<PAGE> 1
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 - DECEMBER 1, 1998
(Date of Earliest Event Reported)
INSpire Insurance Solutions, Inc.
(Exact name of registrant as specified in its charter)
Commission File No. 000-23005
Texas 75-2595937
- ------------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
300 Burnett Street, Fort Worth, Texas 76102-2799
- --------------------------------------------------------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (817) 332-7761
Page 1 of 6 pages.
Exhibit index appears on page 6.
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
As of December 1, 1998, INSpire Insurance Solutions, Inc., a Texas
corporation (the "Company") consummated the transactions contemplated by the (i)
Stock Purchase Agreement, dated October 29, 1998 (the "Stock Purchase
Agreement") by and among the Company, Arrow Claims Management, Inc. a Delaware
corporation ("ACM") and all the shareholders of ACM (John C. Gall, as Trustee
for the Patrick J. Kilkenny Irrevocable Trust, dated September 30, 1992,
Marianne Harmon, Myron Sima, and Gary Kadota) (collectively, the "Shareholders")
and (ii) Asset Purchase Agreement, dated October 29, 1998 (the "Asset Purchase
Agreement") by and between the Company and Arrowhead General Insurance Agency,
Inc., a Minnesota corporation ("AGIA"). The Stock Purchase Agreement and Asset
Purchase Agreement are attached hereto as Exhibit 2.1 and Exhibit 2.2,
respectively, and are incorporated herein by reference.
Pursuant to the Stock Purchase Agreement, the Company purchased all the
outstanding shares of capital stock of ACM for an aggregate purchase price of
$13.5 million. The Company used existing cash reserves to pay the $13.5 million
purchase price under the Stock Purchase Agreement. This purchase price was
determined by an arms-length negotiation among the parties to the Stock Purchase
Agreement.
Pursuant to the Asset Purchase Agreement, the Company purchased from
AGIA certain assets relating to its policy administration services for property
and casualty lines of insurance. The Company paid AGIA an aggregate purchase
price of $6.5 million plus an option to purchase shares valued at $7.0 million
on October 29, 1998, which shares are subject to vesting based upon obtaining
certain performance criteria set forth in the Option Agreement, dated as of
December 1, 1998, between the Company and AGIA and attached hereto as Exhibit
10.1. The
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Company intends to use the newly-acquired assets for policy
administration services for various lines of insurance. The Company used
existing cash reserves to pay the $6.5 million purchase price under the Asset
Purchase Agreement. This purchase price was determined by an arms-length
negotiation between the parties to the Asset Purchase Agreement.
Prior to the consummation of the acquisitions described above, there
was no material relationship between ACM, the Shareholders or AGIA and the
Company or any of its affiliates, any director or officer of the Company, or any
associate of any such director or officer. Upon consummation of the Stock
Purchase Agreement and the Asset Purchase Agreement, the Certificate of
Incorporation of ACM was amended to change the name of ACM to INSpire Claims
Management, Inc. Effective December 1, 1998, INSpire Claims Management, Inc.
entered into a Claims Administration Services Agreement with AGIA and the
Company entered into a Policy Administration Services Agreement with AGIA.
Any statements which are forward-looking in nature are based on certain
assumptions and those assumptions may ultimately prove to be inaccurate. Such
statements reflect the current views of the Company with respect to future
events and are subject to risks, uncertainties and assumptions relating to the
operations, results of operations, growth strategy and liquidity of the Company.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
The required financial statements will be filed by an
amendment not later than 60 days after the date that the
initial report on Form 8-K must be filed.
(b) Pro Forma Financial Information.
The required pro forma financial information will be filed by
an amendment not later than 60 days after the date that the
initial report on Form 8-K must be filed.
(c) Exhibits.
*2.1 Stock Purchase Agreement, dated as of October 29,
1998, by and among the Company, ACM and the
Shareholders signatory thereto. A list identifying
the contents of the Schedules to the Stock Purchase
Agreement is attached.
*2.2 Asset Purchase Agreement, dated as of October 29,
1998, by and between the Company and AGIA. A list
identifying the contents of the Schedules to the
Asset Purchase Agreement is attached.
*10.1 Option Agreement, dated as of December 1, 1998,
between the Company and AGIA.
*10.2 Registration Rights Agreement, dated as of December
1, 1998, between the Company and AGIA.
**27 Financial Data Schedules.
- ---------------------------
* filed herewith
** to be filed in an amendment
[Remainder of this Page Intentionally Left Blank]
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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.
INSPIRE INSURANCE SOLUTIONS, INC.
By: /s/ WILLIAM J. SMITH, III
--------------------------------------
William J. Smith, III
President and Chief
Operating Officer
Dated: December 14, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
*2.1 Stock Purchase Agreement, dated as of October 29,
1998, by and among the Company, ACM and the
Shareholders signatory thereto. A list identifying
the contents of the Schedules to the Stock Purchase
Agreement is attached.
*2.2 Asset Purchase Agreement, dated as of October 29,
1998, by and between the Company and AGIA. A list
identifying the contents of the Schedules to the
Asset Purchase Agreement is attached.
*10.1 Option Agreement, dated as of December 1, 1998,
between the Company and AGIA.
*10.2 Registration Rights Agreement, dated as of December
1, 1998, between the Company and AGIA.
**27 Financial Data Schedules.
</TABLE>
- ---------------------------
* filed herewith
** to be filed in an amendment
6
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EXHIBIT 2.1
================================================================================
STOCK PURCHASE AGREEMENT
by and among
INSpire INSURANCE SOLUTIONS, INC.,
ARROW CLAIMS MANAGEMENT, INC.
and
ALL THE SHAREHOLDERS OF
ARROW CLAIMS MANAGEMENT, INC.
regarding the sale of 100% of the outstanding capital stock of Arrow Claims
Management, Inc. dated as of October 29, 1998
================================================================================
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SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
Schedule Description
- -------- -----------
<S> <C>
Schedule 1.1................................................................................Ownership of the Shares
Schedule 4.1.........................................................................Jurisdictions of Incorporation
Schedule 4.5(a)(1)...................................................................................Capitalization
Schedule 4.5(a)(2).....................................................................Exceptions to Capitalization
Schedule 4.5(b)........................................................................................Subsidiaries
Schedule 4.6(a).......................................................................Year-End Financial Statements
Schedule 4.6(b)........................................................................Interim Financial Statements
Schedule 4.8..........................................................................Exceptions to Certain Changes
Schedule 4.12(a)................................................................................Owned Real Property
Schedule 4.12(b)...............................................................................Leased Real Property
Schedule 4.13(a)............................................................................Owned Personal Property
Schedule 4.13(b)...........................................................................Leased Personal Property
Schedule 4.15.............................................................................................Insurance
Schedule 4.16....................................................................................Material Contracts
Schedule 4.17....................................................................................Litigation; Orders
Schedule 4.17(1)...................................................................Exceptions to Litigation; Orders
Schedule 4.19...............................................................................................Permits
Schedule 4.20(a)............................................................................Owned Intangible Assets
Schedule 4.20(b).........................................................................Licensed Intangible Assets
Schedule 4.21(a)..........................................................................................Employees
Schedule 4.21(b).....................................................................Employment and Labor Contracts
Schedule 4.22(a)..............................................................................Welfare Benefit Plans
Schedule 4.22(b)..............................................................................Pension Benefit Plans
Schedule 4.22(c)..............................................................................Employee Arrangements
Schedule 4.24..................................................................Bank Accounts and Powers of Attorney
Schedule 4.26..................................................................Exceptions to Affiliate Transactions
Schedule 6.3(b)...............................................................Exceptions to Prohibited Transactions
Schedule 6.8.....................................................................................Transferred Assets
Schedule 8.2(b)...................................................................................Required Consents
Schedule 8.3(b)....................................................................................Required Permits
Schedule 9.1(m).................................................................................Restricted Software
Schedule 12.8....................................................................................Notice Information
</TABLE>
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
Exhibit 2.2(d).....................................................................................Form of Guaranty
Exhibit 2.3(e).................................................................Form of Opinion of Company's Counsel
Exhibit 2.4(e)...............................................................Form of Opinion of Purchaser's Counsel
Exhibit 9.1(l)(1)..................................................Form of Claims Administration Services Agreement
Exhibit 9.1(l)(2)..................................................Form of Policy Administration Services Agreement
</TABLE>
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of October
29, 1998 (the "SIGNING DATE"), is made by and among INSpire Insurance Solutions,
Inc., a Texas corporation ("PURCHASER"), Arrow Claims Management, Inc., a
Delaware corporation ("COMPANY"), and the Persons listed on the signature pages
hereto (collectively, the "SELLERS," and individually, a "SELLER"). Purchaser,
Company and Sellers are sometimes collectively referred to as the "PARTIES," and
individually referred to as a "PARTY."
PRELIMINARY STATEMENTS
A. Company is engaged in the administration of claims for certain
insurance companies (such business being herein referred to as the "BUSINESS").
B. Sellers own all the issued and outstanding shares of Company's
common stock, par value $.01 per share (the "COMMON STOCK"), which shares
constitute all the issued and outstanding equity securities of Company.
C. Each Seller desires to sell, and Purchaser desires to purchase,
the Shares, in each case on the terms and subject to the conditions set forth in
this Agreement.
D. Capitalized terms used in this Agreement are defined or indexed
in Appendix A for the convenience of the reader and in order to eliminate the
need for cross-references. Appendix A is incorporated herein by this reference.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties set forth in this
Agreement and for other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I.
TERMS OF THE PURCHASE AND SALE
Section 1.1 Sale of Shares. Subject to the terms and conditions and
in reliance upon the representations and warranties set forth in this Agreement,
at the Closing each Seller will sell and assign to Purchaser, and Purchaser will
purchase and acquire from each Seller, the number of shares of Common Stock
listed on Schedule 1.1 opposite the name of such Seller (collectively, the
"SHARES"), in each case free and clear of all Encumbrances.
Section 1.2 Purchase Price. The total consideration for the Shares
will be the difference of $13,500,000 (the "BASE PURCHASE PRICE") minus the
Adjustment Amount calculated pursuant to Section 1.5 (the Base Purchase Price
minus the Adjustment Amount, the "FINAL PURCHASE PRICE").
<PAGE> 4
Section 1.3 Payment of Base Purchase Price. On the Signing Date,
Purchaser will cause a duly authorized officer of Purchaser to provide Company
with written documentation of a deposit by Purchaser of the Base Purchase Price
into a segregated bank account that is under the exclusive control of Purchaser
(the "SEGREGATED ACCOUNT"). At the Closing, Purchaser will pay to Sellers from
such segregated account an aggregate amount equal to the Base Purchase Price (or
the Final Purchase Price if the Adjustment Amount is deemed final in accordance
with Section 1.5(d)) (the "CLOSING CASH PAYMENT") by wire transfer of
immediately available funds to the bank accounts and in the amounts set forth on
a notice given by Sellers to Purchaser not later than three business days prior
to the Closing Date.
Section 1.4 Allocation of the Purchase Price. As soon as
practicable, but not later than 120 days after the Closing Date, the Parties
will agree upon the allocation of the Base Purchase Price and Company's
liabilities (and all other capitalizable costs) among Company's assets,
liabilities and agreements set forth in Section 6.7, and will set forth such
allocation on a statement (the "ALLOCATION STATEMENT"). The Allocation Statement
will be revised to reflect any changes in the Direct Written Premiums shown on
the Final Closing Premium Statement from the Direct Written Premiums shown on
the Closing Premium Statement, whether or not such changes result in an
adjustment to the Base Purchase Price. If the Parties fail to agree on the
allocation of the Base Purchase Price within 120 days after the Closing Date,
then the disagreement will be resolved as soon as practicable thereafter, but
not later than 180 days after the Closing Date, by one of the largest four
national accounting firms, which accounting firm will be jointly selected by
Purchaser on the one hand and Sellers on the other hand. The Parties acknowledge
that the scope of such accounting firm's work will be limited to resolving only
those items to which the Parties do not agree regarding the allocation of the
Base Purchase Price. The decision of the accounting firm will be final and
binding upon the Parties. The fees, costs and expenses of the accounting firm
selected to resolve any disagreements regarding the Allocation Statement will be
borne equally by Purchaser on the one hand and Sellers on the other hand. Each
Party will file all Tax returns, and execute such other documents as may be
required by any taxing authority, in a manner consistent with the Allocation
Statement.
Section 1.5 Purchase Price Adjustment.
(a) Closing Premium Statement. As soon as reasonably
practicable, but not later than the later to occur of the Signing Date or
November 13, 1998, Company will delivery to Purchaser a statement detailing the
amount of Direct Written Premiums recognized by Company in the calendar months
August 1998, September 1998 and October 1998 (such statement, together with the
supporting workpapers, the "CLOSING PREMIUM STATEMENT"). The amount set forth on
the Closing Premium Statement will be calculated in accordance with GAAP;
provided, however, that the Closing Premium Statement will not be required to
have any of the notes to the financial statements as required by GAAP. Company
will give Purchaser and its Representatives reasonable access to Company's
facilities and the Books and Records so as to enable Purchaser to verify the
amounts set forth on the Closing Premium Statement.
(b) Review of Closing Premium Statement. As soon as
practicable, but not later than 30 days after the delivery of the Closing
Premium Statement, Purchaser will inform
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Sellers and Company in writing of any objection to the Closing Premium
Statement, which objection, if any, will set forth in reasonable detail
Purchaser's objections and the basis for those objections (the "OBJECTION
NOTICE"). If Purchaser so objects and the Parties do not resolve such objections
on a mutually agreeable basis within 45 days after the delivery of the Closing
Premium Statement, then the disagreement will be resolved as soon as practicable
thereafter, but not later than 75 days after the delivery of the Closing Premium
Statement, by one of the largest four national accounting firms, which
accounting firm will be selected jointly by Purchaser on the one hand and
Sellers on the other hand. The Parties acknowledge that the scope of such
accounting firm's work will be limited to resolving the objections set forth in
the Objection Notice. The decision of such accounting firm will be final and
binding upon the Parties. The Closing Premium Statement (as adjusted, if
applicable, by the agreement of the Parties or the decision of the accounting
firm, the "FINAL CLOSING PREMIUM STATEMENT") and the amount of Direct Written
Premiums recognized by Company in the calendar months August 1998, September
1998 and October 1998 (the "WRITTEN PREMIUM AMOUNT") will be deemed final upon
the earlier to occur of (i) the agreement of the Parties, (ii) the decision of
the accounting firm, or (iii) the failure of Purchaser to deliver an Objection
Notice to Sellers and Company within 30 days after the delivery of the Closing
Premium Statement. Each Party will bear the fees, costs and expenses of its own
accountants, will share equally (between Purchaser on the one hand and Sellers
on the other hand) the fees, costs and expenses of the accounting firm selected
by the Parties to resolve any disagreements regarding the Objection Notice and
will permit each other and each other's Representatives reasonable access to the
books and records necessary to perform the analysis contemplated by this
Section.
(c) Purchase Price Adjustment; Procedure. Upon the Final
Closing Premium Statement being deemed final in accordance with Section 1.5(b),
the Base Purchase Price will be adjusted, if at all, as follows: if the product
of the Written Premium Amount multiplied by four is less than $200,000,000, then
the Base Purchase Price will be reduced by an amount equal to the product of (i)
the Base Purchase Price multiplied by (ii) a fraction consisting of (A) a
numerator equal to the difference of $200,000,000 minus the product of the
Written Premium Amount multiplied by four and (B) a denominator equal to
$200,000,000 (such amount, together with interest thereon calculated at a rate
equal to eight percent (8.0%) compounded daily from the Closing Date to the date
the Final Closing Premium Statement is deemed final in accordance with Section
1.5(b), the "ADJUSTMENT AMOUNT").
(d) Adjustment Procedure. Purchaser must first seek payment
of the Adjustment Amount pursuant to the right of set-off under the Option
Agreement and thereafter severally and directly from Sellers. Such payment from
Sellers, if any, will be made within five business days after the final
determination of the number of Option Shares (as defined in the Option
Agreement) that vest pursuant to Section 2.4 of the Option Agreement.
Section 1.6 Delivery of Schedules. The Parties acknowledge that the
Schedules to be delivered pursuant to this Agreement will not be delivered on
the Signing Date. The Parties agree that all Schedules will be delivered no
later than November 6, 1998. If the Party to whom a particular Schedule is
delivered does not object in writing to the contents of such Schedule by
November 11, 1998, then that particular Schedule will be deemed final and the
disclosures made
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thereon will be deemed made as of the Signing Date. Any Schedule to which a
written objection is raised will be deemed final upon the mutual agreement of
the Parties as to the content of such Schedule and the disclosures made thereon
will be deemed made as of the Signing Date.
ARTICLE II.
CLOSING
Section 2.1 Closing. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") will take place at the offices of
Akin, Gump, Strauss, Hauer and Feld, 1700 Pacific Avenue, Suite 4100, Dallas,
Texas 75201 on the first business day following the date on which all of the
conditions set forth in Article IX, to the extent not waived, are satisfied. The
Closing may be postponed to such other date as the Parties may mutually agree.
The date on which the Closing actually occurs is hereinafter referred to as the
"CLOSING DATE." The Parties anticipate that the Closing will occur within 35
days of the filing of the initial notification required under the HSR Act.
Section 2.2 Deliveries by Sellers. At the Closing, Sellers or each
Seller, as the case may be, will deliver, or cause to be delivered, the
following:
(a) the closing certificates referred to in Sections
9.1(e);
(b) a certificate or certificates representing the number
of Shares listed on Schedule 1.1 opposite the name of such Seller, in each case
endorsed in blank or together with duly executed stock transfer powers in favor
of Purchaser;
(c) a receipt for the payment of that portion of the
Closing Cash Payment received by such Seller;
(d) an executed Guaranty, in substantially the form
attached hereto as Exhibit 2.2(d) (the "GUARANTY"); and
(e) all other previously undelivered documents, instruments
and writings required to be delivered by Sellers to Purchaser at or prior to the
Closing pursuant to this Agreement and such other documents, instruments and
certificates as Purchaser may reasonably request in connection with the
transactions contemplated by this Agreement.
Section 2.3 Deliveries by Company. At the Closing, Company will
deliver, or cause to be delivered, the following:
(a) the closing and secretary's certificates referred to in
Sections 9.1(e), 9.1(f) and 9.1(g);
(b) the recorded Charter Document of each Acquired Company,
recently certified by the Secretary of State (or other proper state official) of
the state of such Acquired Company's jurisdiction of incorporation;
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(c) a certificate of existence and good standing (or the
functional equivalents) for each Acquired Company dated within ten business days
of the Closing Date issued by the Secretary of State (or other proper state
official) of the state of such Acquired Company's jurisdiction of incorporation;
(d) all Books and Records of each Acquired Company;
(e) an opinion of counsel addressed to Purchaser from
counsel for Company in substantially the form of Exhibit 2.3(e) attached hereto;
(f) a title insurance policy (in an amount equal to the
fair market value of the insured parcel) naming Purchaser as the insured for
each parcel of Real Property;
(g) executed counterparts of all Required Consents and
Required Permits; and
(h) all other previously undelivered documents, instruments
and writings required to be delivered by any Acquired Company to Purchaser at or
prior to the Closing pursuant to this Agreement and such other documents,
instruments and certificates as Purchaser may reasonably request in connection
with the transactions contemplated by this Agreement.
