........................................................................................33
6.2 OTHER REGULATORY MATTERS AND APPROVALS.........................................................34
6.3 THE COMPANY'S INTERIM OPERATION OF BUSINESS....................................................34
6.4 ACCESS.........................................................................................37
6.5 NOTICE OF DEVELOPMENTS.........................................................................37
6.6 ACQUISITION PROPOSALS..........................................................................38
6.7 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS........................................................38
6.8 COVENANT OF SELLERS............................................................................38
6.9 POST-CLOSING TAX MATTERS.......................................................................39
6.10 DIRECTOR AND OFFICER INDEMNIFICATION...........................................................39
6.11 OBLIGATIONS OF MERGER SUB......................................................................39
6.12 REGISTRATION STATEMENT.........................................................................39
6.13 EMPLOYEE MATTERS...............................................................................40
6.14 EXPENSES OF THE COMPANY........................................................................40
6.15 NONCOMPETITION.................................................................................40
SECTION 7. CONDITIONS TO CLOSING..........................................................................44
7.1 JOINT CONDITIONS TO OBLIGATIONS OF BUYER, MERGER SUB AND THE COMPANY...........................44
7.2 CONDITIONS TO OBLIGATIONS OF BUYER AND MERGER SUB..............................................44
7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY.......................................................45
SECTION 8. INDEMNIFICATION................................................................................45
8.1 AGREEMENTS TO INDEMNIFY........................................................................45
8.2 LIMITATIONS ON INDEMNIFICATION.................................................................46
8.3 METHOD OF ASSERTING AND RESOLVING CLAIMS.......................................................47
-ii-
SECTION 9. TERMINATION AND ITS CONSEQUENCES...............................................................48
9.1 TERMINATION OF AGREEMENT.......................................................................48
9.2 EFFECT OF TERMINATION..........................................................................49
SECTION 10. MISCELLANEOUS..................................................................................49
10.1 REPRESENTATIONS AND SURVIVAL...................................................................49
10.2 NO THIRD PARTY BENEFICIARIES...................................................................50
10.3 ENTIRE AGREEMENT...............................................................................50
10.4 SUCCESSION AND ASSIGNMENT......................................................................50
10.5 COUNTERPARTS AND DELIVERY......................................................................50
10.6 NOTICES........................................................................................50
10.7 GOVERNING LAW..................................................................................51
10.8 CONSENT TO JURISDICTION........................................................................51
10.9 WAIVER OF JURY TRIAL...........................................................................51
10.10 AMENDMENTS AND WAIVERS.........................................................................51
10.11 CONSTRUCTION...................................................................................52
10.12 TIME IS OF THE ESSENCE, COMPUTATION OF TIME....................................................52
10.13 SPECIFIC PERFORMANCE...........................................................................52
-iii-
PLAN AND AGREEMENT OF MERGER
This Plan and Agreement of Merger is entered into as of May 3, 2001, by
and among Aon Corporation, a Delaware corporation ("BUYER"), Merger Acquisition
Company, a Delaware corporation ("MERGER SUB") and wholly owned subsidiary of
Buyer, First Extended, Inc., a Delaware corporation (the "COMPANY"), and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ("▇▇▇▇▇▇▇▇"), ▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), Charwes First Extended 1999
Trust ("CHARWES TRUST"), and Courwes First Extended 1999 Trust ("COURWES TRUST"
and together with ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and Charwes Trust, the "SELLERS"). Buyer,
Merger Sub, Sellers, and the Company are referred to collectively herein as the
"PARTIES."
RECITALS
WHEREAS, Buyer has determined that it is in its best interests to
consummate the business combination transaction provided for herein in which
Merger Sub will, subject to the terms and conditions set forth herein, merge
with and into the Company so that the Company is the Surviving Corporation in
such merger (the "MERGER");
WHEREAS, the Board of Directors of the Company (the "COMPANY BOARD") has
determined that it is in the best interests of the Company and its stockholders
to consummate the Merger, subject to the terms and conditions set forth herein;
WHEREAS, prior to the date hereof the Company Board and the Sellers in
their capacity as stockholders of the Company have unanimously approved this
Agreement and the Merger, upon the terms and subject to the conditions set forth
herein;
WHEREAS, it is the intention of the parties that, for United States
federal income tax purposes, (i) the Merger shall constitute a tax-free
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the United States Internal Revenue Code of 1986, as amended (the "CODE"), and
(ii) this Agreement shall constitute a "plan of reorganization" for purposes of
Section 354 and Section 361 of the Code.
Therefore, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, the Parties agree as follows.
SECTION 1. DEFINITIONS.
In this Agreement:
"AAA RULES" has the meaning given to that term in Section 8.3.
"ACQUISITION PROPOSAL" means, with respect to any Person, any proposal
(other than any proposal with respect to the Merger) regarding (i) any merger,
consolidation, share exchange, business combination or other similar transaction
or series of related transactions involving that Person or any Subsidiary of
that Person; (ii) any sale, lease, exchange, transfer or other disposition of
all or substantially all of the assets of that Person or any of its
Subsidiaries; and (iii) any offer to purchase, tender offer, exchange offer or
any similar transaction or series of related transactions made by any other
Person involving the outstanding shares of any class of capital stock of that
Person.
"AFFILIATE" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. As used in
this definition, "CONTROL" (including its correlative meanings, "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") means the possession, directly or indirectly,
of power to direct or cause the direction of the management and policies of a
Person whether through the ownership of voting securities, by contract or
otherwise.
"AFFILIATED GROUP" has the meaning given to that term in Section 3.24(k).
"AON CURRENT MARKET PRICE" means, with respect to any specific date, the
average of the daily closing sale prices per share of Buyer Common Stock during
the regular session as traded on the NYSE for the ten (10) consecutive trading
days ending on the day immediately prior to such date, rounded to the nearest
cent; provided that, if the CSC Common Stock commences trading on an exchange or
market and the value thereof is no longer reflected in the trading price of the
Buyer Common Stock within such 10-day trading day period, then"Aon Current
Market Price" means, with respect to any specific date, the average of the daily
closing sale prices per share of Buyer Common Stock during the regular session
as traded on the NYSE for the greatest number of consecutive trading days ending
on the day immediately prior to such date on which both the Buyer Common Stock
and the CSC Common Stock are traded on an exchange or market and the value of
the CSC Common Stock is no longer reflected in the trading price of the Buyer
Common Stock, rounded to the nearest cent.
"ARBITRATION NOTICE" has the meaning given to that term in Section 8.3.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday or Friday
that banks located in New York, New York are not required or permitted by law to
be closed.
"BUYER ADJUSTMENT AMOUNT" means (i) with respect to shares of Buyer Common
Stock sold or transferred on or after the record date of the Spin-off, the
greater of (A) the aggregate proceeds due to or received by a Seller from the
sale or transfer of such shares of Buyer Common Stock received in the Merger and
sold or transferred by or on behalf of such Seller on or prior to the Adjustment
Date and (B) the Aon Current Market Price on the Adjustment Date multiplied by
the
-2-
number of such shares of Buyer Common Stock received in the Merger and sold or
transferred by such Seller on or prior to the Adjustment Date, and (ii) with
respect to shares of Buyer Common Stock sold or transferred prior to the record
date of the Spin-off, the greater of (A) the aggregate proceeds due to or
received by a Seller from the sale or transfer of such shares of Buyer Common
Stock received in the Merger and sold or transferred by or on behalf of such
Seller on or prior to the Adjustment Date and (B) the Combined Current Market
Price on the Adjustment Date multiplied by the number of such shares of Buyer
Common Stock received in the Merger and sold or transferred by such Seller on or
prior to the Adjustment Date.
"BUYER COMMON STOCK" means Buyer's Common Stock, $1.00 par value per
share.
"BUYER PREFERRED STOCK" means Buyer's Preferred Stock.
"BUYER SHARE" means a share of Buyer Common Stock issued in the Merger and
such other shares or securities (including CSC Common Stock) or property as may
be issued or issuable with respect to a share of Buyer Common Stock pursuant to
Section 2.5 or as a result of the Spin-off.
"CERTIFICATE OF MERGER" has the meaning given to that term in Section 2.3.
"CLAIM NOTICE" has the meaning given to that term in Section 8.3.
"CLOSING" and "CLOSING DATE" have the meanings given to those terms in
Section 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMBINED CURRENT MARKET PRICE" means, with respect to any specific date,
the sum of the Aon Current Market Price and the CSC Current Market Price, if
applicable, on that date.
"COMPANY BOARD" has the meaning given to that term in the recitals.
"COMPANY PERMITS" has the meaning given to that term in Section 3.10.
"COMPANY SECURITIES" has the meaning given to that term in Section 3.2(a).
"CONFIDENTIAL INFORMATION" has the meaning given to that term in Section
6.4.
"CONSTITUENT DOCUMENTS" has the meaning given to term in Section 3.1(f).
"CONTRACT" means any loan or credit agreement, note, bond, indenture,
mortgage, deed of trust, lease, franchise, permit, authorization, license,
contract, instrument, benefit plan or practice or other agreement, arrangement,
obligation, instrument or commitment of any nature, whether written or oral;
PROVIDED, HOWEVER, that Warranty Contracts, standard dealer agreements and
policies of insurance issued by FFG Insurance Company shall not be deemed to be
Contracts for purposes of this Agreement.
-3-
"CSC" means the corporation to be named Combined Specialty Corporation to
be formed as a result of the Spin-off.
"CSC ADJUSTMENT AMOUNT" means the greater of (A) the aggregate proceeds
due to or received by such Seller from the sale or transfer of CSC Share
Equivalents received in respect of shares of Buyer Common Stock received in the
Merger and sold by such Seller on or prior to the Adjustment Date and (B) the
CSC Current Market Price on the Adjustment Date multiplied by the number of CSC
Share Equivalents received in respect of shares of Buyer Common Stock in the
Merger and sold or transferred by such Seller on or prior to the Adjustment
Date.
"CSC COMMON STOCK" means the common stock of CSC or such other securities
of CSC issued in the Spin-off.
"CSC CURRENT MARKET PRICE" means, with respect to any specific date, the
average of the daily closing sale prices per share of such number of shares of
CSC Common Stock as is equal to a CSC Share Equivalent during the regular
session as traded on the NYSE or such other exchange or market on which CSC
Common Stock is traded for the ten (10) consecutive trading days ending on the
day immediately prior to such date, rounded to the nearest cent; provided that,
to the extent the CSC Common Stock commences trading on an exchange or market in
either case within such ten (10) day trading period, then "CSC Current Market
Price" means, with respect to any specific date, the average of the daily
closing sale prices per share of such number of shares of CSC Common Stock as is
equal to a CSC Share Equivalent during the regular session as traded on the NYSE
or such other exchange or market on which the CSC Common Stock is traded for the
greatest number of consecutive trading days ending on the day immediately prior
to such date on which both the Buyer Common Stock and the CSC Common Stock is
traded on an exchange or market and the value of the CSC Common Stock is no
longer reflected in the trading price of the Buyer Common Stock, rounded to the
nearest cent.
"CSC SHARE EQUIVALENT" means that number of shares of CSC Common Stock, or
fraction thereof, as is issued in respect of one share of Buyer Common Stock in
the Spin-off.
"DGCL" means the General Corporation Law of the State of Delaware, as
amended from time to time.
"DISCLOSURE SCHEDULE" has the meaning given to that term in Section 3.
"DOJ" has the meaning given to that term in Section 6.2.
"DAMAGES" has the meaning given to that term in Section 8.1.
"EFFECTIVE TIME" has the meaning given to that term in Section 2.4(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the regulations and formal interpretations issued thereunder.
-4-
"ERISA AFFILIATE" means any Person who, together with the Company, could
be treated as a single employer under Sections 414(b), 414(c), 414(m) or 414(o)
of the Code.
"ESCROW AGENT" means The Bank of New York, or a successor Escrow Agent
under the terms of the Escrow Agreement.
"ESCROW AGREEMENT" means the agreement by and among the Escrow Agent,
Buyer and the Sellers and substantially in the form of EXHIBIT B attached
hereto, with such changes as the Escrow Agent may reasonably request.
"ESCROW SHARES" has the meaning given to that term in Section 2.4(h).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FFG" has the meaning given to that term in Section 3.4(b).
"FINANCIAL STATEMENTS" has the meaning given to that term in Section 3.4.
"FTC" has the meaning given to that term in Section 6.2.
"GAAP" means the United States generally accepted accounting principles.
"GOVERNMENTAL ENTITY" means any administrative agency, commission, court
or other governmental authority or instrumentality, domestic or foreign,
including any government-sponsored corporation having regulatory authority under
law.
"HSRA" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976, as
amended from time to time.
"INDEMNIFIED PARTY" has the meaning given to that term in Section 8.1.
"INDEMNIFYING PARTY" has the meaning given to that term in Section 8.1.
"INDEMNITY THRESHOLD" shall have the meaning set forth in Section 8.2(b).
"IRS" means the Internal Revenue Service.
"LAWS" has the meaning given to that term in Section 3.5
"LIABILITY" means any liability (whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.
"LIEN" has the meaning given to that term in Section 3.1(b).
-5-
"LOSS CONTINGENCY" means an existing condition, situation, or set of
circumstances involving uncertainty as to possible Liability to an enterprise
that will ultimately be resolved when one or more future events occur or fail to
occur.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, any change in
or effect on the business, or any event, occurrence, condition or development of
that Person or any of its Subsidiaries that, in the aggregate, is or reasonably
would be expected to be materially adverse to the business, operations
(including the income statement), properties (including intangible properties),
condition (financial or otherwise), with respect to the Company only, the
regulatory status of its purchasing group, or prospects (with respect to the
Company only, other than changes in prospects resulting from economic conditions
in the automobile industry) of that Person and its Subsidiaries taken as a
whole.
"MERGER SUB" means Merger Acquisition Company, a Delaware corporation
wholly- owned by Buyer and formed solely for the purpose of consummating the
Merger.
"NYSE" means the New York Stock Exchange.
"ORDINARY COURSE" means with respect to any Person, in the ordinary course
of that Person's business consistent with past practice, including as to the
quantity, quality and frequency.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a Governmental Entity (or any
department, agency, or political subdivision thereof).
"PROPRIETARY RIGHTS" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights in intellectual
property, and (h) all copies and tangible embodiments thereof (in whatever form
or medium).
"REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights
Agreement by and among Buyer and the Sellers that shall be executed and
delivered as of the Closing in substantially the form of EXHIBIT C hereto.
-6-
"REGISTRATION STATEMENT" shall mean a registration statement as defined in
the Registration Rights Agreement.
"REPRESENTATIVES" of a Person means each of the applicable Person's
directors, officers, employees, agents, representatives and advisors.
"RESPONSE NOTICE" has the meaning given to that term in Section 8.3.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLERS" has the meaning given to that term in the recitals.
"SELLER APPROVAL" means the affirmative vote in favor of a proposal to
approve this Agreement and the transactions contemplated hereby, at a meeting or
by written consent, of the holders of all of the shares of each class of Seller
Voting Shares entitled to vote thereon in accordance with the certificate of
incorporation and bylaws of the Company and Section 251(c) of the DGCL.
"SELLER COMMON RATIO" means with respect to any holder of Seller Common
Shares, the number of Seller Common Shares held by that Person immediately prior
to the Closing divided by the total number of Seller Common Shares outstanding
immediately prior to the Closing.
"SELLER COMMON SHARE" means a share of the Company's Common Stock, par
value $0.01 per share.
"SELLER SHARE" means any issued and outstanding share of the Company's
capital stock.
"SELLER VOTING SHARE" means a Seller Share entitled to vote on the Merger.
"SPIN-OFF" means the spin-off currently contemplated by Aon Corporation
and discussed in a press release contained in its Current Report on Form 8-K
filed April 24, 2001.
"STOCK RIGHTS" has the meaning given to that term in Section 3.2(b).
"SUBSIDIARY" means any corporation, partnership, limited liability company
or other organization, whether or not incorporated, with respect to which a
specified Person owns (directly or indirectly through one or more Subsidiaries
thereof) at least twenty-five percent (25%) of the voting securities or equity
interests or has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors, and, with respect to the Company, shall
also include Automotive Insurance Purchasing Group, Inc. and Automotive
Insurance Agency Inc.
