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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 16, 1998
UNIFIED FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-22629 35-1797759
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
organization) Number)
431 NORTH PENNSYLVANIA STREET
INDIANAPOLIS, INDIANA 46204-1873
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 634-3301
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ITEM 5. OTHER EVENTS
On October 16, 1998, Unified Financial Services, Inc.
("Unified") entered into an Agreement and Plan of Merger (the "Strategic
Merger Agreement") with Strategic Fund Services, Inc., a Delaware
corporation ("Strategic"), pursuant to which Unified will acquire Strategic
through a merger of Strategic with and into a wholly owned subsidiary of
Unified. Pursuant to the Strategic Merger Agreement, Unified will issue a
total of 7,500 shares of Unified common stock, par value $.01 per share,
and the associated preferred share purchase rights under Unified's Rights
Agreement, dated August 26, 1998, between Unified and Unified Fund
Services, Inc., in exchange for all the outstanding capital stock of
Strategic. Consummation of the merger is subject to the typical closing
conditions. The merger is intended to be accounted for pursuant to the
pooling-of-interests method of accounting.
Strategic, headquartered in New York, New York, provides
mutual fund administration services to smaller mutual funds and fund
complexes, utilizing a proprietary database. The goal of Strategic is to
become an extension of the investment advisor and thereby perform necessary
fund administration functions such as: monitoring fund compliance;
financial reporting; SEC filings; performance calculations; preparation of
board of director meeting materials; fund expense payment and analysis; and
oversight of the service provider of a given fund.
On October 16, 1998, Unified entered into an Agreement and
Plan of Merger (the "AmeriPrime Merger Agreement") with AmeriPrime
Financial Services, Inc., a Texas corporation ("AmeriPrime"), pursuant to
which Unified will acquire AmeriPrime through a merger of AmeriPrime with
and into a wholly owned subsidiary of Unified. Pursuant to the AmeriPrime
Merger Agreement, Unified will issue a total of 410,000 shares of Unified
common stock, par value $.01 per share, and the associated preferred share
purchase rights under Unified's Rights Agreement, dated August 26, 1998,
between Unified and Unified Fund Services, Inc., in exchange for all the
outstanding capital stock of AmeriPrime. Consummation of the merger is
subject to the typical closing conditions. The merger is intended to be
accounted for pursuant to the pooling-of-interests method of accounting.
AmeriPrime, headquartered in Southlake, Texas, provides
administrative, regulatory, compliance and start-up support services to
investment advisors, banks and other money managers in their proprietary
mutual fund efforts. AmeriPrime provides mutual fund distribution through
its subsidiary, AmeriPrime Financial Securities, Inc., an NASD broker-
dealer registered in all 50 states. In addition, AmeriPrime currently
supports 28 mutual funds consisting of over $500 million in assets.
On October 16, 1998, Unified entered into an Agreement and
Plan of Merger (the "Commonwealth Merger Agreement") with Commonwealth
Investment Services, Inc., a Kentucky corporation ("Commonwealth"),
pursuant to which Unified will acquire Commonwealth through a merger of
Commonwealth with and into a wholly owned subsidiary of Unified. Pursuant
to the Commonwealth Merger Agreement, Unified will issue a total of 27,500
shares of Unified common stock, par value $.01 per share, and the
associated preferred share purchase rights under Unified's Rights
Agreement, dated August 26, 1998, between Unified and Unified Fund
Services, Inc., in exchange for all the outstanding capital stock of
Commonwealth. Consummation of the merger is subject to the typical closing
conditions. The merger is intended to be accounted for pursuant to the
pooling-of-interests method of accounting.
Commonwealth, headquartered in Lexington, Kentucky, provides
investment services to individuals, businesses and institutions throughout
the State of Kentucky and surrounding areas through its network of
independent agents, primarily certified public accountants.
On October 16, 1998, Unified entered into an Agreement and
Plan of Merger (the "Equity Merger Agreement") with Equity Underwriting
Group, Inc., a Kentucky corporation ("Equity"), pursuant to which Unified
will acquire Equity through a merger of a wholly owned subsidiary of
Unified with and into
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Equity. Pursuant to the Equity Merger Agreement, Unified will issue
a total of 241,745 shares of Unified common stock, par value $.01 per
share, and the associated preferred share purchase rights under
Unified's Rights Agreement, dated August 26, 1998, between Unified
and Unified Fund Services, Inc., in exchange for all the outstanding
capital stock of Equity. Consummation of the merger is subject to the
typical closing conditions. The merger is intended to be accounted for
pursuant to the pooling-of-interests method of accounting.
Equity, headquartered in Lexington, Kentucky, is a holding
company for Equity Insurance Managers, Inc., Equity Insurance Managers of
Illinois, LLC, 21st Century Claims Service, Inc., Equity Insurance
Administrators, Inc. and Z-Net Communications, Inc. Equity provides
through its subsidiaries specialty insurance products as a general agent or
as a broker and currently provides service in the States of Kentucky,
Tennessee, West Virginia, Ohio, Indiana and Illinois. Equity writes
insurance products for the insureds primarily in niche areas in the
insurance marketplace that are considered more "non-standard" or "sub-
standard," representing a higher risk of insured.
On October 16, 1998, Unified entered into an Agreement and
Plan of Merger (the "CPFC Merger Agreement") with Commonwealth Premium
Finance Corporation, a Kentucky corporation ("CPFC"), pursuant to which
Unified will acquire CPFC through a merger of a wholly owned subsidiary of
Unified with and into CPFC. Pursuant to the CPFC Merger Agreement, Unified
will issue a total of 12,800 shares of Unified common stock, par value $01
per share, and the associated preferred share purchase rights under
Unified's Rights Agreement, dated August 26, 1998, between Unified and
Unified Fund Services, Inc., in exchange for all the outstanding capital
stock of CPFC. Consummation of the merger is subject to the typical
closing conditions. The merger is intended to be accounted for pursuant to
the pooling-of-interests method of accounting.
CPFC, headquartered in Lexington, Kentucky, provides financing
for the payment of premiums on insurance coverages placed by Equity.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits. See Exhibit Index.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
UNIFIED FINANCIAL SERVICES, INC.
Dated: November 5, 1998 By: /s/ Timothy L. Ashburn
---------------------------------
Timothy L. Ashburn
Chairman, President and Chief
Executive Officer
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger, dated October 16, 1998,
by and among Unified Financial Services, Inc.,
AmeriPrime Acquisition Corporation, AmeriPrime
Financial Services, Inc. and Kenneth D. Trumpfheller.
2.2 Agreement and Plan of Merger, dated October 16, 1998,
by and among Unified Financial Services, Inc., Equity
Acquisition Corporation, Equity Underwriting Group,
Inc., John R. Owens and D. Richard Meyer.
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AGREEMENT AND PLAN OF MERGER
AMONG
UNIFIED FINANCIAL SERVICES, INC.,
A DELAWARE CORPORATION
AND
AMERIPRIME ACQUISITION CORPORATION,
A TEXAS CORPORATION
AND
AMERIPRIME FINANCIAL SERVICES, INC.,
A TEXAS CORPORATION
DATED OCTOBER 16, 1998
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TABLE OF CONTENTS
Page
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE 1
THE MERGER
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Additional Actions. . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Articles of Incorporation and Bylaws. . . . . . . . . . . . . . 2
1.6 Boards of Directors and Officers. . . . . . . . . . . . . . . . 2
1.7 Conversion of Securities. . . . . . . . . . . . . . . . . . . . 2
1.8 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . 3
1.9 No Fractional Shares. . . . . . . . . . . . . . . . . . . . . . 4
1.10 Closing of Stock Transfer Books . . . . . . . . . . . . . . . . 4
1.11 Anti-Dilution Adjustments . . . . . . . . . . . . . . . . . . . 4
1.12 Dissenting Stockholders . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TARGET AND SOLE SHAREHOLDER
2.1 Organization and Qualification. . . . . . . . . . . . . . . . . 5
2.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Authorization and Consents. . . . . . . . . . . . . . . . . . . 6
2.5 Financial Statements and Undisclosed Liabilities. . . . . . . . 7
2.6 Target Reports. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Absence of Certain Changes or Events. . . . . . . . . . . . . . 8
2.8 Title to Assets; Condition of Equipment . . . . . . . . . . . . 9
2.9 Cash, Cash Equivalents, Receivables and Prepaid Expenses. . . . 9
2.10 Other Agreements; Absence of Defaults . . . . . . . . . . . . .10
2.11 Patents and Trademarks; Year 2000 . . . . . . . . . . . . . . .10
2.12 No Violation of Statute, Decree or Order. . . . . . . . . . . .11
2.13 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.14 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . .12
2.15 Discrimination, Occupational Safety, Labor and Other Statutes
and Regulations . . . . . . . . . . . . . . . . . . . . . . . .14
2.16 Insurance Policies. . . . . . . . . . . . . . . . . . . . . . .14
2.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . .15
2.18 Governmental Approvals. . . . . . . . . . . . . . . . . . . . .15
2.19 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.20 Subsidiaries and Investments. . . . . . . . . . . . . . . . . .18
2.21 Corporate Minutes and Stock Transfer Records. . . . . . . . . .18
2.22 Transactions With Affiliates. . . . . . . . . . . . . . . . . .18
2.23 No Broker . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.24 Accuracy of Statements. . . . . . . . . . . . . . . . . . . . .18
2.25 Directors' and Officers' Insurance. . . . . . . . . . . . . . .18
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2.26 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . .18
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 Organization and Authority. . . . . . . . . . . . . . . . . . .20
3.2 Capitalization of Buyer, Merger Sub . . . . . . . . . . . . . .20
3.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . .21
3.4 Buyer Financial Statements. . . . . . . . . . . . . . . . . . .21
3.5 Material Adverse Change . . . . . . . . . . . . . . . . . . . .22
3.6 Legal Proceedings or Other Adverse Facts. . . . . . . . . . . .22
3.7 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . .22
3.8 Accuracy of Information . . . . . . . . . . . . . . . . . . . .22
ARTICLE 4
COVENANTS RELATING TO TARGET AND COMPETITION
4.1 Conduct of Business by Target . . . . . . . . . . . . . . . . .22
4.2 Affirmative Covenants Relating to Target. . . . . . . . . . . .24
4.3 Consents and Closing Conditions . . . . . . . . . . . . . . . .25
4.4 Disclosure Schedules. . . . . . . . . . . . . . . . . . . . . .25
4.5 Employment Agreement. . . . . . . . . . . . . . . . . . . . . .25
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Access and Information; Due Diligence . . . . . . . . . . . . .25
5.3 Shareholder Approval. . . . . . . . . . . . . . . . . . . . . .26
5.4 Current Information . . . . . . . . . . . . . . . . . . . . . .26
5.5 Conforming Entries. . . . . . . . . . . . . . . . . . . . . . .26
5.6 Environmental Reports . . . . . . . . . . . . . . . . . . . . .27
5.7 Lockup. . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
5.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
5.9 Miscellaneous Agreements and Consents.. . . . . . . . . . . . .27
5.10 Press Releases. . . . . . . . . . . . . . . . . . . . . . . . .28
5.11 State Takeover Statutes . . . . . . . . . . . . . . . . . . . .28
5.12 Employee Stock Options. . . . . . . . . . . . . . . . . . . . .28
5.13 Best Efforts to Insure Pooling. . . . . . . . . . . . . . . . .28
5.14 Election to Close Books for Taxes . . . . . . . . . . . . . . .29
ARTICLE 6
COVENANTS REGARDING TAX MATTERS
6.1 Returns and Payment of Taxes. . . . . . . . . . . . . . . . . .29
6.2 Elections and Settlements . . . . . . . . . . . . . . . . . . .29
6.3 Post-Closing Audits and Other Proceedings . . . . . . . . . . .29
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ARTICLE 7
TRANSFER LIMITATIONS AND COVENANTS
7.1 Securities Subject to Article 7 . . . . . . . . . . . . . . . .30
7.2 Restriction on Transfer . . . . . . . . . . . . . . . . . . . .30
7.3 Restrictive Legend. . . . . . . . . . . . . . . . . . . . . . .30
7.4 Notice of Proposed Transfers. . . . . . . . . . . . . . . . . .30
7.5 Investment Representations. . . . . . . . . . . . . . . . . . .31
7.6 Piggyback Registrations.. . . . . . . . . . . . . . . . . . . .31
ARTICLE 8
COVENANTS OF BUYER
ARTICLE 9
CONDITIONS OF BUYER AND TARGET
9.1 Shareholder Approval. . . . . . . . . . . . . . . . . . . . . .33
9.2 Regulatory Approval . . . . . . . . . . . . . . . . . . . . . .33
9.3 No Judicial Prohibition . . . . . . . . . . . . . . . . . . . .33
ARTICLE 10
BUYER'S CONDITIONS TO CLOSING
10.1 Continued Truth of Warranties . . . . . . . . . . . . . . . . .33
10.2 Performance of Covenants. . . . . . . . . . . . . . . . . . . .34
10.3 No Material Adverse Change. . . . . . . . . . . . . . . . . . .34
10.4 Permits and Consents. . . . . . . . . . . . . . . . . . . . . .34
10.5 Full Investigation. . . . . . . . . . . . . . . . . . . . . . .34
10.6 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . .34
10.7 Closing Documents . . . . . . . . . . . . . . . . . . . . . . .34
10.8 Opinion of Accountant . . . . . . . . . . . . . . . . . . . . .34
10.9 Contribution of AFSI. . . . . . . . . . . . . . . . . . . . . .34
ARTICLE 11
TARGET'S CONDITIONS TO CLOSING
11.1 Continued Truth of Warranties . . . . . . . . . . . . . . . . .35
11.2 Performance of Covenants. . . . . . . . . . . . . . . . . . . .35
11.3 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . .35
11.4 Closing Documents . . . . . . . . . . . . . . . . . . . . . . .35
11.5 Permits and Consents. . . . . . . . . . . . . . . . . . . . . .35
ARTICLE 12
DOCUMENTS TO BE DELIVERED AT CLOSING
12.1 Documents to be Delivered by Target.. . . . . . . . . . . . . .35
12.2 Documents to be Delivered by Buyer. . . . . . . . . . . . . . .36
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ARTICLE 13
SURVIVAL AND INDEMNIFICATION
13.1 Survival; Knowledge . . . . . . . . . . . . . . . . . . . . . .37
13.2 General Indemnification . . . . . . . . . . . . . . . . . . . .37
13.3 Notice of, and Procedures for, Collecting Indemnification.. . .38
13.4 Time Limits . . . . . . . . . . . . . . . . . . . . . . . . . .39
13.5 Limits on Amounts . . . . . . . . . . . . . . . . . . . . . . .39
13.6 Sole Remedy . . . . . . . . . . . . . . . . . . . . . . . . . .39
ARTICLE 14
TERMINATION OF AGREEMENT
14.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . .39
14.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . .40
ARTICLE 15
MISCELLANEOUS
15.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
15.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . .41
15.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .41
15.4 Binding on Successors and Assigns . . . . . . . . . . . . . . .41
15.5 Headings; Pronouns. . . . . . . . . . . . . . . . . . . . . . .41
15.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . . .42
15.7 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
15.8 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . .42
15.9 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
15.10 List of Exhibits and Schedules. . . . . . . . . . . . . . . . .42
15.11 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .43
15.12 Entire Agreement; Law Governing.. . . . . . . . . . . . . . . .43
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (which, together with the
Schedules attached hereto and incorporated herein by reference, is
hereinafter referred to as this "Agreement") is made and entered into as
of the 16th day of October 1998, by and among UNIFIED FINANCIAL
SERVICES, INC., a Delaware corporation (the "Buyer"), AMERIPRIME
ACQUISITION CORPORATION, a Texas corporation and wholly owned subsidiary
of Buyer ("Merger Sub"), AMERIPRIME FINANCIAL SERVICES, INC., a Texas
corporation ("Target"), and Kenneth D. Trumpfheller, a resident of the
State of Texas and the sole shareholder of Target ("Trumpfheller" or the
"Sole Shareholder").
RECITALS:
A. The respective Boards of Directors of Buyer and Target deem
it advisable and in the best interests of such corporations and their
respective stockholders and shareholders, as the case may be, that
Target merge with and into Merger Sub, with Merger Sub as the surviving
corporation, all as specifically set forth in this Agreement (the
"Merger").
B. Trumpfheller, as the sole shareholder of Target, has
approved the Merger and other transactions contemplated by this
Agreement.
C. The parties intend that the Merger, for federal income tax
purposes, shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
D. The parties hereto desire to set forth certain
representations, warranties, covenants and agreements made as an
inducement to the execution and delivery of this Agreement and to set
forth certain conditions precedent to the Merger contemplated in this
Agreement.
NOW, THEREFORE, in consideration of these premises, the covenants
and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
----------
Agreement, at the Effective Time (as defined in Section 1.3) Target
shall be merged with and into Merger Sub in accordance with Part Five of
the Texas Business Corporation Act (the "TBCA") and the separate
corporate existence of Target shall thereupon cease. Merger Sub shall
be the surviving corporation of the Merger (sometimes referred to herein
as the "Surviving Corporation") and shall continue to be governed by the
laws of the State of Texas. The Merger shall have the effects set forth
in Part Five of the TBCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of Target and
Merger Sub shall rest in the Surviving Corporation, and all debts,
liabilities and duties of Target and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
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1.2 Closing. The closing (the "Closing") of the Merger shall
-------
take place at 10:00 a.m., local time, at the offices of Thompson Coburn
in St. Louis, Missouri on the date that the Effective Time occurs (the
"Closing Date"), which Closing Date shall not be earlier than October
30, 1998, nor later than December 31, 1998, or at such other date, time
and place as Buyer and Target shall agree.
1.3 Effective Time. The Merger shall become effective on the
--------------
date and at the time (the "Effective Time") on which a Certificate of
Merger is issued by the Secretary of State of the State of Texas, in
accordance with, the relevant provisions of the TBCA. Unless otherwise
agreed in writing by Buyer and Target, subject to the terms and
conditions of this Agreement (including, without limitation,
Section 1.2), the Effective Time shall occur within five business days
after the satisfaction or waiver in accordance with this Agreement of
all conditions to the Merger contained in this Agreement, or on such
other date as is agreed to by Buyer and Target.
1.4 Additional Actions. If, at any time after the Effective
------------------
Time, the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances or any other acts are necessary
or desirable (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under
any of the rights, properties or assets of Target or (ii) otherwise to
carry out the purposes of this Agreement, Target by its execution of
this Agreement shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all
such deeds, assignments or assurances and to do all acts necessary or
desirable to vest, perfect or confirm title and possession to such
rights, properties or assets in the Surviving Corporation and otherwise
to carry out the purposes of this Agreement, and the officers and
directors of the Surviving Corporation hereby are authorized, in the
name of Target or otherwise, to take any and all such action.
1.5 Articles of Incorporation and Bylaws. The Articles of
------------------------------------
Incorporation and Bylaws of Merger Sub in effect immediately prior to
the Effective Time shall be the Articles of Incorporation and Bylaws of
the Surviving Corporation following the Merger until otherwise amended
or repealed; provided, however, that Article FIRST of the Articles of
Incorporation of the Surviving Corporation shall be amended to read in
its entirety as follows:
"FIRST: The name of the Corporation is AmeriPrime Financial
Services, Inc."
1.6 Boards of Directors and Officers. At the Effective Time,
--------------------------------
the directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation following the Merger and such directors and
officers shall hold office in accordance with the Surviving
Corporation's Bylaws and applicable law.
1.7 Conversion of Securities. At the Effective Time, by
------------------------
virtue of the Merger and without any action on the part of the Buyer,
Target or the holder of any of the following securities:
(a) Each share of the common stock, no par value, of
Merger Sub that is issued and outstanding immediately prior to the
Effective Time shall remain outstanding and shall be unchanged after the
Merger and shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation; and
(b) Subject to Sections 1.9, 1.11 and 1.12 hereof, each
share of common stock, no par value, of Target ("Target Common Stock")
issued and outstanding immediately prior to the
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Effective Time, other than Dissenting Shares (as defined in Section 1.12
hereof), shall cease to be outstanding and shall be converted into and
become the right to receive 410 shares (the "Exchange Ratio") of common
stock, $0.01 par value, and the associated "Rights" under the "Rights
Agreement," as those terms are defined in Section 3.2 hereof, of Buyer
(collectively, "Buyer Common Stock"); provided, however, that any Target
Common Stock held by Target, Buyer or any of their respective
Subsidiaries (as defined as in Rule 1-02 of Regulation S-X promulgated
by the Securities and Exchange Commission (the "SEC")), in each case
other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and shall not be exchanged for shares of
Buyer Common Stock. The Exchange Ratio was computed by (i) aggregating
(A) the total number of shares of Target Common Stock that were issued
and outstanding on the date of this Agreement with (B) the total number
of shares of Target Common Stock that are reserved for issuance pursuant
to options or other rights relating to Target Common Stock and
outstanding as of the date of this Agreement and dividing such number of
shares of Target Common Stock (computed by aggregating (A) and (B)
hereof (the "Fully Diluted Shares")) into (ii) 410,000, the aggregate
number of shares of Buyer Common Stock to be issued in the Merger.
1.8 Exchange Procedures.
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(a) As soon as practicable following the Effective Time,
Buyer shall mail or cause to be mailed to holders of record of
certificates formerly representing Target Common Stock (the
"Certificates"), as identified on the Target Shareholder List (as
provided pursuant to Section 1.10(b) hereof), letters advising them
of the effectiveness of the Merger and instructing them to tender such
Certificates to Buyer's duly appointed exchange agent (the "Exchange
Agent"), or in lieu thereof, such evidence of lost, stolen or mutilated
Certificates and such surety bond or other security as the Exchange
Agent may reasonably require (the "Required Documentation").
(b) Subject to Sections 1.9, 1.11 and 1.12 hereof, after the
Effective Time, each previous holder of a Certificate that surrenders
such Certificate or in lieu thereof, the Required Documentation, to the
Exchange Agent, with a properly completed and executed letter of
transmittal with respect to such Certificate, will be entitled to a
certificate or certificates representing the number of full shares of
Buyer Common Stock into which the Certificate so surrendered shall have
been converted pursuant to this Agreement, and any distribution
theretofore declared and not yet paid with respect to such shares of
Buyer Common Stock and any amount due with respect to fractional
shares, without interest (collectively, the "Merger Consideration").
Such shares of Buyer Common Stock, any amount due with respect to
fractional shares and any distribution shall be delivered by the Exchange
Agent to each such holder as promptly as practicable after such surrender.
(c) Each outstanding Certificate, until duly surrendered
to the Exchange Agent, shall be deemed to evidence ownership of the
Merger Consideration into which the stock previously represented by such
Certificate shall have been converted pursuant to this Agreement.
(d) After the Effective Time, holders of Certificates
shall cease to have rights with respect to the stock previously
represented by such Certificates, and their sole rights shall be to
exchange such Certificates for the Merger Consideration to which the
shareholder may be entitled pursuant to the provisions of Section 1.7
hereof. After the closing of the transfer books as described in
Section 1.10 hereof, there shall be no further transfer on the records
of Target of Certificates, and if such Certificates are presented to
Target for transfer, they shall be canceled against delivery of the
Merger Consideration. Neither Buyer nor the Exchange Agent shall be
obligated to deliver the Merger Consideration until such holder
surrenders the Certificates or furnishes the Required Documentation as
provided herein. No dividends or distributions declared after the
Effective Time on the Buyer Common
- 3 -<PAGE>
<PAGE>
Stock will be remitted to any person entitled to receive Buyer Common
Stock under this Agreement until such person surrenders the Certificate
representing the right to receive such Buyer Common Stock or furnishes
the Required Documentation, at which time such dividends or
distributions shall be remitted to such person, without interest and
less any taxes that may have been imposed thereon. Certificates
surrendered for exchange by an affiliate shall not be exchanged until
Buyer has received a written agreement from such affiliate as required
pursuant to Section 5.7 hereof. Neither the Exchange Agent nor any
party to this Agreement nor any affiliate thereof shall be liable to any
holder of stock represented by any Certificate for any Merger
Consideration issuable or payable in the Merger that is paid to a public
official pursuant to applicable abandoned property, escheat or similar
laws.
1.9 No Fractional Shares. Notwithstanding any other
--------------------
provision of this Agreement, neither certificates nor scrip for
fractional shares of Buyer Common Stock shall be issued in the Merger.
Each holder of Target Common Stock who otherwise would have been
entitled to a fraction of a share of Buyer Common Stock shall receive
(by check from the Exchange Agent, mailed to the shareholder with the
certificate(s) for Buyer Common Stock which such holder is to receive
pursuant to the Merger) in lieu thereof, cash (without interest) in an
amount determined by multiplying the fractional share interest to which
such holder would otherwise be entitled by $27.50. No such holder shall
be entitled to dividends, voting rights or any other rights in respect
of any fractional share.
1.10 Closing of Stock Transfer Books.
-------------------------------
(a) The stock transfer books of Target shall be closed at
the end of business on the business day immediately preceding the
Closing Date. In the event of a transfer of ownership of Target Common
Stock that is not registered in the transfer records prior to the
closing of such record books, the Merger Consideration issuable or
payable with respect to such stock may be delivered to the transferee,
if the Certificate or Certificates representing such stock is presented
to the Exchange Agent accompanied by all documents required to evidence
and effect such transfer and all applicable stock transfer taxes are
paid.
(b) At the Effective Time, Target shall provide Buyer with
a complete and verified list of registered holders of Target Common
Stock based upon its stock transfer books or corporate records as of the
closing of said transfer books, including the names, addresses,
certificate numbers and taxpayer identification numbers of such holders
(the "Target Shareholder List"). Buyer shall be entitled to rely upon
the Target Shareholder List to establish the identity of those persons
entitled to receive the Merger Consideration, which list shall be
conclusive with respect thereto. In the event of a dispute with respect
to ownership of stock represented by any Certificate, Buyer shall be
entitled to deposit any Merger Consideration represented thereby in
escrow with an independent third party and thereafter be relieved with
respect to any claims thereto.
1.11 Anti-Dilution Adjustments. If, between the date of
-------------------------
this Agreement and the Effective Time, Buyer shall effect a stock
dividend, or make distributions in stock upon, or subdivide, split up,
reclassify or combine Buyer Common Stock or declare a dividend or make a
distribution on Buyer Common Stock in the form of a security convertible
into Buyer Common Stock, then appropriate and proportional adjustment or
adjustments will be made to the Exchange Ratio such that such shares, as
adjusted, shall result in the issuance of that number of shares of Buyer
Common Stock or other securities as if the declaration or payment of
such dividend, distribution, subdivision, split-up, reclassification or
combination of such Buyer Common Stock had a record or payment date
therefor immediately after the Effective Time.
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<PAGE>
1.12 Dissenting Stockholders. "Dissenting Shares" means shares
-----------------------
held by any holder who becomes entitled to payment of the fair value of
such shares under Part 5 of the TBCA. Dissenting Shares shall not be
converted into or be exchangeable for the Merger Consideration, and any
holder of Dissenting Shares shall be entitled to payment for such shares
only to the extent permitted by and in accordance with the provisions of
such law and Buyer shall cause the Surviving Corporation to pay such
consideration with funds provided by Buyer. Each party hereto shall
give the other prompt notice of any written demands for the payment of
fair value of any shares, withdraws of such demands, and any other
instruments, served pursuant to the TBCA, and Target shall give Buyer
the opportunity to participate in all negotiations and proceedings with
respect to such demands. Target shall not voluntarily make any payment
with respect to any demands for payment of fair value and shall not,
except with the prior written consent of Buyer, settle or offer to
settle any such demands. By his execution of this Agreement,
Trumpfheller agrees to vote in favor of the merger and waives his right
to demand an appraisal of his Target Common Stock in connection with the
Merger.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TARGET AND SOLE SHAREHOLDER
Target and Sole Shareholder hereby jointly and severally represent
and warrant to Buyer as follows:
2.1 Organization and Qualification. Target is a
------------------------------
corporation duly organized, validly existing and in good standing under
the laws of the State of Texas, has all requisite corporate power to
own, lease and operate its properties and to carry on its business as it
is now being conducted, and is duly qualified and in good standing in
all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified. Schedule 2.1
------------
sets forth true and complete copies of Target's Articles of
Incorporation, as amended (certified as of a recent date by the
Secretary of State of the State of Texas), and Bylaws, as amended
(certified as of the date hereof by the Secretary or an Assistant
Secretary of Target).
2.2 Subsidiaries. Schedule 2.2 sets forth a complete and
------------ ------------
correct list of all of Target's Subsidiaries (each individually a
"Target Subsidiary" and, collectively, the "Target Subsidiaries"), and
all outstanding Equity Securities (as hereinafter defined) of each
Target Subsidiary, all of which are owned directly or indirectly by
Target. Except as disclosed in Schedule 2.2, all of the outstanding
------------
shares of capital stock of the Target Subsidiaries owned directly or
indirectly by Target are validly issued, fully paid and nonassessable
and are owned free and clear of any lien, claim, charge, option,
encumbrance, agreement, mortgage, pledge, security interest or
restriction (a "Lien") with respect thereto. Each of the Target
Subsidiaries is a corporation, limited liability company, bank or
savings bank duly incorporated or organized and validly existing under
the laws of its jurisdiction of incorporation or organization, and has
corporate power and authority to own or lease its properties and assets
and to carry on its business as it is now being conducted. Each of the
Target Subsidiaries is duly qualified to do business in each
jurisdiction where its ownership or leasing of property or the conduct
of its business requires it so to be qualified. Except as set forth in
Schedule 2.2, neither Target nor any Target Subsidiary owns
- ------------
beneficially, directly or indirectly, any shares of any class of Equity
Securities or similar interests of any corporation, limited liability
company, bank, business trust, association or organization, or any
interest in a partnership or joint venture of any kind, other than those
identified as Target Subsidiaries in Schedule 2.2 hereof. "Equity
------------
Securities" of an issuer means capital stock or other equity securities of
such issuer, options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, shares of any capital stock or
- 5 -
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<PAGE>
other equity securities of such issuer, or contracts, commitments,
understandings or arrangements by which such issuer is or may become bound
to issue additional shares of its capital stock or other equity securities
of such issuer, or options, warrants, scrip or rights to purchase, acquire,
subscribe to, calls on or commitments for any shares of its capital stock
or other equity securities.
2.3 Capitalization. The authorized capital stock of Target
--------------
consists only of One Thousand (1,000) shares of common stock, no par
value per share, of which 1,000 shares are issued and outstanding (the
"Target Shares"). All treasury shares of Target are identified on
Schedule 2.3. Trumpfheller is the only legal and beneficial owner of
- ------------
capital stock or other securities of any kind or class of Target, and
owns the Target Shares free and clear of all liens, claims, encumbrances
and transfer restrictions. All of the Target Shares are duly
authorized, validly issued, fully paid and nonassessable. There are no
options, warrants, subscriptions, puts, calls or other rights,
commitments, undertaking or understanding to acquire, or restrict the
transfer of, any capital stock or other securities of any kind or class
of Target or any rights, obligations or undertakings convertible into
securities of any kind or class of Target which has been authorized or
which is outstanding. There is no stock appreciation, phantom stock,
profit participation, success fee or similar right with respect to
Target that has been authorized or which is outstanding. There are no
voting trusts, proxies or other agreements or understandings with
respect to the voting of the capital stock of Target. Target is not
subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock.
2.4 Authorization and Consents.
--------------------------
(a) Target has the corporate power and authority to enter
into this Agreement and, subject to the approval of this Agreement by
the Sole Shareholder of Target and the Regulatory Authorities (as
defined in Section 2.6 hereof) to carry out its obligations hereunder.
The execution, delivery and performance of this Agreement by Target and
the consummation by Target of the transactions contemplated hereby in
accordance with and subject to the terms of this Agreement have been
duly authorized by the Board of Directors of Target. Subject to the
approval of the Sole Shareholder of Target and subject to the receipt of
such approvals of the Regulatory Authorities as may be required by
statute or regulation, this Agreement is a valid and binding obligation
of Target enforceable against Target in accordance with its terms.
Except as disclosed on Schedule 2.4(a), neither the execution nor
---------------
delivery nor performance by Target of this Agreement, nor the
consummation by Target of the transactions contemplated hereby, nor
compliance by Target with any of the provisions hereof, will
(i) violate, conflict with, or result in a breach of any provisions of,
or constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the termination
of, or acceleration of, or result in the creation of, any Lien upon any
of the properties or assets of Target or any of the Target Subsidiaries
under any of the terms, conditions or provisions of (x) its Articles of
Incorporation, charter or by-laws or (y) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument
or obligation to which Target or any of the Target Subsidiaries is a
party or by which it may be bound, or to which Target or any of the
Target Subsidiaries or any of the properties or assets of Target or any
of the Target Subsidiaries may be subject, or (ii) subject to compliance
with the statutes and regulations referred to in subsection (d) of this
Section 2.4, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Target or any of the
Target Subsidiaries or any of their respective properties or assets.
(b) Sole Shareholder. The Sole Shareholder has all
----------------
requisite power and authority to enter into and to consummate the sale
contemplated by this Agreement, and otherwise to perform his obligations
hereunder. This Agreement constitutes a valid and legally binding
obligation of the Sole Shareholder, enforceable against him in
accordance with its terms. Except as disclosed on
- 6 -
<PAGE>
<PAGE>
Schedule 2.4(b), neither the execution and delivery of this Agreement by
- ---------------
the Sole Shareholder nor the consummation by the Sole Shareholder of the
transactions contemplated hereby will (i) violate, or conflict with, or
result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the Target Common Stock or
any of the properties of Target under, (A) the Articles of
Incorporation, as amended, or Bylaws of Target or (B) any note, bond,
mortgage indenture, deed of trust, lease, license, agreement or other
instrument or obligation to which Target is bound, or by which Target or
any of its properties, or the Sole Shareholder or any of the Target
Common Stock, may be bound or affected, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Sole
Shareholder, Target or any of their respective properties. No consent
or approval by, notice to or registration with any governmental
authority or other third party, other than those disclosed on
Schedule 2.4(b), is required on the part of Sole Shareholder or Target
- ---------------
in connection with the execution and delivery of this Agreement or the
consummation by Sole Shareholder or Target of the Merger and the other
transactions contemplated hereby.
