STOCK PURCHASE AGREEMENT BY AND AMONG AON CORPORATION, AON SERVICES GROUP, INC. AND MERCURY CASUALTY COMPANY Dated as of October 10, 2008
EXECUTION
COPY
BY
AND AMONG
AON
CORPORATION,
AON
SERVICES GROUP, INC.
AND
MERCURY
CASUALTY COMPANY
Dated
as of October 10, 2008
LA\1903445.15
EXECUTION
COPY
TABLE
OF CONTENTS
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Page
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ARTICLE
I DEFINITIONS
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1
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Section
1.1
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Definitions
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1
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Section
1.2
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Interpretation
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13
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ARTICLE
II PURCHASE AND SALE
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14
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Section
2.1
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Purchase
and Sale of the Shares
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14
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ARTICLE
III PURCHASE PRICE AND WITHHOLDING
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14
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Section
3.1
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Purchase
Price
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14
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Section
3.2
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Working
Capital Adjustment
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14
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Section
3.3
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The
Post-Closing Adjustment Payments
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15
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Section
3.4
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Earn-out
Payment
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16
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Section
3.5
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Withholding
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21
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ARTICLE
IV CLOSING
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21
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Section
4.1
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Closing
Date
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21
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Section
4.2
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Payment
on the Closing Date
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21
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Section
4.3
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Buyer’s
Additional Closing Date Deliveries
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21
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Section
4.4
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Seller’s
Closing Date Deliveries
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22
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ARTICLE
V REPRESENTATIONS AND WARRANTIES OF SELLER
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23
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Section
5.1
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Organization
of the Company and the Subsidiaries
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23
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Section
5.2
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Capital
Structure of the Company and the Subsidiaries
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23
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Section
5.3
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Subsidiaries
and Investments
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23
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Section
5.4
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Authority
of Seller; Conflicts
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23
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Section
5.5
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Financial
Statements
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25
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Section
5.6
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Absence
of Certain Changes
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25
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Section
5.7
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Taxes
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27
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Section
5.8
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Governmental
Permits and Laws
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29
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Section
5.9
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Real
Property
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30
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Section
5.10
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Personal
Property
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30
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Section
5.11
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Intellectual
Property and Information Technology
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31
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Section
5.12
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No
Violation, Litigation or Regulatory Action
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32
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Section
5.13
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Contracts
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33
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Section
5.14
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Status
of Contracts
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34
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Section
5.15
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ERISA
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35
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Section
5.16
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Environmental
Matters
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37
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Section
5.17
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Employee
Relations and Agreements
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38
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Section
5.18
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No
Undisclosed Liabilities
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40
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Section
5.19
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Sufficiency
of Assets
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40
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Section
5.20
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Insurance
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40
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Section
5.21
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No
Brokers
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40
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Section
5.22
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Books
and Records
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41
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Section
5.23
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Affiliate
Transactions
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41
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Section
5.24
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Competing
Transactions
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41
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Section
5.25
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Client
Accounts
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41
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Section
5.26
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Insurer/Producer
Relationships; Insurer Appointments; Broker Authority
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41
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Section
5.27
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Certain
Compensation Arrangements
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42
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Section
5.28
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Fiduciary
Funds
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42
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Section
5.29
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Transferred
Assets
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43
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Section
5.30
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Internal
Controls
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43
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ARTICLE
VI REPRESENTATIONS AND WARRANTIES OF BUYER
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43
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Section
6.1
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Organization
of Buyer
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43
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Section
6.2
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Authority
of Buyer; Conflicts
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43
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Section
6.3
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No
Violation, Litigation or Regulatory Action
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44
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Section
6.4
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Investment
Intent
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44
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Section
6.5
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Financial
Ability
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45
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Section
6.6
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No
Brokers
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45
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ARTICLE
VII ACTION PRIOR TO THE CLOSING DATE
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45
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Section
7.1
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Access
to Information
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45
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Section
7.2
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Notification
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45
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Section
7.3
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Consents
of Third Parties; Governmental Approvals
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46
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Section
7.4
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Transferred
Assets
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47
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Section
7.5
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Operations
Prior to the Closing Date
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48
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Section
7.6
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Termination
of Certain Intercompany Indebtedness
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50
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ARTICLE
VIII ADDITIONAL AGREEMENTS
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50
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Section
8.1
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Tax
Matters
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50
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Section
8.2
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Employee
Matters
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55
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Section
8.3
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Securities
Law Legends
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60
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Section
8.4
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Insurance;
Risk of Loss
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60
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Section
8.5
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Release
of Guaranties
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61
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Section
8.6
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Nonsolicitation
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61
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Section
8.7
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Noncompetition
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61
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Section
8.8
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Use
of Names
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63
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Section
8.9
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Compliance
with Xxxxxxxx-Xxxxx Act
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63
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Section
8.10
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Specified
Lawsuit
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64
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Section
8.11
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Dividends
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64
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Section
8.12
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Post
Closing Cooperation
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64
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ARTICLE
IX CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
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64
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Section
9.1
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No
Misrepresentation or Breach of Covenants and Warranties
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64
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Section
9.2
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HSR
Act
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65
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Section
9.3
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Governmental
Permits and Approvals
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65
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Section
9.4
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Court
Orders and Laws
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65
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Section
9.5
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Receipt
of Consents
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65
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Section
9.6
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No
Material Adverse Effect
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65
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Section
9.7
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Resignations
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65
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Section
9.8
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Net
Working Capital
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65
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Section
9.9
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Transferred
Assets
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65
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Section
9.10
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Ancillary
Agreements and Deliveries
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65
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Section
9.11
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Xxxxxxx
Settlement
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65
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ARTICLE
X CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
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66
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Section
10.1
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No
Misrepresentation or Breach of Covenants and Warranties
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66
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Section
10.2
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HSR
Act
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66
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Section
10.3
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Governmental
Permits and Approvals
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66
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Section
10.4
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Court
Orders and Laws
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66
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Section
10.5
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Ancillary
Agreements and Deliveries
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67
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ARTICLE
XI INDEMNIFICATION
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67
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Section
11.1
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Indemnification
by Seller
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67
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Section
11.2
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Indemnification
by Buyer
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69
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Section
11.3
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Notice
of Claims
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70
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Section
11.4
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Third
Person Claims
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70
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Section
11.5
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Limitations
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72
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Section
11.6
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Determination
of Amount
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72
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Section
11.7
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Mitigation
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72
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Section
11.8
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Taxes
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72
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Section
11.9
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Over-accrual
of Contingent Liabilities on the Closing Net Working Capital
Statement
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72
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ARTICLE
XII TERMINATION
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72
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Section
12.1
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Termination
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72
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Section
12.2
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Notice
of Termination
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73
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Section
12.3
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Effect
of Termination
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73
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Section
12.4
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Specific
Performance
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73
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ARTICLE
XIII GENERAL PROVISIONS
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74
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Section
13.1
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Survival
of Representations and Warranties
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74
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Section
13.2
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Confidential
Nature of Information
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74
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Section
13.3
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No
Public Announcement
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74
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Section
13.4
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Notices
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74
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Section
13.5
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Successors
and Assigns
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75
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Section
13.6
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Access
to Records after Closing
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76
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Section
13.7
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Entire
Agreement; Amendments
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76
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Section
13.8
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Interpretation
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76
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Section
13.9
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Waivers
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77
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Section
13.10
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Expenses
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77
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Section
13.11
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Partial
Invalidity
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77
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Section
13.12
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Execution
in Counterparts
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77
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Section
13.13
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Further
Assurances
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77
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Section
13.14
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Disclaimer
of Projections; Warranties
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77
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Section
13.15
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Governing
Law; Submission to Jurisdiction
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78
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Section
13.16
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No
Third Party Beneficiaries
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78
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LA\1903445.15||
EXECUTION
COPY
List
of Exhibits
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A
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El
Segundo Sublease Term Sheet
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B
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Form
of Software License
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C
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Form
of Transition Services Agreement
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List
of Schedules
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1.1(a)
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Excluded
Personnel
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1.1(b)
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Transferred
Assets
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1.1(c)
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APRM
Insurer/Producer Contracts
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1.1(d)
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APRM
Transactors
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1.1(e)
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Net
Working Capital
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5.4
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No
Conflicts
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5.5
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Pro
Forma Financial Statements
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5.6
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Absence
of Certain Changes
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5.7
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Taxes
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5.8
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Governmental
Permits
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5.9
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Real
Property
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5.10
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Personal
Property
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5.11(a)
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Intellectual
Property
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5.11(b)
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Material
Software
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5.11(c)
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Right,
Title and Interest in Copyrights, Patent Rights, Trademarks and
Software
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5.11(d)
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Registrations
of Copyrights, Patent Rights, Trademarks and Software
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5.11(e)
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Infringement
of Copyrights, Patent Rights and Trademarks
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5.11(f)
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Challenge
to Copyrights, Patent Rights and Trademarks
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5.12
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Violation,
Litigation or Regulatory Action of the Company
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5.13
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Contracts
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5.14(a)
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Status
of Contracts
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5.15(a)
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Company
Plans
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5.15(c)
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Title
IV Company Plans
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5.15(f)
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Change
in Control Under Company Plans
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5.15(g)
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Retiree
Health/COBRA
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5.16
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Environmental
Matters
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5.17
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Employee
Relations and Agreements
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5.18
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No
Undisclosed Liabilities
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5.19
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Sufficiency
of Assets
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5.20
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Insurance
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5.23
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Affiliate
Transactions
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5.25
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Client
Accounts
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5.26(a)
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Insurer/Producer
Relationships; Insurer Appointments; Broker Authority
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5.27
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Certain
Compensation Arrangements
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5.28(a)
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Premium
Trust Accounts
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5.28(b)
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Funding
and Maintenance of Premium Trust Accounts
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6.3
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Violation,
Litigation or Regulatory Action of Buyer
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7.5
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Operations
Prior to Closing Date
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7.5(b)(iv)
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Change
in Compensation
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8.2(a)
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Additional
Personnel
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8.2(o)
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Acceleration
of Equity Awards
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9.3
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Governmental
Permits and Approval for Seller
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9.5
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Change
of Control Consents
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10.3
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Governmental
Permits and Approvals for Buyer
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LA\1903445.15||
EXECUTION
COPY
STOCK PURCHASE AGREEMENT,
dated as of October 10, 2008, by and among Aon Corporation, a Delaware
corporation (“Aon”), Aon Services
Group, Inc., a Delaware corporation (“Seller”), and Mercury
Casualty Company, a California corporation (“Buyer”).
PRELIMINARY
STATEMENT:
WHEREAS, Seller is the owner
of all of the issued and outstanding shares of capital stock of AIS Management
Corporation, a California corporation (the “Company”);
WHEREAS, the Company is the
owner of all of the issued and outstanding shares of capital stock of Auto
Insurance Specialists, Incorporated, a California corporation (“AIS”);
and
WHEREAS, Seller desires to
sell to Buyer, and Buyer desires to purchase from Seller, all of the issued and
outstanding capital stock of the Company (the “Shares”) and certain
identified assets of Seller and its Affiliates (as defined below) relating to
the Business (as defined below), all on the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in
consideration of the mutual covenants and agreements hereinafter set forth, it
is hereby agreed between Buyer and Seller as follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Definitions
. In this
Agreement, the following terms have the meanings specified or referred to in
this Section
1.1 and shall be equally applicable to both the singular and plural
forms.
“Acceleration
Achievement Percentage” has the meaning specified in
Section
3.4(c).
“Acceleration
Date” means the
date on which an Acceleration Event occurs.
“Acceleration
Event”
means:
(i) the
occurrence of any Change In Control of the Company; provided, that where
there is a change in control of the Buyer’s insurance brokerage business as a
whole, such change in control shall not constitute an “Acceleration Event” under
this clause (i) if the purchaser of such business agrees in writing with Seller
to honor all of the obligations of Buyer under Section
3.4(c) hereunder;
(ii) the
Company and its Subsidiaries cease to operate as an insurance brokerage or
agency for individual consumers of automobile insurance policies;
or
(iii) the
Company and the Subsidiaries cease to transact insurance in the State of
California.
“Acceleration
Payment” has the
meaning specified in Section
3.4(c)(ii).
“Acceleration
Payment Target”
means $16,500,000 plus the excess of the First Payment Target over the First
Earn-out Payment. For the avoidance of doubt, during the First
Earn-out Period or in the event that the First Earn-out Payment equals zero, the
“Acceleration Payment Target” shall equal $33,000,000.
“Acceleration
Period” means:
(i) prior to the first anniversary of the Closing Date, the period of time
beginning on the day after the Closing Date and ending on the Acceleration Date,
or (ii) on or after the first anniversary of the Closing Date, the twelve month
period ending on the Acceleration Date.
“Acceleration
Period Premium Flow” means the Premium Flow for
the twelve month period ending on the Acceleration Date; provided, that if the
Acceleration Period is less than 365 days, then Premium Flow shall be calculated
for the period of time beginning on the day after the Closing Date and ending on
the Acceleration Date and then annualized over a 365 day period.
“Achievement
Percentage” has
the meaning specified in Section
3.4(b)(ii).
“Acquired
Business” has the meaning
specified in Section
8.7(c).
“Administrative
Authority” means
any foreign, federal, state, local or other governmental authority, regulatory
body, court, tribunal, administrative agency, commission, stock exchange or
listing authority, or other instrumentality thereof, including any applicable
department of insurance.
“ADSP” has the meaning specified in
Section
8.1(e)(iii).
“Affiliate” means, with respect to any
Person, any other Person which, at the time of determination, directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with such Person.
“Affiliate
Employees” means
those employees of an Affiliate of Seller that are listed on Schedule
8.2(a).
“Agreement” means this Stock Purchase
Agreement.
“AIS” has the meaning specified in
the second recital of this Agreement.
“Allocation
Schedule” has the
meaning specified in Section
8.1(e)(iii).
“Ancillary
Agreements” means
the Buyer Ancillary Agreements and the Seller Ancillary Agreements.
“Aon” has the meaning specified in
the first paragraph of this Agreement.
“Aon
Change of Control” means a transaction pursuant
to which Control of Aon (including by ownership of more than 50% of the voting
equity securities of Aon) or ownership of more than 50% of the consolidated
assets of Aon is acquired, directly or indirectly, by a Person not already an
Affiliate of Aon as of the Closing Date through (x) a tender or exchange offer,
merger, consolidation, share exchange or other business combination, (y) a sale
of securities, recapitalization, liquidation or dissolution or (z) a sale of
assets.
“Aon’s DC
Plans” has the
meaning specified in Section
8.2(c)(ii).
“APRM” means Aon Private Risk
Management Insurance Agency, Inc., an Illinois corporation.
“APRM
Insurer/Producer Contracts” means those certain contracts identified on
Schedule 1.1(c)
between APRM and an insurance company or producer for which APRM produces or
subproduces business, which contracts will be assigned to ASPN on or prior to
the Closing Date.
“APRM
Transactors” means those certain employees of APRM identified on Schedule 1.1(d) who
transact insurance on behalf of APRM and will become employees of ASPN on or
before the Closing Date.
“APRM
Transferred Policies” means all insurance policies transacted, sold,
placed or renewed Clients by APRM (solely in respect of the Business) including
through the APRM Transactors.
“APRM
Transferred Clients”
means those certain Persons for whom or which APRM or the APRM
Transactors transacts, sells, places or renews an APRM Transferred Policy and
which will be transferred to ASPN on or before the Closing Date.
“ASPN” means Agency Specialty
Product Network Insurance Services, Inc., an Illinois corporation, which
corporation’s name will be changed prior to the Closing Date to AIS PoliSeek
Insurance Services, Inc. or AIS PoliSeek Insurance Solutions, Inc.
“Baseline
Objection Notice”
has the meaning specified in Section
3.4(a).
“Baseline
Premium Flow”
means Premium Flow determined in accordance with Section 3.4 for the
twelve month period ending on the last day of the month immediately preceding
the month in which the Closing Date occurs; provided, however, that if the
Closing falls on January 2, 2009, Baseline Premium Flow shall mean Premium Flow
determined in accordance with Section 3.4 for the
twelve month period ending on December 31, 2008; provided further that if the
Closing Date falls on the last day of a calendar month, Baseline Premium Flow
shall mean Premium Flow determined in accordance with Section 3.4 for the
twelve month period ending on the Closing Date.
“Books and
Records” means
all files, documents, instruments, papers, books and records relating to the
Business, including financial statements and related work papers, correspondence
and letters from accountants, budgets, pricing guidelines, ledgers, journals,
deeds, title policies, manuals, contracts, Governmental Permits, customer lists,
computer files and programs, operating data and plans, environmental studies,
analyses, reports and plans, including any of the foregoing stored on electronic
media.
“Broker
Fees” means
broker, service, loss control, claims administration, advisory or placement fees
or similar forms of compensation.
“Business”
means the business of insurance brokerage or agency for individual consumers of
automobile, motorcycle, property, flood, recreational vehicle, watercraft, life,
health, roadside assistance, wedding, Mexico auto and umbrella insurance
policies in the United States as heretofore conducted by Aon, Seller, the
Company, the Subsidiaries and their respective Affiliates, including APRM with
respect to the APRM Transferred Policies (excluding any operating business that
is not reflected in the revenues of the Company and its Subsidiaries in the Pro
Forma Financial Statements).
“Business
Agreements” has
the meaning specified in Section
5.14.
“business
day” means any
day other than a Saturday, a Sunday or a day on which banks in New York City are
authorized or obligated by law or executive order to close.
“Buyer” has the meaning specified in
the first paragraph of this Agreement.
“Buyer
Ancillary Agreements” means all agreements,
instruments and documents being or to be executed and delivered by Buyer or an
Affiliate of Buyer pursuant to this Agreement or in connection
herewith.
“Buyer
Group Member”
means (i) Buyer and its Affiliates, (ii) their respective directors, officers or
employees and (iii) the successors and assigns of the foregoing.
“Buyer
Flexible Spending Account Plan” has the meaning specified in
Section
8.2(j).
“Buyer
Plans” has the
meaning specified in Section
8.2(g).
“Buyer’s
DC Plans” has the
meaning specified in Section
8.2(c)(ii).
“Change In
Control of the Company” means (1) any
transaction or other event pursuant to which Buyer and its Affiliates cease to
own beneficially (within the meaning of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended) a majority of the securities of the Company entitled to
vote generally in the election of directors, or otherwise cease to have the
right to elect a majority of the directors of the Company or (2) a sale,
exchange, transfer or other disposition of all or substantially all of the
assets or the business of the Company; provided, that where
there is a sale of all or substantially all of the capital stock of Mercury
General Corporation or Mercury Casualty Corporation (whether such acquisition is
effected by merger, consolidation, sale or transfer of the Company’s capital
stock or any similar transaction), such sale shall not be deemed to be a “Change
In Control of the Company” hereunder.
“Change of
Control Consents”
has the meaning specified in Section
4.4(e).
“Claim
Notice” has the
meaning specified in Section
11.3.
“Client” means any APRM Transferred
Client and any Person for whom or which Aon, Seller, the Company, AIS, APRM
(solely with respect to the Business) or the Transactors transacts, sells,
places or renews a Policy.
“Closing” means the closing of the
transfer of the Shares from Seller to Buyer in exchange for the Purchase
Price.
“Closing
Balance Sheet”
has the meaning specified in Section
3.2(b).
“Closing
Date” has the
meaning specified in Section
4.1.
“Closing
Net Working Capital” has the meaning specified in
Section
3.2(b).
“COBRA” has the meaning specified in
Section
5.15(g).
“Code” means the Internal Revenue
Code of 1986, as amended.
“Commission
Rights” means all
right, title and interest in and to (i) expiration rights or renewal rights with
respect to the Policies and (ii) any commission payments, contingent payments or
other compensation from insurance carriers or producers with respect to the
Policies.
“Company” has the meaning specified in
the first recital of this Agreement.
“Company
Employees” has
the meaning specified in Section
8.2(a).
“Company
Pension Plan” has
the meaning specified in Section
5.15(c)(i).
“Company
Plan” has the
meaning specified in Section
5.15(a).
“Competing
Transaction” has
the meaning specified in Section
5.24.
“Compound
Annual Growth Rate” has the meaning specified in
Section
3.4(b)(i) or Section 3.4(c)(i), as
applicable.
“Confidential
Information” has
the meaning specified in Section
13.2.
“Confidentiality
Agreement” means
that certain letter agreement dated January 31, 2008 between Buyer and
Aon.
“Contingent
Commissions” has
the meaning specified in Section
5.27(a).
“Control” means, as to any Person, the
ownership of more than 50% of the voting equity securities of such
Person.
“Copyrights” means United States and
foreign registered and unregistered copyrights and all rights under copyright,
and pending applications to register the same.
“Court
Order” means any
writ, judgment, injunction, order, award or decree of any Administrative
Authority (in each case whether preliminary or final), including of any foreign,
federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
“Damages” has the meaning specified in
Section
11.1(a).
“Deductible” has the meaning specified in
Section
11.1(a).
“Disputed
Earn-out Amount”
has the meaning specified in Section
3.4(e)(i).
“Earn-out
Objection Notice”
has the meaning specified in Section
3.4(e)(i).
“Earn-out
Payment” has the
meaning specified in Section
3.4(f).
“Earn-out
Payment Report”
has the meaning specified in Section
3.4(c).
“El
Segundo Sublease”
means a Sublease Agreement including the terms set forth in Exhibit A attached
hereto and otherwise in a form reasonably acceptable to Buyer and
Seller.
“Encumbrance” means any lien, claim,
charge, security interest, mortgage, assessment, deed of trust, pledge,
easement, levy, charge or other encumbrance of any kind, right of first or last
negotiation, offer or refusal, any conditional sale or other title retention
agreement, defect in title or other restrictions of a similar kind.
“Environmental
Law” means any
Law, regulation, ordinance, order, determination, Governmental Permit, or any
other provision, directive or policy having the force or effect of law, any
contractual obligation, and any common law pertaining to the protection of the
environment, health or safety of persons (to the extent related to exposure to
Hazardous Materials), worker health and safety, pollution or Hazardous Material
management, including those Laws relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Materials.
“Environmental
Matter” means any
matter relating to (i) the Release or threatened Release of a Hazardous Material
or (ii) violations of, or Liabilities arising under, applicable Environmental
Laws.
“ERISA” has the meaning specified in
Section
5.15(a).
“ERISA
Affiliate” means
any trade or business (whether or not incorporated) other than the Company that,
together with the Company, is (or at any relevant time was) required to be
treated as a single employer pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated under those Sections.
“Estimated
Closing Balance Sheet” has the meaning specified in
Section
3.2(a).
“Estimated
Net Working Capital” has the meaning specified in
Section
3.2(a).
“Excluded
Employees” means those employees, if any, of the Company or the
Subsidiaries that Buyer identifies as such by written notice to Seller not less
than five (5) business days prior to the Closing Date, and any employees of the
Company or the Subsidiaries on a leave of absence who are not entitled under the
written policies of the Company and the Subsidiaries or applicable law to
reinstatement.
“Excluded
Personnel” means
the individuals listed on Schedule
1.1(a).
“Excluded
Taxes” has the
meaning specified in Section
8.1(a)(i).
“Exempt
Business Activities” means any business activities that are conducted by
Aon or any Affiliate of Aon as of the date hereof (other than any business
activities that are conducted exclusively by the Company or the Subsidiaries or
exclusively with the Transferred Assets as of the date hereof) and any business
activities incidental thereto; provided, that, if
Aon or such Affiliate does not, as of the date hereof, conduct radio and
television marketing of automobile insurance policies in the United States, then
any such activities conducted by such entity after the date of this Agreement
shall not be Exempt Business Activities with respect to such
entity.
“Final
Allocation” has
the meaning specified in Section
8.1(e)(iii).
“Final
Earn-out Resolution Date” has the meaning specified in
Section
3.4(e)(ii).
“Final Net
Working Capital”
has the meaning specified in Section
3.3(c).
“Final
Resolution Date”
has the meaning specified in Section
3.2(d).
“First
Earn-out Payment”
means the Earn-out Payment payable pursuant to Section 3.4(b)(iii),
if any.
“First
Earn-out Period”
means the twelve month period ending on the last day of the month immediately
following the month in which the first anniversary of the Closing Date occurs;
provided, however that if the Closing Date falls on January 1, 2009, the First
Earn-Out Period shall mean the twelve month period ending on December 31, 2009;
provided further, that if the Closing Date falls on the last day of a calendar
month, the First Earn-out Period shall mean the twelve month period ending on
first anniversary of the Closing Date.
“First
Payment Target”
means $16,500,000.
“GAAP” means United States
generally accepted accounting principles, consistently applied throughout the
specified period.
“Governmental
Permits” has the
meaning specified in Section
5.8(b).
“Guaranties” has the meaning specified in
Section
8.5.
“Hazardous
Materials” means
any pollutant, chemical substance and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical, or chemical compound, or
hazardous substance, material or waste, whether solid, liquid or gas, that is
subject to regulation, control or remediation under any Environmental Laws,
including any quantity of asbestos in any form, urea formaldehyde, PCBs, radon
gas, crude oil or any fraction thereof, all forms of natural gas, petroleum
products or by-products or derivatives.
“HSR
Act” means the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder.
“Indebtedness” means all obligations (i)
for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the Ordinary Course of Business),
and (iv) in the nature of guarantees of the obligations described in clauses (i)
through (iii) above of any other Person.
“Indemnified
Party” has the
meaning specified in Section
11.3.
“Indemnitor” has the meaning specified in
Section
11.3.
“Independent
Accountants” has
the meaning specified in Section
3.2(d).
“Information
Technology” means hardware, Software and/or other technology constituting
all or part of any digital or electronic information system or network, together
with all processes, know-how, knowledge, services, Trade Secrets and
confidential information related thereto.
“Initial
Cash Payment” has
the meaning specified in Section
3.1.
“Intellectual
Property” means
Copyrights, Patent Rights, Trademarks, Trade Secrets and Websites.
“Interests” has the meaning specified in
Section
8.1(f).
“Interim
Pro Forma Balance Sheet” has the meaning specified in
Section
5.5.
“Knowledge
of Seller” means,
as to a particular matter, the actual knowledge of the following
persons: Xxxxx Xxxxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxx, Xxxx Xxxxx, Xxxx
Xxxxx, Rumayne Levee, Xxx Xxxx, Xxxx Xxxxx, Xxx Xxxxxxx, Xxxx Xxxxxx, Xxxxxx
Xxxxxxx, Xxxxxxx Xxxxxxx (with respect to tax matters), Xxxx Xxxxx, Xxxxxxx
Xxxxxxxxx (with respect to information technology matters) and Xxxx Xxxxxx (with
respect to information technology matters).