"SURVIVING CORPORATION" means the Company as in existence after the
Effective Time.
-7-
"TAX" or "TAXES" shall have the meaning given to such terms in Section
3.24(k).
"TAX RETURN" means any return, report, declaration, claim for refund,
information return or other document (including any related or supporting
schedule, statement or information) filed or required to be filed in connection
with the determination, assessment or collection of any Tax of any party or the
administration of any laws, regulations or administrative requirements relating
to any Tax (including any amendment or other modification thereof).
"WARRANTY CONTRACT" means a contract providing for the repair, replacement
or indemnity for the cost thereof arising from the use of a vehicle.
SECTION 2. MERGER.
2.1 GENERAL. On and subject to the terms and conditions of this Agreement,
the Merger will take place at the Effective Time. The structure of the Merger
will be a merger of Merger Sub with and into the Company, with the Company being
the Surviving Corporation. The Parties will take all steps necessary to cause
the Merger to comply with applicable requirements of the DGCL regarding
corporate mergers.
2.2 CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
in New York, New York, commencing at 10:00 a.m. local time on the fifth Business
Day following the satisfaction or waiver of all conditions to the obligations of
the Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at or after
the Closing itself) (or such other date as the Parties may mutually determine)
(the "CLOSING DATE").
2.3 ACTIONS AT CLOSING. At the Closing, (i) the Company and, as
applicable, the Sellers will deliver to Merger Sub and Buyer the various
certificates, instruments, and documents referred to in Section 7.2, (ii) Merger
Sub and Buyer will deliver to the Company the various certificates, instruments,
and documents referred to in Section 7.3, (iii) the Company and Merger Sub will
file with the Secretary of State of Delaware a certificate of merger in due and
proper form (the "CERTIFICATE OF MERGER"), (iv) Buyer will deliver to the
Sellers the certificates evidencing the Buyer Shares (other than the Escrow
Shares) issued in the Merger in exchange for all of the certificates
representing the Seller Shares, together with checks representing amounts of
cash payable in lieu of fractional shares, if any, which each Seller is entitled
to receive, and (v) Buyer will deliver to the Escrow Agent the certificates
evidencing the Escrow Shares.
2.4 EFFECT OF MERGER.
(a) GENERAL. The Merger shall become effective at the time (the "EFFECTIVE
TIME") the Certificate of Merger is accepted for filing by the Secretary of
State of Delaware. The Merger shall have the effect set forth under relevant
provisions of the DGCL. The Surviving Corporation may, at any time after the
Effective Time, take any action (including executing and delivering any
document) in the name and on behalf of the Merger Sub in order to fully carry
out and effectuate the Merger.
-8-
(b) CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Merger Sub as in effect immediately prior to the Effective Time will, pursuant
to terms of the Certificate of Merger, become the Certificate of Incorporation
of the Surviving Corporation.
(c) BY-LAWS. The By-laws of Merger Sub as in effect immediately prior to
the Effective Time will remain unchanged by the Merger and be the By-laws of the
Surviving Corporation.
(d) DIRECTORS AND OFFICERS. The directors and officers of Merger Sub in
office immediately prior to the Effective Time will be the directors and
officers of the Surviving Corporation.
(e) CONVERSION OF SELLER SHARES. Subject to the provisions of Section
2.4(g) and 2.4(h), at and as of the Effective Time, each holder of Seller Common
Shares then outstanding shall by virtue of the Merger be entitled to receive
that number of shares of Buyer Common Stock which is equal to the product of (X)
the Seller Common Ratio applicable to such holder of Seller Common Shares and
(Y) Two Million (2,000,000). After the Closing, there shall be no transfers on
the stock transfer books of Seller Shares which were issued and outstanding at
the Effective Time and converted pursuant to the provisions of this Section
2.4(e). Subject to Section 2.4(i), after the Effective Time, holders of
certificates of Seller Shares shall cease to be, and shall have no rights as,
stockholders of the Company, other than to receive shares of Buyer Common Stock
into which such Seller Shares have been converted and, if applicable, fractional
share payments pursuant to the provisions hereof. Each share of Merger Sub
outstanding prior to the Effective Time shall be converted at and as of the
Effective Time into one share of common stock of the Surviving Corporation.
(f) LOST CERTIFICATES. In the event any certificate representing one or
more Seller Shares shall have been lost, stolen or destroyed, upon receipt of
appropriate evidence as to such loss, theft or destruction and to the ownership
of such certificate by the Person claiming such certificate to be lost, stolen
or destroyed, and the receipt by Buyer of an appropriate and customary
indemnity, Buyer will issue, in exchange for such lost, stolen or destroyed
certificate, one or more certificates representing Buyer Shares and the
fractional share payment, if any, deliverable with respect thereof, as
determined in accordance with this Section 2.4.
(g) FRACTIONAL SHARES. In lieu of the issuance of fractional shares of
Buyer Common Stock pursuant to Section 2.4(e), cash adjustments, without
interest, will be paid to the holders of Seller Shares in respect of any
fractional share that would otherwise be issuable pursuant to Section 2.4(e),
and the amount of such cash adjustment shall be determined by multiplying such
holder's fractional interest by the Aon Current Market Price as of the Closing
Date.
(h) ESCROW SHARES. At the Closing, the Sellers, Buyer and the Escrow Agent
shall enter into the Escrow Agreement, which Escrow Agreement is intended to
serve as security against obligations arising under the indemnification
provisions in Section 8 hereof. At the Closing, there shall be withheld from
each holder of Seller Shares a number of shares of Buyer Common Stock
(collectively, the "ESCROW SHARES") equal to the product, rounded to the nearest
whole share, of (X) the number of shares of Buyer Common Stock such holder would
have otherwise received
-9-
pursuant to Section 2.4(e) MULTIPLIED by (Y) 10%. At the Closing, Buyer shall
deposit with the Escrow Agent one or more stock certificates representing the
Escrow Shares.
(i) BUYER COMMON STOCK PRICE ADJUSTMENT. Subject to the last sentence of
this paragraph, if, on March 14, 2002 (the "ADJUSTMENT DATE"), the Combined
Current Market Price does not exceed $45.00, then the Buyer shall pay to each
Seller, in cash, on the third Business Day following the Adjustment Date, an
amount equal to the following (if a positive number): (i) the product obtained
by multiplying $90 million by such Seller's Seller Common Ratio LESS (ii) the
product obtained by multiplying the Aon Current Market Price on the Adjustment
Date by the number of shares of Buyer Common Stock issued to such Seller in the
Merger and held by such Seller on the Adjustment Date (including Escrow Shares)
LESS (iii) the product obtained by multiplying the CSC Current Market Price on
the Adjustment Date by the number of CSC Share Equivalents issued in the
Spin-off in respect of shares of Buyer Common Stock issued to such Seller in the
Merger held by such Seller on the Adjustment Date (including Escrow Securities
(as that term is defined in the Escrow Agreement)) LESS (iv) the Buyer
Adjustment Amount LESS (v) the CSC Adjustment Amount. The obligations in this
paragraph shall terminate and be of no effect if, at any time after the
effective date of the Initial Registration Statement (as defined in the
Registration Rights Agreement) and prior to the Adjustment Date, the sum of the
daily closing sales prices (as quoted by the primary exchange or market on which
such shares are traded) of (A) a share of Buyer Common Stock and (B) such number
of shares of CSC Common Stock as equates to a CSC Share Equivalent is equal to
or greater than $45.00 for 20 consecutive trading days, but only if during each
of those 20 trading days there are effective Registration Statements for the
Buyer Shares and CSC Common Stock issued in respect of Buyer Shares, if any,
which permits the sale of all of both such securities by the Sellers.
2.5 ANTI-DILUTION. In the event that, subsequent to the date of this
Agreement but prior to the Adjustment Date, the outstanding shares of Buyer
Common Stock or, after the Spin-off, CSC Common Stock, shall have been
increased, decreased, changed into or exchanged for a different number of shares
or securities through a split, reverse stock split, stock dividend or other like
changes in capitalization, as the case may be, then a fair and appropriate
adjustment shall be made to the number of shares of Buyer Common Stock and CSC
Common Stock; the Combined Current Market Price (including the Aon Current
Market Price and CSC Current Market Price); the Buyer Adjustment Amount and the
CSC Adjustment Amount; and the closing sale prices of Buyer Common Stock and CSC
Common Stock for purposes of Section 2.4(e) and 2.4(i). In the event the
Spin-off becomes effective after the date hereof but prior to the Effective
Time, appropriate adjustments will be made so that the Sellers receive the
number of shares of Buyer Common Stock determined in Section 2.4(e) plus such
shares of CSC Common Stock as are issuable in the Spin-off in respect of such
shares of Buyer Common Stock.
2.6 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Merger Sub or the Company or otherwise to carry out this
Agreement, the officers and directors of the Company and Merger Sub shall be
authorized to execute and deliver, in the name and on behalf of Merger Sub or
the Company, all such deeds, bills of sale, assignments and
-10-
assurances and to take and do, in the name and on behalf of Merger Sub or the
Company, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY.
The Company and each Seller hereby represent and warrant to Buyer and
Merger Sub that, except as set forth in the disclosure schedule delivered by the
Company and the Sellers to Buyer and Merger Sub concurrently herewith (the
"DISCLOSURE SCHEDULE"), which disclosure shall make reference to the particular
section of this Agreement to which such disclosure relates, and which sets
forth, among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement contained in
a provision hereof or as an exception to one or more of such party's
representations or warranties contained in this Section 3, or to one or more of
the covenants contained in Section 6:
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as presently conducted.
(b) Section 3.1(b) of the Disclosure Schedule lists each Subsidiary of the
Company and its jurisdiction of organization. The Company owns, directly or
indirectly, all of the outstanding capital stock (or other ownership interests)
of each of its Subsidiaries which, with respect to each such Subsidiary, has
been duly authorized and validly issued and is fully paid and, if applicable,
non assessable. The Company is the beneficial owner of all of the outstanding
shares of capital stock of each Subsidiary of the Company, free and clear of any
and all Liens and there are no outstanding options, warrants, convertible
securities, calls, rights, commitments, preemptive rights or agreements or
instruments or understandings of any character, obligating any Subsidiary of the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
contingently or otherwise, additional shares of capital stock of or other
ownership interests in such Subsidiary or any securities or obligations
convertible or exchangeable for such shares or interests or to grant, extend or
enter into any such option, warrants, convertible security, call, right,
commitment, preemptive right or agreement. Except for investments made in the
Ordinary Course pursuant to the investment guidelines adopted by the Company
Board, the Company and its Subsidiaries have no investments (whether through
acquisition of an equity interest or otherwise) in any other person, joint
venture, business, corporation, partnership, trust or other entity with a fair
market value in excess of $100,000. For purposes of this Agreement, "LIEN"
means, with respect to any asset (including, without limitation, any security)
any mortgage, lien, pledge, charge, claim, security interest or encumbrance of
any kind in respect of such asset.
(c) Each Subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of its incorporation or
-11-
organization and has all requisite corporate or other power and authority to
own, lease and operate its respective properties and to carry on its respective
businesses as now being conducted.
(d) Except as set forth in Section 3.1(d) of the Disclosure Schedule,
neither the Company nor any Subsidiary of the Company is a party to any
stockholder agreements, voting trusts, proxies or other agreements or
understandings with respect to or concerning the purchase, sale or voting of the
capital stock of any of such Subsidiaries, and to the knowledge of the Company,
there are no such agreements, trusts, proxies, other agreements or
understandings with respect to which the Company or any material Subsidiary of
the Company is not a party. None of the Subsidiaries of the Company is in
default under or in violation of any provision of its Constituent Documents.
(e) Except as set forth in Section 3.1(e) of the Disclosure Schedule, each
of the Company and its Subsidiaries is duly qualified or licensed to do business
and in good standing in each jurisdiction in which the property owned, leased or
operated by it, or the nature of the business conducted by it, makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not have,
individually or in the aggregate, a Material Adverse Effect on the Company.
(f) The Company has previously made available to Buyer true and complete
copies of the certificate of incorporation and by-laws of the Company and the
charter and by-laws of each of its Subsidiaries, and any similar governing
documents (the "CONSTITUENT DOCUMENTS"), all as currently in full force and
effect.
3.2 CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of 1,000 shares
of common stock, of which, as of the date hereof, 100 shares were issued and
outstanding, which shares are held of record by the persons and in the amounts
set forth in Section 3.2(a) of the Disclosure Schedule. All of the Seller Shares
have been validly issued, and are fully paid, nonassessable and free of
preemptive rights. Except as set forth above, and other than cash bonus plans
based upon financial performance and listed in Section 3.2(a) of the Disclosure
Schedule, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company or its Subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (iii) no options or other rights to acquire from the
Company or its Subsidiaries, and no obligations of the Company or its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and (iv) no equity equivalents, interests in the ownership or earnings
of the Company or its Subsidiaries or other similar rights (collectively
"COMPANY SECURITIES"). Except with respect to Automotive Insurance Agency, Inc.
and the appreciation rights agreement with ▇▇. ▇▇▇▇▇ listed in Section 3.2(a) of
the Disclosure Schedule, there are no outstanding obligations of the Company or
its Subsidiaries or any employees thereof to repurchase, redeem or otherwise
acquire any Company Securities.
(b) Except as set forth in paragraph (a) of this Section 3.2, no Stock
Rights are authorized, issued or outstanding with respect to the capital stock
of the Company or any Subsidiary of the Company. For purposes of this Agreement,
"STOCK RIGHTS" mean (i) subscriptions, calls,
-12-
warrants, options, rights and other arrangements or commitments of any kind
which obligate an entity to issue or dispose of any of its capital stock or
other equity securities, (ii) securities convertible into or exercisable or
exchangeable for shares of capital stock or other equity securities and (iii)
stock appreciation rights, performance units and other similar stock based
rights whether they obligate the issuer thereof to issue stock or other equity
securities or to pay cash.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, subject to the requirements set
forth in Section 3.5. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Company Board, and the Seller Approval has occurred, and no
other corporate proceedings on the part of the Company or approvals of its
shareholders are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and the Sellers and, assuming the due
authorization, execution and delivery hereof by the Buyer and Merger Sub,
constitutes a valid, legal and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
3.4 GAAP FINANCIAL STATEMENTS.
(a) The Company has previously delivered to the Buyer the Company's
audited consolidated balance sheets and statements of income, cash-flow and
shareholders' equity for each of the two years in the period ended December 31,
2000 (all such items mentioned previously in this Section, the "FINANCIAL
STATEMENTS"). The Financial Statements (i) are correct and complete in all
material respects, (ii) are consistent with the books and records of the Company
and its Subsidiaries (which books and records are correct and complete in all
material respects, and are maintained in accordance with applicable
regulations), and (iii) have been prepared in conformity with GAAP applied on a
consistent basis (except as described therein and in prior historical financial
statements of the Company) and present fairly the financial position of the
Company on a consolidated basis as at the dates indicated and the results of its
operations for such period. Except as set forth in the Financial Statements or
Section 3.4(a) of the Disclosure Schedule, as of the date hereof, neither the
Company nor any of its Subsidiaries has (i) any Loss Contingency material to the
Company and its Subsidiaries on a consolidated basis which is not required by
GAAP to be accrued or (ii) any other Liability material to the Company and its
Subsidiaries on a consolidated basis that is not required by GAAP to be accrued.
The financial statements to be delivered pursuant to Section 6.3(i) will be
derived from the accounting books and records of the Company, will provide
adequate disclosure of material changes to the accounts or business of the
Company and its Subsidiaries and will be prepared in accordance with GAAP
(except for the absence of footnotes) and otherwise on the same basis as the
Financial Statements (except as may be required by GAAP), subject to normal
year-end adjustments in the case of monthly financial statements.
(b) STATUTORY FINANCIAL STATEMENTS. The Company has heretofore delivered
to Buyer true and complete copies of Annual Statements of FFG Insurance Company
("FFG") as filed with the Texas Department of Insurance for the year ended
December 31, 2000 (the "ANNUAL STATEMENT"). The balance sheet of FFG as of
December 31, 2000, and the related statement of income and cash flow for the
year then ended, included in the Annual Statement for the year ended
-13-
December 31, 2000, were prepared in conformity with statutory accounting
practices prescribed or permitted by the Texas Department of Insurance
consistently applied, except as otherwise noted therein, for the period covered
thereby and fairly present the statutory financial position of FFG as at the
date thereof and the results of operations and cash flow of FFG for the period
then ended; PROVIDED, that this representation shall not be deemed to be
breached by reason of the development of Reserves for Losses and Loss Adjustment
Expenses and Reserves for Uncollectible Reinsurance after the date of such
financial statement.