(c) Regulatory Compliance. Other than in connection or in
---------------------
compliance with the provisions of the TBCA, the Securities Act of 1933,
as amended, and the rules and regulations thereunder (collectively, the
"Securities Act"), the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (the "Exchange Act"), the
securities or blue sky laws of the various states or filings, consents,
reviews, authorizations, approvals or exemptions required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), or any required approvals of any governmental agencies or
governing boards having regulatory authority over Target or any Target
Subsidiary, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Target of the transactions
contemplated by this Agreement.
2.5 Financial Statements and Undisclosed Liabilities.
------------------------------------------------
(a) Target's Financial Statements. Attached hereto as
-----------------------------
part of Schedule 2.5(a) are true and complete copies of Target's balance
---------------
sheets and related statements of income and cash flow as of and for the
fiscal years ended December 31, 1997 and 1996 and unaudited balance
sheets and related statements of income and cash flow as of and for the
six months ended June 30, 1998 and 1997 (collectively, the "Target
Financial Statements"). Except as disclosed on Schedule 2.5(a), the
---------------
Target Financial Statements (i) have been prepared from the books and
records of Target in accordance with generally accepted accounting
principles and (ii) fairly present the financial position and results of
operations of Target as of and for the fiscal years or interim periods,
as the case may be, then ended.
(b) Undisclosed Liabilities. Except as set forth in the
-----------------------
Target Financial Statements or Schedules to this Agreement, Target has
no liabilities or obligations of any kind, whether existing, fixed,
contingent upon future events, vested, funded, unfunded or otherwise,
except for (i) current liabilities that were incurred since June 30,
1998, in the ordinary course of Target's business, and (ii) liabilities
which will not have a Material Adverse Effect. For purposes of this
Agreement, the term "Material Adverse Effect" means (A) any adverse
impact on the assets, operations, liabilities, earnings, prospects,
business or condition of Target that represents a diminution in value to
Target (whether immediate or as a result of diminished future cash
flows) of more than Ten Thousand Dollars ($10,000), (B) any loss of the
full-time services of key personnel of Target, and/or (C) the creation
of any lien, security interest, charge or encumbrance upon any of the
properties of Target.
- 7 -
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<PAGE>
2.6 Target Reports. Since January 1, 1995, each of Target and
--------------
the Target Subsidiaries has timely filed any and all material reports,
registrations and statements, together with any required amendments
thereto, that it was required to file with (i) the Securities and
Exchange Commission, including, but not limited to, Forms 10-K, Forms
10-Q and Forms 8-K and (ii) any federal, state, municipal or local
government, securities, banking, savings and loan, environmental,
insurance and other governmental or regulatory authority, and the
agencies and staffs thereof (the entities in the foregoing clauses (i)
and (ii) being referred to herein collectively as the "Regulatory
Authorities" and individually as a "Regulatory Authority"), having
jurisdiction over the affairs of it. All such material reports and
statements filed with any such Regulatory Authority are collectively
referred to herein as the "Target Reports." As of each of their
respective dates, the Target Reports complied in all material respects
with all the rules and regulations promulgated by the applicable
Regulatory Authority. With respect to Target Reports filed with the
Regulatory Authorities, there is no material unresolved violation,
criticism or exception by any Regulatory Authority with respect to any
report or statement filed by, or any examinations of, Target or any of
the Target Subsidiaries.
2.7 Absence of Certain Changes or Events. Since December 31,
------------------------------------
1997, and except as disclosed on Schedule 2.7 or as contemplated by this
----------
Agreement, there has not been with respect to Target:
(a) any change in the assets, operations, liabilities,
earnings, prospects, business or condition (financial or otherwise) that
has been or which the Sole Shareholder reasonably should expect to have,
individually or in the aggregate with other changes, a Material Adverse
Effect;
(b) any damage, destruction or casualty loss (whether or
not covered by insurance) which has been or which the Sole Shareholder
reasonably should expect to have a Material Adverse Effect;
(c) any increase in the compensation payable to any
director, officer, employee or agent other than routine increases made
in the ordinary course of business consistent with past practice, or any
bonus, incentive compensation, service award or other like benefit,
granted, made or accrued, contingently or otherwise, to or to the credit
of any of such director, officer, employee or agent, or any employee
welfare, pension, retirement or similar payment or arrangement made or
agreed to by Target with respect to any such director, officer, employee
or agent, other than pursuant to the existing plans disclosed on
Schedule 2.14(c)(i);
- -------------------
(d) any addition to, or modification of, any profit
sharing, bonus, deferred compensation, insurance, pension, retirement or
other employee benefit plan, arrangement or practice described on
Schedule 2.14(c)(i) other than accruals in accordance with the normal
- -------------------
practices of Target and the extension of coverage to employees who
became eligible after December 31, 1997;
(e) any sale, assignment or transfer (including, without
limitation, any collateral assignment or the granting or permitting of
any lien, charge or encumbrance arising other than in connection with
the creation of a security interest in after-acquired property under a
security agreement disclosed on Schedule 2.8) of any asset, property or
------------
right (except sales of inventory and sale or disposal of worn out and
obsolete fixed assets, each in the ordinary course of business);
(f) any amendment, modification, waiver or cancellation of
any debt owed to, or claim of, Target or settlement of any dispute
involving any payment or other obligation due to or
- 8 -
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<PAGE>
owed by Target to be made or performed after the Closing Date involving
more than $5,000 (provided that all items excluded by reason of such
threshold are less than $10,000 in the aggregate);
(g) any borrowing of money, any increase in any existing
indebtedness or the incurrence of any obligation or liability (whether
absolute or contingent), other than current liabilities incurred in the
ordinary course of business;
(h) any capital expenditure or commitment to make a
capital expenditure (exclusive of expenditures for repair or maintenance
of equipment in the ordinary course of business) exceeding $5,000
individually or $10,000 in the aggregate, or the execution of any lease
or similar arrangement with respect to any aspect of the business of
Target, or incurring of liability therefor;
(i) any cancellation, termination or amendment of any
material contract, agreement, license or other instrument to which
Target is a party or by which it is bound;
(j) any lending or advance of money or other pledging of
credit, by way of guaranty or otherwise, in connection with any aspect
of its business, except normal travel and expense advances to employees
and normal equity advances incurred with respect to residential real
property, in the ordinary course of business consistent with prior
practice;
(k) any declaration or payment of any dividend or other
distribution of any kind with respect to any of the capital stock of
Target;
(l) any failure on the part of Target to operate its
business in the ordinary course and to preserve its business
organization intact;
(m) any agreement by, or commitment of, the Sole
Shareholder or Target to do or permit any of the foregoing; or
(n) any other event or condition of any character which,
in any one case or in the aggregate, will or can reasonably be expected
to have a Material Adverse Effect.
2.8 Title to Assets; Condition of Equipment. Schedule 2.8
--------------------------------------- ------------
contains the address of all real properties owned or used by Target and
the buildings and structures located thereon ("Business Premises").
Except as set forth on Schedule 2.8, Target has good and marketable
------------
title to all assets and properties used in its business, subject to
assets held under lease arrangements disclosed on Schedule 2.10. With
-------------
the exception of (a) the liens, security interests and other
encumbrances disclosed on Schedule 2.8, (b) liens arising by operation
------------
of law for taxes accrued but not yet payable, and (c) such imperfections
of title, if any, as do not materially detract from the value or
interfere with Target's present use of such assets nor impair the
marketability of title of any of the assets or properties of Target,
none of the assets of Target is subject to any lease, lien, security
interest, mortgage, charge, easement or encumbrance, right of first
refusal, option or other restriction of any nature whatsoever, nor
subject to any pending or, to the Sole Shareholder's knowledge,
threatened condemnation proceedings. To the Sole Shareholder's
knowledge, none of the Business Premises or the operation or maintenance
thereof as now operated and maintained, contravenes any applicable
zoning ordinance or other administrative regulation or violates any
restrictive covenant or any provision of law. Unless otherwise set
forth on Schedule 2.8, the Business Premises are in good operating
------------
condition and repair.
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<PAGE>
2.9 Cash, Cash Equivalents, Receivables and Prepaid Expenses.
--------------------------------------------------------
(a) Set forth on Schedule 2.9(a) are (i) a list of all
---------------
bank lines, credit arrangements, bank accounts, money market and
securities brokerage accounts, and safe deposit boxes maintained by
Target together with the names of all authorized signatories on each
such arrangement or account and (ii) a list of all certificates of
deposit, money market fund investments, other cash equivalents,
marketable securities of other persons and investment companies and
similar temporary investments.
(b) All of the accounts receivable of Target reflected on
the Target Financial Statements and all such accounts receivable arising
subsequent to the date thereof, (i) represent actual indebtedness
incurred by the applicable account debtors, (ii) have arisen in the
ordinary course of Target's business, (iii) except for liens, security
interests and encumbrances described on Schedule 2.8(b), are subject to
---------------
no prior assignment, claim, charge or encumbrance of any nature
whatsoever, and (iv) are collectible net of the allowance for
uncollectible accounts set forth on the Target Financial Statements, as
the case may be, without rights of counterclaim or setoff by any account
debtor.
(c) All of the prepaid expenses of Target reflected on the
Target Financial Statements represent actual advance payments of
Target's ordinary operating expenses, and can be utilized in full by
Target after the Closing to the extent not used in the ordinary course
of business prior to Closing.
2.10 Other Agreements; Absence of Defaults. Except as disclosed
-------------------------------------
on Schedule 2.10, neither Target nor any of its assets or properties is
-------------
a party to or bound by: (a) any loan agreement, note, mortgage, deed of
trust, security agreement, conditional sales agreement, capital lease,
guaranty, letter of credit arrangement or other document or instrument
reflecting present or contingent indebtedness of Target or for which any
of Target's properties are mortgaged or pledged as collateral (all such
items are referred to collectively as the "Loan Documents"); (b) any
employment agreement, consulting agreement, sales agency agreement,
distributor agreement or other contractual arrangement for services;
(c) any collective bargaining agreement covering any employees; (d) any
contract, agreement or arrangement which prohibits or restricts Target
from freely engaging in any business in any part of the world; (e) any
contract, agreement or arrangement relating to the marketing or sales of
its services, or requiring minimum or exclusive purchases of supplies or
services from vendors; (f) any contract, agreement or arrangement
between Target and a client for the provision of relocation services;
(g) any contract relating to a prior business acquisition, merger,
combination or similar transaction or reorganization under which Target
has any continuing rights or obligations; (h) any contract under which
Target has agreed to indemnify a present or former officer, director or
employee of Target; or (i) any other contract, agreement, lease,
license, outstanding bid or offer or other commitment (whether formal or
informal, written or oral) calling for the payment or receipt by Target
of property or services valued at $5,000 or more, excluding purchase
orders for supplies ordered in the ordinary course of business. The
Sole Shareholder has made available for inspection by Buyer a true and
complete copy of each agreement, instrument or other document (as
amended) referenced or cross-referenced in Schedule 2.10. In the case
-------------
of oral contracts and commitments required to be disclosed pursuant to
this Section, Schedule 2.10 contains a true and complete description of
-------------
the material terms thereof. Except as disclosed on Schedule 2.10,
-------------
Target is not in default under any Loan Document, contract, offer,
commitment or other item listed on Schedule 2.10, nor has any event
-------------
occurred which, upon notice or passage of time or both, will result in
such a default. Except as disclosed on Schedule 2.10, all payments
-------------
required to be made by Target pursuant to the Loan Documents on or prior
to the date hereof have been paid in full.
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2.11 Patents and Trademarks; Year 2000.
---------------------------------
(a) Except as noted on Schedule 2.11(a), Target does not
----------------
use any patent, trade name, trademark, service mark or copyright, or any
application therefor whether or not registered (collectively, "Patents
and Trademarks") that is not owned by or validly licensed to Target,
except where the failure to have a license will not have a Material
Adverse Effect. All Patents and Trademarks (and any applications
therefor) used by Target are described on Schedule 2.11(a) hereto,
----------------
together with the name and address of the owner thereof if other than
Target. Schedule 2.11(a) contains a true and complete list of all
----------------
license agreements, indemnification agreements and other agreements or
understandings with respect to Patents and Trademarks, and true and
complete copies of the same have been delivered to Buyer for review.
Except as disclosed in Schedule 2.11(a), no Patents and Trademarks
----------------
owned, licensed or used by Target are the subject of a lawsuit or any
other proceeding involving Target, no party has challenged or threatened
to challenge Target's right to use such Patents and Trademarks, and to
the Sole Shareholder's knowledge there is no basis for any such
challenge based on a claim of infringement or otherwise.
(b) To the best knowledge of Target all computer software
and hardware utilized by Target is, or Target has taken all required
steps to be, Year 2000 compliant, which, for purposes of this Agreement,
shall mean that the data outside the range 1900-1999 will be correctly
processed in any level of computer hardware or software including, but
not limited to, microcode, firmware, applications programs, files and
data bases. All computer software is, or the Sole Shareholder has
taken steps (including obtaining warranties from the vendors thereof in
respect of compliance) to ensure that all computer software will be,
designed to be used prior to, during and after the calendar year
2000 A.D., and such software will operate during each such time period
without error relating to date data, specifically including any error
relating to, or the product of, date data that represent or reference
different centuries or more than one century.
2.12 No Violation of Statute, Decree or Order. Except as
----------------------------------------
disclosed on Schedule 2.12, Target, is not, and since January 1, 1995
-------------
has not been, in default under or in breach or violation of any statute,
law, ordinance, decree, order, rule or regulation of any governmental
body applicable to Target or its properties, except where such default,
breach or violation will not and cannot reasonably be expected to have a
Material Adverse Effect. The consummation of the Merger and the
consummation of the other transactions contemplated by this Agreement
will not constitute or result in any default under or breach or
violation of any statute, law, ordinance, decree, order, rule or
regulation of any governmental body applicable to Target or its
respective properties.
2.13 Litigation. Except as listed in Schedule 2.13, there is
---------- -------------
not, and since January 1, 1995 there has not been, any suit, claim,
action, proceeding or governmental investigation against Target or
respecting any aspect of its business ("Third Party Litigation") pending
or, to the Sole Shareholder's knowledge, threatened, nor to the Sole
Shareholder's knowledge is there presently any condition or set of facts
which will give rise to any Third Party Litigation. There are no
decrees, injunctions or orders of any court, administrative or
regulatory body, arbitration panel or governmental agency outstanding
against Target relating to any aspect of its business under which Target
has continuing obligations. There is no suit, claim, action, proceeding
or governmental investigation now pending or, to the Sole Shareholder's
knowledge, threatened against the Sole Shareholder or Target which
contests the validity of this Agreement or the ability of Target or the
Sole Shareholder to consummate the Merger and other transactions
contemplated by this Agreement. The Sole Shareholder has furnished to
Buyer true and correct copies of all audit response letters received by
Target in the twelve months preceding the date hereof from legal counsel
devoting substantive attention to matters which may result in any
liability or obligation of Target.
- 11 -
<PAGE>
<PAGE>
2.14 Employee Benefit Plans.
----------------------
(a) Definitions. For purposes of this Section 2.14:
-----------
(i) Arrangement. The term "Arrangement" means any
-----------
personnel policy (including, but not limited to, vacation time, holiday
pay, bonus programs, moving expense reimbursement programs and sick
leave), salary reduction agreements, change-in-control agreements,
employment agreements, stock option plans, consulting agreements or any
other benefit, program, agreement or contract, whether or not written,
(A) which currently is being or since December 31, 1992 has been
maintained for employees of Target or (B) to which Target makes or is
required to make, or since December 31, 1992 has made or was required to
make, contributions.
(ii) Plan. The term "Plan" includes each employee
----
benefit plan, as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA") (other than a Multiemployer Plan
within the meaning of Section 3(37) of ERISA, but including terminated
Plans) (A) which currently is being or since December 31, 1992 has been
maintained for employees of Target or (B) to which Target makes or is
required to make, or since December 31, 1992 has made or was required to
make, contributions.
(iii) Qualified Plan. The term "Qualified Plan" means
--------------
any Plan which is an employee pension benefit plan as defined in
Section 3(2) of ERISA and which is intended to meet the qualification
requirements of Section 401(a) of the Code.
(iv) Title IV Plan. The term "Title IV Plan" means
-------------
any Qualified Plan that is a defined benefit plan (as defined in
Section 3(35) of ERISA) and is subject to Title IV of ERISA.
(b) Operations of Plans. Except as set forth on
-------------------
Schedule 2.14(b):
- ----------------
(i) Each Arrangement and each Plan has been
administered in compliance with its terms and with all filing,
reporting, disclosure and other requirements of all applicable statutes
(including, but not limited to, ERISA, the Code and the Consolidated
Omnibus Budget Reconciliation Act), regulations and interpretations
thereunder. Each Qualified Plan (together with its related funding
instrument) is intended to be qualified and tax exempt under
Sections 401 and 501 of the Code and is the subject of a favorable
Internal Revenue Service determination with respect to such
qualification and exemption.
(ii) All oral or written communications with respect
to each Arrangement and each Plan materially reflect and have materially
reflected the documents and operations of the Arrangement or Plan and no
action is pending or, to any of the Sole Shareholder's knowledge,
threatened, against any person to assert any liability by reason of any
such communication or any failure to communicate with respect to any
Arrangement or Plan.
(iii) Target does not contribute to or sponsor, and
has never contributed to or sponsored, any Title IV Plan.
(iv) Neither Target, nor any of its directors or
employees, has engaged in any transaction with respect to the Plans,
including the execution and delivery of this
- 12 -
<PAGE>
<PAGE>
Agreement and other agreements, instruments and documents for which
execution and delivery by Target is contemplated herein, in violation of
Section 406(a) or (b) of ERISA or which is a "prohibited transaction"
(as defined in Section 4975(c)(1) of the Code) for which no exemption
exists under Section 408(b) of ERISA or Section 4975(d) of the Code or
for which no administrative exemption has been granted under
Section 408(a) of ERISA and which has or would have a Material Adverse
Effect.
(v) Target, and every other person who handles funds
or other property of any Plan, is bonded to the extent required by
Section 412 of ERISA and no civil or criminal action with respect to any
Arrangement or Plan, pursuant to any federal or state law, has been
brought, is pending or, to the Sole Shareholder's knowledge, threatened
against Target, any officer, director or employee of Target of any
Arrangement or Plan. Neither Target nor any other person has, or has
had, any liability to any participant or beneficiary under any Plan or
Arrangement or to any other person under any provision of ERISA or any
other applicable law by reason of any action or failure to act in
connection with any Plan or Arrangement, including, but not limited to,
any liability by reason of any payment of, or failure to pay, benefits
or any other amounts or by reason of any credit or failure to give
credit for any benefits or rights.
(vi) There are no Plans or Arrangements to which
Target is a party or by which it is bound and under which, as a result
of this Agreement or any transaction contemplated by this Agreement, any
director, officer, employee or other agent of Target or any other party
claiming through such a person (A) shall or may acquire rights with
respect to any Plan or Arrangement (including, without limitation, the
creation, increase or extension of new or existing rights), (B) shall
become entitled to a distribution or payment with respect to any Plan or
Arrangement at a date earlier than if this Agreement had not been signed
or such transaction had not occurred (except for benefits paid in the
normal course under a Plan upon termination of a Plan participant's
employment with Target or any successor employer), or (C) shall
otherwise receive or become vested in rights or benefits with respect to
any Plan or Arrangement.
(c) Plan Documents and Records.
--------------------------
(i) All Arrangements and Plans are set forth in
Schedule 2.14(c)(i). Correct and complete copies of all documents,
- -------------------
including all amendments thereto, with respect to each Arrangement and
Plan, have been heretofore delivered to the Buyer. These documents
include, but are not limited to, (A) current (and for those Plans or
Arrangements terminated since January 1, 1995, current as of the
applicable termination date) Plan and Arrangement documents, trust
agreements, insurance contracts, annuity contracts, summary plan
descriptions, investment manager and investment adviser contracts and
Internal Revenue Service determination letters, (B) for the most recent
three full plan years ended prior to the date hereof, annual and
quarterly (for any quarter ended since the most recent full plan year)
audit reports, financial statements, annual reports (Form 5500),
analyses of discrimination testing under Code Sections 401(k) and 401(m)
and other filings with governmental agencies, (C) any Internal Revenue
Service recognitions of exemption issued since December 31, 1988, and
(D) any other general explanation or substantive communication
distributed or otherwise provided to participants in each such
Arrangement or Plan which describes any relevant aspect of each
Arrangement or Plan.
(ii) As of the date of Closing, the participant or
beneficiary records with respect to each Arrangement and Plan shall be
in the custody of the persons listed on Schedule 2.14(c)(ii). Except as
--------------------
set forth on Schedule 2.14(c)(ii), all such records accurately set forth
--------------------
the history of each participant and beneficiary in connection with each
Arrangement and Plan, and accurately
- 13 -
<PAGE>
<PAGE>
state the benefits accrued or credited to each such person, as of the
end of the last quarter of the applicable Plan year preceding the
Effective Time, and provide information sufficient to determine such
benefits for the period from the last quarter to the Effective Time.
(d) Finances. All contributions payable to each Qualified
--------
Plan for all benefits earned and other liabilities accrued through
December 31, 1997, determined in accordance with the terms and
conditions of such Qualified Plan, ERISA and the Code, have been paid or
otherwise provided for, and to the extent unpaid are reflected on the
Target Financial Statements. Schedule 2.14(d) sets forth (1) the amount
----------------
of the liability for minimum contributions for the last plan year to any
Qualified Plan, (2) the approximate amount of the minimum contribution
to any Qualified Plan for the plan year during which the Closing is to
occur, (3) the annual cost of providing coverage under any Plan that is
a welfare plan as defined in Section 3(1) of ERISA to all current
employees of Target and all dependents of a current employee, and
(4) the annual cost of providing coverage under any Plan that is a
welfare plan as defined in Section 3(1) of ERISA to all former employees
of Target and all dependents of a former employee.
(e) Multiemployer Plans. Target has not, and neither
-------------------
Target nor any predecessor ever has had, an obligation to contribute to
a "Multiemployer Plan" within the meaning of Section 3(37) of ERISA.
2.15 Discrimination, Occupational Safety, Labor and Other
----------------------------------------------------
Statutes and Regulations. Except as disclosed on Schedule 2.15, no
- ------------------------ -------------
person, party or labor organization (including, but not limited to,
governmental agencies of any kind) has any claim, action or proceeding
pending or, to the Sole Shareholder's knowledge, threatened or available
to it against Target arising out of any statute, ordinance or regulation
relating to the payment of wages or benefits, plant closing laws,
discrimination in employment, employment practices, immigration,
continuation of health insurance benefits or occupational safety and
health standards (including, but without limiting the foregoing, any
applicable state statutes, any rules, regulations or other similar
standards of the Occupational Health and Safety Administration, the
Truth In Lending Act, the Real Estate Settlement Practices Act, the Fair
Labor Standards Act, National Labor Relations Act, Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act of
1967, or the Americans with Disabilities Act, in each case as amended).
Except as disclosed on Schedule 2.15, to the Sole Shareholder's
-------------
knowledge, there is not presently pending or threatened any proceeding,
hearing or investigation with respect to the adoption by any state,
county or municipality where a Business Premises is located, of
amendments or modifications to existing local or municipal laws,
ordinances, regulations or restrictions with respect to such matters
which, if adopted, would have a Material Adverse Effect.
2.16 Insurance Policies. Schedule 2.16 sets forth a complete
------------------ -------------
list of insurance policies and bonds in force covering Target and/or its
properties, operations and personnel. Upon request, each of said
policies, together with all records and documents relating to insured
losses and claims (other than under any group health or major medical
insurance policy) paid or made during the past three years will be made
available to Buyer for its review. All such policies are in full force
and effect, Target is not in default with respect to its obligations
under such policies, Target has not received any notice of cancellation
of any of such policies, and there is no claim outstanding which could
be expected to cause a material increase in Target's insurance rates.
Except as disclosed in Schedule 2.16, there has been no reservation of
-------------
rights by any insurance carrier, and to the Sole Shareholder's knowledge
no such reservation is threatened, concerning the coverage of any matter
required to be disclosed pursuant to this Agreement.
- 14 -
<PAGE>
<PAGE>
2.17 Environmental Matters.
---------------------
(a) Environmental Claims. Except as set forth on
--------------------
Schedule 2.17(a), neither Target nor the Sole Shareholder has received
- ----------------
any oral or written notice of, nor to the Sole Shareholder's knowledge
is there any basis for, any violation, citation, claim or complaint
relating to the business of Target or any property now or previously
owned or operated by Target arising under the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response Compensation and
Liability Act, the Superfund Amendments and Reauthorization Act, the
Toxic Substances Control Act, the Safe Drinking Water Act, the Federal
Water Pollution Control Act (Clean Water Act), the Clean Air Act, the
Powerplant and Industrial Fuel Use Act of 1978, the National
Environmental Policy Act (Environmental Impact Statement) and
antipollution, waste control and disposal and environmental "cleanup"
provisions of similar statutes of any Governmental Authority, and all
regulations and standards enacted pursuant thereto and all permits and
authorizations issued in connection therewith (collectively,
"Environmental Matters"). Schedule 2.17(a) sets forth all Environmental
----------------
Matters and all such violations, citations, claims and complaints.
(b) Hazardous Substances. Except as set forth in
--------------------
Schedule 2.17(b), to the Sole Shareholder's knowledge no underground
- ----------------
tanks are now or have been located at any facility now or previously
owned or operated by Target, and no toxic or hazardous substances have
been generated, treated, stored, disposed of on or from or otherwise
deposited in or on or allowed to emanate from any such property
(irrespective of whether such substances remain at the property or were
transferred to or otherwise disposed of off site), including, without
limitation, the surface waters and subsurface waters thereof, which may
support a claim or cause of action under any federal, state or local
environmental statutes, ordinances, regulations or guidelines.
2.18 Governmental Approvals. Schedule 2.18 contains a listing of
---------------------- -------------
all licenses, franchises, permits (including, without limitation,
environmental permits) and other governmental authorizations held by
Target or any of its employees. All of such licenses, franchises,
permits and governmental authorizations are in full force and effect,
and to the Sole Shareholder's knowledge, there is no basis for any
governmental body to deny or rescind any such license, franchise, permit
or governmental authorization. The business of Target as presently
conducted does not require any other license, franchise, permit or other
governmental authorization for Target or any of its employees from any
governmental body, whether federal, state, local or foreign.
2.19 Taxes.
-----
(a) Definitions. For purposes of this Section 2.19 and
-----------
Article 6 of this Agreement:
(i) the term "Code" shall mean the Internal Revenue
Code of 1986, as amended. All citations to the Code or to the
regulations promulgated thereunder shall include any amendments or any
substitute or successor provisions thereto;
(ii) the term "Returns" shall mean, collectively,
(A) all reports, declarations, estimates, returns, information
statements and similar documents relating to, or required to be filed in
respect of, any Taxes; and (B) any statements, returns, reports or
similar documents required to be filed pursuant to Part III of
Subchapter A of Chapter 61 of the Code or pursuant to any similar
income, excise or other tax provision of federal, territorial, state,
local or foreign law; and the term "Return" means any one of the
foregoing Returns; and
- 15 -
<PAGE>
<PAGE>
(iii) the term "Taxes" shall mean (A) all taxes
measured with respect to net income, gross income or taxable income, and
all gross receipts, sales, use, ad valorem, franchise, profits, license,
lease, service, service use, withholding, employment, payroll, excise,
severance, transfer, documentary, mortgage, registration, stamp,
occupation, environmental, premium, property, windfall profits, customs,
duties and other taxes, fees, assessments or charges of any kind
whatever, together with any interest, penalties and other additions with
respect thereto, imposed by any federal, territorial, state, local or
foreign government; and (B) any penalties, interest or other additions
to tax for the failure to collect, withhold or pay over any of the
foregoing, or to accurately file any Return; and the term "Tax" shall
mean any one of the foregoing Taxes; provided, however, that when used
with reference to a specified person (for example and without
limitation, "Taxes of Target"), the terms "Taxes" and "Tax" shall
include only those amounts for which such person is, or could become,
liable in whole or part (including, without limitation, any obligation
in connection with a duty to collect, withhold or pay over any Tax, any
obligation to contribute to the payment of any Taxes determined on a
consolidated, combined or unitary basis, any liability as a transferee,
or any liability as a result of any express or implied obligation to
indemnify or pay the Tax obligations of another person).
(b) Returns Filed and Taxes Paid. Except as otherwise set
----------------------------
forth in Schedule 2.19(b): (i) Target has duly filed or caused to be
----------------
filed, on or before the due date thereof (taking into account any
extensions), with the appropriate taxing authorities, all Returns that
it is required to file; (ii) each such Return (including any amendment
thereto) is true, correct and complete in all material respects; and
(iii) all Taxes of Target due with respect to, or shown to be due on,
each such Return (or amendment) or subsequent assessment with regard
thereto, have been timely paid, or an adequate reserve has been
established therefor on the Target Financial Statements. The Sole
Shareholder has delivered to Buyer true copies of Target's federal and
state income tax Returns (and amended Returns, revenue agents' reports
and other notices from federal or state taxing authorities) for the last
four taxable years of Target.
(c) Tax Reserves and Tax Liabilities. The amount of
--------------------------------
Target's liability for unpaid Taxes for all periods ending on or before
the date of the Target Financial Statements does not, in the aggregate,
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred Taxes) as such accruals are reflected on the
Target Financial Statements and the amount of Target's liability for
unpaid Taxes for all periods ending on or before the Closing Date shall
not, in the aggregate, exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) as such
accruals are reflected on the books and records of Target on the Closing
Date. Except for Taxes so accrued, no other Taxes of Target are due or
payable with respect to any taxable periods or portions of periods
ending on or before the date hereof. Target has collected or withheld
all Taxes that it is required to collect or withhold. Target is not a
party to or bound by any tax indemnity, tax sharing or tax allocation
agreement, or any other contractual obligation to pay the Tax
obligations of another person or to pay the Tax obligations with respect
to transactions relating to any other person, except as otherwise set
forth in Schedule 2.19(c).
----------------
(d) Audit History and Other Proceedings. Target has not
-----------------------------------
made an election under Treas. Reg. Section 301.6241-1T(c)(2)(v)(A)
(relating to entity level audit proceedings). Except as set forth in
Schedule 2.19(d): (i) there are no pending or, to the Sole
- ----------------
Shareholder's knowledge, threatened (either in writing or verbally,
formally or informally) audits, investigations, claims, suits or other
proceedings for or relating to any material liability in respect of
Taxes; (ii) no material deficiencies for Taxes have been claimed,
proposed or assessed by any taxing or other governmental authority;
(iii) there are no matters under discussion with any governmental
authorities that could result in any additional
- 16 -
<PAGE>
<PAGE>
amount of Taxes; (iv) no extension of a statute of limitations (whether
arising by reason of a waiver, claim for refund or otherwise) relating
to Taxes or Returns is in effect; and (v) there are no requests for
rulings or determinations in respect of Taxes pending with any
governmental authority. With regard to taxable periods beginning after
1992, audits of Federal, state and local Returns have been completed by
the relevant taxing authorities with regard to the Taxes, jurisdictions
and periods set forth in Schedule 2.19(d).
----------------
(e) Tax Basis, Attributes and Miscellaneous Elections.
-------------------------------------------------
Except as otherwise set forth in Schedule 2.19(e): (i) the net carrying
----------------
values of all assets of Target, as reflected on the Target Financial
Statements, are equal in all material respects to the adjusted bases of
those assets for Federal income tax purposes; (ii) Target does not own
any real property in the State of New York or any other jurisdiction in
which a Tax is imposed upon the transfer of an interest in real
property; (iii) any change made in any method of accounting used by
Target for Federal income tax purposes has been approved by the Internal
Revenue Service in accordance with Section 446(e) of the Code;
(iv) Target will not have a "net unrealized built-in loss" (as defined
in Section 382(h)(3) of the Code) on the Closing Date; (v) Target has
never been a member of an affiliated group of corporations within the
meaning of Section 1504 of the Code; (vi) Target has never been a member
of any combined, consolidated or unitary group for state income or
franchise tax purposes and does not file (and is not required to file)
combined, consolidated or unitary Returns for state income or franchise
tax purposes; (vii) Target is not a party to any agreement, arrangement
or plan that has resulted or could result in the payment of any "excess
parachute payment" as defined in Section 280G of the Code (without
regard to subsection (b)(4) thereof); (viii) Target is not subject to
any joint venture, partnership or other arrangement or contract that
could be treated as a partnership for Federal income tax purposes; and
(ix) Target has fully disclosed on its Federal income tax Returns all
positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Code Section 6662. Except
as otherwise set forth in Schedule 2.1, Target: (i) does not have any
------------
net operating losses or other tax attributes presently subject to
limitation under Code Sections 382, 383, 384, or the Federal
consolidated return regulations; (ii) has not agreed, or is not
otherwise required, to make any adjustment or report any income under
Section 481 of the Code after the Closing Date by reason of a change in
accounting method or otherwise; (iii) has not been a party to any
transaction that could cease to be a "reorganization" (as defined in
Section 168 of the Code) as a result of the transactions contemplated by
this Agreement; (iv) has not made, or is not required to make (or take
any action that could result in), an election or deemed election under
Section 338 of the Code; (v) has not made an election, or is not
otherwise required, to treat any asset of Target as owned by another
person pursuant to the so-called "safe harbor lease" provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended by
the Economic Recovery Tax Act of 1981; (vi) does not have any asset that
directly or indirectly secures any debt the interest on which is tax-
exempt under Section 103(a) of the Code; (vii) does not have any asset
that is "tax-exempt use property" as defined in Section 168(h) of the
Code; (viii) does not have any asset that is subject to a lease, other
than a "true" lease for Federal income tax purposes; and (ix) has not
made (or given) any of the foregoing elections (or consents) or is not
required to apply any rules similar to the foregoing under any
provisions of territorial, state, local or foreign income tax law.