“Laws” means all laws, statutes,
rules, regulations and ordinances having the effect of law of the United States
or any political subdivision thereof, or any Administrative Authority, or any
other laws or reported decisions of any court thereof.
“Leased
Real Property”
has the meaning specified in Section
5.9.
“Liabilities” means any liability,
Indebtedness, capital lease, binding obligation, commitment, expense, claim,
deficiency or guaranty of or by any Person of any type, whether accrued,
absolute, contingent, matured, unmatured or other.
“LLC” has the meaning specified in
Section
8.1(f).
“LLC
Transaction” has
the meaning specified in Section
8.1(f).
“Material
Adverse Effect”
means any effect or change that is materially adverse to the business, assets,
condition (financial or otherwise) or results of operations of the Company or
the Subsidiary, taken as a whole, or to the ability of Seller to consummate
timely the transactions contemplated hereby (regardless of whether Buyer has
knowledge of such effect or change on the date hereof); provided, however, that the
following shall not be considered in determining whether a Material Adverse
Effect has occurred: (i) general economic conditions affecting
the industry in which the Company or the Subsidiaries operate unless the Company
and the Subsidiaries, taken as a whole, are disproportionately affected thereby
relative to other participants in the industry, (ii) any change in Laws or GAAP,
(iii) the execution of this Agreement, the public announcement hereof or the
consummation of the transactions contemplated hereby (including compliance with
the terms of this Agreement), (iv) any action taken at the written request of
Buyer (including pursuant to any request under Section 8.1(f) that
is not otherwise required in connection with the transactions contemplated
hereby, and (v) changes caused by acts of terrorism or war (whether or not
declared) occurring after the date of this Agreement.
“Material
Software” has the
meaning specified in Section
5.11(b).
“Multiemployer
Plan” means a
“multiemployer plan,” as defined in Section 3(37) or 4001(a)(3) of
ERISA.
“Net
Working Capital”
means current assets minus current liabilities, excluding all intercompany
accounts and tax accounts. An example of the calculation of Net
Working Capital as of August 31, 2008 solely for illustrative purposes is set
forth on Schedule
1.1(e) attached hereto.
“Objection
Notice” has the
meaning specified in Section
3.2(c).
“Ordinary
Course of Business” means the ordinary course of
business of Aon, Seller and their Affiliates (in each case, solely with respect
to the Business), and the Company and AIS, as applicable, consistent with past
custom and practice.
“Patent
Rights” means
United States and foreign and multinational patents, patent applications,
continuations, continuations-in-part, divisions or reissues, renewals,
extensions, provisionals, continuations and re-examinations
thereof.
“PBGC” has the meaning specified in
Section
5.15(c)(ii).
“Per Claim
Deductible” has
the meaning specified in Section
11.1(a).
“Permitted
Encumbrances”
means (i) liens for Taxes and other governmental charges and assessments
which are not yet due and payable, (ii) liens of landlords and liens of
carriers, warehousemen, mechanics and materialmen and other like liens arising
in the Ordinary Course of Business for sums not yet due and payable, (iii)
Encumbrances identified on the Schedules to this Agreement, (iv) other
Encumbrances or imperfections on property that are not material in amount or do
not materially detract from the value of or materially impair the existing use
of the property affected by such Encumbrance or imperfection, (v) Encumbrances
imposed by the Securities Act of 1933 or any applicable state securities law,
and (vi) Encumbrances that are set forth on the Pro Forma 2007 Balance
Sheet.
“Person” means any individual,
corporation, general or limited partnership, limited liability company, joint
venture, association, union, joint-stock company, trust, unincorporated
organization or Administrative Authority.
“Policies” means all insurance policies
transacted, sold, placed or renewed by the Company, AIS or APRM in respect of
the Business including through the Transactors.
“Premium
Flow” means,
without duplication, all written premiums, net of cancellations, during the
applicable period from insurance policies placed in California by the Company or
any of its Subsidiaries with insurance carriers.
“Pro Forma
2007 Balance Sheet” has the meaning specified in
Section
5.5.
“Pro Forma
Financial Statements” has the meaning specified in
Section
5.5.
“Purchase
Price” has the
meaning specified in Section
3.1.
“Reimbursement
Accounts” has the
meaning specified Section
8.2.
“Release” means the release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration of a contaminant into the environment.
“Required
Appointments” has
the meaning specified in Section
5.26(a).
“Restricted
Business” shall mean the business of insurance brokerage or agency for
individual consumers of automobile and property insurance policies.
“Retained
Names and Marks”
has the meaning specified in Section
8.8(a).
“Second
Earn-out Payment”
means the Earn-out Payment payable pursuant to Section 3.4(b)(iv),
if any.
“Second
Earn-out Period”
means the twelve month period ending on the last day of the month immediately
following the month in which the second anniversary of the Closing Date occurs;
provided, however, that if the Closing Date falls on January 1, 2009, the Second
Earn-out Period shall mean the twelve month period ending on December 31, 2010;
provided further, that if the Closing Date falls on the last day of a calendar
month, the Second Earn-out Period shall mean the twelve month period ending on
second anniversary of the Closing Date.
“Second
Payment Target”
means $16,500,000 plus the excess of the First Payment Target over the First
Earn-out Payment.
“Section
338 Taxes” means
Taxes imposed by any Taxing jurisdiction in which or with respect to which a
Section 338(h)(10) Election is made or is deemed to be made in accordance with
Section 8.1(e),
to the extent such Taxes are imposed as a result of such Section 338(h)(10)
Election.
“Section
338(h)(10) Election” has the meaning specified in
Section
8.1(e)(i).
“Section
338(h)(10) Election Forms” has the meaning specified in
Section
8.1(e)(ii).
“Seller” has the meaning specified in
the first paragraph of this Agreement.
“Seller
Ancillary Agreements” means all agreements,
instruments and documents being or to be executed and delivered by Aon, Seller
or any of their respective Affiliates pursuant to this Agreement or in
connection herewith.
“Seller
Flexible Spending Account Plan” has the meaning specified in
Section
8.2(j).
“Seller
Group Member”
means (i) Seller and its Affiliates, (ii) the directors, officers or employees
of Seller and its Affiliates and (iii) the successors and assigns of the
foregoing.
“Shares” has the meaning specified in
the third recital of this Agreement.
“Software” means computer software
programs and related documentation and materials, whether in source code, object
code or human readable form; provided, however, that
Software does not include software that is available generally through retail
stores, distribution networks or is otherwise subject to “shrink-wrap” or
“click-through” license agreements, including any software pre-installed in the
ordinary course of business as a standard part of hardware purchased by the
Company or the Subsidiaries.
“Software
License” means
the license with respect to the WinBroker Software in the form attached hereto
as Exhibit
B.
“Specified
Lawsuit” means
the arbitration entitled Xxxxx Xxxxxx et al. v. Auto Insurance
Specialists - Bay Area, Inc. et al., (JAMS ref. no.: 1100048278) and the
lawsuit entitled United
Policyholders (Xxxxx Xxxxxx) et al. v. Auto Insurance Specialists - Bay Area,
Inc. et al, (Cal. Sup. Ct., San Francisco County, Case no.
CGC-03-424538).
“Straddle
Period” means any
taxable year or period beginning before and ending after the Closing
Date.
“Subsidiary” means AIS or ASPN and “Subsidiaries” means AIS and
ASPN.
“Tax” (and, with correlative
meaning, “Taxes”) means any federal, state,
local or foreign income, profits, gross receipts, property, sales, use, stamp,
premium, surplus line, license, excise, franchise, employment, payroll,
withholding, estimated, alternative or add-on minimum, ad valorem, value added,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any governmental authority.
“Tax
Contest” has the
meaning specified in Section
8.1(c)(i).
“Tax
Return” means any
return, report, declaration, or similar statement with respect to any Tax
(including any schedules or attachments thereto), including any information
return, claim for refund, amended return or declaration of estimated
Tax.
“Termination
Date” has the
meaning specified in Section
12.1(e).
“Trade
Secrets” means
confidential ideas, trade secrets, know-how, concepts, methods, processes,
formulae, reports, data, customer lists, customer information, mailing lists,
business plans, or other proprietary information that provides the owner with a
competitive advantage.
“Trademarks” means statutory and common
law United States federal, state and foreign trademarks, service marks, trade
names and pending applications to register the foregoing.
“Transactors” means the APRM Transactors
and any employee of the Company or the Subsidiaries who transacts insurance on
behalf of the Company or the Subsidiaries.
“Transferred
Assets” means the assets of Aon and its Affiliates specified on Schedule 1.1(b) and
the APRM Transferred Clients and APRM Transferred Policies, as well as the
Commission Rights with respect thereto.
“Transferred
Employees” has
the meaning specified in Section
8.2(a).
“Transition
Services Agreement” means the Transition
Services Agreement in the form attached hereto as Exhibit
C.
“Treasury
Regulations”
means the temporary and final regulations promulgated under the Code by the
United States Department of the Treasury.
“Undisclosed
and Retained Liabilities” means any Liabilities arising out of or
relating to the conduct of the operations of the Business or the ownership of
the assets of the Business prior to the Closing Date, other than (i) the amount
of any Liability set forth as a current liability on the face of the Closing
Balance Sheet (rather than any notes thereto) as finally determined on the Final
Resolution Date and accounted for in the calculation of Final Net Working
Capital, (ii) Liabilities set forth on Schedule 5.18; and
(iii) Liabilities to be paid or performed after the Closing Date under the
Business Agreements, except to the extent that any such Liabilities arise from
any breach, violation, default or nonperformance by Aon, Seller, the Company,
any Subsidiary or any of their respective Affiliates under the Business
Agreements that occurred prior to the Closing Date. For the avoidance
of doubt, other than as set forth in (i), (ii) or (iii) above, Undisclosed and
Retained Liabilities include:
(a) all
Liabilities, obligations and commitments of Aon, Seller, the Company, the
Subsidiaries or their respective Affiliates relating to or arising out of
ownership of any assets constituting the Business prior to the Closing
Date;
(b) all
Liabilities under or relating to any Environmental Law arising out of the
interests of Aon, Seller, the Company, the Subsidiaries and their respective
Affiliates or their predecessors in the ownership or operation of the Business
prior to the Closing Date, including those relating to (i) compliance with any
Environmental Law, (ii) the investigation, removal, cleanup or remediation of
any Hazardous Materials whether on-site or off-site, or (iii) any alleged
personal injury or property damage involving any Hazardous
Material;
(c) all
Liabilities of Aon, Seller, the Company, the Subsidiaries or their respective
Affiliates arising out of or related to any action, litigation, claim, order,
labor dispute, arbitral action, government audit, hearing, proceeding or
investigation which shall have been asserted prior to the Closing Date or the
basis of which shall have arisen prior to the Closing Date; and
(d) any Liability to or in respect of any employees or
former employees of Aon, Seller, the Company or any Subsidiary, including any
claim of an unfair labor practice or any
claim under any state unemployment compensation or worker’s compensation law
or regulation or under any federal or state employment discrimination law or
regulation, which has been asserted on or prior to the Closing Date or
is
based on acts or omissions which occurred on or prior to the Closing
Date.
“WARN” has the meaning specified in
Section
5.17(d).
“Websites” means all websites, web
addresses and uniform resource locators owned, operated or hosted by the Company
or any Subsidiary, together with all derivatives, including .net, .org, etc.,
for each of the foregoing that are owned or controlled by the Company or any
Subsidiary or that contain the name or any Trademark of the Company or any
Subsidiary or that are used primarily in connection with the
Business.
“Welfare
Plan” means any
welfare plan, as defined in Section 3(1) of ERISA, applied without regard to the
exceptions from coverage contained in Sections 4(b)(4) or 4(b)(5)
thereof.
Section
1.2 Interpretation
. For purposes of
this Agreement: (i) the words “include,” “includes” and “including”
shall be deemed to be followed by the words “without limitation;” (ii) the word
“or” is not exclusive; (iii) the words “herein”, “hereof”, “hereby”, “hereto”
and “hereunder” refer to this Agreement as a whole, including all Annexes,
Exhibits and Schedules attached to this Agreement; (iv) any rules of
construction relating to interpretation against the drafter of an agreement
shall not apply to this Agreement and are expressly waived by the parties
hereto; and (v) words including the singular or plural number also include the
plural or singular number, respectively. Unless the context otherwise
requires, references herein: (A) to Articles, Sections, Annexes,
Exhibits and Schedules mean the Articles and Sections of, and the Annexes,
Exhibits and Schedules attached to, this Agreement; (B) to an agreement,
instrument or other document means such agreement, instrument or other document
as amended, supplemented and modified from time to time to the extent permitted
by the provisions thereof and by this Agreement; and (C) to a statute means such
statute as amended from time to time and includes any successor legislation
thereto and any regulations promulgated thereunder. Titles to
Articles and headings of Sections are inserted for convenience of reference only
and shall not be deemed a part of or to affect the meaning or interpretation of
this Agreement. Unless expressly indicated to the contrary, all
dollar amounts are expressed in United States funds, and all amounts payable
hereunder shall be paid in United States funds.
ARTICLE
II
PURCHASE
AND SALE
Section
2.1 Purchase and Sale of the
Shares
. Upon the terms
and subject to the conditions of this Agreement, on the Closing Date, Seller
shall sell, transfer, assign, convey and deliver the Shares to Buyer, and Buyer
shall purchase and accept the Shares from Seller, for the consideration set
forth in Section
3.1 below.
ARTICLE
III
PURCHASE
PRICE AND WITHHOLDING
Section
3.1 Purchase
Price
. The purchase
price for the Shares shall be equal to the sum of $120,000,000.00 (One Hundred
Twenty Million Dollars) (the “Initial Cash
Payment”) and the Earn-out Payments, subject to adjustment as set forth
in Section 3.3
(the “Purchase
Price”) and any withholding pursuant to Section
3.5. The Purchase Price shall be paid pursuant to the terms of
this Article
III and Article
IV.
Section
3.2 Working Capital
Adjustment
.
(a) Less than
five (5) business days prior to the Closing Date, Seller shall in good faith
cause to be prepared an estimated combined balance sheet of the Company and the
Subsidiaries as of the Closing Date, in form and substance reasonably
satisfactory to Buyer (the “Estimated Closing Balance
Sheet”), which shall be prepared in accordance with GAAP applied on a
basis consistent with the Pro Forma 2007 Balance Sheet, and a calculation of the
amount of Net Working Capital which Seller estimates will exist as of the
Closing Date based on the Estimated Closing Balance Sheet (the “Estimated Net Working
Capital”). If the Estimated Net Working Capital exceeds
$6,500,000, in addition to the Initial Cash Payment, Buyer shall pay to Seller
at the Closing an amount equal to such excess. If the Estimated Net
Working Capital is less than $6,500,000, Buyer shall deduct from the amount of
the Initial Cash Payment paid at the Closing an amount equal to such
deficiency.
(b) As
promptly as practicable, but no later than one hundred twenty (120) days
following the last day of the month in which the Closing Date falls, Buyer will
cause to be prepared and delivered to Seller a combined balance sheet of the
Company and the Subsidiaries as of the Closing Date (the “Closing Balance
Sheet”) and certificate setting forth Buyer’s calculation of the Closing
Net Working Capital based on the Closing Balance Sheet. “Closing Net Working
Capital” means the Net Working Capital as of the Closing
Date. The Closing Balance Sheet will be prepared in accordance with
GAAP on a basis consistent with the Pro Forma 2007 Balance Sheet (provided, that in the
event of a conflict between GAAP and consistency, GAAP shall
control). Buyer will make available to Seller and its accountant all
records and work papers used in preparing the calculation of Closing Net Working
Capital.
(c) If Seller
disagrees with Buyer’s calculation of the Closing Net Working Capital delivered
pursuant to Section
3.2(b), Seller shall, within thirty (30) days after delivery of the
documents referred to in Section 3.2(b),
deliver a written notice (the “Objection Notice”) to
Buyer disagreeing with such calculation and setting forth Seller’s calculation
of such amount. Any such Objection Notice shall specify those items
or amounts as to which Seller disagrees, and Seller shall be deemed to have
agreed with all other items and amounts contained in Buyer’s calculation of the
Closing Net Working Capital delivered pursuant to Section
3.2(b). If Seller does not deliver an Objection Notice within
such thirty (30) day period, then the amount of the Closing Net Working Capital
shall be deemed to be finally determined as set forth on Buyer’s calculation
thereof.
(d) If an
Objection Notice is delivered pursuant to Section 3.2(c),
Seller and Buyer shall, during the thirty (30) days following such delivery, use
their reasonable best efforts to reach agreement on the disputed items or
amounts in order to determine, as may be required, the amount of the Closing Net
Working Capital. If, after such 30-day period, Seller and Buyer are
unable to reach such agreement, they shall promptly thereafter cause the
independent accountants acceptable to Buyer and Seller (the “Independent
Accountants”) to promptly review this Agreement and the disputed items or
amounts for the purpose of calculating the Closing Net Working
Capital. In making such calculation, such Independent Accountants
shall consider only those items or amounts in Buyer’s calculation of the Closing
Net Working Capital as to which Seller has disagreed and shall adhere to the
standards set forth above in Section 3.2(b) and
Section
3.2(c). The Independent Accountants shall not assign a value
to any item or amount in dispute greater than the greatest value for such item
or amount assigned by Buyer, on the one hand, or Seller, on the other hand, or
less than the smallest value for such item or amount assigned by Buyer, on the
one hand, or Seller, on the other hand. The Independent Accountants
shall act as experts and not as arbitrators, and shall resolve only such items
or amounts that are in dispute. The Independent Accountants shall
deliver to Seller and Buyer as promptly as practicable (but in any event within
thirty (30) days of its retention) a report setting forth such calculation (such
date, the “Final
Resolution Date”). Such report shall be final and binding upon
Seller and Buyer. The cost of such review and report shall be borne
(and paid) fifty percent (50%) by Seller and fifty percent (50%) by
Buyer.
Section
3.3 The Post-Closing Adjustment
Payments
.
(a) Buyer and
Seller agree that they will, and agree to cause their respective independent
accountants to, cooperate and assist in the preparation of the calculation of
the Closing Net Working Capital and in the conduct of the reviews referred to in
Section 3.2
including making available to the extent necessary books, written and electronic
records, work papers and personnel.
(b) Within
two (2) business days after the Final Resolution Date, either (i) Buyer
shall pay to Seller an amount equal to the excess, if any, of (A) the Final Net
Working Capital over (B) the Estimated Net Working Capital, or (ii) Seller shall
pay to Buyer an amount equal to the excess, if any, of (A) the Estimated Net
Working Capital over (B) the Final Net Working Capital. All such
payments by Buyer or Seller shall be made together with interest accruing at an
annual rate of five percent (5%) beginning on the Closing Date and ending on the
day immediately prior to the date of payment. Payments must be made
in immediately available funds by wire transfer of immediately available funds
to the bank account or accounts specified in writing by Seller or Buyer, as
applicable.
(c) For
purposes of this Agreement, “Final Net Working
Capital” means the Closing Net Working Capital as shown in Buyer’s
calculation delivered pursuant to Section 3.2(b), if no
Objection Notice with respect thereto is duly delivered pursuant to Section 3.2(c); or,
if an Objection Notice is delivered, as agreed by Buyer and Seller pursuant to
Section 3.2(d)
or in the absence of such agreement, as shown in the Independent Accountants’
calculation delivered pursuant to Section
3.2(d).
(d) Any
post-closing adjustment payments made under this Section 3.3 shall be
treated as adjustments to the Purchase Price for all Tax purposes.
Section
3.4 Earn-out
Payment
.
(a) Calculation of Baseline
Premium Flow. Within sixty (60) calendar days of the Closing,
Buyer shall cause the Company and the Subsidiaries to prepare and deliver to
Seller a statement of the calculation of Baseline Premium Flow, together with
the work papers related thereto. Buyer agrees to make available to
Seller all books, records and personnel as Seller may reasonably request in
connection with Seller’s review of such calculation of Baseline Premium
Flow. If Seller disagrees with Buyer’s calculation of the Baseline
Premium Flow delivered pursuant to this Section 3.4(a),
Seller shall, within thirty (30) calendar days after delivery thereof, deliver a
written notice (the “Baseline Objection
Notice”) to Buyer disagreeing with such calculation and setting forth
Seller’s calculation of Baseline Premium Flow. Any such Baseline
Objection Notice shall specify those items or amounts as to which Seller
disagrees, and Seller shall be deemed to have agreed with all other items and
amounts contained in Buyer’s calculation of the Baseline Premium Flow delivered
pursuant to Section
3.4(a). Seller shall also provide in the Baseline Objection
Notice, the aggregate dollar amount of any adjustments Seller wishes to propose
to the Baseline Premium Flow. If Seller does not deliver a Baseline
Objection Notice within such thirty (30) day period, then the Baseline Premium
Flow for purposes of this Section 3.4 shall be
deemed to be finally determined as set forth on Buyer’s calculation
thereof. The resolution of any disagreement set forth in any Baseline
Objection Notice shall be made in the same manner as the resolution of the
Earn-Out Payment set forth in Section 3.4(e)
below.
(b) Calculation of Earn-out
Payment. Subject to the following, Buyer will make additional
payments to Seller following the First Earn-out Period and the Second Earn-out
Period conditioned upon the achievement of the Premium Flow “Compound Annual
Growth Rate” thresholds specified below.
(i) Calculation of Compound
Annual Growth Rate. For purposes of this Section 3.4(b),
“Compound Annual
Growth Rate” for the First Earn-out Period or the Second Earn-out Period,
as applicable, shall be calculated using the following formula (rounded to the
nearest hundredth of a percent):
[Missing Graphic Reference]
(ii) Calculation of Achievement
Percentage. For purposes of this Section 3.4(b), the
“Achievement
Percentage” for the First Earn-out Period or the Second Earn-out Period,
as applicable, shall be calculated as follows (in each case, rounded to the
nearest hundredth of a percent):
(A) in the
event that the Compound Annual Growth Rate is less than or equal to -3.00%, then
the Achievement Percentage for such period shall equal 0.00%;
(B) in the
event that the Compound Annual Growth Rate is greater than -3.00% but less than
or equal to 3.30%, the Achievement Percentage for such period shall be
calculated using the following formula:
[Missing Graphic Reference]
(C) in the
event that the Compound Annual Growth Rate is greater than 3.30%, then the
Achievement Percentage for such period shall equal 105.00% (which is the maximum
Achievement Percentage).
(iii) Amount of First Earn-out
Payment. The amount of the First Earn-out Payment will be
equal to the result obtained by multiplying the First Payment Target by the
Achievement Percentage for the First Earn-out Period.
(iv) Amount of Second Earn-out
Payment. The amount of the Second Earn-out Payment will be
equal to the result obtained by multiplying the Second Payment Target by the
Achievement Percentage for the Second Earn-out Period.
(c) Acceleration
of Earn-out Payment. Notwithstanding anything herein to the
contrary, if from the Closing Date through the end of the Second Earn-out
Period, an Acceleration Event occurs, Buyer shall pay to Seller the Acceleration
Payment, calculated pursuant to this Section 3.4(c)
below. Buyer shall promptly provide written notice to Seller upon the
occurrence of any Acceleration Event.
(i) Calculation of Acceleration
Payment. If an Acceleration Event occurs (i) during the first
six (6) months of the First Earn-out Period, then Buyer shall pay Seller an
amount equal to the Acceleration Payment Target or (ii) after the first six (6)
months of the First Earn-out Period, then Buyer shall pay Seller an amount
calculated as set forth in this Section 3.4(c)
below:
(A) Calculation of Compound
Annual Growth Rate. For purposes of this Section 3.4(c),
“Compound Annual
Growth Rate” for the Acceleration Period shall be calculated using the
following formula (rounded to the nearest hundredth of a percent or to four
significant digits following a decimal, as applicable):
[Missing Graphic Reference]
(B) Calculation of Acceleration
Achievement Percentage. For purposes of this Section 3.4(c), the
“Acceleration
Achievement Percentage” shall be calculated as follows (rounded to the
nearest hundredth of a percent):
(x) in
the event that the Compound Annual Growth Rate is less than or equal to -6.00%,
then the Acceleration Achievement Percentage for such period shall equal
0.00%;
(y) in
the event that the Compound Annual Growth Rate is greater than -6.00% but less
than or equal to 0.30%, the Acceleration Achievement Percentage for such period
shall be calculated using the following formula:
[Missing Graphic Reference]
(z) in
the event that the Compound Annual Growth Rate is greater than 0.30%, then the
Acceleration Achievement Percentage for such period shall equal 105.00% (which
is the maximum Acceleration Achievement Percentage).
(ii) Amount of Acceleration
Payment. The amount of the “Acceleration Payment”
under this Section
3.4(c) will be equal to the result obtained by (A) multiplying the
Acceleration Payment Target by the Acceleration Achievement Percentage for the
Acceleration Period, less (B) the amount of the First Earn-out Payment, if
any.
(iii) Payment
of any Acceleration Payment due to Buyer under this Section 3.4(c) shall
be made in accordance with the time periods set forth in Section 3.4(f); provided, that if a
Change In Control of the Company occurs, Buyer shall pay the Acceleration
Payment, if any, concurrently with the Change In Control of the
Company.
(iv) Buyer
agrees to deliver a report with respect to the Acceleration Payment in
accordance with the procedures and time periods set forth in Section
3.4(d). Disputes with respect to such report shall be resolved
in accordance with the procedures and time periods set forth in Section
3.4(e).
(d) Earn-out Payment
Report. Within ninety (90) calendar days after the end of the
First Earn-out Period and the Second Earn-out Period (or, with respect to the
Acceleration Payment, within thirty (30) days after the Acceleration Date),
Buyer shall cause the Company and the Subsidiary to prepare and deliver to
Seller a statement of the calculation of the Earn-out Payment (the “Earn-out Payment
Report”) for such period, together with the work papers related
thereto. Buyer agrees to make available to Seller such books, records
and personnel as Seller may reasonably request in connection with Seller’s
review of such Earn-out Payment Report.
(e) Disputed Earn-out
Amounts.