3.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming the truth and accuracy
of the Buyer's and Merger Sub's representations and warranties contained in
Section 5.3, except for filings, permits, authorizations, consents and approvals
as may be required under, and other applicable requirements of (a) the
Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder, (b) state securities or blue sky laws, (c) the HSRA, (d) the filing
and recordation of the Certificate of Merger with the Secretary of State of the
State of Delaware as required by the DGCL, (e) other immaterial actions,
filings, approvals, and consents or (f) as set forth in Section 3.5 of the
Disclosure Schedule, no filing with or notice to, and no permit, authorization,
consent or approval of, or order of, any Governmental Entity is necessary for
the execution, delivery and performance by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby do not and
will not (a) conflict with or result in any breach of any provision of the
Constituent Documents of the Company or any of its Subsidiaries, (b) result in a
violation or breach of, or cause acceleration, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation, acceleration or loss of material benefits
to the Company or any Subsidiary of the Company) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound, (c) contravene or conflict with or
constitute a violation of any provision of any law, statute, rule, regulation,
judgment, order, writ, injunction or decree (collectively, "LAWS") applicable to
the Company or any of its Subsidiaries or any of their respective properties or
assets or (d) result in the creation or imposition of any Lien on any asset of
the Company or any Subsidiary of the Company, except in the case of (b) through
(d) for violations, breaches or defaults which would not have, individually or
in the aggregate, a Material Adverse Effect on the Company or would not
reasonably be expected to prevent the consummation of the transactions
contemplated by this Agreement.
3.6 NO DEFAULT. None of the Company or any of its Subsidiaries is in
default of, in conflict with or violation (and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or violation by
the Company or any of its Subsidiaries) of any term, condition or provision of
(a) its Constituent Documents, (b) any note, bond, mortgage, indenture, lease,
license, permit, franchise, contract, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their respective properties or assets may be bound
or affected or (c) any Law applicable to the Company, its Subsidiaries or any of
their respective properties or assets, except in the case of (b) or (c) for
violations, breaches or defaults that would not have, individually or in the
aggregate, a Material Adverse Effect on the Company.
-14-
3.7 NO UNDISCLOSED LIABILITIES. Neither the Company nor its Subsidiaries
have any material liabilities or obligations of any nature (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated and whether due or to
become due, including any liability for Taxes) other than such liabilities or
obligations (i) that have been specifically disclosed or provided on the
Company's most recent Financial Statements, (ii) that have been incurred in the
Ordinary Course since the most recent Financial Statements, or (iii) that are
not required by GAAP to have been included in the Company's consolidated balance
sheet. The Company and its Subsidiaries have adequate reserves to cover all
insurance claims under all of their policies written.
3.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth in Section 3.8 of
the Disclosure Schedule, since December 31, 2000 no event has occurred which has
had or reasonably would be expected to have a Material Adverse Effect on the
Company. Except as disclosed in the Financial Statements, and except for this
Agreement and the Merger, since December 31, 2000, each of the Company and its
Subsidiaries has been operated in the Ordinary Course. Without limiting the
generality of the foregoing, except as set forth on Section 3.8 of the
Disclosure Schedule, between December 31, 2000 and the date hereof:
(i) no party (including the Company or any of its Subsidiaries)
has accelerated, terminated, modified or canceled any
Contract (or series of related Contracts) involving more
than $100,000 to which the Company or any of its
Subsidiaries is a party or by which any of them is bound;
(ii) neither the Company nor any of its Subsidiaries has imposed
any Lien upon any of its assets, tangible or intangible,
except in the Ordinary Course;
(iii) there has not been any revaluation by the Company or any of
its Subsidiaries of any of their respective assets,
including, without limitation, write-offs of accounts
receivable;
(iv) there has not been any damage, destruction or other
casualty loss (whether or not covered by insurance) that
has resulted in a Material Adverse Effect on the Company;
(v) except as required by GAAP or applicable Law in any
relevant jurisdiction applicable to the Company or any
of its Subsidiaries, there has not been any material
change in any method of accounting or accounting practice
or policy or application thereof by the Company or any of
its Subsidiaries;
(vi) except in the Ordinary Course, neither the Company nor any
of its Subsidiaries has made any capital investment in
securities rated below investment grade, any loan to, or
any acquisition of the
-15-
securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions)
involving more than $100,000;
(vii) except for provision of services or sales in the Ordinary
Course there has not been (i) any sale, lease, license,
transfer or other disposition of any of its assets or
property having a book or market value in excess of
$100,000 or (ii) any agreement or consent to enter into
such agreement granting a preferential right to sell,
lease or otherwise dispose of any of such assets;
(viii) there has not been entrance into any new line of business,
or incurrence or commitment to incur any capital
expenditures, obligations or liabilities in connection
therewith;
(ix) there has not been any acquisition or agreement to acquire
by merger, consolidation or otherwise, or agreement to
acquire a substantial portion of the assets of, or in
any other manner, any business of any other Person;
(x) there has not been any cancellation or waiver of (i) any
right material to the operation of the business of the
Company or any of its Subsidiaries, or (ii) any debts or
claims against any Affiliate of the Company;
(xi) there has not been any disposition of, or failure to keep
in effect any material right in, to or for the use of
any material patent, trademark, service ▇▇▇▇, trade
name, copyright or trade secret of the Company or any of
its Subsidiaries;
(xii) neither the Company nor any of its Subsidiaries has issued
any note, bond, or other debt security, accommodated or
endorsed the obligations of any other Person, except in
connection with the deposit of checks, or created,
incurred, assumed, or guaranteed any indebtedness or
Liability for borrowed money or capitalized lease
obligation either involving more than $100,000 singly or
$200,000 in the aggregate;
(xiii) neither the Company nor any of its Subsidiaries has delayed
or postponed the payment of accounts payable and other
liabilities outside the Ordinary Course;
(xiv) neither the Company nor any of its Subsidiaries has granted
any license or sublicense of any rights under or with
respect to any Proprietary Rights either involving more
than $100,000 or outside the Ordinary Course;
-16-
(xv) there has been no change made or authorized in the charter
or bylaws of the Company or any of its Subsidiaries;
(xvi) neither the Company nor any of its Subsidiaries has issued,
sold or otherwise disposed of any of its capital stock,
or granted or entered into any option, warrant or other
Contract to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital
stock;
(xvii) neither the Company nor any of its Subsidiaries has
declared, set aside or paid any dividend or made any
distribution with respect to its capital stock (whether
in cash or in kind) or redeemed, purchased or otherwise
acquired any of its capital stock other than dividends
payable in cash in the Ordinary Course (including
amounts necessary to pay certain Taxes) in accordance
with the terms of the Company's (or any such
Subsidiary's) Certificate of Incorporation;
(xviii) neither the Company nor any of its Subsidiaries has entered
into a Contract or any other transaction with any of its
Affiliates other than pursuant to existing Contracts
entered into in the Ordinary Course;
(xix) except in the Ordinary Course, neither the Company nor
any of its Subsidiaries has entered into any employment
Contract (other than Contracts with officers of either
the Company or any of its Subsidiaries) or collective
bargaining agreement, written or oral, or modified the
terms of any existing such Contract or agreement;
(xx) neither the Company nor any of its Subsidiaries has granted
any increase in the base compensation of any of its
directors, officers or employees other than in the
Ordinary Course;
(xxi) neither the Company nor any of its Subsidiaries has
adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance or other plan for
the benefit of any of its directors, officers and
employees (or taken any such action with respect to any
other Plan (as defined in Section 3.11(a)));
(xxii) neither the Company nor any of its Subsidiaries has made
any other change in employment terms for any of its
officers or employees outside the Ordinary Course;
(xxiii) there has not been, to the Company's knowledge, any
activity or proceeding by a labor union or
representative thereof to organize any employees of the
Company or any of its Subsidiaries, or any lockouts,
strikes, slowdowns, work stoppages, or to the Company's
knowledge, threats by or with respect to such employees;
-17-
(xxiv) there has not been any waiver of any material benefits of,
or agreement to modify in any material respect, any
confidential, standstill, non-solicitation or similar
agreement to which the Company or any of its
Subsidiaries is a party;
(xxv) to the Company's knowledge, there has not been any other
occurrence, event, incident, action, failure to act or
transaction outside the Ordinary Course involving the
Company or any of its Subsidiaries; and
(xxvi) neither the Company nor any of its Subsidiaries has
committed to do any of the foregoing.
3.9 LITIGATION. Except as set forth in Section 3.9 of the Disclosure
Schedule, there is no suit, litigation, arbitration, grievance, claim, action,
proceeding or investigation pending or, to the knowledge of the Company and any
of its Subsidiaries, threatened against or relating to the Company or any of its
Subsidiaries or any of their respective properties, assets or business before
any Governmental Entity which would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company or would
reasonably be expected to prevent, enjoin, alter or significantly delay the
consummation of the transactions contemplated by this Agreement. None of the
Company or its Subsidiaries is subject to any outstanding order, writ,
injunction, settlement or similar agreement, or decree that would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company or prevent or significantly delay the consummation of the
transactions contemplated hereby. There are no actions, suits or proceedings
related to discrimination on the basis of age, sex, religion, race or physical
or mental disability, and no labor disturbance by the employees of the Company
or any of its Subsidiaries exists or, to the knowledge of the Company or any of
its Subsidiaries, is threatened which, in each case would reasonably be expected
to have a Material Adverse Effect on the Company.
3.10 COMPLIANCE WITH APPLICABLE LAW; LICENSES.
(a) The Company and its Subsidiaries hold all material permits,
licenses, consents, authorizations, certificates, variances, exemptions,
orders and approvals of and from all, and has made all declarations and
filings with Governmental Entities necessary for the lawful conduct of their
respective businesses and to own, lease, license and use their respective
properties and assets (the "COMPANY PERMITS"). The Company and its
Subsidiaries are in compliance with the terms of the Company Permits. The
activities or businesses of the Company and its Subsidiaries are not being
conducted in violation of or in conflict with any law, rule, order, judgment,
decree, ordinance or regulation of the United States, any foreign country,
any state, county or locality, or of any Governmental Entity of the United
States, any country, any state, county or locality or of any foreign
-18-
jurisdiction. No material investigation or review by any Governmental Entity of
the United States, any country, any state, county or locality or of any foreign
jurisdiction with respect to the Company or its Subsidiaries is pending or, to
the knowledge of the Company and any of its Subsidiaries, threatened, nor, to
the knowledge of the Company and any of its Subsidiaries, has any Governmental
Entity of the United States, any country, any state, county or locality or of
any foreign jurisdiction indicated an intention to conduct the same. Neither the
Company nor any of its Subsidiaries is, or has received any notice, actual or
constructive, to the effect that it is (or that the manner in which any of them
conducts its business is), in breach or violation of, or in default under, any
term or provision of (i) its Constituent Documents, (ii) any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which it is a party or by which it is or may be bound or to which
any of its proportion or assets is or may be subject, or (iii) except as
disclosed pursuant to any other Section of this Section 3, any Law binding upon
or applicable to the Company or any of its Subsidiaries or of any Governmental
Entity, domestic or foreign, having jurisdiction over the Company or any of its
Subsidiaries or any of their respective properties or assets.
(b) The Company and its Subsidiaries has obtained all licenses,
certificates of authority, permits, authorizations, orders and approvals of, and
has made all registrations or filings with, all Governmental Entities as
required in connection with the conduct of the business of the Company as
currently conducted, and with respect to which a failure to so obtain would have
a Material Adverse Effect on the Company (collectively, the "LICENSES"). Section
3.10(b) of the Disclosure Schedule lists the jurisdictions in which the Company
and its Subsidiaries possess licenses, certificates of authority, approvals or
authorizations to conduct an insurance business as an admitted insurer (an
"INSURANCE AUTHORIZATIONS"). Section 3.10(b) of the Disclosure Schedule lists
the jurisdictions in which the Company and its Subsidiaries are otherwise
eligible or qualified to conduct an insurance business ("INSURANCE
ELIGIBILITY"). The Company has heretofore made available to the Buyer true and
complete copies of all documents or certificates relating to such Insurance
Authorizations as are currently in effect. All material licenses and Insurance
Authorizations are valid and in full force and effect.
3.11 ERISA.
(a) Section 3.11 of the Disclosure Schedule sets forth a list of all
"employee benefit plans" (as defined in Section 3(2) of ERISA and which are
subject to ERISA (each, a "PENSION PLAN")), all "employee welfare plans" (as
defined in Section 3(l) of ERISA and which are subject to ERISA) (each, a
"WELFARE PLAN") , all other material bonus, deferred compensation, incentive
compensation, excess benefit, stock, stock option, severance, termination pay,
change in control compensation and death benefit and fringe benefit plans, and
all employment agreements maintained, sponsored, administered contributed to by
the Company or any of its Subsidiaries or with respect to which the Company or
any of its Subsidiaries has any material liability for the benefit of any
current or former employee or other beneficiary, except for any plan or
agreement providing for benefits which are required pursuant to any federal,
state, local or foreign law or regulation (collectively, the "PLANS"). Except as
set forth in Section 3.11 of the Disclosure Schedule, no Plan is, or at any time
within the six calendar years preceding the date of this Agreement has been, a
"multiemployer plan" within the meaning of Section 3(37) of ERISA which is
subject to Title IV of ERISA. The Company Disclosure Schedule sets forth all
collective bargaining agreements covering employees of the Company or any of its
Subsidiaries world-wide.
(b) With respect to each Plan (to the extent applicable), the Company has
made available to Buyer and Merger Sub prior to the execution of this Agreement
true and complete copies of (i) the current Plan documents, including all
amendments, (ii) each trust agreement relating to
-19-
such Plan, (iii) the most recent annual report (Form 5500 Series) required to be
filed with the IRS, (iv) the most recent summary plan description, (v) the most
recent actuarial report or valuation, and (vi) the most recent determination
letter issued by the IRS.
(c) All Plans have maintained, funded, been administered and in all
material respects are in compliance with their terms and the terms of any
applicable collective bargaining agreement and with the requirements of any
applicable law, including, but not limited to ERISA and the Code.
(d) No Pension Plan subject to Title IV of ERISA for which the Company or
a Subsidiary of the Company was the contributing sponsor was terminated within
six years prior to the date hereof, or was terminated more than six years prior
to the date hereof unless the Company has no material contingent or actual
liability with respect to such Pension Plan as of the date hereof (other than in
a standard termination pursuant to Section 4041 of ERISA with respect to which
the Company has no contingent or actual liability). Neither the Company nor any
of its Subsidiaries has engaged in a transaction that may give rise to liability
under sections 4064 or 4069 of ERISA. Neither the Company nor any of its
Subsidiaries is subject to any lien imposed under Section 412(n) of the Code or
Section 302(f) of ERISA, whichever may apply, with respect to any Pension Plan.
Neither the Company nor any of its Subsidiaries has any material liability for
unpaid contributions with respect to any Pension Plan. Neither the Company nor
any of its Subsidiaries is required to provide security to a Pension Plan which
covers or has covered employees or former employees of the Company under Section
401(a) (29) of the Code. Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument which covers or has covered
employees or former employees of the Company and is intended to be qualified and
tax-exempt under the provisions of Code Sections 401(a) and 501(a) has received
a determination letter from the IRS that it is so qualified and the Company has
no knowledge of any facts which would adversely affect its qualified status. The
Company has paid all premiums (and interest charges and penalties for late
payment, it applicable) due the Pension Benefit Guaranty Corporation (the
"PBGC") with respect to each Pension Plan for each plan year thereof for which
such premiums are required. There has been no "reportable event" (as defined in
Section 4043(b) of ERISA and the PBGC regulations under such Section) with
respect to any Pension Plan as to which the reporting requirement has not been
waived. No filing has been made by the Company or any of its Subsidiaries with
the PBGC, and no proceeding has been commenced by the PBGC, to terminate any
Pension Plan, except for any Plan terminated under the standard termination
provisions of Section 4041 of ERISA and with respect to which the Company has no
contingent or actual liability. To the Company's knowledge, no condition exists
and no event has occurred that could constitute grounds for the termination of
any Pension Plan by the PBGC. With respect to any "multiemployer plan" (as
defined in Section 3(37) or 4001(a)(1) of ERISA) to which the Company or any of
its Subsidiaries contributes or with respect thereto has any liability and which
is subject to Title IV of ERISA, no event has occurred in connection with which
the Company or any of its Subsidiaries could have any material liability that
would have a Material Adverse Effect on the Company.