Accurately set forth in Schedule 2.19(e) is: (i) a list of all
----------------
states, territories and jurisdictions (whether foreign or domestic) to
which any Tax is properly payable by Target; and (ii) a complete
schedule of the amount of any net operating loss, net capital loss,
unused investment or other credits, unused foreign tax credits, and
excess charitable contributions. The transactions contemplated by this
Agreement are not subject to the withholding provisions of Section 3406
of the Code, or of subchapter A of Chapter 3 of the Code, or of any
similar provision of territorial, state, local or foreign tax law.
- 17 -
<PAGE>
<PAGE>
2.20 Subsidiaries and Investments. Except as disclosed on
----------------------------
Schedule 2.20, Target does not own, and in the last five (5) years has
- -------------
not owned, any subsidiary or any equity or debt security of, or other
material economic interest in, any other corporation, partnership, joint
venture or other business enterprise.
2.21 Corporate Minutes and Stock Transfer Records. The Sole
--------------------------------------------
Shareholder has furnished to Buyer for review the corporate minutes of
Target, which are current and complete and which contain an accurate
record of all actions taken by the Board of Directors and the Sole
Shareholder of Target. The Sole Shareholder has furnished to Buyer for
review the stock certificate books of Target, which are current,
complete and correct and which accurately reflect all transactions
involving Equity Securities of Target.
2.22 Transactions With Affiliates. Except as disclosed on
----------------------------
Schedule 2.22, neither the Sole Shareholder nor any officer or director
- -------------
of Target, will immediately prior to or immediately after the Closing
Date (a) have any direct or indirect interest, except through ownership
of less than two percent (2%) of the outstanding securities of
corporations listed on a national securities exchange or registered
under the Exchange Act, in any entity which does business with Target or
is competitive with its business or any property, asset or right which
is used by Target in the conduct of such business or (b) be a party to
any transaction with Target relating to any aspect of its business,
including, without limitation, any contract, agreement or other
arrangement (i) providing for the furnishing or services, by,
(ii) providing for lease, management, rental or purchase or real or
personal property to or from, or (iii) otherwise requiring payments to
(other than for services as employees, officers or directors) any such
person, any member of the immediate family of any such person or any
corporation, partnership, trust or other entity in which any such person
has a substantial interest or is an officer, director, trustee or
partner. Except as disclosed on Schedule 2.22, no employee of Target is
-------------
presently a party, directly or indirectly, to any transaction with
Target (other than as an employee) relating to any aspect of its
business requiring payments by Target in excess of $500 within any
twelve-month period.
2.23 No Broker. No person has acted in the capacity of broker or
---------
finder on behalf of the Sole Shareholder or Target (a) to bring about
the negotiation or consummation of this Agreement, the Merger or the
sale of any of the Target Shares or (b) in connection with any prior
transaction involving a sale of a material portion of Target's assets or
Target's stock, whether directly, by merger or otherwise.
2.24 Accuracy of Statements. Neither this Agreement nor any
----------------------
Schedule hereto nor any certificate furnished by Target or the Sole
Shareholder to Buyer in connection with this Agreement or any of the
transactions contemplated hereby contains or will contain an untrue
statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
2.25 Directors' and Officers' Insurance. Each of the Target, the
----------------------------------
Target Subsidiaries and the Sole Shareholder has taken or will take all
requisite action (including, without limitation, the making of claims
and the giving of notices) pursuant to its directors' and officers'
liability insurance policy or policies in order to preserve all rights
thereunder with respect to all matters (other than matters arising in
connection with this Agreement and the transactions contemplated hereby)
occurring prior to the Effective Time that are known to the Sole
Shareholder.
- 18 -
<PAGE>
<PAGE>
2.26 Compliance with Laws.
--------------------
(a) To the best knowledge of the Sole Shareholder and
Target, Target and each of the Target Subsidiaries have all permits,
licenses, authorizations, orders and approvals of, and have made all
filings, applications and registrations with, all Regulatory Authorities
that are required in order to permit them to own or lease their
respective properties and assets and to carry on their respective
businesses as presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and
effect and, to the best knowledge of the Sole Shareholder, no suspension
or cancellation of any of them is threatened; and all such filings,
applications and registrations are current; in each case except for
permits, licenses, authorizations, orders, approvals, filings,
applications and registrations the failure to have (or have made) would
not have a Material Adverse Effect.
(b) (i) Each of Target and the Target Subsidiaries has
complied with all laws, regulations and orders (including, without
limitation, zoning ordinances, building codes, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and securities, tax,
environmental, civil rights, and occupational health and safety laws and
regulations including, without limitation, in the case of Target or any
of the Target Subsidiaries that are a bank or savings association,
banking organization, banking corporation or trust company, all
statutes, rules, regulations and policy statements pertaining to the
conduct of a banking, deposit-taking, lending or related business, or to
the exercise of trust powers) and governing instruments applicable to it
and to the conduct of its business, and (ii) neither the Target nor any
of the Target Subsidiaries is in default under, and no event has
occurred which, with the lapse of time or notice or both, could result
in the default under, the terms of any judgment, order, writ, decree,
permit, or license of any Regulatory Authority or court, whether
federal, state, municipal or local, and whether at law or in equity,
except in the case of subparts (i) and (ii) where such failure to comply
or default would not have a Material Adverse Effect.
(c) Except as set forth on Schedule 2.26(c), neither the
----------------
Target nor any of the Target Subsidiaries is subject to or reasonably
likely to incur a liability as a result of its ownership, operation, or
use of any Property (as defined below) of Target (A) that is
contaminated by or contains any toxic substance, including, without
limitation, petroleum and petroleum products, asbestos, PCBs,
pesticides, herbicides and any other substance or waste that is
hazardous to human health or the environment and regulated by federal,
state or local law or (B) on which any toxic substance has been stored,
disposed of, placed or used at the Property or in the construction of
structures thereon; and which, in each case, reasonably could be
expected to have a Material Adverse Effect. "Property" shall include
all property (real or personal, tangible or intangible) owned or
controlled by Target or any of the Target Subsidiaries, including,
without limitation, property in which any venture capital or similar
unit of Target or any of the Target Subsidiaries has an interest and, to
the best knowledge of the Target, property held by Target or any of the
Target Subsidiaries in its capacity as a trustee. No claim, action,
suit or proceeding is pending or, to the best knowledge of the Sole
Shareholder or Target, threatened, and no material claim has been
asserted against Target or any of the Target Subsidiaries relating to
Property of Target or any of the Target Subsidiaries before any court or
other Regulatory Authority or arbitration tribunal relating to toxic
substances, pollution or the environment, and there is no outstanding
judgment, order, writ, injunction, decree or award against or affecting
Target or any of the Target Subsidiaries with respect to the same.
(d) Neither the Sole Shareholder nor the Target nor any
Target Subsidiary has received any notification or communication that
has not been finally resolved from any Regulatory Authority
(i) asserting that Target or any of the Target Subsidiaries or any
Property is not in substantial compliance with any of the statutes,
regulations or ordinances that such Regulatory Authority enforces,
except with respect to matters which reasonably could not be expected to
have a Material Adverse Effect, (ii) threatening to revoke any license,
franchise, permit or governmental authorization that reasonably
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could be expected to have a Material Adverse Effect, or (iii) requiring
or threatening to require the Target or any of the Target Subsidiaries,
or indicating that the Target or any of the Target Subsidiaries may be
required, to enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting or
limiting or purporting to direct, restrict or limit in any manner the
operations of the Target or any of the Target Subsidiaries, including,
without limitation, any restriction on the payment of dividends. No
such cease and desist order, agreement or memorandum of understanding or
other agreement is currently in effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Target and Sole
Shareholder as follows:
3.1 Organization and Authority. Buyer is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the
State of Delaware, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property
or the conduct of its business requires it to be so qualified, and has
corporate power and authority to own its properties and assets and to
carry on its business as it is now being conducted.
3.2 Capitalization of Buyer, Merger Sub. The authorized capital
-----------------------------------
stock of Buyer consists of (i) 10,000,000 shares of Buyer Common Stock
and (ii) 1,000,000 shares of preferred stock, $0.01 par value, of Buyer
("Buyer Preferred Stock"). As of September 15, 1998, 1,580,604 shares
of Buyer Common Stock were issued and outstanding. As of the date
hereof, Buyer has designated 2,100 shares of Buyer Preferred Stock as
"Series C 6.75% Cumulative Convertible Preferred Stock," of which 1,672
shares are issued and outstanding (the "Series C Preferred Stock"), and
100,000 shares of Buyer Preferred Stock as "Series D Junior
Participating Preferred Stock," of which no shares are issued and
outstanding (the "Series D Preferred Stock"), and has reserved such
shares under a Rights Agreement dated August 26, 1998 between Buyer and
Unified Fund Services, Inc. (the "Rights Agreement" and, the rights to
be issued pursuant thereto, the "Rights"). As of the date hereof, Buyer
has reserved (i) 6,000 shares of Buyer Common Stock for issuance
pursuant to subscriptions accepted by the Company in connection with a
recently completed private placement, (ii) approximately 1,100,000
shares of Buyer Common Stock for issuance in connection with the
proposed acquisitions of Strategic Fund Services, Inc., SBX Inc.,
Commonwealth Investment Services, Inc., Equity Underwriting Group, Inc.,
Commonwealth Premium Finance Corporation and Target, (iii) 1,500,000
shares of Buyer Common Stock for issuance pursuant to the Unified
Financial Services, Inc. 1998 Stock Incentive Plan, (iv) 225,720 shares
of Buyer Common Stock for issuance upon the conversion of the Series C
Preferred Stock (each share of Series C Preferred Stock is convertible
into 135 shares of Buyer Common Stock) and (v) 1,750,000 shares of Buyer
Common Stock for issuance in connection with a proposed private
placement. Prior to the Effective Time, additional shares of Buyer
Common Stock may be issued upon the conversion by Buyer of its Series C
Preferred Stock upon the exercise of the conversion rights with respect
thereto. Buyer continually evaluates possible acquisitions and may
prior to the Closing Date enter into one or more agreements providing
for, and may consummate, the acquisition by it of another company (or
the assets thereof) for consideration that may include capital stock of
Buyer. In addition, prior to the Closing Date, Buyer may, depending on
market conditions and other factors, otherwise determine to issue
equity, equity-linked or other securities for financing purposes or to
repurchase shares of its outstanding capital stock. All of the present
(and to be) issued and outstanding shares of Buyer Common Stock are (and
will be) validly issued, fully paid and nonassessable, and have not been
(and will not be) issued in violation of any preemptive right of any
stockholder of Buyer. Prior to Closing, Buyer
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shall take all appropriate action to cause Merger Sub to approve and
consummate the Merger in accordance with the terms and subject to the
conditions in this Agreement.
3.3 Authorization.
-------------
(a) Buyer has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Buyer and the
consummation by Buyer of the Merger and other transactions contemplated
hereby have been duly authorized by all requisite corporate action of
Buyer. Subject to the receipt of such approvals of regulatory
authorities as may be required by statute or regulation, this Agreement
is a valid and binding obligation of Buyer enforceable against Buyer in
accordance with its terms.
(b) Neither the execution, delivery and performance by
Buyer of this Agreement, nor the consummation by Buyer of the
transactions contemplated hereby, nor compliance by Buyer with any of
the provisions hereof, will (i) violate, conflict with or result in a
breach of any provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) or
result in the termination of, or accelerate the performance required by,
or result in a right of termination or acceleration of, or result in the
creation of, any lien upon any of the properties or assets of Buyer
under any of the terms, conditions or provisions of (x) its Certificate
of Incorporation or Bylaws, or (y) any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or
obligation to which Buyer is a party or by which it may be bound, or to
which Buyer or any of its properties or assets may be subject, or (ii)
subject to compliance with the statutes and regulations referred to in
subsection (c) of this Section 3.3, violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to
Buyer or any of its properties or assets, other than violations,
conflicts, breaches, defaults, terminations, accelerations or liens
which would not have a material adverse effect on Buyer and its
subsidiaries, taken as a whole.
(c) Other than in connection with or in compliance with
the provisions of federal securities laws, the securities or blue sky
laws of the various states, the HSR Act or any required approvals of any
other Regulatory Authority, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Buyer of the transactions
contemplated by this Agreement.
3.4 Buyer Financial Statements. The consolidated balance sheet
--------------------------
of Buyer and its subsidiaries as of December 31, 1997 and 1996 and
related supplemental consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1997, together with the notes thereto, audited
by Larry E. Nunn & Associates, L.L.C. (collectively, the "Buyer
Financial Statements"), have been prepared in accordance with generally
accepted accounting principles, present fairly the consolidated
financial position of Buyer and its subsidiaries at the dates thereof
and the consolidated results of operations, changes in stockholders'
equity and cash flows of Buyer and its subsidiaries for the periods
stated therein and are derived from the books and records of Buyer and
its subsidiaries, which are complete and accurate in all material
respects and have been maintained in accordance with good business
practices. Neither Buyer nor any of its subsidiaries has any material
contingent liabilities that are not described in the Buyer Financial
Statements. Attached hereto as Schedule 3.4 are true and complete copies
------------
of Buyer's Annual Report on Form 10-KSB for the year ended December 31,
1997 and Quarterly Reports on Form 10-QSB for the quarters ended March
31, 1998 and June 30, 1998 (collectively, the "SEC Reports"). Buyer
has timely filed any and all material reports, registrations and
statements, together with any required amendments thereto, that it was
required to file with the Securities and Exchange Commission (the
"SEC"), including,
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but not limited to, Forms 10-KSB, Forms 10-QSB, Forms 8-K and proxy
statements. As of each of their respective dates, the Buyer SEC Reports
complied in all material respects with all the rules and regulations
promulgated by the SEC. With respect to the SEC Reports, there is no
material unresolved violation, criticism or exception by the SEC with
respect to any report or statement filed by, or any examinations of,
Buyer.
3.5 Material Adverse Change. Since June 30, 1998, there has
-----------------------
been no material adverse change to the financial position or results of
operation of Buyer and its subsidiaries, taken as a whole.
3.6 Legal Proceedings or Other Adverse Facts. Except as
----------------------------------------
otherwise disclosed in the Buyer Financial Statements, neither Buyer nor
any of its subsidiaries is a party to any pending or, to the best
knowledge of Buyer, threatened claim, action, suit, investigation or
proceeding, or is subject to any order, judgment or decree, except for
matters which, in the aggregate, will not have, or reasonably could not
be expected to have, a material adverse effect on Buyer and its
subsidiaries, taken as a whole.
3.7 Brokers and Finders. Neither Buyer nor any of its officers,
-------------------
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions
or finder's fees, and no broker or finder has acted directly or
indirectly for Buyer in connection with this Agreement or the
transactions contemplated hereby.
3.8 Accuracy of Information. The statements contained in this
-----------------------
Agreement, the Schedules and in any other written document executed and
delivered by or on behalf of Buyer pursuant to the terms of this
Agreement are true and correct in all material respects, and such
statements and documents do not omit any material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE 4
COVENANTS RELATING TO TARGET AND COMPETITION
4.1 Conduct of Business by Target. From the date hereof to the
-----------------------------
Closing Date, except for transactions which are expressly approved in
writing by Buyer or contemplated by this Agreement, Target shall, and
the Sole Shareholder shall cause Target to, refrain from:
(a) subjecting any of its assets and properties, tangible
or intangible, to any lien of any kind, exclusive of liens arising as a
matter of law in the ordinary course of business as to which there is no
known default;
(b) except for sale or disposal of worn out and obsolete
fixed assets in the ordinary course of business, selling, assigning,
transferring or otherwise disposing of any of Target's assets and
properties;
(c) declaring or paying any dividend, whether in cash or
other property, or effecting or permitting any other distribution of any
kind on or with respect to any of the capital stock of Target;
(d) amending the Articles of Incorporation or Bylaws of
Target;
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(e) authorizing, issuing or selling any equity or debt
securities of Target, or granting any option, warrant or other right
exercisable for or convertible into any such security;
(f) purchasing or otherwise acquiring any partnership or
membership interests, equity or debt securities or other indebtedness of
any partnership, limited liability company, corporation or other person;
(g) increasing or enhancing the compensation or benefits
payable to any employee of Target, except for regularly scheduled wage
adjustments to hourly employees in amounts consistent with past
practice;
(h) borrowing money or increasing existing indebtedness by
any amount, or incurring any other liability or obligation outside of
the ordinary course of business;
(i) enter into or amend any employment, severance or
similar agreement or arrangement with any director, officer or employee,
or materially modify any of the Plans of Target or grant any salary or
wage increase or materially increase any employee benefit (including
incentive or bonus payments), except (i) normal individual increases in
compensation to employees consistent with past practice and (ii) as
required by law or contract;
(j) authorize, recommend, propose or announce an intention
to authorize, recommend or propose, or enter into an agreement in
principle with respect to, any merger, consolidation or business
combination (other than the Merger), any acquisition of a material
amount of assets or securities, any disposition of a material amount of
assets or securities or any release or relinquishment of any material
contract rights;
(k) issue, sell, grant, confer or award any of its Equity
Securities, except that the Target may issue shares of Target Common
Stock upon exercise of the stock options of Target (the "Target Stock
Options") outstanding on the date of this Agreement, or effect any stock
split or adjust, combine, reclassify or otherwise change its
capitalization as it existed on the date of this Agreement;
(l) purchase, redeem, retire, repurchase or exchange, or
otherwise acquire or dispose of, directly or indirectly, any of its
Equity Securities, whether pursuant to the terms of such Equity
Securities or otherwise;
(m) directly or indirectly (including through its
officers, directors, employees or other representatives) (i) initiate,
solicit or encourage any discussions, inquiries or proposals with any
third party (other than Buyer) relating to the disposition of any
significant portion of the business or assets of Target or any of the
Target Subsidiaries or the acquisition of Equity Securities of Target or
any of the Target Subsidiaries or the merger of Target or any of the
Target Subsidiaries with any person (other than Buyer) or any similar
transaction (each such transaction being referred to herein as an
"Acquisition Transaction") or (ii) provide any such person with
information or assistance or negotiate with any such person with respect
to an Acquisition Transaction, and Target shall promptly notify Buyer
orally of all the relevant details relating to all inquiries,
indications of interest and proposals which it may receive with respect
to any Acquisition Transaction;
(n) take any action that would (i) prevent or impede the
transactions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code,
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(ii) materially impede or delay the consummation of the transactions
contemplated by this Agreement or the ability of Buyer or Target to
obtain any approval of any Regulatory Authority required for the
transactions contemplated by this Agreement or to perform its covenants
and agreements under this Agreement, or (iii) prevent or impede the
Merger from qualifying for pooling-of-interests accounting treatment;
(o) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed money
or assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual,
corporation or other entity; and/or
(p) agree in writing or otherwise to take any of the
foregoing actions or engage in any activity, enter into any transaction
or intentionally take or omit to take any other act which would make any
of the representations and warranties in Article II of this Agreement
untrue or incorrect in any material respect if made anew after engaging
in such activity, entering into such transaction, or taking or omitting
such other act.
4.2 Affirmative Covenants Relating to Target. From the date
----------------------------------------
hereof to the Closing Date, the Sole Shareholder shall cause Target to:
(a) maintain Target's properties and activities insured in
amounts and with coverage at least as great as the amounts and coverage
in effect on the date of this Agreement;
(b) maintain Target's properties in good repair, order and
condition, reasonable wear and tear excepted, and use its best efforts
to preserve Target's possession and control of all of its assets and
properties;
(c) maintain the books, accounts and records of Target in
a diligent manner and using procedures consistent with past practice;
(d) allow, at all reasonable times upon reasonable notice,
Buyer and its employees, attorneys, auditors, accountants and other
authorized representatives and its lenders, to have access to Target's
books, records and monthly and audited financial statements, and
(following notification to the Sole Shareholder) to contact key
customers of Target in order that Buyer and its lenders may have full
opportunity to make such investigation as they may desire of the
business of Target;
(e) comply with all applicable laws, rules, regulations
and ordinances relating to Target or to the conduct of its business, and
conduct Target's business in such a manner so that on the Closing Date
the representations and warranties contained in this Agreement shall be
true as though such representations and warranties were made on and as
of such date, except for changes permitted or contemplated by the terms
of this Agreement;
(f) provide Buyer with prompt written notice of (i) any
adverse change in the assets, operations, liabilities, earnings,
prospects, business or condition (financial or otherwise) of Target and
(ii) any variances from the representations and warranties contained in
Article 2; and
(g) operate its business only in the ordinary course
(including, without limitation, the collection of receivables and
payment of payables) and use its best efforts to preserve its
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business organization intact, including the services of its present
officers and the goodwill of its suppliers, customers and others having
business relations with Target.
4.3 Consents and Closing Conditions. The Sole Shareholder and
-------------------------------
Target shall use their best efforts (a) to obtain such consents from
third parties and to take other actions as may be appropriate in order
to fulfill the closing conditions contained in this Agreement that are
reasonably within such party's control, and (b) to cause the
representations and warranties in Article 2 to be true and correct on
and as of the Closing Date.
4.4 Disclosure Schedules. Within 15 days after the date
--------------------
hereof, Target shall deliver to Buyer those disclosure schedules (the
"Schedules") that are required to be prepared by Target pursuant to the
terms of this Agreement.
4.5 Employment Agreement. By his execution of this Agreement,
--------------------
the Sole Shareholder covenants and agrees that at the Closing he shall
execute an Employment Agreement in the form set forth as Exhibit A to
---------
this Agreement.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Access and Information; Due Diligence. Buyer and Target
-------------------------------------
shall each afford to the other, and to the other's accountants, counsel
and other representatives, full access during normal business hours,
during the period prior to the Effective Time, to all their respective
properties, books, contracts, commitments and records and, during such
period, each shall furnish promptly to the other (i) a copy of each
report, schedule and other document filed or received by it during such
period pursuant to the requirements of federal and state securities laws
and (ii) all other information concerning its business, properties and
personnel as the other may reasonably request. Each party shall, and
shall cause its advisors and representatives to, (A) hold confidential
all information obtained in connection with any transaction contemplated
hereby with respect to the other party and its Subsidiaries which is not
otherwise public knowledge, (B) in the event of a termination of this
Agreement, return all documents (including copies thereof) obtained
hereunder from the other party or any of its Subsidiaries to such other
party or its Subsidiaries and (C) use its best efforts to cause all
information obtained pursuant to this Agreement or in connection with
the negotiation of this Agreement to be treated as confidential and not
use, or knowingly permit others to use, any such information unless such
information becomes generally available to the public.
5.2 Regulatory Matters. Buyer shall take any action required to
------------------
be taken under any applicable state blue sky or securities laws in
connection with the issuance of such shares and the exercise of such
options, and Target and the Target Subsidiaries shall furnish Buyer all
information concerning Target and the Target Subsidiaries and the
shareholders thereof as Buyer may reasonably request in connection with
any such action. Target and Buyer shall cooperate and use their
respective best efforts to prepare all documentation, to effect all
filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Regulatory Authorities necessary
to consummate the transactions contemplated by this Agreement and, as
and if directed by Buyer, to consummate such other transactions by and
among Buyer's Subsidiaries and the Target Subsidiaries concurrently with
or following the Effective Time; provided, however, that such actions do
not: (i) prevent or impede the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368
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of the Code; (ii) materially impede or delay the receipt of any approval
referred to in Section 9.2 hereof; (iii) prevent or impede the
transactions contemplated hereby from qualifying for pooling-of-
interests accounting treatment unless Buyer first waives Target's
covenants in Sections 4.1(n), 5.7 and 5.13 hereof; or (iv) materially
impede or delay the consummation of the transactions contemplated by
this Agreement.
5.3 Shareholder Approval. Target shall call a special meeting
--------------------
of its shareholder to be held as soon as is reasonably possible for the
purpose of voting upon this Agreement and the Merger and related
matters. The Board of Directors of Target shall submit for approval of
Target's shareholder the matters to be voted upon at such meeting. The
Board of Directors of Target hereby does recommend this Agreement and
the transactions contemplated hereby to the shareholder of Target and
use its reasonable best efforts to obtain any vote of Target's
shareholder necessary for the approval of this Agreement.
5.4 Current Information. During the period from the date of
-------------------
this Agreement to the Closing Date, (i) each party will promptly furnish
the other with copies of all monthly and other interim financial
statements as the same become available and shall cause one or more of
its designated representatives to confer on a regular and frequent basis
with representatives of the other party. Each party shall promptly
notify the other party of the following events immediately upon learning
of the occurrence thereof, describing the same and, if applicable, the
steps being taken by the affected party with respect thereto: (a) the
occurrence of any event which could cause any representation or warranty
of such party or any schedule, statement, report, notice, certificate or
other writing furnished by such party to be untrue or misleading in any
material respect; (b) any Material Adverse Effect, with respect to the
Target and the Target Subsidiaries, and any material adverse effect with
respect to the Buyer and the Buyer Subsidiaries, taken as a whole;
(c) the issuance or commencement of any governmental and/or regulatory
agency complaint, investigation or hearing or any communications
indicating that the same may be contemplated and, as to any such matter
which shall now or hereafter be in effect, any communications pertaining
thereto; or (d) the institution or the threat of any material litigation
involving such party.
5.5 Conforming Entries.
------------------
(a) Notwithstanding that Target believes that Target and
Target Subsidiaries have established all reserves required by GAAP and
applicable laws, rules and regulations, Target recognizes that Buyer may
have adopted different reserve policies. From and after the date of
this Agreement, Target and Buyer shall consult and cooperate with each
other with respect to conforming the reserve policies of Target and the
Target Subsidiaries to those policies of Buyer, as specified in each
case in writing to Target, based upon such consultation and as
hereinafter provided.
(b) In addition, from and after the date of this
Agreement, Target and Buyer shall consult and cooperate with each other
with respect to determining appropriate Target accruals, reserves and
charges to establish and take in respect of excess equipment write-off
or write-down of various assets and other appropriate charges and
accounting adjustments taking into account the parties' business plans
following the Merger, as specified in each case in writing to Target,
based upon such consultation and as hereinafter provided.
(c) Target and Buyer shall consult and cooperate with each
other with respect to determining the amount and the timing for
recognizing for financial accounting purposes
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Target's expenses of the Merger and the restructuring charges, if any,
related to or to be incurred in connection with the Merger.
(d) With respect to clauses (a) through (c) of this
Section 5.5, it is the objective of Buyer and Target that such reserves,
accruals, charges and divestitures, if any, to be taken shall be
consistent with GAAP.
5.6 Environmental Reports. Buyer may perform, as soon as
---------------------
reasonably practicable, but not later than ninety (90) days after the
date hereof, a phase one environmental investigation and/or asbestos on
all real property owned, leased or operated by Target or any of the
Target Subsidiaries as of the date hereof and within fifteen (15) days
after being notified by Targets of the acquisition or lease of any real
property acquired or leased by Target or any of the Target Subsidiaries
after the date hereof. If the results of the phase one investigation
indicate, in Buyer's reasonable opinion, that additional investigation
is warranted, Buyer may perform, at Buyer's expense, a phase two
subsurface investigation or investigations on properties deemed to
warrant such additional study. Buyer shall perform any such phase two
investigation as soon as reasonably practicable after receipt of the
phase one report(s) for such properties. Should the cost of taking all
remedial or other corrective actions and measures (i) required by
applicable law or (ii) recommended in such phase one or two report or
reports, in the aggregate, exceed the sum of $20,000, as reasonably
estimated by Buyer, or if the cost of such actions or measures cannot be
so reasonably estimated by Buyer to be such amounts or less with any
reasonable degree of certainty, Buyer shall have the right pursuant to
Section 14.1(e) hereof, for a period of fifteen (15) business days
following determination of such estimate or indication that the cost of
such actions and measures cannot be so reasonably estimated, to
terminate this Agreement.
5.7 Lockup. As of the date hereof, the Sole Shareholder shall
------
deliver to Buyer, a written agreement in substantially the form set
forth as Exhibit A to this Agreement providing that he shall not sell,
---------
pledge, transfer or otherwise dispose of (i) any shares of Target Common
Stock after the date hereof through the Closing Date or (ii) the shares
of Buyer Common Stock to be received by him in the Merger during the
period designated in such letter and thereafter in compliance with the
applicable provisions of the Securities Act.
5.8 Expenses. Each party hereto shall bear its own expenses
--------
incident to preparing, entering into and carrying out this Agreement and
to consummating the Merger.
5.9 Miscellaneous Agreements and Consents.
-------------------------------------
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its respective best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as possible, including,
without limitation, using its respective best efforts to lift or rescind
any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated
hereby. Each party shall, and shall cause each of its respective
Subsidiaries to, use its best efforts to obtain consents of all third
parties and Regulatory Authorities necessary or, in the opinion of
Buyer, desirable for the consummation of the transactions contemplated
by this Agreement.
(b) Target, prior to the Effective Time, shall (i) consult
and cooperate with Buyer regarding the implementation of those policies
and procedures established by Buyer for its governance and those of its
Subsidiaries and not otherwise referenced in Section 5.5 hereof,
including,
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without limitation, policies and procedures pertaining to the
accounting, asset/liability management, audit, credit, human resources,
treasury and legal functions and (ii) at the reasonable request of
Buyer, conform Target's existing policies and procedures in respect of
such matters to Buyer's policies and procedures or, in the absence of
any existing Target policy or procedure regarding any such function,
introduce Buyer's policies or procedures in respect thereof, unless to
do so would cause Target or any of the Target Subsidiaries to be in
violation of any law, rule or regulation or requirement of any
Regulatory Authority having jurisdiction over Target and/or the Target
Subsidiary affected thereby.
5.10 Press Releases. Except to the extent disclosure may
--------------
be required by applicable law, Target and the Buyer shall consult with
each other as to the form and substance of any proposed press release or
other proposed public disclosure of matters related to this Agreement or
any of the transactions contemplated hereby.
5.11 State Takeover Statutes. Target will take all steps
-----------------------
necessary to exempt the transactions contemplated by this Agreement and
any agreement contemplated hereby from, and if necessary challenge the
validity of, any applicable state takeover law.
5.12 Employee Stock Options.
----------------------
(a) At the Effective Time, all rights with respect to
Target Common Stock pursuant to Target Stock Options that are
outstanding at the Effective Time, whether or not then exercisable,
shall be converted into and become rights with respect to Buyer Common
Stock, and Buyer shall assume all Target Stock Options in accordance
with the terms of the Target Stock Plan under which it was issued and
the Target Stock Option Agreement by which it is evidenced. From and
after the Effective Time, (i) each Target Stock Option assumed by Buyer
shall be exercised solely for shares of Buyer Common Stock, (ii) the
number of shares of Buyer Common Stock subject to each Target Stock
Option shall be equal to the number of shares of Target Common Stock
subject to such Target Stock Option immediately prior to the Effective
Time multiplied by the Exchange Ratio and (iii) the per share exercise
price under each Target Stock Option shall be adjusted by dividing the
per share exercise price under such Target Stock Option by the Exchange
Ratio and rounding down to the nearest cent; provided, however, that the
terms of each Target Stock Option shall, in accordance with its terms,
be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other similar transaction
subsequent to the Effective Time. It is intended that the foregoing
assumption shall be undertaken in a manner that will not constitute a
"modification" as defined in the Code, as to any Target Stock Option
that is an "incentive stock option" as defined under the Code.
(b) The shares of Buyer Common Stock covered by the Target
Stock Options shall be covered by an effective registration statement
filed on Form S-8 with the SEC and shall be duly authorized, validly
issued and in compliance with all applicable federal and state
securities laws, fully paid and nonassessable and not subject to or in
violation of any preemptive rights. Buyer shall maintain the
effectiveness of such registration statement (and maintain current
status of the prospectus contained therein) for as long as such options
remain outstanding. Buyer shall at and after the Effective Time have
reserved sufficient shares of Buyer Common Stock for issuance with
respect to such options. Buyer shall also take any action required to
be taken under any applicable state blue sky or securities laws in
connection with the issuance of such shares.
5.13 Best Efforts to Insure Pooling. Each of Buyer and
------------------------------
Target undertakes and agrees to use its best efforts to cause the Merger
to qualify for pooling-of-interests accounting treatment.
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<PAGE>
5.14 Election to Close Books for Taxes. Buyer and the Sole
---------------------------------
Shareholder shall jointly elect to have the provisions of Code Section
1362(e)(3) applying to the termination of Target's subchapter S election
caused by the Merger.
ARTICLE 6
COVENANTS REGARDING TAX MATTERS
6.1 Returns and Payment of Taxes. Target shall prepare and
----------------------------
timely file or cause to be prepared and timely filed all Returns and
amendments thereto required to be filed by Target on or before the
Closing Date (taking into account any extensions); such Returns shall be
true, correct and complete in all material respects. Buyer shall have a
reasonable opportunity to review all such Returns and amendments thereto
prior to the filing thereof. Target shall pay and discharge all Taxes
shown to be due on such Returns before the same shall become delinquent
and before penalties accrue thereon. Target shall prepare and timely
file or cause to be prepared and timely filed with the appropriate
taxing authorities any Returns of Tax which are due after the Closing
Date (including Target's Federal income tax Return for the period that
includes the Closing Date) with respect to periods ending on or before
the Closing Date; such Returns shall be true, correct and complete in
all material respects, and all Taxes shown to be due thereon will be
timely paid in full by Target. In order appropriately to apportion
Taxes attributable to a period that includes (but that would not, but
for this Section, close on) the Closing Date, the parties hereto will,
to the extent permitted by applicable law, elect with the relevant
taxing authorities to treat for all purposes the Closing Date as the
last day of a taxable period of Target, and such period shall be treated
as a "Pre-Closing Partial Period" for purposes of this Agreement.
