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PURCHASE AGREEMENT
DATED AS OF
FEBRUARY 28, 1998
BY AND AMONG
HCC INSURANCE HOLDINGS, INC.,
MERGER SUB, INC.
AND
XXXXXXX X. XXXXXXXX,
GUARANTEE INSURANCE RESOURCES, INC.,
XXXXXXXX CORPORATION
XXXXXXXX FAMILY LLLP
AND
XXXXXXX X. XXXXXXX
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TABLE OF CONTENTS
PAGE
ARTICLE I SALE AND TRANSFER OF STOCK AND PARTNERSHIP
ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Sale of IAI Common Stock and GIR Assets. . . . . . . . . . . . 2
Section 1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.4 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.5 Purchase Price Adjustment. . . . . . . . . . . . . . . . . . . 4
Section 1.6 Allocation of Purchase Price . . . . . . . . . . . . . . . . . 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS. . . . . . . . . . . 5
Section 2.1 Corporate Existence and Power. . . . . . . . . . . . . . . . . 6
Section 2.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Governmental Authorization . . . . . . . . . . . . . . . . . . 6
Section 2.4 Non-Contravention. . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.6 Subsidiaries and Joint Ventures. . . . . . . . . . . . . . . . 9
Section 2.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . 9
Section 2.8 Absence of Certain Changes . . . . . . . . . . . . . . . . . . 9
Section 2.9 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 11
Section 2.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.12 Employee Benefit Plans, ERISA. . . . . . . . . . . . . . . . . 12
Section 2.13 Material Agreements. . . . . . . . . . . . . . . . . . . . . . 14
Section 2.14 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.15 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 15
Section 2.16 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 16
Section 2.18 Trademarks, Tradenames, Etc. . . . . . . . . . . . . . . . . . 16
Section 2.19 Sales Negotiations . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.20 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.21 Year 2000 Issues . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.22 Knowledge of the Sellers . . . . . . . . . . . . . . . . . . . 17
Section 2.23 Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
PURCHASERS . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.1 Corporate Existence and Power. . . . . . . . . . . . . . . . . 17
Section 3.2 Corporate Authorization. . . . . . . . . . . . . . . . . . . . 18
Section 3.3 Governmental Authorization . . . . . . . . . . . . . . . . . . 18
Section 3.4 Non-Contravention. . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.5 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.6 Knowledge of Purchasers. . . . . . . . . . . . . . . . . . . . 19
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TABLE OF CONTENTS (Cont.)
PAGE
ARTICLE IV COVENANTS OF THE SELLERS . . . . . . . . . . . . . . . . . . . 19
Section 4.1 Conduct of the Companies . . . . . . . . . . . . . . . . . . . 19
Section 4.2 Access to Financial and Operational Information. . . . . . . . 21
Section 4.3 Other Offers . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.4 Maintenance of Business. . . . . . . . . . . . . . . . . . . . 21
Section 4.5 Compliance with Obligations. . . . . . . . . . . . . . . . . . 22
Section 4.6 Notices of Certain Events. . . . . . . . . . . . . . . . . . . 22
Section 4.7 Necessary Consents . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.8 Regulatory Approval. . . . . . . . . . . . . . . . . . . . . . 22
Section 4.9 Satisfaction of Conditions Precedent . . . . . . . . . . . . . 22
ARTICLE V COVENANTS OF PURCHASERS. . . . . . . . . . . . . . . . . . . . 23
Section 5.1 Conduct of Purchasers. . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI COVENANTS OF PURCHASERS AND SELLERS. . . . . . . . . . . . . . 23
Section 6.1 Advice of Changes. . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.2 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . 23
Section 6.3 Certain Filings. . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.4 Communications . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.5 Satisfaction of Conditions Precedent . . . . . . . . . . . . . 24
Section 6.6 Tax Cooperation. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.7 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . 25
Section 7.1 Conditions to Obligations of Purchasers. . . . . . . . . . . . 25
Section 7.2 Conditions to Obligations of Sellers . . . . . . . . . . . . . 27
Section 7.3 Conditions to Obligations of Each Party. . . . . . . . . . . . 28
ARTICLE VIII TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 28
Section 8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IX CLOSING MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.1 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE X INDEMNIFICATION AND REMEDIES, CONTINUING
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.1 Sellers' Agreement to Indemnify. . . . . . . . . . . . . . . . 29
Section 10.2 Purchasers Agreement to Indemnify. . . . . . . . . . . . . . . 30
Section 10.3 Survival of Representations. . . . . . . . . . . . . . . . . . 31
Section 10.4 Procedure for Indemnification; Third Party Claims. . . . . . . 31
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TABLE OF CONTENTS (Cont.)
PAGE
ARTICLE XI ALTERNATIVE DISPUTE RESOLUTION . . . . . . . . . . . . . . . . 32
Section 11.1 Negotiation. . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 11.2 Arbitration and Mediation. . . . . . . . . . . . . . . . . . . 32
Section 11.3 Extension of Deadlines . . . . . . . . . . . . . . . . . . . . 32
Section 11.4 Other Relief; Statutes of Limitations. . . . . . . . . . . . . 32
Section 11.5 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE XII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.1 Further Assurances.. . . . . . . . . . . . . . . . . . . . . . 33
Section 12.2 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.5 Binding upon Successors and Assigns, Assignment. . . . . . . . 34
Section 12.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.8 Amendment and Waivers. . . . . . . . . . . . . . . . . . . . . 34
Section 12.9 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.10 Construction of Agreement. . . . . . . . . . . . . . . . . . . 35
Section 12.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 12.12 Appointment of Representative. . . . . . . . . . . . . . . . . 35
Section 12.13 Triumph Reinsurance Company. . . . . . . . . . . . . . . . . . 36
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is entered into effective as of
the 28th day of February, 1998 by and among HCC Insurance Holdings, Inc., a
Delaware corporation ("HCCH"), Merger Sub, Inc., a Georgia corporation and a
wholly owned subsidiary of HCCH ("Merger Sub," Merger Sub and HCCH are sometimes
collectively referred to herein as the "Purchasers"), Xxxxxxx X. Xxxxxxxx
("Xxxxxxxx"), Xxxxxxx X. Xxxxxxx ("Xxxxxxx") (Xxxxxxx and Xxxxxxxx being herein
collectively called the "Shareholders"); Guarantee Insurance Resources, Inc., a
Georgia corporation, and Xxxxxxxx Corporation, a Georgia corporation
(collectively the "Selling Corporations"); and the Xxxxxxxx Family LLLP, a
Georgia limited liability limited partnership (the "Family L.P."), the
Shareholders, the Family L.P. and the Selling Corporations being hereinafter
sometimes collectively referred to as the "Sellers"). Sellers and Purchasers
are sometimes referred to herein as the "Parties."
RECITALS:
X. Xxxxxxxx owns all of the outstanding stock of Insurance
Alternatives, Inc., a Georgia corporation ("IAI"), and all of the outstanding
stock of the Selling Corporations.
B. Prior to the Closing Date, as herein defined, Xxxxxxxx Corporation
will transfer certain of its interest in GIR, as herein defined, to Family L.P.
C. The Selling Corporations and the Family L.P. at the Closing Date
will be the sole partners in Guarantee Insurance Resources, a general
partnership formed and existing pursuant to the laws of the State of Georgia
("GIR") (the Selling Corporations and the Family L.P. are sometimes collectively
referred to herein as the "Partners").
D. Prior to the Closing, Xxxxxxx will exercise a stock option and
acquire stock in IAI.
E. Merger Sub desires to purchase all of the outstanding stock of IAI
and all of the assets and certain liabilities held by GIR (IAI and GIR being
hereinafter sometimes collectively referred to as the "Companies").
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
Parties hereto do hereby agree as follows:
ARTICLE I
SALE AND TRANSFER OF STOCK AND PARTNERSHIP ASSETS
SECTION 1.1 SALE OF IAI COMMON STOCK AND GIR ASSETS.
(a) Subject to the terms and conditions of this Agreement, at the
Closing (hereinafter defined), Shareholders shall sell, transfer and deliver to
Merger Sub and Merger Sub shall purchase from Shareholders, all of the
outstanding stock of IAI (the "IAI Common Stock").
(b) (i) Subject to the terms and conditions of this Agreement, at the
Closing, the Selling Corporations and the Family L.P. shall sell, transfer and
deliver to Merger Sub, and Xxxxxxxx and Xxxxxxx shall cause the Selling
Corporations and the Family L.P. to sell, transfer and deliver to Merger Sub,
and Merger Sub shall purchase from the Selling Corporations, all right, title
and interest of the Partners in the assets of GIR (the "Partnership Assets").
(ii) At the Closing, Merger Sub shall assume and agree to pay,
honor and discharge when due, all of the liabilities, obligations and
commitments of GIR that are (x) reflected on the GIR Financial Statements;
(y) incurred after the date of such Financial Statements, in the ordinary
course of business, consistent with prior practice, and in accordance with
the terms of this Agreement; and (z) any and all liabilities, obligations
and commitments of GIR that would not ordinarily be reflected on such
Financial Statements.
SECTION 1.2 PURCHASE PRICE.
(a) At the Closing, the Purchasers shall deliver the purchase price for
the IAI Common Stock and Partnership Assets in the amount of Twenty-two Million
Dollars ($22,000,000) (the "Purchase Price") as follows:
(i) $19,200,000 (the "Shareholders Cash Payment") shall be
transferred by wire transfer to such accounts as the Shareholders shall
specify, in immediately available funds; plus
(ii) HCCH shall issue to Xxxxxxx 29,029 shares of HCCH Common
Stock (the "Share Payment") equal to (x) $600,000, (y) divided by $20.6688
(the HCCH Acquisition Price). As used herein, the HCCH Acquisition Price
means the average of the closing prices of HCCH Common Stock as reported by
the New York Stock Exchange ("NYSE") for the ten trading days ending three
trading days before the Closing Date, hereinafter defined. No fractional
shares of HCCH Common Stock shall be issued and Xxxxxxx shall be entitled
to receive an additional cash payment equal to the fractional share of HCCH
Common Stock that Xxxxxxx would otherwise be entitled to receive,
multiplied by the HCCH Acquisition Price;
(iii) The remaining amount of the Purchase Price of $2,200,000 (the
"Escrow Amount") shall be placed in escrow as provided in Section 1.4
below.
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SECTION 1.3 CLOSING DELIVERIES.
At the Closing:
(a) Sellers shall deliver to HCCH and Merger Sub
(i) certificates representing the IAI Common Stock, endorsed or
transferred to Merger Sub, which shall transfer to Merger Sub good and
indefeasible title to the IAI Common Stock, free and clear of all
encumbrances;
(ii) assignments of the Partnership Assets including such bills of
sale with covenants of warranty, assignments, endorsements, and other good
and sufficient instruments and documents of conveyance and transfer, in
form reasonably satisfactory to HCCH and Merger Sub and their counsel, as
they shall deem necessary and effective to transfer and assign to, and vest
in, Merger Sub, all of the Partnership's right, title and interest in and
to the Partnership Assets, including without limitation, good and valid
title in and to all of the Partnership Assets owned by the Partnership,
good and valid leasehold interest in and to all of the Partnership Assets
leased by the Partners as lessee, and all of the Partnership's rights under
all agreements, contracts, commitments, leases, plans, bids, quotations,
proposals, instruments and other documents included in the Partnership
Assets to which GIR is a party or by which it has rights on the Closing
Date, and all of the agreements, contracts, commitments, leases, plans,
bids, quotations, proposals, instruments, computer programs and software,
databases, whether in the form of computer tapes or otherwise, related
object and source codes, manuals and guidebooks, price books and price
lists, customer and subscriber lists, supplier lists, sales records, files,
correspondences, legal opinions, rulings issued by governmental entities,
and other documents, books, records, papers, files, office supplies and
data belonging to GIR which are part of the Partnership Assets, and
simultaneously with such delivery, all such steps will be taken as may be
required to put Merger Sub in actual possession and operating control of
the Partnership Assets;
(iii) non-competition agreements executed by each Seller and those
key employees of the Companies set forth in Section 7.1(j) in form and
substance satisfactory to the Purchasers (the "Non-Competition
Agreements"); and
(iv) such other documents including officers' certificates and
opinions of counsel as may be required by this Agreement or reasonably
requested by HCCH.