(e) Neither the Company nor any of its Subsidiaries, nor, to the knowledge
of the Company, any trustee or administrator of any Plan, has engaged in a
"prohibited transaction," as defined in Section 4975 of the Code, or a
transaction prohibited by Section 406 of ERISA that could give rise to any tax
or penalty under Section 4975.
-20-
(f) At the end of its most recent plan year, each Plan to which Section
412 of the Code is applicable satisfied the minimum funding standards provided
for in such Section and all required installments (within the meaning of Section
412(m) of the code), the due date for which is after the end of the most recent
plan year but prior to the date hereof, have been made.
(g) Each Welfare Plan which covers or has covered employees or former
employees of the Company and which is a "group health plan," as defined in
Section 607(l) of ERISA, has been operated in compliance in all material
respects with the provisions of Part 6 of Title I, Subtitle B of ERISA and
Sections 162 (k) and 4980B of the Code at all times.
(h) With respect to any plan covering employees or former employees of any
of the Company's Subsidiaries organized under the laws of or doing business in
any country other than the United States which if maintained or administered in
or otherwise subject to the laws of the United States would be an "employee
pension benefit plan" as defined in Section 3(2) of ERISA (except for any such
plan providing for benefits which are required pursuant to any foreign law or
regulation), to the knowledge of the Company, each such plan has been maintained
in all material respects in compliance with its terms and with the requirements
proscribed by any and all applicable statutes, orders, rules and regulations
(including without limitation any special provisions relating to the tax status
of contributions to, earnings of or distributions from such plans where each
such plan was intended to have such tax status) and has been maintained in good
standing with applicable regulatory authorities.
(i) The representations and warranties set forth in Sections 3.11(d) and
(f) are also true with respect to any employee pension benefit plan (as defined
in Section 3(2) of ERISA) maintained, sponsored, administered or contributed to
by any entity which is in the same "controlled group" (as defined in Section
4001(a)(14) of ERISA or Section 412(l)(8)(c) of the Code) as the Company or any
Subsidiary of the Company.
3.12 ENVIRONMENTAL LAWS AND REGULATIONS.
(a) Each of the Company and its Subsidiaries is, and at all times has
been, in material compliance with, all Environmental Laws. Neither the Company
nor any of its Subsidiaries has any basis to expect, nor has any of them
received, any actual or threatened order, notice, or other communication from
any Governmental Entity or private citizen acting in the public interest of any
actual or potential violation or failure to comply with any Environmental Laws.
(b) There are no pending or, to the knowledge of the Company and its
Subsidiaries, threatened claims, encumbrances, or other restrictions of any
nature, resulting from any liabilities for Hazardous Materials or arising under
or pursuant to any Environmental Law.
(c) As used herein:
(i) "Environmental Laws" means any federal, state and local laws,
regulated order relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, or
chemicals, or industrial, toxic or hazardous substances or
wastes, into the
-21-
environment (including structures, ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata), or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
(ii) "Hazardous Material" means (A) any chemicals or other
materials or substances that are defined as or included in the
definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances,"
"pollutants," "contaminants," or words of similar import under
any Environmental Law, including petroleum, friable asbestos,
polychlorinated biphenyls and chlorofluorocarbons, and (B) any
other chemical, material or substance, the presence of or
exposure to which is prohibited, limited or regulated by any
Governmental Entity under any Environmental Law.
3.13 INTELLECTUAL PROPERTY; SOFTWARE. To the Company's knowledge, the
Company or one of its Subsidiaries is the owner of (free and clear of all liens
and encumbrances), has sufficient and valid rights to use or is a licensee under
a valid written license that has been disclosed to Buyer and Merger Sub for, all
items of intangible property, including, without limitation, trademarks and
service marks (whether or not registered or applied for registration), domain
name, trade names, brand names, patents, patent applications, inventions
(whether or not patented), trade secrets and copyrights (whether or not
registered or applied for registration) (collectively, the "INTELLECTUAL
PROPERTY"), which individually or in the aggregate are necessary for the
operation of the business of the Company and any of its Subsidiaries as
currently conducted, except for any such Intellectual Property the loss of which
would not reasonably be expected to cause a Material Adverse Effect on the
Company. Except as would not reasonably be expected to have a Material Adverse
Effect on the Company, there are no claims pending or, to the Company's or any
of its Subsidiaries's knowledge, threatened, that the Company or any of its
Subsidiaries in violation of any intangible property rights of any third party.
Except as would not reasonably be expected to have a Material Adverse Effect on
the Company, no third party has interfered with, infringed upon,
misappropriated, or violated in any material respect any Intellectual Property
rights of the Company or any of its Subsidiaries. The Company and each of its
Subsidiaries has taken reasonable security measures to protect the secrecy,
confidentiality and value of the Intellectual Property. Except as would not
reasonably be expected to have a Material Adverse Effect on the Company, all
payments, including maintenance fees, and all filings and registrations have
been made with respect to the Intellectual Property so as to maintain the
Intellectual Property in full force and effect. Except as would not reasonably
be expected to have a Material Adverse Effect on the Company, all Intellectual
Property owned or used by the Company or any of its Subsidiaries immediately
prior to the Effective Time will be owned as available for use by the Surviving
Corporation and its Subsidiaries on identical terms and conditions immediately
subsequent to the Effective Time.
3.14 CERTAIN BUSINESS PRACTICES. The Company, any of its Subsidiaries or
any directors, officers, agents or employees of the Company or any of its
Subsidiaries, in their capacities as such, each has not, directly or indirectly,
(a) made or agreed to make any contribution, payment
-22-
or gift to any government official, employee or agent where either the
contribution, payment or gift or the purpose thereof was illegal under the laws
of any federal, state, local or foreign jurisdiction, (b) established or
maintained any unrecorded fund or asset for any purpose or made any false
entries on the books and records of the Company and its Subsidiaries for any
reason, (c) made or agreed to make any contribution, or reimbursed any political
gift or contribution made by any other person, to any candidate for federal,
state, local or foreign public office or (d) paid or delivered any fee,
commission or any other sum of money or item of property, however characterized,
to any finder, agent, government official or other party, in the United States
or any other country, which in any manner relates to the assets, business or
operations of the Company or its Subsidiaries, in each case, which the Company,
such Subsidiary or each officer, director, agent or employee knew or has reason
to believe to have been illegal under any federal, state or local laws (or any
rules or regulations thereunder) of the United States or any other country
having jurisdiction.
3.15 LABOR MATTERS. With respect to the Company and its Subsidiaries, as
of the date hereof: (i) there is no collective agreement or bargaining
relationship with any labor organization; (ii) no executive officer has declared
any present intention to terminate their employment; (iii) no labor organization
or group of employees has filed any representation petition or made any written
or oral demand for recognition; (iv) no union organizing or decertification
efforts are underway or threatened and no other question concerning
representation exists; (v) no labor strike, work stoppage, slowdown, or other
material labor dispute has occurred within the past three (3) years or is
currently underway and, to the knowledge of the Company and its Subsidiaries
none is threatened; (vi) there is no ▇▇▇▇▇▇▇'▇ compensation claim; (vii) there
is no employment- related charge, complaint, grievance, investigation, inquiry
or obligation of any kind, pending or to the knowledge of Sellers or the
Company, threatened in any forum, relating to an alleged violation or breach by
the Company or its Subsidiaries (or its or their officers or directors) of any
law, regulation or contract; and, (viii) to the knowledge of Sellers or the
Company, no employee or agent of the Company or its Subsidiaries has committed
any act or omission giving rise to liability for any violation identified in
subsection (vii) above.
Neither the Company nor its Subsidiaries have implemented any plant
closing or layoff of employees that could implicate the Worker Adjustment and
Retraining Notification Act of 1988, as amended, or any similar foreign, state
or local law, regulation or ordinance.
3.16 ACCOUNTS RECEIVABLE. All accounts receivable reflected in the books
of the Company and its Subsidiaries consist of accounts that are, to the
Company's knowledge, good and collectible in the Ordinary Course except to the
extent of applicable reserves which the Company and its Subsidiaries created to
cover claims under insurance policies written or for which the Company and its
Subsidiaries have created an applicable reserve for bad debts on the Company's
unaudited consolidated balance sheet as of December 31, 2000.
3.17 BOOKS AND RECORDS. The books and records of the Company and each of
its Subsidiaries are accurate and complete in all material respects and
accurately reflect in all material respects the ownership, use, and operations
of the Company and each of its Subsidiaries.
3.18 INSURANCE. The Company maintains insurance policies (the "INSURANCE
POLICIES") against all risks of a character and in such amounts as are usually
insured against by
-23-
similarly situated companies in the same or similar businesses. Section 3.18 of
the Disclosure Schedule contains a summary description of all material Insurance
Policies as of the date hereof. As of the date hereof, each Insurance Policy is
in full force and effect and is valid, outstanding and enforceable, and all
premiums due thereon have been paid in full. None of the Insurance Policies will
terminate or lapse (or be affected in any other materially adverse manner) by
reason of the transactions contemplated by this Agreement. The Company and its
Subsidiaries have complied in all material respects with provisions of each
Insurance Policy under which it is the insured party. As of the date hereof, no
insurer under any Insurance Policy has canceled or generally disclaimed
liability under any such policy or, to the Company's knowledge, indicated any
intent to do so or not to renew any such policy. All material claims under the
Insurance Policies have been filed in a timely fashion.
3.19 REINSURANCE. Section 3.19 of the Disclosure Schedule contains a
complete and correct list of all Contracts regarding reinsurance, coinsurance,
excess insurance, ceding of insurance, assumption of insurance or
indemnification with respect to insurance to which FFG is a party (as either a
ceding or assuming party as of the date hereof) and in respect of which there
are open claims as of the date hereof. In respect of all such contracts
(individually a "REINSURANCE AGREEMENT" and collectively the "REINSURANCE
AGREEMENTS") to which FFG has been a party since 1995, and all such treaties or
agreements are in full force and effect. Except as set forth in Section 3.19 of
the Disclosure Schedule, neither FFG, nor to the knowledge of FFG, any other
party, is in default of any material provision of the Reinsurance Agreements. No
other party to any such Reinsurance Agreement has given notice of termination or
cancellation of any such Reinsurance Agreement other than in accordance with the
terms of such Reinsurance Agreement. No reinsurer has asserted or threatened to
assert a claim that FFG has breached any of its material obligations under any
Reinsurance Agreement or that the reinsurer will not or does not intend to
perform any of its material obligations under a Reinsurance Agreement.
3.20 POLICIES OF INSURANCE WRITTEN BY FFG. Except for any failures to
comply or file which did not and will not result in the imposition of a material
fine or penalty against FFG which has not been paid all policies and contracts
of insurance or reinsurance issued by FFG within the five (5) years prior to the
date hereof or which are being issued by FFG as of the date hereof are in
compliance, and at their respective dates of issuance were in compliance, in all
material respects with all applicable Laws and, to the extent required under
applicable Law, are on forms approved by the appropriate Governmental Entities
in the jurisdictions where issued or have been filed with and not objected to by
such Governmental Entities within the period provided for objection. Any premium
rates with respect to insurance policies or contracts currently issued by FFG
which are required to be filed with or approved by any Governmental Entity have
been so filed or approved in accordance with applicable Laws, and such premiums
charged by FFG conform thereto, except where the failure to so file or receive
approval or conform did not and will not result in the imposition of a material
fine or penalty against FFG which has not been paid.
3.21 BROKERS' FEES. Except pursuant to an agreement with ▇▇▇▇▇▇▇▇ Inc.
dated February 12, 2001, none of the Company and its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
similar agent with respect to the transactions contemplated by this Agreement.
-24-
3.22 SUPPLIERS AND CUSTOMERS. The documents and information supplied by
the Company to Buyer and Merger Sub in connection with this Agreement with
respect to the relationships with and volumes of business done with significant
customers and with respect to receivables aging and reserves with respect
thereto was accurate in all material respects. The Company is not aware of any
circumstances that would indicate that any significant supplier or customer
intends to materially alter its relationship with the Company as a result of the
Company's entering into this Agreement.
3.23 CERTAIN CONTRACTS. Section 3.23 of the Disclosure Schedule lists the
following contracts to which the Company or any of its Subsidiaries is a party:
(i) any Contract concerning noncompetition, (ii) any Contract between the
Company and any of its Affiliates or Subsidiaries, (iii) any profit sharing,
stock option, stock purchase, stock appreciation, deferred compensation,
severance, or other plan or arrangement for the benefit of its current or former
directors, officers, and employees, (iv) any powers of attorney executed on
behalf of the Company or any of its Subsidiaries, (v) any Contract under which
any of them has advanced or loaned any amount to any of its directors, officers,
and employees, (vi) any Contract under which the consequences of a default or
termination reasonably would be expected to have a Material Adverse Effect on
the Company (other than Warranty Contracts), (vii) any instrument or Contract
whereby the Company or any of its Subsidiaries indemnifies or guarantees any
loss or Liability which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Company, (viii) any Contract
under which the Company or any of its Subsidiaries could have Liabilities or
obligations in the future relating to the acquisition or disposition of material
assets by way of merger, consolidation, purchase, sale or otherwise, or granting
to any Person a right at such person's option to purchase or acquire any
material asset or property of the Company or any interest therein (not including
dispositions of securities in the Ordinary Course), and (ix) any other Contract
(or group of related contracts) the performance of which involves consideration
in excess of $100,000.
3.24 TAX MATTERS.
(a) Each of the Company and its Subsidiaries has duly and timely filed
(or, in the case of returns and reports due between the date hereof and the
Closing Date, will duly and timely file) all material domestic and foreign
(whether national, federal, state, provincial, local or otherwise) tax returns
and reports required to be filed by it and each such return or report is true,
correct and complete in all material respects. There have been no claims made by
a taxing authority in a jurisdiction where any of the Company and its
Subsidiaries does not file tax returns that it is or may be subject to taxation
by that jurisdiction. Each of the Company and its Subsidiaries has timely paid
(or, in the case of Taxes due between the date hereof and the Closing Date, will
timely pay) all material Taxes owed by it, whether or not shown on such returns
and reports. The December 31, 2000 Financial Statements reflect an adequate
reserve for all Taxes payable by the Company and each of its Subsidiaries (in
addition to any reserve for deferred Taxes established to reflect timing
differences between book and Tax items) for all taxable periods and portions
thereof through the date of such financial statements.
(b) Except as set forth in Section 3.24(b) of the Disclosure Schedule, no
material domestic or foreign (whether national, federal, state, provincial,
local or otherwise) tax return or report of the Company or any of its
Subsidiaries is under audit or examination by any taxing
-25-
authority, and no written or, to the knowledge of the Company, unwritten notice
of such an audit or examination or other inquiry or questionnaire has been
received by the Company or any of its Subsidiaries. The Company has received no
written notice of deficiency, proposed adjustment or matter in controversy or
other similar written notice with respect to any material amount of Taxes due
and owing by the Company or any of its Subsidiaries. Except as set forth in
Section 3.24(b) of the Disclosure Schedule, each deficiency in Taxes resulting
from any completed audit or examination by any taxing authority or any concluded
litigation has been timely paid. Section 3.24(b) of the Disclosure Schedule
lists all United States federal, state and local and non- United States income
tax returns filed with respect to the Company or any of its Subsidiaries for any
taxable period ending on or after January 1, 1996. The United States federal
income tax returns of the Company and each of its Subsidiaries have been
examined by the IRS and settled or have closed by virtue of the expiration of
the relevant statute of limitations for all years through December 31, 1996.