Section 2.4 Deliveries by Purchaser. At the Closing, Purchaser will
deliver, or cause to be delivered, the following:
(a) the Closing Cash Payment to Sellers in federal or other
immediately available funds by wire transfer in accordance with Section 1.3(a);
(b) the closing and secretary's certificates referred to in
Sections 9.2(c) and 9.2(d);
(c) the recorded Charter Document of Purchaser, recently
certified by the Secretary of State (or other proper state official) of the
State of Texas;
(d) a certificate of existence and good standing (or the
functional equivalents) for Purchaser dated within ten business days of the
Closing Date issued by the Secretary of State (or other proper state official)
of the State of Texas;
(e) an opinion of counsel for Purchaser addressed to
Sellers in substantially the form of Exhibit 2.4(e) attached hereto;
(f) a certificate dated within ten business days of the
Closing from the Secretary of State of Texas (or other proper state official)
certifying as to Purchaser's good standing in such state;
(g) a receipt to each Seller for the delivery of the number
of Shares listed on Schedule 1.1 opposite the name of such Seller;
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(h) all other previously undelivered documents, instruments
and writings required to be delivered by Purchaser to any Acquired Company at or
prior to the Closing pursuant to this Agreement and such other documents,
instruments and certificates as any Acquired Company may reasonably request in
connection with the transactions contemplated by this Agreement.
Section 2.5 Simultaneous Deliveries. The delivery of the documents
required to be delivered at the Closing pursuant to this Agreement will be
deemed to occur simultaneously. No delivery will be effective until each Party
has received or waived receipt of all the documents that this Agreement entitles
such Party to receive.
Section 2.6 Sales and Transfer Taxes. Any Taxes and any transfer,
recording or similar fees and charges arising out of or in connection with the
transactions contemplated by this Agreement will be borne by Sellers.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby represents and warrants to Purchaser, with respect
to itself and not with respect to any other Seller, that the statements made in
this Article III are true, correct and complete.
Section 3.1 Title to Shares. Seller is the record and beneficial
owner of the number of Shares listed on Schedule 1.1 opposite the name of such
Seller, free and clear of all Encumbrances. At the Closing, Seller will transfer
to Purchaser its entire right, title and interest in and to the Shares.
Section 3.2 Power, Authority, Right and Capacity. Seller has the
requisite power, authority, right and capacity, as the case may be, to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby, including the execution,
delivery and performance of all the Transaction Document to which such Seller is
a party.
Section 3.3 Authorization; Execution and Validity. Each of the
Transaction Documents, when executed by Seller and delivered to Purchaser, will
be duly authorized (where appropriate), executed and delivered, and will
constitute a valid, legal and binding obligation of Seller, enforceable against
Seller in accordance with the terms of such Transaction Document, subject to any
Law Affecting Creditors' Rights.
Section 3.4 No Conflict; Consents. The execution, delivery and
performance by Seller of each Transaction Document will not (a) violate any Law,
(b) violate any Charter Document of such Seller (if applicable), (c) violate any
Order to which Seller is a party or by which Seller or its assets is bound, (d)
result in the creation of any Encumbrance on any of the Shares, or (e) require
any Consent from any Person.
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Section 3.5 Brokers. No Person is or will become entitled to
receive any brokerage or finder's fee, advisory fee or other similar payment for
the transactions contemplated by this Agreement by virtue of having been engaged
by or acted on behalf of Seller.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND COMPANY
Each Seller and, until the Closing, Company, jointly and severally,
hereby represents and warrants to Purchaser that the statements made in this
Article IV are true, correct and complete:
Section 4.1 Organization; Good Standing; Delivery of Charter
Documents. Each Acquired Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction listed opposite
such Acquired Company on Schedule 4.1. Each Acquired Company is duly qualified
or licensed as a foreign corporation in each jurisdiction in which the nature of
such Acquired Company's business makes qualification or licensing necessary,
except those jurisdictions wherein the failure to so qualify could not have a
Material Adverse Effect on Company. Prior to the Signing Date, Company has
delivered, or caused to be delivered, to Purchaser true and complete copies of
the Charter Documents of each Acquired Company as in effect on the Signing Date.
Section 4.2 Power and Authority. Company has all requisite
corporate power and authority necessary to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby, including the execution, delivery and performance of all
the Transaction Documents to which Company is a party. Each Acquired Company has
all requisite corporate power and authority necessary to own, operate and lease
its assets and to carry on its business as and where conducted.
Section 4.3 Authorization; Execution and Validity. Each of the
Transaction Documents, when executed by Company and delivered to Purchaser, will
be duly authorized, executed and delivered, and will constitute a valid, legal
and binding obligation of Company, enforceable against Company in accordance
with the terms of such Transaction Document, subject to any Law Affecting
Creditors' Rights.
Section 4.4 No Conflict; Consents. The execution, delivery and
performance by Company of each Transaction Document will not (a) violate any
Law, (b) violate any Charter Document of any Acquired Company, (c) violate any
Order to which any Acquired Company is a party or by which any Acquired Company
or its Assets is bound, (d) breach any Material Contract, Real Property Lease or
Personal Property Lease, (e) result in the creation of any Encumbrance on any
Assets of any Acquired Company, other than Permitted Encumbrances, or (f)
require any Consent from any Person.
Section 4.5 Capitalization.
(a) Company. Schedule 4.5(a)(1) lists the total number of
authorized, issued and outstanding shares of capital stock of Company. All the
Shares have been duly authorized and validly issued and are fully paid and
non-assessable. There are no issued and outstanding
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shares of capital stock of Company other than the Shares. Except as listed on
Schedule 4.5(a)(2), there is no authorized or outstanding option, subscription,
warrant, call, right, commitment or other agreement ("SUBSCRIPTION RIGHT")
obligating Company to issue or sell any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock.
None of the Shares were issued or will be transferred pursuant to this Agreement
in violation of any preemptive or preferential rights of any Person. Other than
the capital stock of the Subsidiaries, Company does not own any shares of
capital stock, partnership interests or other beneficial ownership interests in
any other Person.
(b) Subsidiaries. Schedule 4.5(b) lists the name of each
Person whose capital stock, equity securities or Subscription Right that Company
owns, either beneficially or of record (collectively, the "SUBSIDIARIES"), and
the total number of authorized, issued and outstanding shares of such capital
stock, equity securities or Subscription Right of each Subsidiary. All the
shares of capital stock of each Subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable. Company owns all issued and
outstanding shares of capital stock of each Subsidiary. There is no authorized
or outstanding Subscription Rights obligating any Subsidiary to issue or sell
any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock. None of the shares of any
Subsidiary were issued or will be transferred pursuant to this Agreement in
violation of any preemptive or preferential rights of any Person. No Subsidiary
owns any shares of capital stock, partnership interests or other beneficial
ownership interests in any other Person.
Section 4.6 Financial Statements.
(a) Year-End Financial Statements. Attached hereto as
Schedule 4.6(a) are the balance sheets of the Acquired Companies as of December
31, 1997 (the "YEAR-END BALANCE SHEET" and such date the "BALANCE SHEET Date"),
and December 31, 1996, with the related statements of operations and cash flows
for the fiscal years ended on such dates and the accompanying notes
(collectively, the "YEAR-END FINANCIAL STATEMENTS"). The Year-End Financial
Statements have been prepared in accordance with GAAP (except as noted therein),
and present fairly, in all material respects, the financial position of the
Acquired Companies as of the dates indicated and the results of their operations
and cash flows for the periods then ended.
(b) Interim Financial Statements. Attached hereto as
Schedule 4.6(b) are the balance sheet of the Acquired Companies as of September
30, 1998 (the "INTERIM BALANCE SHEET") and the related statement of operations
and cash flows for the nine month period ended on such date (collectively, the
"INTERIM FINANCIAL STATEMENTS"). The Interim Financial Statements have been
prepared in accordance with the Books and Records and with GAAP (except as noted
therein and the absence of detailed notes to such statements), and present
fairly, in all material respects, the financial position of the Acquired
Companies as of the date indicated and the results of its operations and cash
flows for the period then ended, subject to normal year-end adjustments.
Section 4.7 No Undisclosed Liabilities. Except as described in the
Year-End Balance Sheet, none of the Assets or the business of any Acquired
Company is subject to any Claim of
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any nature, absolute or contingent, and no events have occurred or circumstances
exist that could give rise to any future Claim that could have a Material
Adverse Effect on the assets or the business of any Acquired Company, other than
Claims incurred since the Balance Sheet Date in the ordinary course of such
Acquired Company's business consistent with past practices.
Section 4.8 Absence of Certain Changes. Since the Balance Sheet
Date, each Acquired Company has conducted its business only in the ordinary
course of business consistent with past practices and, without limiting the
generality of the foregoing and except as listed on Schedule 4.8, there has been
no (a) event or occurrence that has caused or will cause a Material Adverse
Change with respect to any Acquired Company, (b) amendment to the Charter
Documents of any Acquired Company, (c) payment of any dividend or distribution
made with respect to any Acquired Company's capital stock, (d) redemption or
purchase of any of any Acquired Company's capital stock, (e) amendment,
termination or receipt of notice of termination of or entry into any contract,
lease or license involving a total commitment by or to any Acquired Company of
$10,000, (f) incurrence or guarantee of any debt by any Acquired Company, other
than trade and accounts payable incurred in the ordinary course of business
consistent with past practices, (g) loan to or transaction with any officer,
director or shareholder of any Acquired Company, other than in the ordinary
course of business consistent with past practices, (h) waiver of any material
right or release of any debt or claim by any Acquired Company, other than
waivers or releases given in the ordinary course of business consistent with
past practices, (i) amendment or termination of any Permit of any Acquired
Company, (j) destruction, damage or other loss to any material asset of any
Acquired Company other than destruction, damage or other loss that is fully
covered by insurance, (k) adoption of or increase in the payments to or benefits
under any Employee Benefit Plan of any Acquired Company, (l) sale, lease, or
other disposition of any assets used in the business of any Acquired Company,
other than the Transferred Assets and assets sold, leased or otherwise disposed
of in the ordinary course of business consistent with past practices, (m)
imposition of any Encumbrance on any of the assets of any Acquired Company,
other than Permitted Encumbrances, (n) purchase or lease any assets used in the
business of any Acquired Company, other than assets purchased or leased in the
ordinary course of business consistent with past practice, (o) payment of any
bonus or an increase in the salary, bonus or other compensation payable to any
employee of any Acquired Company, other than payments or increases consistent
with past practice, (p) change in any accounting method used by any Acquired
Company, (q) acceleration related to the collection of accounts receivable of
any Acquired Company or delay related to the payment of accounts payable of any
Acquired Company, or (r) agreement or commitment to take any action described in
this Section.
Section 4.9 Sufficiency and Condition of and Title to the Assets.
(a) Sufficiency of the Assets. Except for the Transferred
Assets, the assets reflected on the Books and Records of the Company (the
"ASSETS") constitute all the assets, properties, licenses and other arrangements
which are presently being used or are reasonably related to the Business, and
are sufficient to operate the Business in a manner consistent with past practice
and historic capacity.
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(b) Condition of the Assets Each of the Assets complies
with Law and is in good and normal operating condition and repair, structurally
sound with no known defects (ordinary wear and tear excepted), and suitable for
its intended use.
(c) Title to the Assets. At the Closing, one of the
Acquired Companies will hold good, valid and indefeasible title to, or a valid
leasehold interest in, each of the Assets, free and clear of all Encumbrances,
other than Permitted Encumbrances.
Section 4.10 Accounts Receivable. All accounts receivable of the
Acquired Companies reflected on the Interim Balance Sheet (the "ACCOUNTS
RECEIVABLE") represent or will represent valid obligations arising from sales
made, commissions earned or services performed in the ordinary course of
business. Unless paid prior to the Closing Date, the Accounts Receivable are
current and collectible net of the respective reserves shown on the Interim
Balance Sheet (which reserves are adequate and calculated consistent with past
practice). Subject to such reserves, each of the Accounts Receivable either has
been or will be collected in full, without any set-off, within ninety days after
the day on which it first becomes due and payable. There is no contest, claim,
or right of set-off under any contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Section 4.11 Intentionally Omitted.
Section 4.12 Real Property.
(a) Owned Real Property. Schedule 4.12(a) lists as of the
Signing Date each parcel of real property owned by any of the Acquired
Companies, including the street address of each property and a summary
description of the buildings and improvements thereon. Each parcel of real
property listed on Schedule 4.12(a) and any parcel of real property purchased
after the Signing Date in accordance with Section 6.3 (collectively, the "OWNED
REAL PROPERTY") is (i) in compliance with all Laws, including the Americans with
Disabilities Act and any building, fire, land use, occupancy, safety, set-back,
or zoning Law, (ii) not burdened by any covenant, easement, encroachment,
restrictive covenant, right-of-way, or servitude, other than those specifically
referenced in the title insurance policies delivered pursuant to Section 2.3(f),
and (iii) not subject to any condemnation, eminent domain or similar Action.
(b) Leased Real Property. Schedule 4.12(b) lists all the
leases of real property to which any Acquired Company is a party and which are
in effect as of the Signing Date. All of the leases on Schedule 4.12(b) and any
leases of real property entered into after the Signing Date in accordance with
Section 6.3 (collectively, the "REAL PROPERTY LEASES") are valid, binding and in
full force and effect. No Acquired Company nor, to Sellers' Knowledge, any other
Person is in default under any Real Property Lease, nor is there any event which
with notice or lapse of time, or both, would constitute a default thereunder by
any Acquired Company or any other Person. The appropriate Acquired Company has
received a nondisturbance agreement from any lessor's lender under each of the
Real Property Leases. True and complete copies of all the Real Property Leases,
any amendments thereto and the nondisturbance agreements have been provided to
Purchaser prior to the Signing Date.
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Section 4.13 Personal Property.
(a) Owned Personal Property. Schedule 4.13(a) lists as of
the Signing Date all of the personal property (including all machinery,
equipment, vehicles, structures, fixtures and furniture) owned by any Acquired
Company and used in the Business, located on its premises or shown on the
Interim Balance Sheet or acquired after the date thereof (except for assets
subsequently sold in the ordinary course of business and consistent with past
practice).
(b) Leased Personal Property. Schedule 4.13(b) lists as of
the Signing Date all the leases of personal property to which any Acquired
Company is a party. All of the leases on Schedule 4.13(b) and any leases of
personal property entered into after the Signing Date in accordance with Section
6.3 (collectively, the "PERSONAL PROPERTY LEASES") are valid, binding and in
full force and effect. No Acquired Company nor, to Sellers' Knowledge, any other
Person is in default under any Personal Property Lease, nor is there any event
which with notice or lapse of time, or both, would constitute a default
thereunder by Company or any other Person. True and complete copies of all the
Personal Property Leases and any amendments thereto have been provided to
Purchaser prior to the Signing Date.
Section 4.14 Compliance with Laws. To Sellers' Knowledge, each
Acquired Company is in compliance with all Laws in the conduct of the Business.
No Acquired Company has received any notice from any Governmental Authority or
other Person asserting that Acquired Company has violated any Law.
Section 4.15 Insurance. Schedule 4.15 lists as of the Signing Date
all insurance policies to which any Acquired Company is a party or which insure
the Business or any of the Assets against loss (collectively, the "INSURANCE
POLICIES"), including each insurer's name, coverage deductible and limit,
expiration date and current premium. Each Insurance Policy is in full force and
effect, all premiums with respect thereto have been paid to the extent due, and
no notice of cancellation or termination has been received with respect to any
such policy, other than any policy that will be replaced or is intended to be
replaced prior to the expiration thereof by policies providing substantially the
same coverage from an insurer that is financially sound and reputable. The
Insurance Policies provide the Acquired Companies with adequate insurance
coverage against the risks involved in the conduct of the Business and ownership
of the Assets. The coverage provided by the Insurance Policies is not less than
the coverage customary in the Acquired Companies' industry and will not in any
way be affected by or terminate or lapse by reason of the consummation of the
transactions contemplated by this Agreement. True and complete copies of all
Insurance Policies have been provided to Purchaser.
Section 4.16 Contracts. Schedule 4.16 lists as of the Signing Date
all the contracts relating to the Business, Assets or Assumed Liabilities or by
which any of the Assets is bound, pursuant to which the obligations of any party
thereto are, or are contemplated to be, with respect to any such contract (a) in
excess of $10,000 during any twelve month period the term thereof, (b) not
terminable prior to three month from the Signing Date, or (c) otherwise material
to the Business. All of the contracts listed on Schedule 4.16 and any contracts
entered into after the Signing Date in accordance with Section 6.3
(collectively, the "MATERIAL CONTRACTS") are valid
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and binding and in full force and effect, subject to Laws Affecting Creditors'
Rights. No Acquired Company nor, to Sellers' Knowledge, any other Person is in
default under any Material Contract, nor is there any event which with notice or
lapse of time, or both, would constitute a default thereunder by an Acquired
Company or any other Person. Other than the Material Contracts, no Acquired
Company is a party to any contract which (x) requires the Consent of any Person
in order to consummate the transactions contemplated by this Agreement, (y) is
in excess of the normal, ordinary and usual requirements of the Business, or (z)
is excessive in price or quantity. True and complete copies of all the Material
Contracts have been provided to Purchaser.
Section 4.17 Litigation; Orders. Schedule 4.17 lists and describes
all Actions pending, or to Sellers' Knowledge, threatened against or affecting
any Acquired Company, the Business or any of the Assets. There is no Action
pending or, to Sellers' Knowledge, threatened in writing affecting any Acquired
Company, the Business or any of the Assets which, if adversely determined, would
have, individually or in the aggregate, a Material Adverse Effect. Except as
listed on Schedule 4.17(1), no Acquired Company is subject to any Order. True
and complete copies of all material pleadings in the Actions listed on Schedule
4.17 have been provided to Purchaser.
Section 4.18 Environmental Matters.
(a) Compliance with Environmental Laws. The Business has
been and is operated in compliance with all Environmental Laws and all Permits
related to Environmental Laws.
(b) Hazardous Materials. To Sellers' Knowledge, no Acquired
Company has caused or allowed the generation, treatment, manufacture,
processing, distribution, use, storage, discharge, release, disposal, transport
or handling of any Hazardous Materials at any of the properties or facilities
used in connection with the Business, including the Owned Real Property and the
premises subject to the Real Property Leases, except in compliance with all
Environmental Laws. To Sellers' Knowledge, no generation, treatment,
manufacture, processing, distribution, use, storage, discharge, release,
disposal, transport or handling of any Hazardous Materials has occurred at any
of the properties or facilities used in connection with the Business, including
the Owned Real Property and the premises subject to the Real Property Leases,
except in compliance with all Environmental Laws.
(c) Existence of an Action. No Acquired Company has
received any notice from any Governmental Authority or other Person alleging or
concerning any Claim against an Acquired Company under any Environmental Law,
whether for personal injuries or property damages. There is no Action pending
or, to Sellers' Knowledge, threatened affecting any Acquired Company with
respect to the Businesses alleging or concerning any Claim under any
Environmental Law, whether for personal injuries or property damages, nor do
Sellers have any knowledge of any fact or condition that could give rise to such
a Claim.