6.2 Elections and Settlements. Except with the prior written
-------------------------
consent of Buyer, prior to the Closing Target shall not, and the Sole
Shareholder shall cause Target not to, make or change any election,
change any annual tax accounting period, adopt or change any tax
accounting method, file any amended Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to
claim a refund of Taxes, consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment, or take any
other action or omit to take any action, if any such election, adoption,
change, amendment, agreement, settlement, surrender, consent or other
action or omission may have the effect of increasing, directly or
indirectly, the Taxes of Target, Buyer or any affiliate of Buyer.
6.3 Post-Closing Audits and Other Proceedings. From and after
-----------------------------------------
the Closing Date, Buyer shall give prompt notice to the Sole Shareholder
of any proposed adjustment to Taxes for periods that end on or prior to
the Closing Date or that include the Closing Date. The parties hereto
acknowledge that Target shall control the conduct of any audit or other
proceeding involving Target for such periods, and shall keep the Sole
Shareholder reasonably informed of the progress thereof. The Sole
Shareholder shall cooperate with Target in the conduct of any audit or
other proceeding and may participate at her or its own expense.
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<PAGE>
ARTICLE 7
TRANSFER LIMITATIONS AND COVENANTS
7.1 Securities Subject to Article 7. For the purposes of this
-------------------------------
Agreement, the term "Securities" shall mean all shares of Buyer Common
Stock issued pursuant to the Merger and all Equity Securities (including
debt obligations) of Buyer (or any successor corporation) received in
exchange for or in respect of such Buyer Common Stock (whether by reason
of a stock split, stock dividend, combination of shares,
recapitalization, reclassification, merger, consolidation, corporate
reorganization or otherwise).
7.2 Restriction on Transfer. From and after the Closing Date,
-----------------------
neither the Securities nor any interest therein shall be transferable
except upon satisfaction of the relevant conditions specified in Section
7.4 of this Agreement, which conditions are intended to ensure
compliance with the provisions of the Securities Act of 1933, as amended
(the "Securities Act"), in respect of the transfer of any of the
Securities or any interest therein. The Sole Shareholder shall cause
any proposed transferee of the Securities (or of any interest therein)
to take and hold such Securities (or any interest therein) subject to
the provisions and upon the conditions specified in this Article 7.
7.3 Restrictive Legend. Each certificate for the Securities
------------------
issued to the Sole Shareholder or to a subsequent transferee shall
(unless otherwise permitted by the provisions of Section 10.4) include a
legend in boldface, 12 point (or larger) print in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT
PURSUANT TO (i) A REGISTRATION STATEMENT RELATING TO
THE SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii)
RULE 144 UNDER SUCH ACT, OR (iii) AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO
THE COMPANY TO THE EFFECT THAT SUCH SALE, TRANSFER,
HYPOTHECATION OR OTHER ASSIGNMENT IS IN COMPLIANCE
WITH THE PROVISIONS OF SUCH ACT.
7.4 Notice of Proposed Transfers. Not less than five days prior
----------------------------
to any proposed transfer of any Securities bearing the restrictive
legend set forth in Section 7.3 or any interest therein, the holder
thereof shall give written notice to Buyer of such holder's intention to
effect such transfer, setting forth the manner and circumstances of the
proposed transfer in reasonable detail. Any such proposed transfer
which is not made pursuant to a registration statement filed under the
Securities Act may be effected only if Buyer shall have received such
notice of transfer accompanied by (a) an opinion of counsel, reasonably
satisfactory to Buyer, to the effect that the proposed transfer of such
Securities or such interest therein may be effected without registration
of such Securities under the Securities Act (except that such an opinion
shall not be required for transfers pursuant to Rule 144 of the
Securities Act), and (b) such representation letters are in form and
substance satisfactory to Buyer to the extent required by the provisions
of the Securities Act. In addition, if in the opinion of counsel,
reasonably satisfactory to Buyer, subsequent transfers of such
Securities will not require registration under the Securities Act, Buyer
will promptly after such contemplated transfer deliver new certificates
for such Securities that do not bear the legend set forth in Section 7.3
above. If the foregoing conditions entitling
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<PAGE>
<PAGE>
the holder to effect a proposed transfer of such Securities without
registration have not been satisfied, the holder in each case will not
transfer the Securities proposed to be transferred. Buyer shall make a
notation in its stock records to the effect that the Securities are
subject to the provisions of this Agreement. Each certificate
evidencing the Securities transferred as above provided shall bear the
appropriate legend set forth in Section 7.3, and each agreement
purporting to transfer any interest in any of the Securities shall
contain a provision setting forth a similar legend, except that such
certificate or agreement shall not bear such legend if the opinion of
counsel, reasonably satisfactory to Buyer, is to the further effect that
neither such legend nor the restriction on transfer in this Section 7.4
are required in order to ensure compliance with the provisions of the
Securities Act. Notwithstanding the foregoing, the restrictions imposed
by this Section 7.4 upon the transferability of any particular
Securities shall cease and terminate when such Securities have been sold
pursuant to an effective registration statement under the Securities Act
(or any similar or successor provision then in force). The holder of
any Securities as to which such restrictions shall have terminated shall
be entitled to receive from Buyer, without expense, a new certificate of
the same type but not bearing the restrictive legend set forth above and
not containing any other reference to the restrictions imposed by this
Section 7.4.
7.5 Investment Representations.
--------------------------
(a) By executing this Agreement, the Sole Shareholder
hereby confirms that the Securities to be received by such Sole
Shareholder in connection with this Agreement will be acquired for
investment for his own account, not as a nominee or agent, and not with
a view to the sale or distribution of any part thereof, and that he has
no present intention of selling, granting participation in, or otherwise
distributing the same. By executing this Agreement, the Sole
Shareholder represents that he does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person, or to any third person, with respect to
any of the Equity Securities.
(b) The Sole Shareholder understands that the Securities
have not been registered under the Securities Act in reliance upon an
exemption or exemptions from registration under the Securities Act,
including Section 4(2) thereof and/or Rule 506 promulgated thereunder,
and that Buyer's reliance on such exemptions is predicated upon such
Sole Shareholder's representations set forth herein. The Sole
Shareholder realizes that the basis for the exemptions may not be
present if, notwithstanding such representations, such Sole Shareholder
has a present intention of acquiring the Securities for a fixed or
determinable period in the future, or for a market rise, or for sale if
the market does not rise. The Sole Shareholder represents that he does
not have any such intention.
(c) The Sole Shareholder hereby represents that he has
such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of his investment, and has
the ability to bear the economic risks of his investment. The Sole
Shareholder further represents that he has had, during the course of the
transaction and prior to his execution of this Agreement, the
opportunity to ask questions of, and receive answers from, Buyer
concerning the terms and conditions of the issuance of the Securities
and to obtain additional information (to the extent Buyer possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to the
Sole Shareholder or to which he had access.
(d) The Sole Shareholder hereby represents that his residence is
located at the address set forth in Section 15.1 hereof.
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<PAGE>
7.6 Piggyback Registrations.
-----------------------
(a) If at any time after the expiration if 180 days after
the consummation of the Merger, Buyer proposes to register any of the Buyer
Common Stock under the Securities Act and the registration form to be used
can be used to register the resale of the Common Stock (other than a
registration statement (A) on Form S-8 or any successor form relating to
securities issuable pursuant to any benefit plan or (B) on Form S-4, or any
successor form to each such form relating to an exchange offer or relating
to a transaction pursuant to Rule 145 of the Act), Buyer shall promptly
give the Sole Shareholder written notice of such determination to effect
such a registration not later than twenty (20) days prior to the
anticipated date of filing with the Securities and Exchange Commission (the
"Commission") of the registration statement. Upon the written request of
the Sole Shareholder given within fifteen (15) days after mailing of any
such notice by Buyer, as part of the registration to which such notice
relates, Buyer shall use its best efforts to cause to be registered under
the Securities Act all of the shares of Buyer Common Stock to be received
by the Sole Shareholder in the Merger (the "Registrable Securities") that
the Sole Shareholder has requested to be registered. The Sole Shareholder
shall be entitled to participate in two "piggyback" registrations of the
Registrable Securities pursuant to this Section. A registration will not
count as a permitted registration until it has become effective.
(b) If the registration of which Buyer gives notice is for a
registered public offering involving an underwriting, then Buyer shall so
advise the Sole Shareholder as a part of such written notice. In such
event, the right of the Sole Shareholder to registration pursuant to this
Section shall be conditioned upon the Sole Shareholder's agreeing to
participate in such underwriting upon the terms and conditions as shall be
negotiated by Buyer, and the inclusion of the Registrable Securities in the
underwriting to the extent provided herein. The Sole Shareholder shall
(together with Buyer) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by
Buyer. Notwithstanding any other provisions of this Section, if the
underwriter determines in writing, in its sole and absolute discretion,
that marketing factors require a limitation of the number of shares to be
underwritten, then the underwriter may exclude some or all Registrable
Securities from such registration and underwriting in accordance with the
provisions of this Section; provided, however, that if any securities are
being offered for the account of any holder of Buyer's securities other
than the Sole Shareholder, the reduction in the number of Registrable
Securities included in such registration shall not represent a greater
percentage of the amount of Registrable Securities originally requested to
be registered and sold in such registration than the lowest percentage
reduction imposed upon any holder of Buyer's securities other than the Sole
Shareholder. If the Sole Shareholder disapproves of the terms of any such
underwriting, then the Sole Shareholder may elect to withdraw therefrom by
written notice to Buyer and the underwriter. Any securities so excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
(c) Notwithstanding anything contained herein to the
contrary, the Sole Shareholder shall not be entitled to request
registration of his Registrable Securities to the extent that Buyer shall
have received an opinion of counsel reasonably acceptable to Buyer that
such shares may be resold without registration under Rule 144 under the
Securities Act (or any successor rule) or an applicable exemption from
registration under the Act.
(d) In the case of any registration effected pursuant to
this Section, any additional registration and qualification fees and
expenses, and any additional costs (other than underwriters discounts and
commissions and the fees and disbursements of counsel for the Sole
Shareholder) that result from the inclusion of securities held by the Sole
Shareholder's participation in the registration shall be borne by Buyer.
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<PAGE>
<PAGE>
(e) It shall be a condition precedent to the obligations of
Buyer to take any action pursuant to this Section that the Sole Shareholder
shall furnish to Buyer such information regarding them, the Registrable
Securities held by them and the intended method of disposition of such
securities as Buyer shall reasonably request and as shall be required in
connection with the action to be taken by Buyer.
ARTICLE 8
COVENANTS OF BUYER
Buyer shall use its best efforts (a) to obtain such consents from
third parties and to take other actions as may be required in order to
fulfill the closing conditions contained in this Agreement that are
reasonably within its control, and (b) to cause the representations and
warranties in Article 3 to be true and correct on and as of the Closing
Date.
ARTICLE 9
CONDITIONS OF BUYER AND TARGET
The respective obligations of each party to effect the Merger
shall be subject to the fulfillment or waiver at or prior to the
Effective Time of the following conditions:
9.1 Shareholder Approval. The approval of this Agreement and
--------------------
the Merger shall have received the requisite vote of shareholders of
Target at the special meeting of shareholders called pursuant to
Section 5.3 hereof.
9.2 Regulatory Approval. This Agreement and the transactions
-------------------
contemplated hereby shall have been approved by any federal and/or state
regulatory agencies whose approval is required for consummation of the
transactions contemplated hereby and all requisite waiting periods
imposed by the foregoing shall have expired.
9.3 No Judicial Prohibition. Neither Buyer, Target nor Merger
-----------------------
Sub shall be subject to any order, decree or injunction of a court or
agency of competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
ARTICLE 10
BUYER'S CONDITIONS TO CLOSING
The obligation of Buyer to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the
fulfillment to Buyer's satisfaction of each of the following conditions:
10.1 Continued Truth of Warranties. The representations and
-----------------------------
warranties of the Sole Shareholder and Target set forth in Article 2 of
this Agreement shall be true and correct in all material respects as of
the date of this Agreement and as of the Effective Time (as though made
on and as of the Effective Time, except (i) to the extent such
representations and warranties are by their express provisions made as
of a specified date or period, (ii) where the facts which caused the
failure of any representation or warranty to be so true and correct have
not resulted, and are not likely to result, in a Material Adverse
Effect, and (iii) for the effect of transactions contemplated by this
Agreement), and Buyer shall have received a certificate of the Sole
Shareholder and President of Target, signing solely in his capacity as
an officer of Target, to such effect.
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<PAGE>
10.2 Performance of Covenants. The Sole Shareholder and the
------------------------
Target shall have performed in all material respects all obligations
required to be performed by them under this Agreement prior to the
Effective Time, and Buyer shall have received a certificate of the Sole
Shareholder and the President of Target, signing solely in his capacity
as an officer of Target, to that effect.
10.3 No Material Adverse Change. There shall have been no
--------------------------
material adverse change to the properties, operations, liabilities,
earnings, prospects, business or condition (financial or otherwise) of
Target since December 31, 1997.
10.4 Permits and Consents. Each of the Sole Shareholder and
--------------------
Target shall have secured all appropriate orders, consents, approvals
and clearances, in form and substance satisfactory to the Buyer, by and
from all regulatory agencies and other governmental authorities and
agencies, whose order, consent and approval or clearance is required by
contract or law for the consummation of the Merger and other
transactions herein contemplated, and from all third parties to the
contracts designated on Schedule 2.10 as a condition to the Buyer's
-------------
obligation to consummate the Merger.
10.5 Full Investigation. Buyer and its employees, attorneys,
------------------
accountants and other agents shall have been permitted to conduct a full
investigation of the books, records, assets, liabilities, operations,
prospects, business and condition of Target, including attorneys' audit
response letters, and environmental assessments of Target's facilities
and business if Buyer deems it appropriate to obtain the same, and Buyer
shall not have discovered any event, circumstance or set of facts which
could reasonably be expected to constitute or lead to a Material Adverse
Effect and that is not accurately disclosed in the Target Financial
Statements or the Schedules to this Agreement. The completion of such
investigation by Buyer shall not be deemed to be a waiver by Buyer of
any claim of Buyer for a breach of representation or warranty of the
Sole Shareholder or Target.
10.6 Opinion of Counsel. Target shall have delivered to Buyer an
------------------
opinion of Target's counsel dated as of the Closing Date or a mutually
agreeable earlier date in substantially the form set forth as Exhibit B
---------
to this Agreement.
10.7 Closing Documents. The Sole Shareholder shall have
-----------------
delivered all documents required to be delivered by such Sole
Shareholder at Closing, as more specifically set forth in Article 12 of
this Agreement, in each case in form and substance reasonably
satisfactory to Buyer.
10.8 Opinion of Accountant. Buyer shall have received an opinion
---------------------
letter, dated as of the Closing Date, from its independent accountants,
to the effect that the Merger will qualify for pooling-of-interests
accounting treatment under Accounting Principles Board Opinion No. 16 if
closed and consummated in accordance with this Agreement.
10.9 Contribution of AFSI. Prior to the Closing Date, the Sole
--------------------
Shareholder shall have taken any and all action necessary or required to
contribute 100% of the capital stock of AmeriPrime Financial Securities,
Inc., a Texas corporation ("AFSI"), to Target, which capital stock shall
be free and clear of any Lien with respect thereto and shall be
contributed solely as a capital contribution by the Sole Shareholder
without the payment or receipt of any consideration therefor. For
purposes of this Agreement, each provision of this Agreement shall be
deemed to apply equally and with full force and effect to AFSI as if
each reference to Target throughout this Agreement was a reference to
ANSI; provided, however, the provisions of this Section 10.9 shall not
apply for purposes of Article I and the first sentence of Section 2.3 of
this Agreement. By way of example and not limitation, the
representations, warranties and covenants contained in this Agreement
with respect to Target shall apply
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<PAGE>
<PAGE>
to AFSI as if AFSI was substituted for Target, including the obligations
contained in Section 4.4 which shall require AFSI to prepare and deliver
disclosure schedules with respect to AFSI.
ARTICLE 11
TARGET'S CONDITIONS TO CLOSING
The obligation of Target to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the
fulfillment to Target's satisfaction of the following conditions:
11.1 Continued Truth of Warranties. The representations and
-----------------------------
warranties of Buyer set forth in Article 3 of this Agreement shall be
true and correct in all material respects as of the date of this
Agreement and as of the Effective Time (as though made on and as of the
Effective Time, except (i) to the extent such representations and
warranties are by their express provisions made as of a specified date
or period, (ii) where the facts which caused the failure of any
representation or warranty to be so true and correct have not resulted,
and are not likely to result, in a material adverse effect on Buyer and
its Subsidiaries, taken as a whole, and (iii) for the effect of
transactions contemplated by this Agreement), and Target shall have
received a certificate of the President and Chief Executive Officer of
Buyer, signing solely in his capacity as an officer of Buyer, to such
effect.
11.2 Performance of Covenants. Buyer shall have performed in all
------------------------
material respects all obligations required to be performed by it under
this Agreement prior to the Effective Time, and Buyer shall have
received a certificate of the President and Chief Executive Officer of
Buyer, signing solely in his capacity as an officer of Buyer, to that
effect.
11.3 Opinion of Counsel. Buyer shall have delivered to Target an
------------------
opinion of Buyer's counsel dated as of the Closing Date or a mutually
agreeable earlier date in substantially the form set forth as Exhibit C
---------
to this Agreement.
11.4 Closing Documents. Buyer shall have delivered all documents
-----------------
required to be delivered by Buyer at Closing, as more specifically set
forth in Article 12 hereof, in each case in form and substance
reasonably satisfactory to the Sole Shareholder.
11.5 Permits and Consents. Buyer shall have secured all
--------------------
appropriate orders, consents, approvals and clearances, in form and
substance reasonably satisfactory to the Sole Shareholder by and from
all regulatory agencies and other governmental authorities and agencies
whose order, consent, approval or clearance is required by contract or
law for the consummation of the transactions herein contemplated, and
all third parties to the contracts designated on Schedule 2.10 as a
-------------
condition to Target's obligation to close.
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<PAGE>
ARTICLE 12
DOCUMENTS TO BE DELIVERED AT CLOSING
12.1 Documents to be Delivered by Target. At the Closing:
-----------------------------------
(a) the Sole Shareholder shall execute and deliver to
Buyer the original certificates for all of the Target Shares, together
with a written notice of exercise of the Merger Consideration and with
stock transfer powers duly executed by the Sole Shareholder and
satisfactory to Buyer, transferring to Buyer good and marketable title
to the Target Shares free and clear of all liens, claims, encumbrances
and transfer restrictions whatever;
(b) the Sole Shareholder shall deliver to Buyer a
certificate of incumbency and copy of the resolutions adopted by the
Board of Directors of Target, authorizing the execution and delivery of
this Agreement, duly certified as of the Closing Date by the Secretary
or an Assistant Secretary of Target;
(c) the Sole Shareholder shall deliver to Buyer a
certificate of good standing or its equivalent, dated not more than ten
days prior to the Closing Date, attesting to the good standing of Target
as a corporation under the laws of the State of Texas and as a foreign
corporation under the laws of each jurisdiction where its ownership or
Leasing of property or the conduct of its business requires it to be so
qualified.
(d) to the extent any consents or approvals shall be
necessary to any of the transactions herein contemplated, or to the
effective transfer of the Target Shares, the Sole Shareholder shall
deliver to Buyer copies of all such consents or approvals as obtained by
them;
(e) the Sole Shareholder shall deliver to Buyer (A) the
Articles of Incorporation, as amended, of Target, certified by the
Secretary of State of the State of Texas as of a date not more than ten
days prior to the Closing Date, and (B) the Bylaws, as amended, of
Target, certified as of the Closing Date by the Secretary or an
Assistant Secretary;
(f) the Sole Shareholder shall deliver to Buyer the
resignations of the directors of Target and such officers of Target as
Buyer shall request; and
(g) the Sole Shareholder shall deliver to Buyer the
original corporate minute books, stock transfer books and corporate seal
of Target.
12.2 Documents to be Delivered by Buyer. At the Closing, Buyer
----------------------------------
shall:
(a) deliver to the Sole Shareholder a certificate of
incumbency and copy of the resolutions adopted by the Board of Directors
of Buyer, authorizing the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, duly certified
as of the Closing Date by the Secretary of Buyer;
(b) deliver to the Sole Shareholder a certificate of good
standing or its equivalent, dated not more than ten days prior to the
Closing Date, attesting to the good standing of Buyer as a corporation
under the laws of the State of Delaware;
(c) to the extent any consents or approvals shall be
necessary to any of the transactions herein contemplated, deliver to
Target copies of all such consents or approvals as obtained by Buyer;
(d) deliver to holders of Target Shares the Merger
Consideration as contemplated in Section 1.8.
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<PAGE>
ARTICLE 13
SURVIVAL AND INDEMNIFICATION
13.1 Survival; Knowledge. The representations, warranties,
-------------------
covenants and agreements set forth in this Agreement or in any
certificate or other writing delivered in connection with this Agreement
shall survive the Closing and the consummation of the transactions
contemplated hereby notwithstanding any examination made for or on
behalf of any party. For the purposes of this Agreement, the term
"knowledge" (or words of similar import) of any party shall mean the
actual present knowledge of such party after inquiry of each other
person known to such party to be in possession of, or in a position to
be aware of, information relating to the matter in question.
13.2 General Indemnification
-----------------------
(a) By Sole Shareholder. By execution of this Agreement,
-------------------
the Sole Shareholder agrees to indemnify the Buyer and Target and their
respective successors and assigns and hold them harmless against and in
respect of:
(i) any and all loss, liability, cost, expense or
damage (including judgments and settlement payments) incurred by any of
them incident to, arising in connection with or resulting from any
misrepresentation, breach, nonperformance or inaccuracy of any
representation, warranty or covenant by the Sole Shareholder or Target
made or contained in this Agreement or in any Exhibit, Schedule,
certificate or other document executed and delivered to Buyer by or on
behalf of the Sole Shareholder or Target under or pursuant to this
Agreement or the transactions contemplated herein; and
(ii) any and all costs, expenses and all other actual
damages incurred by any of them in claiming, contesting or remedying any
breach, misrepresentation, non-performance or inaccuracy of the Sole
Shareholder and Target described above, including, by way of
illustration and not limitation, all legal and accounting fees, other
professional expenses and all filing fees and collection costs incident
thereto and all such fees, costs and expenses incurred in defending
claims which, if successfully prosecuted, would have resulted in Damages
(as hereinafter defined).
(b) By Buyer. By execution of this Agreement, and subject
--------
to Sections 13.4 and 13.5 below, Buyer agrees to indemnify the Sole
Shareholder and his heirs, personal representatives, successors and/or
assigns and hold them harmless against and in respect of:
(i) any and all loss, liability, cost, expense or
damage (including judgments and settlement payments) incurred by any of
them incident to, arising in connection with or resulting from any
misrepresentation, breach, non-performance or inaccuracy of any
representation, warranty or covenant by the Buyer made or contained in
this Agreement or in any Exhibit, Schedule, certificate or document
executed and delivered by or on behalf of Buyer under or pursuant to
this Agreement or the transactions contemplated herein; and
(ii) any and all costs, expenses and all other actual
damages incurred by the Sole Shareholder in claiming, contesting or
remedying any breach, misrepresentation, non-performance or inaccuracy
of Buyer described above, including, by way of illustration and not
limitation, all legal and accounting fees, other professional expenses
and all filing fees and collection costs incident thereto and all such
fees, costs and expenses incurred in defending claims which, if
successfully prosecuted, would have resulted in Damages.
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<PAGE>
(c) Damages. Any and all of the items set forth in
-------
Section 13.2(a) and (b) for which a party is entitled to be indemnified
hereunder are collectively called "Damages."
13.3 Notice of, and Procedures for, Collecting Indemnification.
---------------------------------------------------------
(a) Initial Claim Notice. When a party becomes aware of a
--------------------
situation which may result in Damages for which it would be entitled to
be indemnified hereunder, such party (the "Indemnitee") shall submit a
written notice (the "Initial Claim Notice") to the other party (the
"Indemnitor") to such effect with reasonable promptness after it first
becomes aware of such matter and shall furnish the Indemnitor with such
information as it has available demonstrating its right or possible
right to receive indemnity. If the potential claim is predicated on, or
later results in, the filing by a third party of any action at law or in
equity (a "Third Party Claim"), the Indemnitee shall provide the
Indemnitor with a supplemental Initial Claim Notice not later than ten
(10) days prior to the date on which a responsive pleading must be
filed, and shall also furnish a copy of such claim (if made in writing)
and of all documents received from the third party in support of such
claim. Each Initial Claim Notice shall name, when known, the person or
persons making the assertions which are the basis for such claim.
Failure by the Indemnitee to deliver an Initial Claim Notice or an
update thereof in a timely manner or otherwise in the manner described
herein shall not relieve the Indemnitor of any of its obligations under
this Agreement except to the extent that the Indemnitor can demonstrate
actual monetary prejudice resulting from such delay.
(b) Rights of Indemnitor. If, prior to the expiration of
--------------------
thirty (30) days from the mailing of an Initial Claim Notice (the "Claim
Answer Period"), the Indemnitor shall request in writing that such claim
not be paid, the same shall not be paid, and the Indemnitor shall
settle, compromise or litigate in good faith such claim, and employ
attorneys of its choice to do so; provided, however, that Indemnitee
shall not be required to refrain from paying any claim which has matured
by court judgment or decree, unless appeal is taken therefrom and proper
appeal bond posted by the Indemnitor, nor shall it be required to
refrain from paying any claim where such action would result in the
foreclosure of a lien upon any of its assets or a default in a lease or
other contract except a lease or other contract which is the subject of
the dispute. If the Indemnitor elects to settle, compromise or litigate
such claim, all reasonable expenses, including but not limited to all
amounts paid in settlement or to satisfy judgments or awards and
reasonable attorney's fees and costs, incurred by the Indemnitor in
settling, compromising or litigating such claim shall be secured to the
reasonable satisfaction of Indemnitee. Indemnitee shall cooperate fully
to make available to the Indemnitor and its attorneys, representatives
and agents, all pertinent information under its control. Indemnitee
shall have the right to elect to settle or compromise all other
contested claims with respect to which the Indemnitor has not, within
the Claim Answer Period, acknowledged in writing (i) liability therefor
(should such claim, to the extent Indemnitor is ultimately determined to
be liable for such indemnification under this Agreement, ultimately be
resolved against Indemnitee) and (ii) its election to assume full
responsibility for the settlement, compromise, litigation and payment of
such claim.
(c) Final Claims Statement. At such time as Damages for
----------------------
which the Indemnitor is liable hereunder are incurred by Indemnitee by
actual payment thereof or by entry of a final judgment, Indemnitee shall
forward a Final Claims Statement to the Indemnitor setting forth the
amount of such Damages in reasonable detail on an itemized basis. All
amounts reflected on each Final Claims Statement shall be paid promptly
by Indemnitor to Indemnitee.
(d) Form of Payments Due from Sole Shareholder. Any
------------------------------------------
payment of Damages due from the Sole Shareholder may be made in whole or
part by surrender of Buyer Common
- 38 -
<PAGE>
<PAGE>
Stock to Buyer for cancellation, as provided in this Section 13.3(d).
Each $27.50 of such Damages may be paid by forfeiture of one share of
Buyer Common Stock (appropriately adjusted with regard to stock splits,
reclassifications, recapitalizations, stock dividends, or other
Securities issued in respect of or in exchange for Buyer Common Stock).
If for any reason whatsoever, sufficient Securities are not timely
surrendered to Buyer to fully pay Damages in accordance with this
Article 13, then the amount of any unpaid Damages shall be immediately
due and payable from the Sole Shareholder in cash, notwithstanding this
Section 13.3(d).
13.4 Time Limits. Any claim for indemnification under this
-----------
Article 13 for Damages must be made in writing to the Indemnitor no
later than the first anniversary of the Closing Date.
13.5 Limits on Amounts. The Sole Shareholder, on the one hand,
-----------------
and the Buyer, on the other hand, shall not be liable under this Article
13 for Damages until such time as the Indemnitee has sustained otherwise
indemnifiable Damages under this Agreement totaling the greater of (i)
Ten Thousand Dollars ($10,000) and (ii) three percent (3%) of Target's
fiscal 1997 net income before dividends, as reflected on the Target
Financial Statements (the "Indemnity Basket"); provided that any
representation or warranty in Article 2 that would be breached but for a
qualification by "Material Adverse Effect," "material" or any similar
term shall be treated as otherwise indemnifiable Damages for purposes of
computing the Indemnity Basket. The Sole Shareholder, on the one hand,
and the Buyer, on the other hand, shall not be liable under this Article
13 for Damages which, together with all other indemnifiable Damages
under this Agreement, exceed an amount equal to the Ten Million Dollars
($10,000,000) (the "Indemnity Cap"). Notwithstanding the foregoing, the
Indemnity Basket and Indemnity Cap shall not apply to:
(a) claims by the Buyer for indemnification for Damages
attributable to a breach of a representation or warranty in Sections
2.1, 2.2, 2.3, 2.4, 2.23, 2.24 or the second sentence of Section 2.8;
and
(b) claims by the Sole Shareholder for indemnification for
Damages attributable to a misrepresentation or breach of warranty in
Section 3.1, 3.2 or 3.4.
13.6 Sole Remedy. The parties to this Agreement acknowledge that
-----------
the provisions of this Article 13 shall constitute the sole legal remedy
of any party hereto against any other party hereto with respect to the
sale of the Target Shares by the Sole Shareholder to the Buyer on the
terms set forth in this Agreement, any representations made in
connection with such sale, and any obligations or liabilities of the
Company attributable to periods prior to the Closing, provided that this
Section 13.6 shall not affect the right of any party to seek specific
performance, injunctive or other equitable relief with respect to a
violation of this Agreement.
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<PAGE>
<PAGE>
ARTICLE 14
TERMINATION OF AGREEMENT
14.1 Termination. Anything in this Agreement to the contrary
-----------
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(a) by mutual written consent of the Buyer and Target;
(b) upon written notice from the Buyer to Target if either
(i) any of the conditions precedent to the Buyer's obligations hereunder
shall have become incapable of fulfillment through no fault of the Buyer or
(ii) Target or the Sole Shareholder is in breach of any representation,
warranty or covenant of such party in this Agreement, which breach has
continued for ten (10) days after delivery of written notice to such party
specifying such breach;
(c) upon written notice from Target to the Buyer if either
(i) any of the conditions precedent to Target's obligations hereunder shall
have become incapable of fulfillment through no fault of Target or the Sole
Shareholder, or (ii) Buyer is in breach of any representation, warranty or
covenant of Buyer in this Agreement, which breach has continued for ten
(10) days after delivery of written notice to Buyer specifying such breach;
(d) upon written notice from any party to the other parties
hereto if the Closing does not occur by December 31, 1998 (unless the
failure to consummate the purchase and sale of the Target Shares by such
date shall be due to the action or failure to act of the party seeking to
terminate this Agreement or any affiliate thereof);
(e) by the Board of Directors of Buyer pursuant to and in
accordance with the provisions of Section 5.6 hereof; or
(f) by Buyer, in the event that (i) Target fails to deliver
the Schedules required by Section 4.4 or (ii) the Buyer, in its sole
discretion and within thirty (30) days after delivery to Buyer of the
Schedules required by Section 4.4, objects to any information contained
such Schedules.
Any such written notice shall state the grounds for termination asserted by
the party delivering such notice of termination.
14.2 Effect of Termination. If this Agreement is terminated and
---------------------
the transactions contemplated hereby are abandoned pursuant to Section
14.1, then this Agreement shall become null and void and of no effect,
except for the provisions of this Article 14 and Article 15 (relating to,
among other things, notices, contract construction and effect and
expenses); provided, however, that such termination shall not affect the
right of any party to bring an action against another party for a breach
occurring prior to the termination or for a wrongful termination.
- 40 -
<PAGE>
<PAGE>
ARTICLE 15
MISCELLANEOUS
15.1 Notices. Any notices or other communications required or
-------
permitted hereunder (including, by way of illustration and not
limitation, any notice permitted or required under Article 11 hereof) to
any party hereto shall be sufficiently given if delivered in person or
sent by certified or registered mail, postage prepaid, addressed as
follows:
In the case of Buyer or (after Closing) Target, to:
Unified Financial Services, Inc.
1104 Buttonwood
Lexington, Kentucky 40515
Attention: Mr. Timothy L. Ashburn
With a copy to:
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Attn: Charles H. Binger
(314) 552-7012 (fax)
In the case of the Sole Shareholder to:
Kenneth D. Trumpfheller
1793 Kingswood Drive
Southlake, Texas 76092
and also to:
Crouch & Hallett, LLP
717 N. Harwood, Suite 1400
Dallas, Texas 75201
Attn: Bruce Hallett
(214) 953-3154 (fax)
or such substituted address as any party shall have given notice to the
others in writing in the manner set forth in this Section 15.1.
15.2 Amendment. This Agreement may be amended or modified in
---------
whole or in part only by an agreement in writing executed by all parties
hereto and making specific reference to this Agreement.
15.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which taken together shall constitute one
instrument.
15.4 Binding on Successors and Assigns. This Agreement shall be
---------------------------------
binding upon, inure to the benefit of and be enforceable by and against
the parties hereto and their respective successors and assigns in
accordance with the terms hereof. Neither Target nor the Sole
Shareholder shall be entitled to assign its or his rights under this
Agreement prior to the Closing without the prior written consent of the
Buyer. Prior to the Closing, Buyer may assign its rights under this
Agreement to any existing or new subsidiary corporation provided that
Buyer shall remain liable for the performance of its obligations
hereunder to the extent such assignee fails to do so.
- 41 -
<PAGE>
<PAGE>
15.5 Headings; Pronouns. Descriptive headings and subheadings
------------------
are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. Except as the context
may otherwise require, each reference to a paragraph is to a paragraph
of this Agreement. Each reference herein to any party or to any person
affected hereby shall be deemed to be in the appropriate number and
gender.