(i) If Seller
disagrees with Buyer’s calculation of the Earn-out Payment delivered pursuant to
Section 3.4(d),
Seller shall, within thirty (30) days after delivery of the documents referred
to in Section
3.4(d), deliver a written notice (the “Earn-out Objection
Notice”) to Buyer disagreeing with such calculation and setting forth
Seller’s calculation of the Earn-out Payment; provided, that the
only bases for disagreement by Seller shall be (i) non-compliance with the
standards set forth in Section 3.4(b) and
(ii) computational errors. Any such Earn-out Objection Notice shall
specify those items or amounts as to which Seller disagrees, and Seller shall be
deemed to have agreed with all other items and amounts contained in Buyer’s
Earn-out Payment Report delivered pursuant to Section
3.4(d). Seller shall also provide in the Earn-out Objection
Notice the aggregate dollar amount of any adjustments Seller wishes to propose
to the Earn-out Payment (the “Disputed Earn-out
Amount”). If Seller does not deliver an Earn-out Objection
Notice within such thirty (30) day period, then the amount of the Earn-out
Payment, if any, shall be deemed to be finally determined as set forth on
Buyer’s calculation thereof.
(ii) If the
Earn-out Objection Notice is delivered pursuant to Section 3.4(e)(i),
Seller and Buyer shall, during the thirty (30) days following such delivery, use
their reasonable best efforts to reach agreement on the disputed items or
amounts in order to determine, as may be required, the amount of the Earn-out
Payment. If, after such 30-day period, Seller and Buyer are unable to
reach such agreement, they shall promptly thereafter cause the Independent
Accountants to promptly review this Agreement and the disputed items or amounts
for the purpose of calculating the Earn-out Payment. In making such
calculation, such Independent Accountants shall consider only those items or
amounts in the Earn-out Payment Report as to which Seller has disagreed and
shall adhere to the standards set forth above in this Section
3.4. The Independent Accountants shall not assign a value to
any item or amount in dispute greater than the greatest value for such item or
amount assigned by Buyer, on the one hand, or Seller, on the other hand, or less
than the smallest value for such item or amount assigned by Buyer, on the one
hand, or Seller, on the other hand. The Independent Accountants shall
act as experts and not as arbitrators, and shall resolve only such items or
amounts that are in dispute. The Independent Accountants shall
deliver to Seller and Buyer as promptly as practicable (but in any event within
thirty (30) days of their retention) a report setting forth such calculation
(such date, the “Final
Earn-out Resolution Date”). Such report shall be final and
binding upon Seller and Buyer. The cost of such review and report
shall be borne (and paid) fifty percent (50%) by Seller and fifty percent (50%)
by Buyer.
(f) Payment of Earn-out
Payment. For avoidance of doubt, the “Earn-out Payment”
means the First Earn-out Payment or Second Earn-out Payment, as applicable, as
shown in Buyer’s calculation delivered pursuant to Section 3.4(d), if no
Earn-out Objection Notice with respect thereto is duly delivered pursuant to
Section
3.4(e)(i); or, if an Earn-Out Objection Notice is delivered, as agreed by
Buyer and Seller pursuant to Section 3.4(e)(ii) or
in the absence of such agreement, as shown in the Independent Accountant’s
calculation delivered pursuant to Section
3.4(e)(ii). Any Earn-out Payment made under this Section 3.4 shall be
treated as an adjustment to the Purchase Price for all tax
purposes. Buyer shall pay to Seller the amount of the Earn-out
Payment, if any, by wire transfer of immediately available funds to the account
of Seller specified in writing by Seller within five (5) business days of the
earlier of:
(i) if Seller
notifies Buyer in writing that it agrees with the calculation of an Earn-out
Payment as set forth in an Earn-out Report, the date of such written notice;
or
(ii) if Seller
does not deliver an Earn-out Objection Notice within the thirty (30) day period
following delivery of an Earn-out Payment Report, the date that the thirty (30)
day period expires; or
(iii) if an
Earn-out Objection Notice is delivered, (1) with respect to any portion of the
Earn-out Payment that is not a Disputed Earn-out Amount, the date of the
Earn-out Objection Notice and (2) with respect to any Disputed Earn-out Amount,
the earlier of (x) the date that the Disputed Earn-out Amount is agreed upon by
Buyer and Seller pursuant to Section 3.4(e)(ii)
and (y) the Final Earn-out Resolution Date.
(iv) Control of
Business. Seller hereby understands and acknowledges that
control of all key business decisions of the Business (including any and all
decisions relating to management, personnel, manner of operations, policies and
procedures, closing or openings of officers and other facilities, any
acquisitions, dispositions, purchases and/or sales of assets (and the timing
thereof), capital expenditures (and the timing thereof), changes in the business
plan of the Business, pricing and marketing of products and/or Policies or any
other change in the cost structure of the Business, and any other changes in the
conduct of the Business) from and after the Closing Date shall be the sole right
and responsibility of Buyer, and that Buyer may operate the Business in the
manner it deems appropriate in its sole discretion.
(g) Management
Reports. From and after the Closing until the date on which
the Second Earn-out Payment (if any) has been paid in accordance with this Section 3.4, not
later that thirty (30) days following the end of each calendar-year quarter,
Buyer shall (i) deliver to Seller a copy of its customary internal management
report showing the amount of Premium Flow for the Company and its Subsidiaries
as of the end of the previous calendar quarter (it being understood that Buyer
makes no representation as to the accuracy of the information contained in such
internal management report) and (ii) upon request, participate in a telephone
conference with Seller to discuss matters related to the Earn-out
Payment.
Section
3.5 Withholding
. Each of Buyer and
the Company (on behalf of Buyer) shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to Seller or any
other Person such amounts as each of Buyer and the Company is required to deduct
and withhold under the Code, or any Tax law, with respect to the making of such
payment. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the Person in respect of whom such deduction and withholding was
made.
ARTICLE
IV
CLOSING
Section
4.1 Closing
Date
. The Closing shall
be consummated on a date and at a time agreed upon by Buyer and Seller, but in
no event later than 9:00 a.m. (Pacific Standard Time) on the second business day
after the date on which the conditions set forth in Articles IX and X have been satisfied
or waived, at the offices of Xxxxxx & Xxxxxxx LLP, 000 X. Xxxxx Xxxxxx, Xxx
Xxxxxxx, XX 00000, or at such other time and place as shall be agreed upon by
Buyer and Seller; provided, however, that the
Date shall not take place prior to January 1, 2009. The time and date
on which the Closing is actually held is referred to herein as the “Closing Date.”; provided, however, that if the
Closing takes place on January 2, 2009, the Closing Date shall be deemed to be
effected at 12:01 A.M., January 1, 2009.
Section
4.2 Payment on the Closing
Date
. Subject to
fulfillment or waiver (where permissible) of the conditions set forth in Article IX, at the
Closing, Buyer shall pay to Seller an amount equal to the Initial Cash Payment,
as adjusted pursuant to Section 3.2(a), by
wire transfer of immediately available funds to the bank account or accounts
specified in writing by Seller prior to the Closing Date.
Section
4.3 Buyer’s Additional Closing
Date Deliveries
. Subject to
fulfillment or waiver (where permissible) of the conditions set forth in Article IX, at the
Closing, Buyer shall deliver to Seller, in addition to the Purchase Price, all
of the following:
(a) Certificate
of the secretary or an assistant secretary of Buyer, dated the Closing Date, in
form and substance reasonably satisfactory to Seller, as to: (i) the
Articles of Incorporation of Buyer; (ii) the By-Laws of Buyer; (iii) the
resolutions of the board of directors of Buyer authorizing the execution and
performance of this Agreement, any Buyer Ancillary Agreement and the
transactions contemplated hereby and thereby; and (iv) incumbency and signatures
of the officers of Buyer executing this Agreement and any Buyer Ancillary
Agreement;
(b) The
Transition Services Agreement, duly executed by Buyer;
(c) The
Software License, duly executed by Buyer;
(d) The
certificate contemplated by Section 10.1, duly
executed by a duly authorized officer of Buyer; and
(e) All
consents, waivers and approvals that may be obtained by Buyer with respect to
the consummation of the transactions contemplated by this
Agreement.
Section
4.4 Seller’s Closing Date
Deliveries
. Subject to
fulfillment or waiver (where permissible) of the conditions set forth in Article X, at the
Closing, Seller shall deliver (or cause to be delivered) to Buyer all of the
following:
(a) Certificate
of the secretary or an assistant secretary of Seller, dated the Closing Date, in
form and substance reasonably satisfactory to Buyer, as to: (i) the Certificate
of Incorporation of Seller; (ii) the By-Laws of Seller; (iii) the resolutions of
the board of directors of Seller authorizing the execution and performance of
this Agreement, the Seller Ancillary Agreements and the transactions
contemplated hereby and thereby; and (iv) the incumbency and signatures of the
officers of Seller executing this Agreement and each Seller Ancillary
Agreement;
(b) Stock
certificates representing all of the Shares, duly executed in blank or
accompanied by duly executed instruments of transfer;
(c) The
Transition Services Agreement, duly executed by an Affiliate of
Seller;
(d) The El
Segundo Sublease, duly executed by the Company and an Affiliate of
Seller;
(e) All
consents, waivers and approvals in form and substance reasonably satisfactory to
Buyer for each of the Business Agreements and Permits listed on Schedules 9.3 and Section
9.5 (the “Change of Control
Consents”);
(f) The
certificate contemplated by Section 9.1, duly
executed by a duly authorized officer of Seller;
(g) The
Software License, duly executed by an Affiliate of Seller;
(h) Certificates
signed by Seller and by the Company to the effect that neither Seller nor the
Company, as applicable, is a “foreign person” as defined in Section 1445 of the
Code; and
(i) The
written resignations of the directors of the Company and the Subsidiaries in
form reasonably satisfactory to Buyer.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF SELLER
As an
inducement to Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, Aon and Seller, jointly and severally,
represent and warrant to Buyer as follows, which representations and warranties
are, as of the date hereof, and will be as of the Closing Date, true and
correct:
Section
5.1 Organization of the Company
and the Subsidiaries
. Each of the
Company and the Subsidiaries is a corporation duly formed, validly existing and
in good standing under the laws of its state of incorporation. Each
of the Company and the Subsidiaries is duly qualified to transact business and
is in good standing in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not reasonably be expected to have a Material Adverse
Effect. Each of the Company and the Subsidiaries has full corporate
(or other organizational) power and authority to own or lease and operate its
assets and to own or lease and operate the Transferred Assets and to carry on
its business in the manner that it was conducted immediately prior to the date
of this Agreement.
Section
5.2 Capital Structure of the
Company and the Subsidiaries
. The authorized
capital stock of the Company consists of 1,000 shares of common stock, par value
$1.00 per share, of which 1,000 shares are issued and
outstanding. The authorized capital stock of AIS consists of 1,000
shares of common stock, par value $1.00 per share, of which 1,000 shares are
issued and outstanding. The authorized capital stock of ASPN consists
of 1,000 shares of common stock, par value $1.00 per share, of which 1,000
shares are issued and outstanding. All of the outstanding shares of
capital stock of the Company and the Subsidiaries have been duly authorized, and
are validly issued, fully paid and nonassessable and free of preemptive
rights. All of the outstanding (i) shares of capital stock of the
Company are owned by Seller, (ii) shares of capital stock of AIS are owned by
the Company, and (iii) shares of capital stock of ASPN are owned by the Company,
free and clear of all Encumbrances. Except for this Agreement, there
are no agreements, arrangements, options, warrants, rights or commitments of any
character relating to the issuance, sale, purchase or redemption of any shares
of capital stock of the Company or the Subsidiaries. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company or the
Subsidiaries. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
the Company or the Subsidiaries.
Section
5.3 Subsidiaries and
Investments
. Except for the
Company’s ownership of all of the shares of AIS and ASPN, neither the Company
nor any Subsidiary, directly or indirectly, owns or has the right to acquire any
outstanding voting securities or other equity interests in any corporation,
partnership, joint venture or other entity.
Section
5.4 Authority of Seller;
Conflicts
.
(a) Aon and
Seller each has full power and authority to execute, deliver and perform this
Agreement and each of the Seller Ancillary Agreements. The execution,
delivery and performance of this Agreement and the Seller Ancillary Agreements
by Aon and Seller have been duly authorized and approved by Aon’s and Seller’s
board of directors, as applicable. No other corporate proceedings on
the part of Aon, Seller, the Company or the Subsidiaries are necessary to
authorize this Agreement and the Seller Ancillary Agreements and the
transactions contemplated hereby or thereby. This Agreement has been
duly authorized, executed and delivered by Aon and Seller and (assuming the
valid authorization, execution and delivery by Buyer) is the legal, valid and
binding obligation of Aon and Seller enforceable in accordance with its terms,
and each of the Seller Ancillary Agreements has been duly authorized by Aon or
Seller, as applicable, and upon execution and delivery by Aon or Seller, as
applicable, will be (assuming the valid authorization, execution and delivery by
each of the other parties thereto) a legal, valid and binding obligation of Aon
or Seller, as applicable, enforceable in accordance with its terms, in each case
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors’ rights and to general
equity principles.
(b) Except as
set forth in Schedule
5.4, neither the execution and delivery by Aon and Seller of this
Agreement or any of the Seller Ancillary Agreements or the consummation by Aon
and Seller of any of the transactions contemplated hereby or thereby nor
compliance by Aon and Seller with or fulfillment by Aon and Seller of the terms,
conditions and provisions hereof or thereof will:
(i) assuming
that all necessary consents, approvals, authorizations and other actions
described in Section
5.4(b)(ii) have been obtained, all filings and notifications described in
Schedule 5.4
have been made and any applicable waiting period has expired or been terminated,
result in a material violation or material breach of the terms, conditions or
provisions of, or materially conflict with, or constitute a material default, an
event of default or an event creating rights of acceleration, modification,
termination or cancellation or a loss of material rights or requirement of
notice under, or result in the creation or imposition of any material
Encumbrance upon Aon, Seller, the Company or the Subsidiaries or any of the
Transferred Assets, or any of the Shares or any of the assets of Aon, Seller,
the Company or the Subsidiaries or any of the Transferred Assets under (1) the
charter or by-laws of Aon, Seller, the Company or the Subsidiaries, (2) any
agreement, contract, license, Governmental Permit, instrument, or other
arrangement to which Seller, the Company or any Subsidiary is a party or by
which it is bound or to which any of its assets are subject, including any of
the Business Agreements, (3) any note, instrument, mortgage, lease, franchise or
financial obligation to which Aon, Seller, the Company or any Subsidiary is a
party or by which Aon, Seller, the Company, any Subsidiary or any of the
Transferred Assets is bound, (4) any Court Order to which Aon, Seller, the
Company or any Subsidiary is a party or by which Seller, the Company, the
Subsidiary or any of the Transferred Assets is bound or (5) any Law
affecting Aon, Seller, the Company, any Subsidiary or any of the Transferred
Assets; or
(ii) require
the approval, consent, authorization or act of, or the making by Aon, Seller,
the Company or any Subsidiary of any declaration, filing or registration with,
any Administrative Authority except (1) in connection, or in compliance, with
the provisions of the HSR Act or (2) such filings as may be required in
connection with the Taxes described in Section
8.1.
Section
5.5 Financial
Statements
. Schedule 5.5 contains
(i) the unaudited consolidated pro forma balance sheet of the Company and the
Subsidiaries as of December 31, 2007 (the “Pro Forma 2007 Balance
Sheet”) and the related income statement of the Company and the
Subsidiaries for the year then ended, pro forma to give effect to the transfer
of the Transferred Assets to the Company and the Subsidiaries and the exclusion
of the Excluded Personnel from the Company and its Subsidiaries and the other
adjustments set forth in the notes thereto (A) as of December 31, 2007 in
respect of the balance sheet and (B) as of January 1, 2007 in respect of the
income statement for the twelve month period ended December 31, 2007 and (ii)
the unaudited consolidated pro forma balance sheet of the Company and the
Subsidiaries as of August 31, 2008 (the “Interim Pro Forma Balance
Sheet”) and the related income statement for the 8 months then ended, pro
forma to give effect to the transfer of the Transferred Assets to the Company
and AIS (A) as of August 31, 2008 in respect of the balance sheet and (B) as of
January 1, 2008 in respect of the income statement for the eight month period
ended August 31, 2008 (collectively, the “Pro Forma Financial
Statements”). Except as set forth in Schedule 5.5, the Pro
Forma Financial Statements (including the notes thereto) and the other
adjustments set forth in the notes thereto (A) are in accordance with the Books
and Records of Aon, Seller, the Company and the Subsidiary, (B) have been
prepared in accordance with GAAP consistently applied (except that the financial
statements referred to in clause (ii) do not contain footnotes) and (C) present
fairly the financial condition and results of operations of the Company and the
Subsidiaries, as of their respective dates and for the respective periods
covered thereby (1) subject, in the case of the financial statements referred to
in clause (ii), to normal year end adjustments (which will not be material
individually or in the aggregate) and (2) except that such financial statements
referred to in clauses (i) and (ii) give pro forma effect to the transfer of the
Transferred Assets and the exclusion of the Excluded Personnel and the other
adjustments set forth in the notes thereto. At the respective dates
of the Pro Forma Financial Statements, there were no Liabilities of the Company,
the Subsidiaries or related to the Transferred Assets, which, in accordance with
GAAP, should have been set forth or reserved for in the Pro Forma Financial
Statements or the notes thereto, which are not set forth or reserved for in the
Pro Forma Financial Statements or the notes thereto.
Section
5.6 Absence of Certain
Changes
. From December 31,
2007, there has been no Material Adverse Effect. From December 31,
2007, Aon, Seller, the Company and the Subsidiaries and APRM (solely with
respect to the Business) have conducted the Business in all material respects in
the Ordinary Course of Business, other than the transfer of the Transferred
Assets to the Company or AIS prior to the Closing Date. Without
limiting the generality of the foregoing, from December 31, 2007, except as set
forth in Schedule
5.6 and between the date hereof and the Closing Date, except as permitted
under Section
7.5 or as set forth in Schedule 7.5, neither
the Company nor any Subsidiary has, and neither Aon, Seller nor their Affiliates
with respect to the Transferred Assets, has, and for purposes of Sections 5.6(d),
5.6(f) and
5.6(g) below,
no Affiliate of Seller that employs any individual listed on Schedule 8.2(a) has,
with respect to such individual:
(a) sold,
leased (as lessor), transferred, assigned or otherwise disposed of, or mortgaged
or pledged, or imposed or suffered to be imposed any Encumbrance on, any of its
assets, tangible or intangible, except for (i) assets sold or otherwise disposed
of in the Ordinary Course of Business and (ii) Permitted
Encumbrances;
(b) cancelled,
compromised, waived or released any debts owed to or rights or claims held by it
(including the settlement of any claims or litigation) either involving more
than $50,000 or outside the Ordinary Course of Business;
(c) created,
incurred or assumed, or agreed to create, incur or assume, any Indebtedness or
entered into, as lessee, any capitalized lease obligations (as defined in
Statement of Financial Accounting Standards No. 13) or any voluntary purchase,
cancellation, prepayment or complete or partial discharge in advance of a
scheduled payment date with respect to, or waiver of any right under, any
Indebtedness of or owing to the Company or the Subsidiaries;
(d) except
(i) as set forth in Schedule 5.17, or
(ii) for any compensation and employment practices applied generally for Aon,
instituted any increase in any benefit provided under any Company Plan, other
than in the Ordinary Course of Business;
(e) made, or
agreed to make, any distribution or other disposition of assets (other than cash
or cash equivalents) to Seller or any of its Affiliates;
(f) made any
change in the compensation of their employees, other than changes made in the
Ordinary Course of Business or pursuant to existing commitments under plans or
arrangements disclosed on Schedules 5.15 or
5.17 and
consistent with past compensation practices, including any (i) increase in the
cash compensation payable or to become payable to or for the benefit of any such
employees; (ii) increase in the security or tenure of employment; or (iii)
increase in the amount payable to any such employees upon the termination of
their employment, in each case, except for any compensation and employment
practices applied generally for Aon.
(g) entered
into or adopted any employment, consulting, severance, or change in control
agreement, any Company Plan or any collective bargaining agreement (other than
ordinary course at-will employment arrangements not providing for any severance
or change in control payments), or modified in any material respect the terms of
any existing such contract, plan or agreement, or granted any rights to
severance, termination or change in control payments, other than with respect to
employees who are not officers, executives or key employees, other than in the
Ordinary Course of Business;
(h) made any
change in its charter or by-laws or issued any capital stock (or securities
exchangeable, convertible or exercisable for capital stock);
(i) made, or
agreed to make, (i) any acquisition, disposition, lease, transfer or assignment
of any material assets or properties used or held for use in the conduct of the
Business, or (ii) any creation or incurrence of any Encumbrance, other than a
Permitted Encumbrance, on any of such assets or properties;
(j) made any
change in (i) the accounting policies applied in the preparation of the Pro
Forma Financial Statements, unless such change was required by GAAP or reflected
in the Pro Forma Financial Statements, (ii) any pricing, accounting, financial
reporting, inventory, credit, or allowance related practice or policy of the
Business or (iii) any method of calculating any bad debt, contingency or other
reserve of the Business for accounting, or financial reporting related
purposes;
(k) made or
changed any material Tax election; changed any annual Tax accounting period;
adopted or changed any material method of Tax accounting; amended any material
Tax Returns or filed any material claims for Tax refunds; entered into any
closing agreement, Tax allocation agreement, Tax sharing agreement or material
Tax indemnity agreement; settled or compromised any material Tax claim, audit,
notice or assessment; extended or waived any statute of limitations period
applicable to any material Tax claim or assessment or any right to claim a
material Tax refund; or surrendered any offset or other reduction in Tax
liability, in each case specific to or affecting the Company or any
Subsidiary;
(l) entered
into any transaction with any officer, director or Affiliate of Seller or any
Affiliate of any such officer, director or Affiliate;
(m) entered
into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, or licenses) either involving more than $50,000
or outside the Ordinary Course of Business;
(n) made any
investment in, any loan to, or any acquisition of the securities or assets of,
any other Person (or series of related investments, loans, or acquisitions)
either involving more than $50,000 or outside the Ordinary Course of
Business;
(o) accelerated,
terminated, modified, or cancelled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) either
involving more than $50,000 or outside the Ordinary Course of
Business;
(p) made any
capital expenditure (or series of related capital expenditures) either involving
more than $50,000 or outside the Ordinary Course of Business;
(q) transferred,
assigned, or granted any license or sublicense of any rights under or with
respect to any Intellectual Property other than in the Ordinary Course of
Business;
(r) cause any
employee to suffer an “employee loss” (as that term is defined in WARN); or
engage in a “layoff”, “mass layoff”, “termination” or “relocation” (as those
terms are defined in California Labor Code Section 1400); or
(s) entered
into any agreement, whether oral or written, by the Company or any Subsidiary to
do any of the things described in the preceding clauses (a) through (r) other
than as expressly provided for herein.
Section
5.7 Taxes
. Except as set
forth in Schedule
5.7:
(a) The
Company and the Subsidiaries have timely filed with the appropriate taxing
authority all material Tax Returns required to have been filed. All such Tax
Returns are complete and accurate in all material respects. All Taxes
due and owing by the Company and the Subsidiaries (whether or not shown on any
Tax Return) have been timely paid. Neither the Company nor any of the
Subsidiaries is currently the beneficiary of any extension of time within which
to file any Tax Return. Neither the Company nor any of the
Subsidiaries has waived any statute of limitations in respect of Taxes which
waiver is currently in effect. Since October 5, 1998, no claim has
been made by a taxing authority in a jurisdiction where the Company or a
Subsidiary does not file Tax Returns that the Company or such Subsidiary is or
may be subject to taxation by that jurisdiction.
(b) No
deficiencies for Taxes against the Company or any of the Subsidiaries have been
claimed, proposed or assessed by any taxing authority. There are no
pending or, to the Knowledge of Seller, threatened audits, assessments or other
actions for or relating to any liability in respect of Taxes of the Company or
the Subsidiaries, and there are no matters under discussion with any taxing
authority, or known to Seller, with respect to Taxes that are reasonably likely
to result in an additional liability for Taxes with respect to the Company or
any of its Subsidiaries. The Company and the Subsidiaries have
delivered or made available to Buyer complete and accurate copies of all
material federal, state, local, and foreign Tax Returns of the Company and the
Subsidiaries and any predecessors of either for all open Tax
years. No power of attorney (other than powers of attorney
authorizing employees of the Company to act on behalf of the Company or the
Subsidiaries) with respect to any Taxes has been executed or filed with any
taxing authority, which power of attorney will be in effect after the
Closing.
(c) There are
no liens for Taxes upon the assets of the Company or any of the Subsidiaries
except liens constituting Permitted Encumbrances.
(d) Neither
the Company nor any of the Subsidiaries (i) has made an election, or is
required, to treat any of its assets as owned by another Person pursuant to the
provisions of Section 168(f) of the Internal Revenue Code of 1954 or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code; (ii) has acquired or owns any assets that directly
or indirectly secure any debt the interest on which is tax exempt under Section
103(a) of the Code; (iii) has made or will make a consent dividend election
under Section 565 of the Code; (iv) has elected at any time to be treated as an
S corporation within the meaning of Sections 1361 or 1362 of the Code; or (v)
has made any of the foregoing elections or is required to apply any of the
foregoing rules under any comparable state or local Tax provision.
(e) Since
October 5, 1998, neither the Company nor any of the Subsidiaries has been a
member of an affiliated group filing a consolidated federal income Tax Return,
other than a consolidated group in which Aon is the parent. Neither
the Company nor any of the Subsidiaries has any liability for the material Taxes
of any Person (other than Taxes of the Company or the Subsidiary) (i) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv)
otherwise.
(f) All Tax
sharing arrangements and material Tax indemnity arrangements relating to the
Company or any of its Subsidiaries (other than this Agreement) will terminate on
or prior to the Closing Date and neither the Company nor any Subsidiary will
have any liability thereunder on or after the Closing Date.
(g) At any
time, from and after October 5, 2008, neither the Company nor any of the
Subsidiaries has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code.
(h) All
material Taxes which the Company or any of the Subsidiaries is required by law
to withhold or to collect for payment have been duly withheld and collected and
have been paid to the appropriate governmental authority.
(i) Neither
the Company nor any of the Subsidiaries (i) is a shareholder of a “controlled
foreign corporation” as defined in Section 957 of the Code (or any similar
provision of state, local or foreign law), (ii) is a “personal holding company”
as defined in Section 542 of the Code (or any similar provision of state, local
or foreign law) or (iii) is a stockholder in a “passive foreign investment
company” within the meaning of Section 1297 of the Code.