(d) Environmental Permits. To Sellers' Knowledge, the
Acquired Companies are in possession of and in compliance with all Permits
required under the Environmental Laws
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with respect to the operation of the Business. There are no Actions pending or,
to Sellers' Knowledge, threatened which seek to modify, revoke or deny renewal
of any of such Permit. Sellers have no knowledge of any fact or condition that
is reasonably likely to give rise to any Action to modify, revoke or deny
renewal of any of such Permit. No Consent from any Person is necessary for the
transfer of any such Permit, and the consummation of the transactions
contemplated by this Agreement will not violate, alter, impair or invalidate, in
any respect, any such Permit.
(e) Miscellaneous. Without in any way limiting the
generality of the foregoing, to Sellers' Knowledge, (i) none of the off-site
locations where any Acquired Company has transported, released, discharged,
stored, disposed or arranged for the disposal of Hazardous Materials has been
identified as a facility that is subject to an existing Claim under any
Environmental Law or is the subject of any threatened Claim by any Person, (ii)
no underground improvement regulated by any Environmental Law, including any
storage or treatment tank, is located on the Owned Real Property or the premises
subject to the Real Property Leases, (iii) there is no asbestos contained in or
forming part of any Assets, and (iv) no polychlorinated biphenyls or
polychlorinated biphenyls-containing items are used or stored at the Owned Real
Property or the premises subject to the Real Property Leases.
Section 4.19 Permits. Schedule 4.19 lists all the Permits related to
the Assets or operation of the Business, and indicates those Permits for which
the Consent of any Person is required to assign such Permit. Each Acquired
Company has obtained, maintains in effect, and complies with the terms and
conditions of all Permits required by Law. There is no Action pending or, to
Sellers' Knowledge, threatened in writing to revoke or limit any Permit listed
on Schedule 4.19.
Section 4.20 Intangible Assets.
(a) Owned Intangible Assets. Schedule 4.20(a) lists all the
Intangible Assets owned by any Acquired Company as of the Signing Date. With
respect to the Intangible Assets listed on Schedule 4.20(a) and all the
Intangible Assets obtained or developed prior to the Closing, (i) the Acquired
Company owns all right, title and interest in and to such Intangible Assets free
and clear of all Encumbrances, (ii) the Acquired Company has not sold,
transferred, licensed, sub-licensed or conveyed any interest in any of such
Intangible Assets, and (iii) no Person has infringed upon or misappropriated any
of such Intangible Assets.
(b) Licensed Intangible Assets. Schedule 4.20(b) lists all
licenses and contracts related to any Intangible Asset used by any Acquired
Company as of the Signing Date. Each license or contract listed on Schedule
4.20(b) and each license or contract related to an Intangible Asset which is
entered into after the Signing Date in accordance with Section 6.3 is valid,
binding and in full force and effect. No Acquired Company has infringed upon or
misappropriated any Intangible Asset owned by another Person.
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Section 4.21 Employees.
(a) Employees. Schedule 4.21(a) lists the name, job title,
date of employment and current annual compensation (salary, bonus and all
amounts paid pursuant to an Employee Benefit Plan) for each employee of the
Acquired Companies employed as of the Signing Date (collectively, the
"EMPLOYEES"). All Employees are either United States citizens or resident aliens
specifically authorized to engage in employment in the United States in
accordance with all Laws. All sums due for employee compensation and benefits
and all vacation time owing to any employee of the Acquired Companies (including
all persons whose employment by any Acquired Company terminated prior to the
Signing Date) have been duly and adequately accrued on the accounting Books and
Records.
(b) Contracts. Schedule 4.21(b) lists each (i) contract
between any Acquired Company and an Employee, and (ii) collective bargaining
agreement and other contract to or with any labor union, employee representative
or group of employees. Other than the contracts listed on Schedule 4.21(b), each
Acquired Company's employment of each Employee is terminable at will without any
penalty or severance obligation of any kind on the part of such Acquired
Company.
(c) Compliance with Labor Laws. Each Acquired Company has
complied and is presently complying with all Laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor practice or unlawful employment practice.
(d) Labor Actions and Relations. There is no unfair labor
practice charge or complaint against any Acquired Company pending or threatened
before the National Labor Relations Board nor is there any grievance nor any
arbitration proceeding arising out of or under any collective bargaining
agreement pending and, to Sellers' Knowledge, no basis for any such charge,
complaint or grievance exists. There is no labor strike, slowdown or work
stoppage pending or threatened against any Acquired Company. No Acquired Company
has experienced any significant work stoppages or been a party to any Action
before the National Labor Relations Board involving any issue for the past three
years nor been a party to any arbitration proceeding arising out of or under any
collective bargaining agreement for the past three years. There is no charge or
complaint pending or threatened against any Acquired Company before the Equal
Employment Opportunity Commission or the Department of Labor or any state or
local agency of similar jurisdiction.
(e) WARN Act. No Acquired Company nor any Person with whom
any Acquired Company would be treated as an "employer" for purposes of the
Worker Adjustment and Retraining Notification Act or any similar state law has
incurred any liability or obligation under such laws.
Section 4.22 Employee Benefits.
(a) Welfare Benefit Plan. Schedule 4.22(a) lists, as of the
Signing Date, each Welfare Benefit Plan maintained by any Acquired Company or to
which any Acquired Company
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contributes or is required to contribute with respect to any Person. True,
correct and complete copies of the plan documents for each of the Acquired
Company's Welfare Benefit Plans and all related summary plan descriptions have
been provided to Purchaser. No Acquired Company has any liability for
contributions or payments more than 30 days past due with respect to any of its
Welfare Benefit Plans or for any retiree benefits under any such Welfare Benefit
Plan to current or retired employees of any Acquired Company (other than as
required by Section 601 of ERISA).
(b) Pension Benefit Plans. Schedule 4.22(b) lists, as of
the Signing Date, each Pension Benefit Plan maintained by any Acquired Company
or to which any Acquired Company contributes or is required to contribute with
respect to any Person. True, correct and complete copies of the plan and related
trust documents for each of the Acquired Companies' Pension Benefit Plan and all
related summary plan descriptions have been provided to Purchaser. No Acquired
Company presently maintains and has never maintained, nor has had any obligation
of any nature (whether contingent or otherwise) to contribute to, a "defined
benefit plan" (as defined in Section 414(j) of the Code), without regard to
whether such defined benefit plan met the requirements of section 401(a) of the
Code. No Acquired Company has any liability for contributions due with respect
to its Pension Benefit Plans, including any "individual account plan" (as
defined in Section 3(34) of ERISA).
(c) Employee Arrangements. Schedule 4.22(c) lists each
Employee Benefit Plan not otherwise disclosed in Schedules 4.22(a) or 4.22(b)
maintained by any Acquired Company with respect to any past or present employee
of any Acquired Company. True, correct and complete copies of each Employee
Benefit Plan listed on Schedule 4.22(c) (and any related documents) have been
provided to Purchaser. No Acquired Company has any liability for contributions
or payments more than 30 days past due with respect to any of its Employee
Benefit Plans listed on Schedule 4.22(c).
(d) Benefit Plan Compliance. All of the Acquired Companies'
Employee Benefit Plans and any related trust agreements or annuity contracts (or
any other funding instruments) currently comply in all respects, and have so
complied in the past, both as to form and operation, with all applicable Laws,
including ERISA and the Code. No assets of any Acquired Company Employee Benefit
Plans include any "employer securities" or "employer real property" as such
terms are defined in Section 407 of ERISA. No debt has been incurred by any
Acquired Company Benefit Plans, other than liabilities for the payment of
benefits or insurance premiums.
(e) No Liability. No liability under Title IV of ERISA has
been or will be incurred by any Acquired Company on or prior to the Closing
Date. No Acquired Company has made any commitment, whether formal or informal,
and whether legally binding or not, to create or have liability under any
additional Employee Benefit Plan, policy or arrangement, or to modify any
existing Acquired Company Employee Benefit Plan.
(f) Effect of Consummation. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee of any Acquired Company or any other individual to a bonus,
severance pay, unemployment
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compensation or similar payment, (ii) otherwise accelerate the time of payment
or vesting, or increase the amount of any compensation due to any current or
former employee of any Acquired Company, (iii) result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available or (iv) in any way result in any additional
liability with respect to any Acquired Company Employee Benefit Plan.
(g) No Penalties. No Acquired Company Employee Benefit
Plans or any trusts relating thereto have engaged in any transaction in
connection with which any Acquired Company or any fiduciaries of such Employee
Benefit Plans or related trusts is or could be subject either to a civil penalty
or other liability under Sections 502(i), 406 or 409 of ERISA or a tax imposed
by Section 4975 of the Code, and no event has occurred and no condition exists
with respect to Acquired Company Employee Benefit Plans that could subject any
Acquired Company to any other tax or penalty under the Code or civil penalty or
other liability under ERISA or other Laws.
(h) No Actions. No Action is pending or, to Sellers'
Knowledge, threatened involving any Acquired Company Employee Benefit Plan.
Section 4.23 Taxes.
(a) Tax Returns. All Tax returns, reports, and declarations
of estimated Tax (collectively, "RETURNS") which were required to be filed by
any Acquired Company with any Governmental Authority have been timely filed. All
Returns are true and correct and accurately reflect the Tax liabilities of each
Acquired Company. All Taxes shown to be due pursuant to such Returns, other than
Taxes being contested in good faith and for which adequate reserves are
reflected on the Interim Balance Sheet, have been paid.
(b) Statute of Limitations and Tax Actions. No Acquired
Company has executed any presently effective waiver or extension of any statute
of limitations against assessments and collection of Taxes. There are no pending
or, to Sellers' Knowledge, threatened Claims, assessments, notices, proposals to
assess, deficiencies or audits with respect to Taxes.
(c) Miscellaneous Tax Representations. Proper and accurate
amounts have been withheld and remitted by each Acquired Company from and with
respect to all Persons from whom it is required by applicable law to withhold
for all periods in compliance with the tax withholding provisions of all Laws.
No Acquired Company nor, to Sellers' Knowledge, any other corporation has filed
an election under Section 341(f) of Code that is applicable to any Acquired
Company or any of the Assets. No Acquired Company is a party to any tax sharing
agreement. There is no contract, plan or arrangement covering any Person that,
individually or collectively, would give rise to the payment of any amount that
would not be deductible by any Acquired Company by reason of Section 280G of the
Code. No Acquired Company is a "foreign person" within the meaning of Section
1445(f)(3) of the Code. No Acquired Company has ever been a member of any group
that filed a consolidated federal income tax return.
Section 4.24 Bank Accounts; Powers of Attorney. Schedule 4.24 lists
the names of (a) each bank, trust company and stock or other broker with which
any Acquired Company has an
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account, credit line or safe deposit box or vault, or otherwise maintains
relations (the "BANK ACCOUNTS"), (b) all Persons authorized to draw on, or to
have access to, each of the Accounts, and (c) all Persons authorized by proxies,
powers of attorney or other like instrument to act on behalf of any Acquired
Company in any matter concerning the Business. Each of the Bank Accounts has a
positive cash balance. No proxies, powers of attorney or other like instruments
are irrevocable.
Section 4.25 Suppliers and Customers. The relationships of each
Acquired Company with its suppliers and customers are satisfactory. No such
material customer or supplier has canceled or otherwise terminated, or
threatened to cancel or otherwise terminate, its relationship with any Acquired
Company, or to materially decrease its services to any Acquired Company or its
usage of the services of any Acquired Company.
Section 4.26 Affiliated Transactions. Since the Year-End Balance
Sheet Date, except as listed on Schedule 4.26 no Acquired Company has paid,
loaned or advanced any amount to, or sold, transferred or leased any properties
or assets (tangible or intangible) to, or entered into any agreement or
arrangement with, any of the officers, directors or stockholders of any Acquired
Company or any of its affiliates, except for compensation to officers at rates
not exceeding the rates of compensation paid during the fiscal year ended on the
Year-End Balance Sheet Date and routine travel advances to officers and
employees.
Section 4.27 Books and Records. The Books and Records of each
Acquired Company, all of which have been made available to Purchaser, are
complete and correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls.
Section 4.28 Full Disclosure. No representation or warranty of any
Seller and, until the Closing, Company made in this Agreement, nor any written
statement furnished to Purchaser pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact which affects the Business or financial condition of any
Acquired Company, or omits or will omit to state a material fact necessary to
make the statements or facts contained herein or therein not misleading.
Section 4.29 Brokers. No Person is or will become entitled to
receive any brokerage or finder's fee, advisory fee or other similar payment for
the transactions contemplated by this Agreement by virtue of having been engaged
by or acted on behalf of Seller or any Acquired Company.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers that the statements
set forth in this Article V are correct and complete.
Section 5.1 Organization; Good Standing; Delivery of Charter
Documents. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State
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of Texas. Purchaser is duly qualified or licensed as a foreign corporation in
each jurisdiction in which its assets are owned or leased, or the nature of its
business makes such qualification or licensing necessary, except those
jurisdictions wherein the failure to so qualify could not have a Material
Adverse Effect on Purchaser. Prior to the Signing Date, Purchaser has delivered
to Company and Sellers true and complete copies of Purchaser's Charter Documents
as in effect on the Signing Date.
Section 5.2 Power and Authority. Purchaser has all requisite
corporate power and authority necessary to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby, including the execution, delivery and performance of all
the other Transaction Documents to which Purchaser is a party. Purchaser has all
requisite corporate power and authority necessary to own, operate and lease its
assets and to carry on its business as and where conducted.
Section 5.3 Authorization; Execution and Validity. Each of the
Transaction Documents, when executed and delivered by Purchaser, will be duly
authorized, executed and delivered, and will constitute a valid, legal and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with the terms of such Transaction Document, subject to any Law Affecting
Creditors' Rights.
Section 5.4 No Conflict; Purchaser Consents. The execution,
delivery and performance by Purchaser of each Transaction Document to which it
is a party will not (a) violate any Law, (b) violate any Charter Document of
Purchaser, (c) violate any Order to which Purchaser is a party or by which
Purchaser or its assets is bound, or (d) require any Consent from any Person.
Section 5.5 Full Disclosure. No representation or warranty of
Purchaser made in this Agreement, nor any written statement furnished to Sellers
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact which affects
the business or financial condition of Purchaser, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading.
Section 5.6 Brokers. No Person is or will become entitled to
receive any brokerage or finder's fee, advisory fee or other similar payment for
the transactions contemplated by this Agreement by virtue of having been engaged
by or acted on behalf of Purchaser.
ARTICLE VI.
COVENANTS OF COMPANY AND SELLERS
Section 6.1 Cooperation of Company and Sellers. From the Signing
Date through the Closing Date, Company and each Seller will use all reasonable
efforts (a) to take all actions and to do all things necessary or advisable to
consummate the transactions contemplated by this Agreement, (b) to cooperate
with Purchaser in connection with the foregoing, including using reasonable
efforts to obtain all of the Consents, and (c) subject to the other terms and
conditions
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of this Agreement, to cause all the conditions set forth in Section 9.1, the
satisfaction of which is in the reasonable control of Company or any Seller, to
be satisfied on or prior to Closing.
Section 6.2 Pre-Closing Access to Information. From the Signing
Date through the Closing Date, Company and each Seller will afford to Purchaser
its Representatives access to the properties and the Books and Records of the
Acquired Companies.
Section 6.3 Conduct of Business.
(a) Ordinary Course. From the Signing Date through the
Closing Date, Company and each Seller, in connection with the conduct of the
Business, will use all reasonable efforts to (i) preserve substantially the
relationships with its Representatives, suppliers and customers, (ii) perform
its obligations under all contracts, leases and Permits in all material
respects, (iii) comply with all Laws, (iv) confer with Purchaser regarding
operational matters of a material nature, (v) report periodically to Purchaser
regarding the status of the Businesses and the results of operations of the
Acquired Companies, and (vi) conduct the Businesses in the ordinary course and
consistent with past practices.
(b) Prohibited Actions. Except as otherwise required or
permitted by this Agreement or listed on Schedule 6.3(b), from the Signing Date
through the Closing Date Company and each Seller will not, and Company will
cause each Subsidiary not to, without the prior written consent of Purchaser,
take or fail to take any action as a result of which any of the changes or
events listed in Section 4.8 occur or become likely to occur.
Section 6.4 Supplements to Schedules. If, between the Signing Date
and the Closing Date, Company or any Seller becomes aware that any of its
representations and warranties in this Agreement or the schedules to this
Agreement was inaccurate when made or if during such period any event occurs or
condition changes that causes any of such representations and warranties to be
inaccurate, then such Party will notify Purchaser thereof in writing and
supplement the schedules hereto to account for any such inaccuracy, event or
change. Any such supplement to the schedules will not be deemed to have been
disclosed as of the Signing Date or to have cured any breach of a
representations and warranties made in this Agreement, unless so agreed to in
writing by Purchaser.
Section 6.5 Standstill. Until the earlier to occur of the Closing
or the termination of this Agreement pursuant to Article X, Company and each
Seller will not, nor will Company and each Seller permit any of its
Representatives to, (a) directly or indirectly, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any information or
assistance to, any Person (other than Purchaser and its Representatives)
concerning any merger, sale of securities, sale of substantial assets,
investment proposals or similar transaction involving any Acquired Company, (b)
entertain or discuss any acquisition or investment proposals whatsoever, (c)
disclose to any third party any non-published information concerning any
Acquired Company, the Business or any Acquired Company's financial condition, or
(d) withdraw Seller's intention to sell the Shares to Purchaser.
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Section 6.6 Discharge of Encumbrances. Company and each Seller will
take, and Company will cause each Subsidiary to take, all actions and do all
things necessary to cause all Encumbrances other than Permitted Encumbrances on
any Assets to be terminated or otherwise discharged at or prior to the Closing.
Section 6.7 Non-Disclosure; Non-Competition; Non-Solicitation.
(a) Non-Disclosure Agreement. Each Seller acknowledges, for
itself and each of its Affiliates, that it has and may have access to
Confidential Information and that such Confidential Information does and will
constitute valuable, special and unique property of Purchaser. At no time will
Seller, and at no time will Seller allow its Affiliates or its Representatives
to, (i) use any Confidential Information in any manner adverse to the business
interests of Purchaser, or (ii) disclose any such Confidential Information to
any Person for any reason or purpose whatsoever. Upon the request of Purchaser,
each Seller will, and will cause its Affiliates and Representatives to, deliver
to Purchaser all letters, notes, computer disks, software, notebooks, reports
and other materials which contain Confidential Information and which are in the
possession or under the control of such Seller, Affiliate or Representative.
(b) Non-Competition Agreement. Each Seller agrees, and will
cause each of its Affiliates, not to provide, either directly or indirectly, any
of the Restricted Services within the United States of America for so long as
Purchaser provides services to any Affiliate of a Seller (such time period, the
"RESTRICTION PERIOD").