15.6 Severability. In the event that any one or more of the
------------
provisions contained in this Agreement or any application thereof shall
be invalid, illegal or unenforceable in any respect, the validity,
legality or enforceability of the remaining provisions of this Agreement
and any other application thereof shall not in any way be affected or
impaired thereby; provided, however, that to the extent permitted by
applicable law, any invalid, illegal, or unenforceable provision may be
considered for the purpose of determining the intent of the parties in
connection with the other provisions of this Agreement.
15.7 Waivers. The parties may, by written agreement, (a) extend
-------
the time for the performance of any of the obligations or other acts of
the parties hereto, (b) waive any inaccuracies in the representations
contained in this Agreement or in any document delivered pursuant to
this Agreement, (c) waive compliance with, or modify, any of the
covenants or conditions contained in this Agreement, and (d) waive or
modify performance of any of the obligations of any of the parties
hereto; provided, that the occurrence of the Closing shall not of itself
constitute such a waiver or modification, and provided further, that no
such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall operate as a waiver
of, or an estoppel with respect to, any subsequent insistence upon such
strict compliance other than with respect to the matter so waived or
modified.
15.8 Publicity. Any public announcements prior to the Closing
---------
concerning the transaction contemplated by this Agreement shall be
jointly planned and simultaneously released by Buyer and Target and no
party shall act in this regard without the prior approval of the other
parties, which approval shall not be unreasonably withheld or delayed.
15.9 Headings. The headings in the sections and subsections of
--------
this Agreement and in the Schedules are inserted for convenience only
and in no way alter, amend, modify, limit or restrict the contractual
obligations of the parties.
- 42 -
<PAGE>
<PAGE>
15.10 List of Exhibits and Schedules. As mentioned in this
------------------------------
Agreement, there are attached hereto or delivered herewith, the
following Exhibits and Schedules:
EXHIBITS
--------
Section
Exhibit Document Reference
------- -------- ---------
A Employment Agreement 4.6
B Affiliate Letter 5.7
C Opinion of Target's Counsel 10.6
D Opinion of Buyer's Counsel 11.3
SCHEDULES
---------
Schedule
No. Schedule Caption
-------- ----------------
2.1 Certificate of Incorporation and Bylaws
2.2 Subsidiaries
2.3 Capitalization
2.4(a) Authorization and Consents of Target
2.4(b) Authorization and Consents of Sole Shareholder
2.5(a) Exceptions to Financial Statements
2.7 Certain Changes or Events
2.8 Exceptions to Title
2.9(a) Bank Accounts and Procedures
2.9(b) Encumbrances on Accounts Receivable
2.10 Contracts and Defaults
2.11(a) Patents and Trademarks
2.12 Violations of Law
2.13 Litigation
2.14(b) Operation of Employee Benefit Plans
2.14(c)(i) Employee Benefit Plans and Arrangements
2.14(c)(ii) Employment Records
2.14(d) Finances
2.15 Proceedings and Regulations
2.16 Insurance
2.17(a) Environmental Claims
2.17(b) Hazardous Substances
2.18 Governmental Approvals
2.19 Taxes
2.19(b) Returns Filed and Taxes Paid
2.19(c) Tax Reserves and Tax Liabilities
2.19(d) Audit History and Other Proceedings
2.19(e) Tax Basis, Attributes and Miscellaneous Elections
2.20 Subsidiaries and Investments
2.22 Transactions with Affiliates
2.26(c) Compliance with Laws
5.7 List of Affiliates
Each of the foregoing Exhibits and Schedules is incorporated herein by
this reference and expressly made a part hereof.
15.11 Expenses. Except to the extent otherwise provided in this
--------
Agreement, the Sole Shareholder and Buyer shall bear his or its own
expenses incurred in connection with the negotiation, execution and
performance of this Agreement and the transactions herein contemplated,
including, but not limited to, legal and accounting fees and expenses.
The Sole Shareholder shall bear all costs and expenses of Target and the
Sole Shareholder relating to the negotiation, execution and delivery of
this Agreement and the Merger (collectively, the "Transaction
Expenses").
- 43 -
<PAGE>
<PAGE>
15.12 Entire Agreement; Law Governing. All prior negotiations and
-------------------------------
agreements between the parties hereto are superseded by this Agreement,
and there are no representations, warranties, understandings or
agreements other than those expressly set forth herein or in an Exhibit
or Schedule delivered pursuant hereto, except as modified in writing
concurrently herewith or subsequent hereto. Except to the extent the
TBCA applies to the Merger, this Agreement shall be governed by and
construed and interpreted according to the internal laws of the State of
Indiana, determined without reference to conflicts of law principles.
[remainder of this page intentionally left blank]
- 44 -
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the day and year first above written.
"BUYER"
UNIFIED FINANCIAL SERVICES, INC.
By: /s/ Timothy L. Ashburn
------------------------------------------
Timothy L. Ashburn, Chairman of the Board,
President and Chief Executive Officer
"MERGER SUB"
AMERIPRIME ACQUISITION CORPORATION
By: /s/ Timothy L. Ashburn
------------------------------------------
Timothy L. Ashburn, President
"TARGET" AND "SOLE SHAREHOLDER"
AMERIPRIME FINANCIAL SERVICES, INC.
By: /s/ Kenneth D. Trumpfheller
------------------------------------------
Kenneth D. Trumpfheller, President
/s/ Kenneth D. Trumpfheller
----------------------------------------------
Kenneth D. Trumpfheller
- 45 -
<PAGE>
- -----------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
UNIFIED FINANCIAL SERVICES, INC.,
A DELAWARE CORPORATION,
EQUITY ACQUISITION CORPORATION,
A KENTUCKY CORPORATION,
EQUITY UNDERWRITING GROUP, INC.
A KENTUCKY CORPORATION
AND
JOHN R. OWENS AND D. RICHARD MEYER
DATED OCTOBER 16, 1998
- -----------------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE 1
THE MERGER
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Effective Time. . . . . . . . . . . . . . . . . . . . . . .2
1.4 Additional Actions. . . . . . . . . . . . . . . . . . . . .2
1.5 Articles of Incorporation and Bylaws. . . . . . . . . . . .2
1.6 Directors and Officers. . . . . . . . . . . . . . . . . . .2
1.7 Conversion of Securities. . . . . . . . . . . . . . . . . .2
1.8 Exchange Procedures . . . . . . . . . . . . . . . . . . . .3
1.9 No Fractional Shares. . . . . . . . . . . . . . . . . . . .3
1.10 Closing of Stock Transfer Books . . . . . . . . . . . . . .3
1.11 Anti-Dilution Adjustments . . . . . . . . . . . . . . . . .4
1.12 Waiver of Dissenters Rights . . . . . . . . . . . . . . . .4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TARGET COMPANY AND SHAREHOLDERS
2.1 Organization and Qualification. . . . . . . . . . . . . . .4
2.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . .4
2.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . .5
2.4 Authorization and Consents. . . . . . . . . . . . . . . . .5
2.5 Consolidated Financial Statements and
Undisclosed Liabilities . . . . . . . . . . . . . . . . .6
2.6 Target Reports. . . . . . . . . . . . . . . . . . . . . . .7
2.7 Absence of Certain Changes or Events. . . . . . . . . . . .7
2.8 Title to Assets; Condition of Equipment . . . . . . . . . .8
2.9 Cash, Cash Equivalents, Receivables and Prepaid Expenses. .9
2.10 Other Agreements; Absence of Defaults . . . . . . . . . . .9
2.11 Patents and Trademarks; Year 2000 . . . . . . . . . . . . 10
2.12 No Violation of Statute, Decree or Order. . . . . . . . . 10
2.13 Litigation. . . . . . . . . . . . . . . . . . . . . . . . 10
2.14 Employee Benefit Plans. . . . . . . . . . . . . . . . . . 11
2.15 Discrimination, Occupational Safety, Labor and Other
Statutes and Regulations. . . . . . . . . . . . . . . . 13
2.16 Insurance Policies. . . . . . . . . . . . . . . . . . . . 13
2.17 Environmental Matters . . . . . . . . . . . . . . . . . . 14
2.18 Governmental Approvals. . . . . . . . . . . . . . . . . . 14
2.19 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.20 Subsidiaries and Investments. . . . . . . . . . . . . . . 17
2.21 Corporate Minutes and Stock Transfer Records. . . . . . . 17
2.22 Transactions With Affiliates. . . . . . . . . . . . . . . 17
2.23 No Broker . . . . . . . . . . . . . . . . . . . . . . . . 17
2.24 Compliance with Laws. . . . . . . . . . . . . . . . . . . 17
2.25 Accuracy of Statements. . . . . . . . . . . . . . . . . . 18
- i -<PAGE>
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 Organization and Authority. . . . . . . . . . . . . . . .19
3.2 Capitalization of Buyer, Merger Sub . . . . . . . . . . .19
3.3 Authorization . . . . . . . . . . . . . . . . . . . . . .19
3.4 Buyer Financial Statements. . . . . . . . . . . . . . . .20
3.5 Material Adverse Change . . . . . . . . . . . . . . . . .20
3.6 Legal Proceedings or Other Adverse Facts. . . . . . . . .21
3.7 Brokers and Finders . . . . . . . . . . . . . . . . . . .21
3.8 Accuracy of Information . . . . . . . . . . . . . . . . .21
ARTICLE 4
COVENANTS RELATING TO TARGET COMPANIES AND COMPETITION
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . .21
4.2 Affirmative Covenants Relating to Target Company. . . . .23
4.3 Consents and Closing Conditions . . . . . . . . . . . . .23
4.4 Divestiture of CPFC . . . . . . . . . . . . . . . . . . .23
4.5 Disclosure Schedules. . . . . . . . . . . . . . . . . . .24
4.6 Employment Agreement. . . . . . . . . . . . . . . . . . .24
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Access and Information; Due Diligence . . . . . . . . . .24
5.2 Regulatory Matters. . . . . . . . . . . . . . . . . . . .24
5.3 [Reserved]. . . . . . . . . . . . . . . . . . . . . . . .24
5.4 Current Information . . . . . . . . . . . . . . . . . . .24
5.5 Conforming Entries. . . . . . . . . . . . . . . . . . . .25
5.6 Environmental Reports . . . . . . . . . . . . . . . . . .25
5.7 Lockup. . . . . . . . . . . . . . . . . . . . . . . . . .26
5.8 Miscellaneous Agreements and Consents . . . . . . . . . .26
5.9 Press Releases. . . . . . . . . . . . . . . . . . . . . .26
5.10 Best Efforts to Ensure Pooling. . . . . . . . . . . . . .26
5.11 Tax Opinion Certificates. . . . . . . . . . . . . . . . .26
5.12 Expenses. . . . . . . . . . . . . . . . . . . . . . . . .26
ARTICLE 6
COVENANTS REGARDING TAX MATTERS
6.1 Returns and Payment of Taxes. . . . . . . . . . . . . . .27
6.2 Elections and Settlements . . . . . . . . . . . . . . . .27
6.3 Post-Closing Audits and Other Proceedings . . . . . . . .27
ARTICLE 7
TRANSFER LIMITATIONS AND COVENANTS
7.1 Securities Subject to Article 7 . . . . . . . . . . . . .27
7.2 Restriction on Transfer . . . . . . . . . . . . . . . . .28
- ii -<PAGE>
<PAGE>
7.3 Restrictive Legend. . . . . . . . . . . . . . . . . . . .28
7.4 Notice of Proposed Transfers. . . . . . . . . . . . . . .28
7.5 Investment Representations. . . . . . . . . . . . . . . .29
7.6 Piggyback Registrations.. . . . . . . . . . . . . . . . .29
ARTICLE 8
COVENANTS OF BUYER
8.1 Capital Contribution. . . . . . . . . . . . . . . . . . .31
8.2 Consents and Closing Conditions.. . . . . . . . . . . . .31
8.3 Conduct of Business . . . . . . . . . . . . . . . . . . .31
ARTICLE 9
CONDITIONS OF BUYER AND TARGET COMPANY
9.1 Regulatory Approval . . . . . . . . . . . . . . . . . . .31
9.2 No Judicial Prohibition . . . . . . . . . . . . . . . . .31
9.3 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE 10
BUYER'S CONDITIONS TO CLOSING
10.1 Continued Truth of Warranties . . . . . . . . . . . . . .32
10.2 Performance of Covenants. . . . . . . . . . . . . . . . .32
10.3 No Material Adverse Change. . . . . . . . . . . . . . . .32
10.4 Permits and Consents. . . . . . . . . . . . . . . . . . .32
10.5 Full Investigation. . . . . . . . . . . . . . . . . . . .32
10.6 Closing Documents . . . . . . . . . . . . . . . . . . . .32
10.7 Opinion of Counsel. . . . . . . . . . . . . . . . . . . .32
10.8 Opinion of Accountant . . . . . . . . . . . . . . . . . .32
10.9 Termination of Agreements . . . . . . . . . . . . . . . .33
ARTICLE 11
SHAREHOLDERS' AND TARGET'S CONDITIONS TO CLOSING
11.1 Continued Truth of Warranties . . . . . . . . . . . . . .33
11.2 Performance of Covenants. . . . . . . . . . . . . . . . .33
11.3 Permits and Consents. . . . . . . . . . . . . . . . . . .33
11.4 Closing Documents . . . . . . . . . . . . . . . . . . . .33
11.5 Opinion of Counsel. . . . . . . . . . . . . . . . . . . .33
11.6 Board Representation. . . . . . . . . . . . . . . . . . .33
ARTICLE 12
DOCUMENTS TO BE DELIVERED AT CLOSING
12.1 Documents to be Delivered by Shareholders and Target. . .33
12.2 Documents to be Delivered by Buyer. . . . . . . . . . . .34
- iii -<PAGE>
<PAGE>
ARTICLE 13
SURVIVAL AND INDEMNIFICATION
13.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . .35
13.2 General Indemnification.. . . . . . . . . . . . . . . . .35
13.3 Notice of, and Procedures for, Collecting
Indemnification. . . . . . . . . . . . . . . . . . . .36
13.4 Time Limits . . . . . . . . . . . . . . . . . . . . . . .37
13.5 Limits on Amounts . . . . . . . . . . . . . . . . . . . .37
13.6 Sole Remedy . . . . . . . . . . . . . . . . . . . . . . .37
ARTICLE 14
TERMINATION OF AGREEMENT
14.1 Termination . . . . . . . . . . . . . . . . . . . . . . .38
14.2 Effect of Termination . . . . . . . . . . . . . . . . . .38
ARTICLE 15
MISCELLANEOUS
15.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . .39
15.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . .39
15.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . .40
15.4 Binding on Successors and Assigns . . . . . . . . . . . .40
15.5 Headings; Pronouns. . . . . . . . . . . . . . . . . . . .40
15.6 Severability. . . . . . . . . . . . . . . . . . . . . . .40
15.7 Waivers . . . . . . . . . . . . . . . . . . . . . . . . .40
15.8 Publicity . . . . . . . . . . . . . . . . . . . . . . . .40
15.9 Headings. . . . . . . . . . . . . . . . . . . . . . . . .40
15.10 List of Exhibits and Schedules. . . . . . . . . . . . . .40
15.11 Entire Agreement; Law Governing . . . . . . . . . . . . .42
- iv -<PAGE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (which, together with the
Schedules attached hereto and incorporated herein by reference, is
hereinafter referred to as this "Agreement") is made and entered into as
of the 16th day of October 1998, by and among UNIFIED FINANCIAL SERVICES,
INC., a Delaware corporation (the "Buyer"), EQUITY ACQUISITION
CORPORATION, a Kentucky corporation and wholly owned subsidiary of Buyer
("Merger Sub"), EQUITY UNDERWRITING GROUP, INC., a Kentucky corporation
("Target"), and John R. Owens ("Owens") and D. Richard Meyer ("Meyer"),
the sole shareholders of Target (Owens and Meyer sometimes are
collectively referred to herein as the "Shareholders").
RECITALS:
A. The respective Boards of Directors of Buyer and Target deem
it advisable and in the best interests of such corporations and their
respective stockholders and shareholders, as the case may be, that Merger
Sub merge with and into Target, with Target as the surviving corporation,
all as specifically set forth in this Agreement (the "Merger").
B. The Shareholders have approved the Merger and other
transactions contemplated by this Agreement.
C. The parties intend that the Merger, for federal income tax
purposes, shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended.
D. The parties hereto desire to set forth certain
representations, warranties, covenants and agreements made as an
inducement to the execution and delivery of this Agreement and to set
forth certain conditions precedent to the Merger contemplated in this
Agreement.
NOW, THEREFORE, in consideration of these premises, the covenants
and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
----------
Agreement, at the Effective Time (as defined in Section 1.3) Merger Sub
shall be merged with and into Target in accordance with Chapter 271B of
the Kentucky Business Corporation Act (the "KBCA") and the separate
corporate existence of Merger Sub shall thereupon cease. Target shall be
the surviving corporation of the Merger (sometimes referred to herein as
the "Surviving Corporation") and shall continue to be governed by the
laws of the Commonwealth of Kentucky. The Merger shall have the effects
set forth in Chapter 271B of the KBCA. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of Target and
Merger Sub shall rest in the Surviving Corporation, and all debts,
liabilities and duties of Target and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
<PAGE>
<PAGE>
1.2 Closing. The closing (the "Closing") of the Merger shall
-------
take place at 10:00 a.m., local time, at the offices of Thompson Coburn
in St. Louis, Missouri on the date that the Effective Time occurs (the
"Closing Date"), which Closing Date shall not be earlier than October 16,
1998, nor later than December 31, 1998, or at such other date, time and
place as Buyer and Target shall agree.
1.3 Effective Time. The Merger shall become effective on the
--------------
date and at the time (the "Effective Time") on which duly executed
Articles of Merger are filed with the Secretary of State of the
Commonwealth of Kentucky, in accordance with, the relevant provisions of
the KBCA. Unless otherwise agreed in writing by Buyer and Target
Company, subject to the terms and conditions of this Agreement
(including, without limitation, Section 1.2), the Effective Time shall
occur within five business days after the satisfaction or waiver in
accordance with this Agreement of all conditions to the Merger contained
in this Agreement, or on such other date as is agreed to by Buyer and
Target Company.
1.4 Additional Actions. If, at any time after the Effective
------------------
Time, the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances or any other acts are necessary
or desirable (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under
any of the rights, properties or assets of Merger Sub or (ii) otherwise
to carry out the purposes of this Agreement, Merger Sub by its execution
of this Agreement shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all
such deeds, assignments or assurances and to do all acts necessary or
desirable to vest, perfect or confirm title and possession to such
rights, properties or assets in the Surviving Corporation and otherwise
to carry out the purposes of this Agreement, and the officers and
directors of the Surviving Corporation hereby are authorized, in the name
of Merger Sub or otherwise, to take any and all such action.
1.5 Articles of Incorporation and Bylaws. The Articles of
------------------------------------
Incorporation and Bylaws of Target in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation following the Merger until otherwise amended or
repealed.
1.6 Directors and Officers. At the Effective Time, the directors
----------------------
and officers of Target immediately prior to the Effective Time shall be
the directors and officers, respectively, of the Surviving Corporation
following the Merger and such directors and officers shall hold office in
accordance with the Surviving Corporation's Bylaws and applicable law.
1.7 Conversion of Securities. At the Effective Time, by virtue
------------------------
of the Merger and without any action on the part of the Buyer, Merger Sub
or the holder of any of the following securities:
(a) Each share of the common stock, no par value per share,
of Merger Sub that is issued and outstanding immediately prior to the
Effective Time shall remain outstanding and shall thereafter constitute
all of the issued and outstanding capital stock of the Surviving
Corporation; and
(b) Subject to Sections 1.9, 1.11 and 1.12 hereof, each
share of common stock, no par value per share, of Target ("Target Common
Stock") issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding and shall be converted into and become the
right to receive 5372.1112 shares (the "Exchange Ratio") of common stock
of Buyer, par value $0.01 per share, and the associated "Rights" under
the "Rights Agreement," as those terms are defined in Section 3.2 hereof
("Buyer Common Stock"); provided, however, that any Target Common Stock
held by Target, Buyer or any of their respective Subsidiaries (as defined
as in Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")), in each case other than in a fiduciary
capacity
- 2 -<PAGE>
<PAGE>
or as a result of debts previously contracted, shall be canceled and
shall not be exchanged for shares of Buyer Common Stock. The Exchange
Ratio was computed by dividing (i) the total number of shares of Target
Common Stock that were issued and outstanding on the date of this
Agreement into (ii) 241,745, the aggregate number of shares of Buyer
Common Stock to be issued in the Merger.
1.8 Exchange Procedures
-------------------
(a) Immediately following the Effective Time, each
Shareholder shall deliver to the Buyer's duly appointed transfer agent
("Transfer Agent"), each share certificate formerly evidencing shares of
Target Common Stock (a "Certificate"), together with a properly completed
and executed letter of transmittal with respect to such Certificate.
Thereafter, such Shareholder shall be entitled to receive a certificate
or certificates representing the number of full shares of Buyer Common
Stock into which the Certificate so surrendered shall have been converted
pursuant to this Agreement, and any distribution theretofore declared and
not yet paid with respect to such shares of Buyer Common Stock and any
amount due with respect to fractional shares, without interest
(collectively, the "Merger Consideration"). Such shares of Buyer Common
Stock, any amount due with respect to fractional shares and any
distribution shall be delivered by the Transfer Agent to each such holder
as promptly as practicable after such surrender.
(b) Each outstanding Certificate, until duly surrendered to
the Transfer Agent, shall be deemed to evidence ownership of the Merger
Consideration into which the stock previously represented by such
Certificate shall have been converted pursuant to this Agreement.
(c) After the Effective Time, the Shareholders shall cease
to have rights with respect to the Target Common Stock previously
represented by such Certificates, and their sole rights shall be to
exchange such Certificates for the Merger Consideration to which the
Shareholder may be entitled pursuant to the provisions of Section 1.7
hereof. After the closing of the transfer books as described in
Section 1.10 hereof, there shall be no further transfer on the records of
Target of Certificates, and if such Certificates are presented to Target
for transfer, they shall be canceled against delivery of the Merger
Consideration. Neither Buyer nor the Transfer Agent shall be obligated
to deliver the Merger Consideration to a Shareholder until he surrenders
the Certificates or furnishes the Required Documentation as provided
herein. No dividends or distributions declared after the Effective Time
on the Buyer Common Stock will be remitted to any person entitled to
receive Buyer Common Stock under this Agreement until such person
surrenders the Certificate representing the right to receive such Buyer
Common Stock or furnishes a properly completed and executed letter of
transmittal, at which time such dividends or distributions shall be
remitted to such person, without interest and less any taxes that may
have been imposed thereon.
1.9 No Fractional Shares. Notwithstanding any other provision of
--------------------
this Agreement, neither certificates nor scrip for fractional shares of
Buyer Common Stock shall be issued in the Merger. Each holder of Target
Common Stock who otherwise would have been entitled to a fraction of a
share of Buyer Common Stock shall receive (by check from the Transfer
Agent, mailed to the shareholder with the certificate(s) for Buyer Common
Stock which such holder is to receive pursuant to the Merger) in lieu
thereof, cash (without interest) in an amount determined by multiplying
the fractional share interest to which such holder would otherwise be
entitled by $27.50. No such holder shall be entitled to dividends,
voting rights or any other rights in respect of any fractional share.
1.10 Closing of Stock Transfer Books. The stock transfer books of
-------------------------------
Target shall be closed at the end of business on the business day
immediately preceding the Closing Date. In the event of a transfer of
ownership of Target Common Stock that is not registered in the transfer
records prior to the
- 3 -<PAGE>
<PAGE>
closing of such record books, the Merger Consideration issuable or
payable with respect to such stock may be delivered to the transferee, if
the Certificate or Certificates representing such stock is presented to
the Exchange Agent accompanied by all documents required to evidence and
effect such transfer and all applicable stock transfer taxes are paid.
1.11 Anti-Dilution Adjustments. If, between the date of this
-------------------------
Agreement and the Effective Time, Buyer shall effect a stock dividend, or
make distributions in stock upon, or subdivide, split up, reclassify or
combine Buyer Common Stock or declare a dividend or make a distribution
on Buyer Common Stock in the form of a security convertible into Buyer
Common Stock, then appropriate and proportional adjustment or adjustments
will be made to the Exchange Ratio such that such shares, as adjusted,
shall result in the issuance of that number of shares of Buyer Common
Stock or other securities as if the declaration or payment of such
dividend, distribution, subdivision, split-up, reclassification or
combination of such Buyer Common Stock had a record or payment date
therefor immediately after the Effective Time.
1.12 Waiver of Dissenters Rights. By his execution of this
---------------------------
Agreement, each Shareholder acknowledges and agrees that he has voted in
favor of the Merger, and hereby irrevocably waives his right under
Chapter 271B of the KBCA to demand an appraisal of his Target Common
Stock in connection with the Merger (including any shares acquired by
such Shareholder after the date hereof).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TARGET COMPANY AND SHAREHOLDERS
Target Company and the Shareholders hereby jointly and severally
represent and warrant to Buyer as follows:
2.1 Organization and Qualification. Each of Target and each
------------------------------
subsidiary of Target listed on Schedule 2.2 is a corporation or limited
------------
liability company duly organized, validly existing and in good standing
under the laws of its state of incorporation set forth in Schedule 2.2,
------------
has all requisite corporate power to own, lease and operate its
properties and to carry on its business as it is now being conducted, and
is duly qualified and in good standing in all jurisdictions where its
ownership or leasing of property or the conduct of its business requires
it to be so qualified. Schedule 2.1 sets forth true and complete copies
------------
of (a) the Articles of Incorporation, as amended (certified as of a
recent date by the appropriate state authority), and Bylaws, as amended
(certified as of the date hereof by the Secretary or an Assistant
Secretary of such corporation), of Target and each subsidiary of Target,
and (b) the articles of organization and operating agreement of each
subsidiary that is a limited liability company, certified by an
authorized person thereof.
2.2 Subsidiaries. Except for the corporate subsidiaries and
------------
limited liability company identified on Schedule 2.2 (individually, a
------------
"Subsidiary" and, collectively the "Subsidiaries" and, collectively with
the Target, the "Target Companies"), Target does not own, directly or
indirectly, beneficially or of record, any shares of any class of Equity
Securities (as hereinafter defined) or similar interests of any
corporation, limited liability company, bank, business trust, association
or organization, or any interest in a partnership or joint venture of any
kind. "Equity Securities" of an issuer means capital stock or other
equity securities of such issuer, options, warrants, subscriptions,
rights to subscribe to, scrip, puts, calls, commitments, understandings
or undertakings of any character whatsoever relating to, or securities or
rights convertible into, shares of any capital stock or other equity
securities of such issuer, or contracts, commitments, understandings or
arrangements by which such issuer is or may become bound to issue
additional shares of its capital stock or other equity securities of such
issuer, or options,
- 4 -<PAGE>
<PAGE>
warrants, scrip or rights to purchase, acquire (including any preemptive
right), subscribe to, calls on or commitments for any shares of its
capital stock or other equity securities.
2.3 Capitalization.
--------------
(a) Target. The authorized capital stock of Target
------
consists solely of One Thousand (1,000) shares of common stock, no par
value per share, of which Forty-Five (45) shares are issued and
outstanding (the "Target Shares") and held of record and beneficially by
the shareholders identified on Schedule 2.3. All treasury shares of
------------
Target are identified on Schedule 2.3. Except as set forth on Schedule
------------ --------
2.3, each Shareholder owns, of record and beneficially, the Target Shares
- ---
set forth on Schedule 2.3 as owned by him, free and clear of all liens,
------------
claims, charges, options, encumbrances, agreements, mortgages, pledges,
security interests or restrictions (each, a "Lien" and, collectively, the
"Liens"). All of the Target Shares are duly authorized, validly issued,
fully paid and nonassessable. With the exception of the Target Shares,
there are no Equity Securities of Target which have been authorized or
which are outstanding. There is no stock appreciation, phantom stock,
profit participation, success fee or similar right (individually and
collectively, "Appreciation Rights") with respect to Target, that has
been authorized or which is outstanding. There are no voting trusts,
proxies or other agreements or understandings with respect to the voting
of the capital stock of Target. Target is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of its capital stock.
(b) Subsidiaries. The authorized, issued and outstanding
------------
capital stock of the Subsidiaries are as set forth in Schedule 2.3, with
------------
all treasury shares of each Subsidiary identified on Schedule 2.3. All
------------
of the outstanding shares of each Subsidiary are duly authorized, validly
issued, fully paid and nonassessable. With the exception of the shares
listed in Schedule 2.3, there are no Equity Securities of any Subsidiary
------------
which have been authorized or which are outstanding. There are no
Appreciation Rights with respect to any Subsidiary that have been
authorized or which are outstanding. Except as set forth on Schedule
--------
2.3, there are no voting trusts, proxies or other agreements or
- ---
understandings with respect to the voting of the capital stock of any
Subsidiary. No Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock.
2.4 Authorization and Consents.
--------------------------
(a) Target. Target has the corporate power and authority
------
to enter into this Agreement and to carry out its obligations hereunder.
The execution, delivery and performance of this Agreement by Target and
the consummation by Target of the transactions contemplated hereby in
accordance with and subject to the terms of this Agreement have been duly
authorized by the Board of Directors and shareholders of Target. This
Agreement is a valid and binding obligation of Target enforceable against
Target in accordance with its terms. Except as disclosed on
Schedule 2.4(a), neither the execution nor delivery nor performance by
- ---------------
Target of this Agreement, nor the consummation by Target of the
transactions contemplated hereby, nor compliance by Target with any of
the provisions hereof, will (i) violate, conflict with or result in a
breach of any provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or acceleration of, or result in the
creation of, any Lien upon any of the properties or assets of any of the
Target Companies under any of the terms, conditions or provisions of
(A) its Articles of Incorporation, By-Laws or other constituent document
or (B) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which any of the
Target Companies is a party or by which they may be bound, or to which
any of the Target Companies or their properties or assets may be subject,
or (ii) subject to compliance with the statutes and regulations referred
to in
- 5 -<PAGE>
<PAGE>
subsection (c) of this Section 2.4, violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to any
of the Target Companies or its properties or assets.
(b) Shareholders. Each Shareholder has all requisite power
------------
and authority to enter into and to consummate the transactions,
contemplated by this Agreement, and otherwise to perform his obligations
hereunder. This Agreement constitutes a valid and legally binding
obligation of each Shareholder, enforceable against him in accordance
with its terms. Except as disclosed on Schedule 2.4(b), neither the
execution and delivery of this Agreement by such Shareholder nor the
consummation by such Shareholder of the transactions contemplated hereby
will (i) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result
in the creation of any Lien upon any of the Target Common Stock or the
properties of any of the Target Companies under, (A) its Articles of
Incorporation, Bylaws or other constituent document or (B) except for
loans currently outstanding with Bank One, Kentucky, NA, any note, bond,
mortgage indenture, deed of trust, lease, license, agreement or other
instrument or obligation to which such Target Company is bound, or by
which such Target Company or any of its properties, or such Shareholder
or any of the Target Common Stock, may be bound or affected, or
(ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to such Shareholder, Target or any of their
respective properties. No consent or approval by, notice to or
registration with any governmental authority or other third party is
required on the part of such Shareholder or Target in connection with the
execution and delivery of this Agreement or the consummation by the
Shareholders or Target of the Merger and the other transactions
contemplated hereby.
(c) Regulatory Compliance. Except as set forth in Schedule
--------------------- --------
2.4(c), other than in connection or in compliance with the provisions of
- ------
the KBCA, the Securities Act of 1933, as amended, and the rules and
regulations thereunder (collectively, the "Securities Act"), the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act"), the securities or blue sky
laws of the various states, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is required on the part of any of the Target Companies in
connection with the consummation of the transactions contemplated by this
Agreement.
2.5 Consolidated Financial Statements and Undisclosed Liabilities.
-------------------------------------------------------------
(a) Target's Consolidated Financial Statements. Attached
------------------------------------------
hereto as part of Schedule 2.5(a) are true and complete copies of (i)
---------------
audited consolidated balance sheets and related audited consolidated
statements of income and cash flow for Target and its subsidiaries as of
and for the fiscal years ended December 31, 1997 and 1996, as applicable,
and (ii) Target's unaudited balance sheets and related statements of
income and cash flow as of and for the six months ended June 30, 1998
(collectively, the "Financial Statements"). Except as disclosed on
Schedule 2.5(a), the Financial Statements (i) have been prepared from the
- ---------------
books and records of the Target Companies in accordance with generally
accepted accounting principles and (ii) fairly present the consolidated
financial position and results of operations of the Target Companies as
of and for the fiscal years or interim periods, as the case may be, then
ended.
(b) Undisclosed Liabilities. Except as set forth in the
-----------------------
Financial Statements or Schedules to this Agreement, none of the Target
Companies has any liabilities or obligations of any kind, whether
existing, fixed, contingent upon future events, vested, funded, unfunded
or otherwise, except for (i) current liabilities that were incurred since
June 30, 1998, in the ordinary course of business, and (ii) liabilities
which will not have a Material Adverse Effect. For purposes of this
Agreement, the
- 6 -<PAGE>
<PAGE>
term "Material Adverse Effect" means (A) any adverse impact on the
assets, operations, liabilities, earnings, prospects, business or
condition of any of the Target Companies that represents a diminution in
value (whether immediate or as a result of diminished future cash flows)
of more than Twenty-Five Thousand Dollars ($25,000), (B) any loss of the
full-time services of key personnel and/or (C) the creation of any Lien
upon any of the properties of such Target Company.