(b) The Purchasers shall
(i) cause the Shareholder Cash Payment to be transferred to the
accounts designated by the Shareholders, in immediately available funds;
(ii) deliver to Xxxxxxx certificates of HCCH Common Stock in the
amount of the Share Payment. Xxxxxxx agrees and understands that such
shares of HCCH
3
Common Stock shall be restricted as to transfer for a period of two years
and shall bear the appropriate legend as set forth herein;
(iii) cause the escrow payments to be made; and
(iv) deliver to the Shareholders such other documents, including
officers' certificates and opinions of counsel, as may be required by this
Agreement or reasonably requested by the Shareholders.
SECTION 1.4 ESCROW. Pursuant to an Escrow Agreement to be entered into
on or before the Closing Date (as hereinafter defined) in substantially the form
of Exhibit 1.4 (the "Escrow Agreement") among HCCH, Xxxxxxxx and Xxxxx Xxxxxx
Private Trust Company of Florida, as Escrow Agent, HCCH will withhold in cash or
approved investment securities for a period of 24 months following the Closing
Date, an amount equal to 10% of the Purchase Price. On the Closing Date, HCCH
will deposit, or cause to be deposited in escrow pursuant to the Escrow
Agreement, the cash representing the Escrow Amount, provided, however, if the
Purchase Price is reduced pursuant to Section 1.5 the Escrow Amount shall be
similarly reduced to equal 10% of the Adjusted Purchase Price, as herein
defined. The Escrow Amount will be held as collateral for the indemnification
obligations of Xxxxxxxx pending its release from escrow in accordance with the
terms of the Escrow Agreement.
SECTION 1.5 PURCHASE PRICE ADJUSTMENT.
(a) The Purchase Price shall be subject to adjustment after the Closing
Date as provided in this Section. If the Earnings (as defined in subsection (b)
of this Section 1.5) are less than $3,000,000, the Purchase Price shall be
adjusted to an amount (the "Adjusted Purchase Price") that bears the same ratio
to $22,000,000 that the Earnings bears to $3,000,000. Within five (5) days of
the determination of the Earnings as set forth in a schedule (the "Closing Date
Schedule") prepared by HCCH and Merger Sub and agreed to by Coopers & Xxxxxxx,
LLP, Xxxxxxxx shall repay to HCCH in immediately available funds the excess, if
any, of $22,000,000 over the Adjusted Purchase Price.
(b) "Earnings" means the aggregate pre-tax earnings of IAI and GIR
for the calendar year ending on December 31, 1997 as shown on audited
financial statements of IAI and GIR prepared by Coopers & Xxxxxxx, LLP in
accordance with generally accepted accounting principles consistently applied
combined for purposes of this calculation and excluding (i) costs relating to
the transaction contemplated by this Agreement which have been accrued as of
December 31, 1997, (ii) accrued employee bonuses associated with the
transaction, and (iii) deferred compensation paid to Xxxxxxx in cash or
equity. Each of the Parties agrees to cause Coopers & Xxxxxxx, LLP to audit
or review such financial statements and agree to the Earnings as soon as
practicable and to fully cooperate with Coopers & Xxxxxxx, LLP in connection
therewith. The fees of Coopers & Xxxxxxx, LLP to combine the audited
financial statements shall be paid by GIR. Fees of Coopers & Xxxxxxx, LLP
incurred in connection with the audits of GIR and IAI which are in excess of
amounts accrued at December 31, 1997 for such audits shall be paid by
Xxxxxxxx.
4
(c) Following the Closing, the Purchase Price paid by Purchaser at the
Closing shall be adjusted in the manner set forth in Section 1.5(a) as follows:
(i) as soon as practicable but not later than 60 business days
after the Closing Date, Purchaser shall prepare a schedule setting forth
the Earnings and, pursuant to Section 4.1(j), (A) the combined capital
accounts of GIR Partners' and IAI Shareholders' equity and (B) the cash and
cash equivalents as of the opening of business on the Closing Date (the
"Proposed Closing Date Schedule"). The Proposed Closing Date Schedule
shall be prepared in accordance with the same accounting principles as were
utilized in preparing the year-end December 31, 1997 financial statements
and as set forth herein. If the Sellers do not give notice of dispute to
Purchasers within thirty business days after receiving the Proposed Closing
Date Schedule, the Proposed Closing Date Schedule shall be deemed to be
accepted by Sellers and thereupon shall become the Closing Date Schedule.
If Sellers give notice of dispute to Purchasers within such period of
thirty business days, Sellers and Purchasers shall negotiate in good faith
to resolve the dispute and, if such resolution is successful, the Proposed
Closing Date Schedule, as so revised and agreed to by the Parties shall
become the Closing Date Schedule. If, after fifteen days from the date
notice of dispute is given hereunder, Sellers and Purchasers cannot agree
on a resolution of the dispute, then either Sellers or Purchasers may
direct Coopers & Xxxxxxx, LLP to resolve the dispute. Sellers and
Purchasers shall each provide Coopers & Xxxxxxx, LLP with all information
they reasonably require and Coopers & Xxxxxxx, LLP shall be entitled (to
the extent they consider it appropriate) to base their opinion on such
information and on the accounting or other records, and any written
submissions made by the Sellers or Purchasers. The costs associated with
retaining Coopers & Xxxxxxx, LLP in resolving the dispute shall be borne
equally by Sellers and Purchasers. The decision of Coopers & Xxxxxxx, LLP
as to the Closing Date Schedule shall be conclusive and binding upon
Sellers and Purchasers in the absence of any manifest error. If the
Closing Date Schedule demonstrates that the covenants set forth in
Section 4.1(j) have not been satisfied, the Purchase Price shall be
adjusted to cause any such deficiency to be satisfied.
SECTION 1.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated $4,000,000 to the purchase of the IAI Common Stock and $18,000,000 to
the purchase of the Partnership Assets, or if the Purchase Price is adjusted as
set forth herein, in the same ratios.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as disclosed in a document referring specifically to this Agreement
(the "Seller Disclosure Schedule") which has been delivered to Purchasers on or
before the date hereof, each of the Sellers (jointly and severally) represents
and warrants to Purchasers as set forth below.
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SECTION 2.1 CORPORATE EXISTENCE AND POWER.
(a) IAI is a corporation duly organized and validly existing under the
laws of the state of its incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
(collectively, "Governmental Authorizations") required to carry on its business
as now conducted, except such Governmental Authorizations the failure of which
to have obtained would not have a Material Adverse Effect, as hereinafter
defined, on IAI. Sellers have delivered to Purchasers true and complete copies
of IAI's Articles or Certificate of Incorporation and Bylaws as currently in
effect. IAI is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified would not have a Material Adverse
Effect on IAI. For purposes of this Agreement, a "Material Adverse Effect,"
with respect to any person or entity (including without limitation IAI, GIR, and
Purchasers), means a material adverse effect on the condition (financial or
otherwise), business, properties, assets, liabilities (including contingent
liabilities), results of operations or prospects of such person or entity; and
"Material Adverse Change" means a change or a development involving a
prospective change which is reasonably likely to result in a Material Adverse
Effect.
(b) GIR is a general partnership formed and existing under the
laws of the state of its organization, and has all partnership powers and all
material Governmental Authorizations required to carry on its business as now
conducted, except such Governmental Authorizations the failure of which to have
obtained would not have a Material Adverse Effect on GIR. Sellers have
delivered to Purchasers copies of the partnership agreement of GIR and all
amendments thereto.
(c) Family L.P. is a limited liability limited partnership formed
and existing under the laws of the state of Georgia and has all powers and all
material Governmental Authorizations required to carry on its business as now
conducted, except such Governmental Authorizations the failure of which to have
obtained would not have a Material Adverse Effect on Family L.P. Sellers have
delivered to Purchasers copies of the limited partnership agreement of Family
L.P. and all amendments thereto.
SECTION 2.2 AUTHORIZATION.
Each Seller represents and warrants that such Seller has full right, power
and authority to enter into this Agreement and each other agreement to be
entered into by such Seller in connection with the transactions contemplated
hereby and that this Agreement and such other agreements contemplated hereby
constitute, or upon execution will constitute, valid and binding agreements of
such Seller, enforceable against such Seller in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency or
other similar laws effecting the enforcement of creditors' rights generally or
by general principles of equity.
SECTION 2.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by each of the Sellers of this Agreement, and the consummation of
the transactions contemplated
6
hereunder require no action by any of the Sellers or the Companies or any
filing by them with any governmental body, agency, official or authority
other than in respect of:
(a) compliance with the applicable requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act");
(b) compliance with any applicable requirements of the Securities Act of
1933, as amended (the "Securities Act") and the rules and regulations
promulgated thereunder;
(c) compliance with any applicable foreign or state securities or "blue
sky" laws;
(d) compliance with any requirements of any federal, state, foreign or
other insurance or reinsurance or intermediaries or managing general agent or
third party administrators' laws, including licensing or other related laws;
(e) such other filings or registrations with, or authorizations,
consents or approvals of, governmental bodies, agencies, officials or
authorities, the failure of which to make or obtain (i) would not reasonably be
expected to have a Material Adverse Effect on either of the Companies, or
(ii) would not materially adversely affect the ability of either of the
Companies or Purchasers to consummate the transactions contemplated hereby and
to operate their businesses as heretofore operated.
SECTION 2.4 NON-CONTRAVENTION. The execution, delivery and performance
by each of the Sellers of this Agreement, and the consummation by each of the
Sellers of the transactions contemplated hereby and thereby do not and will not:
(a) contravene or conflict with IAI's Articles or Certificate of
Incorporation or Bylaws, the partnership agreement of GIR or the limited
partnership agreement of the Family L.P.;
(b) assuming compliance with the matters referred to in Section 2.3,
contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to any of the Companies or the Sellers;
(c) conflict with or result in a breach or violation of, or constitute a
default under, or result in a contractual right to cause the termination or
cancellation of or loss of a material benefit under, or right to accelerate, any
material agreement, contract or other instrument binding upon either of the
Companies or any material license, franchise, permit or other similar
authorization held by either of the Companies; or
(d) result in the creation or imposition of any Lien (as hereinafter
defined) on any material asset of either of the Companies;
except, with respect to clauses (b), (c) and (d) above, for contraventions,
defaults, losses, Liens and other matters referred to in such clauses that would
not be reasonably expected to have, in the aggregate, a Material Adverse Effect
on either of the Companies. For purposes of this
7
Agreement, the term "Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect
of such asset.
SECTION 2.5 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of
IAI consists of 10,000 shares of a single class designated as common stock,
1,000 shares of which are issued and outstanding. All of such outstanding
shares are owned by the Shareholders free of any Liens or other encumbrances.