(c) Except as set forth in Section 3.24(c) of the Disclosure Schedule,
with respect to the Company and each of its Subsidiaries, there is no currently
effective agreement or other document extending, or having the effect of
extending, the period of assessment or collection of any Taxes, and no power of
attorney with respect to any Taxes has been executed or filed with any taxing
authority. Except as set forth in Section 3.24(c) of the Disclosure Schedule,
neither the Company nor any Subsidiary of the Company is the beneficiary of any
extension of time to file any tax return or report that has not been filed.
(d) Each of the Company and its Subsidiaries has withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, former employee, independent contractor,
creditor, stockholder, affiliate, customer, supplier or other third party.
(e) No liens for Taxes exist upon any assets or properties of the Company
or any of its Subsidiaries, except for statutory liens for Taxes not yet due and
payable.
(f) Except as set forth in Section 3.24(f) of the Disclosure Schedule,
none of the Company or any Subsidiary of the Company is a party to or bound by
any tax sharing agreement, tax indemnity obligation or other agreement or
arrangement with respect to Taxes (including any advance pricing agreement,
closing agreement, gain recognition agreement or other material agreement
relating to Taxes with any taxing authority).
(g) Except as set forth in Section 3.24(g) of the Disclosure Schedule,
none of the Company or any Subsidiary of the Company (i) has filed a consent
under Section 341(f) of the Code concerning collapsible corporations, or (ii)
has made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments, that will not be deductible under Section 280G of the Code (or any
similar provision of state, local or foreign law).
(h) The Company has not at any time since January 1, 1998 been a member of
any Affiliated Group other than the Affiliated Group of which the Company is the
common parent. No subsidiary of the Company has at any time since January 1,
1998 been a member of any Affiliated Group other than the Affiliated Group the
common parent of which is the Company or the Affiliated
-26-
Group of which FFG Corporation is the common parent. Other than the several
liability for federal income taxes of those Subsidiaries of the Company that
file federal income tax returns as members of the Affiliated Group the common
parent of which is FFG Corporation , none of the Company or any Subsidiary of
the Company has any liability for Taxes of any other person under Treasury
Regulation Section 1.1502-6 (or comparable provisions of foreign, state or
local law), as a transferee or successor, by contract or otherwise.
(i) Except as set forth in Section 3.24(i) of the Disclosure Schedule,
none of the Company or any Subsidiary of the Company has constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying or intended to qualify for tax-free treatment under Section 355
of the Code in the two years prior to the date of this Agreement.
(j) Neither the Company nor any Subsidiary of the Company has participated
in or cooperated with an international boycott within the meaning of Section 999
of the Code. Each of the Company and its Subsidiaries has proper receipts,
within the meaning of Treasury Regulation Section 1.905-2, for any foreign Tax
that has been or in the future may be claimed as a foreign tax credit for United
States federal income tax purposes. Neither the Company nor any Subsidiary of
the Company is, or at any time has been, subject to (i) the dual consolidated
loss provisions of Section 1503(d) of the Code, (ii) the overall foreign loss
provisions of Section 904(f) of the Code or (iii) the recharacterization
provisions of Section 952(c)(2) of the Code. Neither the Company nor any
Subsidiary of the Company has any "non-recaptured net Section 1231 losses"
within the meaning of Section 1231(c)(2) of the Code.
(k) As used in this Agreement, (A) "TAXES" shall include all (x) domestic
and foreign (whether national, federal, state, provincial, local or otherwise)
income, franchise, property, sales, use, excise, employment, payroll, social
security, value added, ad valorem, transfer, withholding, license, severance,
stamp, premium, environmental, customs, duties, capital stock, unemployment,
disability, registration, estimated, alternative or add-on minimum and other
taxes, including taxes based on or measured by gross receipts, profits, sales,
use or occupation, tariffs, levies, impositions, assessments, liabilities under
abandoned property, escheat or similar law or governmental charges of any nature
whatever, whether disputed or not, including any interest, penalties or
additions with respect thereto, (y) liability for the payment of any amounts of
the type described in clause (x) as a result of being a member of an affiliated,
consolidated, combined, unitary or similar group and (z) liability for the
payment of any amounts as a result of being party to any tax sharing agreement
or as a result of any express or implied obligation to indemnify any other
person with respect to the payment of any amounts of the types described in
clauses (x) or (y); and (B) "AFFILIATED GROUP" shall mean each group of which
the Company or any Subsidiary of the Company is or has been a member during a
period for which the group filed a tax return or report on an affiliated,
combined, consolidated, unitary or similar basis.
3.25 RELATED PARTY TRANSACTIONS. Since December 31, 2000, there have been
no Contracts between either the Company or its Subsidiaries or any officer or
director of the Company or its Subsidiaries, except as set forth in Section 3.25
of the Disclosure Schedule.
3.26 RESTRICTIONS ON BUSINESS ACTIVITIES. As of the date hereof, there is
no judgment, injunction, order or decree binding upon the Company or any of its
Subsidiaries, or, to the
-27-
Company's or any of its Subsidiaries' knowledge, threatened, which has, or would
reasonably be expected to have, the effect of prohibiting or materially
impairing any business practice of the Company or any of its Subsidiaries, any
acquisition of property by the Company or any of its Subsidiaries or the conduct
of business by the Company or any of its Subsidiaries as currently conducted.
3.27 REAL ESTATE.
(a) There are no parcels of real property owned by the Company or any of
its Subsidiaries.
(b) Section 3.27(b) of the Disclosure Schedule sets forth all leases,
subleases and other occupancy agreements, including all amendments, extensions
and other modifications (the "LEASES") for real property (the "LEASED REAL
PROPERTY") to which the Company or any Subsidiary of the Company is a party. The
Company or its applicable Subsidiary has a good and valid leasehold interest in
and to all of the Leased Real Property, subject to no Liens except as described
in such Schedule. Each Lease is in full force and effect and is enforceable in
accordance with its terms. Except as disclosed in Section 3.27(b) of the
Disclosure Schedule, there exists no default or condition which, with the giving
of notice, the passage of time or both, could become a default under any Lease.
The Company has previously made available to Buyer true, complete, and correct
copies of all the Leases. Except as described in Section 3.27(b) of the
Disclosure Schedule no consent, waiver, approval or authorization is required
from the landlord under any Lease as a result of the execution of this Agreement
or the consummation of the transactions contemplated hereby.
(c) The Leased Real Property constitutes all of the real property owned,
leased, occupied or otherwise used in connection with the business of the
Company and its Subsidiaries. Except as disclosed on Section 3.27(c) of the
Disclosure Schedule, other than the Company and its Subsidiaries, there are no
parties in possession or parties having any current or future right to occupy
any of the Leased Real Property. The Leased Real Property is in good condition
and repair and is sufficient and appropriate for the conduct of the business of
the Company and its Subsidiaries. To the Company's knowledge, the Leased Real
Property and all plants, buildings and improvements located thereon conform to
all applicable building, zoning and other laws, ordinances, rules and
regulations. All permits, licenses and other approvals necessary to the current
occupancy and use of the Leased Real Property by the Company and its
Subsidiaries have been obtained, are in full force and effect and have not been
violated, except for violations that, individually or in the aggregate, would
not have a Material Adverse Effect on the Company. There exists no violation by
the Company or any of its Subsidiaries of any covenant, condition, restriction,
easement, agreement or order affecting any portion of the Leased Real Property
except for violations that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. To the knowledge of the Company and its
Subsidiaries, there is no pending or threatened condemnation proceeding
affecting any portion of the Leased Real Property. Except as disclosed on
Section 3.27(b) of the Disclosure Schedule, neither the Company nor any
Subsidiary of the Company is obligated to purchase or lease any real property.
-28-
3.28 PERSONAL PROPERTY.
(a) Each of the Company and its Subsidiaries has good title to all
personalty of any kind or nature which the Company or its Subsidiaries purport
to own, free and clear of all Liens, except for (i) Liens for non-delinquent
taxes and non-delinquent statutory Liens arising other than by reason of
default, (ii) statutory Liens of landlords, Liens of carriers, warehousemen,
mechanics and materialmen incurred in the past customary practice for sums not
yet due; (iii) Liens incurred or deposits made in the past customary practice in
connection with worker's compensation, unemployment insurance and other types of
social security, (iv) purchase money Liens, and (v) Liens which do not
materially detract from the value or use of said personalty. The Company and its
Subsidiaries, as lessees, have the right under valid and subsisting leases to
use, possess and control all personalty leased by and material to the Company or
its Subsidiaries as now used, possessed and controlled by the Company or its
Subsidiaries, as applicable.
(b) All machinery, equipment and other tangible assets currently being
used by the Company or its Subsidiaries which are owned or leased by the Company
or its Subsidiaries are in good operating condition, maintenance and repair,
ordinary wear and tear excepted, are usable in the ordinary course of business
and are reasonably adequate and suitable for the uses to which they are being
put, except where any other condition of any machinery, equipment or other
tangible asset would not have a Material Adverse Effect on the Company.
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS.
Each Seller represents and warrants to Buyer and Merger Sub that, with
respect to such Seller:
4.1 ORGANIZATION AND CORPORATE POWER. If such Seller is Charwes Trust or
Courwes Trust, such Seller is duly organized, validly existing, and in good
standing under the laws of its jurisdiction of organization, and has the power
and authority necessary to enter into and perform its obligations under this
Agreement. If such Seller is ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇, such Seller has the legal
capacity to perform its obligations under this Agreement.
4.2 AUTHORIZATION OF MERGER. This Agreement has been duly authorized,
executed and delivered by such Seller and, assuming the due authorization,
execution and delivery hereof by the other Sellers, the Company, the Buyer and
Merger Sub, constitutes the valid and legally binding obligation of such Seller,
enforceable in accordance with its terms and conditions.
4.3 NO CONFLICTS. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which such Seller is subject or any provision of the charter or bylaws
of such Seller, if any, or (ii) conflict with, result in a breach of, constitute
a default (or any event which, with notice or lapse of time, or both, would
constitute a default) under, result in the acceleration of, create in any party
a put right or repurchase obligation or the right to accelerate, terminate,
modify or cancel, create any Lien or require any notice, under any Contract to
which such Seller is a party or by which it is bound or to which any of its
assets is subject. Other
-29-
than in connection with the provisions of the HSRA or any state insurance laws,
such Seller is not required to give any notice to, make any filing with or
obtain any authorization, consent, or approval of any government or governmental
agency or other Person in order for the Company to consummate the Merger.
4.4 SELLER SHARES. Such Seller beneficially owns and has the sole and
unrestricted voting power with respect to the number of Seller Shares indicated
opposite such Seller's name in Section 3.2(a) of the Disclosure Schedule. Such
Seller owns its Seller Shares free and clear of any liens, claims, charges or
other encumbrances or restrictions of any kind whatsoever, other than pursuant
to the Securities Act or the Exchange Act.
4.5 SECURITIES LAW ISSUES.
(a) Such Seller has received and had an opportunity to review Buyer's
Annual Report on Form 10-K for the fiscal year ended December 31, 2000, such
Seller is aware of and has access to all other Buyer SEC Reports and such Seller
has had the opportunity to ask officers of Buyer questions regarding the
business, operations and prospects of Buyer.
(b) Such Seller is familiar with Rule 144 of the Securities Act and
understands and agrees that (i) investing in Buyer Common Stock involves risks,
which risks are discussed in the Buyer SEC Reports and (ii) such Seller will not
sell the Buyer Shares issued to such Seller except pursuant to such Rule 144, an
effective registration statement under the Securities Act or an available
exemption from registration thereunder. Any stock certificate evidencing the
Buyer Shares issued to a Seller may have the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE, SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT (I) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR (II) PURSUANT TO RULE 144 OF THE ACT, OR IN A TRANSACTION WHICH,
IN THE OPINION OF INDEPENDENT COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION OR AS DESCRIBED IN A "NO ACTION" OR INTERPRETIVE LETTER FROM
THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION, IS NOT REQUIRED TO BE
REGISTERED UNDER THE ACT.
4.6 DISCLOSURE. To such Seller's knowledge, no representation or warranty
of any Seller contained in this Agreement, including Section 3, or any schedule,
attachment or exhibit hereto, and no statement contained herein or in any
certificate or document furnished to Buyer pursuant to the transactions
contemplated hereby, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances in which they were made, not
misleading.
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING BUYER AND MERGER SUB.
Each of Buyer and Merger Sub represents and warrants to the Company that:
5.1 ORGANIZATION.
-30-
(a) Each of Buyer and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as presently
conducted.
(b) Buyer and Merger Sub have heretofore delivered to the Company true and
complete copies of the Certificate of Incorporation and Bylaws, as currently in
full force and effect, of Buyer and Merger Sub. Each of Buyer and its
subsidiaries is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not have a Material Adverse
Effect on Buyer.
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Buyer and Merger Sub has
all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the boards of
directors of Buyer and Merger Sub and by Buyer as the sole shareholder of Merger
Sub, and no other corporate proceedings on the part of Buyer or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Buyer and Merger Sub and constitutes a valid, legal and
binding agreement of each of Buyer and Merger Sub, enforceable against each of
Buyer and Merger Sub in accordance with its terms.
5.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming the truth and accuracy
of the Company's representations and warranties contained in Section 3.5, except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of (a) the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder, (b) state securities
or blue sky laws, (c) the HSRA, (d) the filing and recordation of the
Certificate of Merger with the Secretary of State of the State of Delaware as
required by the DGCL, (e) such filings, consents, approvals, orders,
registrations and declarations as may be required under state insurance laws or
the laws of any foreign country in which the Company or any of its Subsidiaries
conducts any business or owns any assets and (f) such other actions, filings,
approvals and consents, the failure to make or obtain which would not, either
individually or in the aggregate, have a Material Adverse Effect on Buyer, no
filing with or notice to, and no permit, authorization, consent or approval of,
or order of, any Governmental Entity is necessary for the execution, delivery
and performance by Buyer or Merger Sub of this Agreement or the consummation by
Buyer or Merger Sub of the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Buyer or Merger Sub and the
consummation by Buyer or Merger Sub of the transactions contemplated hereby do
not and will not (a) conflict with or result in any breach of any provision of
the respective Constituent Documents of Buyer or Merger Sub, (b) result in a
violation or breach of, or cause acceleration, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation, acceleration or loss of material benefits
to Buyer or Merger Sub) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Buyer or Merger Sub is a party or by which any
of them or any of their respective properties
-31-
or assets may be bound, (c) contravene or conflict with or constitute a
violation of any provision of any Laws applicable to Buyer or Merger Sub or any
of Buyer's Subsidiaries or any of their respective properties or assets or (d)
result in the creation or imposition of any Lien on any asset of Buyer or Merger
Sub, except in the case of (b) through (d) for violations, breaches or defaults
which would not have, individually or in the aggregate, a Material Adverse
Effect on Buyer or would not reasonably be expected to prevent the consummation
of the transactions contemplated by this Agreement.
5.4 BROKERS. No broker, finder, investment banker or other agent is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Buyer or Merger Sub.
5.5 CAPITALIZATION OF BUYER AND ITS SUBSIDIARIES. The authorized capital
stock of Buyer consists of 775,000,000 shares of Buyer Common Stock, of which,
as of March 31, 2001, 261,776,590 shares were issued and outstanding, and
25,000,000 shares of Buyer Preferred Stock, of which, as of the date hereof,
1,000,000 shares of Series C Cumulative Preferred Stock were issued and
outstanding. All of Buyer's outstanding shares of capital stock have been
validly issued, and are fully paid, nonassessable and free of preemptive rights.
As of March 31, 2001, 31,680,241 shares of Buyer Common Stock were reserved for
issuance and issuable upon, or otherwise deliverable in connection with, the
exercise of outstanding options or other rights to buy Buyer Common Stock. From
March 31, 2001 to the date hereof, no shares of Buyer's capital stock have been
issued other than pursuant to options or other rights to buy Buyer Common Stock
already in existence on such date, and, from March 31, 2001 to the date hereof,
no stock options have been granted. As of the date hereof, there are no shares
of Buyer Common Stock reserved for issuance and issuable upon, or otherwise
deliverable in connection with, the exercise of outstanding warrants. Except as
described in this paragraph, as of the date hereof, there are outstanding (a) no
shares of capital stock or other voting securities of Buyer, (b) no securities
of Buyer or its Subsidiaries convertible into or exchangeable for shares of
capital stock or voting securities of Buyer, (c) no options or other rights to
acquire from Buyer or its Subsidiaries, and no obligations of Buyer or its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Buyer, and (d) no equity equivalents, interests in the ownership or earnings of
Buyer or its Subsidiaries or other similar rights (collectively "BUYER
SECURITIES"). As of the date hereof, there are no outstanding obligations of
Buyer or its Subsidiaries to repurchase, redeem or otherwise acquire any Buyer
Securities. The shares of Buyer Common Stock to be issued in the Merger or
otherwise pursuant to this Agreement have been duly and validly reserved for
issuance, and when issued in accordance with the terms of this Agreement, will
be duly validly issued, fully paid and nonassessable and not subject to any
preemptive rights.