(j) None of
the outstanding indebtedness of the Company or any of the Subsidiaries
constitutes indebtedness with respect to which any interest deductions may be
disallowed under Sections 163(i), 163(l) or 279 of the Code or under any other
provision of applicable law.
(k) Neither
the Company nor any of the Subsidiaries has distributed the stock of any
corporation in a transaction satisfying the requirements of Section 355 of the
Code in the past two years, and neither the stock of the Company nor any of the
Subsidiaries has been distributed in a transaction satisfying the requirements
of Section 355 of the Code in the past two years.
(l) Neither
the Company nor any of the Subsidiaries has entered into any transaction that is
a “reportable transaction” as defined in Treasury Regulation Section 1.6011-4,
or any other transaction requiring disclosure under analogous provisions of
state, local, or foreign law. If either the Company or any Subsidiary
has entered into any transaction such that, if the treatment claimed by it were
to be disallowed, the transaction would constitute a substantial understatement
of federal income tax within the meaning of Section 6662 of the Code, then the
Company or the Subsidiary, as the case may be, believes that either (i)
substantial authority exists for the tax treatment of such transaction or (ii)
sufficient disclosure has been made on Tax Returns of the relevant facts
affecting the tax treatment of such transaction.
Section
5.8 Governmental
Permits and
Laws
.
(a) Schedule 5.8
identifies (i) all jurisdictions in which APRM (solely with respect to the
Business), the Company or any Subsidiary transacts insurance, (ii) all
jurisdictions in which APRM (solely with respect to the Business), the Company
or any Subsidiary maintains an office for the conduct and operation of the
Business, and (iii) the types and lines of insurance that APRM (solely with
respect to the Business), the Company and the Subsidiaries transact in each such
jurisdiction specifying whether any such types or lines of insurance are
transacted on a surplus line basis.
(b) APRM
(solely with respect to the Business), the Company, the Subsidiaries and to the
Knowledge of Seller, the Transactors own, hold or possess all insurance
producer, administrator, adjuster, agent and broker licenses and all other
licenses, franchises, permits, privileges, immunities, approvals and other
authorizations from an Administrative Authority that are required under Law or
are necessary to entitle them to lawfully own or lease, operate and use their
assets and to carry on and conduct their Business substantially as conducted
immediately prior to the date of this Agreement (herein collectively called
“Governmental
Permits”).
(c) Seller
has made available to Buyer true, correct and complete copies of all such
Governmental Permits (except with respect to the Transactors), and Schedule 5.8 sets
forth a true and complete list of each Governmental Permit referenced in Section 5.8(b),
except for such incidental licenses, permits and other authorizations which
would be readily obtainable by any qualified applicant without undue burden in
the event of any lapse, termination, cancellation or forfeiture
thereof.
(d) Except as
set forth in Schedule
5.8, neither APRM (solely with respect to the Business), any Company, its
Subsidiaries nor, to the Knowledge of Seller, any Transactor has received any
written notice of any violation of any Governmental Permit. No
suspension, cancellation or non-renewal of any Governmental Permit is pending
or, to the Knowledge of Seller, threatened. APRM (solely with respect
to the Business), the Company, the Subsidiaries and, to the Knowledge of Seller,
the Transactors are not in violation or breach of, or default under, any
Governmental Permit. Since January 1, 2006, neither the Company, the
Subsidiaries, APRM nor, to the Knowledge of Seller, the Transactors have had (i)
a Governmental Permit terminated, non-renewed, limited, revoked, cancelled,
suspended or adversely modified by any Administrative Authority or (ii) an
application for a Governmental Permit or renewal thereof rejected, denied or
withdrawn.
(e) APRM
(solely with respect to the Business), the Company and the Subsidiaries have at
all times complied in all material respects with all applicable data privacy
laws, regulations, rules and certification guidelines and the terms and
conditions of all versions of their privacy policies.
(f) ASPN has
had no operations and has transacted no business of any type prior to the
Closing Date other than obtaining and maintaining the Governmental Permits
identified in Schedule
5.8.
Section
5.9 Real
Property
. Neither the
Company nor any Subsidiary owns any real property. Schedule 5.9 contains
a list of: (i) each option held by the Company or any Subsidiary to acquire
any real property; and (ii) each lease or similar agreement under which the
Company or any Subsidiary is lessee of, or holds or operates, any real property
owned by any third Person or which is included in the Transferred Assets (the
“Leased Real
Property”). The Company or the Subsidiaries have a valid
leasehold interest in the Leased Real Property. The Company and the
Subsidiaries do not owe brokerage commissions with respect to any such leased
space.
Section
5.10 Personal
Property
. Schedule 5.10
contains, as of the date of this Agreement, a list of each lease or other
agreement or right under which the Company or the Subsidiary is lessee of, or
holds or operates, any machinery, equipment, vehicle or other tangible personal
property owned by a third Person or which is included in the Transferred Assets,
except those which are or will be as of the Closing Date terminable by the
Company or the Subsidiary without penalty on 90 days’ or less notice or which
provide for annual rental payments of less than $5,000. Each of the
Company or the applicable Subsidiary has indefeasible and marketable title to,
or has a valid leasehold interest in, all machinery, equipment, vehicles or
other tangible personal property located on its premises or reflected on the
Interim Pro Forma Balance Sheet or acquired thereafter, other than that disposed
of in the Ordinary Course of Business, in each case free and clear of all
Encumbrances, except for Permitted Encumbrances. All material
machinery, equipment, vehicles or other tangible personal property located on
each of the Company’s or either Subsidiary’s premises or reflected on the
Interim Pro Forma Balance Sheet or acquired thereafter, other than that disposed
of in the Ordinary Course of Business, is in good working order and condition,
ordinary wear and tear excepted, in each case free and clear of all
Encumbrances, except for Permitted Encumbrances.
Section
5.11 Intellectual Property and
Information Technology
.
(a) Schedule 5.11(a)
contains a list of all registered Copyrights and Copyright applications, Patent
Rights, registered Trademarks and trademark applications and Websites which are
(i) owned by or exclusively licensed to an Affiliate of Aon (solely with respect
to the Business), the Company or any of the Subsidiaries, or
(ii) non-exclusively licensed to an Affiliate of Aon (solely with respect
to the Business), the Company or any of the Subsidiaries or included in the
Transferred Assets and that are material to the conduct of the Business, as
currently conducted.
(b) Schedule 5.11(b)
contains a list of all Software owned, used or necessary to the conduct of the
Business (“Material
Software”). The Company or the applicable Subsidiary, or, in
the case of the Transferred Assets, an Affiliate of Aon as of the date hereof
and the Company or the Subsidiary as of the Closing Date, as applicable, has a
written license to use all Material Software.
(c) Except as
set forth in Schedule
5.11(c), the Company or either of the Subsidiaries or, in the case of the
Transferred Assets, an Affiliate of Aon as of the date hereof and the Company or
the Subsidiaries as of the Closing Date, either: (i) owns the entire right,
title and interest in and to the Trade Secrets used in its Business and the
Copyrights, Patent Rights, Trademarks and Software required to be listed in
Schedules
5.11(a) and 5.11(b), free and
clear of all Encumbrances; or (ii) has a valid and enforceable contractual right
or license to use the same in the conduct of its Business. The
Company and the Subsidiaries have taken all actions reasonably necessary to
protect and maintain the confidentiality of confidential information that, if
protected, would constitute Trade Secrets and to prevent the unauthorized use
thereof by any Person.
(d) Except as
set forth in Schedule
5.11(d), to the Knowledge of Seller: (i) all registrations for
Copyrights, Patent Rights and Trademarks required to be identified in Schedule 5.11(a) are
valid and in force, and all applications to register any unregistered
Copyrights, Patent Rights and Trademarks so identified are pending and in good
standing, all without challenge of any kind; (ii) the Copyrights, Patent
Rights and Trademarks (other than with respect to pending applications) owned by
the Company and the Subsidiaries or an Affiliate of Aon are valid and in force;
(iii) the Company and the Subsidiaries have the right to bring actions for
infringement or unauthorized use of the Copyrights, Patent Rights, Trademarks
and Software owned by the Company and the Subsidiaries; and (iv) as of the
date hereof, the Affiliate of Aon that owns the Copyrights, Patent Rights,
Trademarks and Software included in the Transferred Assets has the right to
bring actions for infringement or unauthorized use of such Copyrights, Patent
Rights, Trademarks and Software.
(e) Except as
set forth in Schedule
5.11(e), to the Knowledge of Seller, (i) no direct or indirect
infringement or misappropriation by the Company or any of the Subsidiaries of
any Intellectual Property right or license of any other Person has occurred or
resulted in any way from the conduct of their Business between January 1, 2006
and the date hereof and (ii) no written notice of a claim of any direct or
indirect infringement or misappropriation of any Intellectual Property of any
other Person has been received by the Company or any of the Subsidiaries or an
Affiliate of Aon in respect of the conduct of their Business between January 1,
2005 and the date hereof.
(f) Except as
set forth in Schedule
5.11(f), as of the date hereof, no proceedings are pending or, to the
Knowledge of Seller, threatened against the Company, any of the Subsidiaries or
an Affiliate of Aon which challenge the validity or ownership of or right to use
any Intellectual Property used in and material to the conduct of its
Business.
(g) Aon and
its Affiliates (solely with respect to the Business), the Company and its
Subsidiaries (i) own or lawfully possess adequate and enforceable rights to use
all Information Technology used in the conduct of the Business as currently
conducted and as proposed to be conducted and (ii) own or lawfully possess all
Information Technology necessary for the conduct of the Business as currently
conducted. The Information Technology owned or possessed by the
Company and its Subsidiaries is free from material defects so as to permit the
operation of its Business as presently conducted. Neither the Company
nor the Subsidiaries have granted to any unrelated Person any license,
sublicense or other similar right relating in whole or in part to the use of
such Information Technology.
Section
5.12 No Violation, Litigation or
Regulatory Action
. Except as set
forth in Schedule
5.12:
(a) the
Company, the Subsidiaries, APRM (solely with respect to the Business) and, to
the Knowledge of Seller, the Transactors have complied in all material respects
with all applicable Laws and Court Orders (including, in connection with the
marketing, sale and issuance of the Policies); and
(b) (i) as of
the date hereof, there is no action, litigation, claim, order, labor dispute,
arbitral action, government audit, hearing, proceeding or investigation that
would materially impair Buyer’s ability to perform its obligations hereunder or
prevent the consummation or any of the transactions contemplated hereby, and
(ii) other than as contemplated in (i) above, there is no action, litigation,
claim, order, labor dispute, arbitral action, government audit, hearing,
proceeding or investigation pending or, to the Knowledge of Seller, threatened
against, related to or affecting the Company, the Subsidiaries, APRM (solely
with respect to the Business) or the Transferred Assets.
None of
the representations and warranties contained in Section 5.12(a) or
Section 5.12(b)
shall be deemed to relate to Tax matters (which are governed by Section 5.7), ERISA
and employee benefits matters (which are governed by Section 5.15) or
Environmental Matters (which are governed by Section
5.16).
Section
5.13 Contracts
. Except as set
forth in Schedule
1.1 or Schedule
5.13, neither the Company, any Subsidiary, nor any of the Transferred
Assets is party to or bound by, or with respect to Sections 5.13(h),
(i), (j), (k), (l) and (m), neither the
Company, APRM (solely with respect to the Business), any Subsidiary, nor any of
the Transferred Assets is party to or bound by, any of the following (of which
Seller has made available to Buyer true, correct and complete
copies):
(a) any
contract (other than form purchase orders) for the purchase by the Company or
any Subsidiary of supplies or equipment which the Company or any Subsidiary
reasonably anticipates will involve the annual payment of more than $10,000
after the date hereof;
(b) agreements
or commitments for capital expenditures exceeding $10,000 or outside the
Ordinary Course of Business;
(c) contracts
or commitments to sell, lease, exclusively license out or otherwise dispose of
any assets and properties of the Business, other than in the Ordinary Course of
Business;
(d) collective
bargaining agreements;
(e) any
contract for the sale or license by the Company or any Subsidiary of any
services or products of their Business which involved payments or fees in fiscal
2007 of more than $10,000;
(f) any loan
agreements, promissory notes, indentures, bonds, security agreements, guarantees
or obligations for borrowed money or other instruments involving Indebtedness or
capital leases in excess of $25,000 principal amount, whether the Company or any
Subsidiary shall be the borrower, lender or guarantor thereunder or whereby the
assets of the Company, any Subsidiary or the Transferred Assets are
pledged;
(g) any
partnership, joint venture or other similar agreement or arrangement with any
entity other than the Company or the Subsidiaries;
(h) any
agreement containing covenants that in any way purport to (x) restrict the
business activity of the Company, APRM (solely with respect to the Business) or
any Subsidiary, including by preventing any of them from doing business with any
insurance carrier, agent or broker or (y) limit the freedom of the Company,
APRM (solely with respect to the Business), any Subsidiary or their respective
Affiliates or employees (including the Transactors) to engage in any line or
type of business or in any geographic area or with any Person;
(i) any
contract providing for agency, brokerage, producer or other arrangements between
the Company, APRM (solely with respect to the Business) or any Subsidiary and an
insurance carrier or producer in any case providing for payments that may exceed
$25,000 in any year;
(j) any
employment, consulting, severance, change in control or other agreement with any
employee (including the Transactors) or other service provider of the Company,
APRM (solely with respect to the Business) or any Subsidiary, or any Affiliate
Employee, in any case providing for payments that may exceed $25,000 in any
year;
(k) any
contract pursuant to which the Company, APRM (solely with respect to the
Business) or any Subsidiary accepts, bears, participates in or shares any
insurance risks;
(l) any
contract pursuant to which the Company, APRM (solely with respect to the
Business) or any Subsidiary provides services to insurance carriers other than
as an insurance producer including agreements with respect to consulting
services, self-insurance plans, insurance adjusting and risk purchasing
groups;
(m) any
material contract providing for the respective rights of the Company, APRM
(solely with respect to the Business) the Subsidiary, the Transactors, any
employees of the Company or the Subsidiary or any other Person to the Client
accounts or Commission Rights;
(n) any
material contract with the United States, state or local government or any
agency or department thereof;
(o) any loans
to officers or employees of the Business, the Company or its Subsidiaries;
or
(p) any
contracts or commitments that in any case is not terminable on at least 30 days
prior written notice or involve payments or receipts of more than $25,000 per
annum.
Section
5.14 Status of
Contracts
.
(a) Except as
set forth in Schedule
5.14(a), each of the leases, contracts, licenses and other agreements
listed in Schedules 1.1,
5.9, 5.10, 5.11, 5.13 (other than
5.13(h)) and
5.17
(collectively, the “Business Agreements”)
is in full force and effect (except as terminated prior to the Closing Date in
accordance with its terms) and is valid, binding and enforceable in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general application relating to or affecting creditors’
rights and to general equity principles. Each of the Company and the
Subsidiaries has duly performed its obligations under the Business
Agreements. No party is in, or, to the Knowledge of Seller, alleged
to be in, material breach or default under any of the Business
Agreements. No event has occurred that (with or without notice or
lapse of time) may materially contravene, materially conflict with, or result in
a material violation or material breach of, or give the Company, the
Subsidiaries or any Person the right to default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel, terminate or modify,
any Business Agreement. Seller has made available to Buyer a true and
correct copy of each Business Agreement, together with all amendments,
modifications and waivers related thereto.
(b) Neither
Aon nor its Affiliate, as applicable, is in, or, to the Knowledge of Seller,
alleged to be in, breach or default under the Business Agreements.
Section
5.15 ERISA
.
(a) List of
Plans. Schedule 5.15(a) sets
forth a complete list of each “employee benefit plan” as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) (whether or
not subject to ERISA) and each other plan, policy, program practice, agreement,
understanding or arrangement (whether written or oral) providing compensation or
other benefits to any Affiliate Employee or any current or former director,
officer, employee or consultant (or to any dependent or beneficiary thereof) of
the Company or any Subsidiary, or in which any Affiliate Employee or any
employee of the Company or any Subsidiary participates or is eligible to
participate, or under which the Company or any Subsidiary has or may have any
obligation or liability, whether actual or contingent (each, a “Company Plan”), and
Seller has made available to Buyer either a true and correct copy of each such
Company Plan or a summary plan description used in connection with such
plan. With respect to each Company Plan, (i) such plan has been
maintained and operated in all material respects in compliance with the
applicable requirements of the Code, ERISA, the regulations issued thereunder
and any other Laws, and all contributions required to be made under the terms of
any of the Company Plans as of the date of this Agreement have been timely made
or, if not yet due, have been properly reflected on the most recent consolidated
balance sheet filed or incorporated by reference in the Pro Forma Financial
Statements prior to the date of this Agreement and (ii) no event has
occurred and, to the Knowledge of Seller, there exists no condition or set of
circumstances in connection with which the Company or the Subsidiaries could be
subject to any material liability (other than for routine benefit liabilities)
under the terms of, or with respect to, such Company Plans, ERISA, the Code or
any other Law.
(b) Legal
Actions. As of the date hereof, no litigation or asserted
claims against the Company exist, or to the Knowledge of Seller are threatened,
with respect to any Company Plan (other than claims for benefits in the normal
course of business).
(c) Title IV of
ERISA.
(i) Except as
set forth on Schedule
5.15(c), no Company Plan is a Multiemployer Plan or other pension plan
subject to Title IV or Part 3 of Title I of ERISA or Section 412 of the Code,
and neither the Company nor any ERISA Affiliate has sponsored, maintained,
participated in, contributed to, or has been required to participate in or
contribute to a Multiemployer Plan or other pension plan subject to Title IV or
Part 3 of Title I of ERISA or Section 412 of the Code (any such plan, a “Company Pension
Plan”). The Company and the Subsidiaries do not have, and have
never had, any obligation to contribute to any Multiemployer Plan or
union-sponsored welfare fund with respect to its employees. None of
the Company or any ERISA Affiliate has incurred or would reasonably be expected
to incur any liability under or pursuant to Title IV of ERISA with respect to
its employees that would reasonably be expected to have a Material Adverse
Effect. None of the assets of the Company or any ERISA Affiliate is,
or may reasonably be expected to become, the subject of any lien arising under
ERISA or Section 412(n) of the Code.
(ii) With
respect to each Company Pension Plan that is subject to Title IV or Part 3 of
Title I of ERISA or Section 412 of the Code (other than a Multiemployer Plan),
(A) no reportable event (within the meaning of Section 4043 of ERISA, other than
an event for which the reporting requirements have been waived by regulations)
has occurred or is expected to occur, (B) there was not an accumulated funding
deficiency (within the meaning of Section 302 of ERISA or Section 412 of the
Code), whether or not waived, as of the most recently ended plan year of such
Company Pension Plan, (C) according to the latest actuarial information for
2008, each Company Pension Plan has a certified Adjusted Funding Target
Attainment Percentage (AFTAP) of at least 80% as determined under the rules
prescribed by the Pension Protection Act, (D) the Company and each ERISA
Affiliate have made when due any “required installments” within the meaning of
Section 412(m) of the Code and Section 302(e) of ERISA, whichever may apply, (E)
neither the Company nor any ERISA Affiliate is required to provide security
under Section 401(a)(29) of the Code, (F) all premiums (and interest charges and
penalties for late payment, if applicable) have been paid when due to the
Pension Benefit Guaranty Corporation (“PBGC”), and (G) no
filing has been made by the Company or any ERISA Affiliate with the PBGC and no
proceeding has been commenced by the PBGC to terminate any such Company Pension
Plan and no condition exists which could constitute grounds for the termination
of any such Company Pension Plan by the PBGC.
(d) Tax Qualification of
Plans. Each Company Plan which is intended to qualify under
Section 401(a), Section 401(k), Section 401(m) or Section 4975(e)(7) of the Code
has either (i) received a favorable determination letter from the IRS as to its
qualified status, or (ii) may rely upon a favorable prototype opinion letter
from the IRS, and each trust established in connection with any Company Plan
which is intended to be exempt from federal income taxation under Section 501(a)
of the Code is so exempt, and to the Knowledge of Seller, no fact or event has
occurred that could adversely affect the qualified status of any such Company
Plan or the exempt status of any such trust.
(e) Prohibited
Transactions. To the Knowledge of Seller, there has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code and other than a transaction that is exempt under a statutory
or administrative exemption) with respect to any Company Plan that could result
in liability to the Company or the Subsidiaries.
(f) Change in
Control. Except as set forth on Schedule 5.15(f),
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in any payment, acceleration or
creation of any rights of any Company Employee or any Affiliate
Employee. No amount that could be received (whether in cash,
property, the vesting of property or otherwise) as a result of or in connection
with the consummation of the transactions contemplated by this Agreement (either
alone or in combination with any other event) or by any of the Buyer Ancillary
Agreements, by any employee, officer, director or other service provider of the
Company or the Subsidiaries or any Affiliate Employee who is a “disqualified
individual” (as such term is defined in Treasury Regulation Section 1.280G-1)
could be characterized as an “excess parachute payment” (as defined in Section
280G(b)(1) of the Code).
(g) Retiree
Health/COBRA. Except as set forth on Schedule 5.15(g) and
as may be required to comply with any applicable Law, no Company Plan provides
any of the following retiree or post-employment benefits to any person: medical,
disability or life insurance benefits. The Company and the
Subsidiaries are in compliance in all material respects with (i) the
requirements of the applicable health care continuation and notice provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
regulations (including proposed regulations) thereunder (“COBRA”) and any
similar state law and (ii) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996, as amended, and the regulations
(including proposed regulations) thereunder.
(h) Code Section
409A. Each Company Plan that is a nonqualified deferred
compensation plan subject to Section 409A of the Code has been operated and
administered in good faith compliance with Section 409A of the Code from the
period beginning January 1, 2005 through the date hereof. All Aon
stock options granted to employees of the Company or the Subsidiaries or to
Affiliate Employees have been granted in compliance with all applicable Laws and
the applicable equity incentive plan and have (or with respect to such options
which have been exercised as of the date of this Agreement, had) a per share
exercise price that is (or with respect to such options which have been
exercised as of the date of this Agreement, was) at least equal to the fair
market value of a share of the underlying stock as of the date the option was
granted (determined in accordance with applicable Laws, including, to the extent
applicable, Section 409A of the Code).
(i) Classification. The
Company and the Subsidiaries have properly classified all individuals providing
services to the Company and the Subsidiaries as employees or non-employees for
all relevant purposes.
(j) Foreign
Plans. Neither the Company nor the Subsidiaries has sponsored,
maintained, participated in, contributed to, or has been required to sponsor,
maintain, participate in or contribute to, any employee benefit plan, program,
or other arrangement providing compensation or benefits to any employee or
former employee (or any dependent thereof) which is subject to the laws of any
jurisdiction outside of the United States.
Section
5.16 Environmental
Matters
. Except as set
forth in Schedule
5.16,
(a) each of
Aon and Seller (in each case, solely with respect to the Business), the Company
and the Subsidiaries are in compliance in all material respects with applicable
Environmental Laws;
(b) neither
the Company nor any Subsidiary nor, with respect to the Transferred Assets, Aon
or its Affiliates, is subject to any judicial or administrative proceeding, or
outstanding obligation under any outstanding order, judgment, decree or
settlement, in each case, in each case alleging or addressing a violation of or
Liability under any Environmental Law, and no notice of investigation has been
received or, to the Knowledge of Seller, no investigation threatened by any
Administrative Authority, and, to the Knowledge of Seller, there are no facts or
circumstances relating to the Company, any Subsidiary or the Transferred Assets
that could reasonably be expected to form the basis for any such judicial or
administrative proceeding, order, judgment, decree or settlement alleging or
addressing a violation of or Liability under any Environmental Law involving the
Company, any Subsidiary or the Transferred Assets;
(c) neither
the Company nor any Subsidiary (nor Aon, Seller and their Affiliates, in each
case, solely with respect to the Business) has received any written notice or
claim of alleged, actual or potential responsibility or liability for, or any
inquiry or investigation regarding, any Release or threatened Release of a
Hazardous Material, or alleged violation of or non compliance with Environmental
Laws, nor to the Knowledge of Seller, is there any information which could
reasonably form the basis of any such notice or claim; and
(d) Seller,
the Company and the Subsidiaries have obtained all material Governmental
Permits, if any, that are required under applicable Environmental Laws in
connection with the Business. Each of such Governmental Permits is in
full force and effect and, the Company and the Subsidiaries are in compliance in
all material respects with the terms and conditions of all such Governmental
Permits.
The
representations and warranties set forth in this Section 5.16 are
Seller’s sole and exclusive representations regarding Environmental
Matters.
Section
5.17 Employee Relations and
Agreements
.
(a) Schedule 5.17 contains a true
and complete listing of each employee of the Company and the Subsidiaries and
each individual listed on Schedule 8.2(a) whose
base compensation exceeded $250,000 during the twelve months ended December 31,
2007, along with their base compensation during such period. Schedule 5.17
separately lists each Company Employee and each Affiliate Employee who is on
short-term or long-term disability or any other leave of absence, or who is not
otherwise an active employee. With respect to each employee on any
leave of absence, Schedule 5.17
lists the date on which such leave began and the type of
leave. Seller has made available to Buyer a true and complete list of
all current Company Employees and Affiliate Employees which sets forth the
following information with respect to each such individual: name, position,
employer, date of hire, years of credited service, and base
compensation.
(b) Except as
set forth in Schedule 5.17,
since January 1, 2000, neither the Company nor any Subsidiary is or has been a
party to any labor contract or collective bargaining agreement having provisions
covering its employees or is currently negotiating such an agreement; and the
foregoing applies with respect to the Affiliate of Seller that employs the
individuals listed on Schedule
8.2(a).
(c) Except as
set forth in Schedule
5.17, no union or similar organization represents employees of the
Company or any Subsidiary and, to the Knowledge of Seller, no such organization
is currently attempting to organize or otherwise represent such employees; and
the foregoing applies with respect to the Affiliate of Seller that employs the
individuals listed on Schedule
8.2(a).
(d) Except as
set forth in Schedule 5.17,
(i) no complaint against the Company or any Subsidiary is currently pending or,
to the Knowledge of Seller, threatened before the National Labor Relations Board
or the Equal Employment Opportunity Commission or before any analogous entity in
any country, (ii) there are no labor strikes, disputes, requests for
representation, slowdowns, or stoppages actually pending or, to the Knowledge of
Seller, threatened against the Company or any Subsidiary, and (iii) neither the
Company nor any Subsidiary has caused an employee to suffer an “employment loss”
(as that term is defined in the Worker Adjustment and Retraining Notification
Act of 1988 (“WARN”)) or engaged in
a “layoff”, “mass layoff”, “termination” or “relocation” (as those terms are
defined in California Labor Code Section 1400) in the ninety (90) day period
prior to the date of this Agreement; and the foregoing applies with respect to
the Affiliate of Seller that employs the individuals listed on Schedule
8.2(a).