2.6 Target Reports. Since January 1, 1995, each of Target and
--------------
the Subsidiaries has timely filed any and all material reports,
registrations and statements, together with any required amendments
thereto, that it was required to file with any federal, state, municipal
or local government, securities, banking, savings and loan,
environmental, insurance and other governmental or regulatory authority,
and the agencies and staffs thereof (the entities in the foregoing clause
being referred to herein collectively as the "Regulatory Authorities" and
individually as a "Regulatory Authority"), having jurisdiction over the
affairs of it. All such material reports and statements filed with any
such Regulatory Authority are collectively referred to herein as the
"Target Reports." As of each of their respective dates, the Target
Reports complied in all material respects with all the rules and
regulations promulgated by the applicable Regulatory Authority. With
respect to Target Reports filed with the Regulatory Authorities, there is
no material unresolved violation, criticism or exception by any
Regulatory Authority with respect to any report or statement filed by, or
any examinations of, Target or any of the Subsidiaries.
2.7 Absence of Certain Changes or Events. Since June 30, 1998,
------------------------------------
and except as disclosed on Schedule 2.7 or as contemplated by this
------------
Agreement, there has not been with respect to any of the Target
Companies:
(a) any change in the assets, operations, liabilities,
earnings, business or condition (financial or otherwise) that has been or
will be, individually or in the aggregate with other changes, a Material
Adverse Effect;
(b) any damage, destruction or casualty loss (whether or
not covered by insurance) which has been or will be a Material Adverse
Effect;
(c) any increase in the compensation payable to any
director, officer, employee or agent other than routine increases made in
the ordinary course of business consistent with past practice, or any
bonus, incentive compensation, service award or other like benefit,
granted, made or accrued, contingently or otherwise, to or to the credit
of any of such director, officer, employee or agent, or any employee
welfare, pension, retirement or similar payment or arrangement made or
agreed to by such Target Company with respect to any such director,
officer, employee or agent, other than pursuant to the existing plans
disclosed on Schedule 2.14(c)(i);
-------------------
(d) any addition to, or modification of, any profit
sharing, bonus, deferred compensation, insurance, pension, retirement or
other employee benefit plan, arrangement or practice described on
Schedule 2.14(c)(i) other than accruals in accordance with the normal
- -------------------
practices of such Target Company and the extension of coverage to
employees who became eligible after December 31, 1997;
(e) any sale, assignment or transfer (including, without
limitation, any collateral assignment or the granting or permitting of
any lien, charge or encumbrance arising other than in connection with the
creation of a security interest in after-acquired property under a
security agreement disclosed on Schedule 2.8) of any asset, property or
------------
right (except sales of inventory and sale or disposal of worn out and
obsolete fixed assets, each in the ordinary course of business);
- 7 -<PAGE>
<PAGE>
(f) any amendment, modification, waiver or cancellation of
any debt owed to, or claim of, such Target Company or settlement of any
dispute involving any payment or other obligation due to or owed by such
Target Company to be made or performed after the Closing Date involving
more than $5,000 (provided that all items excluded by reason of such
threshold are less than $10,000 in the aggregate);
(g) any borrowing of money, any increase in any existing
indebtedness or the incurrence of any obligation or liability (whether
absolute or contingent), other than current liabilities incurred in the
ordinary course of business;
(h) any capital expenditure or commitment to make a capital
expenditure (exclusive of expenditures for repair or maintenance of
equipment in the ordinary course of business) exceeding $25,000
individually or $50,000 in the aggregate, or the execution of any lease
or similar arrangement with respect to any aspect of the business of such
Target Company, or incurring of liability therefor;
(i) any cancellation, termination or amendment of any
material contract, agreement, license or other instrument to which such
Target Company is a party or by which it is bound;
(j) any lending or advance of money or other pledging of
credit, by way of guaranty or otherwise, in connection with any aspect of
its business, except normal travel and expense advances to employees in
the ordinary course of business consistent with prior practice;
(k) any declaration or payment of any dividend or other
distribution of any kind with respect to any of the capital stock of any
Target Company;
(l) any material failure on the part of such Target Company
to operate its business in the ordinary course and to preserve its
business organization intact;
(m) any agreement by, or commitment of, the Shareholders or
such Target Company to do or permit any of the foregoing; or
(n) any other event or condition of any character which, in
any one case or in the aggregate, will or can reasonably be expected to
have a Material Adverse Effect.
2.8 Title to Assets; Condition of Equipment. Schedule 2.8
--------------------------------------- ------------
contains the address of all real properties owned or used by each Target
Company and the buildings and structures located thereon ("Business
Premises"). Except as set forth on Schedule 2.8, each Target Company has
------------
good and marketable title to all assets and properties used in its
business, subject to assets held under lease arrangements disclosed on
Schedule 2.10. With the exception of (a) the Liens disclosed on
- -------------
Schedule 2.8, (b) liens arising by operation of law for taxes accrued but
- ------------
not yet payable, and (c) such imperfections of title, if any, as do not
materially detract from the value or interfere with such Target Company's
present use of such assets nor impair the marketability of title of any
of the assets or properties of such Target Company, none of the assets of
such Target Company is subject to any lease, lien, security interest,
mortgage, charge, easement or encumbrance, right of first refusal, option
or other restriction of any nature whatsoever, nor subject to any pending
or, to the Shareholders' knowledge, threatened condemnation proceedings.
To the best knowledge of Shareholders, none of the Business Premises or
the operation or maintenance thereof as now operated and maintained,
contravenes any applicable zoning ordinance or other administrative
regulation or violates any restrictive covenant or any provision of law.
Unless
- 8 -<PAGE>
<PAGE>
otherwise set forth on Schedule 2.8, the Business Premises are in good
------------
operating condition and repair, ordinary wear and tear excepted.
2.9 Cash, Cash Equivalents, Receivables and Prepaid Expenses.
--------------------------------------------------------
(a) Set forth on Schedule 2.9(a) are (i) a list of all bank
---------------
lines, credit arrangements, bank accounts, money market and securities
brokerage accounts, and safe deposit boxes maintained by each Target
Company together with the names of all authorized signatories on each
such arrangement or account and (ii) a list of all certificates of
deposit, money market fund investments, other cash equivalents,
marketable securities of other persons and investment companies and
similar temporary investments.
(b) All of the accounts receivable of each Target Company
reflected on the Financial Statements and all such accounts receivable
arising subsequent to the date thereof, (i) represent actual indebtedness
incurred by the applicable account debtors, (ii) have arisen in the
ordinary course of such Target Company's business, (iii) except for
liens, security interests and encumbrances described on Schedule 2.8, are
------------
subject to no prior assignment, claim, charge or encumbrance of any
nature whatsoever, and (iv) are collectible net of the allowance for
uncollectible accounts set forth on the Financial Statements, without
rights of counterclaim or setoff by any account debtor, except in each
instance where any such failure would not have a Material Adverse Effect.
(c) All of the prepaid expenses reflected on the Financial
Statements represent actual advance payments of the Target Companies'
ordinary operating expenses, and can be utilized in full by the Target
Companies after the Closing to the extent not used in the ordinary course
of business prior to Closing.
2.10 Other Agreements; Absence of Defaults. Except as disclosed
-------------------------------------
on Schedule 2.10, no Target Company and none of its assets or properties
-------------
is a party to or bound by: (a) any loan agreement, note, mortgage, deed
of trust, security agreement, conditional sales agreement, capital lease,
guaranty, letter of credit arrangement or other document or instrument
reflecting present or contingent indebtedness of such Target Company or
for which any of its properties are mortgaged or pledged as collateral
(all such items are referred to collectively as the "Loan Documents");
(b) with the exception of sales agency agreements, any employment
agreement, consulting agreement, distributor agreement or other
contractual arrangement for services; (c) any collective bargaining
agreement covering any employees; (d) any contract, agreement or
arrangement which prohibits or restricts such Target Company from freely
engaging in any business in any part of the world; (e) any contract,
agreement or arrangement relating to the marketing or sales of its
services, or requiring minimum or exclusive purchases of supplies or
services from vendors; (f) any contract, agreement or arrangement under
which any Target Company reinsures its risk as an insurer; (g) any
contract relating to a prior business acquisition, merger, combination or
similar transaction or reorganization under which Target Company has any
continuing rights or obligations; (h) any contract under which such
Target Company has agreed to indemnify a present or former officer,
director or employee; or (i) any other contract, agreement, binder,
lease, license, outstanding bid or offer or other commitment (whether
formal or informal, written or oral) calling for the payment or receipt
by such Target Company of property or services valued at $5,000 or more,
excluding purchase orders for supplies ordered in the ordinary course of
business. The Shareholders have made available for inspection by Buyer a
true and complete copy of each agreement, instrument or other document
(as amended) referenced or cross-referenced in Schedule 2.10. In the case
-------------
of oral contracts and commitments required to be disclosed pursuant to
this Section, Schedule 2.10 contains a true and complete description of
-------------
the material terms thereof. Except as disclosed on Schedule 2.10, Target
-------------
is not in default under any Loan Document, contract, offer, commitment or
other item listed on Schedule 2.10, nor has any event occurred
-------------
- 9 -<PAGE>
<PAGE>
which, upon notice or passage of time or both, will result in such a
default. Except as disclosed on Schedule 2.9, all payments required to
be made by each Target Company pursuant to the Loan Documents on or prior
to the date hereof have been paid in full.
2.11 Patents and Trademarks; Year 2000.
---------------------------------
(a) Except as noted on Schedule 2.11(a), no Target Company
----------------
uses any patent, trade name, trademark, service mark or copyright, or any
application therefor whether or not registered (collectively, "Patents
and Trademarks") that is not owned by or validly licensed to such Target
Company, except where the failure to have a license will not have a
Material Adverse Effect. All Patents and Trademarks (and any
applications therefor) used by each Target Company are described on
Schedule 2.11(a) hereto, together with the name and address of the owner
- ----------------
thereof if other than such Target Company. Schedule 2.11(a) contains a
----------------
true and complete list of all license agreements, indemnification
agreements and other agreements or understandings with respect to Patents
and Trademarks, and true and complete copies of the same have been
delivered to Buyer for review. Except as disclosed in Schedule 2.11(a),
----------------
no Patents and Trademarks owned, licensed or used by any Target Company
are the subject of a lawsuit or any other proceeding involving Target, no
party has challenged or threatened to challenge such Target Company's
right to use such Patents and Trademarks, and to the Shareholders'
knowledge there is no basis for any such challenge based on a claim of
infringement or otherwise.
(b) To the best knowledge of the Shareholders, all computer
software and hardware utilized by each Target Company is, or such Target
Company has taken all required steps to be, Year 2000 compliant, which,
for purposes of this Agreement, shall mean that the data outside the
range 1900-1999 will be correctly processed in any level of computer
hardware or software including, but not limited to, microcode, firmware,
applications programs, files and data bases. All computer software is,
or each Target Company has taken steps (including obtaining warranties
from the vendors thereof in respect of compliance) to ensure that all
computer software will be, designed to be used prior to, during and after
the calendar year 2000 A.D., and such software will operate during each
such time period without error relating to date data, specifically
including any error relating to, or the product of, date data that
represent or reference different centuries or more than one century.
2.12 No Violation of Statute, Decree or Order. Except as
----------------------------------------
disclosed on Schedule 2.12, no Target Company is, and since January 1,
-------------
1995 has been, in default under or in breach or violation of any statute,
law, ordinance, decree, order, rule or regulation of any governmental
body applicable to such Target Company or its properties, except where
such default, breach or violation has not had and will not have a
Material Adverse Effect. The consummation of the Merger and the
consummation of the other transactions contemplated by this Agreement
will not constitute or result in any default under or breach or violation
of any statute, law, ordinance, decree, order, rule or regulation of any
governmental body applicable to such Target Company or its properties.
2.13 Litigation. Except as listed in Schedule 2.13, and except
---------- -------------
for any suit, claim, action or proceeding that is subject to full and
valid indemnification, there is not, and since January 1, 1995 there has
not been, any suit, claim, action, proceeding or governmental
investigation against any Target Company or respecting any aspect of its
business ("Third Party Litigation") pending or, to the Shareholders'
knowledge, threatened, nor to the Shareholders' knowledge is there
presently any condition or set of facts which will give rise to any Third
Party Litigation. There are no decrees, injunctions or orders of any
court, administrative or regulatory body, arbitration panel or
governmental agency outstanding against any Target Company relating to
any aspect of its business under which such Target Company has continuing
obligations. There is no suit, claim, action, proceeding or governmental
- 10 -<PAGE>
<PAGE>
investigation now pending or, to the Shareholders' knowledge, threatened
against either Shareholder or any Target Company that contests the
validity of this Agreement or the ability of such Shareholder or Target
to consummate the Merger and other transactions contemplated by this
Agreement. The Shareholders have furnished to Buyer true and correct
copies of all audit response letters received by each Target Company in
the twelve months preceding the date hereof from legal counsel devoting
substantive attention to matters which may result in any liability or
obligation of such Target Company.
2.14 Employee Benefit Plans.
----------------------
(a) Definitions. For purposes of this Section 2.14:
-----------
(i) Arrangement. The term "Arrangement" means any
-----------
personnel policy (including, but not limited to, vacation time, holiday
pay, bonus programs, moving expense reimbursement programs and sick
leave), salary reduction agreements, change-in-control agreements,
employment agreements, stock option plans, consulting agreements or any
other benefit, program, agreement or contract, whether or not written,
(A) which currently is being or since December 31, 1992 has been
maintained for employees of any Target Company or (B) to which any Target
Company makes or is required to make, or since December 31, 1992 has made
or was required to make, contributions.
(ii) Plan. The term "Plan" includes each employee
----
benefit plan, as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA") (other than a Multiemployer Plan
within the meaning of Section 3(37) of ERISA, but including terminated
Plans) (A) which currently is being or since December 31, 1992 has been
maintained for employees of any Target Company or (B) to which any Target
Company makes or is required to make, or since December 31, 1992 has made
or was required to make, contributions.
(iii) Qualified Plan. The term "Qualified Plan" means
--------------
any Plan which is an employee pension benefit plan as defined in
Section 3(2) of ERISA and which is intended to meet the qualification
requirements of Section 401(a) of the Code.
(iv) Title IV Plan. The term "Title IV Plan" means
-------------
any Qualified Plan that is a defined benefit plan (as defined in
Section 3(35) of ERISA) and is subject to Title IV of ERISA.
(b) Operations of Plans. Except as set forth on
-------------------
Schedule 2.14(b):
- ----------------
(i) To the best knowledge of the Shareholders, each
Arrangement and each Plan has been administered in material compliance
with its terms and with all filing, reporting, disclosure and other
requirements of all applicable statutes (including, but not limited to,
ERISA, the Code and the Consolidated Omnibus Budget Reconciliation Act),
regulations and interpretations thereunder. Each Qualified Plan
(together with its related funding instrument) is intended to be
qualified and tax exempt under Sections 401 and 501 of the Code and is
the subject of a favorable Internal Revenue Service determination with
respect to such qualification and exemption.
(ii) All oral or written communications with respect
to each Arrangement and each Plan materially reflect and have materially
reflected the documents and operations of the Arrangement or Plan and no
action is pending or, to either Shareholders' knowledge, threatened,
against any person to assert any liability by reason of any such
communication or any failure to communicate with respect to any
Arrangement or Plan.
- 11 -<PAGE>
<PAGE>
(iii) No Target Company contributes to or sponsors, or
has ever contributed to or sponsored, any Title IV Plan.
(iv) To the best knowledge of the Shareholders, no
Target Company, nor any of its directors or employees, has engaged in any
transaction with respect to the Plans, including the execution and
delivery of this Agreement and other agreements, instruments and
documents for which execution and delivery by such Target Company is
contemplated herein, in violation of Section 406(a) or (b) of ERISA or
which is a "prohibited transaction" (as defined in Section 4975(c)(1) of
the Code) for which no exemption exists under Section 408(b) of ERISA or
Section 4975(d) of the Code or for which no administrative exemption has
been granted under Section 408(a) of ERISA and which has or would have a
Material Adverse Effect.
(v) Each Target Company, and every other person who
handles funds or other property of any Plan, is bonded to the extent
required by Section 412 of ERISA and no civil or criminal action with
respect to any Arrangement or Plan, pursuant to any federal or state law,
has been brought, is pending or, to the Shareholders' knowledge,
threatened against any Target Company, any officer, director or employee
of such Target Company or any Arrangement or Plan. To the best knowledge
of the Shareholders, no Target Company nor any other person has, or has
had, any liability to any participant or beneficiary under any Plan or
Arrangement or to any other person under any provision of ERISA or any
other applicable law by reason of any action or failure to act in
connection with any Plan or Arrangement, including, but not limited to,
any liability by reason of any payment of, or failure to pay, benefits or
any other amounts or by reason of any credit or failure to give credit
for any benefits or rights.
(vi) There are no Plans or Arrangements to which any
Target Company is a party or by which it is bound and under which, as a
result of this Agreement or any transaction contemplated by this
Agreement, any director, officer, employee or other agent of such Target
Company or any other party claiming through such a person (A) shall or
may acquire rights with respect to any Plan or Arrangement (including,
without limitation, the creation, increase or extension of new or
existing rights), (B) shall become entitled to a distribution or payment
with respect to any Plan or Arrangement at a date earlier than if this
Agreement had not been signed or such transaction had not occurred
(except for benefits paid in the normal course under a Plan upon
termination of a Plan participant's employment with such Target Company
or any successor employer), or (C) shall otherwise receive or become
vested in rights or benefits with respect to any Plan or Arrangement.
(c) Plan Documents and Records.
--------------------------
(i) All Arrangements and Plans are set forth in
Schedule 2.14(c)(i). Correct and complete copies of all documents,
- -------------------
including all amendments thereto, with respect to each Arrangement and
Plan, have been and will continue to be made available to the Buyer.
These documents include, but are not limited to, (A) current (and for
those Plans or Arrangements terminated since January 1, 1995, current as
of the applicable termination date) Plan and Arrangement documents, trust
agreements, insurance contracts, annuity contracts, summary plan
descriptions, investment manager and investment adviser contracts and
Internal Revenue Service determination letters, (B) for the most recent
three full plan years ended prior to the date hereof, annual and
quarterly (for any quarter ended since the most recent full plan year)
audit reports, financial statements, annual reports (Form 5500), analyses
of discrimination testing under Code Sections 401(k) and 401(m) and other
filings with governmental agencies, (C) any Internal Revenue Service
recognitions of exemption issued since December 31, 1988, and (D) any
other general explanation or substantive communication distributed or
otherwise provided to participants in each such Arrangement or Plan which
describes any relevant aspect of each Arrangement or Plan.
- 12 -<PAGE>
<PAGE>
(ii) As of the date of Closing, the participant or
beneficiary records with respect to each Arrangement and Plan shall be in
the custody of the persons listed on Schedule 2.14(c)(ii). Except as set
--------------------
forth on Schedule 2.14(c)(ii), to the best knowledge of the Shareholders,
--------------------
all such records accurately set forth the history of each participant and
beneficiary in connection with each Arrangement and Plan, and accurately
state the benefits accrued or credited to each such person, as of the end
of the last quarter of the applicable Plan year preceding the Effective
Time, and provide information sufficient to determine such benefits for
the period from the last quarter to the Effective Time.
(d) Finances. All contributions payable to each Qualified
--------
Plan for all benefits earned and other liabilities accrued through
December 31, 1997, determined in accordance with the terms and conditions
of such Qualified Plan, ERISA and the Code, have been paid or otherwise
provided for, and to the extent unpaid are reflected on the Target
Company Financial Statements. Schedule 2.14(d) sets forth (1) the amount
----------------
of the liability for minimum contributions for the last plan year to any
Qualified Plan, (2) the approximate amount of the minimum contribution to
any Qualified Plan for the plan year during which the Closing is to
occur, (3) the annual cost of providing coverage under any Plan that is a
welfare plan as defined in Section 3(1) of ERISA to all current employees
of each Target Company and all dependents of a current employee, and
(4) the annual cost of providing coverage under any Plan that is a
welfare plan as defined in Section 3(1) of ERISA to all former employees
of each Target Company and all dependents of a former employee.
(e) Multiemployer Plans. No Target Company has and neither
-------------------
it nor any predecessor ever has had, an obligation to contribute to a
"Multiemployer Plan" within the meaning of Section 3(37) of ERISA.
2.15 Discrimination, Occupational Safety, Labor and Other Statutes
-------------------------------------------------------------
and Regulations. Except as disclosed on Schedule 2.15, no person, party
- --------------- -------------
or labor organization (including, but not limited to, governmental
agencies of any kind) has any claim, action or proceeding pending or, to
the Shareholders' knowledge, threatened or available to it against any
Target Company arising out of any statute, ordinance or regulation
relating to the payment of wages or benefits, plant closing laws,
discrimination in employment, employment practices, immigration,
continuation of health insurance benefits or occupational safety and
health standards (including, but without limiting the foregoing, any
applicable state statutes, any rules, regulations or other similar
standards of the Occupational Health and Safety Administration, the Truth
In Lending Act, the Real Estate Settlement Practices Act, the Fair Labor
Standards Act, National Labor Relations Act, Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act of 1967, or
the Americans with Disabilities Act, in each case as amended). Except as
disclosed on Schedule 2.15, to the Shareholders' knowledge, there is not
-------------
presently pending or threatened any proceeding, hearing or investigation
with respect to the adoption by any state, county or municipality where a
Business Premises is located, of amendments or modifications to existing
local or municipal laws, ordinances, regulations or restrictions with
respect to such matters which, if adopted, would have a Material Adverse
Effect.
2.16 Insurance Policies. Schedule 2.16 sets forth a complete list
------------------ -------------
of insurance policies and bonds in force covering each Target Company
and/or its properties, operations and personnel. Upon request, each of
said policies, together with all records and documents relating to
insured losses and claims (other than under any group health or major
medical insurance policy) paid or made during the past three years will
be made available to Buyer for its review. All such policies are in full
force and effect, no Target Company is in default with respect to its
obligations under such policies, Target has not received any notice of
cancellation of any of such policies, and there is no claim outstanding
which could
- 13 -<PAGE>
<PAGE>
be expected to cause a material increase in any Target Company's
insurance rates. Except as disclosed in Schedule 2.16, there has been no
-------------
reservation of rights by any insurance carrier, and to the Shareholders'
knowledge no such reservation is threatened, concerning the coverage of
any matter required to be disclosed pursuant to this Agreement.
2.17 Environmental Matters.
---------------------
(a) Environmental Claims. Except as set forth on
--------------------
Schedule 2.17(a), neither any Target Company nor the Shareholders has
- ----------------
received any oral or written notice of, nor to the Shareholders'
knowledge is there any basis for, any violation, citation, claim or
complaint relating to the business of any Target Company or any property
now or previously owned or operated by it arising under the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Superfund Amendments and
Reauthorization Act, the Toxic Substances Control Act, the Safe Drinking
Water Act, the Federal Water Pollution Control Act (Clean Water Act), the
Clean Air Act, the Powerplant and Industrial Fuel Use Act of 1978, the
National Environmental Policy Act (Environmental Impact Statement) and
antipollution, waste control and disposal and environmental "cleanup"
provisions of similar statutes of any Governmental Authority, and all
regulations and standards enacted pursuant thereto and all permits and
authorizations issued in connection therewith (collectively,
"Environmental Matters"). Schedule 2.17(a) sets forth all Environmental
----------------
Matters and all such violations, citations, claims and complaints.
(b) Hazardous Substances. Except as set forth in
--------------------
Schedule 2.17(b), to the Shareholders' knowledge no underground tanks are
- ----------------
now or have been located at any facility now or previously owned or
operated by any Target Company, and no toxic or hazardous substances have
been generated, treated, stored, disposed of on or from or otherwise
deposited in or on or allowed to emanate from any such property
(irrespective of whether such substances remain at the property or were
transferred to or otherwise disposed of off site), including, without
limitation, the surface waters and subsurface waters thereof, which may
support a claim or cause of action under any federal, state or local
environmental statutes, ordinances, regulations or guidelines.
2.18 Governmental Approvals. Schedule 2.18 contains a listing of
---------------------- -------------
all licenses, franchises, permits (including, without limitation,
environmental permits) and other governmental authorizations held by any
Target Company or any of its employees. All of such licenses,
franchises, permits and governmental authorizations are in full force and
effect, and to the Shareholders' knowledge, there is no basis for any
governmental body to deny or rescind any such license, franchise, permit
or governmental authorization. The business of each Target Company as
presently conducted does not require any other license, franchise, permit
or other governmental authorization for such Target Company or any of its
employees from any governmental body, whether federal, state, local or
foreign.
2.19 Taxes.
-----
(a) Definitions. For purposes of this Section 2.19 and
-----------
Article 6 of this Agreement:
(i) the term "Code" shall mean the Internal Revenue
Code of 1986, as amended. All citations to the Code or to the
regulations promulgated thereunder shall include any amendments or any
substitute or successor provisions thereto;
(ii) the term "Returns" shall mean, collectively,
(A) all reports, declarations, estimates, returns, information statements
and similar documents relating to, or required to
- 14 -<PAGE>
<PAGE>
be filed in respect of, any Taxes; and (B) any statements, returns,
reports or similar documents required to be filed pursuant to Part III of
Subchapter A of Chapter 61 of the Code or pursuant to any similar income,
excise or other tax provision of federal, territorial, state, local or
foreign law; and the term "Return" means any one of the foregoing
Returns; and
(iii) the term "Taxes" shall mean (A) all taxes
measured with respect to net income, gross income or taxable income, and
all gross receipts, sales, use, ad valorem, franchise, profits, license,
lease, service, service use, withholding, employment, payroll, excise,
severance, transfer, documentary, mortgage, registration, stamp,
occupation, environmental, premium, property, windfall profits, customs,
duties and other taxes, fees, assessments or charges of any kind
whatever, together with any interest, penalties and other additions with
respect thereto, imposed by any federal, territorial, state, local or
foreign government; and (B) any penalties, interest or other additions to
tax for the failure to collect, withhold or pay over any of the
foregoing, or to accurately file any Return; and the term "Tax" shall
mean any one of the foregoing Taxes; provided, however, that when used
with reference to a specified person (for example and without limitation,
"Taxes of Target Company"), the terms "Taxes" and "Tax" shall include
only those amounts for which such person is, or could become, liable in
whole or part (including, without limitation, any obligation in
connection with a duty to collect, withhold or pay over any Tax, any
obligation to contribute to the payment of any Taxes determined on a
consolidated, combined or unitary basis, any liability as a transferee,
or any liability as a result of any express or implied obligation to
indemnify or pay the Tax obligations of another person).
(b) Returns Filed and Taxes Paid. Except as otherwise set
----------------------------
forth in Schedule 2.19(b): (i) each Target Company has duly filed or
----------------
caused to be filed, on or before the due date thereof (taking into
account any extensions), with the appropriate taxing authorities, all
Returns that it is required to file; (ii) each such Return (including any
amendment thereto) is true, correct and complete in all material
respects; and (iii) all Taxes of each Target Company due with respect to,
or shown to be due on, each such Return (or amendment) or subsequent
assessment with regard thereto, have been timely paid, or an adequate
reserve has been established therefor on the Financial Statements. The
Shareholders have delivered to Buyer true copies of Target's federal and
state income tax Returns (and amended Returns, revenue agents' reports
and other notices from federal or state taxing authorities) for the last
four taxable years of Target.
(c) Tax Reserves and Tax Liabilities. The amount of each
--------------------------------
Target Company's liability for unpaid Taxes for all periods ending on or
before the date of the Financial Statements does not, in the aggregate,
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred Taxes) as such accruals are reflected on the
Financial Statements and the amount of each Target Company's liability
for unpaid Taxes for all periods ending on or before the Closing Date
shall not, in the aggregate, exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) as such
accruals are reflected on the books and records of such Target Company on
the Closing Date. Except for Taxes so accrued, no other Taxes of such
Target Company are due or payable with respect to any taxable periods or
portions of periods ending on or before the date hereof. Each Target
Company has collected or withheld all Taxes that it is required to
collect or withhold. No Target Company is a party to or bound by any tax
indemnity, tax sharing or tax allocation agreement, or any other
contractual obligation to pay the Tax obligations of another person or to
pay the Tax obligations with respect to transactions relating to any
other person, except as otherwise set forth in Schedule 2.19(c).
----------------
(d) Audit History and Other Proceedings. No Target Company
-----------------------------------
has made an election under Treas. Reg. Section 301.6241-1T(c)(2)(v)(A)
(relating to entity level audit proceedings). Except as set forth in
Schedule 2.19(d): (i) there are no pending or, to the Shareholders'
- ----------------
knowledge, threatened
- 15 -<PAGE>
<PAGE>
(either in writing or verbally, formally or informally) audits,
investigations, claims, suits or other proceedings for or relating to any
material liability in respect of Taxes; (ii) no material deficiencies for
Taxes have been claimed, proposed or assessed by any taxing or other
governmental authority; (iii) there are no matters under discussion with
any governmental authorities that could result in any additional amount
of Taxes; (iv) no extension of a statute of limitations (whether arising
by reason of a waiver, claim for refund or otherwise) relating to Taxes
or Returns is in effect; and (v) there are no requests for rulings or
determinations in respect of Taxes pending with any governmental
authority. With regard to taxable periods beginning after 1992, audits
of Federal, state and local Returns have been completed by the relevant
taxing authorities with regard to the Taxes, jurisdictions and periods
set forth in Schedule 2.19(d).
----------------
(e) Tax Basis, Attributes and Miscellaneous Elections.
-------------------------------------------------
Except as otherwise set forth in Schedule 2.19(e): (i) the net carrying
----------------
values of all assets of each Target Company, as reflected on the
Financial Statements, are equal in all material respects to the adjusted
bases of those assets for Federal income tax purposes; (ii) no Target
Company owns any real property in the State of New York or any other
jurisdiction in which a Tax is imposed upon the transfer of an interest
in real property; (iii) any change made in any method of accounting used
by any Target Company for Federal income tax purposes has been approved
by the Internal Revenue Service in accordance with Section 446(e) of the
Code; (iv) no Target Company will have a "net unrealized built-in loss"
(as defined in Section 382(h)(3) of the Code) on the Closing Date; (v) no
Target Company has ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code; (vi) no
Target Company has ever been a member of any combined, consolidated or
unitary group for state income or franchise tax purposes and does not
file (and is not required to file) combined, consolidated or unitary
Returns for state income or franchise tax purposes; (vii) no Target
Company is a party to any agreement, arrangement or plan that has
resulted or could result in the payment of any "excess parachute payment"
as defined in Section 280G of the Code (without regard to
subsection (b)(4) thereof); (viii) no Target Company is subject to any
joint venture, partnership or other arrangement or contract that could be
treated as a partnership for Federal income tax purposes; (ix) each
Target Company has fully disclosed on its Federal income tax Returns all
positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Code Section 6662; and (x)
no Target Company has ever elected to be taxed as a small business
corporation under Section 1362 of the Code. Except as otherwise set
forth in Schedule 2.1, no Target Company: (i) has any net operating
------------
losses or other tax attributes presently subject to limitation under Code
Sections 382, 383, 384, or the Federal consolidated return regulations;
(ii) has agreed, or is otherwise required, to make any adjustment or
report any income under Section 481 of the Code after the Closing Date by
reason of a change in accounting method or otherwise; (iii) has been a
party to any transaction that could cease to be a "reorganization" (as
defined in Section 168 of the Code) as a result of the transactions
contemplated by this Agreement; (iv) has made, or is required to make (or
take any action that could result in), an election or deemed election
under Section 338 of the Code; (v) has made an election, or is otherwise
required, to treat any asset of such Target Company as owned by another
person pursuant to the so-called "safe harbor lease" provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended by the
Economic Recovery Tax Act of 1981; (vi) has any asset that directly or
indirectly secures any debt the interest on which is tax-exempt under
Section 103(a) of the Code; (vii) has any asset that is "tax-exempt use
property" as defined in Section 168(h) of the Code; (viii) has any asset
that is subject to a lease, other than a "true" lease for Federal income
tax purposes; and (ix) has made (or given) any of the foregoing elections
(or consents) or is required to apply any rules similar to the foregoing
under any provisions of territorial, state, local or foreign income tax
law. Accurately set forth in Schedule 2.19(e) is: (i) a list of all
----------------
states, territories and jurisdictions (whether foreign or domestic) to
which any Tax is properly payable by any Target Company; and (ii) a
complete schedule of the amount of any net operating loss, net capital
loss, unused investment or other credits, unused foreign tax credits, and
excess charitable contributions. The transactions contemplated by
- 16 -<PAGE>
<PAGE>
this Agreement are not subject to the withholding provisions of
Section 3406 of the Code, or of subchapter A of Chapter 3 of the Code, or
of any similar provision of territorial, state, local or foreign tax law.
2.20 Subsidiaries and Investments. Except as disclosed on
----------------------------
Schedule 2.20, no Target Company owns, or in the last five (5) years has
- -------------
owned, any subsidiary or any equity or debt security of, or other
material economic interest in, any other corporation, partnership, joint
venture or other business enterprise.
2.21 Corporate Minutes and Stock Transfer Records. The
--------------------------------------------
Shareholders have furnished to Buyer for review the corporate minutes of
each Target Company, which are substantially current and complete and
which contain an accurate record of all actions taken by the Board of
Directors and the shareholders of each Target Company. The Shareholders
have furnished to Buyer for review the stock certificate books of each
Target Company, which are current, complete and correct and which
accurately reflect all transactions involving Equity Securities of any
Target Company.
2.22 Transactions With Affiliates. Except as disclosed on
----------------------------
Schedule 2.22, neither the Shareholders nor any officer or director of
- -------------
any Target Company, will immediately prior to or immediately after the
Closing Date (a) have any direct or indirect interest, except through
ownership of less than two percent (2%) of the outstanding securities of
corporations listed on a national securities exchange or registered under
the Exchange Act, in any entity which does business with any Target
Company or is competitive with its business or any property, asset or
right which is used by any Target Company in the conduct of such business
or (b) be a party to any transaction with any Target Company relating to
any aspect of its business, including, without limitation, any contract,
agreement or other arrangement (i) providing for the furnishing or
services, by, (ii) providing for lease, management, rental or purchase or
real or personal property to or from, or (iii) otherwise requiring
payments to (other than for services as employees, officers or directors)
any such person, any member of the immediate family of any such person or
any corporation, partnership, trust or other entity in which any such
person has a substantial interest or is an officer, director, trustee or
partner. Except as disclosed on Schedule 2.22, no employee of any Target
-------------
Company is presently a party, directly or indirectly, to any transaction
with any Target Company (other than as an employee) relating to any
aspect of its business requiring payments by any Target Company in excess
of $500 within any twelve-month period.