5.6 SEC REPORTS; FINANCIAL STATEMENTS.
(a) Buyer has filed all required forms, reports, registration statements
and documents with the SEC since January 1, 1999 (the "BUYER SEC REPORTS"). Each
of the Buyer SEC Reports has complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, each as in
effect on the dates such forms, reports and documents were filed. The Company
and the Sellers have had access to, in the form filed with the SEC (including
any amendments thereto), (a) Buyer's Annual Report on Form 10-K for the fiscal
year ended
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) all definitive proxy statements relating to Buyer's
meetings of shareholders (whether annual or special) held since January 1, 1998,
and (c) its Quarterly Reports on Form 10-Q for the quarters ended March 31,
2000, June 30, 2000 and ▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) its Current Report on Form 8-K
filed April 24, 2001, and (e) all other reports or registration statements filed
by Buyer with the SEC since December 31, 2000. None of the Buyer SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. No representation or warranty of Buyer or Merger Sub contained in
this Agreement, or any schedule, attachment or exhibit hereto, and no statement
contained herein or in any certificate or document furnished to the Company or
any Seller pursuant to the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) The audited consolidated financial statements of Buyer and its
Subsidiaries included in the SEC Reports and the unaudited consolidated interim
financial statements of Buyer and its Subsidiaries included in Buyer's most
recent Quarterly Report on Form 10-Q (a) comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (b) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, and (c) fairly present the consolidated financial position of
Buyer and its Subsidiaries as of the dates thereof and their consolidated
results of operations, financial condition, cash flow and changes in financial
position for the periods then ended (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments). Except as set
forth in Section 5.6 of the Disclosure Schedule, since December 31, 2000 no
event has occurred which has had or reasonably would be expected to have a
Material Adverse Effect on Buyer.
5.7 INTERIM OPERATIONS OF MERGER SUB. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement and has
engaged in no business activities other than as contemplated by this Agreement.
5.8 NYSE REQUIREMENTS. Buyer is not required to obtain stockholder
approval of this Agreement or the transactions contemplated hereby pursuant to
the rules of the New York Stock Exchange applicable to listed companies.
SECTION 6. COVENANTS.
The Parties agree as follows with respect to the period from and after the
execution of this Agreement.
6.1 GENERAL. Each of the Parties will use all commercially reasonable
efforts to take all action and to do all things necessary, proper, and advisable
in order to consummate and make effective the Merger as soon as practicable
after the date of this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 7). Each Party will give any notices for
which it is responsible by law or under this or any other contract (and will
cause each of its
-33-
Subsidiaries to give any notices) to any third parties, and will use all
commercially reasonable efforts to obtain (and will cause each of its
Subsidiaries to use all commercially reasonable efforts to obtain) any third
party consents, necessary to the consummation of the Merger, including any
consents, waivers, amendment or other action.
6.2 OTHER REGULATORY MATTERS AND APPROVALS. Each of the Parties will (and
will cause each of its Subsidiaries to) give any notices to, make any filings
with, and use all commercially reasonable efforts to obtain any authorizations,
consents, and approvals of governments, and governmental agencies in connection
with the matters referred to in Sections 3.3 and 5.3. Without limiting the scope
of the immediately preceding sentence, Buyer, the Sellers and the Company will
as promptly as practicable, but in no event later than fifteen (15) Business
Days following the date of this Agreement, each file any Notification and Report
Forms or other form or report and related material that the Parties may be
required to file with the Federal Trade Commission ("FTC"), and the Antitrust
Division of the United States Department of Justice ("DOJ") under the HSRA, with
any Governmental Entity with respect to any Insurance Law or with any other
Governmental Entity under the laws of any foreign jurisdiction. Any such
notification and report form and supplemental information will be in substantial
compliance with the requirements of the HSRA or such other law. Each of Buyer
and the Company shall furnish to the other such necessary information and
reasonable assistance as the other may request in connection with its
preparation of any filing or submission which is necessary under the HSRA or
other law. Buyer and the Company shall keep each other apprised of the status of
any communications with, and inquiries or requests for additional information
from, the FTC, the DOJ and any other Governmental Entity and shall respond
promptly with any such inquiry or request. Buyer and the Company will use all
commercially reasonable efforts to obtain an early termination of any applicable
waiting period, and will make any further filings pursuant thereto that may be
necessary, proper, or advisable.
6.3 THE COMPANY'S INTERIM OPERATION OF BUSINESS. Prior to the Closing,
except as otherwise expressly provided herein or as to which Buyer may consent,
(i) the Company shall, (ii) the Company shall cause its Subsidiaries to and
(iii) the Sellers shall cause the Company and the Company's Subsidiaries to:
(a) except as contemplated by this Agreement, operate only in the Ordinary
Course;
(b) use all commercially reasonable efforts to keep in full force and
effect its corporate existence and all material rights, franchises, Proprietary
Rights and goodwill relating or obtaining to its business;
(c) use reasonable efforts to retain its employees and agents and preserve
its present relationships with customers, suppliers, contractors, distributors
and such employees and agents;
(d) perform in all material respects all of its obligations under all
Contracts to which it is a party or by which it or its properties or assets may
be bound and not enter into, assume, create, renew, amend or terminate, or give
notice of a proposed renewal, amendment or termination of, (i) any Contract for
goods, services or office space to which the Company or any of its Subsidiaries
is (or would thereby be) a party or by which the Company or any of its
Subsidiaries or
-34-
any of their properties are (or would thereby be) bound, excepting only
Contracts made in the Ordinary Course or under which the aggregate payments by
either party over the term of the Contract do not exceed $100,000, (ii) any
Contract the benefits of which (to either party) will accrue or be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
the Merger (either alone or upon the occurrence of any additional acts or
events) or the value of any of the benefits under which will be calculated on
the basis of the Merger or any portion or aspect of either (including any
so-called retention or similar bonuses), (iii) any Contract relating to
non-competition, or (iv) any Contract that materially restricts the conduct of
any line of business by the Company or any of its Subsidiaries;
(e) not make any single capital expenditure exceeding $500,000 or any
capital expenditures exceeding $1,000,000 in the aggregate; PROVIDED, HOWEVER,
that with Buyer's prior written consent, which consent may not be unreasonably
withheld, conditioned or delayed, the Company's aggregate capital expenditures
during the term of this Agreement may exceed $1,000,000 but not more than
$3,000,000;
(f) not enter into any new line of business;
(g) not enter into, renew or amend any agreement relating to employment,
salary continuation, severance, consulting, collective bargaining or otherwise
relating to the provision of personal services or payment therefor; not
institute, amend or terminate any Plan; not terminate any group health plan that
covers, as of the date of this Agreement, current or former employees of the
Company, any of its Subsidiaries or any ERISA Affiliate or their beneficiaries;
not enter into, renew or amend any agreement that, upon the consummation of the
Merger, will result in any payment (whether of severance pay or otherwise)
becoming due from Buyer, the Surviving Corporation, or any of their
Subsidiaries, to any officer or employee of the Company or any of its
Subsidiaries; not pay any pension or retirement allowance to any Person not
required by an existing plan or agreement; not increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any officer, director
or employee except (i) as set forth on Schedule 6.3(g) or (ii) customary
increases in the wages or salaries of employees and customary bonuses to
employees, in each case substantially consistent with past practice; or not
increase any other direct or indirect compensation or employee benefit for or to
any of its officers, directors or employees;
(h) prepare and file, on a timely basis, all Tax Returns and other Tax
reports, filings and amendments thereto required to be filed by it;
(i) deliver to Buyer, within fifteen (15) days of each month end from the
date hereof through the Closing Date, the Company's consolidated unaudited
balance sheets, income statements and cash flow statements as of and for the
immediately preceding month, all consistent with the applicable requirements of
Section 3.4;
(j) not declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its
outstanding capital stock, except, notwithstanding any other provision of this
agreement, the Company may declare, set aside and pay for dividends which shall
not exceed 40% of the Company's consolidated Subchapter S taxable income for the
period January 1, 2001 through the Effective Time;
-35-
(k) not issue, sell, grant, pledge or otherwise encumber any shares of its
capital stock, any other of its voting securities or any securities convertible
into, or any rights, warrants or option to acquire, any such shares, voting
securities or convertible securities, or take any action that would make the
representations and warranties set forth in Section 3.2 as applicable not true
and correct in all material respects;
(l) not amend its Certificate of Incorporation or By-laws or other
comparable charter or organizational documents;
(m) not acquire by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other business
organization or division thereof (or any interest therein), or form any
subsidiary or solicit or negotiate any Acquisition Proposal with respect to any
other Person;
(n) not change its accounting policies in any material respect, except as
required by GAAP;
(o) not sell, dispose or encumber any of its business or assets except in
the Ordinary Course;
(p) not create, assume or guarantee any indebtedness for borrowed money
without the prior written approval of Buyer;
(q) not declare any stock split, stock dividend or engage in any
recapitalization; and
(r) not authorize or enter into any agreement or commitment to take any
action inconsistent with any of the foregoing.
Further, prior to the Closing, without the prior written consent of Buyer or as
otherwise expressly provided herein, the Company will not, and will not permit
any of its Subsidiaries, to take any action that is intended or may reasonably
be expected to result in any of the conditions to the Merger as set forth in
Section 7 not being satisfied or in a violation of this Agreement; or take or
omit to be taken any reasonable action which reasonably would be expected to
have a Material Adverse Effect on the Company.
Further, prior to the Closing, without the prior written consent of the Sellers
or as otherwise expressly provided herein, the Buyer and Merger Sub will not,
and will not permit any of their Subsidiaries, to take any or omit to take any
reasonable action that is intended or would reasonably be expected to result in
any of the conditions to the Merger as set forth in Section 7 not being
satisfied or in a material violation of this Agreement.
-36-
6.4 ACCESS.
(a) The Company shall make available to Buyer all information regarding
the Company that Buyer reasonably may request and shall authorize all reasonable
visits to the Company's premises to make such investigations of the business,
properties, books and records of the Company and its Subsidiaries as Buyer
reasonably may request. Buyer agrees to coordinate closely all such activities
with the Company's President or Chief Financial Officer and to conduct any such
inquiries with appropriate discretion and sensitivity to the Company's
relationships with its employees, customers and suppliers.
(b) Nothing in this Section 6.4 shall require any Party or any of its
Subsidiaries to provide access to or to disclose information where such access
or disclosure would jeopardize the attorney-client privilege of the Person in
possession or control of such information or would contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The Parties will make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the immediately preceding sentence apply.
(c) Each Party acknowledges that certain of the information made available
to it pursuant to this Section 6.4 and otherwise in connection with the Merger
may be confidential, proprietary or otherwise nonpublic, and each Party agrees,
for itself and for each of its Representatives, that it (i) shall hold in
confidence all confidential, proprietary or otherwise nonpublic information
received by it from or with regard to the other Party ("CONFIDENTIAL
INFORMATION") subject to the terms of this Section 6.4, (ii) shall disclose such
Confidential Information only to those of its Representatives, and (iii) shall
inform each Representative or current or prospective lender or investor to whom
Confidential Information is disclosed that such information is confidential and
direct such Representative or current or prospective lender or investor not to
disclose the same. Each Party shall remain responsible for any disclosure of
Confidential Information by any of its Representatives or current or prospective
lender or investors. Each Party further agrees that, upon the request of the
other Party given following the termination of this Agreement for any reason,
the receiving Party and each of its Representatives either shall return to the
requesting Party all Confidential Information received by the receiving Party
and its Representatives (including all compilations, analyses or other documents
prepared by it that contain Confidential Information) or shall certify that the
same has been destroyed. As used herein, Confidential Information shall not
include (i) information that is or becomes generally available to the public
other than as a result of a breach of this Agreement, (ii) information that the
receiving Party demonstrates was known to it on a non-confidential basis prior
to receiving such information from the other Party, (iii) information that the
receiving Party develops independently without relying on Confidential
Information, and (iv) information that becomes available to the receiving Party
on a non-confidential basis from another source if the source was not subject to
any prohibition against disclosing such information.
6.5 NOTICE OF DEVELOPMENTS. Each Party shall promptly advise the other
Party of any change or event having a Material Adverse Effect on it or its
ability to perform its obligations under this Agreement or which it believes
would or would be reasonably likely to cause or constitute a material breach of
any of its representations, warranties or covenants contained herein or to
-37-
preclude the satisfaction of one or more of the conditions set forth in Section
7; PROVIDED, HOWEVER, that any such disclosure shall not have any effect for the
purpose of determining the accuracy of any representation or warranty when made,
for determining satisfaction of the conditions set forth in Section 7, or for
determining the compliance with any other provision of this Agreement.
6.6 ACQUISITION PROPOSALS. The Company shall not, and it shall not
authorize or permit any of its Subsidiaries, officers, directors, employees,
Affiliates, stockholders or any Representative retained by the Company or its
Subsidiaries, directly or indirectly, to (i) solicit, initiate or knowingly
encourage or induce the making of any Acquisition Proposal, (ii) negotiate with
any third party with respect to any Acquisition Proposal, (iii) endorse or
recommend the Acquisition Proposal of any Person other than the Buyer or any of
its Subsidiaries or (iv) enter into any understanding, arrangement or Contract
(written or oral) with any third party with the intent to effect any Acquisition
Proposal.
6.7 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Other than required by this
Agreement, no Party shall issue any press release or make any public
announcement (including filings with the SEC or NYSE) prior to the Effective
Time and relating to the subject matter of this Agreement without the prior
written approval of the other Parties; PROVIDED, HOWEVER, that Buyer may make
any public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities (in
which case Buyer will advise and consult the Company and its counsel a
reasonable time prior to making the disclosure and will make such changes to the
disclosure as the Company or its counsel may reasonably request).
6.8 COVENANT OF SELLERS.
(a) Prior to the Closing, without the prior written consent of Buyer or as
otherwise expressly provided herein, the Sellers will not, and will not permit
any of their Affiliates to take any action that is intended or would reasonably
be expected to result in any of the conditions to the Merger as set forth in
Section 7 not being satisfied or in a violation of this Agreement; or take or
omit to be taken any reasonable action which reasonably could be expected to
have a Material Adverse Effect on the Company.
(b) Each Seller shall vote or cause to be voted all of its Seller Shares
that are Seller Voting Shares and that are owned by it as of the record date
against the approval of any Acquisition Proposal providing for a merger,
acquisition, consolidation, sale of a material amount of assets or other
business combination of the Company or any of its Subsidiaries with any Person
other than Buyer or any of its Subsidiaries.
(c) So long as this Agreement has not been terminated in accordance with
the terms hereof, the Seller will not sell, assign, transfer or otherwise
dispose of (including, without limitation, by the creation of a Lien), or permit
to be sold, assigned, transferred or otherwise disposed of, any of the Seller
Shares, whether such Seller Shares are held on the date of this Agreement or are
subsequently acquired, whether pursuant to the exercise of stock options or
otherwise, except (i) transfers by operation of law (in which case this
Agreement shall bind the transferee), and (ii) as Buyer may otherwise agree in
its sole discretion.
-38-
(d) Each Seller agrees that, so long as this Agreement has not been
terminated in accordance with the terms hereof, each Seller shall, and shall
instruct each of its Representatives and Affiliates to, cease and refrain from
any and all activities, discussions, negotiations, providing any information
with respect to, or other actions with any Person other than Buyer or any of its
Subsidiaries or any of their respective Representatives with respect to any
Acquisition Proposal other than the Merger.