(b) All outstanding shares of IAI have been, or will be prior to the
Closing Date, duly authorized and validly issued and are fully paid and
nonassessable and free from any preemptive rights. Except as set forth in and
as otherwise contemplated by this Agreement, for IAI there are outstanding
(i) no shares of capital stock or other voting securities, (ii) no securities
convertible into or exchangeable for shares of its capital stock or voting
securities, (iii) no options or other rights to acquire, and no obligation to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for its capital stock or other voting securities (the items in
clauses (i), (ii) and (iii) of this subsection (b) being referred to
collectively as the "IAI Securities"), (iv) no obligations to repurchase, redeem
or otherwise acquire any IAI Securities, and (v) no contractual rights of any
person or entity to include any IAI Securities in any registration statement
filed under the Securities Act.
(c) As of the date of this Agreement, all of the Partnership Assets in
GIR are owned by the Sellers free of any Liens or other encumbrances. Except as
set forth in and as otherwise contemplated by this Agreement, for GIR there are
outstanding (i) no interests in GIR, (ii) no securities convertible into
interests in GIR, (iii) no options or other rights to acquire, and no obligation
to issue, any interest in or convertible into or exchangeable for any interest
in GIR (the items in clauses (i), (ii) and (iii) of this subsection (c) being
referred to collectively as the "GIR Securities"), (iv) no obligations to
repurchase, redeem, or otherwise acquire any GIR Securities, and (v) no
contractual rights of any person or entity to include any GIR Securities in any
registration statement filed under the Securities Act.
(d) As of the date of this Agreement, all of the General Partnership and
Limited Partnership interests in the Family L.P. are owned collectively by
Xxxxxxxx Corporation, Xxxxxxx and a public charity free of any Liens or other
encumbrances. Except as set forth in and as otherwise contemplated by this
Agreement, for the Family L.P. there are outstanding (i) no interests in the
Family L.P., (ii) no securities convertible into interests in the Family L.P.,
(iii) no options or other rights to acquire and no obligations to issue any
general or limited partnership interests in or convertible into or exchangeable
for any general or limited partnership interests in the Family L.P. other than
an option provided to the public charity requiring a certain trust to purchase
limited partnership interests at the charity's option. (The items in
clauses (i), (ii) and (iii) of this subsection (d) being referred to
collectively as the "Family L.P. Securities"), (iv) no obligation to repurchase,
redeem, or otherwise acquire any of the Family L.P. Securities, other than said
option held by the public charity, and (v) no contractual rights of any person
or entity to include any of the Family L.P. Securities in any registration
statement filed under the Securities Act.
8
SECTION 2.6 SUBSIDIARIES AND JOINT VENTURES.
(a) For purposes of this Agreement, (i) "Subsidiary" means, with respect
to any entity, any corporation of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are directly or indirectly owned by
such entity, and (ii) "Joint Venture" means, with respect to any entity, any
corporation or organization (other than such entity and any Subsidiary thereof)
of which such entity or any Subsidiary thereof is, directly or indirectly, the
beneficial owner of 25% or more of any class of equity securities or equivalent
profit participation interest.
(b) As of the date hereof neither IAI nor GIR has any Subsidiary or
Joint Venture.
SECTION 2.7 FINANCIAL STATEMENTS. Sellers have delivered to Purchasers
the audited balance sheets as of December 31, 1997, December 31, 1996, and
December 31, 1995, audited income statements for the annual periods ended
December 31, 1997, December 31, 1996, and December 31, 1995 and unaudited
balance sheets and income statements for the period ending September 30, 1997
for GIR and the unaudited balance sheets as of December 31, 1997, December 31,
1996 and December 31, 1995 and the unaudited income statements for the annual
periods ended December 31, 1997, December 31, 1996 and December 31, 1995 for IAI
(collectively, the "Financial Statements"). For purposes of this Agreement, the
"Balance Sheet Date" shall mean December 31, 1996, unless the Closing Date is
later than January 30, 1998, in which case it shall mean December 31, 1997. The
Financial Statements present fairly in all material respects, substantially in
conformity with generally accepted accounting principles consistently applied
(except as indicated in the notes thereto), the financial position of the
Companies as of the dates thereof and results of operations and cash flows for
the periods therein indicated (subject to normal year-end adjustments in the
case of any interim financial statements and the absence of certain footnotes in
the case of unaudited financial statements). Neither of the Companies has any
material debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is not
reflected, reserved against or disclosed in the Financial Statements except for
(i) those that are not required to be reported in accordance with the aforesaid
accounting principles; (ii) normal or recurring liabilities incurred since
December 31, 1997 in the ordinary course of business or (iii) as disclosed in
the Seller Disclosure Schedule.
SECTION 2.8 ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, each of
the Companies has in all material respects conducted its business in the
ordinary course and there has not been:
(a) any Material Adverse Change with respect thereto or any event,
occurrence or development of a state of circumstances or facts known to any of
the Sellers, which as of the date hereof could reasonably be expected to have a
Material Adverse Effect on either of the Companies;
(b) any declaration, setting aside or payment of any dividend or other
distribution by either of the Companies other than dividend distributions to the
Shareholders and distributions to partners;
9
(c) any repurchase, redemption or other acquisition by either of the
Companies of any outstanding shares of capital stock or other securities or
other ownership interests in either of the Companies;
(d) any amendment of any term of any outstanding securities of either
of the Companies;
(e) any damage, destruction or other property or casualty loss (whether
or not covered by insurance) affecting the business, assets, liabilities,
earnings or prospects of either of the Companies which, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on either of the Companies;
(f) any increase in indebtedness for borrowed money or capitalized lease
obligations of either of the Companies, except in the ordinary course of
business;
(g) any sale, assignment, transfer or other disposition of any tangible
or intangible asset material to the business of either of the Companies, except
in the ordinary course of business and for a fair and adequate consideration;
(h) any amendment, termination or waiver by either of the Companies of
any right of substantial value under any agreement, contract or other written
commitment to which it is a party or by which it is bound which could reasonably
be expected to have a Material Adverse Effect on either of the Companies;
(i) any material reduction in the amounts of coverage provided by
existing casualty and liability insurance policies with respect to the business
or properties of either of the Companies;
(j) any (i) grant of any severance or termination pay to any director,
officer or employee of either of the Companies, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or employee of either
of the Companies other than the Non-Competition Agreements contemplated by this
Agreement, (iii) any increase in benefits payable under any existing severance
or termination pay policies or employment agreements, or (iv) any increase in
compensation, bonus or other benefits payable to directors, officers or
employees of either of the Companies, in each case other than in the ordinary
course of business consistent with past practice;
(k) any new or amendment to or alteration of any existing bonus,
incentive, compensation, severance, stock option, stock appreciation right,
pension, matching gift, profit-sharing, employee stock ownership, retirement,
pension group insurance, death benefit, or other fringe benefit plan,
arrangement or trust agreement adopted or implemented by either of the Companies
which would result in a material increase in cost;
10
(l) any capital expenditures, capital additions or capital improvements
incurred or undertaken by either of the Companies in excess of $10,000, or any
non-budgeted expenditure in excess of $5,000; or
(m) the entering into of any agreement by either of the Companies or any
person on behalf of either of the Companies to take any of the foregoing
actions;
(n) cancellation or threat of cancellation from any issuing company or
reinsurer that affects more than 10% of either IAI's or GIR's business.
SECTION 2.9 NO UNDISCLOSED LIABILITIES. There are no existing
liabilities of either of the Companies of any kind whatsoever that are,
individually or in the aggregate, material to either of the Companies, other
than:
(a) liabilities disclosed or provided for in the respective audited
financial statements as of and for the fiscal year ended December 31, 1997
(including the notes thereto) of the Companies;
(b) liabilities incurred in the ordinary course of business consistent
with past practice since December 31, 1997;
(c) liabilities under this Agreement or indicated in the Seller
Disclosure Schedule.
SECTION 2.10 LITIGATION. Other than actions, suits, proceedings, claims
or investigations occurring in the ordinary course of business involving
respective amounts in controversy of less than $10,000 each and $100,000 in the
aggregate, there is no action, suit, proceeding, claim or investigation pending
against, nor has any of the Companies or any Seller received written notice of a
claim threatened against either of the Companies or any of its assets or against
or involving any of its officers, directors or employees in connection with the
business or affairs of either of the Companies, including, without limitation,
any such claims for indemnification arising under any agreement to which either
of the Companies is a party. Neither of the Companies has received written
notice that it is subject, or in default with respect, to any writ, order,
judgment, injunction or decree which could, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 2.11 TAXES.
(a) Each of the Companies (i) has filed when due (taking into account
extensions) with the appropriate federal, state, local, foreign and other
governmental agencies, all material tax returns, estimates and reports required
to be filed by it, (ii) either paid when due and payable or established adequate
reserves or otherwise accrued on the Financial Statements all material federal,
state, local or foreign taxes, levies, imposts, duties, licenses and
registration fees and charges of any nature whatsoever, and unemployment and
social security taxes and income tax withholding, including interest and
penalties thereon (each individually a "Tax" and collectively the "Taxes") and
there are no tax deficiencies claimed in writing by any taxing authority that,
in the aggregate, would result in any tax liability in excess of the amount of
the reserves or accruals
11
and (iii) has or will establish in accordance with its normal accounting
practices and procedures accruals and reserves that, in the aggregate, are
adequate for the payment of all Taxes not yet due and payable and
attributable to any period preceding the Closing Date. The Seller Disclosure
Schedule sets forth those tax returns for all periods that currently are the
subject of audit by any federal, state, local or foreign taxing authority.
(b) There are no material taxes, interest, penalties, assessments or
deficiencies claimed in writing by any taxing authority to be due in respect of
any tax returns filed by IAI (or any predecessor corporations) or GIR (or any
predecessor). Neither IAI nor any predecessor corporation, has executed or
filed with the Internal Revenue Service ("IRS") or any other taxing authority
any agreement or other document extending, or having the effect of extending,
the period of assessment or collection of any Taxes.
(c) Neither of the Companies is a party to or bound by (or will prior to
the Effective Date become a party to or bound by) any Tax indemnity, Tax sharing
or Tax allocation agreement or other similar arrangement. IAI is not a member
of an affiliated group or filed or been included in a combined, consolidated or
unitary Tax return.
(d) IAI has maintained a valid S election pursuant to the Code since its
incorporation and there is no corporate income tax due from IAI. GIR has
maintained its status as a partnership subject to Subchapter K of the Internal
Revenue Code of 1986, as amended (the "Code") since its organization and no
taxes of any kind are due from GIR.
(e) Each of the Companies will distribute to the Shareholders prior to
Closing an amount determined by Coopers & Xxxxxxx, LLP adequate for the payment
of all Taxes attributable to income of the Companies for the portion of 1998
preceding the Closing and which must be paid by the Shareholders. The Parties
will cooperate with each other and will make reasonable post-Closing adjustments
to provide for actual payments of Taxes once determined.
SECTION 2.12 EMPLOYEE BENEFIT PLANS, ERISA.