(c) Non-Solicitation Agreement. For a period equal to the
Restriction Period, each Seller will not, and will cause each of its Affiliates
not to, either on its own behalf or on behalf of any entity providing Restricted
Services, directly or indirectly to the extent that such Seller is prohibited in
engaging in such Restricted Services pursuant to this Section, (i) solicit or
induce, or in any manner attempt to solicit or induce any person employed by, or
an agent of, any Acquired Company or Purchaser to terminate such person's
employment or agency, as the case may be, with such entity, or (ii) solicit,
divert, or attempt to solicit or divert, or otherwise accept as a supplier or
customer, any Person which sells any products and services of any Acquired
Company, furnishes products or services to, or receives products and services
from, Purchaser, nor will such Seller attempt to induce any such supplier or
customer to cease being (or any prospective supplier or customer not to become)
a supplier or customer of any Acquired Company or Purchaser.
(d) Independent Covenants. The covenants set forth in this
Section are independent and separate, and in the event that any provision
contained herein is declared invalid or illegal, the other provisions hereof
will not be affected or impaired thereby and will remain valid and enforceable.
(e) Injunctive Relief. In the event of a breach or
threatened breach by any Seller of any provision of this Section, each Acquired
Company and Purchaser will be entitled to an injunction to prevent irreparable
injury to such entity. Nothing herein will be construed as prohibiting any
Acquired Company or Purchaser from pursuing any other remedies available to
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such entity for such breach or threatened breach, including the recovery of
damages from such Seller.
(f) Acknowledgments of Seller. Each Seller acknowledges
that (i) any public disclosure of the Confidential Information will have an
adverse effect on the Acquired Companies, Purchaser and the Business, (ii) the
Acquired Companies and Purchaser would suffer irreparable injury if Seller
breaches any of the terms of this Section, (iii) the Acquired Companies and
Purchaser will be at a substantial competitive disadvantage if such entity fails
to acquire and maintain exclusive ownership of the Confidential Information or
to abide by the restrictions provided for in this Section, (iv) the scope of the
protective restrictions provided for in this Section are reasonable when taking
into account (A) the negotiations between the Parties and (B) that Seller is the
direct beneficiary of the Purchase Price paid pursuant to this Agreement, (v)
the consideration being paid to Seller pursuant to this Agreement is sufficient
inducement for Seller to agree to the terms hereof, (vi) the provisions of this
Section are reasonable and necessary to protect the Business, to prevent the
improper use or disclosure of the Confidential Information and to provide the
Acquired Companies and Purchaser with exclusive ownership of all such
Confidential Information and (vii) the terms of this Section preclude Seller
from providing the Restricted Services. Without limiting the foregoing, in the
event that a court of competent jurisdiction determines that the Restriction
Period exceeds the maximum reasonable and enforceable time period or that the
designated area exceeds the maximum reasonable and enforceable area, the
Restriction Period or designated area shall be deemed to become and thereafter
shall be the maximum time period or area which such court deems reasonable and
enforceable.
Section 6.8 Transfer of Certain Assets. On or prior to the Closing
Date, Company will transfer to an Affiliate acceptable to Purchaser the claims
contracts and assets specified on Schedule 6.8 (the "TRANSFERRED ASSETS").
ARTICLE VII.
COVENANTS OF PURCHASER
Section 7.1 Cooperation by Purchaser. From the Signing Date through
the Closing Date, Purchaser will use all reasonable efforts (a) to take all
actions and to do all things necessary or advisable to consummate the
transactions contemplated by this Agreement, (b) to cooperate with Company and
Sellers in connection with the foregoing, including using reasonable efforts to
obtain all of the Consents and the Releases, and (c) subject to the other terms
and conditions of this Agreement, to cause all the conditions set forth in
Section 9.2, the satisfaction of which is in the reasonable control of
Purchaser, to be satisfied on or prior to Closing.
Section 7.2 Pre-Closing Access to Information. Purchaser will
refrain from imposing any undue burden upon the Acquired Companies and Sellers
and from interfering with the operations and conduct of the Business.
Section 7.3 Purchasers' Consent. If any Acquired Company gives
written notice to Purchaser that such Acquired Company proposes to take any
action for which Purchaser's
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consent is required under Section 6.3 and if Purchaser has not delivered to
Company a written objection to such proposed action within 10 business days of
such Acquired Company's notice, then Purchaser will be deemed to have consented
to such proposed action. Purchaser's consent to any such proposed action will
not be unreasonably withheld.
Section 7.4 Maintenance of the Segregated Account. Until the
earlier to occur of the Closing or the termination of this Agreement pursuant to
Article X, Purchaser will maintain in the Segregated Account a balance equal to
the lesser of the Base Purchase Price or the Final Purchase Price.
ARTICLE VIII.
MUTUAL COVENANTS
Section 8.1 Governmental Consents.
(a) HSR Filing. Within five business days after the Signing
Date, each Party will take all actions and do all things necessary to file the
notification required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR ACT"). The Parties will use all reasonable efforts to
comply as promptly as practicable with any request made pursuant to the HSR Act
for additional information. Purchaser will pay the statutory filing fees
required by the HSR Act. The Parties anticipate all applicable waiting periods
under the HSR Act to be expired or terminated within 30 days of the filing of
the initial notification required under the HSR Act.
(b) Other Governmental Consents. Promptly after the Signing
Date, each Party will take all actions and do all things necessary to obtain all
Consents required by any Governmental Authority to consummate the transactions
contemplated hereby. Each Party will reasonably cooperate with the other Parties
in obtaining the Consents specified in this Section.
Section 8.2 Consents to Assign Leases and Contracts.
(a) Cooperation and Reasonable Efforts. Each Party hereby
agrees to use reasonable efforts, to take reasonable actions (including
Purchaser's delivery to third parties of its financial statements) and to
cooperate with each other as may be necessary to obtain Consents to transfer and
assign the Encumbered Instruments. Except as expressly provided herein, no Party
will be required to pay any sum, to incur any obligation or to agree to any
amendment of any Encumbered Instrument in order to obtain any such Consent to
transfer and assign the Encumbered Instrument.
(b) Pre-Closing; Required Consents. Schedule 8.2(b) lists
the Encumbered Instruments to which a Consent to transfer and assign must be
obtained from the appropriate third party prior to Closing (collectively, the
"REQUIRED CONSENTS"). Except for the Required Consents, the obtaining of any
Consents related to the Encumbered Instruments will not be a condition to
Closing, and Closing will occur irrespective of whether any such Consent has
been obtained.
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Section 8.3 Permits.
(a) Cooperation and Reasonable Efforts. Each Party hereby
agrees to use reasonable efforts, to take reasonable actions (including
Purchaser's delivery to any Governmental Authority of its financial statements)
and to cooperate with each other as may be necessary to transfer to Purchaser,
or assist Purchaser in obtaining, all Permits required to conduct the Business.
On or as soon as practicable after the Signing Date, each Party will file,
separately or jointly with any other Party, as the case may be, all applications
necessary to transfer or obtain the Permits. Each Party will use reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Authority with respect to the applications contemplated hereby.
Sellers, as a group, and Purchaser will each pay one-half of the fees and
expenses incurred in connection with transferring or obtaining all Permits.
(b) Pre-Closing; Required Permits. Schedule 8.3(b) lists
the Permits which must be transferred to or obtained by Purchaser prior to
Closing (the "REQUIRED PERMITS"). Except for the Required Permits, the transfer
or issuance to Purchaser of any Permit will not be a condition to Closing, and
Closing will occur irrespective of whether any such Permit has been transferred
or obtained.
Section 8.4 Books and Records.
(a) Access. For a period of six years after Closing, each
Party will provide the other Parties with reasonable access during normal
business hours to its Books and Records relating to the Business (other than
books and records protected by the attorney-client privilege) to the extent that
they relate to the condition or operation of the Business prior to Closing and
are requested by such Party to prepare its Returns, to respond to third party
Claims or for any other legitimate purpose specified in writing. Each Party will
have the right, at its own expense, to make copies of any such Books and
Records.
(b) Destruction. For a period of six years after Closing
(unless otherwise required by Law), no Party will dispose of or destroy any
Books and Records relating to the Business to the extent that they relate to the
condition or operation of the Business prior to the Closing without first
offering to turn over possession thereof to the other Parties by written notice
at least 30 days prior to the proposed date of disposition or destruction.
(c) Confidentiality. Each Party may take such action as it
deems reasonably appropriate to separate or redact information unrelated to the
Business from documents and other materials requested and made available
pursuant to this Section and may condition the other Parties' access to
documents and other materials that it deems confidential to the execution and
delivery of an agreement by the other Parties not to disclose or misuse such
information.
(d) Assistance. Each Party will, upon written request and
at the requesting Party's expense, make personnel available to assist in
locating and obtaining any Books and Records relating to the Business to the
extent that they relate to the condition or operation of the Business prior to
Closing and make personnel available whose assistance, participation or
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testimony is reasonably required in anticipation of, preparation for or the
prosecution or defense of any third party Claim in which the other Parties do
not have any adverse interest.
(e) Further Assurances. Subject to the other terms and
conditions of this Agreement, at any time and from time to time, whether before
or after Closing, each Party will execute and deliver all instruments and
documents and take all other action that the other Parties may reasonably
request to consummate or to evidence the consummation of the transactions
contemplated by this Agreement.
Section 8.5 Tax Matters.
(a) Apportionment of Income and Loss. For purposes of
apportioning taxable income or loss relating to any taxable period that ends on
the Closing Date ("SHORT TAX PERIOD") and for that portion of any taxable year
that includes (but that does not end on) the Closing Date (a "PARTIAL TAX
PERIOD"), such taxable income or loss will be determined by reference to the
operations of the Acquired Companies through the Closing Date as though it were
the last day of a taxable year. If required, appropriate elections will be made
with applicable taxable authorities to accomplish such result.
(b) Liability For Short Period Tax. Any taxable income or
loss with respect to a Short Tax Period will be included in the Acquired
Companies federal income Tax Return, and, if applicable, consolidated, unitary
or combined state income Tax Returns filed on behalf of the Acquired Companies
in all jurisdictions to which the Acquired Companies are subject to income Tax
(together with the United States federal Return, the "SUBJECT JURISDICTIONS").
Any income tax payable with respect to such Short Tax Period will be borne by
Sellers, as a group, and Purchaser as hereinafter provided; provided, however,
that any tax liability arising from an election made under Section 338 of the
Code will be borne solely by Purchaser.
(c) Liability For Partial Period Tax. With respect to
income Tax Returns filed in Subject Jurisdictions that include a Partial Tax
Period, income taxes attributable to such Partial Tax Periods will be computed
according to the apportionment rule of subsection (a) above. Any income tax
payable with respect to any such Partial Tax Period will be borne by the
Sellers, as a group, and Purchaser as hereinafter provided; provided, however,
that any tax liability arising from an election made under Section 338 of the
Code will be borne solely by Purchaser.
(d) Payment of Short Period Taxes. With respect to each Tax
Return covering a Short Tax Period that is required to be filed in a Subject
Jurisdiction after the Closing Date for, by or with respect to Company or any
Subsidiary, Sellers will cause such Tax Return to be prepared, will cause to be
included in such Tax Return all items of income, gain, loss, deduction and
credit or other items (collectively "TAX ITEMS") required to be included
therein, and will deliver the original of such Tax Return to Purchaser, with
copies of work papers that will permit Purchaser to review and substantiate the
accuracy of such Tax Return, at least 45 days prior to the due date (including
extensions) of such Tax Return. Sellers, severally, will pay to Purchaser not
less than 10 days prior to the due date (including extensions) of a Tax Return
to be filed in a Subject Jurisdiction for a Short Tax Period the amount of tax
shown to be due on such Tax
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Return (except any tax liability arising from an election made under Section 338
of the Code will be borne solely by Purchaser) less any amount reflected on the
Interim Financial Statement as a current tax liability.
(e) Payment of Partial Period Tax. With respect to each Tax
Return to be filed in a Subject Jurisdiction covering a Partial Tax Period by or
with respect to the Acquired Companies, Purchaser will cause such Tax Return to
be prepared and will cause to be included in such Tax Return all Tax Items
required to be included therein. Purchaser will determine (by an interim closing
of the books as of the Closing Date, except for ad valorem Taxes and franchise
Taxes based on capital which will be prorated on a daily basis) the portion, if
any, of the Tax due with respect to the period covered by such Tax Return to be
filed in a Subject Jurisdiction which is attributable to the Acquired Companies
with respect to the Partial Tax Period after giving effect to (i) any credits
for the amount of such Tax, if any, paid on or prior to the Closing Date and
(ii) any amount reflected on the Final Closing Premium Statement as a current
tax liability which remains unused as of the due date for a particular Return.
At least 45 days prior to the due date (including extensions) of such Tax
Return, Purchaser will deliver to each Seller a copy of such Tax Return with
copies of work papers which will permit Sellers to review and substantiate the
accuracy of such Returns. Sellers, severally, will pay to Purchaser the amount
of Tax due in the Subject Jurisdictions determined to be attributable to the
Partial Tax Period (except any tax liability arising from an election made under
Section 338 of the Code will be borne solely by Purchaser) not less than 10 days
prior to the due date (including extensions) of such Tax Return.
(f) Appointment of Independent Person. If Purchaser and
Sellers' fail to agree by the day which is 30 days prior to the due date
(including extensions) of a Tax Return due pursuant to this Section, the matters
in dispute (but no other matters) will be submitted to a firm of independent
certified accountants mutually acceptable to Purchaser and Sellers, as a group
(the "INDEPENDENT PERSON"), which firm will make a final and binding
determination as to the matters in dispute within 15 days after its appointment.
The Independent Person will send its written determination, at which point the
determination of the Independent Person will be binding on Purchaser and
Sellers, absent fraud or manifest error. The fees and expenses of the
Independent Person will be borne equally by the Purchaser, on the one hand, and
the Sellers, on the other hand.
(g) Consistency. Any Tax Return to be prepared pursuant to
the provisions of this Section will be prepared in a manner consistent with
practices followed in prior years with respect to similar Tax Returns, except
for changes required by applicable law.
ARTICLE IX.
CONDITIONS PRECEDENT TO CLOSING
Section 9.1 Conditions Precedent to Purchaser's Obligations. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement will be subject to the satisfaction of the following conditions, any
of which may be waived in writing by Purchaser.
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(a) Accuracy of Representations and Warranties. The
representations and warranties made by each Seller and, until the Closing,
Company in this Agreement will have been true and complete as of the Signing
Date and as of the Closing Date as though made as of the Closing Date, except to
the extent such representations or warranties made as of a specific date will
have been correct and complete as of the specified date.
(b) Performance of Covenants. Company and each Seller will
have performed and complied with all agreements, covenants and obligations
required by this Agreement to be performed by such party prior to or at the
Closing.
(c) No Material Adverse Change. No Acquired Company has
undergone any Material Adverse Change since the Signing Date.
(d) Consents. Company and each Seller, as the case may be,
will have received and delivered to Purchaser all the Required Consents and the
Required Permits, each in form and substance satisfactory to Purchaser, and will
have given all notices required to be given to any Persons prior to the
consummation of the transactions contemplated by this Agreement.
(e) Closing Certificate. An executive officer of Company
and each Seller will have delivered to Purchaser a certificate confirming (i)
the satisfaction of the conditions set forth in Sections 9.1(a), 9.1(b) and
9.1(c) and (ii) the continuing force and effect of the Required Consents and
Required Permits.
(f) Secretary's Certificate--Company. Company will have
delivered to Purchaser a certificate executed by the secretary or an assistant
secretary of Company certifying as to Company's Charter Documents, Company's
good standing, (iii) the resolutions in which Company's board of directors
approved this Agreement and the transactions contemplated hereby, and the
incumbency of Company's officers who execute any documents on behalf of Company
in connection with this Agreement.
(g) Secretary's Certificate--Acquired Companies. Company
will have caused each Acquired Company to deliver to Purchaser a certificate
executed by the secretary or an assistant secretary of such Acquired Company
certifying as to (i) such Acquired Company's Charter Documents, (ii) such
Acquired Company's good standing and (iii) the incumbency of such Acquired
Company's officers who execute any documents on behalf of such Acquired Company
in connection with this Agreement.
(h) Deliveries. Company and each Seller, as the case may
be, will have delivered the documents required by Sections 2.3 and 2.2,
respectively, and such other documents as Purchaser may reasonably require.
(i) Compliance with HSR Act. All applicable waiting periods
under the HSR Act will have expired or been terminated.
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(j) Consummation of Asset Purchase. The consummation of the
transactions set forth in that certain Asset Purchase Agreement, dated the
Signing Date, between Purchaser and Arrowhead General Insurance Agency, Inc.
(k) Transfer of the Transferred Assets. Company will have
consummated the transfer of the Transferred Assets.
(l) Claims and Policy Administration Services Agreements.
The execution and delivery by each of Arrowhead Management Company, Inc.,
Arrowhead General Insurance Agency, Inc. and the transferee of the Transferred
Assets of (i) a Claims Administration Services Agreement in substantially the
form attached hereto as Exhibit 9.1(l)(1) and (ii) a Policy Administration
Services Agreement in substantially the form attached hereto as Exhibit
9.1(l)(2).
(m) Establishment of a Ethical Wall. Company and each of
Arrowhead Management Company, Inc. and Arrowhead General Insurance Agency, Inc.
will have agreed to the establishment of written procedures related to the use
by Company of the software applications listed on Schedule 9.1(m).
(n) No Order or Action. No Order will be in effect
forbidding or enjoining the consummation of the transactions contemplated
hereby. No Action will be pending or threatened before any court or other
Governmental Authority seeking to enjoin the Closing or seeking damages against
Purchaser or any of its Representatives as a result of any of the transactions
contemplated by this Agreement, provided that neither Purchaser nor any of its
affiliates instituted such Action.
Section 9.2 Conditions Precedent to Company and Sellers'
Obligations. The obligation of Company and each Seller to consummate the
transactions contemplated by this Agreement will be subject to the satisfaction
of the following conditions, any of which may be waived in writing by Company or
Sellers, as the case may be.
(a) Accuracy of Representations and Warranties. The
representations and warranties made by Purchaser in this Agreement will have
been true and complete as of the Signing Date and as of the Closing Date as
though made as of the Closing Date, except to the extent such representations or
warranties made as of a specific date will have been correct and complete as of
the specified date.
(b) Performance of Covenants. Purchaser will have performed
and complied with all agreements, covenants and obligations required by this
Agreement to be performed by Purchaser prior to or at the Closing.
(c) Closing Certificate. An executive officer of Purchaser
will have delivered to Company and each Seller a certificate confirming the
satisfaction of the conditions set forth in Sections 9.2(a) and 9.2(b).
(d) Secretary's Certificate. Purchaser will have delivered
to Company and each Seller a certificate executed by the secretary or an
assistant secretary of Purchaser certifying
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as to (i) Purchaser's Charter Documents, (ii) Purchaser's good standing, (iii)
the resolutions in which Purchaser's board of directors approved this Agreement
and the transactions contemplated hereby, and (iv) the incumbency of Purchaser's
officers who execute any documents on behalf of Purchaser in connection with
this Agreement.
(e) Deliveries. Purchaser will have delivered the documents
required by Section 2.4 and such other documents as Sellers may reasonably
require.