6.9 POST-CLOSING TAX MATTERS.
(a) The Parties hereby agree that the accounting records and books of the
Company and First Extended Service Corporation ("FESC") will be closed on the
Closing Date and agree that the pro rata allocation method provided in Section
1362(e)(2) of the Code will not apply. The parties hereto agree that the
accounting firm that prepared the Company's 2000 S corporation tax return will
prepare the Company's and FESC's final S corporation tax return and such return
will, except as required by law, be prepared in a manner consistent with the
Company's 2000 S corporation tax return. Buyer agrees that it will make the
books and records of the Company and FESC available to Sellers and their
Representatives, upon reasonable notice and at reasonable times, at the Sellers'
cost and expense, it being understood that Sellers shall be entitled to make
copies of any such books and records as shall be reasonably necessary. In the
event the Internal Revenue Service or any other taxing authority initiates an
examination of the Company or FESC with respect to a taxable period that could
impact any Seller's Tax liability for any year, Buyer shall promptly notify
Sellers of such examination, and Sellers shall have the right to control the
defense of the Company and FESC in responding to any proposed adjustments that
would impact any Seller. Buyer will not file any amended return, carryback
claim, or other adjustment request relating to the Company or FESC for any Tax
period that includes or ends on or before the Closing Date.
(b) Promptly upon completion of the Company's final S corporation tax
return, Buyer shall pay in cash to each Seller an amount equal to the product of
(i) such Seller's Seller Common Ratio as of the Closing, times (ii) the
difference, if any, between (A) 40% of the Subchapter S taxable income of the
Company and FESC for the period January 1, 2001 through the Closing Date, as
shown on such return, and (B) the aggregate amount of dividends paid by the
Company pursuant to Section 6.3(j) hereof.
6.10 DIRECTOR AND OFFICER INDEMNIFICATION. The Buyer agrees to indemnify
the directors and officers of the Company and the Subsidiaries of the Company
for a period of six years after the Closing Date, to the fullest extent that
such directors and officers would be entitled to indemnification pursuant to the
certificate of incorporation and bylaws or equivalent documents of the Company
and the Subsidiaries as in effect on the date hereof.
6.11 OBLIGATIONS OF MERGER SUB. Buyer shall take all action necessary to
cause Merger Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement.
6.12 REGISTRATION STATEMENT. Buyer shall file the Initial Registration
Statement with the Securities and Exchange Commission as promptly as practicable
after the date hereof, but in no event later than the Effective Time, with the
purpose of having the Registration Statement declared
-39-
effective promptly after the Effective Time, but in no event later than ninety
(90) days after the Effective Time.
6.13 EMPLOYEE MATTERS.
(a) EMPLOYMENT OF CONTINUING EMPLOYEES. Company's and its Subsidiaries'
staff as of the Closing shall continue as employees of the Surviving Corporation
or its Subsidiaries, as the case may be, after the Closing ("CONTINUING
EMPLOYEES"). Subject to prudent business and personnel practices, Buyer reserves
the right to make (or to cause the Surviving Corporation to make) necessary
personnel or staffing adjustments following the Closing and this Agreement shall
not be construed to create contractual employment rights in any of such
Continuing Employees other than as employees terminable at will.
(b) After the Closing, Buyer shall cause the Surviving Corporation (x) to
honor all obligations under (i) the existing terms of the employment, retention,
termination and severance agreements to which the Company or any of its
Subsidiaries is presently a party and other compensation agreements,
arrangements and Plans of the Company or any of its Subsidiaries existing prior
to the date of this Agreement, except, in each case, as may otherwise be agreed
to by the parties thereto, and (ii) the Company's and any of its Subsidiaries'
general severance policy and (y) to allow employees of the Company and its
Subsidiaries to continue to participate in the Plans (other than stock option or
stock purchase plans) on substantially similar terms to those currently in
effect; PROVIDED that, in each case, Buyer or Merger Sub may substitute its own
arrangements, plans or policies if such arrangements, plans or policies are
either (A) not materially less favorable to the employees as those of the
Company currently in effect or (B) those arrangements, plans or policies
currently in effect for comparable employees of Buyer and its Subsidiaries.
(c) If any employee of the Company or any of its Subsidiaries becomes a
participant in any employee benefit plan, practice or policy of Buyer, any of
its affiliates or the Surviving Corporation, such employee shall be given credit
under such plan for all service prior to the Effective Time with the Company and
any of its Subsidiaries and prior to the time such employee becomes such a
participant, for purposes of eligibility (including, without limitation, waiting
periods) and vesting, and such employees will be given credit for such service
for purposes of any vacation policy. In addition, if any employees of the
Company or any of its Subsidiaries employed as of the Closing Date become
covered by a medical plan of Buyer, any of its affiliates or the Surviving
Corporation, such medical plan shall not impose any exclusion on coverage for
preexisting medical conditions with respect to these employees. Such employees
shall also be given credit for any deductible or co-payment amounts paid in
respect of the plan year in which the Closing Date occurs to the extent that,
following the Closing Date, they participate in any plan of Buyer, any of its
affiliates or the Surviving Corporation for which deductibles or co-payments are
requested. Buyer and the Surviving Corporation will make appropriate
arrangements with its insurance carrier(s) to ensure the foregoing.
6.14 EXPENSES OF THE COMPANY. The Company or the Surviving Corporation
shall pay all of the expenses incurred by the Company in connection with the
transactions contemplated hereby.
6.15 Noncompetition
-40-
(a) RECITALS; COVENANT NOT TO COMPETE.
(i) RECITALS. Buyer with its executive headquarters in Chicago,
Illinois, and its subsidiaries and affiliates (and divisions
thereof) including the Company following the merger
(collectively "Aon Group") are in the business of providing
extended service contract products and services for automobile
dealers and insurance services related to extended service
contracts for automobile dealers, including accounting, claims
management and handling, contract wording, information systems
and actuarial services related to extended service contracts
for automobile dealers (collectively, the "Business"). An
essential element of the Business is the development and
maintenance of personal contacts and relationships with
clients. Because of these contacts and relationships, it is
common for Aon Group's clients to develop an identification
with the employee who serves its insurance needs rather than
with Aon Group itself. Aon Group, however, invests
considerable time and money necessary for a relationship
between its employee and a client to develop and be
maintained, in that Aon Group pays the employee's salary and
reimburses the employee for business expenses. Aon Group also
assists its employees in servicing clients by making available
to these employees legal advice, accounting support,
advertising and other corporate services.
The personal identification of clients of Aon Group with an
Aon Group employee creates the potential for the employee's
appropriation of the benefits of the relationships developed
with clients on behalf of and at the expense of Aon Group.
Since Aon Group would suffer irreparable harm if a Seller
solicited the insurance or other related business of clients
of Aon Group, it is reasonable to protect Aon Group against
solicitation activities by the Sellers for a limited period of
time after such Sellers leave the Company so that Aon Group
may renew or restore its business relationship with its
clients.
Buyer and each Seller acknowledge and agree that the covenant
contained in Sections 6.15(a)(ii), 6.15(a)(iii) and
6.15(a)(iv) below is reasonably necessary for the protection
of Buyer and Aon Group and is reasonably limited with respect
to the activities it prohibits, its duration (particularly in
the context of annual and multi-year insurance renewal
periods), its geographical scope and its effect on each Seller
and the public. The parties acknowledge that the purpose and
effect of the covenant simply is to protect Buyer and Aon
Group for a limited period of time from unfair competition by
the Sellers.
(ii) COVENANT NOT TO COMPETE. Each Seller hereby covenants and
agrees that, except with the prior written consent of the
Chairman of Buyer,
-41-
each Seller will not, for five (5) years after the Effective
Time, directly or indirectly, engage or invest in, own,
manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with,
lend such Seller's name or any similar name to, lend such
Seller's credit to, or render services or advice to, any
portion of a business that offers or provides products or
activities that compete in whole or in material part with the
Business, provided, however, that each Seller may purchase or
otherwise acquire up to (but not more than) five percent (5%)
of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise
except as provided in the next sentence) if such securities
are listed on any national or regional securities exchange or
have been registered under Section 12(g) of the Securities
Exchange Act of 1934 and may own interests in competing
entities through mutual funds, private equity funds and
similar arrangements so long as each such Seller owns less
than five percent (5%) of such pooled entities.
(iii) COVENANT NOT TO SOLICIT. Each Seller hereby covenants and
agrees that, except with the prior written consent of Buyer,
each Seller will not, for a period of five (5) years after the
Effective Time for any reason enter into or attempt to enter
into (on each such Seller's own behalf or on behalf of any
other person or entity) any business relationship of the same
type or kind as the business relationship which exists between
Aon Group and its clients or customers to provide services
related to the Business for any individual, partnership,
corporation, association or other entity who or which was a
client or customer during the twenty-four (24) months prior to
the Effective Time. "Client" or "customer" means any person or
entity listed on the books of Aon Group as such, including,
but not limited to the former clients and customers of the
Company.
Each Seller acknowledges that there is no general geographical
restriction contained in the preceding paragraph because the
restriction applies only to the specified clients and
customers of Aon Group.
(iv) COVENANT NOT TO HIRE. Each Seller hereby also agrees not to
induce or attempt to induce, or to cause any person or other
entity to induce or attempt to induce, any person who is an
employee of Aon Group, other than another Seller, to leave the
employ of Aon Group during the period of the covenant in
Section 6.15(a)(iii) above.
(b) COMPANY'S RIGHT TO INJUNCTIVE RELIEF; ATTORNEYS' FEES.
-42-
(i) Each Seller acknowledges that a breach of Section 6.15(a) or
6.15(c) of this Agreement will result in irreparable and
continuing harm to Buyer or Aon Group, or both, and that
therefore, in addition to any other remedy which Buyer or Aon
Group, or both, may have at law or in equity, Buyer and Aon
Group shall be entitled to injunctive relief for a breach of
this Agreement by any Seller. In the event that any action is
filed in relation to this Agreement, the prevailing party in
the action shall recover from the non-prevailing party, in
addition to any other sum that either party may be called upon
to pay, a reasonable sum for the prevailing party's attorney's
fees.
(c) TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(i) Each Seller acknowledges that Buyer's and Aon Group's business
depend to a significant degree upon the possession of
information which is not generally known to others, and that
the profitability of the business of Buyer and Aon Group
requires that this information remain proprietary to Buyer and
Aon Group.
(ii) From and after the Effective Time, none of the Sellers shall
disclose or use during or subsequent to the course of
employment, any trade secrets or confidential or proprietary
information relating to the business of Buyer or Aon Group of
which any Seller becomes aware. Such information includes
client and customer lists, data, records, computer programs,
manuals, processes, methods and intangible rights to which any
Seller has or has had access. All records and equipment and
other materials relating in any way to any confidential
information relating to clients or to the business of Buyer or
Aon Group shall be and remain the sole property of Buyer and
Aon Group after the Effective Time.
(iii) At the Effective Time, each Seller shall promptly return to
Buyer all materials and all copies or tangible embodiments of
materials involving any confidential information (other than
tax information and tax records) in such Seller's possession
or control.
(d) MERGERS AND CONSOLIDATIONS; ASSIGNABILITY. The rights and obligations
under this Agreement shall inure to the benefit of and be binding upon Buyer and
its successors and assigns. By way of explanation, and without limiting the
generality of the foregoing sentence, if Buyer or any entity resulting from any
merger or consolidation referred to in this Section 6.15(d) is merged with or
consolidated into any other entity or entities, or if substantially all of the
assets of Buyer or any such entity are sold or otherwise transferred to another
entity, the provisions of this Agreement shall be binding upon and shall inure
to the benefit of the continuing entity in or the entity resulting from such
merger or consolidation or the entity to which such assets are sold or
transferred. This Agreement shall not be assignable by any Seller, but in the
event of the death of
-43-
any Seller, it shall be binding upon and inure to the benefit of each such
Seller's legal representatives to the extent required to effectuate its terms.
SECTION 7. CONDITIONS TO CLOSING.
7.1 JOINT CONDITIONS TO OBLIGATIONS OF BUYER, MERGER SUB AND THE COMPANY.
The obligations of Sellers, Buyer and the Company to consummate the Merger are
subject to the satisfaction of each of the following conditions:
(a) All necessary approvals of any Governmental Entity required for the
consummation of the Merger shall have been obtained and shall remain in full
force and effect; all statutory or other required waiting periods in respect
thereof shall have expired; and no approval of any Governmental Entity shall
have imposed any condition or requirement which, in the reasonable opinion of
Buyer, would so materially adversely affect the economic or business benefits to
Buyer of the Merger so as to render inadvisable the consummation thereof.
(b) There shall be no claim, action, suit, investigation or other
proceeding before any court or other Governmental Entity wherein an unfavorable
judgment, order, decree, ruling, charge or injunction has been issued, or
reasonably would be expected to be issued, which would (i) prevent consummation
of any of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (iii) present a substantial risk of the obtaining of material
damages from the Company, the Sellers or Buyer or their respective officers or
directors in connection therewith.
7.2 CONDITIONS TO OBLIGATIONS OF BUYER AND MERGER SUB. The obligations of
Buyer and Merger Sub to consummate the transactions to be performed by them in
connection with the Closing are subject to satisfaction of the following
conditions.
(a) (i) each of the representations and warranties of the Company
contained in this Agreement which is qualified by materiality or Material
Adverse Effect or words of similar effect shall be true and correct (except to
the extent such representations and warranties expressly relate to a specific
date or as of the date hereof, in which case such representations and warranties
shall be true and correct as of such date) and (ii) each of the representation
and warranties of the Company contained in this Agreement which is not so
qualified shall be true and correct (except to the extent such representations
and warranties expressly relate to a specific date or as of the date hereof, in
which case such representations and warranties shall be true and correct as of
such date), except in the case of clause (i) or (ii) for such inaccuracies as,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company;
(b) the Company and the Sellers shall have performed and complied in all
material respects with all of its agreements and covenants hereunder through the
Closing;
(c) there shall have been no event subsequent to the date hereof having a
Material Adverse Effect on the Company;
(d) the Company shall have delivered to Buyer and Merger Sub a certificate
signed by its Chief Executive Officer and its Chief Financial Officer to the
effect that each of the
-44-
conditions specified above in Section 7.1 and 7.2(a) (with respect only to
Section 3), 7.2(b) (with respect only to the Company) and 7.2(c) is satisfied in
all respects;
(e) each Seller shall have delivered to Buyer and Merger Sub a certificate
to the effect that each of the conditions specified above in Sections 7.2(a) and
7.2(b) is satisfied in all respects; and
(f) each Seller shall have entered into an Escrow Agreement with Buyer and
Escrow Agent.
7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company and Sellers to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions.
(a) the representations and warranties set forth in Section 5 shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date as though then made (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct as of such certain date);
(b) each of Buyer and the Merger Sub shall have performed and complied in
all material respects with all of its covenants hereunder through the Closing;
(c) each of Buyer and the Merger Sub shall have delivered to the Company a
certificate to the effect that each of the conditions specified in Section 7.1,
7.3(a)-(b), 7.3(e) and 7.3(f) is satisfied in all respects;
(d) Buyer shall have executed and delivered to the Sellers the
Registration Rights Agreement, which shall be in full force and effect;
(e) Buyer shall have entered into an Escrow Agreement with each Seller and
Escrow Agent; and
(f) Buyer shall have filed the Registration Statement with the Securities
and Exchange Commission.
SECTION 8. INDEMNIFICATION.
8.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Section 8:
(i) "DAMAGES" means all claims, damages, dues, penalties, fines,
costs, amounts paid in settlement, liabilities, losses,
expenses, and fees, including court costs and attorneys' fees
and expenses, and including costs of environmental
investigations and/or cleanups ordered by federal, state,
local, or foreign governments (or any agencies thereof).
-45-
(ii) "INDEMNIFYING PARTY" means the party obligated to provide
indemnification under Sections 8.1(b), (c) or (d).
(iii) "INDEMNIFIED PARTY" shall mean a party entitled to
indemnification under Sections 8.1(b), (c), or (d).