(a) Neither of the Companies is a party to any oral or written
(i) employment, severance, collective bargaining or consulting agreement not
terminable on 60 days' or less notice, (ii) agreement with any executive officer
or other key employee of such Company (A) the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a
transaction involving either of the Companies of the nature of any of the
transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee extending for a period longer than one
year, or (C) providing severance benefits or other benefits after the
termination of employment of such executive officer or key employee regardless
of the reason for such termination of employment, (iii) agreement, plan or
arrangement under which any person may receive payments subject to the tax
imposed by Section 4999 of the Code, or (iv) agreement or plan, including,
without limitation, any stock option plan, stock appreciation right plan,
restricted stock plan or stock purchase plan, the benefits of which would be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of
12
the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
(b) Neither of the Companies nor any corporation or other entity which
under Section 4001(b) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), is under common control with either of the Companies (an
"ERISA Affiliate") maintains or within the past five years has maintained,
contributed to, or been obligated to contribute to, any "Employee Pension
Benefit Plan" ("Pension Plan") or any "Employee Welfare Benefit Plan" ("Welfare
Plan") as such terms are defined in Sections 3(2) and 3(1) respectively of
ERISA, which is subject to ERISA, except as described on Schedule 2.12(b). Each
Pension Plan and Welfare Plan disclosed in Schedule 2.12(b) and the Seller
Disclosure Schedule (which Plans have been heretofore delivered to Purchasers)
and maintained by either of the Companies has been maintained in all material
respects in compliance with their terms and all provisions of ERISA and the Code
(including rules and regulations thereunder) applicable thereto.
(c) No Pension Plan or Welfare Plan is currently subject to an audit or
other investigation by the IRS, the Department of Labor (the "DOL"), the Pension
Benefit Guaranty Corporation or any other governmental agency or office nor are
any such Plans subject to any lawsuits or legal proceedings of any kind or to
any material pending disputed claims by employees or beneficiaries covered under
any such Plan or by any other parties.
(d) No "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, resulting in liability to either of the Companies or
any ERISA Affiliate has occurred with respect to any Pension Plan or Welfare
Plan. None of the Sellers has any knowledge of any breach of fiduciary
responsibility under Part 4 of Title I of ERISA which may result in liability of
either of the Companies or any ERISA Affiliate, any trustee, administrator or
fiduciary of any Pension Plan or Welfare Plan.
(e) Neither of the Companies nor any ERISA Affiliate, since January 1,
1986, has maintained or contributed to, or been obligated or required to
contribute to, a "Multiemployer Plan," as such term is defined in
Section 4001(a)(3) of ERISA. Neither of the Companies nor any ERISA Affiliate
has either withdrawn, partially or completely, or instituted steps to withdraw,
partially or completely, from any Multiemployer Plan nor has any event occurred
which would enable a Multiemployer Plan to give notice of and demand payment of
any withdrawal liability with respect to either of the Companies or any ERISA
Affiliate.
(f) There is no contract, agreement, plan or arrangement covering any
employee or former employee of either of the Companies or any ERISA Affiliate
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to the terms of Sections 162(a)(1) or 280G
of the Code.
(g) With respect to either of the Companies and each ERISA Affiliate,
Schedule 2.12(b) and the Seller Disclosure Schedule correctly identifies each
material agreement, policy, plan or other arrangement, whether written or oral,
express or implied, fixed or contingent, to which either of the Companies is a
party or by which either of the Companies or any property or asset of either of
the Companies is bound, which is or relates to a pension,
13
option, bonus, deferred compensation, retirement, stock purchase,
profit-sharing, severance pay, health, welfare, incentive, vacation, sick
leave, medical disability, hospitalization, life or other insurance or fringe
benefit plan, policy or arrangement. Each such agreement, policy, plan or
other arrangement has been maintained in all material respects in compliance
with its terms and all provisions of ERISA and the Code (including rules and
regulations thereunder) applicable thereto.
(h) Neither of the Companies nor any ERISA Affiliate maintains or has
maintained or contributed to any Pension Plan that is or was subject to
Section 302 of Title IV of ERISA or Section 412 of the Code. Sellers have made
available to Purchasers, for each Pension Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code, a copy of the most
recent determination letter issued by the IRS to the effect that each such Plan
is so qualified and that each trust created thereunder is tax exempt under
Section 501 of the Code, and each of the Sellers is unaware of any fact or
circumstances that would jeopardize the qualified status of each such Pension
Plan or the tax exempt status of each trust created thereunder.
(i) One or more of the benefit plans of the Companies listed in the
Seller Disclosure Schedule may be subject to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"). If so, each such plan has
been operated in, and is in compliance with COBRA. All notices required to be
given under COBRA have been timely and properly given in accordance with COBRA,
and the rules and regulations promulgated thereunder, and no employee, former
employee or "qualified beneficiary" (as defined in COBRA) has any claim or
contingent claim against the Companies or any ERISA Affiliate. Neither Company
provides retiree benefits of any kind, including health, medical, life, etc. and
neither Company has agreed to continue any employee benefits after termination
of employment other than COBRA.
SECTION 2.13 MATERIAL AGREEMENTS.
(a) The Seller Disclosure Schedule includes a complete and accurate list
of all contracts, agreements, leases (other than Property Leases, as hereinafter
defined), and instruments to which either of the Companies is a party or by
which it or its properties or assets are bound (1) which individually involve
net payments or receipts in excess of $25,000 per annum, inclusive of contracts
entered into with customers and suppliers in the ordinary course of business, or
(2) that pertain to employment or severance benefits for any officer, director
or employee of either of the Companies, whether written or oral, but exclusive
of contracts, agreements, leases and instruments terminable without penalty upon
60 days' or less prior written notice to the other party or parties thereto, or
(3) to which Xxxxxxxx, Xxxxxxx or the Selling Corporations are the opposing
contracting party (the "Material Agreements").
(b) Neither of the Companies nor, to the knowledge of any of the
Sellers, any other party is in default under any Material Agreement and no event
has occurred which (after notice or lapse of time or both) would become a breach
or default under, or would permit modification, cancellation, acceleration or
termination of any Material Agreement or result in the creation of any security
interest upon, or any person obtaining any right to acquire, any properties,
assets or rights of either of the Companies, which, in any such case, has had or
would reasonably be expected to have a Material Adverse Effect.
14
(c) To the knowledge of each of the Sellers, each such Material
Agreement is in full force and effect and is valid and legally binding and there
are no material unresolved disputes involving or with respect to any Material
Agreement. No party to a Material Agreement has advised either of the Companies
that it intends either to terminate a Material Agreement or to refuse to renew a
Material Agreement upon the expiration of the term thereof. No representation
or warranty is made that all benefits contemplated in the Material Agreements
will be received.
(d) IAI is not in violation of, or in default with respect to, any term
of its Articles of Incorporation or Bylaws. None of the partners of GIR is in
violation of, or in default with respect to, any term of the partnership
agreement of GIR.
SECTION 2.14 PROPERTIES. Neither of the Companies owns any real estate,
and all leases of real property to which either of the Companies is a party or
by which it is bound ("Property Leases") are in full force and effect. There
exists no default under such Property Leases, nor any event (other than the
transactions contemplated by this Agreement) which with notice or lapse of time
or both would constitute a default thereunder, which default would have a
Material Adverse Effect. All of the properties and assets which are owned by
either of the Companies are owned free and clear of any Lien, except for Liens
which do not have a Material Adverse Effect. Each of the Companies has good and
indefeasible title with respect to such owned properties and assets subject to
no Liens, other than those permitted under this Section 2.14, to all of the
properties and assets necessary for the conduct of its business other than to
the extent that the failure to have such title would not have a Material Adverse
Effect.
SECTION 2.15 ENVIRONMENTAL MATTERS.
(a) For the purposes of this Agreement, the following terms have the
following meanings:
"Environmental Laws" shall mean any and all federal, state, local
and foreign statutes, laws (including case law), regulations, ordinances,
rules, judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and governmental
restrictions relating to human health, the environment or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances
(as hereinafter defined) or wastes into the environment or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation
thereof.
"Environmental Liabilities" shall mean all liabilities, whether
vested or unvested, contingent or fixed, actual or potential, which
(i) arise under or relate to Environmental Laws and (ii) relate to actions
occurring or conditions existing on or prior to the Effective Time.
"Hazardous Substances" shall mean any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other
15
hydrocarbons, or any substance having any constituent elements displaying
any of the foregoing characteristics.
"Regulated Activity" shall mean any generation, treatment, storage,
recycling, transportation, disposal or release of any Hazardous Substances.
(b) No notice, notification, demand, request for information, citation,
summons, complaint or order has been received, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending, or to any
Seller's knowledge, has been threatened by any governmental entity or other
party with respect to any (i) alleged violation of any Environmental Law by
either of the Companies, (ii) alleged failure by either of the Companies to have
any environmental permit, certificate, license, approval, registration or
authorization required in connection with the conduct of its business or
(iii) Regulated Activity of either of the Companies.
(c) Neither of the Companies has any material Environmental Liabilities
and there has been no release of Hazardous Substances into the environment by
either of the Companies or with respect to any of their properties which has
had, or would reasonably be expected to have, a Material Adverse Effect.
SECTION 2.16 LABOR MATTERS. Neither of the Companies is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by either of the Companies, nor does any of the Sellers know of
any activities or proceedings of any labor union to organize any such employees.
SECTION 2.17 COMPLIANCE WITH LAWS. Except for violations which do not
have and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, neither of the Companies has received any
notice that it is in violation of, or has violated, any applicable provisions of
any laws, statutes, ordinances or regulations or any term of any judgment,
decree, injunction or order binding against it.
SECTION 2.18 TRADEMARKS, TRADENAMES, ETC. Each of the Companies owns or
possesses, or holds a valid right or license to use, all intellectual property,
patents, trademarks, tradenames, service marks, copyrights and licenses, and all
rights with respect to the foregoing, necessary for the conduct of its business
as now conducted, without any known conflict with the rights of others.
SECTION 2.19 SALES NEGOTIATIONS. Except as contemplated by this
Agreement, there are currently no discussions to which either of the Companies
or any of the Sellers is a party relating to (a) the sale of any material
portion of the assets of either of the Companies, (b) any merger, consolidation,
liquidation, dissolution or similar transaction involving either of the
Companies whereby either of the Companies will issue any securities or for which
either of the Companies is required to obtain the approval of its shareholders
or partners, or (c) the sale of any IAI Common Stock or any interest in GIR.
16
SECTION 2.20 BROKER'S FEES. None of the Companies or the Sellers nor
anyone acting on the behalf or at the request thereof has any liability to any
broker, finder, investment banker or agent, or has agreed to pay any brokerage
fees, finder's fees or commissions, or to reimburse any expenses of any broker,
finder, investment banker or agent in connection with this Agreement, other than
the finder's fee to be paid by Shareholder to Xxxxxxxxxxx Partners,
Inc./PaineWebber Incorporated at Closing pursuant to Section 7.1(q) hereof.
SECTION 2.21 YEAR 2000 ISSUES. Any software of either of the Companies
will perform in all material respects in accordance with published technical
specifications and any applicable related documentation, both prior to and
following January 1, 2000. Neither of the Companies will experience software
ending and/or invalid and/or incorrect results from any such software in the
operation of their respective businesses based upon change in dates. The
software programming design and performance capabilities of such software to
ensure year 2000 compatibility includes, but is not limited to, date, data
century recognition, calculations which accommodate same century and
multi-century formulas and date values, and date data interface values which
reflect the correct century.
SECTION 2.22 KNOWLEDGE OF THE SELLERS. As used in this Agreement,
"knowledge of the Sellers" means the actual knowledge of Xxxxxxx X. Xxxxxxxx,
Xxxxxxx X. Xxxxxxx, or the following officers of (a) GIR, (b) the managing
partner of GIR, or (c) IAI: the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, or any Executive Vice President.