(f) Compliance with HSR Act. All applicable waiting periods
under the HSR Act will have expired or been terminated.
(g) Consummation of the Asset Purchase. The consummation of
the transactions set forth in that certain Asset Purchase Agreement, dated the
Signing Date, between Purchaser and Arrowhead General Insurance Agency, Inc.
(h) No Order or Action. No Order will be in effect
forbidding or enjoining the consummation of the transactions contemplated
hereby. No Action will be pending or threatened before any court or other
Governmental Authority seeking to enjoin the Closing or seeking damages against
Company or any Seller or any of their Representatives as a result of any of the
transactions contemplated by this Agreement, provided that neither Company nor
any Seller nor any of their affiliates instituted such Action.
Section 9.3 If Conditions Not Satisfied. In the event that any of
the conditions set forth in this Article IX are not satisfied, and the Parties
nevertheless consummate the transactions contemplated by this Agreement to take
place at the Closing, the Parties will not be deemed to have waived any Claim
for damages or other relief arising from or in connection with such
non-satisfaction.
ARTICLE X.
TERMINATION PRIOR TO CLOSING
Section 10.1 Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual agreement of the Parties;
(b) by Purchaser at any time after the occurrence of a
Material Adverse Change in any Acquired Company; or
(c) by Purchaser or Company or any Seller at any time on or
after December 31, 1998 if any of the conditions provided for in Section 9.1 or
9.2, respectively, will not have been met or waived in writing prior to such
date.
Section 10.2 Procedure Upon Termination. In the event of termination
pursuant to Section 10.1, written notice thereof will be immediately given to
the other Parties and the
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transactions contemplated by this Agreement will be terminated, without any
further action by any Party. If the transactions contemplated by this Agreement
are terminated as provided herein:
(a) each Party will return all documents, work papers and
other materials of the other parties, whether obtained before or after the
execution hereof, to the party furnishing the same; and
(b) such termination will not in any way limit, restrict or
relieve any Party of liability for any breach of this Agreement.
ARTICLE XI.
INDEMNIFICATION
Section 11.1 Indemnification of Purchaser.
(a) Several Indemnification Obligation. Each Seller will,
severally but not jointly, indemnify, defend, and hold Purchaser harmless from
any and all Claims directly or indirectly related or arising with respect to:
(i) Any inaccuracy in any representation or
warranty of Seller made in Article III or in the certificate delivered by such
Seller pursuant to Section 2.2(a) (as such certificates relate to the
representations and warranties set forth in Article III); and
(ii) Any failure by Seller to perform or observe
the covenant or agreement set forth in Section 6.7.
(b) Joint and Several Indemnification Obligation. Each
Seller and, until the Closing, Company will, joint and severally, indemnify,
defend, and hold Purchaser harmless from any and all Claims directly or
indirectly related or arising with respect to:
(i) Any inaccuracy in any representation or
warranty made in Article IV or in the certificates delivered pursuant to
Sections 2.2(a) (as such certificates relate to the representations and
warranties set forth in Article IV) and 2.3(a);
(ii) Any failure to perform or observe (A) in the
case of any covenant or agreement of Company which by its terms relates to the
time period prior to the Closing, any covenant or agreement of Company set forth
in this Agreement or in any agreement delivered pursuant to this Agreement, (B)
any covenant or agreement of Sellers set forth in this Agreement (other than the
covenant or agreement set forth in Section 6.7) or in any agreement delivered
pursuant to this Agreement;
(iii) The Transferred Assets;
(iv) Any Claim related to an Action arising out of
or in connection with the conduct of the Business on or prior to the Closing
Date, whether asserted before or after the Closing Date; and
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(v) Any failure of Seller to comply with all Laws
in the conduct of the Business on or prior to the Closing Date.
Section 11.2 Indemnification of Sellers. Purchaser will indemnify,
defend, and hold Sellers and, until the Closing, Company harmless from any and
all Claims directly or indirectly related or arising with respect to:
(a) Breaches of Representations and Warranties. Any
inaccuracy in any representation or warranty of Purchaser made in Article V or
in the certificates delivered by Purchaser pursuant to Section 2.4(d); or
(b) Breaches of Covenants. Any failure to perform or
observe (A) in the case of any covenant or agreement of Company which by its
terms relates to the time period after the Closing, any covenant or agreement of
Company set forth in this Agreement or in any agreement delivered pursuant to
this Agreement, (B) any covenant or agreement of Purchaser set forth in this
Agreement or in any agreement delivered pursuant to this Agreement.
Section 11.3 Indemnification Procedure. The indemnification
obligations under this Agreement will be subject to the following procedures:
(a) Defense of Claim. Within five days after a Party
entitled to indemnification (an "INDEMNITEE") receives a notice of any Claim
that may give rise to an indemnification obligation under this Agreement, the
Indemnitee will give the Party responsible for providing indemnification with
respect to such Claim (the "INDEMNITOR") notice of such Claim, together with a
copy of all documents relating to such Claim that the Indemnitee possesses. The
Indemnitor will then immediately undertake the defense of such Claim by
representatives of its own choosing, provided that the Indemnitee will have the
right to control and undertake such defense by representatives of its own
choosing if the Claim could have a continuing effect upon the Indemnitee or
involves any Environmental Law or Hazardous Material. The Indemnitor will notify
the Indemnitee of the Indemnitor's undertaking of the defense of a Claim
promptly after receiving the notice of the Claim. Similarly, the Indemnitee will
notify promptly the Indemnitor of the Indemnitee's election of its right to
control such defense under the circumstances described above. The failure to
give notice of a Claim within the period described above will not affect the
Indemnitee's rights to indemnification under this Agreement unless such delay
prejudices the Indemnitor.
(b) Participation of the Indemnitee. If ten days after
delivering notice of a Claim to the Indemnitor or such shorter period necessary
to prevent judgment by default in favor of the Person asserting the Claim, the
Indemnitor has not begun to defend against such Claim, the Indemnitee will have
the right to defend or settle such Claim on behalf of the Indemnitor.
Notwithstanding whether the Indemnitor commences at any time to defend against a
Claim, the Indemnitee will have the right to participate in such defense by
representatives of its own choosing. The Indemnitee will bear any expense of
such participation if the Indemnitor is defending against the Claim unless
defenses exist to the Indemnitee that are unavailable to the Indemnitor or the
Indemnitor otherwise possesses a conflict of interest with respect to the
Indemnitee. Under such circumstances, the Indemnitor will reimburse the
Indemnitee for the Indemnitee's reasonable attorneys' fees and expenses. In
addition, the Indemnitor will reimburse the Indemnitee for the
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Indemnitee's reasonable attorneys' fees and expenses incurred during the period
when the Indemnitor did not defend against the Claim and in connection with
Claims that Purchaser possesses the right to defend. Notwithstanding whether the
Claim involves a purported breach of the Indemnitor's representations and
warranties, the Indemnitor's obligation to reimburse such fees and expenses will
not be subject to the Indemnitor's Basket or Maximum Liability. The Indemnitor
will make such reimbursement payments to the Indemnitee upon the Indemnitee's
submission of periodic invoices describing such fees and expenses in reasonable
detail.
(c) Settlement of Claims. The Indemnitor may settle any
Claim at its own expense, provided that the Indemnitor will not settle any Claim
or consent to the entry of any judgment without the consent of the Indemnitee if
such settlement or judgment (i) includes any admission of wrongdoing by the
Indemnitee or any of the Indemnitee's Representatives, (ii) includes any consent
to any type of injunctive relief affecting the Indemnitee or any of the
Indemnitee's Representatives, (iii) excludes an unconditional release by the
Person asserting the Claim of the Indemnitee and the Indemnitee's
Representatives from all liability with respect to such Claim, or requires the
Indemnitee or any of the Indemnitee's Representatives.
(d) Reimbursement. If an Indemnitor undertakes the defense
of any Claim or settles any Claim and such Claim was not within the scope of the
Indemnitor's indemnification obligations under this Agreement, the Indemnitee
will promptly reimburse the Indemnitor for all expenses with respect to such
defense or settlement, including the Indemnitor's reasonable attorneys' fees and
expenses.
(e) Cooperation. In connection with any indemnity
obligation, the Indemnitee will cooperate with all reasonable requests of the
Indemnitor.
(f) Payment--Net of Insurance Proceeds. The amount of any
damage or indemnification payable pursuant to this Article will be net of any
insurance proceeds actually received by the Indemnitee in connection with the
circumstances giving rise to the Claim. The calculation of net insurance
proceeds will give effect to all costs incurred by the Indemnitee for such
insurance recovery, including all costs associated with retrospective premium
adjustments, experienced-based premium adjustments, and indemnification
obligations. Nothing in this Section will be construed or interpreted as a
guaranty of any level or amount of insurance recovery with respect to any Claim
hereunder.
(g) Payment--Net of Tax Benefit and Detriment. The Parties
will treat any payment or receipt of damages or indemnification hereunder as an
adjustment to the Final Purchase Price on all Tax Returns, except for the
interest component of any such payment, which the Parties will treat as interest
income or expense, as the case may be. To the extent that any damage or
indemnification payment exclusive of the interest component constitutes taxable
income to the Indemnitee, the amount of such damage or indemnification payment
will be increased by the amount of any income Tax attributable to such payment
and the reimbursement of any related income Taxes. To the extent that any damage
or indemnification payment
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exclusive of the interest component constitutes a reduction of taxable income to
the Indemnitee, the amount of such damage or indemnification payment will be
decreased by the amount of any income Tax attributable to such reduction of
taxable income.
Section 11.4 Meritless Third Party Claims, If a third party makes a
Claim against the Indemnitee that ultimately proves to be meritless, the
Indemnitee may nevertheless require the Indemnitor to defend such Claim and
reimburse the Indemnitee for its reasonable attorneys' fees and expenses in
connection with such Claim if such Claim was within the scope of the
Indemnitor's indemnification obligations under this Agreement.
Section 11.5 Assignment of Claims. If any amounts for which the
Indemnitor is responsible are recoverable from a third party, the Indemnitee
will assign any rights that it may have to recover such amounts to the
Indemnitor.
Section 11.6 Other Indemnitees. Upon Purchaser's request, Sellers
will indemnify any of Purchaser's Representatives to the same extent as
Purchaser. Conversely, upon any Seller's request Purchaser will indemnify any of
Seller's Representatives to the same extent as such Seller. No Representative of
any Party, however, will be a third party beneficiary of the indemnification
provisions set forth in this Agreement. In addition, a Party may release or
waive any Claim to which such Party previously requested another Party to
indemnify such Party's Representatives, and such Representatives will have no
recourse against the Party releasing or waiving such Claim. To the extent that a
Party requests another Party to indemnify such Party's Representatives, such
Party will cause its Representatives to comply with the indemnification
provisions and abide by the indemnification limitations set forth in this
Agreement.
Section 11.7 Contribution. If the indemnity obligations provided for
in this Agreement are held unenforceable in whole or in part for any reason,
each Party will perform such indemnity obligations to the extent enforceable. To
the extent that such indemnity obligations are unenforceable, the Party that
would have been the Indemnitor with respect to a Claim except for such
unenforceability will contribute to such Claim in such proportion as appropriate
to reflect the relative fault of such Party as opposed to the relative fault of
the Person who would have been the Indemnitee, as well as any other relevant
equitable considerations.
Section 11.8 Damages Without Indemnification. A Party may assert a
Claim for damages against another Party for a breach of this Agreement even
though the Party seeking such damages has not incurred a liability or made a
payment to another Person.
Section 11.9 Basket. The Parties acknowledge that all the
representations and warranties set forth in this Agreement are without
qualification as to materiality and that the provisions of this Section
regarding the Basket are intended to serve as the exclusive standard of
materiality for purposes of this Agreement. Sellers and Company, on the one
hand, and Purchaser, on the other hand, will not be liable for any Claim for
damages or indemnification with respect to a breach of representations and
warranties under this Agreement until the aggregate amount of such Claims for
damages and indemnification concerning breaches of representations and
warranties exceeds $10,000 (as the case may be, the "BASKET"); provided,
however, that the Basket will not apply to any breach of the representations and
warranties set
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forth in Sections 3.1 or 4.5. If the aggregate amount of such Claims for which
Sellers and Company, on the one hand, and Purchaser, on the other hand, is
responsible exceeds the Basket, the Indemnitor will then only be responsible for
the amount of such excess.
Section 11.10 Liability Not Limited to Set-Off Under the Option
Agreement. Each Party acknowledges and agrees that (a) the value of the Option
Shares (as defined in the Option Agreement) is not intended to be, nor will that
amount be construed as, Sellers' or Company's maximum amount of damages or
indemnification with respect to any Claim for a breach of such Party's
representations and warranties under this Agreement and (b) Purchaser may pursue
any rights or remedies available at law or in equity in connection with this
Agreement notwithstanding the availability of the right of set-off under the
Option Agreement.
Section 11.11 Liabilities for Special Indemnities and Breaches of
Covenants. Sellers' Basket will be inapplicable with respect to any Claim for
damages or indemnification concerning Sellers' breach of any representation and
warranty that the indemnities pursuant to Sections 11.1(b)(iii), 11.1(b)(iv) and
11.1(b)(v) cover. Any damages or indemnification with respect to any such Claims
will not count toward Sellers' Basket. A Party's Basket will be inapplicable
with respect to any Claim for damages or indemnification concerning such Party's
breach of any of its covenants under this Agreement or any other terms of this
Agreement applicable to such Party, other than the representations and
warranties to which such Party's Basket apply.
Section 11.12 Consequential Damages. A Party will be (a) liable for
any consequential, incidental, punitive, or special damages with respect to any
breach of this Agreement, and (b) responsible for indemnifying an Indemnitee for
any consequential, incidental, punitive, or special damages that such Indemnitee
incurs if within the scope of such Party's indemnification obligation.
Section 11.13 Interest. A Party will pay interest computed at the
then current prime rate on (a) any Claim for damages with respect to such
Party's breach of this Agreement from the date of the breach through the date
that the Party pays such damages, and (b) any Claim for indemnification under
this Agreement for which such Party is the Indemnitor from the date of the
Indemnitee's indemnifiable out-of-pocket expenditure through the date that the
Party pays such Claim.
Section 11.14 Notice of Breach Prior to Closing. If before the
Closing a Party notifies another Party of its breach of this Agreement, such
notification will neither prevent such other Party from seeking damages for such
breach nor decrease or mitigate such damages if such other Party still closes
the transactions contemplated by this Agreement.
Section 11.15 Discovery of Breach Prior to Closing. If before the
Closing a Party discovers that another Party has breached this Agreement, such
discovery will neither prevent such Party from seeking damages for such breach
nor decrease or mitigate such damages if such Party still closes the
transactions contemplated by this Agreement.
Section 11.16 Survival of Terms. The agreements, covenants, indemnity
obligations, representations and warranties, and other terms of this Agreement,
Purchaser's closing
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certificate, each Seller's closing certificate, Company's closing certificate
and any other documents contemplated under this Agreement will survive the
Closing and any investigation or notice by any Party, provided that the
representations and warranties of each Party under this Agreement will expire 30
days after the expiration of the applicable statute of limitations, as such
statutory period may be extended from time to time. Notwithstanding the general
expiration of each Party's representations and warranties described above, the
representations and warranties set forth in Article III, Sections 4.2 (Power and
Authority), 4.3 (Authorization; Execution and Validity), 4.4 (No Conflict), 4.5
(Capitalization), 4.9(c) (Title to Assets), 4.28 (Full Disclosure) and 4.29
(Brokers) will survive forever, subject to all defenses available under Law,
including the expiration of any applicable statute of limitations. A Party will
not be responsible with respect to any Claim for damages or indemnification with
respect to any inaccuracy in any of such Party's representations or warranties
unless such Party receives notice of the Claim with respect to such inaccuracy
before such representation and warranty expires. With respect to any such Claim
received before the expiration of a particular representation or warranty, the
Party responsible for such representation or warranty will remain responsible
for any damage or indemnification amounts claimed notwithstanding the subsequent
expiration of such representation or warranty.
Section 11.17 Negligence and Strict Liability. THE PROVISIONS OF THIS
AGREEMENT CONCERNING CLAIMS FOR DAMAGES AND INDEMNIFICATION WILL APPLY WHETHER
OR NOT THE PARTY OR OTHER PERSON CLAIMING SUCH DAMAGES OR INDEMNIFICATION WAS
NEGLIGENT, GROSSLY NEGLIGENT, OR STRICTLY LIABLE IN CONNECTION WITH THE EVENTS
GIVING RISE TO SUCH CLAIM.
ARTICLE XII.
MISCELLANEOUS
Section 12.1 Amendment. No amendment of this Agreement will be
effective unless in a writing signed by the Parties.
Section 12.2 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original
agreement, but all of which will constitute one and the same agreement. Any
Party may execute and deliver this Agreement by an executed signature page
transmitted by a facsimile machine. If a Party transmits its signature page by a
facsimile machine, such Party will promptly thereafter deliver an originally
executed signature page to the other Parties, provided that any failure to
deliver such an originally executed signature page will not affect the validity,
legality, or enforceability of this Agreement.
Section 12.3 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the Parties and supersedes all prior
agreements and understandings, both written and oral, with respect to the
subject matter of this Agreement.
Section 12.4 Expenses. Each Party will bear its own expenses with
respect to the negotiation and preparation of this Agreement and the Closing,
including any fees and expenses
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of its Representatives, provided that if a Party terminates this Agreement
because of another Party's breach of this Agreement, the non-breaching Party
will be entitled to seek reimbursement of its expenses as part of its damages
with respect to such breach. Sellers, as a group, will bear any Tax imposed in
connection with the transfer of the Assets to Purchaser pursuant to this
Agreement.
Section 12.5 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY THE
LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.
Section 12.6 No Assignment. No Party may assign its benefits or
delegate its duties under this Agreement without the prior consent of the other
Parties. Any attempted assignment or delegation without such prior consent will
be void. Notwithstanding the foregoing, after the Closing each Party may assign
its rights under this Agreement to a purchaser of all of the assets or equity of
such Party without the other Parties' consent, and any such purchaser and any
subsequent purchasers of all of the assets or equity of such Party may similarly
assign such rights.
Section 12.7 No Third Party Beneficiaries. This Agreement is solely
for the benefit of the Parties and no other Person will have any right,
interest, or claim under this Agreement.
Section 12.8 Notices. All claims, consents, designations, notices,
waivers, and other communications in connection with this Agreement will be in
writing. Such claims, consents, designations, notices, waivers, and other
communications will be considered received (a) on the day of actual transmittal
when transmitted by facsimile with written confirmation of such transmittal, (b)
on the next business day following actual transmittal when transmitted by a
nationally recognized overnight courier, or (c) on the third business day
following actual transmittal when transmitted by certified mail, postage
prepaid, return receipt requested; in each case when transmitted to a Party at
the address or location set forth on Schedule 12.8 (or to such other address to
which such Party has notified the other Parties in accordance with this Section
to send such claims, consents, designations, notices, waivers, and other
communications).