(b) On the terms and subject to the limitations set forth in this Section
8, (i) the Company, (ii) the Sellers, jointly and severally, and (iii) the
Escrow Agent, solely on behalf of the Persons receiving Buyer Shares in
connection with the Merger, and not individually, shall indemnify, defend and
hold harmless Buyer and its Subsidiaries and their Representatives from and
against any and all Damages incurred in connection with or arising out of or
resulting from or incident to (i) any breach of any warranty, or the inaccuracy
of any representation made by the Company or any Seller in or pursuant to this
Agreement, or (ii) any breach of any other covenant or agreement made by the
Company or any Seller in or pursuant to this Agreement. The remedies provided in
this Section 8 will be the sole and exclusive remedy of Buyer and its
Subsidiaries (including Merger Sub) and their Representatives for any such
breach or inaccuracy or other breach of this Agreement.
(c) On the terms and subject to the limitations set forth in this Section
8, Buyer shall indemnify, defend and hold harmless the Company and the Sellers
and their respective Subsidiaries and Representatives from and against any and
all Damages incurred in connection with or arising out of or resulting from or
incident to (i) any breach of any warranty, or the inaccuracy of any
representation, made by Buyer in or pursuant to this Agreement, or (ii) the
breach of any other covenant or agreement made by Buyer in or pursuant to this
Agreement. Except for any breach of Sections 2.4(i), 6.9, 6.10, 6.12, and 6.14,
the remedies provided in this Section 8 will be the sole and exclusive remedy of
the Company and the Sellers and their respective Subsidiaries and
Representatives for any such breach or inaccuracy.
(d) Any payment made by any Seller or the Escrow Agent on behalf of any
Seller pursuant to the indemnification obligations provided for in this Section
8 shall constitute a reduction in the consideration paid by Buyer in the Merger;
PROVIDED, that such indemnification obligations of the Escrow Agent shall not
exceed the amount then held by the Escrow Agent under the Escrow Agreement,
valued as set forth in the Escrow Agreement. Any payment made by Buyer pursuant
to the indemnification obligations provided for in this Section 8 shall
constitute an addition to the consideration paid by Buyer in the Merger.
8.2 LIMITATIONS ON INDEMNIFICATION.
(a) None of the parties hereto shall be liable to the other parties
pursuant to the indemnification provisions of Sections 8.1 (b), (c) or (d)
unless it receives notice from the other party of its claim for indemnification
hereunder within twelve (12) months after the Closing Date and such claim shall
not be invalidated if the amount of damages is contingent and is determined
after twelve months after the Closing Date; PROVIDED, HOWEVER, that the
representations and warranties contained in Section 3.24 hereof shall survive
until the expiration of the applicable statutes of limitations with respect to
the matters contained therein.
(b) Pursuant to claims for indemnification of the type referred to in
Sections 8.1(b), 8.1(c) or 8.1(d), an Indemnifying Party
-46-
shall only be liable to an Indemnified Party to the extent the aggregate amount
of such claims by the Indemnified Party for indemnification exceeds five hundred
thousand Dollars ($500,000) in the aggregate (the "INDEMNITY THRESHOLD"),
whereupon only the amount of such claims in excess of the Indemnity Threshold
shall be recoverable in accordance with the terms hereof. For purposes of
applying the Indemnity Threshold to claims under Section 8.1(c), all Sellers and
the Company shall be treated as a single Indemnified Party.
(c) If the Merger has occurred, any indemnification payment owed by Buyer
pursuant to Section 8.1(c) shall be payable in cash.
(d) The maximum aggregate liability of the Sellers and the Escrow Agent,
as a group, pursuant to this Section 8 shall equal nine million dollars
($9,000,000).
8.3 METHOD OF ASSERTING AND RESOLVING CLAIMS.
(a) All claims for indemnification by Buyer pursuant to Section 8.1(b)
shall be made and resolved in accordance with the provisions of this Section 8
and the Escrow Agreement.
(b) Any claim for indemnification pursuant to Section 8.1(c) or (d), shall
be made and resolved in accordance with this Section 8.3. A Person seeking
indemnification shall, prior to the date that is twelve (12) months after the
Closing Date, give written notice of such claim (a "CLAIM NOTICE") to the
proposed Indemnifying Party. In the case of a Claim Notice seeking
indemnification pursuant to Section 8.1(c), the Claim Notice shall be given by
such applicable Seller. Each Claim Notice shall state the amount of claimed
Damages and the basis for such claim. Within thirty (30) days after delivery of
a Claim Notice, the proposed Indemnifying Party shall provide a written response
(the "RESPONSE NOTICE") to the Person who gave the Claim Notice. If no Response
Notice is delivered within such thirty (30) day period, the proposed
Indemnifying Party shall be deemed to have waived its right to dispute such
claim for indemnification. Buyer, on the one hand, and the Sellers on the other
hand, shall use good faith efforts to resolve any disputed indemnification
claim. If the matter is not resolved within fifteen (15) days of the delivery of
the Response Notice, any Party shall have the right, by delivery of written
notice to the other Parties (the "ARBITRATION NOTICE"), to submit the matter to
binding arbitration in such location (other than Chicago, Illinois or Dallas,
Texas) as the Parties shall reasonably agree at such time. Such matter shall
then be settled by three arbitrators in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association (the
"AAA RULES"). The Sellers and Buyer shall each designate one arbitrator within
fifteen (15) days of the delivery of the Arbitration Notice. The Sellers and
Buyer shall cause such designated arbitrators mutually to agree upon and shall
designate a third arbitrator; PROVIDED, HOWEVER, that (i) failing such agreement
within forty-five (45) days of delivery of the Arbitration Notice, the third
arbitrator shall be appointed in accordance with the AAA Rules and (ii) if
either the Sellers or Buyer fail to timely designate an arbitrator, the dispute
shall be resolved by the one arbitrator timely designated. The losing party in
the arbitration shall pay the fees and expenses of the arbitration and the
arbitrators. The Sellers and Buyer shall cause the arbitrators to decide the
matter to be arbitrated pursuant hereto within sixty (60) days after the
appointment of the last arbitrator. The arbitrators' decision shall relate
solely to whether the proposed Indemnified Party is entitled to receive the
claimed Damages (or a portion thereof) pursuant to the applicable terms of this
Agreement. The final decision of the majority of the arbitrators shall be
furnished to the Sellers and Buyer in writing and shall constitute a conclusive,
final and nonappealable
-47-
determination of the issue in question, binding upon the Sellers, Buyer and
their successors and assigns. Such decision may be used in a court of law only
for the purpose of seeking enforcement of the arbitrators' award.
(c) The Indemnified Party shall give prompt written notification to the
Indemnifying Party of the commencement of any action, suit or proceeding
relating to a third party claim for which indemnification pursuant to this
Section 8 may be sought. Within twenty (20) Business Days after delivery of such
notification, the Indemnifying Party (which for purposes of this Section 8.3(c)
shall mean the Company or, if the merger has occurred, the Sellers, in the case
of a claim pursuant to Section 8.1(b)) may, upon written notice thereof to the
Indemnified Party, assume control of the defense of such action, suit or
proceeding with counsel reasonably satisfactory to the Indemnified Party,
provided the Indemnifying Party acknowledges in writing to the Indemnified Party
that any Damages that may be assessed against the Indemnified Party in
connection with such action, suit or proceeding constitute Damages for which the
Indemnified Party shall be entitled to indemnification pursuant to this Section
8. If the Indemnifying Party does not so assume control of such defense, the
Indemnified Party shall control such defense. The Indemnifying Party shall not
be entitled to assume control of the defense of a third party claim and shall
pay the reasonable fees and expenses of counsel retained by the Indemnified
Party (provided that such counsel is reasonably acceptable to the Indemnifying
Party) if (i) the claim for indemnification relates to or arises in connection
with any criminal proceeding, action, indictment, allegation or investigation,
(ii) an adverse determination with respect to the action, lawsuit,
investigation, proceeding or other claim giving rise to such claim for
indemnification would reasonably be likely to be materially detrimental to the
Indemnified Party's reputation or (iii) the claim seeks an injunction or
equitable relief against the Indemnified Party; PROVIDED, that in the case of
any of (i) through (iii) above, (x) the Indemnified Party shall not agree to any
stipulation to or the entry of a court order that adversely affects the
Indemnifying Party without the Indemnifying Party's consent and (y) the
Indemnifying Party shall have the right to retain counsel of its choice at its
own expense and participate in the defense of the third party claim, in which
the Indemnifying Party or its counsel and the Indemnified Party or its counsel
shall cooperate in defending such third party claim. The Person not controlling
such defense may participate therein at its own expense. The Person controlling
such defense shall keep the other Person (i.e., the Indemnified Party or the
Indemnifying Party, as the case may be) advised of the status of such action,
suit or proceeding and the defense thereof and shall consider in good faith
recommendations made by the other Party with respect thereto. The Indemnified
Party shall not agree to any settlement of such action, suit or proceeding
without the prior written consent of the Indemnifying Party, which shall not be
unreasonably withheld. The Indemnifying Party shall not agree to any settlement
of such action, suit or proceeding without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
SECTION 9. TERMINATION AND ITS CONSEQUENCES.
9.1 TERMINATION OF AGREEMENT.
(a) Buyer and the Company may terminate this Agreement by mutual written
consent at any time prior to the Effective Time.
-48-
(b) Either Buyer or the Company may terminate this Agreement by giving
written notice to the other Party at any time prior to the Effective Time, if
the Closing has not occurred on or before July 31, 2001 by reason of the failure
of any condition precedent under Section 7.1, 7.2 or 7.3 hereof, unless the
failure of the Closing to occur by such date shall be due to the failure of the
Party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such Party set forth herein; provided, however, that Buyer may
not terminate this Agreement pursuant to this Section 9.1(b) prior to September
30, 2001 if the relevant failure of condition is of the type specified in
Section 7.1 and results from the announcement or consummation of the Spin- off.
(c) Either Buyer or the Company may terminate this Agreement by giving
written notice to the other Party at any time prior to the Effective Time if any
other Party has breached any material representation, warranty, covenant or
agreement contained in this Agreement that would result in any of the conditions
to the Merger set forth in Section 7 applicable to (i) the Sellers or the
Company in the event Buyer desires to terminate this Agreement pursuant to this
Section 9.1(c) or (ii) Buyer or Merger Sub in the event the Company desires to
terminate this Agreement pursuant to this Section 9.1(c) not being satisfied,
which breach has not been cured within ten (10) Business Days of received notice
thereof from the other Party; PROVIDED, HOWEVER, that a Party may not terminate
this Agreement pursuant to this Section 9.1(c) if such Party is then in breach
of any material representation, warranty, covenant or agreement contained in
this Agreement.
(d) Buyer may terminate this Agreement within twenty days after the date
hereof if (A) as a result of its discussions with Lithia, Motors Inc., ▇▇▇▇▇▇▇▇▇
Group, PG Marketing Inc., Designed Leaderships Inc. or Southwest Dealers
Services after the date hereof or (B) as a result of its review of the operation
of the Company at the Company's ▇▇▇▇▇ Tower offices after the date hereof,
information is brought to Buyer's attention that has not previously been
disclosed to Buyer by the Company or its officers that would reasonably be
expected to cause a buyer of the Company to be unwilling to proceed with the
transactions contemplated hereby and, within such twenty-day period and prior to
any such termination, Buyer provides Sellers with a written statement that it is
terminating this Agreement in accordance with this clause (d) specifying the
specific facts on which it is relying in terminating this Agreement in
accordance with this clause (d) signed by the Chief Executive Officer of Buyer.
9.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Buyer or the Company as provided in Section 9.1, all rights and
obligations of the Parties hereunder will terminate without any liability of any
Party to any other Party, except (i) Sections 6.4(c), 9.1 and 10 will survive
any termination of this Agreement and (ii) notwithstanding anything to the
contrary contained in this Agreement, any termination of this Agreement will not
relieve or release any Party from any liability or damages arising out of its
breach of any provision of this Agreement.
SECTION 10. MISCELLANEOUS.
10.1 REPRESENTATIONS AND SURVIVAL. The Parties make no other
representations or warranties to each other except as expressly set forth in
this Agreement. Except as expressly provided in Section 8 and except for
Sections 2.4, 2.5, 2.6, 6.9, 6.10, 6.12, 6.14 and 6.15, none of the
representations, warranties, and covenants of the Parties will survive the
Effective Time.
-49-
10.2 NO THIRD PARTY BENEFICIARIES. This Agreement, other than Section 6.10
hereof, shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
10.3 ENTIRE AGREEMENT. This Agreement (including the Disclosure Schedule)
and other documents referenced herein as exhibits hereto constitute the entire
agreement between the Parties and supersedes any prior understanding, agreement,
or representation by or between the Parties, written or oral, to the extent they
relate in any way to the subject matter, including without limitation those
certain confidentiality agreements entered into prior to the date of this
Agreement.
10.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties, except that Buyer may assign its rights and its
obligations under Section 2.4(i) to CSC after the Spin-off; provided, however,
such assignment shall not relieve Buyer of any obligations under this Agreement
(including under Section 2.4(i) of this Agreement to the extent CSC fails to
perform such obligations) and, furthermore, in no event shall CSC have any
rights against the Sellers, except as provided in this Agreement.
10.5 COUNTERPARTS AND DELIVERY. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. The delivery of a
signature page of this Agreement by one Party to the each of the other Parties
via facsimile transmission shall constitute the execution and delivery of this
Agreement by the transmitting Party.
10.6 NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given two Business Days
after it is sent either by certified mail or FedEx or similar overnight courier
service, and addressed to the intended recipient as set forth below:
IF TO THE BUYER OR MERGER SUB: COPY TO (which shall not constitute notice):
Aon Corporation ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Chairman and Chief Executive Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Officer
▇▇▇▇▇ ▇. ▇▇▇▇,
Vice Chairman and Chief
Operating Officer
-50-
IF TO THE COMPANY OR ANY SELLER: COPY TO (which shall not constitute notice):
c/o ▇▇▇▇ ▇▇▇▇▇▇▇▇ LLC ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ 2001 ▇▇▇▇ Avenue
Dallas, Texas 75201 ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Any Party may send any notice, request, demand and, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice of the change in the manner herein set forth.
10.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
10.8 CONSENT TO JURISDICTION. EXCEPT AS SET FORTH IN SECTION 8, EACH PARTY
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND
STATE COURTS SITTING IN THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ESCROW AGREEMENT, THE
REGISTRATION RIGHTS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY ANY OF THE
FOREGOING. EACH PARTY HEREBY IRREVOCABLY AGREES, ON BEHALF OF ITSELF AND ON
BEHALF OF SUCH PARTY'S SUCCESSORS AND PERMITTED ASSIGNS, THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION SUCH PERSON MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
10.9 WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
THEY MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE ESCROW AGREEMENT, THE
REGISTRATION RIGHTS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY ANY OF THE
FOREGOING.
10.10 AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time with the prior
authorization of their respective boards of directors. No amendment or other
modification of any provision of this
-51-
Agreement and no waiver of any provision hereof or any right or benefit
hereunder shall be valid unless the same shall be in writing and signed by each
of the Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
10.11 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation. The terms "herein",
"hereunder", and terms of similar import refer to this Agreement as a whole and
not to the specific Section or Article in which they are used. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.12 TIME IS OF THE ESSENCE, COMPUTATION OF TIME. Time is of the essence
for each and every provision of this Agreement. Whenever the last day for the
exercise of any privilege or the discharge of any duty hereunder shall fall upon
a Saturday, Sunday, or any date on which banks in New York, New York are
authorized to be closed, the party having such privilege or duty may exercise
such privilege or discharge such duty on the next succeeding day which is a
Business Day.
10.13 SPECIFIC PERFORMANCE. Each of the Parties acknowledges that the
rights created hereby are unique and recognizes and affirms that in the event of
a breach of this Agreement irreparable harm would be caused, money damages may
be inadequate and an aggrieved party may have no adequate remedy at law.
Accordingly, each of the Parties agrees that the other Party shall have the
right, in addition to any other rights and remedies existing in its favor at law
or in equity, to enforce its rights and the obligations of the other party
hereunder not only by an action or actions for damages but also by an action or
actions for specific performance, injunctive and/or other equitable relief
(without posting of bond or other security).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-52-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FIRST EXTENDED, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
MERGER ACQUISITION COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
AON CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman and Chief
Executive Officer
CHARWES FIRST EXTENDED 1999 TRUST
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
COURWES FIRST EXTENDED 1999 TRUST
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
-53-