SECTION 2.23 TOTAL ASSETS. The total assets of Sellers and Xxxxxxxx are
not greater than $10 million as determined in accordance with 16 C.F.R.
Section 801.11.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Except as disclosed in a document referring specifically to this Agreement
or in a document, exhibit, or appendix filed with the Securities and Exchange
Commission ("SEC") which has been filed on or before the date hereof
(collectively referred to herein as the "Purchasers Disclosure Schedule") which
has been delivered to Shareholder on or before the date hereof, each Purchaser
represents and warrants to the Sellers (it being agreed that the disclosure on
the Purchasers Disclosure Schedule of the existence of any document or fact or
circumstance or situation relating to any representations, warranties, covenants
or agreements in any section of this Agreement shall be automatically deemed to
be disclosure of such document or fact or circumstance or situation for purposes
of all other representations, warranties, covenants and agreements in this
Agreement):
SECTION 3.1 CORPORATE EXISTENCE AND POWER. Each Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation. Each Purchaser has all corporate powers
and all material Governmental Authorizations required to carry on its business
as now conducted, except such Governmental Authoriza-
17
tions the failure of which to have obtained would not have a Material Adverse
Effect on Purchasers.
SECTION 3.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by each Purchaser of this Agreement, and the consummation by
Purchaser of the transactions contemplated hereby and thereby are within the
corporate powers of each Purchaser and have been duly authorized by all
necessary corporate action. This Agreement constitutes, or upon execution
will constitute, valid and binding agreements of each Purchaser enforceable in
each case in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity.
SECTION 3.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by each Purchaser of this Agreement, require no action by or in
respect of, or filing with, any governmental body, agency, official or authority
other than:
(a) compliance with the applicable requirements of the HSR Act;
(b) compliance with any applicable requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations
promulgated thereunder;
(c) such other filings or registrations with, or authorizations,
consents or approvals of, governmental bodies, agencies, officials or
authorities, the failure of which to make or obtain (i) would not reasonably be
expected to have a Material Adverse Effect on Purchasers or (ii) would not
materially adversely affect the ability of the Sellers or Purchasers to
consummate the transactions contemplated hereby and operate their businesses as
heretofore operated.
SECTION 3.4 NON-CONTRAVENTION. The execution, delivery and performance
by each Purchaser of this Agreement and the consummation by each Purchaser of
the transactions contemplated hereby and thereby do not and will not:
(a) contravene or conflict with the Certificate of Incorporation or
Bylaws of each Purchaser;
(b) assuming compliance with the matters referred to in Section 3.3,
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to each Purchaser;
(c) conflict with or result in a breach or violation of, or constitute a
default under, or result in a contractual right to cause the termination or
cancellation of or loss of a material benefit under, or right to accelerate, any
material agreement, contract or other instrument binding upon Purchasers or any
other Subsidiary of Purchasers or any material license, franchise, permit or
other similar authorization held by Purchasers or any Subsidiary of Purchasers;
or
(d) result in the creation or imposition of any Lien on any material
asset of Purchasers;
18
except, with respect to clauses (b), (c) and (d) above, for contraventions,
defaults, losses, Liens and other matters referred to in such clauses that in
the aggregate would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on each Purchaser.
SECTION 3.5 BROKER'S FEES. Neither Purchasers, nor anyone acting on the
behalf or at the request thereof has any liability to any broker, finder,
investment banker or agent, or has agreed to pay any brokerage fees, finder's
fees or commissions, or to reimburse any expenses of any broker, finder,
investment banker or agent in connection with the transactions contemplated by
this Agreement.
SECTION 3.6 KNOWLEDGE OF PURCHASERS. As used in this Agreement,
"knowledge of Purchasers" means the actual knowledge of the Chief Executive
Officer, Chief Operating Officer, President, Chief Financial Officer, or any
Executive Vice President of Purchasers.
ARTICLE IV
COVENANTS OF THE SELLERS
SECTION 4.1 CONDUCT OF THE COMPANIES. From the date of the execution of
this Agreement until Closing, the Sellers shall cause the Companies to conduct
their businesses in all material respects in the ordinary course. Without
limiting the generality of the foregoing, from the date hereof until the Closing
or a termination of this Agreement, and except as contemplated by this
Agreement, each of the Sellers shall cause each of the Companies to:
(a) not adopt or propose any change in its Articles or Certificate of
Incorporation or Bylaws or partnership agreement;
(b) not enter into or amend any employment agreements (oral or written)
or increase the compensation payable or to become payable by it to any of its
officers, directors, or consultants over the amount payable as of September 30,
1997, or increase the compensation payable to any other employees (other than
(i) increases in the ordinary course of business which are not in the aggregate
material, or (ii) pursuant to plans disclosed in Seller Disclosure Schedule, or
(iii) payment to Xxxxxxxx of a salary from January 1, 1998 to Closing of a pro
rated portion of an annual salary of $375,000), or adopt or amend any employee
benefit plan or arrangement (oral or written), or (iv) adopt or amend any
employee benefit plan or arrangement (oral or written), except that the
Companies agree to terminate the Amended and Restated Guarantee Insurance
Resources 401(k) Profit Sharing Plan ("GIR Plan") by appropriate action of such
Boards of Directors or other proper entities prior to the Closing Date (although
the parties understand that liquidation of the GIR Plan and a determination
letter filing with the IRS will occur after the Closing Date);
(c) not issue any IAI Securities or GIR Securities other than such IAI
securities issued to Xxxxxxx as compensation for prior services rendered to the
Companies;
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(d) not terminate any existing directors' or officers' or similar
liability insurance and not modify or reduce the coverage thereunder;
(e) not pay any dividend or make any other distribution to holders of
its capital stock or partnership interests in excess of Taxes on 1998 Earnings
up to the Closing as provided in Section 2.11(e) hereof and distributions of
earnings (through dividends or partnership distributions) by the Companies for
periods prior to 1998, nor redeem or otherwise acquire any IAI Securities or
GIR Securities;
(f) not, directly or indirectly, dispose of or acquire any material
properties or assets except in the ordinary course of business;
(g) not incur any additional indebtedness for borrowed money except
pursuant to existing arrangements which have been disclosed to Purchasers prior
to the date hereof;
(h) not (i) change accounting methods except as necessitated by changes
which such Company is required to make in order to prepare its federal, state
and local tax returns; (ii) amend or terminate any contract, agreement or
license to which it is a party (except pursuant to arrangements previously
disclosed in writing to Purchasers or disclosed in the Seller Disclosure
Schedule) except those amended or terminated in the ordinary course of business,
consistent with past practices, or involving changes which are not materially
adverse in amount or effect to such Company individually or taken as a whole;
(iii) lend any amount to any person or entity, other than advances for travel
and expenses which are incurred in the ordinary course of business consistent
with past practices, and which are not material in amount to such Company taken
as a whole, which travel and expenses shall be documented by receipts for the
claimed amounts; (iv) enter into any guarantee or suretyship for any obligation
except for the endorsements of checks and other negotiable instruments in
ordinary course of business, consistent with past practice; (v) waive or release
any material right or claim; (vi) issue or sell any shares of its capital stock
of any class or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities, stock appreciation
rights or other commitments to issue shares of capital stock, or take any action
other than this transaction to accelerate the vesting of any outstanding option
or other security (except pursuant to existing arrangements disclosed in writing
to Purchasers before the date of this agreement); (vii) merge, consolidate or
reorganize with or acquire any entity; (viii) agree to any audit assessment by
any tax authority or file any federal or state income or franchise tax return
unless copies of such returns have been delivered to Purchasers for its review
prior to such agreement or filing; and (ix) terminate the employment of any key
executive employee;
(i) not take any action or engage in any activity which would result in
IAI losing its S corporation status or GIR losing its partnership status for
federal income tax purposes;
(j) not take any action or make any distribution which would cause the
combined GIR partners' capital accounts and IAI Shareholders' equity, determined
in accordance with generally accepted accounting principles, after distribution,
to partners and shareholders as allowed by this Agreement, and exclusive of any
capitalized non-compete or other employment-related compensation, or other
capitalized costs related to payments made pursuant to items (i) to (iii)
20
set forth in Section 1.5(b), to be less than $750,000 plus 1998 earnings net
of tax distributions as provided for in Section 4.1(e), $500,000 of which is
to be in cash, cash equivalents or accounts receivable for management fees
which will become cash within ten (10) days of the Closing, excluding the cash
or cash equivalents necessary to pay any liabilities for the items (i) to
(iii) set forth in Section 1.5(b) (whether occurring on or after December 31,
1997), provided, however, that if such amounts as set forth herein are
satisfied, the Company may distribute three automobiles, certain art work and
other mutually agreed to cash or cash equivalents;
(k) not pay for any personal or personal travel expenses of Xxxxxxxx
after January 1, 1998; and
(l) not, directly or indirectly, agree or commit to do any of the
foregoing.
SECTION 4.2 ACCESS TO FINANCIAL AND OPERATIONAL INFORMATION. The Sellers
will give Purchasers, its counsel, financial advisors, auditors and other
authorized representatives reasonable access during normal business hours to the
offices, properties, books and records of the Companies, will furnish to
Purchasers, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data as such persons may reasonably
request and will instruct its employees, counsel and financial advisors to
cooperate with Purchasers in its investigation of the businesses of the
Companies and in the planning for the combination of the businesses of the
Companies and Purchasers following the consummation of the transactions
contemplated by this Agreement; PROVIDED that no investigation pursuant to this
Section shall affect any representation or warranty given hereunder. In
addition, following the public announcement of this Agreement or the
transactions contemplated hereby, the Sellers will cooperate in arranging joint
meetings among representatives of the Companies and Purchasers and persons with
whom they maintain business relationships.
SECTION 4.3 OTHER OFFERS.
(a) The Sellers will not, and will not permit either of the Companies
to, directly or indirectly, (i) take any action to solicit, initiate or discuss
any Acquisition Proposal (as hereinafter defined), or (ii) engage in
negotiations with, or disclose any nonpublic information relating to, either of
the Companies or afford access to the properties, books or records of either of
the Companies to, any person or entity that may be considering making, or has
made, an Acquisition Proposal. To the extent that any of the Sellers or either
of the Companies or any of their respective officers, directors, employees or
other agents are currently involved in any discussions with respect to any
Acquisition Proposal or contemplated or proposed Acquisition Proposal, Sellers
shall terminate, and shall cause, where applicable, the Companies and their
respective officers, directors, employees or other agents to terminate, such
discussions immediately. The term "Acquisition Proposal" as used herein means
any offer or proposal for, or any indication of interest in, a merger or other
business combination involving either of the Companies or the acquisition of any
equity interest in, or a substantial portion of the assets of, either of the
Companies other than the transactions contemplated by this Agreement.
SECTION 4.4 MAINTENANCE OF BUSINESS. The Sellers will use reasonable
best efforts to cause each of the Companies to carry on its business, keep
available the services of its officers
21
and employees and preserve its relationships with those of its customers,
agents, suppliers, licensors and others having business relationships with it
that are material to its business in substantially the same manner as it has
prior to the date hereof. If any of the Sellers becomes aware of a material
deterioration or facts which are likely to result in a material deterioration
in the relationship with any customers, supplier, licensor or others having
business relationships with it, such Seller will promptly in writing bring
such information to the attention of the Purchasers.