2.23 No Broker. No person has acted in the capacity of broker or
---------
finder on behalf of the Shareholders or any Target Company (a) to bring
about the negotiation or consummation of this Agreement, the Merger or
the sale of any of the shares of Target Common Stock or (b) in connection
with any prior transaction involving a sale of a material portion of any
Target Company's assets or stock, whether directly, by merger or
otherwise.
2.24 Compliance with Laws.
--------------------
(a) To the best knowledge of the Shareholders, each Target
Company has all permits, licenses, authorizations, orders and approvals
of, and have made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit such Target
Company to own or lease its properties and assets and to carry on its
business as presently conducted; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect and, to
the best knowledge of the Shareholders, no suspension or cancellation of
any of them is threatened; and all such filings, applications and
registrations are current; in each case except for permits, licenses,
authorizations, orders, approvals, filings, applications and
registrations the failure to have (or have made) would not have a
Material Adverse Effect.
- 17 -<PAGE>
<PAGE>
(b) (i) Each Target Company has complied with all laws,
regulations and orders (including, without limitation, zoning ordinances,
building codes, the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and securities, tax, environmental, civil rights, and
occupational health and safety laws and regulations including, without
limitation, governing instruments applicable to it and to the conduct of
its business, and (ii) no Target Company is in default under, and no
event has occurred which, with the lapse of time or notice or both, could
result in the default under, the terms of any judgment, order, writ,
decree, permit, or license of any Regulatory Authority or court, whether
federal, state, municipal or local, and whether at law or in equity,
except in the case of subparts (i) and (ii) where such failure to comply
or default would not have a Material Adverse Effect.
(c) Except as set forth on Schedule 2.24(c), no Target
----------------
Company is subject to or reasonably likely to incur a liability as a
result of its ownership, operation, or use of any Property (as defined
below) (A) that is contaminated by or contains any toxic substance,
including, without limitation, petroleum and petroleum products,
asbestos, PCBs, pesticides, herbicides and any other substance or waste
that is hazardous to human health or the environment and regulated by
federal, state or local law or (B) on which any toxic substance has been
stored, disposed of, placed or used at the Property or in the
construction of structures thereon; and which, in each case, reasonably
could be expected to have a Material Adverse Effect. "Property" shall
include all property (real or personal, tangible or intangible) now or
formerly owned or controlled by any Target Company, including, without
limitation, property in which any venture capital or similar unit of such
Target Company has an interest and property held by such Target Company
in its capacity as a trustee. No claim, action, suit or proceeding is
pending or, to the best knowledge of the Shareholders, threatened, and no
material claim has been asserted against any Target Company or its
Property before any court or other Regulatory Authority or arbitration
tribunal relating to toxic substances, pollution or the environment, and
there is no outstanding judgment, order, writ, injunction, decree or
award against or affecting any Target Company with respect to the same.
(d) Neither the Shareholders nor any Target Company has
received any notification or communication that has not been finally
resolved from any Regulatory Authority (i) asserting that such Target
Company or any of its Property is not in substantial compliance with any
of the statutes, regulations or ordinances that such Regulatory Authority
enforces, except with respect to matters that reasonably could not be
expected to have a Material Adverse Effect, (ii) threatening to revoke
any license, franchise, permit or governmental authorization that
reasonably could be expected to have a Material Adverse Effect, or
(iii) requiring or threatening to require any Target Company, or
indicating that any Target Company may be required, to enter into a cease
and desist order, agreement or memorandum of understanding or any other
agreement restricting or limiting or purporting to direct, restrict or
limit in any manner the operations of the Target Company, including,
without limitation, any restriction on the payment of dividends. No such
cease and desist order, agreement or memorandum of understanding or other
agreement is currently in effect.
2.25 Accuracy of Statements. Neither this Agreement nor any
----------------------
Schedule hereto nor any certificate furnished by any Target Company or
the Shareholders to Buyer in connection with this Agreement or any of the
transactions contemplated hereby contains or will contain an untrue
statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
- 18 -<PAGE>
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Target and Shareholders
as follows:
3.1 Organization and Authority. Buyer is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the
State of Delaware, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property
or the conduct of its business requires it to be so qualified, and has
corporate power and authority to own its properties and assets and to
carry on its business as it is now being conducted.
3.2 Capitalization of Buyer, Merger Sub. The authorized capital
-----------------------------------
stock of Buyer consists of (i) 10,000,000 shares of Buyer Common Stock
and (ii) 1,000,000 shares of preferred stock, $0.01 par value, of Buyer
("Buyer Preferred Stock"). As of September 15, 1998, 1,580,604 shares of
Buyer Common Stock were issued and outstanding. As of the date hereof,
Buyer has designated 2,100 shares of Buyer Preferred Stock as "Series C
6.75% Cumulative Convertible Preferred Stock," of which 1,672 shares are
issued and outstanding (the "Series C Preferred Stock"), and 100,000
shares of Buyer Preferred Stock as "Series D Junior Participating
Preferred Stock," of which no shares are issued and outstanding (the
"Series D Preferred Stock"), and has reserved all shares of Series D
Preferred Stock under a Rights Agreement dated August 26, 1998 between
Buyer and Unified Fund Services, Inc. (the "Rights Agreement" and, the
rights to be issued pursuant thereto, the "Rights"). As of the date
hereof, Buyer has reserved (i) 6,000 shares of Buyer Common Stock for
issuance pursuant to subscriptions accepted by the Company in connection
with a recently completed private placement, (ii) approximately 1,100,000
shares of Buyer Common Stock for issuance in connection with the proposed
acquisitions of AmeriPrime Financial Services, Inc., Commonwealth
Investment Services, Inc., SBX Inc., Strategic Fund Services, Inc.,
Commonwealth Premium Finance Corporation and Target, (iii) 1,500,000
shares of Buyer Common Stock for issuance pursuant to the Unified
Financial Services, Inc. 1998 Stock Incentive Plan, (iv) 225,720 shares
of Buyer Common Stock for issuance upon the conversion of the Series C
Preferred Stock (each share of Series C Preferred Stock is convertible
into 135 shares of Buyer Common Stock) and (v) 1,750,000 shares of Buyer
Common Stock for issuance pursuant to a proposed private placement.
Prior to the Effective Time, additional shares of Buyer Common Stock may
be issued upon the conversion by Buyer of its Series C Preferred Stock
upon the exercise of the conversion rights with respect thereto. Buyer
continually evaluates possible acquisitions and may prior to the Closing
Date enter into one or more agreements providing for, and may consummate,
the acquisition by it of another company (or the assets thereof) for
consideration that may include capital stock of Buyer. In addition,
prior to the Closing Date, Buyer may, depending on market conditions and
other factors, otherwise determine to issue equity, equity-linked or
other securities for financing purposes or to repurchase shares of its
outstanding capital stock. All of the present (and to be) issued and
outstanding shares of Buyer Common Stock are (and will be) validly
issued, fully paid and nonassessable, and have not been (and will not be)
issued in violation of any preemptive right of any stockholder of Buyer.
Prior to Closing, Buyer shall take all appropriate action to cause Merger
Sub to approve and consummate the Merger in accordance with the terms and
subject to the conditions in this Agreement.
3.3 Authorization.
-------------
(a) Each of Buyer and Merger Sub has the corporate power
and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this
Agreement by each of Buyer and Merger Sub and the consummation by each of
Buyer and Merger Sub of the Merger and other transactions contemplated
hereby have been duly authorized by all requisite corporate action of
Buyer and Merger Sub, respectively. Subject to the receipt
- 19 -<PAGE>
<PAGE>
of such approvals of regulatory authorities as may be required by statute
or regulation, this Agreement is a valid and binding obligation of each
of Buyer and Merger Sub enforceable against Buyer and Merger Sub in
accordance with its terms.
(b) Neither the execution, delivery and performance by
Buyer of this Agreement, nor the consummation by Buyer of the
transactions contemplated hereby, nor compliance by Buyer with any of the
provisions hereof, will (i) violate, conflict with or result in a breach
of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) or result in
the termination of, or accelerate the performance required by, or result
in a right of termination or acceleration of, or result in the creation
of, any lien upon any of the properties or assets of Buyer under any of
the terms, conditions or provisions of (x) its Certificate of
Incorporation or Bylaws, or (y) any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to
which Buyer is a party or by which it may be bound, or to which Buyer or
any of its properties or assets may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in subsection
(c) of this Section 3.3, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer or
any of its properties or assets, other than violations, conflicts,
breaches, defaults, terminations, accelerations or liens which would not
have a material adverse effect on Buyer and its subsidiaries, taken as a
whole.
(c) Other than in connection with or in compliance with the
provisions of federal securities laws, the securities or blue sky laws of
the various states or any required approvals of any other Regulatory
Authority, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Buyer of the transactions contemplated
by this Agreement.
3.4 Buyer Financial Statements. The consolidated balance sheet
--------------------------
of Buyer and its subsidiaries as of December 31, 1997 and 1996 and
related supplemental consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1997, together with the notes thereto, audited
by Larry E. Nunn & Associates, L.L.C. (collectively, the "Buyer Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles, contain no material omission, present fairly the
consolidated financial position of Buyer and its subsidiaries at the
dates thereof and the consolidated results of operations, changes in
stockholders' equity and cash flows of Buyer and its subsidiaries for the
periods stated therein and are derived from the books and records of
Buyer and its subsidiaries, which are complete and accurate in all
material respects and have been maintained in accordance with good
business practices. Neither Buyer nor any of its subsidiaries has any
material contingent liabilities that are not described in the Buyer
Financial Statements. Attached hereto as Schedule 3.4 are true and
------------
complete copies of Buyer's Annual Report on Form 10-KSB for the year
ended December 31, 1997 and Quarterly Reports on Form 10-QSB for the
quarters ended March 31, 1998 and June 30, 1998 (collectively, the "SEC
Reports"). Buyer has timely filed any and all material reports,
registrations and statements, together with any required amendments
thereto, that it was required to file with the Securities and Exchange
Commission (the "SEC"), including, but not limited to, Forms 10-KSB,
Forms 10-QSB, Forms 8-K and proxy statements. As of each of their
respective dates, the Buyer SEC Reports complied in all material respects
with all the rules and regulations promulgated by the SEC. With respect
to the SEC Reports, there is no material unresolved violation, criticism
or exception by the SEC with respect to any report or statement filed by,
or any examinations of, Buyer.
3.5 Material Adverse Change. Since June 30, 1998, there has been
-----------------------
no material adverse change to the financial position or results of
operation of Buyer and its subsidiaries, taken as a whole.
- 20 -<PAGE>
<PAGE>
3.6 Legal Proceedings or Other Adverse Facts. Except as
----------------------------------------
otherwise disclosed in the Buyer Financial Statements, neither Buyer nor
any of its subsidiaries is a party to any pending or, to the best
knowledge of Buyer, threatened claim, action, suit, investigation or
proceeding, or is subject to any order, judgment or decree, except for
matters which, in the aggregate, will not have, or reasonably could not
be expected to have, a material adverse effect on Buyer and its
subsidiaries, taken as a whole.
3.7 Brokers and Finders. Neither Buyer nor any of its officers,
-------------------
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly
for Buyer in connection with this Agreement or the transactions
contemplated hereby.
3.8 Accuracy of Information. The statements contained in this
-----------------------
Agreement, the Schedules and in any other written document executed and
delivered by or on behalf of Buyer pursuant to the terms of this
Agreement are true and correct in all material respects, and such
statements and documents do not omit any material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE 4
COVENANTS RELATING TO TARGET COMPANIES AND COMPETITION
4.1 Conduct of Business. From the date hereof to the Closing
-------------------
Date, except for transactions that are expressly approved in writing by
Buyer or contemplated by this Agreement, the Target shall, and the Target
and the Shareholders shall cause each Target Company to, refrain from:
(a) subjecting any of its assets and properties, tangible
or intangible, to any Lien of any kind, exclusive of Liens arising as a
matter of law in the ordinary course of business as to which there is no
known default;
(b) except for sale or disposal of worn out and obsolete
fixed assets in the ordinary course of business, selling, assigning,
transferring or otherwise disposing of any of its assets and properties;
(c) declaring or paying any dividend, whether in cash or
other property, or effecting or permitting any other distribution of any
kind on or with respect to any of its capital stock;
(d) amending the Articles of Incorporation, Bylaws or other
constituent instrument of such Target Company;
(e) purchasing or otherwise acquiring any partnership or
membership interests, equity or debt securities or other indebtedness of
any partnership, limited liability company, corporation or other person;
(f) increasing or enhancing the compensation or benefits
payable to any employee of such Target Company, except for regularly
scheduled wage adjustments to employees in amounts consistent with past
practice;
(g) borrowing money or increasing existing indebtedness by
any amount, or incurring any other liability or obligation outside of the
ordinary course of business;
- 21 -
<PAGE>
<PAGE>
(h) enter into or amend any employment, severance or
similar agreement or arrangement with any director, officer or employee,
or materially modify any of the Plans or grant any salary or wage
increase or materially increase any employee benefit (including incentive
or bonus payments), except (i) normal individual increases in
compensation to employees consistent with past practice and (ii) as
required by law or contract;
(i) authorize, recommend, propose or announce an intention
to authorize, recommend or propose, or enter into an agreement in
principle with respect to, any merger, consolidation or business
combination (other than the Merger), any acquisition of a material amount
of assets or securities, any disposition of a material amount of assets
or securities or any release or relinquishment of any material contract
rights;
(j) authorize, issue, sell, grant, confer or award any of
its Equity Securities, Appreciation Rights or debt securities, or effect
any stock split or adjust, combine, reclassify or otherwise change its
capitalization as it existed on the date of this Agreement;
(k) purchase, redeem, retire, repurchase or exchange, or
otherwise acquire or dispose of, directly or indirectly, any of its
Equity Securities or Appreciation Rights, whether pursuant to the terms
of Equity Securities or otherwise;
(l) directly or indirectly (including through its officers,
directors, employees or other representatives) (i) initiate, solicit or
encourage any discussions, inquiries or proposals with any third party
(other than Buyer) relating to the disposition of any significant portion
of the business or assets of any Target Company or the acquisition of
Equity Securities of any Target Company or the merger of any Target
Company with any person (other than Buyer) or any similar transaction
(each such transaction being referred to herein as an "Acquisition
Transaction") or (ii) provide any such person with information or
assistance or negotiate with any such person with respect to an
Acquisition Transaction, and Target shall promptly notify Buyer orally
and in writing of all the relevant details relating to all inquiries,
indications of interest and proposals which it may receive with respect
to any Acquisition Transaction;
(m) take any action that would (i) prevent or impede the
transactions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code, (ii) materially impede or
delay the consummation of the transactions contemplated by this Agreement
or the ability of Buyer or any Target Company to obtain any approval of
any Regulatory Authority required for the transactions contemplated by
this Agreement or to perform its covenants and agreements under this
Agreement, or (iii) prevent or impede the Merger from qualifying for
pooling-of-interests accounting treatment;
(n) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed money
or assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual,
corporation or other entity; and/or
(o) agree in writing or otherwise to take any of the
foregoing actions or engage in any activity, enter into any transaction
or intentionally take or omit to take any other act that would make any
of the representations and warranties in Article 2 of this Agreement
untrue or incorrect in any material respect if made anew after engaging
in such activity, entering into such transaction, or taking or omitting
such other act.
- 22 -<PAGE>
<PAGE>
4.2 Affirmative Covenants Relating to Target Company. From the
------------------------------------------------
date hereof to the Closing Date, the Target shall, and the Target and the
Shareholders shall cause each Target Company to:
(a) maintain its properties and activities insured in
amounts and with coverage at least as great as the amounts and coverage
in effect on the date of this Agreement;
(b) maintain its properties in good repair, order and
condition, reasonable wear and tear excepted, and use its best efforts to
preserve its possession and control of all of its assets and properties;
(c) maintain the books, accounts and records of such Target
Company in a diligent manner and using procedures consistent with past
practice;
(d) allow, at all reasonable times upon reasonable notice,
Buyer and its employees, attorneys, auditors, accountants and other
authorized representatives and its lenders, to have access to such Target
Company's books, records and monthly and audited financial statements,
and (following notification to and consent of either of the Shareholders)
to contact key customers of each Target Company in order that Buyer and
its lenders may have full opportunity to make such investigation as they
may desire of the businesses of the Target Companies;
(e) comply with all applicable laws, rules, regulations and
ordinances relating to such Target Company or to the conduct of its
business, and conduct its business in such a manner so that on the
Closing Date the representations and warranties contained in this
Agreement shall be true as though such representations and warranties
were made on and as of such date, except for changes permitted or
contemplated by the terms of this Agreement;
(f) provide Buyer with prompt written notice of (i) any
material adverse change in the assets, operations, liabilities, earnings,
prospects, business or condition (financial or otherwise) of such Target
Company and (ii) any variances from the representations and warranties
contained in Article 2; and
(g) operate its business only in the ordinary course
(including, without limitation, the collection of receivables and payment
of payables) and use its best efforts to preserve its business
organization intact, including the services of its present officers and
the goodwill of its suppliers, customers and others having business
relations with such Target Company.
4.3 Consents and Closing Conditions. The Shareholders and Target
-------------------------------
Company shall use their best efforts (a) to obtain such consents from
third parties and to take other actions as may be appropriate in order to
fulfill the closing conditions contained in this Agreement that are
reasonably within such party's control, and (b) to cause the
representations and warranties in Article 2 to be true and correct on and
as of the Closing Date.
4.4 Divestiture of CPFC. As an inducement to the Buyer to
-------------------
complete the transactions contemplated by this Agreement, each
Shareholder covenants and agrees that such Shareholder shall divest
himself, by sale of stock, merger, sale of assets or otherwise, of his
interest in Commonwealth Premium Finance Corporation, a Kentucky
corporation, within six (6) months after the Closing Date.
- 23 -<PAGE>
<PAGE>
4.5 Disclosure Schedules. Within 15 days after the date hereof,
--------------------
Target shall deliver to Buyer those disclosure schedules (the
"Schedules") that are required to be prepared by Target pursuant to the
terms of this Agreement.
4.6 Employment Agreement. By execution of this Agreement, Owens
--------------------
and Meyer each covenants and agrees that at the Closing he shall execute
an Employment Agreement in the form set forth as Exhibit A to this
Agreement.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Access and Information; Due Diligence. Buyer and Target
-------------------------------------
shall each afford to the other, and to the other's accountants, counsel
and other representatives, full access during normal business hours,
during the period prior to the Effective Time, to all their and the
Target Companies' respective properties, books, contracts, commitments
and records and, during such period, each shall furnish promptly to the
other (i) a copy of each report, schedule and other document filed or
received by it during such period pursuant to the requirements of federal
and state securities laws and (ii) all other information concerning its
business, properties and personnel as the other may reasonably request.
Each party shall, and shall cause its advisors and representatives to,
(A) hold confidential all information obtained in connection with any
transaction contemplated hereby with respect to the other party and its
affiliates which is not otherwise public knowledge, (B) in the event of a
termination of this Agreement, return all documents (including copies
thereof) obtained hereunder from the other party or any of its affiliates
to such other party or its affiliates and (C) use its best efforts to
cause all information obtained pursuant to this Agreement or in
connection with the negotiation of this Agreement to be treated as
confidential and not use, or knowingly permit others to use, any such
information unless such information becomes generally available to the
public.
5.2 Regulatory Matters. Buyer shall take any action required to
------------------
be taken under any applicable state blue sky or securities laws in
connection with the issuance of such shares and the exercise of such
options, and Target shall furnish Buyer all information concerning each
Target Company and the Shareholders as Buyer may reasonably request in
connection with any such action. Each Target Company and Buyer shall
cooperate and use their respective best efforts to prepare all
documentation, to effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Regulatory
Authorities necessary to consummate the transactions contemplated by this
Agreement and, as and if directed by Buyer, to consummate such other
transactions by and among Buyer's subsidiaries and any Target Company
concurrently with or following the Effective Time; provided, however,
that such actions do not: (i) prevent or impede the transactions
contemplated hereby from qualifying as a reorganization within the
meaning of Section 368 of the Code; (ii) materially impede or delay the
receipt of any approval referred to in Section 9.1 hereof; (iii) prevent
or impede the transactions contemplated hereby from qualifying for
pooling-of-interests accounting treatment unless Buyer first waives
Target's covenants in Sections 4.1(n), 5.7 and 5.10 hereof; or
(iv) materially impede or delay the consummation of the transactions
contemplated by this Agreement.
5.3 [Reserved].
5.4 Current Information. During the period from the date of this
-------------------
Agreement to the Closing Date, (i) each party will promptly furnish the
other with copies of all monthly and other interim financial statements
as the same either become available (in the case of any Target Company)
or are published (in the case of Buyer), and shall cause one or more of
its designated representatives to confer
- 24 -<PAGE>
<PAGE>
on a regular and frequent basis with representatives of the other party.
Each party shall promptly notify the other party of the following events
immediately upon learning of the occurrence thereof, describing the same
and, if applicable, the steps being taken by the affected party with
respect thereto: (a) the occurrence of any event which could cause any
representation or warranty of such party or any schedule, statement,
report, notice, certificate or other writing furnished by such party to
be untrue or misleading in any material respect; (b) any Material Adverse
Effect with respect to any Target Company, and any material adverse
effect with respect to the Buyer and its subsidiaries, taken as a whole;
(c) the issuance or commencement of any governmental and/or regulatory
agency complaint, investigation or hearing or any communications
indicating that the same may be contemplated and, as to any such matter
which shall now or hereafter be in effect, any communications pertaining
thereto; or (d) the institution or the threat of any material litigation
involving such party.
5.5 Conforming Entries.
------------------
(a) Notwithstanding that the Shareholders believe that each
Target Company has established all reserves required by GAAP and
applicable laws, rules and regulations, the Shareholders recognize that
Buyer may have adopted different reserve policies. From and after the
date of this Agreement, Target and Buyer shall consult and cooperate with
each other with respect to conforming the reserve policies of each Target
Company to those policies of Buyer.
(b) In addition, from and after the date of this Agreement,
Target and Buyer shall consult and cooperate with each other with respect
to determining appropriate accruals, reserves and charges to establish
and take on the books of each Target Company in respect of excess
equipment write-off or write-down of various assets and other appropriate
charges and accounting adjustments taking into account the parties'
business plans following the Merger.
(c) Target and Buyer shall consult and cooperate with each
other with respect to determining the amount and the timing for
recognizing for financial accounting purposes each Target Company's
expenses of the Merger and the restructuring charges, if any, related to
or to be incurred in connection with the Merger.
(d) With respect to clauses (a) through (c) of this Section
5.5, it is the objective of Buyer and Target that such reserves,
accruals, charges and divestitures, if any, to be taken by any Target
Company shall be consistent with GAAP.
5.6 Environmental Reports. Buyer may perform, as soon as
---------------------
reasonably practicable, but not later than ninety (90) days after the
date hereof, a phase one environmental investigation and/or asbestos on
all real property owned, leased or operated by any Target Company as of
the date hereof and within fifteen (15) days after being notified by
Target of the acquisition or lease of any real property acquired or
leased by any Target Company after the date hereof. If Buyer determines
that additional investigation is warranted, Buyer may perform, at Buyer's
expense, a phase two subsurface investigation or investigations on
properties deemed to warrant such additional study. Buyer shall perform
any such phase two investigation as soon as reasonably practicable after
receipt of the phase one report(s) for such properties. Should the cost
of taking all remedial or other corrective actions and measures
(i) required by applicable law or (ii) recommended in such phase one or
two report or reports, in the aggregate, exceed the sum of Ten Thousand
Dollars ($10,000), as reasonably estimated by Buyer, or if the cost of
such actions or measures cannot be so reasonably estimated by Buyer to be
such amounts or less with any reasonable degree of certainty, Buyer shall
have the right pursuant to Section 14.1(e) hereof, for a period of
fifteen (15) business days following determination of such estimate or
indication that the cost of such actions and measures cannot be so
reasonably estimated, to terminate this Agreement.
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<PAGE>
5.7 Lockup. As of the date hereof, each Shareholder shall
------
deliver to Buyer, a written agreement in substantially the form set forth
as Exhibit B to this Agreement providing that he shall not sell, pledge,
---------
transfer or otherwise dispose of (i) any shares of Target Common Stock
after the date hereof through the Closing Date or (ii) the shares of
Buyer Common Stock to be received by him in the Merger during the period
designated in such letter and thereafter in compliance with the
applicable provisions of the Securities Act.
5.8 Miscellaneous Agreements and Consents.
-------------------------------------
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its respective best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as possible, including,
without limitation, using its respective best efforts to lift or rescind
any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated
hereby. Each party shall use its best efforts to obtain consents of all
third parties and Regulatory Authorities necessary or, in the opinion of
Buyer, desirable for the consummation of the transactions contemplated by
this Agreement.
(b) Prior to the Effective Time, the Target and the
Shareholders shall cause each Target Company to (i) consult and cooperate
with Buyer regarding the implementation of those policies and procedures
established by Buyer for its governance and those of its subsidiaries and
not otherwise referenced in Section 5.5 hereof, including, without
limitation, policies and procedures pertaining to the accounting,
asset/liability management, audit, credit, human resources, treasury and
legal functions and (ii) at the reasonable request of Buyer, conform such
Target Company's existing policies and procedures in respect of such
matters to Buyer's policies and procedures or, in the absence of any
existing policy or procedure regarding any such function, introduce
Buyer's policies or procedures in respect thereof, unless to do so would
cause such Target Company to be in violation of any law, rule or
regulation or requirement of any Regulatory Authority having jurisdiction
over such Target Company.
5.9 Press Releases. Except to the extent disclosure may be
--------------
required by applicable law, Target Company and the Buyer shall consult
with each other as to the form and substance of any proposed press
release or other proposed public disclosure of matters related to this
Agreement or any of the transactions contemplated hereby.
5.10 Best Efforts to Ensure Pooling. Each of Buyer and Target
------------------------------
Company undertakes and agrees to use its best efforts to cause the Merger
to qualify for pooling-of-interests accounting treatment.
5.11 Tax Opinion Certificates. Target shall cause each of its
------------------------
Shareholders as may be reasonably requested by Thompson Coburn to timely
execute and deliver to Thompson Coburn a certificate substantially in the
form of Exhibit C hereto.
---------
5.12 Expenses. Each party hereto shall bear its own expenses
--------
incident to preparing, entering into and carrying out this Agreement and
to consummating the Merger; provided, however, that any and all fees paid
by the Target Companies, in the aggregate, to their legal counsel related
to the preparation of this Agreement and all other agreements and
documentation in connection with the negotiation and consummation of the
transactions contemplated herein, shall not exceed $20,000.
- 26 -<PAGE>
<PAGE>
ARTICLE 6
COVENANTS REGARDING TAX MATTERS
6.1 Returns and Payment of Taxes. Each Target Company shall
----------------------------
prepare and timely file or cause to be prepared and timely filed all
Returns and amendments thereto required to be filed by such Target
Company on or before the Closing Date (taking into account any
extensions); such Returns shall be true, correct and complete in all
material respects. With the exception of payroll tax returns, Buyer
shall have a reasonable opportunity to review all such Returns and
amendments thereto prior to the filing thereof. Each Target Company
shall pay and discharge all Taxes shown to be due on such Returns before
the same shall become delinquent and before penalties accrue thereon.
Each Target Company shall prepare and timely file or cause to be prepared
and timely filed with the appropriate taxing authorities any Returns of
Tax which are due after the Closing Date (including such Target Company's
Federal income tax Return for the period that includes the Closing Date)
with respect to periods ending on or before the Closing Date; such
Returns shall be true, correct and complete in all material respects, and
all Taxes shown to be due thereon will be timely paid in full by such
Target Company. In order appropriately to apportion Taxes attributable
to a period that includes (but that would not, but for this Section,
close on) the Closing Date, the parties hereto will, to the extent
permitted by applicable law, elect with the relevant taxing authorities
to treat for all purposes the Closing Date as the last day of a taxable
period of such Target Company, and such period shall be treated as a
"Pre-Closing Partial Period" for purposes of this Agreement.
6.2 Elections and Settlements. Except with the prior written
-------------------------
consent of Buyer, prior to the Closing no Target Company shall, and
Target and the Shareholders shall cause each Target Company not to, make
or change any election, change any annual tax accounting period, adopt or
change any tax accounting method, file any amended Return, enter into any
closing agreement, settle any Tax claim or assessment, surrender any
right to claim a refund of Taxes, consent to any extension or waiver of
the limitation period applicable to any Tax claim or assessment, or take
any other action or omit to take any action, if any such election,
adoption, change, amendment, agreement, settlement, surrender, consent or
other action or omission may have the effect of increasing, directly or
indirectly, the Taxes of any Target Company, Buyer or any affiliate of
Buyer.
6.3 Post-Closing Audits and Other Proceedings. From and after
-----------------------------------------
the Closing Date, Buyer shall give prompt notice to the Shareholders of
any proposed adjustment to Taxes for periods that end on or prior to the
Closing Date or that include the Closing Date. The parties hereto
acknowledge that Target Company shall control the conduct of any audit or
other proceeding involving Target Company for such periods, and shall
keep the Shareholders reasonably informed of the progress thereof. The
Shareholders shall cooperate with Target Company in the conduct of any
audit or other proceeding and may participate at their own expense.
ARTICLE 7
TRANSFER LIMITATIONS AND COVENANTS
7.1 Securities Subject to Article 7. For the purposes of this
-------------------------------
Agreement, the term "Securities" shall mean all shares of Buyer Common
Stock issued pursuant to the Merger and all Equity Securities (including
debt obligations) of Buyer (or any successor corporation) received in
exchange for or in respect of such Buyer Common Stock (whether by reason
of a stock split, stock dividend, combination of shares,
recapitalization, reclassification, merger, consolidation, corporate
reorganization or otherwise).
- 27 -<PAGE>
<PAGE>
7.2 Restriction on Transfer. From and after the Closing Date,
-----------------------
neither the Securities nor any interest therein shall be transferable
except upon satisfaction of the relevant conditions specified in Section
7.4 of this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), in respect of the transfer of any of the Securities or
any interest therein. The Shareholders shall cause any proposed
transferee of the Securities (or of any interest therein) to take and
hold such Securities (or any interest therein) subject to the provisions
and upon the conditions specified in this Article 7.
7.3 Restrictive Legend. Each certificate for the Securities
------------------
issued to the Shareholders or to a subsequent transferee shall (unless
otherwise permitted by the provisions of Section 7.4) include a legend in
boldface, 12 point (or larger) print in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR
OTHERWISE ASSIGNED EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT RELATING TO THE SECURITIES WHICH IS EFFECTIVE UNDER
SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) AN OPINION
OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT SUCH SALE, TRANSFER, HYPOTHECATION
OR OTHER ASSIGNMENT IS IN COMPLIANCE WITH THE PROVISIONS OF
SUCH ACT.
7.4 Notice of Proposed Transfers. Not less than five days prior
----------------------------
to any proposed transfer of any Securities bearing the restrictive legend
set forth in Section 7.3 or any interest therein, the holder thereof
shall give written notice to Buyer of such holder's intention to effect
such transfer, setting forth the manner and circumstances of the proposed
transfer in reasonable detail. Any such proposed transfer that is not
made pursuant to a registration statement filed under the Securities Act
may be effected only if Buyer shall have received such notice of transfer
accompanied by (a) an opinion of counsel, reasonably satisfactory to
Buyer, to the effect that the proposed transfer of such Securities or
such interest therein may be effected without registration of such
Securities under the Securities Act (except that such an opinion shall
not be required for transfers pursuant to Rule 144 of the Securities
Act), and (b) such representation letters are in form and substance
satisfactory to Buyer to the extent required by the provisions of the
Securities Act. In addition, if in the opinion of counsel, reasonably
satisfactory to Buyer, subsequent transfers of such Securities will not
require registration under the Securities Act, Buyer will promptly after
such contemplated transfer deliver new certificates for such Securities
that do not bear the legend set forth in Section 7.3 above. If the
foregoing conditions entitling the holder to effect a proposed transfer
of such Securities without registration have not been satisfied, the
holder in each case will not transfer the Securities proposed to be
transferred. Buyer shall make a notation in its stock records to the
effect that the Securities are subject to the provisions of this
Agreement. Each certificate evidencing the Securities transferred as
above provided shall bear the appropriate legend set forth in Section
7.3, and each agreement purporting to transfer any interest in any of the
Securities shall contain a provision setting forth a similar legend,
except that such certificate or agreement shall not bear such legend if
the opinion of counsel, reasonably satisfactory to Buyer, is to the
further effect that neither such legend nor the restriction on transfer
in this Section 7.4 are required in order to ensure compliance with the
provisions of the Securities Act. Notwithstanding the foregoing, the
restrictions imposed by this Section 7.4 upon the transferability of any
particular Securities shall cease and terminate when such Securities have
been sold pursuant to an effective registration statement under the
Securities Act (or any
- 28 -<PAGE>
<PAGE>
similar or successor provision then in force) or pursuant to Rule 144.
The holder of any Securities (including the Shareholders) as to which
such restrictions shall have terminated shall be entitled to receive from
Buyer, without expense, a new certificate of the same type but not
bearing the restrictive legend set forth above and not containing any
other reference to the restrictions imposed by this Section 7.4.
7.5 Investment Representations.
--------------------------
(a) By executing this Agreement, each Shareholder hereby
confirms that the Securities to be received by Shareholder in connection
with this Agreement will be acquired for investment for his own account,
not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and that he has no present intention of
selling, granting participation in, or otherwise distributing the same.