Section 12.9 Public Announcements. The Parties will agree on the
terms of any press releases or other public announcements related to this
Agreement, and will consult with each other before issuing any press releases or
other public announcements related to this Agreement; provided, however, that
any Party may make a public disclosure if in the opinion of such party's counsel
it is required by Law or the rules of the New York Stock Exchange or the Nasdaq
National Market to make such disclosure. The parties agree, to the extent
practicable, to consult with each other regarding any such public announcement
in advance thereof.
Section 12.10 Representation by Legal Counsel. Each Party is a
sophisticated Person that was advised by experienced legal counsel and other
advisors in the negotiation and preparation of this Agreement.
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Section 12.11 Schedules. All references in this Agreement to
schedules will mean the schedules identified in this Agreement, which are
incorporated into this Agreement and will be deemed a part of this Agreement for
all purposes. Each Section of this Agreement that refers to a schedule will have
a separate schedule. In addition, any disclosure under a particular section's
schedule will be made under the heading of any relevant subsection of such
section. A disclosure of an item in a schedule for a particular section or under
a heading in a schedule corresponding to a particular subsection will not be a
disclosure under any other section's schedule or any other subsection, unless so
noted specifically on such schedule. Sellers have delivered to Purchaser a
correct and complete copy of each document described on each schedule to this
Agreement and a correct and complete written description of each unwritten
arrangement or other item described on each such schedule.
Section 12.12 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will not invalidate the
remaining provisions of this Agreement or affect the validity or enforceability
of such provision in any other jurisdiction. In addition, any such prohibited or
unenforceable provision will be given effect to the extent possible in the
jurisdiction where such provision is prohibited or unenforceable.
Section 12.13 Successors. This Agreement will be binding upon and
will inure to the benefit of each Party and its heirs, legal representatives,
permitted assigns, and successors, provided that this Section will not permit
the assignment or other transfer of this Agreement, whether by operation of law
or otherwise, if such assignment of other transfer is not otherwise permitted
under this Agreement.
Section 12.14 Time of the Essence. Time is of the essence in the
performance of this Agreement and all dates and periods specified in this
Agreement.
Section 12.15 Waiver. No provision of this Agreement will be
considered waived unless such waiver is in writing and signed by the Party that
benefits from the enforcement of such provision. No waiver of any provision in
this Agreement, however, will be deemed a waiver of a subsequent breach of such
provision or a waiver of a similar provision. In addition, a waiver of any
breach or a failure to enforce any term or condition of this Agreement will not
in any way affect, limit, or waive a Party's rights under this Agreement at any
time to enforce strict compliance thereafter with every term and condition of
this Agreement.
Section 12.16 Attorney's Fees. In the event of any Action among the
Parties seeking enforcement of any of the terms and conditions of this
Agreement, the prevailing party in such Action will be awarded its reasonable
costs and expenses, including its court costs and reasonable attorneys' fees.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each Party executed, or has caused a duly
authorized officer to execute, this Agreement as of the Signing Date.
PURCHASER: INSpire INSURANCE SOLUTIONS, INC.
By: /s/ WILLIAM J. SMITH
--------------------------------------
William J. Smith, III, President
COMPANY: ARROW CLAIMS MANAGEMENT, INC.
By: /s/ KEVIN MCDONALD
--------------------------------------
Kevin McDonald, President
SELLERS: /s/ JOHN C. GALL
-----------------------------------------
John C. Gall, as Trustee for the
Patrick J. Kilkenny Irrevocable
Trust dated September 30, 1992
/s/ MARIANNE HARMON
-----------------------------------------
Marianne Harmon, in her individual
capacity
/s/ MYRON SIMA
-----------------------------------------
Myron Sima, in his individual capacity
/s/ GARY KADOTA
-----------------------------------------
Gary Kadota, in his individual capacity
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APPENDIX A
DEFINITIONS AND RULES OF INTERPRETATION
Definitions. Unless the context otherwise requires, the terms defined
in this Appendix will have the meanings specified below for all purposes of this
Agreement:
(a) "ACCOUNTS RECEIVABLE" will have the meaning set forth
in Section 4.10.
(b) "ACQUIRED COMPANIES" means Company and the
Subsidiaries.
(c) "ACTION" means any action, arbitration proceeding,
cause of action, charge, counterclaim, cross claim, inquiry, investigation,
legal action, litigation, Order, proceeding, or suit.
(d) "ADJUSTMENT AMOUNT" will have the meaning set forth in
Section 1.5(c).
(e) "AFFILIATE" means with respect to a Person means any
other Person that directly or indirectly controls, is controlled by, or is under
common control with such Person. For the purposes of this definition, control
means the power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by contract, or
otherwise. Control shall be presumed by an individual that is a director,
executive officer, general partner, manager, or similar functionary of a Person,
or a Person that beneficially owns more than 10% of any class of securities of
such Person having general voting rights. For purpose of this Agreement, each of
Arrowhead Management Company, Inc., Arrowhead General Insurance Agency, Inc. and
each Affiliate of such Person shall be considered an Affiliate of each Seller.
(f) "AGREEMENT" will have the meaning set forth in the
first paragraph.
(g) "ALLOCATION STATEMENT" will have the meaning set forth
in Section 1.4.
(h) "ASSETS" will have the meaning set forth in Section
4.9(a).
(i) "BALANCE SHEET DATE" will have the meaning set forth in
Section 4.6(a).
(j) "BANK ACCOUNTS" will have the meaning set forth in
Section 4.24.
(k) "BASE PURCHASE PRICE" will have the meaning set forth
in Section 1.2.
(l) "BASKET" will have the meaning set forth in Section
11.9.
(m) "BOOKS AND RECORDS" will mean all the books and records
maintained by or for any Acquired Company, including all accounting records,
minute books, stock records, computerized records and storage media and the
software used in connection therewith.
(n) "BUSINESS" will have the meaning set forth in Recital
A.
<PAGE> 41
(o) "CHARTER DOCUMENTS" will mean (i) in the case of a
corporation, its articles or certificate of incorporation and its bylaws, (ii)
in the case of a partnership, its partnership certificate and its partnership
agreement, and (iii) in the case of any other Person, its organic and governing
documents; in each case as such document has been amended or supplemented from
time to time prior to the Signing Date.
(p) "CLAIM" will mean any arbitration award, assessment,
charge, citation, claim, damage, demand, directive, expense, fine, interest,
joint or several liability, Lawsuit, notice, obligation, payment, penalty, or
summons of any kind or nature whatsoever, including any damages incurred because
of the claimant's negligence or gross negligence or any strict liability imposed
upon the claimant, any consequential or punitive damages, and any reasonable
attorneys' fees and expenses. A Claim will be considered to exist even though it
may be conditional, contingent, indirect, potential, secondary, unaccrued,
unasserted, unknown, unliquidated, or unmatured.
(q) "CLOSING" will have the meaning set forth in Section
2.1.
(r) "CLOSING CASH PAYMENT" will have the meaning set forth
in Section 1.3.
(s) "CLOSING DATE" will have the meaning set forth in
Section 2.1.
(t) "CLOSING PREMIUM STATEMENT" will have the meaning set
forth in Section 1.5(a).
(u) "CODE" will mean the Internal Revenue Code of 1986, as
amended.
(v) "COMMON STOCK" will have the meaning set forth in
Recital B.
(w) "COMPANY" will have the meaning set forth in the first
paragraph.
(x) "CONFIDENTIAL INFORMATION" means any proprietary
information, and any information which Purchaser reasonably considers to be
proprietary, pertaining to each of the Acquired Company's and Purchaser's past,
present or prospective business secrets, methods or policies, earnings,
finances, security holders, lenders, key employees, nature of services performed
by such entity's sales personnel, procedures, standards and methods, information
relating to arrangements with suppliers, the identity and requirements of
arrangements with customers, the type, volume or profitability of services or
products for customers, drawings, records, reports, documents, manuals,
techniques, ratings, information, data, statistics, trade secrets and all other
information of any kind or character relating to each of the Parties, whether or
not reduced to writing.
(y) "CONSENT" will mean a consent, approval, order,
authorization or waiver from, notice to or declaration, registration or filing
with any Person.
(z) "DIRECT WRITTEN PREMIUMS" will mean the sum of (i) with
respect to all insurance policies except personal automobile insurance policies,
the aggregate amount of
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premiums payable to Arrowhead General Insurance Agency, Inc. on all the
insurance policies issued by such agency during a time particular period, plus
(ii) with respect to personal automobile insurance policies, the aggregate
amount of premiums paid to Arrowhead General Insurance Agency, Inc. by insureds
during a particular time period.
(aa) "EMPLOYEE BENEFIT PLAN" will mean any (i) Pension
Benefit Plan, (ii) Welfare Benefit Plan, (iii) accident, dental, disability,
health, life, medical, or vision plan or insurance policy, (iv) bonus,
executive, incentive or deferred compensation plan, (v) change in control plan,
(vi) fringe benefits and perquisites, (vii) holiday, sick pay, leave, vacation,
moving or tuition reimbursement or other similar policy, (viii) stock option,
stock purchase, phantom stock, restricted stock or stock appreciation plan, (ix)
severance plan, or (x) other employee arrangement, commitment, custom, policy or
practice.
(bb) "EMPLOYEES" will have the meaning set forth in Section
4.21(a).
(cc) "ENCUMBERED INSTRUMENT" will mean any contract and
lease that by its terms requires Consent from a third party in order to transfer
the rights and obligations thereunder.
(dd) "ENCUMBRANCE" will mean any title defect or objection,
mortgage, lien, deed of trust, equity, judgment, claim, restrictive covenant,
use restriction, charge, pledge, security interest or other encumbrance of any
nature whatsoever, including all leases, chattel mortgages, conditional sales
contracts, collateral security arrangements and other title or interest
retention arrangements.
(ee) "ENVIRONMENTAL LAW" will mean (i) the Clean Air Act (42
U.S.C. Section 7401 et seq.), (ii) the Clean Water Act (33 U.S.C. Section 1251
et seq.), (iii) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act of
1986 (42 U.S.C. Section 9601 et seq.), (iv) the Federal Water Pollution Control
Act (33 U.S.C. Section 1251 et seq.), (v) the Hazardous Materials Transportation
Act (49 U.S.C. Section 5101 et seq.), (vi) the National Environmental Policy Act
(42 U.S.C. Section 4321 et seq.), (vii) the Oil Pollution Act of 1990 (33 U.S.C.
Section 2701 et seq.), (viii) the Resource Conservation and Recovery Act, as
amended by the Hazardous and Solid Waste Amendments of 1984 (42 U.S.C. Section
6901 et seq.), (ix) the Safe Drinking Water Act (42 U.S.C. Section 300f et
seq.), (x) the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.),
(xi) any state, local, tribal, or foreign law, ordinance, regulation, or statute
analogous to any of the foregoing statutes, or (xii) any other federal, state,
local, tribal, or foreign law, ordinance, regulation, or statute prohibiting,
regulating, or restricting the disposal, generation, handling, placement,
recycling, release, storage, or treatment of any contaminant, liquid, mass,
material, matter, pollutant, solid, substance, or waste classified or considered
to be hazardous or toxic to human health or the environment or otherwise related
to environmental protection or health and safety.
(ff) "ERISA" will mean the Employee Retirement Income
Security Act of 1974, as amended.
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(gg) "FINAL CLOSING PREMIUM STATEMENT" will have the meaning
set forth in Section 1.5(b).
(hh) "FINAL PURCHASE PRICE" will have the meaning set forth
in Section 1.2.
(ii) "GAAP" will mean generally accepted accounting
principles in effect in the United States of America as of the Signing Date.
(jj) "GOVERNMENTAL AUTHORITY" will mean any federal, state,
local, tribal, foreign or other governmental agency, department, branch,
commission, board, bureau, court, instrumentality or body.
(kk) "HAZARDOUS MATERIAL" will mean (i) any contaminant,
liquid, mass, material, matter, pollutant, solid, substance, or waste for which
any Environmental Law limits, prohibits, or regulates its disposal, generation,
handling, placement, recycling, release, storage, or treatment, (ii) any
carcinogenic, corrosive, explosive, flammable, infectious, mutagenic,
radioactive, or toxic substance, (iii) any diesel fuel, gasoline, or other
petroleum product in an unconfined manner, (iv) any substance that contains
polychlorinated biphenyls, (v) any substance that contains asbestos, (vi) any
substance that contains urea formaldehyde foam installation, (vii) any substance
that constitutes a nuisance upon any property, or (viii) any substance that
imposes a hazard to the health or safety of any individual.
(ll) "HSR ACT" will have the meaning set forth in Section
8.1.
(mm) "INDEMNITEE" will have the meaning set forth in Section
11.3(a).
(nn) "INDEMNITOR" will have the meaning set forth in Section
11.3(a).
(oo) "INDEPENDENT PERSON" will have the meaning set forth in
Section 8.6(f).
(pp) "INSURANCE POLICIES" will have the meaning set forth in
Section 4.15.
(qq) "INTANGIBLE ASSET" will mean any patent, trademark,
trademark license, computer software, trade name, masthead, brand name, slogan,
copyright, reprint right, franchise, license, process, authorization, invention,
know-how, formula, trade secret and other intangible asset, together with any
pending application, continuation-in-part or extension therefor.
(rr) "INTERIM BALANCE SHEET" will have the meaning set forth
in Section 4.6(b).
(ss) "INTERIM FINANCIAL STATEMENTS" will have the meaning
set forth in Section 4.6(b).
(tt) "LAW" will mean any applicable code, statute, law,
common law, rule, regulation, order, ordinance, judgment, decree, order, writ or
injunction of any Governmental Authority.
4
<PAGE> 44
(uu) "LAW AFFECTING CREDITORS' RIGHTS" will mean any
bankruptcy, fraudulent conveyance or transfer, insolvency, moratorium,
reorganization, or other law affecting the enforcement of creditors' rights
generally, and any general principles of equity.
(vv) "MATERIAL ADVERSE CHANGE" will mean, with respect to a
Person, that such Person has (i) breached a Material Contract, (ii) incurred a
Claim or become a party to an Action that could have a significant and
detrimental effect upon it, (iii) suffered a Material Adverse Effect, or (iv)
violated any Law or Order to which it or any of its assets is subject or bound.
(ww) "MATERIAL ADVERSE EFFECT" will mean, with respect to a
Person, the occurrence of an event or the existence of a circumstance that has a
material adverse effect on such Person's assets, business, cash flows, financial
condition, liabilities, operations, prospects, or relationships, including the
occurrence of any event or the existence of any circumstance that could cause
such an effect in the future.
(xx) "MATERIAL CONTRACTS" will have the meaning set forth in
Section 4.16.
(yy) "MAXIMUM LIABILITY" will have the meaning set forth in
Section 11.10.
(zz) "OBJECTION NOTICE" will have the meaning set forth in
Section 1.5(b).
(aaa) "OPTION AGREEMENT" means that certain Option Agreement,
dated as of the Closing Date, between Purchaser and Arrowhead General Insurance
Agency, Inc.
(bbb) "ORDER" will mean any consent decree, decree,
determination, injunction, judgment, order, or writ of any arbitrator or
Governmental Authority.
(ccc) "OWNED REAL PROPERTY" will have the meaning set forth
in Section 4.12(a).
(ddd) "PARTIAL TAX PERIOD" will have the meaning set forth in
Section 8.6(a).
(eee) "PARTY" will have the meaning set forth in the first
paragraph.
(fff) "PENSION BENEFIT PLAN" will mean (i) an "employee
pension benefit plan" as defined in Section 3(2) of ERISA, and (ii) a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
(ggg) "PERMIT" will mean any license, approval, certificate,
franchise, registration, permit or authorization issuable by any Governmental
Authority.
(hhh) "PERMITTED ENCUMBRANCE" will mean any Encumbrance
directly related to (i) Taxes that are not yet due and payable or Taxes that are
being contested in good faith by an appropriate proceeding, and in each case as
to which adequate reserves have been established in accordance with GAAP, (ii)
Encumbrances shown on the Interim Balance Sheet as securing specified Claims
with respect to which no breach or default exists, (iii) workers', repairmen's
and similar Encumbrances imposed by Law that have been incurred in the ordinary
course of
5
<PAGE> 45
business, (iv) retention of title agreements with suppliers entered into in the
ordinary course of business, and (v) the rights of others to customer deposits.
(iii) "PERSON" will mean any association, bank, business
trust, corporation, estate, general partnership, Governmental Authority,
individual, joint stock company, joint venture, labor union, limited liability
company, limited partnership, non-profit corporation, professional association,
professional corporation, trust, or any other organization or entity.
(jjj) "PERSONAL PROPERTY LEASES" will have the meaning set
forth in Section 4.13(b).
(kkk) "PLAN" will mean any bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance, hospitalization
or other medical, life or other insurance, supplemental unemployment benefit,
profit sharing, pension, or retirement plan, program, agreement or arrangement.
(lll) "PURCHASER" will have the meaning set forth in first
paragraph.
(mmm) "REAL PROPERTY LEASES" will have the meaning set forth
in Section 4.12(a).
(nnn) "REPRESENTATIVES" will mean, with respect to a Person,
such Person's directors, employees, officers, agents, accountants, affiliates,
consultants, investment bankers, attorneys, lenders, representatives and
shareholders.
(ooo) "REQUIRED CONSENT" will have the meaning set forth in
Section 8.2(b).
(ppp) "REQUIRED PERMIT" will have the meaning set forth in
Section 8.3(b).
(qqq) "RESTRICTED SERVICES" means any actions directly or
indirectly related to providing or soliciting third party administrator services
in connection with property and casualty insurance lines.
(rrr) "RESTRICTION PERIOD" will have the meaning set forth in
Section 6.7(b).
(sss) "RETURNS" will have the meaning set forth in Section
4.23(a).
(ttt) "SEGREGATED ACCOUNT" will have the meaning set forth in
Section 1.3.
(uuu) "SELLER" will have the meaning set forth in the first
paragraph.
(vvv) "SELLERS' KNOWLEDGE" will mean the actual knowledge as
of the date that a specific representation or warranty is made or deemed made,
after reasonable inquiry, of each Seller, Patrick Kilkenny, Sue Brown, and Kevin
McDonald.
(www) "SHARES" will have the meaning set forth in Section
1.1.
6
<PAGE> 46
(xxx) "SHORT TAX PERIOD" will have the meaning set forth in
Section 8.6(a).
(yyy) "SIGNING DATE" will have the meaning set forth in the
first paragraph.
(zzz) "SUBJECT JURISDICTIONS" will have the meaning set forth
in Section 8.6(b).
(aaaa) "SUBSCRIPTION RIGHT" will have the meaning set forth in
Section 4.5(a).
(bbbb) "SUBSIDIARY" will have the meaning set forth in Section
4.5(b).
(cccc) "TAX" will mean any assessment, charge, duty, fee,
impost, levy, tariff, or tax of any nature whatsoever imposed by any
Governmental Authority or payable pursuant to any tax sharing agreement,
including any income, payroll, withholding, excise, gift, alternative minimum,
capital gain, added value, social security, sales, use, real and personal
property, use and occupancy, business and occupation, mercantile, real estate,
capital stock, and franchise tax or charge, together with any related interest,
penalties or additions thereon.
(dddd) "TAX ITEMS" will have the meaning set forth in Section
8.6(d).