SECTION 4.5 COMPLIANCE WITH OBLIGATIONS. The Sellers shall use
reasonable best efforts to cause each of the Companies to comply in all material
respects with (i) all applicable federal, state, local and foreign laws, rules
and regulations, (ii) all material agreements and obligations, including its
respective charter and bylaws, by which it, its properties or its assets may be
bound, and (iii) all decrees, orders, writs, injunctions, judgments, statutes,
rules and regulations applicable to either of the Companies and its respective
properties or assets.
SECTION 4.6 NOTICES OF CERTAIN EVENTS. Any Seller shall, upon obtaining
knowledge of any of the following, promptly notify Purchasers of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with this Agreement,
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with this Agreement, and
(c) any actions, suits, claims, investigations or other judicial
proceedings commenced or threatened against either of the Companies which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant hereto or which relate to the consummation of transactions
contemplated by this Agreement.
SECTION 4.7 NECESSARY CONSENTS. After the Closing Date, each of the
Sellers shall use reasonable best efforts to obtain such written consents and
take such other actions as may be necessary or appropriate to allow Purchasers
to hold and carry on the acquired businesses after the Closing.
SECTION 4.8 REGULATORY APPROVAL. Each of the Sellers will, and will
cause each of the Companies to, where required pursuant to the rules or
regulations of any regulatory agency, execute and file, or join in the execution
and filing, with any application or other document that may be necessary in
order to obtain any Governmental Authorization which may be reasonably required,
or which Purchasers may reasonably request, in connection with the consummation
of the transaction provided for in this Agreement. Each of the Sellers will,
and will cause each of the Companies to, use reasonable best efforts to obtain
or assist Purchasers in obtaining all such Governmental Authorizations.
SECTION 4.9 SATISFACTION OF CONDITIONS PRECEDENT. Each of the Sellers
shall use all reasonable efforts to cause the transactions provided for in this
Agreement to be consummated, and, without limiting the generality of the
foregoing to obtain all consents and authorizations of
22
third parties and to make all filings with, and give all notices to, third
parties that may be necessary or reasonably required on its part in order to
effect the transactions provided for herein.
ARTICLE V
COVENANTS OF PURCHASERS
SECTION 5.1 CONDUCT OF PURCHASERS. From the date hereof until the
Closing or a termination of this Agreement, Purchasers shall in all material
respects conduct its business in the ordinary course, PROVIDED, HOWEVER, THAT
nothing in this Agreement shall be construed to prohibit or otherwise restrain
Purchasers in any manner from acquiring other businesses or substantially all of
the assets thereof.
ARTICLE VI
COVENANTS OF PURCHASERS AND SELLERS
SECTION 6.1 ADVICE OF CHANGES. Each Party will promptly advise the
others in writing (i) of any event known to it, him or her or any of its
executive officers occurring subsequent to the date of this Agreement that in
its reasonable judgment renders any representation or warranty of such Party
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue, inaccurate or misleading in any material respect and
(ii) of any Material Adverse Change in the business condition of the Party or
(in the case of either Shareholder) of either of the Companies.
SECTION 6.2 REGULATORY APPROVALS. The Parties shall execute and file,
or join in the execution and filing of, any application or other document
that may be necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign, which may be
required or reasonably requested by Purchasers in connection with the
consummation of the transactions contemplated by this Agreement, including
filings under the HSR Act, if determined to be applicable by counsel for
Purchasers. Each Party shall use its reasonable best efforts to obtain all such
authorizations, approvals and consents, and the costs therefor shall be paid by
Purchasers.
SECTION 6.3 CERTAIN FILINGS. The Parties shall cooperate with one
another:
(a) in determining whether any action by or in respect of, or filing
with, any governmental body, agency or official, or authority is required, or
any actions, consents, approvals or waivers are required to be obtained from
Parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement; and
(b) in seeking any such actions, consents, approvals or waivers or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
23
SECTION 6.4 COMMUNICATIONS. None of the Sellers or the Companies shall
make any disclosure to the public or to any person or entity, other than their
officers, employees, or advisors who need to know such information in connection
with the negotiation and consummation of the transactions contemplated by this
Agreement, of the negotiation, execution, terms, or subject matter of this
Agreement without the prior written consent of Purchasers. Unless required by
law, prior to consummation, Purchasers shall not make any further public
announcement in connection with the negotiation and consummation of the
transactions contemplated by this Agreement, without the prior consent of
Xxxxxxxx, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, Sellers and Purchasers shall have the right to
disclose the transaction contemplated by this Agreement to the insurers,
reinsurers, brokers, agents and third-party administrators that work with GIR
and IAI, and Purchasers shall have the right to disclose the transaction
contemplated by this Agreement to financial analysts, lenders, regulating
agencies, and its shareholders.
SECTION 6.5 SATISFACTION OF CONDITIONS PRECEDENT. Each of the Parties
will use its reasonable best efforts to satisfy or cause to be satisfied all the
conditions precedent that are applicable to each of them, and to cause the
transactions contemplated by this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all material consents and
authorizations of third parties and to make filings with, and give all notices
to, third parties that may be necessary or reasonably required on its part in
order to effect the transactions contemplated hereby.
SECTION 6.6 TAX COOPERATION. The Parties shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any sales, use, transfer, value added, stock
transfer or stamp taxes, any transfer, recording, registration or other fees,
and any similar taxes or fees which become payable in connection with the
transactions contemplated by this Agreement. The Parties shall also cooperate
in the preparation of income and franchise tax returns for 1998, including the
preparation of short-year returns for the portion of 1998 preceding the Closing.
Sellers agree that prior or subsequent to the Closing, they shall take all
actions required and necessary in order to make an effective Section 338(h)(10)
election under the Code with respect to purchase of the IAI Common Stock, if
requested by Purchasers. The Sellers agree to cause GIR, upon request by
Purchasers at or following the Closing and as permitted by the Code, to make an
election under Section 754 of the Code to adjust the basis of property of GIR.
SECTION 6.7 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, each Party, and each of the Companies, will maintain in
confidence, and cause its directors, officers, employees, agents, and advisors
to maintain in confidence, and not use to the detriment of another Party, any
written or oral or other information obtained in confidence from another Party
or either of the Companies in connection with this Agreement or the transactions
contemplated hereby unless (1) such information is already known to such party
or to others not bound by a duty of confidentiality, (2) such information
becomes publicly available through no fault of such Party, (3) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the transaction
contemplated hereby, or (4) the furnishing or use of such information is
required by or necessary or appropriate in connection with legal proceedings.
Upon a termination of this Agreement, each
24
Party will return or destroy as much of such written information as may be
reasonably requested. Whether or not the Closing takes place, Sellers and
each of the Companies waive any cause of action, right or claim arising out of
the access of Purchasers or its representatives to any trade secrets or other
confidential information of either of the Companies except for the intentional
competitive misuse by Purchasers of such trade secrets or confidential
information.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1 CONDITIONS TO OBLIGATIONS OF PURCHASERS. The obligations of
Purchasers hereunder are subject to the fulfillment or satisfaction, on and as
of the Closing Date, of each of the following conditions (any one or more of
which may be waived by Purchasers, but only in a writing signed by Purchasers):
(a) The representations and warranties contained in Article II remain
true and accurate in all material respects on and as of the Closing Date with
the same force and effect as if they had been made on the Closing Date (except
to the extent a representation or warranty speaks specifically as of an earlier
date and except for changes contemplated by this Agreement) and Sellers shall
have provided Purchasers with a certificate, dated as of the Closing Date, to
such effect.
(b) Sellers shall have performed and complied in all material respects
with all of their covenants contained herein required to be performed on or
before the Closing Date, and Purchasers shall have received a certificate to
such effect signed by each of the Sellers.
(c) Except as set forth in the Seller Disclosure Schedule, there shall
have been no Material Adverse Change in either of the Companies since
December 31, 1997.
(d) All written consents, assignments, waivers or authorizations, other
than Governmental Authorizations, that are required as a result of the
transaction contemplated by this Agreement for the continuation in full force
and effect of any Material Agreements shall have been obtained.
(e) Purchasers shall have received an opinion of counsel to Sellers and
the Companies in form and substance satisfactory to Purchasers.
(f) All underwriting agreements of either of the Companies in force on
the date hereof shall be in force on the Closing Date, except for such
agreements which have been replaced with agreements of similar like and kind.
(g) The Companies shall have received and delivered to Purchasers the
special purpose opinion of Coopers & Xxxxxxx, LLP on the combined financial
statements of GIR and IAI and the related supplemental schedules for the years
ended December 31, 1997 and 1996.
25
(h) Sellers shall have arranged for Purchasers' review of the Coopers &
Xxxxxxx, LLP audit workpapers for IAI and GIR for each of fiscal year 1997 and
the three prior fiscal years for GIR.
(i) Until the Closing, IAI shall continue to qualify as an S corporation
and GIR shall continue to constitute a partnership for federal income tax
purposes.
(j) Sellers shall have transferred all the IAI Common Stock and
Partnership Assets to Purchasers, free and clear of all Liens and encumbrances
other than the permitted encumbrances, with transfer taxes, if any, paid by
Sellers. No claim shall have been filed, made or threatened by any person or
entity asserting that he, she or it is entitled to any part of the Purchase
Price paid for the IAI Common Stock or any of the Partnership Assets.
(k) Xxxxxxxx, Xxxxxxx and J. Xxxxxx Xxxxxx, Xxxxxx Xxxxxxx, Xxxxxxxx
Xxxxxxx, Xxxx Xxxxxx-Xxxx and Xxxx X. Xxxxxxxxxx (collectively, the "Employees")
and such other key employees of the Companies as Purchasers shall require shall
each have executed and delivered to Purchasers a Non-Competition Agreement in
form and substance reasonably satisfactory to Purchasers, and all employment or
consulting agreements of either of the Companies other than those described on
the Sellers' Disclosure Schedule shall have been terminated without any payment
by or further obligation of either of the Companies.
(l) Shareholders shall have furnished Purchasers with evidence of such
consents as Shareholders shall know, or Purchasers shall determine, to be
required to enable Purchasers to continue to enjoy the benefit of any lease,
license, permit, contract or other agreement or instrument to or of which either
of the Companies is a party or beneficiary and which can, by its terms (with
consent) and consistent with applicable law, be so enjoyed after the transfer of
the IAI Common Stock and Partnership Assets to Purchasers. If there is in
existence any material lease, governmental license, permit or contract that by
its terms or applicable law, expires, terminates or is otherwise rendered
invalid upon the transfer of the IAI Common Stock or the Partnership Assets to
Purchasers, and such lease, license, permit, or contract is required in order
for the business of either of the Companies to continue to be conducted
following the transfer of the IAI Common Stock and Partnership Assets in the
same manner as conducted previously, Purchasers shall have obtained, or been
furnished by Shareholders an equivalent of, that lease, license, permit, or
contract effective as of and after the Closing Date.
(m) Purchasers shall have received resignations of all persons who are
officers or directors, as applicable, of IAI and GIR immediately prior to the
Closing.
(n) Purchasers shall have received general releases in favor of each of
the Companies and Purchasers executed by each of the Sellers and any such other
employees, officers or directors of the Companies as Purchasers may designate in
writing at the time this Agreement is executed. Those releases will not relate
to rights or obligations arising under this Agreement.
(o) Purchasers shall have received possession of all corporate,
accounting, business and tax records of each of the Companies.