(e) The
Company and the Subsidiaries are in material compliance with all applicable Laws
respecting labor, employment, immigration, fair employment practices, terms and
conditions of employment, workers’ compensation, occupational safety, plant
closings and wages and hours. There are no material controversies
pending or, to the Knowledge of Seller, threatened between the Company or any
Subsidiary and any of its respective current or former employees which have or
could reasonably be expected to result in a proceeding before an Administrative
Authority. Seller has made available to Buyer true and correct copies
of any written material relating to the material personnel policies of the
Company and the Subsidiary. The foregoing representations of this
Section 5.17(e)
apply with respect to the Affiliate of Seller that employs the individuals
listed on Schedule
8.2(a).
(f) Except as
set forth in Schedule 5.17,
no director, officer or employee of the Company or any Subsidiary is a party to
any employment or other agreement with the Company or the Subsidiary that
entitles him or her to compensation or other consideration upon the acquisition
by any Person of control of the Company or any Subsidiary; and the foregoing
applies with respect to the Affiliate of Seller that employs the individuals
listed on Schedule
8.2(a).
(g) Except as
set forth on Schedule 5.17,
no Transactor or director, officer or employee of the Company, APRM (solely with
respect to the Business) or any Subsidiary has made or is required to make a
filing with any Administrative Authority seeking an exemption or consent under
18 U.S.C. § 1033(e)(2).
(h) Except as
set forth on Schedule 5.17,
each of the Company, APRM (solely with respect to the Business) and the
Subsidiaries has made all filings with all Administrative Authorities required
to be made under all applicable Laws to appoint, endorse and authorize the
Transactors to transact insurance on their behalf.
(i) Except as
set forth in Schedule 5.17,
no employee (including any Transactor) of the Company, APRM (solely with respect
to the Business) or any Subsidiary has indicated in writing to Seller, the
Company or the Subsidiary that such employee will be unable or unwilling to
continue its relationship with the Company or the Subsidiary after the Closing
Date.
(j) Except as
set forth in Schedule 5.17,
the Transactors are the only Persons transacting insurance on behalf of the
Company, APRM (solely with respect to the Business) and the
Subsidiary.
Section
5.18 No Undisclosed
Liabilities
. Neither the
Company nor any Subsidiary nor the Transferred Assets is subject to any material
Liabilities, other than Liabilities (i) set forth on the face of the Pro Forma
2007 Balance Sheet (rather than in any notes thereto), (ii) set forth in Schedule 5.18, or
(iii) incurred since December 31, 2007 in the Ordinary Course of Business of the
Company and the Subsidiaries, none of which results from, arises out of, relates
to, is in the nature of or was caused by any breach of any contract, breach of
warranty, tort, infringement or violation of Law.
Section
5.19 Sufficiency of
Assets
. Except as set
forth in Schedule
5.19, the assets and properties of the Company and the Subsidiaries,
including the Transferred Assets, constitute all of the assets and properties
necessary to operate the business of insurance brokerage or agency for
individual consumers of automobile, motorcycle, property, flood, recreational
vehicle, watercraft and umbrella insurance policies in the United States, as
heretofore conducted by Aon, Seller, the Company, the Subsidiaries and their
respective Affiliates (excluding any operating business that is not reflected in
the revenues of the Company and its Subsidiaries in the Pro Forma Financial
Statements) in the Ordinary Course of Business, other than assets and properties
utilized to provide services under the Transition Services Agreement and the
Software License. Nothing in this Section 5.19
constitutes a representation or warranty with respect to title or the condition
of any assets or properties (whether real or personal, tangible or intangible,
owned, leased or held under license), any and all representations or warranties
with respect to which are set forth in other sections of this Article
V.
Section
5.20 Insurance
.
(a) Schedule 5.20 is a
true, complete and correct list of all policies of insurance currently providing
coverage to the Company or the Subsidiaries.
(b) Schedule 5.20
describes any self-insurance arrangement for the transfer or sharing of any risk
by the Company or the Subsidiary, other than a policy of insurance.
(c) Seller
has made available a description of the loss experience since January 1, 2003
through July 1, 2008, under each policy listed in Schedule 5.20
providing coverage for errors and omissions or workers’ compensation claims, and
a similar description of losses incurred under any self-insurance arrangements
during that period.
(d) The
Company and the Subsidiary currently maintain policies of fire and extended
coverage and casualty, liability and other forms of insurance in such amounts
and against such risks and losses, and including such levels of self-insured
retention, as are in their judgment prudent and shall use reasonable efforts to
keep such insurance or comparable insurance in full force and effect through the
Closing Date.
Section
5.21 No
Brokers
. Except for the
services of Aon Capital Markets, none of the Company, the Subsidiaries or any
Person acting on their behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement. Seller is solely
responsible for any payment, fee or commission that may be due to Aon Capital
Markets in connection with the transactions contemplated hereby.
Section
5.22 Books and
Records
. The Books and
Records of Aon, Seller and their respective Affiliates (solely with respect to
the Business), the Company and the Subsidiaries, which Seller has made available
to Buyer, are true, complete and correct and have been made and kept in
accordance with sound business practices. None of the Books and
Records is recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) that (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of one or more employees of Seller, the Company or any
Subsidiary.
Section
5.23 Affiliate
Transactions
. Except as
disclosed in Schedule
5.23 hereto and except for services of the types to be provided under the
Transition Services Agreement to Buyer after the Closing, (a) no director,
officer or Affiliate of Seller, the Company or any Subsidiary or any Affiliate
of any such officer, director or Affiliate provides or causes to be provided any
assets, services or facilities used or held for use in connection with the
Company and the Subsidiaries or the Business, and (b) the Company and the
Subsidiaries do not provide or cause to be provided any assets, services or
facilities to any such officer, director or Affiliate.
Section
5.24 Competing
Transactions
. None of Seller,
the Company or any Subsidiary is a party to or bound by any agreement, agreement
in principle or other commitment (whether or not legally binding) relating to
any possible business combination involving the Company or the Subsidiary or the
sale of substantially all the assets or shares of the Company or any Subsidiary
(a “Competing
Transaction”) (other than this Agreement) and Seller, the Company and the
Subsidiaries have terminated all discussions with any third party (other than
Buyer), if any, regarding any Competing Transaction.
Section
5.25 Client
Accounts
. Except as set
forth in Schedule
5.25, (i) the Client accounts are direct accounts of the Company, APRM
(solely with respect to the Business) and the Subsidiaries, (ii) none of the
Clients has been brokered to the Company, APRM (solely with respect to the
Business) or any of the Subsidiaries by any third party, and (iii) no other
Person (including any Transactor or other employee of the Company, APRM (solely
with respect to the Business) or any of the Subsidiaries) owns or otherwise has
any right, title or interest in or to the Commission Rights.
Section
5.26 Insurer/Producer
Relationships; Insurer Appointments; Broker Authority
.
(a) Schedule 5.26(a) sets
forth a true and complete list of (i) each insurance company or producer for
which the Company, APRM (solely with respect to the Business) or any of the
Subsidiaries produces or subproduces business, setting forth the name of each
such Person and the total gross premiums produced by the Company, APRM (solely
with respect to the Business) or any of the Subsidiaries or the Business for
each such Person during the 12 months ended December 31, 2007, and 8 months
ended August 31, 2008, and (ii) each insurance company that has appointed the
Company, APRM (solely with respect to the Business) any of the Subsidiaries or a
Transactor as such insurance company’s agent as well as the Administrative
Authority with which such appointment was filed.
(b) The
insurer appointments identified on Schedule 5.26(a)
constitute all of the appointments that the Company, APRM (solely with respect
to the Business) any of the Subsidiaries and the Transactors require to conduct
the Business (the “Required
Appointments”), each such Required Appointment is valid and binding in
accordance with its terms on the parties thereto, and there has been no notice
in writing that any such Required Appointment will be, nor, to the Knowledge of
Seller, do any grounds exist, which could reasonably be expected to result in
any such Required Appointment being, revoked, rescinded or
terminated.
(c) Each of
the Company, APRM (solely with respect to the Business) and any of the
Subsidiaries acts as an agent (and not as a broker) for each insurance company
that has appointed it as an agent of such insurance company. Each of
the Business, the Company, APRM (solely with respect to the Business) and the
Subsidiaries acts as a broker with respect to the placement of insurance on
behalf of any Client with any insurance company that has not appointed it as an
agent of such insurance company.
(d) Neither
the Company, APRM (solely with respect to the Business) nor any of the
Subsidiaries is a party to any agreement which prevents it from doing business
with any insurance company or producer. Neither the Company, APRM
(solely with respect to the Business) any of the Subsidiaries nor, to the
Knowledge of Seller, any Transactor is bound, or committed to bind, any
insurance coverage in connection with any Policy which exceeds its binding
authority in respect thereof. Neither the Company, APRM (solely with
respect to the Business) any of the Subsidiaries nor, to the Knowledge of
Seller, any Transactor is in default under any material obligations to any
insurance company or producer through which it places insurance, nor does any
insurance company or producer claim that any such default exists.
(e) All
Policies with respect to the Business are transacted by AIS or
APRM.
Section
5.27 Certain Compensation
Arrangements
(a) Schedule 5.27 sets
forth a true and complete list of each insurance company or producer that paid
any contingent, volume-based or profit-based commissions or any commissions that
are not based on a fixed percentage of new and renewal premium (collectively,
“Contingent
Commissions”) to the Company, APRM (solely with respect to the Business)
or the Subsidiaries since April 1, 2005, setting forth the names of each
such Person paying such Contingent Commissions and the amount and type of
Contingent Commissions paid to the Company, APRM (solely with respect to the
Business) or the Subsidiaries.
(b) Neither
the Company, APRM (solely with respect to the Business) the
Subsidiaries nor any of the Transactors charges, collects or receives any Broker
Fees from any Client with respect to insurance placed with an insurance company
that has appointed the Company, APRM (solely with respect to the Business) any
of the Subsidiaries or any of the Transactors to act as an agent of such
insurance company.
Section
5.28 Fiduciary
Funds
(a) Schedule 5.28(a) sets
forth a complete and accurate list of all premium trust accounts maintained by
the Company, APRM (solely with respect to the Business) and the
Subsidiaries.
(b) Except as
disclosed in Schedule
5.28(b), each premium trust account maintained by the Company, APRM
(solely with respect to the Business) and the Subsidiaries is, and has during
the past five (5) years been, fully funded and maintained in accordance with all
applicable Laws.
Section
5.29 Transferred
Assets
. Aon, or one of
its Affiliates, has good and marketable title to each item of equipment and
other tangible personal property included in the Transferred Assets, and as of
the Closing Date, the Company or the Subsidiaries will have good and marketable
title to such Transferred Assets.
Section
5.30 Internal
Controls
. The Company and
the Subsidiaries each maintain internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in
accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES OF BUYER
As an
inducement to Aon and Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Buyer hereby represents and warrants to Aon
and Seller as follows, which representations and warranties are, as of the date
hereof, and will be as of the Closing Date, true and correct:
Section
6.1 Organization of
Buyer
. Buyer is a
corporation duly formed, validly existing and in good standing under the laws of
the State of California. Buyer has full corporate power and authority
to own or lease and operate its assets and to carry on its business in the
manner that it was conducted immediately prior to the date of this
Agreement.
Section
6.2 Authority of Buyer;
Conflicts
.
(a) Buyer has
the corporate power and authority to execute, deliver and perform this Agreement
and each of the Buyer Ancillary Agreements. The execution, delivery
and performance of this Agreement and the Buyer Ancillary Agreements by Buyer
have been duly authorized and approved by Buyer’s board of
directors. No other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement and the Buyer Ancillary Agreements and the
transactions contemplated hereby or thereby. This Agreement has been
duly authorized, executed and delivered by Buyer and (assuming the valid
authorization, execution and delivery by Aon and Seller) is the legal, valid and
binding obligation of Buyer enforceable in accordance with its terms, and each
of the Buyer Ancillary Agreements has been duly authorized by Buyer and upon
execution and delivery by Buyer will be (assuming the valid authorization,
execution and delivery by each of the other parties thereto) a legal, valid and
binding obligation of Buyer enforceable in accordance with its terms, in each
case subject to bankruptcy, insolvency, reorganization, moratorium and similar
laws of general application relating to or affecting creditors’ rights and to
general equity principles.
(b) Neither
the execution and delivery by Buyer of this Agreement or any of the Buyer
Ancillary Agreements or the consummation by Buyer of any of the transactions
contemplated hereby or thereby nor compliance by Buyer with or fulfillment by
Buyer of the terms, conditions and provisions hereof or thereof
will:
(i) assuming
that all necessary consents, approvals, authorizations and other actions
described in Section
6.2(b)(ii) have been obtained, all filings and notifications described in
Section
6.2(b)(ii) have been made and any applicable waiting period has expired
or been terminated, result in a material violation or material breach of the
terms, conditions or provisions of, or materially conflict with, or constitute a
material default, an event of default or an event creating rights of
acceleration, modification, termination or cancellation or a loss of material
rights or requirement of notice under, or result in the creation or imposition
of any material Encumbrance upon Buyer, or any assets of Buyer, under (1) the
charter or by-laws of Buyer, (2) any agreement, contract, license, Governmental
Permit, instrument, or other arrangement to which Buyer is a party or by which
it is bound or to which any of its assets are subject, (3) any note, instrument,
mortgage, lease, franchise or financial obligation to which Buyer is a party or
by which it is bound, (4) any Court Order to which Buyer is a party or by which
it is bound or (5) any Law affecting Buyer; or
(ii) require
the approval, consent, authorization or act of, or the making by Buyer of any
declaration, filing or registration with, any Administrative Authority, except
for (1) in connection, or in compliance, with the provisions of the HSR Act, (2)
the California Department of Insurance (to the extent required) and (3) the
Texas Department of Insurance.
Section
6.3 No Violation, Litigation or
Regulatory Action
. Except as set
forth in Schedule
6.3:
(a) Buyer has
complied with all applicable Laws and Court Orders, other than those instances
of noncompliance which would not reasonably be expected to materially impair the
ability of Buyer to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby; and
(b) as of the
date hereof, there is no action, claim, litigation, order, labor dispute,
arbitral action, government audit, inquiry, criminal proceeding, suit, hearing,
proceeding or investigation pending or, to the knowledge of Buyer, threatened
against, related to or affecting Buyer or its subsidiaries which is reasonably
expected to materially impair the ability of Buyer to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
Section
6.4 Investment
Intent
. Buyer is
acquiring the Shares as an investment for its own account and not with a view to
the distribution thereof. Buyer shall not sell, transfer, assign,
pledge or hypothecate any of the Shares in the absence of registration under, or
pursuant to an applicable exemption from, federal and applicable state
securities laws.
Section
6.5 Financial
Ability
. Buyer has the
financial ability to consummate the transactions contemplated by this
Agreement.
Section
6.6 No
Brokers
. Neither Buyer nor
any Person acting on its behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
ARTICLE
VII
ACTION
PRIOR TO THE CLOSING DATE
The
respective parties hereto covenant and agree to take the following actions
between the date hereof and the Closing Date:
Section
7.1 Access to
Information
. Seller shall and
shall cause the Company and the Subsidiaries to afford to the officers,
employees and authorized representatives of Buyer (including independent public
accountants and attorneys) reasonable access during normal business hours, upon
reasonable advance notice, to the offices, properties, employees and business
and financial records (including computer files, retrieval programs and similar
documentation) of the Business, the Company, the Subsidiaries, APRM (solely with
respect to the Business) and the Transferred Assets and shall promptly furnish
or cause to be furnished to Buyer or its authorized representatives such
additional information concerning the Business, the Company and the
Subsidiaries, APRM (solely with respect to the Business) and the Transferred
Assets as shall be reasonably requested, including, within ten (10) days after
the end of each month, a copy of the income statement and balance sheet for such
month and the fiscal year to date of the Company and the Subsidiaries, prepared
in a manner and containing information consistent with the Company’s and the
Subsidiaries’ current practices; provided, however, that Buyer
shall not, without the prior written consent of Seller, contact or communicate
with any vendor, customer or other business partner of the Company or the
Subsidiaries with respect to or in connection with the transactions contemplated
by this Agreement. Buyer agrees that (A) such investigation shall be
conducted in such a manner as to not interfere unreasonably with the operations
of Seller, the Company and the Subsidiaries; and (B) Seller, the Company and the
Subsidiaries shall not be required to provide any books and records or reports
based thereon that they do not maintain or prepare in the Ordinary Course of
Business. The parties shall act at all times in accordance with the
terms and provisions of the Confidentiality Agreement.
Section
7.2 Notification
. Each of Buyer and
Seller shall promptly notify the other of any action, suit or proceeding that
shall be instituted or threatened against such party to restrain, prohibit or
otherwise challenge the legality of any transaction contemplated by this
Agreement. Each party hereto shall promptly notify the other of any
lawsuit, claim, proceeding or investigation that may be threatened, brought,
asserted or commenced against the Company, the Subsidiaries, Seller or Buyer, as
the case may be, that would have been listed in Schedule 5.12 or
Schedule 6.3,
as the case may be, if such lawsuit, claim, proceeding or investigation had
arisen prior to the date hereof.
Section
7.3 Consents of Third Parties;
Governmental Approvals
.
(a) Seller
and Buyer will act diligently and reasonably in attempting to secure, before the
Closing Date, the consent, approval or waiver, in form and substance reasonably
satisfactory to the other party, required to be obtained from any party (other
than an Administrative Authority) to consummate the transactions contemplated by
this Agreement; provided, however, that such
action shall not include any requirement of Aon, Seller, the Company, the
Subsidiaries, on one hand, or Buyer, on the other hand, or any of their
respective Affiliates, to expend money in excess of $125,000 in the
aggregate.
(b) During
the period prior to the Closing Date, each of Buyer and Seller shall
act diligently and reasonably, and upon the request of the other party, shall
use its reasonable efforts to cooperate, in attempting to secure any consents
and approvals of any Administrative Authority required to be obtained by Buyer
or Seller in order to permit the consummation of the transactions contemplated
by this Agreement or to otherwise satisfy the conditions set forth in Sections 9.3 and
10.3. In
connection therewith and subject to Section 7.3(c), each
of Buyer and Seller shall use its commercially reasonable efforts to make all
such filings no later than 45 business days after the date hereof and in any
event prior to the Closing Date. Prior to filing any materials or
documents with any Administrative Authority, each of Buyer and Seller shall
afford the other party a reasonable opportunity (no less than three business
days) to review and comment on such materials or documents; provided; that such
materials or documents do not contain or reveal confidential information of
Buyer, the Company, the Subsidiaries or any of their respective Affiliates in
which event such materials or documents shall be provided on a confidential
basis solely to the other party’s outside counsel, subject to entering into a
mutually agreeable joint defense agreement.
(c) Buyer and
Seller shall use their reasonable best efforts to file not more than 10 business
days after the date hereof with the Federal Trade Commission and the Antitrust
Division of the Department of Justice the Notification and Report Form and other
information required to be filed under the HSR Act. Each party
warrants that all such filings by it will be, as of the date filed, true,
complete and accurate and in substantial compliance with the requirements of the
HSR Act. Each of Buyer and Seller agrees to file as promptly as
reasonably practicable any additional information requested by such
Administrative Authorities under the HSR Act (including information requested
pursuant to any request for additional information), to make available to the
other such information as each of them may reasonably request relative to its
business, assets and properties as may be required of each of them “to
substantially comply” with such “request for additional information” (including
information required pursuant to any such request for additional information)
and to take all other actions reasonably necessary to cause the expiration or
termination of the applicable waiting period under the HSR Act as soon as
practicable after the date hereof.
(d) Each of
Buyer and Seller shall (i) permit the other to review in advance any proposed
written communication by such party or their respective advisors to any
Administrative Authority relating to the subject matter of this Agreement, (ii)
promptly notify the other party of any written communication it or any of its
Affiliates (or their respective advisors) receives from any Administrative
Authority relating to such matters and (iii) provide to the other copies of all
correspondence, filings or written communications between it or any of its
Affiliates (or their respective advisors) and any such Administrative Authority
relating to this Agreement or any of the matters described in this Section 7.3(d); provided that such
correspondence, filings or written communications do not contain or reveal
confidential information of Buyer or the Company, the Subsidiaries, or any of
their respective Affiliates, respectively, in which event such materials or
documents shall be provided on a confidential basis solely to the other party’s
outside counsel, subject to entering into a mutually agreeable joint defense
agreement.
(e) Notwithstanding
anything to the contrary in this Agreement, in connection with obtaining any
approval or consent from any Person with respect to the transactions
contemplated by this Agreement, (i) without the prior written consent of Buyer,
none of Seller, the Company, the Subsidiaries nor any of their Affiliates shall
pay or commit to pay to such Person whose approval or consent is being solicited
any cash or other consideration, make any commitment or incur any liability or
other obligation due to such Person, provided that Buyer’s
consent shall not be required if (A) neither the Company, the Subsidiaries nor
the Business shall bear any Liability or responsibility arising from or relating
to the matters relating to such consent and (B) no commitment or agreement is
made in connection with such consent that would have an ongoing impact on Buyer,
the Company, the Subsidiaries or the Transferred Assets, and (ii) neither Buyer
nor any of its Affiliates shall be required to pay or commit to pay to such
Person whose approval or consent is being solicited any cash or other
consideration, make any commitment or incur any liability or other
obligation. The foregoing shall not negate any obligation of a party
to pay any filing fee to any Administrative Authority.
(f) Notwithstanding
anything to the contrary in this Agreement, in connection with seeking or
attempting to obtain any necessary approvals or clearances or non-action of any
Administrative Authority (including under the HSR Act) or to resolve or
eliminate any objection, order or injunction, neither Buyer nor any of its
Affiliates shall be required to sell, hold separate or otherwise dispose of or
conduct or agree to conduct its business in any specified manner or enter into
or agree to enter into a voting trust arrangement, proxy arrangement, or similar
agreement or arrangement, nor shall the Buyer or any of its Affiliates be
required to agree to , sell, hold separate or otherwise dispose of or conduct
its or agree to conduct in any specified manner, or enter into or agree to enter
into a voting trust arrangement, proxy arrangement, “hold separate” agreement or
arrangement or similar agreement or arrangement with respect to the Company or
any of its Affiliates or the business or any material assets of the Buyer, the
Company or any of their Affiliates, nor shall Seller, the Company or any of its
Affiliates enter into or agree to any such agreement or
arrangement.
Section
7.4 Transferred
Assets
. Aon
and Seller shall cause the Transferred Assets to be transferred to the Company
or the Subsidiaries prior to the Closing Date, free from Encumbrances, except
for Permitted Encumbrances. In addition, prior to the Closing Date,
Aon and Seller shall use commercially reasonable efforts to:
(a) cause
ASPN to make all filings with all Administrative Authorities required to be made
under all applicable Laws to appoint, endorse and authorize the APRM Transactors
to transact insurance on ASPN’s behalf;
(b) cause
ASPN to make all filings with all Administrative Authorities required to be made
under all applicable Laws to authorize ASPN to broker insurance (including the
filing of any bonds with any Administrative Authorities that require such
filings in order to broker insurance);
(c) cause the
APRM Insurer/Producer Contracts to be assigned to ASPN and in connection
therewith obtain the written consent of the insurers or producers that are
parties to such APRM Insurer/Producer Contracts, to the extent required by the
terms thereof, and take such other actions as required to legally assign the
APRM Insurer/Producer Contracts to ASPN; and
(d) cause
each insurance company that has appointed APRM or any APRM Transactor as such
insurance company’s agent with any Administrative Authority in respect of the
Business to make a filing with such Administrative Authority to appoint ASPN as
such insurance company’s agent.
Section
7.5 Operations Prior to the
Closing Date
.
(a) Except as
set forth in Schedule
7.5 or as contemplated by this Agreement or except with the written
approval of Buyer, Seller shall cause the Company and the Subsidiaries to
operate and carry on their Business in the Ordinary Course of Business and
substantially as operated immediately prior to the date of this
Agreement. Consistent with the foregoing, Seller shall cause the
Company and the Subsidiaries to use their reasonable efforts consistent with
good business practice to preserve the goodwill of the suppliers, contractors,
licensors, employees, customers, distributors and others having business
relations with the Company and the Subsidiaries.