(eeee) "TRANSACTION DOCUMENTS" will mean the Agreement and all
other documents and instruments executed and delivered pursuant to or in
furtherance of this Agreement.
(ffff) "TRANSFERRED ASSETS" will have the meaning set forth in
Section 6.8.
(gggg) "WELFARE BENEFIT PLAN" will mean an "employee welfare
benefit plan" as defined in Section 3(1) of ERISA, including an employee welfare
benefit plan which is a "multiemployer welfare plan" as defined in Section 3(37)
of ERISA and a "multiple employer welfare arrangement" as defined in Section
3(40) of ERISA.
(hhhh) "WRITTEN PREMIUM AMOUNT will have the meaning set forth
in Section 1.5(b).
(iiii) "YEAR-END BALANCE SHEET" will have the meaning set
forth in Section 4.6(a).
(jjjj) "YEAR-END FINANCIAL STATEMENTS" will have the meaning
set forth in Section 4.6(a).
Accounting Terms. Except as otherwise provided in this Agreement, all
accounting terms defined in this Agreement, whether defined in this Article or
otherwise, will be construed in accordance with GAAP on a consolidated basis.
Articles, Sections, Exhibits and Schedules. Except as specifically
stated otherwise, references to Articles, Sections, Exhibits and Schedules refer
to the Articles, Sections, Exhibits and Schedules of this Agreement.
7
<PAGE> 47
Attorneys' Fees. Whenever this Agreement refers to a Person's
"attorneys' fees and expenses," such reference also will include any fees and
expenses of accountants, experts, investigators, and other professional advisors
whose services such Person's attorney considered advisable in connection with
the prosecution or defense of the particular matter.
Breach. The term "breach" with respect to any contract or instrument
means any breach or violation of, or default under, such contract or instrument,
any conflict with another contract or instrument or any emergence of a right of
another party to such contract or instrument to accelerate, cancel, modify or
terminate such contract or instrument, including any such breach, violation,
default, conflict, or right that will arise after notice or lapse of time.
Disclosure Thresholds. The establishment of any monetary thresholds for
the disclosure of particular items will not create a materiality standard under
this Agreement.
Drafting. Neither this Agreement nor any provision set forth in this
Agreement will be interpreted in favor of or against any Party because such
Party or its legal counsel drafted this Agreement or such provision. No prior
draft of this Agreement or any provision set forth in this Agreement will be
used when interpreting this Agreement or its provisions.
Headings. Article and section headings are used in this Agreement only
as a matter of convenience and will not have any effect upon the construction or
interpretation of this Agreement.
Include. The term "include" or any derivative of such term does not
mean that the items following such term are the only types of such items.
Or. The term "or" will not be interpreted as excluding any of the items
described.
Plural and Singular Words. Whenever the plural form of a word is used
in this Agreement, that word will include the singular form of that word.
Whenever the singular form of a word is used in this Agreement, that word will
include the plural form of that word.
Predecessors. Any of Sellers' representations and warranties concerning
any Claim against an Acquired Company, any liability or obligation of an
Acquired Company, or any violation of Law by an Acquired Company will include
any Claims with respect to each predecessor of the Acquired Companies, including
all direct and indirect predecessors of any such predecessor.
Pronouns. Whenever a pronoun of a particular gender is used in this
Agreement, if appropriate that pronoun also will refer to the other gender and
the neuter. Whenever a neuter pronoun is used in this Agreement, if appropriate
that pronoun also will refer to the masculine and feminine gender.
Representations and Warranties. Sellers' representations and warranties
under this Agreement will mean the representations and warranties set forth in
Articles III and IV and the
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<PAGE> 48
reaffirmation of Sellers' representations and warranties in certificates
delivered pursuant to Sections 2.2(a) and 2.3(a). Purchaser's representations
and warranties under this Agreement will mean the representations and warranties
set forth in Article V and the reaffirmation of those representations and
warranties in the certificates delivered pursuant to Section 2.4(d).
Statutes. Any reference to Law or any specific statute will include any
changes to such law or statute after the Signing Date, any successor law or
statute, and any regulations and rules promulgated under such law or statute and
any successor law or statute, whether promulgated before or after the Signing
Date.
9
<PAGE> 1
EXHIBIT 2.2
===============================================================================
ASSET PURCHASE AGREEMENT
between
INSpire INSURANCE SOLUTIONS, INC.
and
ARROWHEAD GENERAL INSURANCE AGENCY, INC.
regarding the sale of a certain business and the assets
related to such business
dated as of October 29, 1998
===============================================================================
<PAGE> 2
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
Schedule Description
- -------- -----------
<S> <C> <C>
Schedule 1.2.......................................................................................Excluded Assets
Schedule 4.5(a)(1)...................................................................................Capitalization
Schedule 4.5(a)(2).....................................................................Exceptions to Capitalization
Schedule 4.5(b)........................................................................................Subsidiaries
Schedule 4.6(a).......................................................................Year-End Financial Statements
Schedule 4.6(b)........................................................................Interim Financial Statements
Schedule 4.8..........................................................................Exceptions to Certain Changes
Schedule 4.12(a)................................................................................Owned Real Property
Schedule 4.12(b)...............................................................................Leased Real Property
Schedule 4.13(a)............................................................................Owned Personal Property
Schedule 4.13(b)...........................................................................Leased Personal Property
Schedule 4.15.............................................................................................Insurance
Schedule 4.16....................................................................................Material Contracts
Schedule 4.17....................................................................................Litigation; Orders
Schedule 4.19...............................................................................................Permits
Schedule 4.20(a)............................................................................Owned Intangible Assets
Schedule 4.20(b).........................................................................Licensed Intangible Assets
Schedule 4.21(a)..........................................................................................Employees
Schedule 4.21(b).....................................................................Employment and Labor Contracts
Schedule 4.22(a)..............................................................................Welfare Benefit Plans
Schedule 4.22(b)..............................................................................Pension Benefit Plans
Schedule 4.22(c)..............................................................................Employee Arrangements
Schedule 4.24..................................................................Bank Accounts and Powers of Attorney
Schedule 4.26..................................................................Exceptions to Affiliate Transactions
Schedule 6.3(b)...............................................................Exceptions to Prohibited Transactions
Schedule 8.2(b)...................................................................................Required Consents
Schedule 8.3(b)....................................................................................Required Permits
Schedule 9.1(l).................................................................................Restricted Software
Schedule 11.1....................................................................................Retained Employees
Schedule 13.8....................................................................................Notice Information
Exhibit Description
- ------- -----------
Exhibit 2.2(b).............................................................................Form of Option Agreement
Exhibit 3.2(g)..................................................................Form of Opinion of Seller's Counsel
Exhibit 3.2(h)................................................................Form of Registration Rights Agreement
Exhibit 3.3(d)...............................................................Form of Opinion of Purchaser's Counsel
Exhibit 9.1(k)(1)..................................................Form of Claims Administration Services Agreement
Exhibit 9.1(k)(2)..................................................Form of Policy Administration Services Agreement
</TABLE>
<PAGE> 3
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of October
29, 1998 (the "SIGNING DATE"), is made by and between Arrowhead General
Insurance Agency, Inc., a Minnesota corporation ("SELLER"), and INSpire
Insurance Solutions, Inc., a Texas corporation ("PURCHASER"). Seller and
Purchaser are sometimes collectively referred to as the "PARTIES," and
individually referred to as a "PARTY."
PRELIMINARY STATEMENTS
A. Seller is a general insurance agency that provides policy
administration services for property and casualty lines of insurance (such
policy administration services being herein referred to as the "BUSINESS," and
that portion of Seller which conducts the Business, the "DIVISION").
B. Seller desires to sell and assign to Purchaser, and Purchaser
desires to purchase and assume from Seller, all the Business and substantially
all of the assets of the Division, in each case on the terms and subject to the
conditions set forth in this Agreement.
C. Capitalized terms used in this Agreement are defined or indexed in
Appendix A for the convenience of the reader and in order to eliminate the need
for cross-references. Appendix A is incorporated herein by this reference.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties set forth in this
Agreement and for other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I.
IDENTIFICATION OF ASSETS AND LIABILITIES
Section 1.1 Sale of Purchased Assets. Subject to the terms and
conditions and in reliance upon the representations and warranties of Seller
contained in this Agreement, at the Closing Seller will (or Seller will cause
its Affiliates to) sell and transfer to Purchaser, and Purchaser will purchase
and receive from Seller, all the assets of Seller (except for Excluded Assets)
which are presently being used in the conduct of, or are reasonably related to,
the Business as they exist on the Closing Date, free and clear of all
Encumbrances other than Permitted Encumbrances (the "PURCHASED ASSETS"). Without
limiting the generality of the preceding sentence, the Purchased Assets include
all of the following assets which are presently being used in the conduct of, or
are reasonably related to, the Business:
(a) the leasehold or subleasehold interests of Seller in the
Real Property Leases;
(b) the Intangible Assets of Seller, whether owned or
licensed, and all goodwill attendant thereto;
<PAGE> 4
(c) furniture and fixtures of Seller;
(d) computer and other equipment of Seller;
(e) automobiles and other vehicles owned, leased or used by
Seller;
(f) supplies and sundry items, including telephone numbers,
keys and lock combinations;
(g) contracts, agreements, leases, licenses, arrangements,
commitments, franchises, and understandings, whether written or oral, to which
Seller is a party;
(h) rights and claims under insurance policies for damage to
Purchased Assets to the extent that any damaged Purchased Assets have not been
repaired or replaced prior to Closing;
(i) Permits of Seller, including all Permits relating to
operation and ownership of the Purchased Assets;
(j) prepaid expenses, including monies held by third parties
and loans to employees;
(k) Books and Records;
(l) technical documentation owned by Seller, including
material and tooling specifications, purchasing specifications, invention
records, research records, inspection processes and equipment lists; and
(m) claims and causes of action of Seller relating to or
arising out of the Business, except to the extent that any claim or cause of
action against third parties can be used as a defense, counterclaim or offset
against any suit brought by third parties against Seller with respect to any
Excluded Liabilities.
Section 1.2 Excluded Assets. The term "EXCLUDED ASSETS" will mean the
assets of Seller specified on Schedule 1.2, and will not be construed to include
any assets of Seller not specifically listed on Schedule 1.2.
Section 1.3 Assumed Liabilities. Subject to the terms and conditions
and in reliance upon the representations and warranties of Seller contained in
this Agreement, at the Closing Seller will assign to Purchaser, and Purchaser
will assume from Seller, all the liabilities of Seller which (a) relate
exclusively to the ownership or conduct of the Business, and (b) are reflected
on the Year-End Balance Sheet or were incurred in the ordinary course of
business since the Balance Sheet Date, including obligations related to accrued
vacation, holiday and sick leave (collectively, the "ASSUMED LIABILITIES").
Section 1.4 Excluded Liabilities. Except for the Assumed Liabilities,
Purchaser has not agreed to pay, will not be required to assume and will have
no liability or obligation with respect to, any liability or obligation, direct
or indirect, absolute or contingent, of Seller or the
2
<PAGE> 5
Division, any subsidiary or affiliate of Seller or the Division or any other
Person (collectively, the "EXCLUDED LIABILITIES"), and Seller agrees that it
will take all actions and do all things necessary to ensure that Purchaser is
not liable for any Excluded Liabilities. Without limiting the generality of the
preceding sentence, the Excluded Liabilities include all of the following:
(a) liabilities related to Taxes and Environmental Laws for
all periods prior to the Closing Date;
(b) liabilities related to any Action arising out of or in
connection with the ownership or conduct of the Business by Seller or the
Division, whether asserted before or after the Closing Date and whether known
or unknown on the Closing Date;
(c) liabilities related to any former or current employee or
agent of Seller or the Division, including any liabilities under or associated
with any Employee Benefit Plan, any Actions asserted by or on behalf of any
former or current employee or agent of Seller or the Division, any claims for
wages, overtime pay, bonuses, commissions or other forms of compensation, and
any claims under any policies of Seller or the Division related to its
Employees; provided, however, that the Excluded Liabilities does not include
obligations related to accrued vacation, holiday and sick leave; and
(d) liabilities, costs and expenses incurred by Seller or the
Division in connection with the negotiation, execution or performance of this
Agreement and the transactions contemplated hereby.
ARTICLE II.
PURCHASE PRICE AND RELATED TERMS
Section 2.1 Base Purchase Price. In addition to the assumption by
Purchaser of the Assumed Liabilities, the total consideration for the Purchased
Assets will be the sum of $13,500,000 (the "BASE PURCHASE PRICE"), minus the
Adjustment Amount calculated pursuant to Section 2.4 (the Base Purchase Price
minus the Adjustment Amount, the "FINAL PURCHASE PRICE").
Section 2.2 Payment of Base Purchase Price. On the Signing Date,
Purchaser will cause a duly authorized officer of Purchaser to provide Seller
with written documentation of a deposit by Purchaser of the Base Purchase Price
into a segregated bank account that is under the exclusive control of Purchaser
(the "SEGREGATED ACCOUNT"). At the Closing, Purchaser will (a) pay to Seller
from the Segregated Account an amount equal to $6,500,000 (or $6,500,000 minus
the Adjustment Amount if the Adjustment Amount is deemed final in accordance
with Section 2.4(b)) (such amount, the "CLOSING CASH PAYMENT") by wire transfer
of immediately available funds to the bank account set forth on a notice given
by Seller to Purchaser not later than three business days prior to the Closing
Date and (b) deliver to Seller an Option Agreement substantially in the form
attached as Exhibit 2.2(b) (the "OPTION AGREEMENT").
Section 2.3 Allocation of the Purchase Price. As soon as practicable,
but not later than 120 days after the Closing Date, the Parties will agree upon
the allocation of the Base Purchase Price (and all other capitalizable costs)
among the Purchased Assets and Assumed Liabilities, and will set forth such
allocation on a statement (the "ALLOCATION STATEMENT"). The Allocation
3
<PAGE> 6
Statement will be revised to reflect any changes in the Direct Written Premiums
shown on the Final Closing Premium Statement from the Direct Written Premiums
shown on the Closing Premium Statement, whether or not such changes result in
an adjustment to the Base Purchase Price. If the Parties fail to agree on the
allocation of the Purchase Price within 120 days after the Closing Date, then
the disagreement will be resolved as soon as practicable thereafter, but not
later than 180 days after the Closing Date, by one of the largest four national
accounting firms, which accounting firm will be jointly selected by the
Parties. The Parties acknowledge that the scope of such accounting firm's work
will be limited to resolving only those items to which the Parties do not agree
regarding the allocation of the Base Purchase Price. The decision of the
accounting firm will be final and binding upon the Parties. The Parties will
share equally the fees, costs and expenses of the accounting firm selected to
resolve any disagreements regarding the Allocation Statement. Each Party will
file all Tax returns, and execute such other documents as may be required by
any taxing authority, in a manner consistent with the Allocation Statement.
Each Party will prepare Internal Revenue Service Form 8594 pursuant to Section
1060 of the Code relating to the transactions contemplated by this Agreement
based on the Allocation Statement, and will deliver such form to each other.
Each Party will file such form with all relevant taxing authorities.
Section 2.4 Purchase Price Adjustment.
(a) Closing Premium Statement. As soon as reasonably
practicable, but not later than the later to occur of the Signing Date or
November 13, 1998, Seller will delivery to Purchaser a statement detailing the
amount of Direct Written Premiums recognized by Seller in the calendar months
August 1998, September 1998 and October 1998 (such statement, together with the
supporting workpapers, the "CLOSING PREMIUM STATEMENT"). The amount set forth
on the Closing Premium Statement will be calculated in accordance with GAAP;
provided, however, that the Closing Premium Statement will not be required to
have any of the notes to the financial statements as required by GAAP. Seller
will give Purchaser and its Representatives reasonable access to Seller's
facilities and the Books and Records so as to enable Purchaser to verify the
amounts set forth on the Closing Premium Statement.
(b) Review of Closing Premium Statement. As soon as
practicable, but not later than 30 days after the delivery of the Closing
Premium Statement, Purchaser will inform Seller in writing of any objection to
the Closing Premium Statement, which objection, if any, will set forth in
reasonable detail Purchaser's objections and the basis for those objections
(the "OBJECTION NOTICE"). If Purchaser so objects and the Parties do not
resolve such objections on a mutually agreeable basis within 45 days after the
delivery of the Closing Premium Statement, then the disagreement will be
resolved as soon as practicable thereafter, but not later than 75 days after
the delivery of the Closing Premium Statement, by one of the largest four
national accounting firms, which accounting firm will be selected jointly by
the Parties. The Parties acknowledge that the scope of such accounting firm's
work will be limited to resolving the objections set forth in the Objection
Notice. The decision of such accounting firm will be final and binding upon the
Parties. The Closing Premium Statement (as adjusted, if applicable, by the
agreement of the Parties or the decision of the accounting firm, the "FINAL
CLOSING PREMIUM STATEMENT") and the amount of Direct Written Premiums
recognized by Seller in the calendar months August 1998, September 1998 and
October 1998 (the "WRITTEN PREMIUM AMOUNT") will
4
<PAGE> 7
be deemed final upon the earlier to occur of (i) the agreement of the Parties,
(ii) the decision of the accounting firm, or (iii) the failure of Purchaser to
deliver an Objection Notice to Seller within 30 days after the delivery of the
Closing Premium Statement. Each Party will bear the fees, costs and expenses of
its own accountants, will share equally the fees, costs and expenses of the
accounting firm selected by the Parties to resolve any disagreements regarding
the Objection Notice and will permit each other and each other's
Representatives reasonable access to the books and records necessary to perform
the analysis contemplated by this Section.
(c) Purchase Price Adjustment; Procedure. Upon the Final
Closing Premium Statement being deemed final in accordance with Section 2.4(b),
the Base Purchase Price will be adjusted, if at all, as follows: if the product
of the Written Premium Amount multiplied by four is less than $200,000,000,
then the Base Purchase Price will be reduced by an amount equal to the product
of (i) the Base Purchase Price multiplied by (ii) a fraction consisting of (A)
a numerator equal to the difference of $200,000,000 minus the product of the
Written Premium Amount multiplied by four and (B) a denominator equal to
$200,000,000 (such amount, together with interest thereon calculated at a rate
equal to eight percent (8.0%) compounded daily from the Closing Date to the
date the Final Closing Premium Statement is deemed final in accordance with
Section 2.4(b), the "ADJUSTMENT AMOUNT").
(d) Adjustment Procedure. Purchaser must first seek payment
of the Adjustment Amount from the Closing Cash Payment, thereafter pursuant to
the right of set-off under the Option Agreement and thereafter from Seller.
Such payment from Seller, if any, will be made within five business days after
the final determination of the number of Option Shares (as defined in the
Option Agreement) that vest pursuant to Section 2.4 of the Option Agreement.
Section 2.5 Delivery of Schedules. The Parties acknowledge that the
Schedules to be delivered pursuant to this Agreement will not be delivered on
the Signing Date. The Parties agree that all Schedules will be delivered no
later than November 6, 1998. If the Party to whom a particular Schedule is
delivered does not object in writing to the contents of such Schedule by
November 11, 1998, then that particular Schedule will be deemed final and the
disclosures made thereon will be deemed made as of the Signing Date. Any
Schedule to which a written objection is raised will be deemed final upon the
mutual agreement of the Parties as to the content of such Schedule and the
disclosures made thereon will be deemed made as of the Signing Date.