26
(p) The form and substance of all actions, proceedings, instruments and
documents required to consummate the transactions contemplated by this Agreement
shall have been satisfactory in all reasonable respects to Purchasers and
Purchasers' counsel.
(q) The Shareholders shall have paid to Xxxxxxxxxxx Partners,
Inc./PaineWebber Incorporated ("NP/PW") from funds other than the Purchase Price
all amounts claimed by NP/PW to be due to NP/PW in connection with the
transactions contemplated by this Agreement and shall have delivered to
Purchasers a release executed by NP/PW to that effect satisfactory to
Purchasers.
(r) Purchasers shall have received an Investment Agreement from Xxxxxxx.
(s) Purchasers shall have received an agreement from Xxxxxxxx whereby
Xxxxxxxx agrees that if at any time during the first twelve months after the
Closing Date, Xxxxxxx is no longer working for Merger Sub whether or not Xxxxxxx
has voluntarily or involuntarily been terminated, and whether or not such
termination is with or without cause, then and in such event Xxxxxxxx shall
agree for a period of twelve months subsequent to the date of Xxxxxxx'x
termination to provide to Merger Sub up to 500 hours of time, as provided in a
Consulting Agreement between Purchasers and Xxxxxxxx. Xxxxxxxx shall receive no
compensation for providing such time but shall have expenses reimbursed as set
forth in such agreement.
(t) Xxxxxxxx shall have provided the amount set forth on Schedule 7.1(t)
to those persons set forth on such Schedule.
SECTION 7.2 CONDITIONS TO OBLIGATIONS OF SELLERS. The Sellers'
obligations hereunder are subject to the fulfillment or satisfaction, on and as
of the Closing Date, of each of the following conditions (any one or more of
which may be waived, but only in a writing signed by such Party):
(a) The representations and warranties of Purchasers set forth herein
shall be true and accurate in all material respects on and as of the Closing
Date with the same force and effect as if they had been made on the Closing Date
(except to the extent a representation or warranty speaks specifically as of an
earlier date and except for changes contemplated by this Agreement) and
Purchasers shall have provided the Sellers with a certificate executed by the
President and the Chief Financial Officer of Purchasers, dated as of the Closing
Date, to such effect. For the purposes of determining the accuracy of the
representations and warranties of Purchasers, any change or effect in the
business of Purchasers that results in substantial part as a consequence of the
public announcement or pendency of the transactions contemplated hereby shall
not be deemed a Material Adverse Change or Material Adverse Effect or other
breach of representation or warranty with respect to Purchasers.
(b) Purchasers shall have performed and complied with all of its
covenants contained herein in all material respects on or before the Closing
Date, and the Sellers shall have received a certificate to such effect signed by
Purchasers' President and Chief Financial Officer.
27
(c) The Shareholders shall have received from Xxxxxxxx Xxxxxxxx & Xxxxxx
P.C., counsel to Purchasers, an opinion in form and substance satisfactory to
the Shareholders.
(d) The form and substance of all actions, proceedings, instruments and
documents required to consummate the transactions contemplated by this Agreement
shall have been satisfactory in all reasonable respects to the Shareholders and
their counsel.
SECTION 7.3 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of the Parties hereunder are subject to the fulfillment, on and as
of the Closing Date, of each of the following conditions (any one or more of
which may be waived by such Parties, but only in a writing signed by such
Parties):
(a) No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, promulgated or enforced (and not
repealed, superseded or otherwise made inapplicable) by any court or
governmental authority which prohibits the consummation of the transaction
contemplated by this Agreement (each Party agreeing to use its reasonable best
efforts to have any such order, decree or injunction lifted).
(b) There shall have been obtained any and all Governmental
Authorizations, permits, approvals and consents of securities or "blue sky"
commissions of any jurisdiction and of any other governmental body or agency,
that may reasonably be deemed necessary so that the consummation of the
transaction contemplated by this Agreement will be in compliance with applicable
laws, the failure to comply with which would have a Material Adverse Effect on
Purchasers, IAI, or GIR or would be reasonably likely to subject any of
Purchasers, IAI, GIR or any of their respective directors or officers to
penalties or criminal liability.
ARTICLE VIII
TERMINATION OF AGREEMENT
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) By the mutual consent of the Shareholders and Purchasers.
(b) By Purchasers or by the Shareholders if there has been a material
breach by the other of any representation or warranty contained in this
Agreement, which in either case cannot be, or has not been, cured within 15 days
after written notice of such breach is given to the Party committing such
breach, provided that the right to effect such cure shall not extend beyond the
date set forth in subparagraph (c) below.
(c) By Purchasers or by the Shareholders if all conditions of Closing
required by Article VII hereof have not been met or waived by March 10, 1998
(the "Termination Date"), PROVIDED, HOWEVER, that neither Purchasers nor the
Shareholders, shall be entitled to terminate this
28
Agreement pursuant to this subparagraph (c) if such Party is in willful and
material violation of any of its representations, warranties or covenants in
this Agreement.
(d) If any governmental authority shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable.
SECTION 8.2 EFFECT OF TERMINATION. Upon termination of this Agreement
pursuant to this Article VIII, this Agreement shall be void and of no effect and
shall result in no obligation of or liability to any Party or their respective
directors, officers, employees, agents or shareholders, unless such termination
was the result of an intentional breach of any representation, warranty or
covenant in this Agreement, in which case the Party who breached the
representation, warranty or covenant shall be liable to the other Parties for
damages, and all costs and expenses incurred in connection with the preparation,
negotiation, execution and performance of this Agreement.
ARTICLE IX
CLOSING MATTERS
SECTION 9.1 THE CLOSING. Subject to termination of this Agreement as
provided in Article VIII above, the closing of the transactions provided for
herein (the "Closing") will take place at the offices of Xxxxxxxx Xxxxxxxx &
Xxxxxx P.C., 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 at 9:00 a.m.,
Houston Time on March 6, 1998, or, if all conditions to Closing have not been
satisfied or waived by such date, such other place, time and date as the
Shareholders and Purchasers may mutually select (the "Closing Date"). Such
Closing may, with the consent of all Parties, take place by delivery and
exchange of documents by facsimile transmission with originals to follow by
overnight mail service courier.
ARTICLE X
INDEMNIFICATION AND
REMEDIES, CONTINUING COVENANTS
SECTION 10.1 SELLERS' AGREEMENT TO INDEMNIFY.
(a) Subject to the limitations set forth in this Article X, from and
after the Closing Date until the Final Date, each Seller will indemnify and hold
harmless Purchasers and its respective officers, directors, agents and
employees, and each person, if any, who controls or may control Purchasers
within the meaning of the Securities Act (hereinafter referred to individually
as a "Company Indemnified Person" and collectively as "Company Indemnified
Persons") from and against any and all claims, demands, actions, causes of
action, losses, costs, damages, liabilities and expenses including, without
limitation, reasonable legal fees, (net of: (i) any
29
recoveries under insurance policies; (ii) recoveries from third parties; and
(iii) tax savings known to Company Indemnified Persons at the time of making
of claims hereunder) made against or incurred by Company Indemnified Persons
(hereafter in this Section 10.1 referred to as "Purchasers Damages"), arising
out of any misrepresentation or breach of or default under any of the
representations, warranties, covenants or agreements given or made in this
Agreement or any certificate or exhibit delivered by or on behalf of any
Seller pursuant hereto. The indemnification provided for in this Section 10.1
will not apply unless and until the aggregate Purchasers Damages for which
one or more Company Indemnified Persons seeks indemnification exceeds $75,000
in the aggregate, in which event the indemnification provided for will
include all Purchasers Damages (a "Franchise Deductible"). The aggregate
liability of the Sellers for indemnification under this Agreement shall not
exceed the Purchase Price. The Company Indemnified Persons are only entitled
to be reimbursed for the actual indemnified expenditures or damages incurred
by them for the above described losses. Such Company Indemnified Persons are
not entitled to consequential, special, or other speculative or punitive
categories of damages.
(b) Sellers further agree to indemnify and hold harmless Purchasers and
all Company Indemnified Persons, without regard to the Franchise Deductible for
any damages, liabilities, fines, costs, losses or other expense incurred in
connection with: (i) the termination, if any, of employment of Xxxxxx Xxxxxx or
Xxx X'Xxxxxxx at any time before or within twelve months of the Closing; or (ii)
a breach of the representation set forth in Section 2.11 (Taxes); (iii) Sellers,
GIR, or the Companies failing to have obtained or maintained any license or
other Governmental Authorization, and (iv) any costs not set forth on Sellers'
Financial Statements for failing to provide software that satisfies in full the
representations set forth in Section 2.21, whether or not a limitation is set
forth on the Disclosure Schedule; and for liability in excess of the Franchise
Deductible for all actions, suits, proceedings, claims or investigations
covered by Section 2.10 whether or not set forth on a Disclosure Schedule.
SECTION 10.2 PURCHASERS AGREEMENT TO INDEMNIFY. Subject to the
limitations set forth in this Article X, from and after the Closing Date until
the Final Date Purchasers will indemnify and hold harmless IAI, the Selling
Corporations, and the Shareholders and their respective officers, shareholders,
directors, administrators, heirs, personal representatives, successors and
assigns (hereinafter in this Section 10.2 referred to individually as a
"Purchasers Indemnified Person" and collectively as "Purchasers Indemnified
Persons") from and against any and all claims, demands, actions, causes of
action, losses, costs, damages, liabilities and expenses including, without
limitation, reasonable legal fees (net of: (i) any recoveries under insurance
policies; (ii) recoveries from third parties; and (iii) tax savings known to
Purchasers Indemnified Persons at the time of making a claim hereunder)
(hereafter in this Section 10.2 referred to as "Seller Damages") arising out of
any misrepresentation or breach of or default under any of the
representations, warranties, covenants and agreements given or made by
Purchasers in this Agreement or any certificate or exhibit delivered by or on
behalf of Purchasers pursuant hereto. The indemnification provided for in
this Section 10.2 will not apply unless and until the aggregate Seller
Damages for which one or more Purchasers Indemnified Person seeks
indemnification exceeds $75,000 in the aggregate, in which event the
indemnification provided for will include all Seller Damages (a franchise
deductible). The aggregate liability of Purchasers for indemnification under
this Agreement shall not exceed the Purchase Price. The Purchasers
30
Indemnified Persons are only entitled to be reimbursed for the actual
indemnified expenditures or damages incurred by them for the above described
losses. Such Purchasers Indemnified Persons are not entitled to
consequential, special, or other speculative or punitive categories of
damages.
SECTION 10.3 SURVIVAL OF REPRESENTATIONS. The right to enforce the breach
of each representation, warranty, covenant and agreement set forth in this
Agreement will remain operative and in full force and effect for the maximum
period permitted by applicable law after the Closing except that the right to
enforce a breach of any representation or warranty in Section 2.12 (Employee
Benefit Plans, ERISA) shall not expire (the last date of such applicable period
being herein called the "Final Date"), regardless of any investigation made by
or on behalf of the Parties to this Agreement, upon which Final Date such
representations, warranties, covenants and agreements shall expire and be of no
further force and effect. Any litigation or other action of any kind arising
out of or attributable to a breach of any representation, warranty, covenant or
agreement contained in this Agreement, must be commenced prior to the Final
Date. If not so commenced prior to the Final Date, any claims or
indemnifications brought under this Article X will thereafter conclusively be
deemed to be waived regardless of when such claim is or should have been
discovered. Any such claim for indemnification brought under this Article X,
brought before the Final Date, shall survive until a final resolution of such
claim is effective. As set forth herein, no investigation by any Party hereto
into the business, operations and conditions of the other Party shall diminish
in any way the effect of any representation or warranty made by any such Party
in this Agreement or shall relieve any Party of any of its obligations under
this Agreement.