(b) Notwithstanding
Section 7.5(a),
except as set forth in Schedule 7.5, as
contemplated by this Agreement or with the written consent of Buyer (any request
for which Buyer will consider in good faith), Seller shall not permit the
Company and the Subsidiaries to:
(i) sell,
lease (as lessor), transfer, assign or otherwise dispose of, or mortgage or
pledge, or impose or suffer to be imposed any Encumbrance on, any of its assets,
tangible or intangible, except for (i) assets sold or otherwise disposed of
in the Ordinary Course of Business for fair consideration and (ii) Permitted
Encumbrances;
(ii) cancel,
compromise, waive or release any debts owed to or rights or claims held by it
(including the settlement of any claims or litigation) outside the Ordinary
Course of Business;
(iii) create,
incur or assume, or agree to create, incur or assume, any Indebtedness or enter
into, as lessee, any capitalized lease obligation (as defined in Statement of
Financial Accounting Standards No. 13) or any voluntary purchase, cancellation,
prepayment or complete or partial discharge in advance of a scheduled payment
date with respect to, or waiver of any right under, any Indebtedness of or owing
to the Company or the Subsidiaries;
(iv) except
(i) as set forth in Schedule 7.5(b)(iv)
or (ii) for any compensation and employment practices applied generally for Aon,
institute any increase in any benefit provided under any Company Plan, other
than in the Ordinary Course of Business;
(v) make, or
agree to make, any distribution or other disposition of assets (other than cash
or cash equivalents) to Seller or any of its Affiliates;
(vi) make any
change in the compensation of their employees, other than changes made in
accordance with normal compensation practices or pursuant to existing
commitments under plans or arrangements disclosed on Schedules 5.15 or
5.17 and
consistent with past compensation practices, including any (i) increase in the
cash compensation payable or to become payable to or for the benefit of any such
employees; (ii) increase in the security or tenure of employment; or (iii)
increase in the amount payable to any such employees upon the termination of
their employment, in each case, except for any compensation and employment
practices applied generally for Aon;
(vii) enter
into or adopt any employment, consulting, severance, or change in control
agreement, any Company Plan or any collective bargaining agreement (other than
ordinary course at-will employment arrangements not providing for any severance
or change in control payments), or modify in any material respect the terms of
any existing such contract, plan or agreement, or grant any rights to severance,
termination or change in control payments, other than with respect to employees
who are not officers, executives or key employees, other than in the Ordinary
Course of Business;
(viii) make any
change in their charters or by-laws or issue any capital stock (or securities
exchangeable, convertible or exercisable for capital stock);
(ix) make, or
agree to make, (i) any acquisition, disposition, lease, transfer or assignment
of any material assets or properties used or held for use in the conduct of the
Business, or (ii) any creation or incurrence of any Encumbrance, other than a
Permitted Encumbrance, on any of such assets or properties,
(x) make any
change in (i) the accounting policies applied in the preparation of the Pro
Forma Financial Statements, unless such change was required by GAAP, (ii) any
accounting, financial reporting or allowance related practice or policy of the
Business or (iii) any method of calculating any bad debt, contingency or other
reserve of the Business for accounting, or financial reporting related
purposes;
(xi) make or
change any material Tax election; change any annual Tax accounting period; adopt
or change any material method of Tax accounting; amend any material Tax Returns
or file any material claims for Tax refunds; enter into any closing agreement,
Tax allocation agreement, Tax sharing agreement or material Tax indemnity
agreement; settle or compromise any material Tax claim, audit, notice or
assessment; extend or waive any statute of limitations period applicable to any
material Tax claim or assessment or any right to claim a material Tax refund; or
surrender any offset or other reduction in Tax liability, in each case specific
to or affecting the Company or any Subsidiary;
(xii) enter
into any transaction with any officer, director or Affiliate of Seller or any
Affiliate of any such officer, director or Affiliate, except in the Ordinary
Course of Business;
(xiii) enter
into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, or licenses) outside the Ordinary Course of
Business;
(xiv) make any
investment in, any loan to, or any acquisition of the securities or assets of,
any other Person (or series of related investments, loans, or acquisitions)
outside the Ordinary Course of Business;
(xv) accelerate,
terminate, modify, or cancel any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) outside the
Ordinary Course of Business;
(xvi) make any
capital expenditure (or series of related capital expenditures) outside the
Ordinary Course of Business;
(xvii) transfer,
assign, or grant any license or sublicense of any rights under or with respect
to any Intellectual Property other than in the Ordinary Course of
Business;
(xviii) cause any
employee to suffer an “employee loss” (as that term is defined in WARN); or
engage in a “layoff”, “mass layoff”, “termination” or “relocation” (as those
terms are defined in California Labor Code Section 1400); or
(xix) enter
into any agreement, whether oral or written, by the Company or the Subsidiary to
do any of the things described in the preceding clauses (i) through (xviii)
other than as expressly provided for herein.
Section
7.6 Termination of Certain
Intercompany Indebtedness
. At or prior to
the Closing, Seller shall release, cancel, terminate or otherwise settle all
intercompany Indebtedness and owed by the Company and the Subsidiaries to Seller
or any of its Affiliates (other than the Company and the Subsidiaries) as of the
Closing Date, and Seller shall cause the Company and the Subsidiaries to
release, cancel, terminate or otherwise settle all intercompany Indebtedness
owed by Seller or any of its Affiliates (other than the Company and the
Subsidiaries) to the Company and the Subsidiaries as of the Closing
Date.
ARTICLE
VIII
ADDITIONAL
AGREEMENTS
Section
8.1 Tax
Matters
.
(a) Liability for
Taxes.
(i) Seller
shall be liable for, pay, indemnify and hold harmless each Buyer Group Member
against, (A) any and all Taxes imposed on the Company or the Subsidiaries
pursuant to Treasury Regulation Section 1.1502-6 or similar provision of state
or local law as a result of the Company or the Subsidiaries having been a member
of the Aon or any other consolidated group and any and all Taxes imposed on the
Company or the Subsidiaries as a transferee or successor, by contract, or
otherwise, and (B) any and all Taxes of the Company or the
Subsidiaries, or for which the Company or the Subsidiaries may otherwise be
liable, for any taxable year or period that ends on or before the Closing Date
and, with respect to any Straddle Period, the portion of such Straddle Period
ending on and including the Closing Date, including any Section 338 Taxes; provided, however, that Seller
shall not be liable for or pay, and shall not indemnify or hold harmless any
Buyer Group Member from and against (I) any Taxes (other than any Section 338
Taxes) of the Company or any of its Subsidiaries that result from an election
under Section 338(a) of the Code or any similar provisions of state, local or
foreign law (other than, for the avoidance of doubt, an election under Section
338(h)(10) of the Code) made unilaterally by Buyer, (II) any Taxes imposed on
the Company or the Subsidiaries or for which the Company or the Subsidiaries may
otherwise be liable as a result of transactions engaged in or directed by Buyer
after the Closing to the extent such transactions are outside the ordinary
course of business and not otherwise contemplated by this Agreement (the Taxes
described in clauses I and II hereof being referred to as “Excluded Taxes”), and
(III) any Taxes (excluding, for the avoidance of doubt, any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) of
the Company or any Subsidiaries to the extent the liability for such Taxes are
reflected in the calculation of Final Net Working Capital. Seller
shall be entitled to any refund of (or credit for) Taxes allocable to any
taxable year or period that ends on or before the Closing Date and, with respect
to any Straddle Period, the portion of such Straddle Period ending on and
including the Closing Date to the extent such refund is not reflected in the
calculation of the Final Net Working Capital.
(ii) Buyer
shall be liable for, pay, indemnify, and hold harmless each Seller Group Member
from and against, (A) any and all Taxes imposed on the Company or the
Subsidiaries or for which the Company or the Subsidiaries may otherwise be
liable for any taxable year or period that begins after the Closing Date and,
with respect to any Straddle Period, the portion of such Straddle Period
beginning after the Closing Date and (B) Excluded Taxes.
(iii) Whenever
it is necessary to determine the liability for Taxes of the Company or the
Subsidiaries for a Straddle Period under this Agreement, the portion of such
Taxes that relates to the portion of the Straddle Period ending on and including
the Closing Date shall (x) in the case of any Taxes other than Taxes based upon
or related to income or receipts, be deemed to be the amount of such Tax for the
entire taxable year or period multiplied by a fraction the numerator of which is
the number of days in the taxable year or period ending at the close of the
Closing Date and the denominator of which is the number of days in the entire
taxable year or period, and (y) in the case of any Tax based upon or related to
income or receipts, be deemed equal to the amount which would be payable if the
relevant taxable year or period ended at the close of the Closing
Date. The portion of such Taxes that relates to the portion of the
Straddle Period beginning after the Closing Date shall be equal to the actual
tax payable for the entire Straddle Period less the portion attributable to the
period ending on the Closing Date.
(iv) Any real
property or gains Tax (other than any income or similar Taxes), sales Tax, use
Tax, stamp Tax, stock transfer Tax, or other similar Tax imposed on the
transactions contemplated by this Agreement shall be borne one-half by Seller
and one-half by Buyer.
(b) Tax
Returns.
(i) Aon shall
include the income of the Company and the Subsidiaries on its consolidated
federal income Tax Return for all Tax years or periods ending on (and including)
or prior to the Closing Date. Seller and Aon shall cause the Company
and the Subsidiaries to join in Aon’s consolidated federal income Tax Return,
and in jurisdictions requiring separate reporting from Aon, to file separate
company state and local income Tax Returns. Seller shall timely file or cause to
be timely filed when due (taking into account all extensions properly obtained)
all income Tax Returns required to be filed with respect to the Company and the
Subsidiaries for taxable years or periods ending on or prior to the Closing
Date. Seller shall prepare such Tax Returns consistent with past practice of the
Company and the Subsidiaries and shall provide Buyer pro forma copies of such
Tax Returns (or relevant excerpts of such Tax Returns) prior to the filing
thereof and to the extent such Tax Returns are separate Company Income Tax
Returns, shall make such revisions to such Tax Returns as are reasonably
requested by Buyer. Seller shall remit, or cause to be remitted, any Taxes due
in respect of such Tax Returns to the appropriate taxing authority.
(ii) Buyer
shall timely file or cause to be timely filed when due (taking into account all
extensions properly obtained) all other Tax Returns that are required to be
filed by or with respect to the Company and the Subsidiaries after the Closing
Date and all Straddle Period Tax Returns. Buyer shall permit Seller to review
and comment on each such Tax Return relating to a taxable year or period ending
on or prior to the Closing Date or relating to the portion of the Straddle
Period ending on the Closing Date prior to filing such Tax Return and shall make
such changes as are reasonably requested by Seller. Buyer shall
remit, or cause to be remitted, any Taxes due in respect of such Tax Returns to
the appropriate taxing authority. Subject to Section 8.1(a),
Seller shall pay to Buyer, within fifteen (15) days after the date on which such
Taxes are paid, that amount equal to the Taxes of the Company and the
Subsidiaries attributable to taxable years or periods ending on or prior to the
Closing Date or the portion of the Straddle Period ending on the Closing
Date.
(iii) Unless
otherwise required by applicable Law, none of Buyer or any Affiliate of Buyer
shall (or shall cause or permit the Company or the Subsidiaries to) amend,
refile or otherwise modify any Tax Return relating in whole or in part to the
Company or the Subsidiaries with respect to any taxable year or period ending on
or before the Closing Date (or with respect to any Straddle Period) without the
prior written consent of Seller to the extent such amendment, refiling or
modification could increase the Tax liabilities for which Seller may be liable
under this Agreement.
(iv) Buyer
shall promptly cause the Company and each Subsidiary to prepare and provide to
Seller such Tax information as Seller reasonably requests to enable Aon to
prepare and file all Tax Returns required to be prepared and filed by it
pursuant to Section
8.1(b)(i). Buyer shall cause such information to be delivered
to Aon as soon as practicable after such request; provided, however, so long as
Seller makes such request at least 90 days prior to the due date of the relevant
Tax Return, Buyer shall provide such information no later than 60 days prior to
the date the relevant Tax Return is required to be filed (after taking into
account all applicable extensions).
(c) Contest
Provisions.
(i) Buyer
shall promptly notify Aon in writing upon receipt by Buyer, any of its
Affiliates, the Company or the Subsidiaries of notice of any pending or
threatened federal, state, local or foreign Tax audits, examinations or
assessments (“Tax
Contest”) relating to taxable periods ending on or before the Closing
Date or which might otherwise affect the Tax liabilities for which Aon may be
liable pursuant to this Section 8.1; provided, however, that a
failure to give such notice will not affect the rights of Buyer, the Company or
the Subsidiaries to indemnification under this Agreement except and only to the
extent that such failure impairs the ability of Aon or Seller to contest such
Tax Contest.
(ii) Aon shall
have the right to represent the Company’s and the Subsidiaries’ interests in any
Tax Contest or court proceeding relating to Taxes for which Seller may be liable
pursuant to this Section 8.1, and to
employ counsel of its choice at its own expense; provided, however, that if any
of the issues raised in such Tax Contest or court proceeding (other than a Tax
Contest or court proceeding relating to a combined, consolidated or unitary
return that includes an entity other than the Company or the Subsidiaries) could
have a material impact on Taxes or Tax positions of Buyer, the Company or the
Subsidiary for a taxable year or period ending after the Closing Date, then
Buyer shall have the right to participate at its own expense in the conduct and
resolution of such Tax Contest or court proceeding. In the case of a
Straddle Period, Seller shall be entitled to participate at its own expense in
any Tax Contest or court proceeding relating (in whole or in part) to Taxes
attributable to the portion of such Straddle Period ending on and including the
Closing Date. If Seller or Aon shall have the right to control the
conduct and resolution of any Tax Contest but elect in writing not to do so,
then Buyer shall have the right to control the conduct and resolution of such
Tax Contest, provided that Buyer
shall keep Seller informed of all developments on a timely basis and shall not
settle any such Tax Contest without the approval of Seller (which approval shall
not be unreasonably withheld) if such Tax Contest could result in any
indemnification obligation for Seller. Notwithstanding the foregoing,
Seller shall not settle or compromise any Tax Contest if such settlement or
compromise would adversely affect the Taxes or Tax position of Buyer, the
Company or any Subsidiary for a taxable year or period ending after the Closing
Date without Buyer’s prior written consent (which consent shall not be
unreasonably withheld) unless Seller agrees to indemnify Buyer from and against
such adverse effect.
(d) Assistance and
Cooperation. After the Closing Date, Seller and Buyer shall
(and shall cause their respective Affiliates to):
(i) assist
the other parties in preparing any Tax Returns which such other party is
responsible for preparing and filing in accordance with Section
8.1(b);
(ii) cooperate
fully in preparing for any Tax Contest or disputes with taxing authorities
regarding any Tax Returns of the Company and the Subsidiaries;
(iii) retain
and make available to the others and to any taxing authority as reasonably
requested all information, records, and documents relating to Taxes of the
Company and the Subsidiaries;
(iv) make
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided under Section
8.1(d)(iii). Buyer, the Company and the Subsidiary and Seller
agree (a) to retain all books and records with respect to Tax matters pertinent
to the Company and the Subsidiary relating to any Tax period beginning before
the Closing Date until sixty (60) days after the expiration of the applicable
statute of limitations (and, to the extent notified by Buyer, any extensions
thereof), and to abide by all record retention agreements entered into with any
Administrative Authority; (b) to deliver or make available to Buyer at Closing,
copies of all such books and records; and (c) to give the other party reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if the other party so requests, Buyer, the Company, the
Subsidiary or Seller, as the case may be, shall allow the other party to take
possession of such books and records at such other party’s expense;
and
(v) timely
sign and deliver such certificates or forms as may be reasonably necessary or
appropriate to establish an exemption from (or otherwise reduce), or file Tax
Returns or other reports with respect to, Taxes described in Section 8.1(a)(iv)
(relating to sales, transfer and similar Taxes).
(e) Election Under Section
338(h)(10).
(i) Seller
and Buyer shall make, or cause to be made, a timely and effective joint election
for the Company and each Subsidiary under Section 338(h)(10) of the Code and
under any applicable similar provisions of foreign, state or local law with
respect to the purchase of the Shares (all such elections being referred to
collectively as a “Section 338(h)(10)
Election”).
(ii) As soon
as practicable, Buyer shall prepare Internal Revenue Service Form 8023, required
schedules thereto (including Internal Revenue Service Form 8883) and any similar
forms necessary to effectuate the Section 338(h)(10) Election under applicable
state and local laws (collectively, the “Section 338(h)(10) Election
Forms”). Seller shall cooperate with Buyer in the preparation
of the Section 338(h)(10) Election Forms and shall deliver duly completed,
executed copies thereof on the Closing Date. Buyer and Seller shall
cooperate with each other and take all actions necessary and appropriate
(including filing such additional forms, Tax Returns, elections, schedules, and
other documents as may be required) to effect and preserve the Section
338(h)(10) Elections in accordance with the provisions of Treasury Regulation
Section 1.338(h)(10)-1 and comparable provisions of applicable state and local
Tax laws and shall take no action inconsistent therewith except to the extent
required pursuant to a “determination” as defined in Section 1313(a) of the Code
or any similar provision of any state, foreign or local law.
(iii) As soon
as practicable following the Closing, Buyer shall prepare and deliver to Seller
a determination of the Aggregate Deemed Sales Price (“ADSP”) (as defined in
the applicable Treasury Regulations promulgated under Section 338 of the Code)
and a proposed allocation of the ADSP among the assets of the Company and the
Subsidiary (the “Allocation
Schedule”). The Allocation Schedule shall be deemed to be
accepted by and shall be conclusive and binding on Seller except to the extent,
if any, that Seller or Seller’s accountants shall have delivered within 30 days
after the date on which the Allocation Schedule is delivered to Seller, a
written notice to Buyer stating each and every item to which Seller takes
exception (it being understood that any amounts not disputed shall be final and
binding). If a change proposed by Seller is disputed by Buyer, then
Buyer and Seller shall negotiate in good faith to resolve such
dispute. If, after a period of twenty (20) days following the date on
which Seller gives Buyer notice of any such proposed change, any such proposed
change still remains disputed, then Seller and Buyer shall submit the dispute to
the Independent Accountants to resolve any remaining disputes. The
decision of the Independent Accountants shall be final and
binding. Buyer and Seller each agrees that promptly upon receiving
the final and binding Allocation Schedule (the “Final Allocation”) it
shall return an executed copy thereof to the other party. Each of
Buyer, the Company, the Subsidiary and Seller agrees to file all federal, state,
local and foreign Tax Returns in accordance with the Allocation Schedule or the
Final Allocation, if any, and shall not take any action inconsistent therewith
upon audit or examination of any Tax Return or in any other filing or proceeding
relating to Taxes, unless required pursuant to a “determination” as defined in
Section 1313(a) of the Code or any similar provision of any foreign, state or
local law.
(f) LLC
Transaction. At any time prior to the Closing Date, Buyer may
request in writing that Seller, and Seller agrees that upon receipt of any such
request, it will use commercially reasonable efforts to restructure the
transactions contemplated by this Agreement as the sale by Seller and a purchase
by Buyer of membership interests in an LLC Transaction. The “LLC Transaction”
shall refer to a transaction consummated in the following form: (i) prior to the
Closing, Seller shall cause each of the Company and its Subsidiaries to (and
each of the Company and its Subsidiaries shall) convert to a limited liability
company (an “LLC”) whose separate
existence from Seller is disregarded for federal income tax purposes, and (ii)
Seller shall sell, transfer, assign, convey and deliver the membership interests
(the “Interests”) in each
such LLC to Buyer, and Buyer shall purchase and accept such Interests from
Seller for the consideration set forth in Section 3.1 of this
Agreement. If an LLC Transaction is consummated, (i) any Taxes
resulting from the LLC Transaction shall be treated as “Section 338 Taxes” for
purposes of this Agreement, (ii) the Section 338(h)(10) Election required
pursuant to Section
8.1(e) shall not be made, and (iii) the Parties shall report the LLC
Transaction as the purchase and sale of all of the Interests in each LLC for
federal and state Tax purposes. Buyer shall reimburse Seller for any
additional costs incurred in connection with such an LLC Transaction that would
not have been incurred but for the LLC Transaction.
Section
8.2 Employee
Matters
.
(a) Continued
Employment. As of the Closing Date, Buyer agrees to, or to
cause an Affiliate of Buyer to, continue to employ as a successor employer all
of the employees of the Company and the Subsidiaries (including all such
employees who are on vacation, leave or other authorized absence and have rights
to reinstatement in accordance with the established written policies of the
Company and the Subsidiaries or applicable law on return from any vacation,
leave or other authorized absence), (the “Company Employees”),
other than the Excluded Employees, and, to the extent not transferred to the
Company or the Subsidiaries prior to the Closing Date, shall offer employment to
the Affiliate Employees that are listed on Schedule 8.2(a),
other than the Excluded Employees, on terms and conditions which Buyer shall
determine in its sole discretion (all such employees listed in Schedule 8.2(a) who
accept Buyer’s or its Affiliate’s offers of employment and all Company
Employees, in each case other than the Excluded Employees, are referred to
collectively as the “Transferred
Employees”); provided, however, that any
Company Employee and any Affiliate Employee that is on short-term disability or
other leave as of the Closing Date shall not become a Transferred Employee
unless and until such employee returns to active
employment. Effective prior to the Closing Date, Seller shall take
all necessary action to (i) transfer or cause the transfer of the employment of
the Affiliate Employees to the Company or the Subsidiaries, and (ii) transfer or
cause the transfer of the employment of the Excluded Employees to Seller or an
Affiliate of Seller (other than the Company or the Subsidiaries) or terminate
the employment of the Excluded Employees. Subject to applicable Law,
Seller shall provide Buyer with reasonable access to the facilities and
personnel records of Seller, the Company and the Subsidiaries with respect to
the Company Employees and the Affiliate Employees. Access will be
provided by Seller upon reasonable prior notice during normal business
hours. Notwithstanding any provision herein to the contrary, neither
Buyer nor any of its Affiliates (including the Company and the Subsidiaries)
shall be obligated to continue to employ any Transferred Employee for any
specific period of time following the Closing Date, subject to applicable
Law.
(b) Buyer Benefit
Plans. For a period of at least one year following the Closing
Date, Buyer shall provide, or cause an Affiliate of Buyer to provide, the
Transferred Employees with employee benefits (including, for the avoidance of
doubt, retirement, welfare and fringe benefits) that are at least substantially
comparable in the aggregate to those benefits provided to similarly situated
employees of Buyer or its Affiliates.
(c) Company
Plans.
(i) Except as
otherwise specifically provided in this Agreement, Seller shall be solely
responsible for all Company Plans and Company Pension Plans and all obligations
and liabilities thereunder, and neither Buyer nor any of its Affiliates shall
have or assume any obligations under or liabilities with respect to, and it
shall not receive any right or interest in the assets of, any Company Plans or
Company Pension Plans. Effective immediately prior to the Closing,
except as otherwise specifically provided in this Agreement or as otherwise
required by applicable Law, Seller, the Company and the Subsidiaries shall take
all necessary action to cause all Transferred Employees to cease any active
participation in, and any benefit accrual under, all Company Plans; provided, however, that if
Buyer does not sponsor a retiree medical plan for pre-age 65 or post-age 65
retirees, then otherwise eligible Transferred Employees may apply for coverage
on or before December 31, 2009 under Aon’s U.S. retiree medical plan and will be
granted age and service credit for their employment with Buyer or its Affiliates
for eligibility purposes.
(ii) Seller
and/or its Affiliates (other than the Company and the Subsidiaries) shall retain
the sponsorship of all Company Plans that are tax-qualified defined contribution
plans (the “Aon DC
Plans”), and shall make distributions under the Aon DC Plans to Company Employees and Affiliate Employees in
accordance with the terms of the Aon DC Plans and the applicable provisions of the Code. To the extent permitted by the terms of one or
more tax-qualified defined contribution plans maintained by Buyer or an
Affiliate of Buyer in which Transferred Employees are eligible to participate
following the Closing Date (the “Buyer DC Plans”),
Transferred Employees may elect to make direct rollovers of “eligible rollover
distributions” (as defined in the Code and applicable Laws) from the Aon DC
Plan(s) to the Buyer DC Plan(s). Seller agrees not to, and to cause
its Affiliates not to, place any plan loans to the Transferred Employee under
the Aon DC Plans in default for at least 90 days following the Closing
Date.
(d) Severance
Benefits. Without limiting the generality of the
foregoing, Seller shall be solely responsible for all severance and similar
obligations under any Company Plan that becomes payable as a result of the
termination of employment of any Company Employee or Affiliate Employee
(including Transferred Employees) or any Excluded Employee in connection with
the transactions contemplated by this Agreement
(e) Welfare
Benefits. Seller or one of its Affiliates (other than the
Company and the Subsidiaries) shall retain responsibility and all obligations
and liabilities under the Company Plans that are Welfare Plans in which the
Transferred Employees participate with respect to all amounts that are payable
by reason of, or in connection with, any and all welfare benefit claims made by
the Transferred Employees and their eligible dependents but only to the extent
the claims were incurred prior to the Closing Date. Buyer and its
Affiliates shall be responsible for all other welfare benefit claims made by the
Transferred Employees and their eligible dependents under Welfare Plans
maintained by Buyer to the extent such claims were incurred on or after the
Closing Date. Seller shall retain the obligation for short-term
disability or sick pay for Company Employees who are on short-term disability
leave or receiving sick pay as of the Closing Date. Notwithstanding
the immediately preceding sentence, on and after the Closing Date, Buyer shall
have the liability and obligation for, and neither Seller nor any of its
Affiliates shall have any liability or obligation for, all other welfare
benefits and salary continuation benefits for all Transferred Employees who are
not actively at work as of the Closing Date (and, for the avoidance of doubt,
the parties agree that Buyer shall have no such liability with respect to any
Company Employee or any Affiliate Employee that is on short-term disability or
other leave as of the Closing Date unless and until such employee returns to
active employment and becomes a Transferred Employee).
(f) Credit for
Service. To the extent that service is relevant for purposes
of eligibility and vesting (and, in order to calculate the amount of any
vacation, sick days, severance and similar benefits, but not for purposes of
defined benefit pension benefit accruals) under any retirement plan, employee
benefit plan, program or arrangement established or maintained by Buyer or any
of its Affiliates for the benefit of the Transferred Employees, following the
Closing Date such plan, program or arrangement shall, in addition to service
earned with Buyer or any of Buyer’s Affiliates after the Closing Date, credit
such Transferred Employees for service earned on and prior to the Closing Date
with the Company, the Subsidiaries, any of their respective Affiliates or any of
their respective predecessors to the same extent as such employee was entitled,
before the Closing Date, to credit for such service under any similar Company
Plans, except to the extent such credit would result in a duplication of
benefits.
(g) Preexisting Conditions;
Coordination. Following the Closing Date, Buyer shall, or
shall cause its Affiliates to, waive limitations on eligibility, enrollment and
benefits relating to any preexisting medical conditions of the Transferred
Employees and their eligible dependents to the extent that such limitations did
not apply or were satisfied under the corresponding Company
Plan. Following the Closing Date, Buyer shall recognize, or shall
cause its Affiliates to also recognize, for purposes of annual deductible and
out of pocket limits under its health and dental plans (the “Buyer Plans”),
deductible and out of pocket expenses paid by Transferred Employees and their
respective dependents under health and dental Company Plans in the calendar year
in which the Closing Date occurs to the extent the Transferred Employees
participate in any such Buyer Plans in such same calendar year.
(h) Vacations. Buyer
shall, or shall cause its Affiliates to, recognize and provide all accrued but
unused vacation of each Transferred Employee as of the Closing Date to the
extent that such accrued vacation is reflected on the Closing Balance Sheet as
finally determined on the Final Resolution Date, and such Transferred Employee
is employed by the Company or the Subsidiaries as of the Closing
Date. Seller shall be responsible for the payment of any accrued but
unused vacation as of the Closing Date of any Transferred Employee who is not an
employee of the Company or the Subsidiaries as of the Closing Date; otherwise,
neither Seller nor its Affiliates shall have any obligation or liability to pay
or provide any vacation payments claimed on or after the Closing
Date.
(i) Bonuses. Buyer
shall, to the extent that such bonuses and commissions are reflected on the
Closing Balance Sheet as finally determined on the Final Resolution Date, pay to
the Transferred Employees the bonuses and commissions they earn under the
Company bonus and commission programs with respect to the bonus and commission
determination periods that include the Closing Date.