By executing this Agreement, such Shareholder represents that he does not
have any contract, undertaking, agreement or arrangement with any person
to sell, transfer or grant participations to such person, or to any third
person, with respect to any of the Equity Securities.
(b) Each Shareholder understands that the Securities have
not been registered under the Securities Act in reliance upon an
exemption or exemptions from registration under the Securities Act,
including Section 4(2) thereof and/or Rule 506 promulgated thereunder,
and that Buyer's reliance on such exemptions is predicated upon such
Shareholder's representations set forth herein. Each Shareholder
realizes that the basis for the exemptions may not be present if,
notwithstanding such representations, such Shareholder has a present
intention of acquiring the Securities for a fixed or determinable period
in the future, or for a market rise, or for sale if the market does not
rise. Each Shareholder represents that he does not have any such
intention.
(c) Each Shareholder hereby represents that he has such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of his investment, and has the
ability to bear the economic risks of his investment. Each Shareholder
further represents that he has had, during the course of the transaction
and prior to his execution of this Agreement, the opportunity to ask
questions of, and receive answers from, Buyer concerning the terms and
conditions of the issuance of the Securities and to obtain additional
information (to the extent Buyer possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify
the accuracy of any information furnished to such Shareholder or to which
he had access.
(d) Each Shareholder hereby represents that his residence
is located at his notice address set forth in Section 13.1 hereof.
7.6 Piggyback Registrations.
-----------------------
(a) If at any time after the expiration of 180 days after the
consummation of the Merger, Buyer proposes to register any of the Buyer
Common Stock under the Securities Act and the registration form to be used
can be used to register the resale of the Common Stock (other than a
registration statement (A) on Form S-8 or any successor form relating to
securities issuable pursuant to any benefit plan or (B) on Form S-4, or any
successor form to each such form relating to an exchange offer or relating
to a transaction pursuant to Rule 145 of the Act), Buyer shall promptly give
the Shareholders written notice of such determination to effect such a
registration not later than twenty (20) business days prior to the
anticipated date of filing with the Securities and Exchange Commission (the
"Commission") of the registration statement. Upon the written request of
either of the Shareholders given within fifteen (15) days after mailing of
any such notice by Buyer, as part of the registration to which such notice
relates, Buyer shall use its best efforts to cause to be registered under
the Securities Act all of the shares of Buyer Common Stock to be received
by the Shareholders in the Merger (the "Registrable Securities") that the
Shareholders
- 29 -<PAGE>
<PAGE>
have requested to be registered. Each Shareholder shall be entitled to
participate in two "piggyback" registrations of the Registrable Securities
pursuant to this Section. A registration will not count as a permitted
registration until it has become effective and the shares of Buyer Common
Stock requested by the Shareholder to be included in the registration
statement have been sold pursuant to the registration statement.
(b) If the registration of which Buyer gives notice is for a
registered public offering involving an underwriting, then Buyer shall so
advise the Shareholders as a part of such written notice. In such event,
the right of the Shareholders to registration pursuant to this Section shall
be conditioned upon the Shareholders' agreeing to participate in such
underwriting upon the terms and conditions as shall be negotiated by Buyer,
and the inclusion of the Registrable Securities in the underwriting to the
extent provided herein. The Shareholders proposing to distribute securities
through such underwriting shall (together with Buyer) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by Buyer. Notwithstanding any
other provisions of this Section, if the underwriter determines in writing,
in its sole and absolute discretion, that marketing factors require a
limitation of the number of shares to be underwritten, then the underwriter
may exclude some or all Registrable Securities from such registration and
underwriting in accordance with the provisions of this Section; provided,
however, that if any securities are being offered for the account of any
holder of Buyer's securities other than the Shareholders, the reduction in
the number of Registrable Securities included in such registration shall not
represent a greater percentage of the amount of Registrable Securities
originally requested to be registered and sold in such registration than the
lowest percentage reduction imposed upon any holder of Buyer's securities
other than the Shareholders. Buyer shall so advise the Shareholders
distributing securities through such underwriting, and the number of
Registrable Securities that may be included in the registration and
underwriting on behalf of the Shareholders shall be allocated among the
Shareholders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities which the Shareholders requested to be
included in the registration. If the Shareholders disapprove of the terms
of any such underwriting, then the Shareholders may elect to withdraw
therefrom by written notice to Buyer and the underwriter. Any securities so
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
(c) Notwithstanding anything contained herein to the
contrary, a Shareholder shall not be entitled to request registration of his
Registrable Securities to the extent that Buyer shall have received an
opinion of counsel reasonably acceptable to Buyer that such shares may be
resold without registration under Rule 144 under the Securities Act (or any
successor rule) or an applicable exemption from registration under the Act.
(d) In the case of any registration effected pursuant to this
Section, any additional registration and qualification fees and expenses,
and any additional costs (other than underwriters discounts and commissions
and the fees and disbursements of counsel for the Shareholders) that result
from the inclusion of securities held by the Shareholders participating in
the registration shall be borne by Buyer.
(e) It shall be a condition precedent to the obligations of
Buyer to take any action pursuant to this Section that the Shareholders
shall furnish to Buyer such information regarding them, the Registrable
Securities held by them and the intended method of disposition of such
securities as Buyer shall reasonably request and as shall be required in
connection with the action to be taken by Buyer.
- 30 -
<PAGE>
<PAGE>
ARTICLE 8
COVENANTS OF BUYER
8.1 Capital Contribution. From time to time after the Closing
--------------------
Date as and when requested by Owens, Buyer shall make capital
contributions to Target in an aggregate amount not exceeding $1.0
million, which funds shall be used by Target for general corporate
purposes.
8.2 Consents and Closing Conditions. Prior to the Effective
-------------------------------
Time, Buyer shall use its best efforts (a) to obtain such consents from
third parties and to take other actions as may be required in order to
fulfill the closing conditions contained in this Agreement that are
reasonably within its control, and (b) to cause the representations and
warranties in Article 3 to be true and correct on and as of the Closing
Date.
8.3 Conduct of Business. From the date hereof to the Closing
-------------------
date, except for transactions that are expressly approved in writing by
Target or contemplated by this Agreement, the Buyer shall refrain from
taking any action that would (i) prevent or impede the transactions
contemplated hereby from qualifying as a reorganization within the
meaning of Section 368 of the Code, (ii) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Buyer or any Target Company to obtain any approval of any
Regulatory Authority required for the transactions contemplated by this
Agreement or to perform its covenants and agreements under this
Agreement, or (iii) prevent or impede the Merger from qualifying for
pooling-of-interests accounting treatment.
ARTICLE 9
CONDITIONS OF BUYER AND TARGET COMPANY
The respective obligations of each party to effect the Merger shall
be subject to the fulfillment or waiver at or prior to the Effective Time
of the following conditions:
9.1 Regulatory Approval. This Agreement and the transactions
-------------------
contemplated hereby shall have been approved by any federal and/or state
regulatory agencies whose approval is required for consummation of the
transactions contemplated hereby and all requisite waiting periods
imposed by the foregoing shall have expired.
9.2 No Judicial Prohibition. Neither Buyer, Target Company nor
-----------------------
Merger Sub shall be subject to any order, decree or injunction of a court
or agency of competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
9.3 Tax Opinion. The Shareholders shall have received from
-----------
Thompson Coburn an opinion (which opinion shall not have been withdrawn
at or prior to the Effective Time) reasonably satisfactory in form and
substance to them to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code, and to the
effect that, as a result of the Merger, except with respect to fractional
share interests and assuming that such Target Common Stock is a capital
asset in the hands of the holder thereof at the Effective Time,
(i) holders of Target Common Stock who receive Buyer Common Stock in the
Merger will not recognize gain or loss for federal income tax purposes on
the receipt of such stock, (ii) the basis of such Buyer Common Stock will
equal the basis of the Target Common Stock for which it is exchanged, and
(iii) and the holding period of such Buyer Common Stock will include the
holding period of the Target Common Stock for which it is exchanged.
- 31 -<PAGE>
<PAGE>
ARTICLE 10
BUYER'S CONDITIONS TO CLOSING
The obligation of Buyer and Merger Sub to consummate the
Merger and the other transactions contemplated by this Agreement shall be
subject to the fulfillment to Buyer's reasonable satisfaction of each of
the following conditions:
10.1 Continued Truth of Warranties. The representations and
-----------------------------
warranties of the Shareholders and Target set forth in Article 2 of this
Agreement shall be true and correct as of the date of this Agreement and
as of the Effective Time (as though made on and as of the Effective Time,
except (i) to the extent such representations and warranties are by their
express provisions made as of a specified date or period, (ii) where the
facts which caused the failure of any representation or warranty to be so
true and correct have not resulted, and are not likely to result, in a
Material Adverse Effect, and (iii) for the effect of transactions
contemplated by this Agreement).
10.2 Performance of Covenants. The Shareholders and the Target
------------------------
shall have duly performed all obligations required to be performed by
them under this Agreement prior to the Effective Time.
10.3 No Material Adverse Change. There shall have been no
--------------------------
material adverse change to the properties, operations, liabilities,
earnings, prospects, business or condition (financial or otherwise) of
any Target Company since December 31, 1997.
10.4 Permits and Consents. Each of the Shareholders and Target
--------------------
shall have secured all appropriate orders, consents, approvals and
clearances, in form and substance satisfactory to the Buyer, by and from
all regulatory agencies and other governmental authorities and agencies,
whose order, consent and approval or clearance is required by contract or
law for the consummation of the Merger and other transactions herein
contemplated, and from all third parties to the contracts designated on
Schedule 2.10 as a condition to the Buyer's obligation to consummate the
Merger.
10.5 Full Investigation. Buyer and its employees, attorneys,
------------------
accountants and other agents shall have been permitted to conduct a full
investigation of the books, records, assets, liabilities, operations,
prospects, business and condition of each Target Company, including
attorneys' audit response letters, and environmental assessments of such
Target Company's facilities and business if Buyer deems it appropriate to
obtain the same, and Buyer shall not have discovered any event,
circumstance or set of facts which could reasonably be expected to
constitute or lead to a Material Adverse Effect and that is not
accurately disclosed in the Target Financial Statements or the Schedules
to this Agreement. The completion of such investigation by Buyer shall
not be deemed to be a waiver by Buyer of any claim of Buyer for a breach
of representation or warranty of the Shareholders or Target.
10.6 Closing Documents. The Shareholders shall have delivered all
-----------------
documents required to be delivered by such Shareholders at Closing, as
more specifically set forth in Article 12 of this Agreement, in each case
in form and substance reasonably satisfactory to Buyer.
10.7 Opinion of Counsel. Target shall have delivered to Buyer an
------------------
opinion of Target's counsel dated as of the Closing Date or a mutually
agreeable earlier date in substantially the form set forth in Exhibit D
to this Agreement.
10.8 Opinion of Accountant. Buyer shall have received an opinion
---------------------
letter, dated as of the Closing Date, from its independent accountants to
the effect that the Merger will qualify for pooling-
- 32 -<PAGE>
<PAGE>
of-interests accounting treatment under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with this
Agreement.
10.9 Termination of Agreements. Prior to the Closing Date, Target
-------------------------
and the Shareholders shall have taken any and all actions required or
necessary to terminate those instruments and agreements set forth on
Schedule 2.3 hereto.
- ------------
ARTICLE 11
SHAREHOLDERS' AND TARGET'S CONDITIONS TO CLOSING
The obligations of Shareholders and Target to consummate the
Merger and the other transactions contemplated by this Agreement shall be
subject to the fulfillment to their reasonable satisfaction of the
following conditions:
11.1 Continued Truth of Warranties. The representations and
-----------------------------
warranties of Buyer set forth in Article 3 of this Agreement shall be
true and correct as of the date of this Agreement and as of the Effective
Time (as though made on and as of the Effective Time, except (i) to the
extent such representations and warranties are by their express
provisions made as of a specified date or period, (ii) where the facts
which caused the failure of any representation or warranty to be so true
and correct have not resulted, and are not likely to result, in a
Material Adverse Effect, and (iii) for the effect of transactions
contemplated by this Agreement).
11.2 Performance of Covenants. Buyer shall have performed all
------------------------
obligations required to be performed by it under this Agreement prior to
the Effective Time.
11.3 Permits and Consents. Buyer shall have secured all
--------------------
appropriate orders, consents, approvals and clearances, in form and
substance reasonably satisfactory to the Shareholders by and from all
regulatory agencies and other governmental authorities and agencies whose
order, consent, approval or clearance is required by contract or law for
the consummation of the transactions herein contemplated.
11.4 Closing Documents. Buyer shall have delivered all documents
-----------------
required to be delivered by Buyer at Closing, as more specifically set
forth in Article 12 hereof, in each case in form and substance reasonably
satisfactory to the Shareholders.
11.5 Opinion of Counsel. Buyer shall have delivered to Target an
------------------
opinion of Buyer's counsel dated as of the Closing Date or a mutually
agreeable earlier date in substantially the form set forth in Exhibit E
to this Agreement.
11.6 Board Representation. On or prior to the Closing Date, the
--------------------
Boards of Directors of each of Buyer and Target shall take any and all
actions required to add Owens as a member of the Board of Directors of
Buyer and the Board of Directors of Target, respectively, such
appointments to be effective as of the Closing Date.
ARTICLE 12
DOCUMENTS TO BE DELIVERED AT CLOSING
12.1 Documents to be Delivered by Shareholders and Target. At the
----------------------------------------------------
Closing:
(a) the Shareholders shall execute and deliver to Buyer the
original certificates for all of the Target Shares, together with a
written notice of exercise of the Merger
- 33 -<PAGE>
<PAGE>
Consideration and with stock transfer powers duly executed by the
Shareholders and satisfactory to Buyer, transferring to Buyer good and
marketable title to the Target Shares free and clear of all liens,
claims, encumbrances and transfer restrictions whatever;
(b) the Shareholders shall deliver to Buyer a certificate
of incumbency and copy of the resolutions adopted by the Board of
Directors of Target, authorizing the execution and delivery of this
Agreement, duly certified as of the Closing Date by the Secretary or an
Assistant Secretary of Target;
(c) the Shareholders shall deliver to Buyer (A) the
Articles of Incorporation, as amended, of each Target Company, certified
by the appropriate Secretary of State as of a date not more than ten days
prior to the Closing Date, and (B) the Bylaws, as amended, of each Target
Company, certified as of the Closing Date by the Secretary or an
Assistant Secretary of Target Company;
(d) the Shareholders shall deliver to Buyer a certificate
executed by them confirming the matters in Sections 10.1 and 10.2 above;
(e) the Shareholders shall deliver to Buyer a certificate
of good standing or its equivalent, dated not more than ten days prior to
the Closing Date, attesting to the good standing of each Target Company
as a corporation under the laws of its state of organization and under
the laws of each foreign jurisdiction where its ownership or Leasing of
property or the conduct of its business requires it to be so qualified.
(f) to the extent any consents or approvals shall be
necessary to any of the transactions herein contemplated, or to the
Merger, the Shareholders shall deliver to Buyer copies of all such
consents or approvals as obtained by them;
(g) the Shareholders shall deliver to Buyer the
resignations of the directors of each Target Company and such officers of
each Target Company as Buyer shall request;
(h) the Shareholders shall deliver to Buyer the original
corporate minute books, stock transfer books and corporate seal of each
Target Company; and
(i) the Shareholders shall cause Target to execute and
deliver to Buyer Articles of Merger with respect to the Merger to be
filed with the Secretary of State of the Commonwealth of Kentucky (the
"Articles of Merger").
12.2 Documents to be Delivered by Buyer. At the Closing, Buyer
----------------------------------
shall:
(a) deliver to the Shareholders a certificate of incumbency
and copy of the resolutions adopted by the Board of Directors of Buyer,
authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, duly certified as
of the Closing Date by the Secretary of Buyer;
(b) deliver to the Shareholders a certificate executed by
an officer of Buyer confirming the matters in Sections 11.1 and 11.2
above;
(c) deliver to the Shareholders a certificate of good
standing or its equivalent, dated not more than ten days prior to the
Closing Date, attesting to the good standing of Buyer as a corporation
under the laws of the State of Delaware;
- 34 -<PAGE>
<PAGE>
(d) to the extent any consents or approvals shall be
necessary to any of the transactions herein contemplated, deliver to
Target Company copies of all such consents or approvals as obtained by
Buyer;
(e) cause the Merger Sub to execute and deliver the
Articles of Merger; and
(f) deliver to holders of Target Common Stock the Merger
Consideration as contemplated in Section 1.8.
ARTICLE 13
SURVIVAL AND INDEMNIFICATION
13.1 Survival. The representations, warranties, covenants and
--------
agreements set forth in this Agreement or in any certificate or other
writing delivered in connection with this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby
notwithstanding any examination made for or on behalf of any party.
13.2 General Indemnification.
-----------------------
(a) By Shareholders. By execution of this Agreement, the
---------------
Shareholders jointly and severally agree to indemnify the Buyer and each
Target Company and their respective successors and assigns and hold them
harmless from and after the Closing against and in respect of:
(i) any and all loss, liability, cost, expense or
damage (including judgments and settlement payments) incurred by any of
them incident to, arising in connection with or resulting from any
misrepresentation, breach, nonperformance or inaccuracy of any
representation, warranty or covenant by the Shareholders or Target made
or contained in this Agreement or in any Exhibit, Schedule, certificate
or other document executed and delivered to Buyer or Merger Sub by or on
behalf of the Shareholders or Target under or pursuant to this Agreement
or the transactions contemplated herein; and
(ii) any and all costs, expenses and all other actual
damages incurred by any of them in claiming, contesting or remedying any
breach, misrepresentation, non-performance or inaccuracy of the
Shareholders and Target described above or satisfying any liability or
obligation described above, including, by way of illustration and not
limitation, all legal and accounting fees, other professional expenses
and all filing fees and collection costs incident thereto and all such
fees, costs and expenses incurred in defending claims which, if
successfully prosecuted, would have resulted in Damages (as hereinafter
defined).
(b) By Buyer. By execution of this Agreement, Buyer agrees
--------
to indemnify each Shareholder and his heirs, personal representatives,
successors and/or assigns and hold them harmless from and after the
Closing against and in respect of:
(i) any and all loss, liability, cost, expense or
damage (including judgments and settlement payments) incurred by any of
them incident to, arising in connection with or resulting from any
misrepresentation, breach, non-performance or inaccuracy of any
representation, warranty or covenant by the Buyer made or contained in
this Agreement or in any Exhibit, Schedule, certificate or document
executed and delivered by or on behalf of Buyer or Merger Sub under or
pursuant to this Agreement or the transactions contemplated herein; and
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<PAGE>
(ii) any and all costs, expenses and all other actual
damages incurred by the Shareholders in claiming, contesting or remedying
any breach, misrepresentation, non-performance or inaccuracy of Buyer
described above, including, by way of illustration and not limitation,
all legal and accounting fees, other professional expenses and all filing
fees and collection costs incident thereto and all such fees, costs and
expenses incurred in defending claims which, if successfully prosecuted,
would have resulted in Damages.
(c) Damages. Any and all of the items set forth in Section
-------
13.2 13.2(a) and (b) for which a party is entitled to be indemnified
hereunder are collectively called "Damages."
13.3 Notice of, and Procedures for, Collecting Indemnification.
---------------------------------------------------------
(a) Initial Claim Notice. When a party becomes aware of a
--------------------
situation which may result in Damages for which it would be entitled to
be indemnified hereunder, such party (the "Indemnitee") shall submit a
written notice (the "Initial Claim Notice") to the other party (the
"Indemnitor") to such effect with reasonable promptness after it first
becomes aware of such matter and shall furnish the Indemnitor with such
information as it has available demonstrating its right or possible right
to receive indemnity. If the potential claim is predicated on, or later
results in, the filing by a third party of any action at law or in equity
(a "Third Party Claim"), the Indemnitee shall provide the Indemnitor with
a supplemental Initial Claim Notice not later than ten (10) days prior to
the date on which a responsive pleading must be filed, and shall also
furnish a copy of such claim (if made in writing) and of all documents
received from the third party in support of such claim. Each Initial
Claim Notice shall name, when known, the person or persons making the
assertions which are the basis for such claim. Failure by the Indemnitee
to deliver an Initial Claim Notice or an update thereof in a timely
manner or otherwise in the manner described herein shall not relieve the
Indemnitor of any of its obligations under this Agreement except to the
extent that the Indemnitor can demonstrate actual monetary prejudice
resulting from such delay.
(b) Rights of Indemnitor. If, prior to the expiration of
--------------------
thirty (30) days from the mailing of an Initial Claim Notice (the "Claim
Answer Period"), the Indemnitor shall request in writing that such claim
not be paid, the same shall not be paid, and the Indemnitor shall settle,
compromise or litigate in good faith such claim, and employ attorneys of
its choice to do so; provided, however, that Indemnitee shall not be
required to refrain from paying any claim which has matured by court
judgment or decree, unless appeal is taken therefrom and proper appeal
bond posted by the Indemnitor, nor shall it be required to refrain from
paying any claim where such action would result in the foreclosure of a
lien upon any of its assets or a default in a lease or other contract
except a lease or other contract which is the subject of the dispute. If
the Indemnitor elects to settle, compromise or litigate such claim, all
reasonable expenses, including but not limited to all amounts paid in
settlement or to satisfy judgments or awards and reasonable attorney's
fees and costs, incurred by the Indemnitor in settling, compromising or
litigating such claim shall be secured to the reasonable satisfaction of
Indemnitee. Indemnitee shall cooperate fully to make available to the
Indemnitor and its attorneys, representatives and agents, all pertinent
information under its control. Indemnitee shall have the right to elect
to settle or compromise all other contested claims with respect to which
the Indemnitor has not, within the Claim Answer Period, acknowledged in
writing (i) liability therefor (should such claim, to the extent
Indemnitor is ultimately determined to be liable for such indemnification
under this Agreement, ultimately be resolved against Indemnitee) and
(ii) its election to assume full responsibility for the settlement,
compromise, litigation and payment of such claim.
(c) Final Claims Statement. At such time as Damages for
----------------------
which the Indemnitor is liable hereunder are incurred by Indemnitee by
actual payment thereof or by entry of a final
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<PAGE>
judgment, Indemnitee shall forward a Final Claims Statement to the
Indemnitor setting forth the amount of such Damages in reasonable detail
on an itemized basis. All amounts reflected on each Final Claims
Statement shall be paid promptly by Indemnitor to Indemnitee.
(d) Form of Payments Due from Indemnifying Shareholders.
---------------------------------------------------
Any payment of Damages due from a Shareholder may be made in whole or
part by surrender of Buyer Common Stock to Buyer for cancellation, as
provided in this Section 13.3(d). Each $27.50 of such Damages may be
paid by forfeiture of one share of Buyer Common Stock (appropriately
adjusted with regard to stock splits, reclassifications,
recapitalizations, stock dividends, or other Securities issued in respect
of or in exchange for Buyer Common Stock). If for any reason whatsoever,
sufficient Securities are not timely surrendered to Buyer to fully pay
Damages in accordance with this Article 13, then the amount of any unpaid
Damages shall be immediately due and payable from the Shareholders in
cash, jointly and severally, notwithstanding this Section 13.3(d).
13.4 Time Limits. Any claim for indemnification under this
-----------
Article 13 for Damages must be made in writing to the Indemnitor no later
than the first anniversary of the Closing Date.
13.5 Limits on Amounts. The Shareholders, on the one hand, and
-----------------
the Buyer, on the other hand, shall not be liable under this Article 13
for Damages until such time as the Indemnitee has sustained otherwise
indemnifiable Damages under this Agreement totaling Twenty-One Thousand
Dollars ($21,000) (the "Indemnity Basket"); provided that any
representation or warranty in Article 2 that would be breached but for a
qualification by "Material Adverse Effect," "material" or any similar
term shall be treated as otherwise indemnifiable Damages for purposes of
computing the Indemnity Basket. The Shareholders, on the one hand, and
the Buyer, on the other hand, shall not be liable under this Article 13
for Damages which, together with all other indemnifiable Damages under
this Agreement, exceed an amount equal to the Four Million Two Hundred
Thousand Dollars ($4,200,000) (the "Indemnity Cap"). Notwithstanding the
foregoing, the Indemnity Basket and Indemnity Cap shall not apply to:
(a) claims by the Buyer for indemnification for Damages
attributable to a breach of a representation or warranty in Sections 2.1,
2.2, 2.3, 2.4, 2.23, 2.24 or the second sentence of Section 2.8; and
(b) claims by the Shareholders for indemnification for
Damages attributable to a misrepresentation or breach of warranty in
Section 3.1, 3.2 or 3.4.
13.6 Sole Remedy. The parties to this Agreement acknowledge that
-----------
the provisions of this Article 13 shall constitute the sole legal remedy
of any party hereto against any other party hereto with respect to the
sale of the Target Shares by the Shareholders to the Buyer on the terms
set forth in this Agreement, any representations made in connection with
such sale, and any obligations or liabilities of the Company attributable
to periods prior to the Closing, provided that this Section 13.6 shall
not affect the right of any party to seek specific performance,
injunctive or other equitable relief with respect to a violation of this
Agreement.
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<PAGE>
ARTICLE 14
TERMINATION OF AGREEMENT
14.1 Termination. Anything in this Agreement to the contrary
-----------
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(a) by mutual written consent of the Buyer and Target;
(b) upon written notice from the Buyer to Target if either
(i) any of the conditions precedent to the Buyer's obligations hereunder
shall have become incapable of fulfillment through no fault of the Buyer or
(ii) Target or either Shareholder is in breach of any representation,
warranty or covenant of such party in this Agreement, which breach has
continued for ten (10) days after delivery of written notice to such party
specifying such breach;
(c) upon written notice from Target to the Buyer if either
(i) any of the conditions precedent to Target's obligations hereunder shall
have become incapable of fulfillment through no fault of Target or the
Shareholders, or (ii) Buyer is in breach of any representation, warranty or
covenant of Buyer in this Agreement, which breach has continued for ten (10)
days after delivery of written notice to Buyer specifying such breach;
(d) upon written notice from any party to the other parties
hereto if the Closing does not occur by December 31, 1998 (unless the
failure to consummate the purchase and sale of the Target Shares by such
date shall be due to the action or failure to act of the party seeking to
terminate this Agreement or any affiliate thereof);
(e) by Buyer pursuant to and in accordance with the
provisions of Section 5.6 hereof; or
(f) by Buyer, in the event that (i) Target fails to deliver
the Schedules required by Section 4.5 or (ii) the Buyer, in its sole
discretion and within thirty (30) days after delivery to Buyer of the
Schedules required by Section 4.5, objects to any information contained such
Schedules.
Any such written notice shall state the grounds for termination asserted by
the party delivering such notice of termination.
14.2 Effect of Termination. If this Agreement is terminated and the
---------------------
transactions contemplated hereby are abandoned pursuant to Section 14.1,
then this Agreement shall become null and void and of no effect, except for
the provisions of this Article 14 and Article 15 (relating to, among other
things, notices, contract construction and effect and expenses); provided,
however, that such termination shall not affect the right of any party to
bring an action against another party for a breach occurring prior to the
termination or for a wrongful termination.
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<PAGE>
ARTICLE 15
MISCELLANEOUS
15.1 Notices. Any notices or other communications required or
-------
permitted hereunder (including, by way of illustration and not
limitation, any notice permitted or required under Article 11 hereof) to
any party hereto shall be sufficiently given if delivered in person or
sent by certified or registered mail, postage prepaid, addressed as
follows:
In the case of Buyer or (after Closing) any Target Company, to:
Unified Financial Services, Inc.
1104 Buttonwood
Lexington, Kentucky 40515
Attn: Mr. Timothy L. Ashburn
With a copy to:
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Attn: Charles H. Binger
(314) 552-7012 (fax)
In the case of Target (before Closing) or Owens, to:
John R. Owens
Equity Insurance Managers
220 Lexington Green Circle
Lexington, Kentucky 40503
In the case of Meyer, to:
D. Richard Meyer
Equity Insurance Managers
220 Lexington Green Circle
Lexington, Kentucky 40503
In each case with a copy to:
Robert M. Beck, Jr.
Stites & Harbison
250 West Main Street, Suite 2300
Lexington, Kentucky 40507
or such substituted address as any party shall have given notice to the
others in writing in the manner set forth in this Section 15.1.
15.2 Amendment. This Agreement may be amended or modified in
---------
whole or in part only by an agreement in writing executed by all parties
hereto and making specific reference to this Agreement.
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<PAGE>
15.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which taken together shall constitute one
instrument.
15.4 Binding on Successors and Assigns. This Agreement shall be
---------------------------------
binding upon, inure to the benefit of and be enforceable by and against
the parties hereto and their respective heirs, personal representatives,
successors and assigns in accordance with the terms hereof. Neither
Target nor either Shareholder shall be entitled to assign its or his
rights under this Agreement prior to the Closing without the prior
written consent of the Buyer. Prior to the Closing, Buyer may assign its
rights under this Agreement to any existing or new subsidiary corporation
provided that Buyer shall remain liable for the performance of its
obligations hereunder to the extent such assignee fails to do so.
15.5 Headings; Pronouns. Descriptive headings and subheadings are
------------------
for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. Except as the context
may otherwise require, each reference to a paragraph is to a paragraph of
this Agreement. Each reference herein to any party or to any person
affected hereby shall be deemed to be in the appropriate number and
gender.
15.6 Severability. In the event that any one or more of the
------------
provisions contained in this Agreement or any application thereof shall
be invalid, illegal or unenforceable in any respect, the validity,
legality or enforceability of the remaining provisions of this Agreement
and any other application thereof shall not in any way be affected or
impaired thereby; provided, however, that to the extent permitted by
applicable law, any invalid, illegal, or unenforceable provision may be
considered for the purpose of determining the intent of the parties in
connection with the other provisions of this Agreement.
15.7 Waivers. The parties may, by written agreement, (a) extend
-------
the time for the performance of any of the obligations or other acts of
the parties hereto, (b) waive any inaccuracies in the representations
contained in this Agreement or in any document delivered pursuant to this
Agreement, (c) waive compliance with, or modify, any of the covenants or
conditions contained in this Agreement, and (d) waive or modify
performance of any of the obligations of any of the parties hereto;
provided, that the occurrence of the Closing shall not of itself
constitute such a waiver or modification, and provided further, that no
such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall operate as a waiver
of, or an estoppel with respect to, any subsequent insistence upon such
strict compliance other than with respect to the matter so waived or
modified.
15.8 Publicity. Any public announcements prior to the Closing
---------
concerning the transaction contemplated by this Agreement shall be
jointly planned and simultaneously released by Buyer and Target and no
party shall act in this regard without the prior approval of the other
parties, which approval shall not be unreasonably withheld or delayed.
15.9 Headings. The headings in the sections and subsections of
--------
this Agreement and in the Schedules are inserted for convenience only and
in no way alter, amend, modify, limit or restrict the contractual
obligations of the parties.
15.10 List of Exhibits and Schedules. As mentioned in this
------------------------------
Agreement, there are attached hereto or delivered herewith, the following
Exhibits and Schedules:
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<PAGE>
EXHIBITS
Section
Exhibit Document Reference
------- -------- ---------
A Incentive Employment Agreement 4.6
B Affiliate Letter 5.7
C Tax Certificate 5.11
D Opinion of Target's Counsel 10.7
E Opinion of Buyer's Counsel 11.5
SCHEDULES
Schedule
No. Schedule Caption
-------- ----------------
2.1 Certificate of Incorporation and Bylaws
2.2 Subsidiaries
2.3 Capitalization
2.4(a) Authorization and Consents of Target Company
2.4(b) Authorization and Consents of Shareholders
2.5(a) Exceptions to Financial Statements
2.7 Certain Changes or Events
2.8 Exceptions to Title
2.9(a) Bank Accounts and Procedures
2.9(b) Encumbrances on Accounts Receivable
2.10 Contracts and Defaults
2.11(a) Patents and Trademarks
2.12 Violations of Law
2.13 Litigation
2.14(b) Operation of Employee Benefit Plans
2.14(c)(i) Employee Benefit Plans and Arrangements
2.14(c)(ii) Employment Records
2.14(d) Finances
2.15 Proceedings and Regulations
2.16 Insurance
2.17(a) Environmental Claims
2.17(b) Hazardous Substances
2.18 Governmental Approvals
2.19 Taxes
2.19(b) Returns Filed and Taxes Paid
2.19(c) Tax Reserves and Tax Liabilities
2.19(d) Audit History and Other Proceedings
2.19(e) Tax Basis, Attributes and Miscellaneous
Elections
2.20 Subsidiaries and Investments
2.22 Transactions with Affiliates
2.25(c) Compliance with Laws
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<PAGE>
<PAGE>
Each of the foregoing Exhibits and Schedules is incorporated herein by
this reference and expressly made a part hereof.
15.11 Entire Agreement; Law Governing. All prior negotiations and
-------------------------------
agreements between the parties hereto are superseded by this Agreement,
and there are no representations, warranties, understandings or
agreements other than those expressly set forth herein or in an Exhibit
or Schedule delivered pursuant hereto, except as modified in writing
concurrently herewith or subsequent hereto. Except to the extent the
KBCA applies to the Merger, this Agreement shall be governed by and
construed and interpreted according to the internal laws of the
Commonwealth of Kentucky, determined without reference to conflicts of
law principles.
[remainder of this page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the day and year first above written.
"BUYER"
UNIFIED FINANCIAL SERVICES, INC.
By: /s/ Timothy L. Ashburn
------------------------------------------
Timothy L. Ashburn, Chairman of the Board,
President and Chief Executive Officer
"MERGER SUB"
EQUITY ACQUISITION CORPORATION
By: /s/ Timothy L. Ashburn
------------------------------------------
Timothy L. Ashburn, President
"TARGET" AND "SHAREHOLDERS"
EQUITY UNDERWRITING GROUP, INC.
By: /s/ John R. Owens
------------------------------------------
Name: John R. Owens
Title: President
/s/ John R. Owens
----------------------------------------------
John R. Owens
/s/ D. Richard Meyer
----------------------------------------------
D. Richard Meyer
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