SECTION 10.4 PROCEDURE FOR INDEMNIFICATION; THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified person under this Article X
of notice of a claim against it for which such person claims indemnification
under this Article X (a "Claim"), the indemnified person will give prompt
written notice to the indemnifying Party of the Claim, but the failure to
promptly notify the indemnifying Party will not relieve the indemnifying Party
of any liability that it may have to any indemnified person, except to the
extent that the indemnifying Party demonstrates that the defense of such action
is prejudice by the indemnified person's failure to give such prompt notice.
Such notice shall contain a description in reasonable detail of facts upon which
such Claim is based and, to the extent known, the amount thereof.
(b) If any Claim referred to in this Article X is made by a third party
against either Purchasers or Sellers, Purchasers shall in all circumstances
assume the defense of the Claim. Sellers shall have the right to participate in
the defense of any Claim that might result in an indemnified loss under
Section 10.1 of this Agreement, but in such event Sellers shall pay for their
nonlegal costs and expenses incurred in connection with such participation.
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ARTICLE XI
ALTERNATIVE DISPUTE RESOLUTION
SECTION 11.1 NEGOTIATION. In the event that any controversy or claim
between or among the Parties (including, without limitation, any disputed claim
for indemnification) should arise out of the interpretation of or performance
under this Agreement for which no method of resolution is specifically provided
elsewhere in this Agreement, the Parties will refrain from initiating any legal
or other proceeding until all of the procedures set forth in this Article XI
have been exhausted. The parties to the dispute, including officers of each
such party who are authorized to negotiate and enter into a settlement on
behalf of such party (the "Authorized Officers"), will meet at least once and
will attempt to resolve the matter. Any party to the controversy may, by
delivery to each other party to the controversy of a written notice of the
controversy, request the other(s) to meet within fifteen (15) days of
delivery of such notice, at a mutually agreed time and place in Houston,
Texas.
SECTION 11.2 ARBITRATION AND MEDIATION. If the matter has not been
resolved by negotiation within sixty (60) days of delivery of the notice
described in Section 11.1, the Parties shall finally settle such dispute by
binding arbitration conducted expeditiously by a sole arbitrator in
accordance with the then-current Commercial Arbitration Rules (including the
Supplementary Procedures for Large, Complex Disputes) of the American
Arbitration Association (the "AAA"). The place of arbitration shall be
Houston, Texas, unless some other location is mutually selected. At any time
during the pendency of the arbitration proceeding, any party to the
controversy may make a request for non-binding mediation in accordance with
the then-current Commercial Mediation Rules of the AAA. Upon the making or
receipt of a request for mediation, the parties to the controversy, including
the Authorized Officers, shall endeavor to settle the dispute by holding at
least one mediation session no later than thirty (30) days following delivery
of the mediation request.
SECTION 11.3 EXTENSION OF DEADLINES. All deadlines specified in this
Article XI may be extended by mutual agreement of the parties to the
controversy.
SECTION 11.4 OTHER RELIEF; STATUTES OF LIMITATIONS. Except as otherwise
allowed by this Agreement, the procedures specified in this Article XI shall be
the sole and exclusive procedures for the resolution of disputes between or
among the Parties arising out of or relating to this Agreement; provided,
however, that a Party may seek a preliminary injunction or other preliminary
judicial relief for the purpose of maintaining the status quo if in its judgment
such action is necessary to avoid irreparable damage. Despite such action, the
Parties will continue to participate in good faith in the procedures specified
in this Article XI. All applicable statutes of limitation shall be tolled while
the procedures specified in this Article XI are pending. The Parties will take
such action, if any, required to effectuate such tolling. Upon the entry of an
award in any arbitration proceeding, the recipient may file an action in any
court of competent jurisdiction for enforcement of the award.
SECTION 11.5 COSTS. The cost of the mediation and arbitration will be
shared equally by the parties to the controversy or claim.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.1 FURTHER ASSURANCES. Each Party agrees to cooperate fully
with the other Parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other Party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
SECTION 12.2 FEES AND EXPENSES. Until otherwise agreed by the Parties,
each Party shall bear its own fees and expenses, including counsel fees and fees
of brokers and investment bankers contracted by such Party, in connection with
the transaction contemplated hereby.
SECTION 12.3 NOTICES. Whenever any Party hereto desires or is required to
give any notice, demand, or request with respect to this Agreement, each such
communication shall be in writing and shall be effective only if it is delivered
by personal service or mailed, United States registered or certified mail,
postage prepaid, or sent by prepaid overnight courier with delivery confirmation
or confirmed telecopier (except that notices concerning Claims or
indemnifications shall not be given by telecopier), addressed as follows:
If to Purchasers or Merger Sub:
HCC Insurance Holdings, Inc.
00000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Executive Vice President
With a copy to (which shall not constitute notice):
Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
If to any of the Sellers:
Xxxxxxx X. Xxxxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
33
With a copy to (which shall not constitute notice):
Xxxxxx & Xxxxxxx, LLP
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Such communications shall be effective when they are received by the
addressee thereof. Any Party may change its address for such communications
by giving notice thereof to other Parties in conformity with this Section.
SECTION 12.4 GOVERNING LAW. The internal laws of the State of Texas
(without regard to its choice of law principles) will govern the validity of
this Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the Parties hereto. Any dispute arising
hereunder shall lie exclusively in the state courts of the State of Texas.
SECTION 12.5 BINDING UPON SUCCESSORS AND ASSIGNS, ASSIGNMENT. This
Agreement and the provisions hereof shall be binding upon each of the Parties,
their permitted successors and assigns. This Agreement may not be assigned by
any Party without the prior consent of the other.
SECTION 12.6 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall continue in full force and effect and in
no way be affected, impaired or invalidated.
SECTION 12.7 ENTIRE AGREEMENT. This Agreement and any other agreement and
instrument referenced herein constitute the entire understanding and agreement
of the Parties with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between Parties with respect hereto.
SECTION 12.8 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by all Parties hereto in the case of
an amendment or the Party waiving compliance in the case of a waiver. The
waiver by any Party of any breach hereof or default in the performance hereof
shall not be deemed to constitute a waiver of any other default or any
succeeding breach or default, unless such waiver so expressly states.
SECTION 12.9 NO WAIVER. The failure of any Party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
Party thereafter to enforce such provisions.
34
SECTION 12.10 CONSTRUCTION OF AGREEMENT. A reference to an Article,
Section or an Exhibit shall mean an Article of, a Section in, or Exhibit to,
this Agreement unless otherwise explicitly set forth. The titles and headings
herein are for reference purposes only and shall not in any manner limit the
construction of this Agreement which shall be considered as a whole. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation."
SECTION 12.11 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original as against any Party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all the Parties reflected hereon as signatories.
SECTION 12.12 APPOINTMENT OF REPRESENTATIVE. Subject to the successorship
provisions of this Section 12.12, Xxxxxxx X. Xxxxxxxx (the "Representative") is
hereby irrevocably appointed as the attorney-in-fact and representative of the
interests of each Seller for all purposes of this Agreement, and notice is
hereby given thereof to Purchasers, and, without independent verification,
Purchasers may rely upon Representative's undertakings in such capacity. The
Representative shall have full and irrevocable authority on behalf of the
Sellers, and shall promptly and completely exercise such authority in a timely
fashion to:
(a) participate in, represent and bind each of the Sellers in all
respects with respect to any arbitration or legal proceeding relating to this
Agreement, including without limitation, all matters relating to any
indemnification under Article X, taking any action under Article X including,
without limitation, the defense and settlement of any matter, and the
calculation thereof for every purpose thereunder, consent to jurisdiction, enter
into any settlement, and consent to entry of judgment, each with respect to any
or all of the Sellers;
(b) receive, accept and give notices and other communications relating
to this Agreement;
(c) take any action that the Representative deems necessary or desirable
in order to fully effectuate the transactions contemplated by this Agreement;
(d) execute and deliver any instrument or document that the
Representative deems necessary or desirable in the exercise of her authority
under this Section 12.12; and
(e) waive the fulfillment of any condition or conditions to the Closing.
After the Closing, the holders of a majority of the IAI Common Stock may,
at any time and by written action delivered to Purchasers, remove the
Representative or any successor thereto, but such removal shall be effective
only upon the replacement of such Representative or successor by a new
Representative designated, by written notice delivered by Purchasers, by the
holders of a majority of the IAI Common Stock, PROVIDED, HOWEVER, that any such
notice shall be effective only upon actual receipt by Purchasers. If any
Representative shall have died, become incapacitated or unable to serve, the
holders of a majority of the IAI Common Stock
35
shall promptly designate by written notice delivered to Purchasers, a
replacement Representative. Any costs and expenses incurred by the
Representative in connection with actions taken pursuant to or permitted by
this Section 12.12 will be borne by the Shareholders.
The foregoing authorization is granted and conferred in consideration for
the various agreements and covenants of Purchasers contained herein. In
consideration of the foregoing, and subject to the successorship provisions of
this Section 12.12, this authorization granted to the Representative shall be
irrevocable and shall not be terminated by any act of any of the holders of the
IAI Common Stock or by operation of law, whether by death or incompetence of the
Sellers or by the occurrence of any other event except the termination of this
Agreement. If after the execution hereof any Seller shall die or become
incompetent or dissolve, the Representative is nevertheless authorized and
directed to exercise the authority granted in this Section 12.12 as if such
death or incompetence or dissolution had not occurred and regardless of
notice thereof. The Representative shall have no liability to any Seller for
any act or omission or obligation hereunder, provided that such action or
omission is taken by the Representative in good faith and without willful
misconduct.
SECTION 12.13 TRIUMPH REINSURANCE COMPANY. Xxxxxxxx currently owns all of
the outstanding shares of capital stock of Triumph Reinsurance Company, an
Arizona life reinsurance company ("Triumph"), which Purchasers will not be
acquiring hereunder. Xxxxxxxx shall retain ownership and contract of Triumph
following the Closing. However, Purchasers agree, subject to the management and
direction of Xxxxxxxx, to administer the business and operations of Triumph and
Xxxxxxxx will reimburse Purchasers for all out-of-pocket costs related thereto
(with the exclusion of the direct cost of Purchasers' employees). In addition
to the amounts otherwise held in escrow pursuant to this Agreement, Xxxxxxxx
agrees to provide whatever funds are necessary to solvently manage the run-off
of the Triumph Reinsurance Company business.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
effective as of the date first above written.
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"PURCHASERS":
HCC INSURANCE HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxx,
Title: Executive Vice President
MERGER SUB INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxx,
Title: Executive Vice President
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
SIGNATURE PAGE OF AGREEMENT
"SHAREHOLDERS":
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx
"SELLING CORPORATIONS":
GUARANTEE INSURANCE RESOURCES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx, President
XXXXXXXX CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx, President
SIGNATURE PAGE OF AGREEMENT
"GIR"
GUARANTEE INSURANCE RESOURCES,
a Georgia General Partnership
By: Guarantee Insurance Resources, Inc.,
a General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxxx,
President
By: Xxxxxxxx Corporation,
a General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxxx,
President
FAMILY LLLP
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------
General Partner
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SIGNATURE PAGE OF AGREEMENT