(j) Flexible Spending Account
Program. Seller or one of its Affiliates maintains a plan
qualified under Section 125 of the Code (the “Seller Flexible Spending
Account Plan”) that includes flexible spending accounts of Transferred
Employees for medical care reimbursements and dependent care reimbursements
(“Reimbursement
Accounts”). In the event that the Closing Date occurs on or
after the first payroll date for Transferred Employees in 2009 (the “First Payroll
Date”),
then (i) as of the Closing Date, Buyer shall, or shall cause its Affiliates to,
establish or maintain a Flexible Spending Account program (the “Buyer Flexible Spending
Account Plan”) for each Transferred Employee who, in the portion of the
calendar year on or prior to the Closing Date, contributed to the Seller
Flexible Spending Account Plan, and (ii) as soon as reasonably
practical following the Closing Date, Seller shall transfer or cause to be
transferred to a Buyer Flexible Spending Account Plan designated by Buyer cash
equal to the excess of the aggregate accumulated contributions to the
Reimbursement Accounts made prior to the Closing Date during the year in which
the Closing Date occurs by Transferred Employees under the Seller Flexible
Spending Account Plan over the aggregate reimbursement payouts made for such
year from such accounts to the Transferred Employees. In the event of
such transfer, the beginning balance as of the Closing Date of each Transferred
Employee’s Reimbursement Account in the Buyer Flexible Spending Account Plan
shall be the amount of the excess of such contributions made by the Transferred
Employee over such reimbursement payouts to the Transferred Employee,
and Buyer shall recognize or cause to be recognized the Reimbursement
Account elections of the Transferred Employees under the Seller Flexible
Spending Account Plan for purposes of the Buyer Flexible Spending Account Plan
for the calendar year in which the Closing Date occurs. Seller and
its Affiliates shall provide Buyer with all information reasonably requested by
Buyer in order for Buyer and the Buyer Flexible Spending Account Plan to satisfy
the obligations set forth in this Section
8.2(j).
(k) COBRA. Seller
and its Affiliates (other than the Company and the Subsidiaries) shall be solely
responsible for providing continuation health care coverage and compliance with
the applicable provisions of COBRA pursuant to Section 4980B of the Code and
Title I, Subtitle B, Part 6 of ERISA with respect to any current or former
Company Employee or Affiliate Employee who does not become a Transferred
Employee. Following the Closing Date, Buyer shall, or shall cause an
Affiliate to, provide continuation health care coverage to all Transferred
Employees and their qualified beneficiaries, regardless of when a “qualifying
event” occurs, in accordance with the continuation health care coverage
requirements of COBRA with respect to claims incurred at any time on or after
the Closing Date.
(l) WARN. Seller
shall be responsible for all liabilities or obligations under WARN and similar
state or local rules, statutes or ordinances with respect to the Transferred
Employees arising out of: (i) the Closing; or (ii) any action taken prior to the
Closing, including, without limitation, the transfer of employees of the
Affiliate Employees to the Company or the Subsidiaries and the transfer of the
Excluded Employees to Seller or an Affiliate of Seller or the termination of the
Excluded Employees. Buyer shall be responsible for all liabilities or
obligations under WARN and similar state and local rules, statutes and
ordinances resulting from Buyer’s, the Company’s or the Subsidiaries’ actions
following the Closing Date.
(m) Workers’ Compensation
Liabilities. From and after the Closing Date, Buyer will cause
the Company and the Subsidiaries to assume all liabilities and obligations
relating to compensation and benefits under any state workers’ compensation or
similar Law with respect to the Transferred Employees with respect to all claims
that arise (or with respect to which the incident on which the claim is based
occurred) after the Closing Date. Seller shall retain and pay for all
liabilities and obligations relating to compensation and benefits under state
workers’ compensation or similar Law (i) with respect to Excluded Employees, and
(ii) with respect to Transferred Employees with respect to all claims that arose
(or with respect to which the incident on which the claims is based occurred) on
or prior to the Closing Date.
(n) Regardless
of anything else contained herein, this Agreement shall not be interpreted as an
amendment or modification of any employee benefit plan, program, policy,
agreement or arrangement, and nothing in the preceding or any other provision of
the Agreement shall be interpreted to interfere with Buyer’s rights to amend or
terminate any such plan, program, policy, agreement and
arrangement. No Transferred Employee or other current or former
employee of the Company, Buyer, Seller or any of their respective Affiliates,
including any beneficiary or dependent thereof, or any other person not a party
to this Agreement, shall be entitled to assert any claim
hereunder. Without limiting the foregoing, all provisions contained
in this Agreement with respect to employee benefit plans or employee
compensation are included for the sole benefit of the respective parties hereto
and shall not create any third-party beneficiary or other right in any other
Person, including any employee or former employee of the Company or the
Subsidiaries or any participant or beneficiary in any Company Plan.
(o) Prior to
the Closing Date, Aon shall take or cause to be taken all action necessary to
cause, effective at Closing, the acceleration and full vesting of all of the
equity awards identified on Schedule
8.2(o).
(p) Prior to
the Closing Date, Aon shall take or cause to be taken all action necessary to
cause, effective at Closing, the full vesting of the account balances of the
Transferred Employees under each Company Plan that is a defined contribution
plan, including, without limitation, the Aon DC Plans.
Section
8.3 Securities Law
Legends
. Buyer agrees and
understands that the Shares have not been, and will not be, registered under the
Securities Act or the securities laws of any state or other Administrative
Authority and that the Shares may be sold or disposed of only in one or more
transactions (i) registered under the Securities Act, applicable state
securities laws and/or the laws of any other applicable Administrative Authority
or (ii) as to which an exemption from the registration requirements of the
Securities Act, applicable state securities laws and/or the laws of any other
applicable Administrative Authority is available. Buyer acknowledges
and agrees that no person has any right to require Seller or the Company to
cause the registration of any of the Shares. The certificates
representing the Shares shall contain a legend similar to the following and
other legends necessary or appropriate under applicable state securities laws or
the laws of any other Administrative Authority:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS A REGISTRATION STATEMENT UNDER
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH SHARES IS
EFFECTIVE OR UNLESS THE COMPANY IS IN RECEIPT OF AN OPINION OF COUNSEL
SATISFACTORY TO IT TO THE EFFECT THAT SUCH SHARES MAY BE SOLD WITHOUT
REGISTRATION UNDER THE ACT AND SUCH LAWS.
Section
8.4 Insurance; Risk of
Loss
. Seller will cause
the Company and the Subsidiaries to keep insurance policies currently maintained
by the Company or the Subsidiaries covering their business, assets and current
or former employees, as the case may be, or suitable replacements therefor, in
full force and effect through the close of business on the Closing Date; provided, however, that (a) no
termination of any “occurrence based” policy in force as of the Closing Date
shall be effected so as to prevent the Company and the Subsidiary from
recovering under such policies for losses covered thereby from events occurring
on or prior to the close of business on the Closing Date, it being understood
that the Company and the Subsidiary shall be responsible for any deductible
payable under the terms of the applicable policy in connection with any such
claims, subject to each Buyer Group Member’s right to seek indemnification for
any such amounts or any amounts in excess of any policy limits in accordance
with Article XI
hereof; and (b) no termination of any “claims made” policy in force as of the
Closing Date shall be effected so as to prevent the Company and the Subsidiary
from recovering under such policies for losses covered thereby arising from or
out of any claim made on or prior to the close of business on the Closing Date,
it being understood that the Company and the Subsidiary shall be responsible for
any deductible payable under the terms of the applicable policy in connection
with any such claims, subject to each Buyer Group Member’s right to seek
indemnification for any such amounts or any amounts in excess of any policy
limits in accordance with Article XI
hereof. From and after the Closing Date, Buyer shall be solely
responsible for maintaining all insurance coverage for the Company and the
Subsidiaries for all losses incurred following the Closing Date, subject to the
provisions of this Section
8.4. To the extent that after the Closing any party hereto
requires any information regarding claim data, payroll or other information in
order to make filing with insurance carriers or self insurance regulators from
another party hereto, such other party will promptly supply such
information.
Section
8.5 Release of
Guaranties
. Buyer shall use
all reasonable efforts to cause Seller and its Affiliates to be fully released,
as of the Closing Date or as promptly as practicable after the Closing Date, in
respect of any and all obligations under any guaranties, letters of credit,
letters of comfort, bid bonds or performance or surety bonds or cash or other
collateral obtained or given by Seller or its Affiliates relating to any parcel
of Leased Real Property or any other contractual commitment of the Company and
the Subsidiaries or any Transferred Asset (collectively, the “Guaranties”). If
Buyer is unable to effect such a substitution and release with respect to any
Guaranty, Buyer shall indemnify each Seller Group Member against any and all
Damages arising from such Guaranty. Any cash or other collateral
posted by Seller or its Affiliates in respect of any Guaranty shall be delivered
to Seller.
Section
8.6 Nonsolicitation
.
(a) For a
period of one year following the Closing, Seller shall not, and shall cause its
Affiliates not to, take any action to initiate, solicit, encourage, accept,
negotiate, assist or otherwise facilitate any employee of Buyer, any of its
Affiliates, the Company or any Subsidiaries to leave the employ of Buyer, any of
its Affiliates, the Company or any Subsidiaries or violate the terms of their
contracts, or any employment arrangements, with Buyer, any of its Affiliates,
the Company or any Subsidiaries; provided, however, that Seller
or any of its Affiliates may solicit any such employees who are discharged by
Buyer, any of its Affiliates, the Company or any Subsidiaries, and, provided further, that nothing
in this Section
8.6(a) shall prohibit Seller or any of its Affiliates from employing any
such employee as a result of a general solicitation to the public or general
advertising (provided that such
general solicitation or advertising was not directed to a specific employee), or
the solicitation of any individual whose employment with Buyer, any of its
Affiliates, the Company or any Subsidiaries has been terminated for at least
twelve months.
(b) For a
period of one year following the Closing, Buyer shall not, and shall cause its
Affiliates (including the Company and the Subsidiaries) not to, take any action
to initiate, solicit, encourage, accept, negotiate, assist or otherwise
facilitate any employees of Seller or its Affiliates to leave the employ of
Seller or its Affiliates, as applicable, or violate the terms of their
contracts, or any employment arrangements, with Seller or its Affiliates, as
applicable; provided, however, that Buyer
or any of its Affiliates may solicit any such employees who are discharged by
Seller or its Affiliates, as applicable, and, provided further, that nothing
in this Section
8.6(b) shall prohibit Buyer or any of its Affiliates from employing any
such employee as a result of a general solicitation to the public or general
advertising (provided that such
general solicitation or advertising was not directed to a specific employee), or
the solicitation of any individual whose employment with Seller and its
Affiliates has been terminated for at least twelve months.
Section
8.7 Noncompetition
.
(a) From and
after the date hereof, Seller will refrain from, either alone or in conjunction
with any other Person, or directly or indirectly through its present or future
Affiliates:
(i) causing
or attempting to cause any client, customer or supplier of the Company or the
Subsidiaries to terminate or materially reduce its business with the Company,
the Subsidiaries or any of their Affiliates; or
(ii) disclosing
(unless compelled by judicial or administrative process) or using any Trade
Secrets relating to the Business of the Company or the Subsidiaries in a manner
adverse to the Company or any Subsidiary.
(b) For a
period of two years after the Closing Date, Seller will refrain from, either
alone or in conjunction with any other Person, or directly or indirectly through
its present or future Affiliates, participating or engaging in the Restricted
Business in California; provided, however, that, for
the purposes of this Section 8.7,
(x) ownership of securities having no more than 5% of the outstanding
voting power of any Person whose capital stock or equity is listed on any
national or international securities exchange or quotation system and
(y) ownership of not more than 10% of any private equity fund or
alternative investment vehicle in which Aon or its Affiliates is a passive
investor shall not be deemed to be a violation of this Section
8.7.
(c) Notwithstanding
the provisions of this Section 8.7 and
without implicitly agreeing that the following activities would be subject to
the provisions of Section 8.7(b),
nothing in this Agreement or in the Seller Ancillary Agreements shall preclude,
prohibit or restrict Aon or any of its Affiliates from: (i) engaging in or
owning an interest in any entity that engages in any Exempt Business Activities;
(ii) acquiring, and following such acquisition, actively engaging in any
business that has a subsidiary, division, group, franchise or segment that is
engaged in any Restricted Business (an “Acquired Business”),
so long as for the most recent fiscal year ending prior to the date of such
purchase, the revenues of such business derived from a Restricted Business were
less than 25% of the total consolidated revenues of such business; or
(iii) engaging in an Aon Change of Control or, if the acquiring
Person has a subsidiary, division, group, franchise or segment that is engaged
in a Restricted Business at the time of the Aon Change of Control, thereafter
engaging in the Restricted Business.
(d) The
parties hereto recognize that the Laws and public policies of the various states
of the United States may differ as to the validity and enforceability of
covenants similar to those set forth in this Section
8.7. It is the intention of the parties that the provisions of
this Section
8.7 be enforced to the fullest extent permissible under the Laws and
policies of each jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such Laws or policies) of
any provisions of this Section 8.7 shall not
render unenforceable, or impair, the remainder of the provisions of this Section
8.7. Accordingly, if any provision of this Section 8.7 shall be
determined to be invalid or unenforceable, such invalidity or unenforceability
shall be deemed to apply only with respect to the operation of such provision in
the particular jurisdiction in which such determination is made and not with
respect to any other provision or jurisdiction.
(e) The
parties hereto acknowledge and agree that any remedy at Law for any breach of
the provisions of this Section 8.7 would be
inadequate, and Seller hereby consents to the granting by any court of an
injunction or other equitable relief to Buyer, without the necessity of actual
monetary loss being proved, in order that the breach or threatened breach of
such provisions may be effectively restrained.
Section
8.8 Use of
Names
.
(a) Neither
Seller nor its Affiliates are conveying ownership rights or granting Buyer or
its Affiliates (including the Company and the Subsidiaries after the Closing) a
license to use any of the tradenames, service marks or trademarks of Aon or any
Affiliate of Aon (other than the trademarks and service marks included in the
Intellectual Property required to be identified in Schedule 5.11(a))
(collectively, after taking into account the foregoing parenthetical, the “Retained Names and
Marks”) and, after the Closing, Buyer and its Affiliates (including the
Company and the Subsidiaries after the Closing) shall not use in any manner the
Retained Names and Marks or any trade marks, service marks, or trade names that
are confusingly similar in sound or appearance to such names or marks, except as
provided in this Section
8.8. In the event Buyer or any Affiliate of Buyer (including
the Company and the Subsidiaries after the Closing) violates any of its
obligations under this Section 8.8, Seller
and its Affiliates may proceed against it in law or in equity for such damages
or other relief as a court may deem appropriate. Buyer acknowledges
that a violation of this Section 8.8 may cause
Seller and its Affiliates irreparable harm which may not be adequately
compensated for by money damages. Buyer therefore agrees that in the
event of any actual or threatened violation of this Section 8.8, Seller
and its Affiliates shall be entitled, in addition to other remedies that they
may have, to a temporary restraining order and to preliminary and final
injunctive relief against Buyer or such Affiliate of Buyer to prevent any
violations of this Section 8.8, without
the necessity of posting a bond.
(b) Following
the Closing, Buyer shall (and shall cause the Company and the Subsidiaries to)
cease promptly, but in no event later than 180 days after the Closing Date,
using (i) any advertising or promotional materials and (ii) any stationery,
business cards, business forms and other similar items, in each case that
contain anywhere thereon any of the Retained Names and Marks; provided, however, that Buyer
shall (and shall cause the Company and the Subsidiaries to), when using items
referred to in clause (ii) in the context of entering into or conducting
contractual relationships, make reasonably clear to all other applicable parties
that Buyer and the Company and the Subsidiaries, rather than Aon or any
Affiliate of Aon is the party entering into or conducting the contractual
relationship; provided, further, that Buyer
shall (and shall cause the Company to) ensure that personnel of the Company and
the Subsidiaries using such items shall not, and shall have no authority to,
hold themselves out as officers, employees or agents of Aon or any Affiliate of
Aon.
Section
8.9 Compliance with
Xxxxxxxx-Xxxxx Act
. Upon
Buyer’s request, Aon and Seller will provide (i) copies of all non-privileged
reports internally generated by Aon, Seller or any of their respective
Affiliates, which were used by Aon in connection with its attestation under
Section 404 of the Xxxxxxxx-Xxxxx Act as it relates to the business processes,
applications and IT general controls utilized by the Business, and (ii)
reasonable access to knowledgeable personnel to respond to related questions on
a reasonably timely basis. Aon and Seller will also provide Buyer
with reasonable access to test the business processes, applications and IT
general controls utilized by the Business. The obligations set forth
in this Section
8.9 shall terminate on the date on which Mercury General Corporation
would otherwise be required to first file with the Securities and Exchange
Commission (without giving effect of Rule 12b-25 under the Securities Exchange
Act of 1934, as amended) an attestation from its public accountants with respect
to the overall effectiveness its internal controls, the scope of which covers
the Company, the Subsidiaries and the Business, as mandated by Section 404 of
the Xxxxxxxx-Xxxxx Act.
Section
8.10 Specified
Lawsuit
. Within
five (5) business days following a judgment or execution of a settlement
agreement with respect to the Specified Lawsuit, regardless of whether Buyer
makes a Claim Notice with respect thereto, Aon and Seller shall, jointly and
severally, pay the Company any obligations of the Company and its Subsidiaries
under such judgment or settlement, unless within such time period Aon and Seller
pay such judgment or settlement amount directly. Any unpaid amounts
hereunder shall accrue interest at the rate of 12% per annum, commencing the
next calendar day following such judgment or settlement.
Section
8.11 Dividends
. Prior
to the Closing Date, Aon and Seller shall be entitled to cause the Company or
any Subsidiary to declare and pay one or more cash dividends to Aon or any of
its Affiliates.
Section
8.12 Post Closing
Cooperation
. Following
the Closing Date, AON and Seller shall, and shall cause APRM to, cooperate with
Buyer and ASPN in sending notices, mutually agreed upon by all such parties, to
the APRM Transferred Clients in an effort to cause such APRM Transferred Clients
to obtain, replace or renew the APRM Transferred Policies through
ASPN.
ARTICLE
IX
CONDITIONS
PRECEDENT TO OBLIGATIONS OF BUYER
The
obligations of Buyer under this Agreement shall be subject to the satisfaction
or waiver, on or prior to the Closing Date, of the following
conditions:
Section
9.1 No Misrepresentation or
Breach of Covenants and Warranties
. All
representations and warranties of Seller contained in this Agreement shall be
true and correct on the Closing Date as though made on the Closing Date, except
for breaches of representations and warranties which, individually or in the
aggregate, do not constitute a Material Adverse Effect (it being understood
that, for the purposes of determining the accuracy of such representations and
warranties all “Material Adverse Effect” qualifications and other materiality
qualifications contained in such representations and warranties shall be
disregarded) and Seller shall have performed and satisfied in all material
respects all agreements and covenants required hereby to be performed by it
prior to or on the Closing Date; and there shall have been delivered to Buyer a
certificate to such effect, dated the Closing Date, signed on behalf of Seller
by a duly authorized officer of Seller.
Section
9.2 HSR Act
. All applicable
waiting periods (and any extensions thereof) under the HSR Act and any timing
agreement entered into with the Federal Trade Commission or the U.S. Department
of Justice shall have expired or been terminated.
Section
9.3 Governmental Permits and
Approvals
. All approvals and
actions of or by all Administrative Authorities set forth in Schedule 9.3 or as to
which the failure to have been obtained or taken place would reasonably be
expected to have a Material Adverse Effect shall have been obtained or taken
place. All licenses set forth in Schedule 9.3 shall
have been obtained from the relevant Administrative Authorities.
Section
9.4 Court Orders and
Laws
. There shall not
be in effect on the Closing Date any Court Order or Law restraining, enjoining
or otherwise prohibiting or making illegal, nor shall there be pending any
action, case or proceeding seeking to restrain, enjoin, or otherwise prohibit or
make illegal, the consummation of the transactions contemplated by this
Agreement or any of the Ancillary Agreements, and there shall not be pending or
threatened on the Closing Date any action in, before or by any Administrative
Authority that could reasonably be expected to result in the issuance of any
such Court Order or the enactment, promulgation or deemed applicability to
consummation of the transactions contemplated by this Agreement or any of the
Ancillary Agreements of any such Law.
Section
9.5 Receipt of
Consents
. Seller shall have
delivered to Buyer in form and substance reasonably satisfactory to Buyer the
consents set forth in Schedule 9.5.
Section
9.6 No Material Adverse
Effect
. Since the date of
the Agreement, no event, circumstance, change or effect shall have occurred or
come to exist which has had a Material Adverse Effect.
Section
9.7 Resignations
. Buyer shall have
received an executed resignation letter effective as of the Closing Date, from
each director and officer of the Company and the Subsidiaries other than those
whom Buyer shall have specified in writing at least five (5) business days prior
to the Closing.
Section
9.8 Net Working
Capital
. Estimated Net
Working Capital shall not exceed $7,500,000 and cash on hand shall not be less
than $1,000,000.
Section
9.9 Transferred
Assets
. The
Transferred Assets and Transferred Employees shall have been transferred to the
Company or any of the Subsidiaries, as applicable, free of Encumbrances, except
for Permitted Encumbrances. The capital stock of ASPN shall have been
conveyed to AIS, free of Encumbrances.
Section
9.10 Ancillary Agreements and
Deliveries
. Seller shall have
executed and delivered the Seller Ancillary Agreements and the other closing
date deliveries set forth in Section
4.4.
Section
9.11 Xxxxxxx
Settlement
. Aon
or its Affiliates shall have delivered evidence reasonably satisfactory to Buyer
of a binding agreement with the relevant Administrative Authorities to the
effect that following the Closing Date, neither the Company, the Subsidiaries
nor the Business will be bound in any jurisdiction in any respect by the
Agreement Among the Attorney General of the State of New York, the
Superintendent of Insurance of the State of New York, the Attorney General of
the State of Connecticut, the Illinois Attorney General, the Director of the
Division of Insurance, Illinois Department of Financial and Professional
Regulation, and Aon and its subsidiaries and affiliates dated March 4, 2005, as
amended.
ARTICLE
X
CONDITIONS
PRECEDENT TO OBLIGATIONS OF SELLER
The
obligations of Seller under this Agreement shall, at the option of Seller, be
subject to the satisfaction or waiver, on or prior to the Closing Date, of the
following conditions:
Section
10.1 No Misrepresentation or
Breach of Covenants and Warranties
. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct on the Closing Date as though made on the Closing Date, except
for breaches of representations and warranties which, individually or in the
aggregate, would not have a material adverse effect on Buyer’s ability to
consummate the transactions contemplated hereby (it being understood that, for
the purposes of determining the accuracy of such representations and warranties
all “material adverse effect” qualifications and other materiality
qualifications contained in such representations and warranties shall be
disregarded) and Buyer shall have performed and satisfied in all material
respects all agreements and covenants required hereby to be performed by Buyer
prior to or on the Closing Date; and there shall have been delivered to Seller a
certificate to such effect, dated the Closing Date, signed on behalf of Buyer by
a duly authorized officer of Buyer.
Section
10.2 HSR Act
. All applicable
waiting periods (and any extensions thereof) under the HSR Act and any timing
agreement entered into with the Federal Trade Commission or the U.S. Department
of Justice shall have expired or been terminated.
Section
10.3 Governmental Permits and
Approvals
. All approvals and
actions of or by all Administrative Authorities set forth in Schedule 10.3 or as
to which the failure to have been obtained or taken place would reasonably be
expected to have a Material Adverse Effect shall have been obtained or taken
place. All licenses set forth in Schedule 10.3 shall
have been obtained from the relevant Administrative Authorities.
Section
10.4 Court Orders and
Laws
. There shall not
be in effect on the Closing Date any Court Order or Law restraining, enjoining
or otherwise prohibiting or making illegal, nor shall there be pending any
action, case or proceeding seeking to restrain, enjoin, or otherwise prohibit or
make illegal, the consummation of the transactions contemplated by this
Agreement or any of the Ancillary Agreements, and there shall not be pending or
threatened on the Closing Date any action in, before or by any Administrative
Authority that could reasonably be expected to result in the issuance of any
such Court Order or the enactment, promulgation or deemed applicability to
consummation of the transactions contemplated by this Agreement or any of the
Ancillary Agreements of any such Law.
Section
10.5 Ancillary Agreements and
Deliveries
. Buyer shall have
executed and delivered the Buyer Ancillary Agreements and the other closing date
deliveries set forth in Section
4.3.
ARTICLE
XI
INDEMNIFICATION
Section
11.1 Indemnification by
Seller
.
(a) From and
after the Closing, Aon and Seller, jointly and severally, agree to indemnify and
hold harmless each Buyer Group Member from and against any and all losses,
costs, settlement payments, awards, judgments, fines, penalties, damages,
deficiencies or other charges, claims, liabilities, lawsuits, demands and
expenses, including reasonable fees and disbursements of counsel (whether or not
arising out of third-party claims), and all amounts arising from or relating to
investigation, defense or settlement of any of the foregoing (collectively,
“Damages”)
incurred by such Buyer Group Member in connection with, arising out of or
resulting from:
(i) any
breach or inaccuracy of any representation or warranty of Seller contained in
this Agreement or any certificate delivered by or on behalf of Seller hereunder
at or prior to the Closing (without giving effect to any materiality, Material
Adverse Effect or similar qualification contained therein);
(ii) any
breach by Aon or Seller of, or failure by Aon or Seller to perform, any of its
covenants or obligations contained in this Agreement that are required to be
performed prior to the Closing Date;
(iii) any
breach by Aon or Seller of, or failure by Aon or Seller to perform, any of its
covenants or obligations contained in this Agreement that are required to be
performed on or following the Closing Date, including Sections 8.1 and
8.2;
(iv) the
Specified Lawsuit and the other matters listed on Schedule
5.12;
(v) the
charging or collecting from the Clients of Broker Fees by the Company, APRM
(solely with respect to the Business) or the Subsidiaries prior to the Closing
Date or from the eligibility of the Company, APRM (solely with respect to the
Business) or the Subsidiaries to collect Broker Fees from Clients prior to the
Closing Date;
(vi) any claim
by any Person for brokerage or finder’s fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by any such
Person with the Company or any Seller (or any Person acting on their behalf) in
connection with any transactions contemplated by this Agreement;
(vii) the
Undisclosed and Retained Liabilities;
(viii) any
Damages arising from or related to the operation of ASPN prior to the Closing
Date; or
(ix) in
connection with the assignment and assumption of any lease with respect to any
Change of Control Consent relating to Leased Real Property, (A) any consent fee,
(B) any increase in rent relating to such existing lease for the remainder of
the term of such lease, (C) any reasonable increase in rent by any new lease for
comparable space in excess of the current rent contemplated under the current
lease for the remainder of the term of the currently existing lease, and (D) any
reasonable moving costs incurred by Buyer, in the case of (C) and (D), in the
event Buyer is evicted from any properties leased pursuant to such lease as a
result of a failure by Sellers to obtain any consent required to assign such
lease to Buyer;
provided, however, that Aon and
Seller shall be required to indemnify and hold harmless under Section 11.1(a)(i),
11.1(a)(ii) and
11.1(a)(vii)
with respect to Damages incurred by Buyer Group Members only to the extent
that:
(x) the
aggregate amount of such Damages resulting from any single claim or aggregated
claims arising out of the same facts, events or circumstances (provided, that
individual claims based upon the same act, event, omission or set of facts shall
be deemed a single individual claim for purposes of this Section 11.1(a)(i))
exceeds $10,000 (the “Per Claim
Deductible”) (it being understood that such amount shall be a deductible
for which Aon and Seller shall bear no indemnification responsibility under
Section
11.1(a)(i), 11.1(a)(ii) and 11.1(a)(vii)
above);
(y) the
aggregate amount of such Damages in excess of the Per Claim Deductible exceeds
$1,200,000 (the “Deductible”), (it
being understood that such amount shall be a deductible for which Aon and Seller
shall bear no indemnification responsibility under Section 11.1(a)(i),
11.1(a)(ii) and
11.1(a)(vii)
above); and
(z) the
aggregate amount required to be paid by Aon and Seller pursuant to Section 11.1(a)(i),
11.1(a)(ii) and
11.1(a)(vii)
shall not exceed fifty percent (50%) of the Purchase Price;
provided further,
however, that
the limitations set forth in (x), (y) and (z) immediately above shall not apply
to any Damages arising out of or related to the breach or inaccuracy of the
representations , warranties and covenants contained in Section 5.1
(Organization of the Company and the Subsidiaries), Section 5.2 (Capital
Structure of the Company and the Subsidiaries), Section 5.3
(Subsidiaries and Investments), Section 5.4
(Authority of Seller; Conflicts), Section 5.7 (Taxes),
Section 5.15
(ERISA) and Section
7.6 (Termination of Certain Intercompany Indebtedness).
(b) The
indemnification provided for in Section 11.1(a)(i),
11.1(a)(ii) and
11.1(a)(vii)
shall terminate sixty (60) months after the Closing Date (and no claims shall be
made by any Buyer Group Member under Section 11.1(a)(i),
11.1(a)(ii) and
11.1(a)(vii)
thereafter), except that the indemnification by Aon and Seller shall continue as
to:
(i) the
representations, warranties and covenants of Aon and Seller set forth in Section 5.1
(Organization of the Company and the Subsidiaries), Section 5.2 (Capital
Structure of the Company and the Subsidiaries), Section 5.3
(Subsidiaries and Investments), Section 5.4
(Authority of Seller; Conflicts), Section 5.7 (Taxes),
Section 5.15
(ERISA) and Section
7.6 (Termination of Certain Intercompany Indebtedness), which shall
survive until sixty (60) days after the expiration of the relevant statutory
period of limitations applicable to the underlying claim, giving effect to any
waiver, mitigation or extension thereof;
(ii) any
Damages of which any Buyer Group Member has validly given a Claim Notice to Aon
and Seller in accordance with the requirements of Section 11.3 on or
prior to the date such indemnification would otherwise terminate in accordance
with this Section
11.1, as to which the obligation of Aon and Seller shall continue solely
with respect to the specific matters in such Claim Notice until the liability of
Aon and Seller shall have been determined pursuant to this Article XI, and Aon
and Seller shall have reimbursed all Buyer Group Members for the full amount of
such Damages that are payable with respect to such Claim Notice in accordance
with this Article
XI;
(c) From and
after the Closing, Aon and Seller, jointly and severally, agree to indemnify and
hold harmless each Buyer Group Member from and against any Damages incurred by
such Buyer Group Member in connection with, arising out of or resulting from the
Company Pension Plans (including, without limitation, any Damages under Title IV
of ERISA or Section 412 of the Code).
(d) The term
“Damages” as used in this Article XI is not
limited to matters asserted by third parties against Seller, the Company, the
Subsidiaries or Buyer, but includes Damages incurred or sustained by Seller, the
Company, the Subsidiaries or Buyer in the absence of third-party
claims. Payments by a party of amounts for which such party is
indemnified hereunder shall not be a condition precedent to
recovery. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedies based on such representations, warranties, covenants
and obligations. The amount of any Damages claimed by any Buyer Group
Member hereunder shall be reduced to the extent that the item that is subject of
the indemnification was specifically accounted for in the Closing Net Working
Capital as determined on the Final Resolution Date.
Section
11.2 Indemnification by
Buyer
.
(a) From and
after the Closing, Buyer agrees to indemnify and hold harmless each Seller Group
Member from and against any and all Damages incurred by such Seller Group Member
in connection with or arising from:
(i) any
breach or inaccuracy of any representation or warranty of Buyer contained in
this Agreement;
(ii) any
breach by Buyer of, or failure by Buyer to perform, any of its covenants and
obligations contained in this Agreement that are required to be performed prior
to the Closing Date; or
(iii) any
breach by Buyer of, or failure by Buyer to perform, any of its covenants and
obligations contained in this Agreement that are required to be performed on or
following the Closing Date;
provided, however, that Buyer
shall be required to indemnify and hold harmless under Section 11.2(a)(i)
and Section
11.2(a)(ii) with respect to Damages incurred by Seller Group Members only
to the extent that:
(x) the
aggregate amount of such Damages resulting from any single claim or aggregated
claims arising out of the same facts, events or circumstances (provided that
individual claims based upon the same act, event, omission or set of facts shall
be deemed a single individual claim for the purposes of this Section 11.2(a)(x))
exceeds the Per Claim Deductible, (it being understood that such amount shall be
a deductible for which Buyer shall bear no indemnification responsibility under
Section
11.2(a)(i) and Section 11.2(a)(ii)
above);
(y) the
aggregate amount of such Damages in excess of the Per Claim Deductible exceeds
the Deductible, (it being understood that such amount shall be a deductible for
which Buyer shall bear no indemnification responsibility under Section 11.2(a)(i)
and Section
11.2(a)(ii) above); and
(z) the
aggregate amount required to be paid by Buyer pursuant to Section 11.2(a)(i)
and Section
11.2(a)(ii) shall not exceed fifty percent (50%) of the Purchase
Price.
(b) The
indemnification provided for in Section 11.2(a)(i)
and Section
11.2(a)(ii) shall terminate sixty (60) months after the Closing Date (and
no claims shall be made by any Seller Group Member under Section 11.2(a)(i) or
Section
11.2(a)(ii) thereafter), except that the indemnification by Buyer shall
continue as to any Damages of which any Seller Group Member has validly given a
Claim Notice to Buyer in accordance with the requirements of Section 11.3 on or
prior to the date such indemnification would otherwise terminate in accordance
with this Section
11.2, as to which the obligation of Buyer shall continue solely with
respect to the specific matters in such Claim Notice until the liability of
Buyer shall have been determined pursuant to this Article XI, and Buyer
shall have reimbursed all Seller Group Members for the full amount of such
Damages that are payable with respect to such Claim Notice in accordance with
this Article
XI.
Section
11.3 Notice of
Claims
. Any Buyer Group
Member or Seller Group Member seeking indemnification hereunder (the “Indemnified Party”)
shall give promptly to the party obligated to provide indemnification to such
Indemnified Party (the “Indemnitor”) a notice
(a “Claim
Notice”) describing in reasonable detail the facts giving rise to the
claim for indemnification hereunder and shall include in such Claim Notice (if
then known) the amount or the method of computation of the amount of such claim,
and a reference to the provision of this Agreement or any other agreement,
document or instrument executed hereunder or in connection herewith upon which
such claim is based; provided, however, that a Claim
Notice in respect of any action at law or suit in equity by or against a third
Person as to which indemnification will be sought shall be given promptly after
the action or suit is commenced; and provided further, however, that the
failure of any Indemnified Party to give prompt notice hereunder shall not
affect rights to indemnification hereunder, except to the extent that the
Indemnitor shall have been actually prejudiced by such failure.
Section
11.4 Third Person
Claims
.
(a) If a
third Person claim is made against an Indemnified Party, and the Indemnitor
acknowledges in writing to the Indemnified Party that the Indemnitor shall be
obligated under the terms of its indemnity hereunder in connection with such
third Person claim, then the Indemnitor shall be entitled, if it so elects, at
its own cost, risk and expense, to assume the defense thereof with counsel
selected by the Indemnitor and reasonably satisfactory to the Indemnified
Party. The Indemnitor shall have thirty (30) calendar days from
receipt of any such notice of a third Person claim to give notice to assume the
defense thereof. Should the Indemnitor so elect to assume the defense
of a third Person claim, the Indemnitor shall not be liable to the Indemnified
Party for legal expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof. If the Indemnitor assumes such
defense, the Indemnified Party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense (except to the extent
provided in the immediately preceding sentence), separate from the counsel
employed by the Indemnitor, it being understood that the Indemnitor shall
control such defense. Any compromise or settlement of a third Person
claim by the Indemnitor shall be made only with the written consent of the
Indemnified Party, such consent not to be unreasonably withheld. If
the Indemnitor fails to assume the defense of a third Person claim within thirty
(30) calendar days after receipt of such notice, the Indemnified Party against
which such third Person claim has been asserted shall (upon delivering notice to
such effect to the Indemnitor) have the right to undertake, at the Indemnitor’s
cost and expense, the defense, compromise or settlement of such claim on behalf
of and for the account and risk of the Indemnitor. In the event the
Indemnified Party assumes the defense of the third Person claim, the Indemnified
Party shall keep the Indemnitor reasonably informed of the progress of any such
defense, compromise or settlement. The Indemnitor shall be liable for
the fees and expenses of counsel employed by the Indemnified Party for any
period during which the Indemnitor has not assumed the defense
thereof. If the Indemnitor chooses to defend any third Person claim,
all the parties hereto shall cooperate in the defense or prosecution
thereof. Such cooperation shall include the retention and (upon the
Indemnitor’s request) the provision to the Indemnitor of records and information
that are reasonably relevant to such third Person claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Indemnitor shall
be liable for any settlement of any action effected pursuant to and in
accordance with this Section 11.4 and for
any final judgment (subject to any right of appeal), and the Indemnitor agrees
to indemnify and hold harmless an Indemnified Party from and against any Damages
by reason of such settlement or judgment.
(b) The
Indemnified Party shall notify the Indemnitor in writing as soon as practicable
of its discovery of any matter that does not involve a third Person claim being
asserted against or sought to be collected from the Indemnified Party, giving
rise to the claim of indemnity pursuant hereto. The failure so to
notify the Indemnitor shall not relieve the Indemnitor from liability on account
of this indemnification, except only if and to the extent that the Indemnitor
demonstrates actual damage caused by such failure. The Indemnitor
shall have thirty (30) calendar days from receipt of any such notice to give
notice of dispute of the claim to the Indemnified Party. The
Indemnified Party shall reasonably cooperate and assist the Indemnitor in
determining the validity of any claim for indemnity by the Indemnified Party and
in otherwise resolving such matters. Such assistance and cooperation
shall include providing reasonable access to and copies of information, records
and documents relating to such matters, furnishing employees to assist in the
investigation and resolution of such matters and providing business assistance
with respect to such matters.
Section
11.5 Limitations
. In no event shall any
party be liable for any consequential, special, exemplary or punitive damages
(except to the extent constituting third party punitive claims), all of which
are hereby excluded by agreement of the parties regardless of whether or not any
party to this Agreement has been advised of the possibility of such
damages. Except for remedies that cannot be waived as a matter of law
and injunctive and provisional relief (including specific performance) and
except in the case of fraud, if the Closing occurs, this Article XI shall be
the exclusive remedy for breaches of this Agreement (including any covenant,
obligation, representation or warranty contained in this Agreement or in any
certificate delivered pursuant to this Agreement) or otherwise in respect of the
sale of the Shares contemplated hereby.
Section
11.6 Determination of
Amount
. The calculation
of any Damages shall be net of any third party insurance proceeds which have
been actually recovered by the Indemnified Party under any insurance policy in
connection with the facts giving rise to the right of
Indemnification.
Section
11.7 Mitigation
. Each of the
parties agrees to take all reasonable steps to mitigate their respective Damages
upon and after becoming aware of any event or condition which could reasonably
be expected to give rise to any Damages that are indemnifiable
hereunder. To the extent that any claim is indemnifiable and may be
covered by a third party insurance policy, the Indemnified Party shall use
commercially reasonable efforts to timely provide notice and file claims with
respect to such claim under any such third party insurance policy.
Section
11.8 Taxes
. To the extent of
any inconsistency between this Article XI and Section 8.1, the
provisions of Section
8.1 shall control.
Section
11.9 Over-accrual of Contingent
Liabilities on the Closing Net Working Capital Statement
. If a contingent
liability is accounted for in the calculation of Final Net Working Capital, and
the amount of such contingent liability is ultimately reduced (as a result of a
final judgment, dismissal with prejudice, settlement or otherwise), Buyer shall
reimburse Seller the difference between (i) the accrual of such contingent
liability in the calculation of Final Net Working Capital and (ii) the amount of
such liability, as finally determined, net of costs incurred by any Buyer Group
Member in connection with the resolution or settlement of such contingent
liability.
ARTICLE
XII
TERMINATION
Section
12.1 Termination
. Anything
contained in this Agreement to the contrary notwithstanding, this Agreement may
be terminated at any time prior to the Closing Date:
(a) by the
mutual written consent of Buyer and Seller;
(b) by Buyer,
if Seller shall have breached any of its representations, warranties, covenants
or agreements contained in this Agreement, which would give rise to the failure
of a condition set forth in Article IX, which
breach cannot be or has not been cured upon twenty (20) business days’ written
notice of such breach;
(c) by
Seller, if Buyer shall have breached any of its representations, warranties,
covenants or agreements contained in this Agreement which would give rise to the
failure of a condition set forth in Article X, which
breach cannot be or has not been cured upon twenty (20) business days’ written
notice of such breach;
(d) by Buyer
or Seller if any court of competent jurisdiction in the United States or other
United States Administrative Authority shall have issued a final and
non-appealable order, decree or ruling permanently restraining, enjoining or
otherwise prohibiting the consummation of any material transaction contemplated
hereby; or
(e) by Buyer
or Seller if the Closing shall not have occurred on or before April 10, 2009
(the “Termination
Date”) (or such later date as may be agreed in writing to by Buyer and
Seller); provided, however, that either
Buyer or Seller may by written notice to the other delivered on or before April
8, 2009 extend the Termination Date until any date prior to July 10, 2009 if the
failure of the Closing to have occurred on or before April 10, 2009 shall have
resulted from the failure of the condition set forth in Section 9.3 or Section 10.3, as the
case may be; provided further that the
right to terminate this Agreement pursuant to this Section 12.1(e) shall
not be available to any party whose failure to fulfill any of its obligations
contained in this Agreement has been the cause of, or resulted in, the failure
of the Closing to have occurred on or prior to the aforesaid date.
Section
12.2 Notice of
Termination
. Any party
desiring to terminate this Agreement pursuant to Section 12.1 shall
give written notice of such termination to the other party to this
Agreement.
Section
12.3 Effect of
Termination
. If this Agreement
shall be terminated pursuant to this Article XII, all
further obligations of the parties under this Agreement (other than Sections 13.2 and
13.10) shall be
terminated without further liability of any party to the other; provided, however, that nothing
herein shall relieve any party from liability for its intentional breach of this
Agreement or to limit or restrict the availability of specific performance or
other injunctive relief to the extent specific performance or such other relief
would otherwise be available to a party hereunder.
Section
12.4 Specific
Performance
. The parties agree
that irreparable damage would occur in the event that any of the terms or
provisions of this Agreement were not performed in accordance with their
specific wording or were otherwise breached. It is accordingly agreed
that, notwithstanding anything to the contrary contained in this Agreement, each
of the parties hereto shall be entitled to an injunction or injunctions to
prevent such breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States of America or any state
having jurisdiction, such remedy being in addition to any other remedy to which
any party may be entitled at law or in equity.
ARTICLE
XIII
GENERAL
PROVISIONS
Section
13.1 Survival of Representations
and Warranties
. All
representations and warranties contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement through the
period during which claims for indemnification may be made for such
representations and warranties pursuant to Article XI (at which
time such representations and warranties shall terminate). The
parties acknowledge that it is their intent that the period during which claims
for indemnification may be made for such representations and warranties be
limited to the periods set forth in Article XI even where
such periods are shorter than the statute of limitations that would otherwise
have been applicable to such a claim but for the limitations agreed to by the
parties pursuant to Article
XI.
Section
13.2 Confidential Nature of
Information
. Except as
otherwise provided herein, after the Closing Date, Seller shall keep secret and
retain in strictest confidence, and shall not use for the benefit of itself or
others, all trade secrets used exclusively in the Business, customer lists of
the Business, details of client or consultant contracts of the Business and
pricing policies, marketing plans or strategies of the Business (the “Confidential
Information”), and shall not disclose such Confidential Information to
any Person other than Buyer except with Buyer’s express written
consent. Notwithstanding anything to the contrary contained herein,
the term “Confidential Information” shall not include any of the following: (a)
such information that becomes or is already known to the public generally
through no fault of Seller, any of Seller’s representatives or their respective
Affiliates, (b) information that is required by law to be disclosed; provided that prior
to disclosing any information pursuant to this clause (b) Seller’s
representative shall, if possible, give prior written notice thereof to Buyer
and provide Buyer with the reasonable opportunity to contest or seek a
protective order with respect to such disclosure, and shall cooperate with Buyer
with respect to the foregoing, and (c) such information as is necessary to
prepare Tax Returns or filings with any Administrative Authority for the period
ending immediately prior to the Closing Date.
Section
13.3 No Public
Announcement
. Neither Buyer nor
Seller, nor their respective Affiliates shall, without the approval of the
other, make any press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the extent that
any such party shall be so obligated by law, in which case the other party shall
be advised and the parties shall use their reasonable efforts to cause a
mutually agreeable release or announcement to be issued; provided, however, that the
foregoing shall not preclude communications or disclosures necessary to
implement the provisions of this Agreement or to comply with the accounting and
the Securities and Exchange Commission disclosure obligations or the rules of
any stock exchange.
Section
13.4 Notices
. All notices or
other communications required or permitted hereunder shall be in writing and
shall be deemed given or delivered when delivered personally, by facsimile or
when sent by registered or certified mail (postage prepaid, return receipt
requested) or by an internationally recognized overnight courier service
addressed as follows:
If to
Buyer, to:
Mercury
Casualty Corporation
0000
Xxxxxxxx Xxxxxxxxx
Xxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxx
Xxxxxxx
Facsimile: (000)
000-0000
with a
copy (which shall not constitute notice) to:
Xxxxxx
& Xxxxxxx LLP
000 Xxxxx
Xxxxx Xxxxxx
Xxx
Xxxxxxx, XX 00000-0000
Attention: Julian
T. H. Xxxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
If to
Seller, to:
Aon
Corporation
Aon
Center
000 Xxxx
Xxxxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx 00000
Attention: Xxxxxxx
X. Xxxxx
Facsimile: (000)
000-0000
with a
copy (which shall not constitute notice) to:
Sidley
Austin LLP
Xxx Xxxxx
Xxxxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx 00000
Attention: Xxxxxxxxx
X. Xxxxxxxx
Xxxx X. Xxxxxxxx
Facsimile: (000)
000-0000
or to
such other address as such party may indicate by a notice delivered to the other
party hereto.
Section
13.5 Successors and
Assigns
. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that neither
party to this Agreement may assign its rights or delegate its obligations under
this Agreement without the express prior written consent of the other party to
this Agreement; provided, however, that Buyer
may, without the consent of Aon, Seller, the Company or any Subsidiary, assign
all or any portion of its rights and obligations hereunder to Mercury General
Corporation or any other Affiliate(s) of Buyer, provided that, except
in the case of an assignment to Mercury General Corporation, Buyer shall
continue to remain responsible for its obligations hereunder.
Section
13.6 Access to Records after
Closing
.
(a) For a
period of six years after the Closing Date, Seller, its Affiliates and their
representatives shall have reasonable access to all of the books and records of
the Company and the Subsidiaries to the extent that such access may reasonably
be required by Seller or its Affiliates in connection with matters relating to
or affected by the operations of the Company and the Subsidiaries prior to the
Closing Date. Such access shall be afforded by Buyer upon receipt of
reasonable advance notice and during normal business hours. Seller
shall be solely responsible for any costs or expenses incurred by it or its
Affiliates pursuant to this Section
13.6(a).
(b) For a
period of six years after the Closing Date, Buyer and its representatives shall
have reasonable access to all of the books and records relating to the Company
and the Subsidiaries which Seller and its Affiliates may retain after the
Closing Date. Such access shall be afforded by Seller upon receipt of
reasonable advance notice and during normal business hours. Buyer
shall be solely responsible for any costs and expenses incurred by it pursuant
to this Section
13.6(b).
Section
13.7 Entire Agreement;
Amendments
. This Agreement,
the Ancillary Agreements, the Exhibits and Schedules referred to herein, the
documents delivered pursuant hereto and the Confidentiality Agreement contain
the entire understanding of the parties hereto with regard to the subject matter
contained herein or therein, and supersede all other prior representations,
warranties, agreements, understandings or letters of intent between or among any
of the parties hereto. This Agreement shall not be amended, modified
or supplemented except by a written instrument signed by an authorized
representative of each of the parties hereto.
Section
13.8 Interpretation
. Neither the
specification of any dollar amount in any representation or warranty contained
in this Agreement nor the inclusion of any specific item in any Schedule hereto
is intended to imply that such amount, or higher or lower amounts, or the item
so included or other items, are or are not material, and no party shall use the
fact of the setting forth of any such amount or the inclusion of any such item
in any dispute or controversy between the parties as to whether any obligation,
item or matter not described herein or included in any Schedule is or is not
material for purposes of this Agreement. Unless this Agreement
specifically provides otherwise, neither the specification of any item or matter
in any representation or warranty contained in this Agreement nor the inclusion
of any specific item in any Schedule hereto is intended to imply that such item
or matter, or other items or matters, are or are not in the Ordinary Course of
Business, and no party shall use the fact of the setting forth or the inclusion
of any such item or matter in any dispute or controversy between the parties as
to whether any obligation, item or matter not described herein or included in
any Schedule is or is not in the Ordinary Course of Business for purposes of
this Agreement. Seller shall, prior to the Closing, by notice in
accordance with the terms of this Agreement, promptly notify Buyer in writing of
all events, circumstances, facts and occurrences arising subsequent to the date
of this Agreement which are reasonably likely to result in a material breach of
a representation or warranty or covenant of Seller, the Company or the
Subsidiary in this Agreement or which are reasonably likely to have the effect
of making any representation or warranty of Seller, the Company or the
Subsidiary in this Agreement untrue or incorrect in any material respect; provided, however, that no
disclosure by the Company pursuant to this Section 13.8 shall be
deemed to amend or supplement the Schedules or to prevent or cure any
misrepresentation, breach of warranty or breach of covenant, or waive any rights
under Article
XI hereof. If any such notification results in a breach
of the representations and warranties set forth in this Agreement, Buyer shall
have all rights and remedies under this Agreement with respect to such breach
without regard to such notification.
Section
13.9 Waivers
. Any term or
provision of this Agreement may be waived by the party or parties entitled to
the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by such party. The failure of any party
hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
Section
13.10 Expenses
. Except as
expressly set forth herein, each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel, independent public accountants and other
advisors.
Section
13.11 Partial
Invalidity
. Wherever
possible, each provision hereof shall be interpreted in such manner as to be
effective and valid under applicable law, but in case any one or more of the
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such provision shall be ineffective to
the extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such invalid, illegal or
unenforceable provision or provisions or any other provisions
hereof.
Section
13.12 Execution in
Counterparts
. This Agreement
may be executed in counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to the other party.
Section
13.13 Further
Assurances
. Upon the terms
and subject to the conditions herein, each of the parties hereto agrees to use
its commercially reasonable efforts to take or cause to be taken all action, to
do or cause to be done, and to assist and cooperate with the other party in
doing, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement, including the
execution and delivery of such conveyances as may be reasonably necessary in
order to carry out the transactions contemplated hereunder.
Section
13.14 Disclaimer of Projections;
Warranties
. Seller makes no
representations or warranties with respect to any projections, forecasts or
forward-looking information provided to Buyer. There is no assurance
that any projected or forecasted results will be achieved. Buyer
acknowledges and agrees that it is not entitled to rely upon any representations
or warranties, other than the representations and warranties expressly set forth
in this Agreement.
Section
13.15 Governing Law; Submission to
Jurisdiction
. This Agreement
shall be governed by and construed in accordance with the internal laws (as
opposed to the conflicts of law provisions) of the State of
California. By the execution and delivery of this Agreement, Buyer
and Seller submit to the personal jurisdiction of any state or federal court in
the State of California in any suit or proceeding arising out of or relating to
this Agreement. Each party agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court and agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a state or federal court sitting in the State of
California.
Section
13.16 No Third Party
Beneficiaries
. Except for
Persons entitled to indemnification under Article XI hereof,
this Agreement is for the sole benefit of the parties hereto and their
successors and permitted assigns, and nothing herein express or implied shall
give or be construed to give to any Person, other than the parties hereto and
their successors and permitted assigns, any legal or equitable rights hereunder
as a third-party beneficiary or otherwise.
(Remainder
of page intentionally left blank; signature page follows.)
|
LA\1903445.15||
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as
of the day and year first above written.
AON
CORPORATION
By: /s/ Xxxxxxx
X.
Xxxxx
Name:
Xxxxxxx X. Xxxxx
Title:
Chief Administrative Officer
AON
SERVICES GROUP, INC.
By: /s/ Xxxxxxx
Xxxxx
Name:
Xxxxxxx Xxxxx
Title:
Vice President
MERCURY
CASUALTY COMPANY
By: /s/ Xxxxxxx
Xxxxxxx
Name:
Xxxxxxx Xxxxxxx
Title:
President and CEO