ARTICLE III.
CLOSING
Section 3.1 Closing. The consummation of the transactions contemplated
by this Agreement (the "CLOSING") will take place at the offices of Akin, Gump,
Strauss, Hauer and Feld, 1700 Pacific Avenue, Suite 4100, Dallas, Texas 75201
on the first business day following the date on which all of the conditions
contained in Article IX, to the extent not waived, are satisfied. The Closing
may be postponed to such other date as the Parties may mutually agree. The date
on which the Closing actually occurs is hereinafter referred to as the "CLOSING
DATE." The Parties anticipate that the Closing will occur within 35 days of the
filing of the initial notification required under the HSR Act.
5
<PAGE> 8
Section 3.2 Deliveries by Seller. At the Closing, Seller will deliver,
or cause to be delivered, to Purchaser the following:
(a) a bill of sale in form and substance reasonably
acceptable to Purchaser;
(b) a lease assignment and estoppel certificate with respect
to each Real Property Lease, each in recordable form;
(c) instruments of assignment with respect to the Intangible
Assets, each in recordable form;
(d) documents evidencing the transfers of all motor vehicles
and registrations;
(e) such other instruments of conveyance and transfer as will
be necessary to vest in Purchaser good and valid title to the Purchased Assets,
free and clear of all Encumbrances other than Permitted Encumbrances;
(f) the officers' certificates referred to in Sections 9.1(d)
and 9.1(e);
(g) an opinion of counsel in substantially the form of
Exhibit 3.2(g) attached hereto;
(h) an executed Registration Rights Agreement in
substantially the form of Exhibit 3.2(h) attached hereto (the "REGISTRATION
RIGHTS AGREEMENT");
(i) executed counterparts of all Required Consents and
Required Permits;
(j) all Books and Records;
(k) a certificate dated within ten business days of the
Closing from the Secretary of State of Minnesota (or other proper state
official) certifying as to Seller's good standing in such state;
(l) a receipt for the payment of the Closing Cash Payment and
the delivery of the Option Agreement; and
(m) all other previously undelivered documents, instruments
and writings required to be delivered by Seller to Purchaser at or prior to the
Closing pursuant to this Agreement.
Section 3.3 Deliveries by Purchaser. At the Closing, Purchaser will
deliver to Seller the following:
(a) federal or other immediately available funds by wire
transfer to Seller in an amount of the Closing Cash Payment;
(b) the Option Agreement;
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(c) the officer's certificates referred to in Sections 9.2(c)
and 9.2(d);
(d) an opinion of counsel in substantially the form of
Exhibit 3.3(d) attached hereto;
(e) a certificate dated within ten business days of the
Closing from the Secretary of State of Texas (or other proper state official)
certifying as to Purchaser's good standing in such state;
(f) an instrument of assumption by Purchaser of the Assumed
Liabilities in form and substance reasonably acceptable to Seller;
(g) an executed Registration Rights Agreement; and
(h) all other previously undelivered documents, instruments
and writings required to be delivered by Purchaser to Seller at or prior to the
Closing pursuant to this Agreement.
Section 3.4 Simultaneous Deliveries. The delivery of the documents
required to be delivered at the Closing pursuant to this Agreement will be
deemed to occur simultaneously. No delivery will be effective until each Party
has received or waived receipt of all the documents that this Agreement entitles
such Party to receive.
Section 3.5 Bulk Sale; Sales and Transfer Taxes. The Parties agree not
to comply with the bulk transfer provisions of any jurisdiction in which any of
the Purchased Assets are located. Except for the Assumed Liabilities, Purchaser
will have no liability or obligation to Seller, to Seller's creditors or to
others, growing out of or arising from the sale by Seller of the Purchased
Assets to Purchaser under the provisions of this Agreement; nor will Purchaser
be liable for any Tax liabilities, including any sales tax or title transfer
fee attributable to the sale of the Purchased Assets. Any Taxes and any
transfer, recording or similar fees and charges arising out of or in connection
with the transfer of the Purchased Assets will be borne by Seller.
Section 3.6 Mail Received After Closing. On and after the Closing,
Purchaser may receive and open all mail addressed to Seller and deal with the
contents thereof in its discretion to the extent that such mail and the
contents thereof relate to the Business or any of the Purchased Assets or
Assumed Liabilities. Purchaser agrees to deliver or to cause to be delivered to
Seller all mail received by Purchaser which is addressed to Seller and does not
relate to the Business, the Purchased Assets or the Assumed Liabilities.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser that the statements
made in this Article IV are true, correct and complete:
Section 4.1 Organization; Good Standing; Delivery of Charter
Documents. Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota. Seller is duly qualified or
licensed as a foreign corporation in each jurisdiction in
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which the Purchased Assets are owned or leased by Seller, or the nature of the
Business makes such qualification or licensing necessary, except those
jurisdictions wherein the failure to so qualify could not have a Material
Adverse Effect on Seller. Prior to the Signing Date, Seller has delivered to
Purchaser true and complete copies of Seller's Charter Documents as in effect
on the Signing Date.
Section 4.2 Power and Authority. Seller has all requisite corporate
power and authority necessary to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby, including the execution, delivery and performance of all documents and
instruments to be delivered by Seller pursuant to the terms hereof (such
documents and instruments, together with this Agreement, the "TRANSACTION
DOCUMENTS"). Seller has all requisite corporate power and authority necessary
to own, operate and lease the Purchased Assets and to carry on its Business as
and where conducted.
Section 4.3 Authorization; Execution and Validity. Each of the
Transaction Documents, when executed by Seller and delivered to Purchaser, will
be duly authorized, executed and delivered, and will constitute a valid, legal
and binding obligation of Seller, enforceable against Seller in accordance with
the terms of such Transaction Document, subject to any Law Affecting Creditors'
Rights.
Section 4.4 No Conflict; Seller Consents. The execution, delivery and
performance by Seller of each Transaction Document will not (a) violate any
Law, (b) violate any Charter Document of Seller, (c) violate any Order to which
Seller is a party or by which Seller or its assets is bound, (d) breach any
Material Contract, Real Property Lease or Personal Property Lease, (e) result
in the creation of any Encumbrance on any of the Purchased Assets, other than
Permitted Encumbrances, or require any Consent from any Person.
Section 4.5 Capitalization.
(a) Seller. Schedule 4.5(a)(1) lists the total number of
authorized, issued and outstanding shares of capital stock of Seller. All the
outstanding shares have been duly authorized and validly issued and are fully
paid and non-assessable. There are no issued and outstanding shares of capital
stock of Seller other than as listed on Schedule 4.5(a)(1). Except as listed on
Schedule 4.5(a)(2), there is no authorized or outstanding option, subscription,
warrant, call, right, commitment or other agreement ("SUBSCRIPTION RIGHT")
obligating Seller to issue or sell any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock.
None of the shares were issued in violation of any preemptive or preferential
rights of any Person. Other than the capital stock of the Subsidiaries, Seller
does not own any shares of capital stock, partnership interests or other
beneficial ownership interests in any other Person. None of the Business is
conducted in any Subsidiary.
(b) Subsidiaries. Schedule 4.5(b) lists the name of each
Person whose capital stock, equity securities or Subscription Right that Seller
owns, either beneficially or of record (collectively, the "SUBSIDIARIES"), and
the total number of authorized, issued and outstanding shares of such capital
stock, equity securities or Subscription Right of each Subsidiary. All the
shares of capital stock of each Subsidiary have been duly authorized and
validly issued and are fully paid and non-assessable. Seller owns all issued
and outstanding shares of capital stock of
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each Subsidiary. There is no authorized or outstanding Subscription Rights
obligating any Subsidiary to issue or sell any shares of its capital stock or
any securities convertible into or exercisable for any shares of its capital
stock. None of the shares of any Subsidiary were issued or will be transferred
pursuant to this Agreement in violation of any preemptive or preferential
rights of any Person. No Subsidiary owns any shares of capital stock,
partnership interests or other beneficial ownership interests in any other
Person.
Section 4.6 Financial Statements--Division.
(a) Year-End Financial Statements. Attached hereto as
Schedule 4.6(a) are the balance sheets of the Division as of December 31, 1997
(the "YEAR-END BALANCE SHEET" and such date the "BALANCE SHEET DATE"), and
December 31, 1996, with the related statements of operations and cash flows for
the fiscal years ended on such dates and the accompanying notes (collectively,
the "YEAR-END FINANCIAL STATEMENTS"). The Year-End Financial Statements have
been prepared in accordance with GAAP (except as noted therein), and present
fairly, in all material respects, the financial position of the Division as of
the dates indicated and the results of its operations and cash flows for the
periods then ended.
(b) Interim Financial Statements. Attached hereto as Schedule
4.6(b) are the unaudited balance sheet of the Division as of September 30, 1998
(the "INTERIM BALANCE SHEET") and the related statement of operations and cash
flows for the nine month period ended on such date (collectively, the "INTERIM
FINANCIAL STATEMENTS"). The Interim Financial Statements have been prepared in
accordance with the Books and Records and with GAAP (except as noted therein
and the absence of detailed notes to such statements), and present fairly, in
all material respects, the financial position of the Division as of the date
indicated and the results of its operations and cash flows for the period then
ended, subject to normal year-end adjustments.
Section 4.7 No Undisclosed Liabilities. Except as described in the
Year-End Balance Sheet, the Purchased Assets and the Business are not subject
to any Claim of any nature, absolute or contingent, and no events have occurred
or circumstances exist that could give rise to any future Claim that could have
a Material Adverse Effect on the Purchased Assets or the Business, other than
Claims incurred since the Balance Sheet Date in the ordinary course of Seller's
business consistent with past practices.
Section 4.8 Absence of Certain Changes. Since the Balance Sheet Date,
Seller has conducted its business only in the ordinary course of business
consistent with past practices and, without limiting the generality of the
foregoing and except as listed on Schedule 4.8, there has been no (a) event or
occurrence that has caused or will cause a Material Adverse Change, (b)
amendment to the Charter Documents, (c) payment of any dividend or distribution
made with respect to Seller's capital stock, (d) redemption or purchase of any
of Seller's capital stock, (e) amendment, termination or receipt of notice of
termination of or entry into any contract, lease or license involving a total
commitment by or to Seller of $10,000, (f) incurrence or guarantee of any debt,
other than trade and accounts payable incurred in the ordinary course of
business consistent with past practices, (g) loan to or transaction with any
officer, director or shareholder, other than in the ordinary course of business
consistent with past practices, (h) waiver of any material right or release of
any debt or claim, other than waivers or releases given in the ordinary course
of business consistent with past practices, (i) amendment or termination of any
Permit,
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(j) destruction, damage or other loss to any of the Purchased Assets other than
destruction, damage or other loss that is fully covered by insurance, (k)
adoption of or increase in the payments to or benefits under any Employee
Benefit Plan, (l) sale, lease, or other disposition of any assets used in the
Business, other than the Excluded Assets and assets sold, leased or otherwise
disposed of in the ordinary course of business consistent with past practices,
(m) imposition of any Encumbrance on any of the Purchased Assets, other than
Permitted Encumbrances, (n) purchase or lease any assets used in the Business,
other than assets purchased or leased in the ordinary course of business
consistent with past practice, (o) payment of any bonus or an increase in the
salary, bonus or other compensation payable to any employee of Seller, other
than payments or increases consistent with past practice, (p) change in any
accounting method, (q) acceleration related to the collection of accounts
receivable or delay related to the payment of accounts payable, or (r)
agreement or commitment to take any action described in this Section.
Section 4.9 Sufficiency and Condition of and Title to the Purchased
Assets.
(a) Sufficiency of the Purchased Assets. The Purchased Assets
constitute all of the assets, properties, licenses and other arrangements which
are presently being used or are reasonably related to the Business, and are
sufficient to operate the Business in a manner consistent with past practice
and at Seller's historic capacity.
(b) Condition of the Purchased Assets Each of the Purchased
Assets complies with Law and is in good and normal operating condition and
repair, structurally sound with no known defects (ordinary wear and tear
excepted), and suitable for its intended use.
(c) Title to the Purchased Assets. At the Closing, Seller
will transfer to Purchaser good, valid and indefeasible title to, or a valid
leasehold interest in, each of the Purchased Assets, free and clear of all
Encumbrances, other than Permitted Encumbrances.
Section 4.10 Accounts Receivable. All accounts receivable of Seller
reflected on the Interim Balance Sheet (the "ACCOUNTS RECEIVABLE") represent or
will represent valid obligations arising from sales made, commissions earned or
services performed in the ordinary course of business. Unless paid prior to the
Closing Date, the Accounts Receivable are current and collectible net of the
respective reserves shown on the Interim Balance Sheet (which reserves are
adequate and calculated consistent with past practice). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected
in full, without any set-off, within ninety days after the day on which it
first becomes due and payable. There is no contest, claim, or right of set-off
under any contract with any obligor of an Accounts Receivable relating to the
amount or validity of such Accounts Receivable.
Section 4.11 Intentionally Omitted.
Section 4.12 Real Property.
(a) Owned Real Property. Schedule 4.12(a) lists as of the
Signing Date each parcel of real property owned by Seller used in the Business,
including the street address of each property and a summary description of the
buildings and improvements thereon. Each parcel of real property listed on
Schedule 4.12(a) and any parcel of real property purchased after the
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Signing Date in accordance with Section 6.3 (collectively, the "OWNED REAL
PROPERTY") is (i) in compliance with all Laws, including the Americans with
Disabilities Act and any building, fire, land use, occupancy, safety, set-back,
or zoning Law, (ii) not burdened by any covenant, easement, encroachment,
restrictive covenant, right-of-way, or servitude, other than those specifically
referenced in the title insurance policies delivered pursuant to Section
3.2(b), and (iii) not subject to any condemnation, eminent domain or similar
Action.
(b) Leased Real Property. Schedule 4.12(b) lists all the
leases of real property to which Seller is a party and which are used in the
Business and in effect as of the Signing Date. All of the leases on Schedule
4.12(b) and any leases of real property entered into after the Signing Date in
accordance with Section 6.3 (collectively, the "REAL PROPERTY LEASES") are
valid, binding and in full force and effect. Neither Seller nor, to Seller's
Knowledge, any other Person is in default under any Real Property Lease, nor is
there any event which with notice or lapse of time, or both, would constitute a
default thereunder by Seller or any other Person. Seller has received a
nondisturbance agreement from any lessor's lender under each of the Real
Property Leases. True and complete copies of all the Real Property Leases, any
amendments thereto and the nondisturbance agreements have been provided to
Purchaser prior to the Signing Date.
Section 4.13 Personal Property.
(a) Owned Personal Property. Schedule 4.13(a) lists as of the
Signing Date all of the personal property (including all machinery, equipment,
vehicles, structures, fixtures and furniture) owned by Seller and used in the
Business, located on its premises or shown on the Interim Balance Sheet or
acquired after the date thereof (except for inventory subsequently sold in the
ordinary course of business and consistent with past practice).
(b) Leased Personal Property. Schedule 4.13(b) lists as of
the Signing Date all the leases of personal property used in the Business to
which Seller is a party. All of the leases on Schedule 4.13(b) and any leases
of personal property entered into after the Signing Date in accordance with
Section 6.3 (collectively, the "PERSONAL PROPERTY LEASES") are valid, binding
and in full force and effect. Neither Seller nor, to Seller's Knowledge, any
other Person is in default under any Personal Property Lease, nor is there any
event which with notice or lapse of time, or both, would constitute a default
thereunder by Seller or any other Person. True and complete copies of all the
Personal Property Leases and any amendments thereto have been provided to
Purchaser prior to the Signing Date.
Section 4.14 Compliance with Laws. To Seller's Knowledge, Seller is in
compliance with all Laws in the conduct of the Business. Seller has not received
any notice from any Governmental Authority or other Person asserting that Seller
has violated any Law.
Section 4.15 Insurance. Schedule 4.15 lists as of the Signing Date all
insurance policies to which Seller is a party or which insure the Business or
any of the Purchased Assets against loss (collectively, the "INSURANCE
POLICIES"), including each insurer's name, coverage deductible and limit,
expiration date and current premium. Each Insurance Policy is in full force and
effect, all premiums with respect thereto have been paid to the extent due, and
no notice of cancellation or termination has been received with respect to any
such policy, other than any policy that will be replaced or is intended to be
replaced prior to the expiration thereof by policies providing
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substantially the same coverage from an insurer that is financially sound and
reputable. The Insurance Policies provide Seller with adequate insurance
coverage against the risks involved in the conduct of the Business and
ownership of the Purchased Assets. The coverage provided by the Insurance
Policies is not less than the coverage customary in Seller's industry and will
not in any way be affected by or terminate or lapse by reason of the
consummation of the transactions contemplated by this Agreement. True and
complete copies of all Insurance Policies have been provided to Purchaser.
Section 4.16 Contracts. Schedule 4.16 lists as of the Signing Date all
the contracts relating to the Business, Purchased Assets or Assumed Liabilities
or by which any of the Purchased Assets is bound, pursuant to which the
obligations of any party thereto are, or are contemplated to be, in respect of
any such contract (a) in excess of $10,000 during any twelve month period the
term thereof, (b) not terminable prior to three month from the Signing Date, or
otherwise material to the Business. All of the contracts listed on Schedule
4.16 and any contracts entered into after the Signing Date in accordance with
Section 6.3 (collectively, the "MATERIAL CONTRACTS") are valid and binding and
in full force and effect, subject to Laws Affecting Creditors' Rights. Neither
Seller nor, to Seller's Knowledge, any other Person is in default under any
Material Contract, nor is there any event which with notice or lapse of time,
or both, would constitute a default thereunder by Seller or any other Person.
Other than the Material Contracts, Seller is not a party to any contract which
(x) requires the Consent of any Person in order to consummate the transactions
contemplated by this Agreement, (y) is in excess of the normal, ordinary and
usual requirements of the Business, or (z) is excessive in price or quantity.
True and complete copies of all the Material Contracts have been provided to
Purchaser.
Section 4.17 Litigation; Orders. Schedule 4.17 lists and describes all
Actions pending, or to Seller's Knowledge, threatened against or affecting
Seller, the Business or any of the Purchased Assets. There is no Action pending
or, to Seller's Knowledge, threatened in writing affecting Seller, the Business
or any of the Purchased Assets which, if adversely determined, would have,
individually or in the aggregate, a Material Adverse Effect. Seller is not
subject to any Order. True and complete copies of all material pleadings in the
Actions listed on Schedule 4.17 have been provided to Purchaser.
Section 4.18 Environmental Matters.
(a) Compliance with Environmental Laws. The Business has been
and is operated in compliance with all Environmental Laws and all Permits
related to Environmental Laws.
(b) Hazardous Materials. To Seller's Knowledge, Seller has
neither caused nor allowed the generation, treatment, manufacture, processing,
distribution, use, storage, discharge, release, disposal, transport or handling
of any Hazardous Materials at any of the properties or facilities used in
connection with the Business, including the Owned Real Property and the premise
subject to the Real Property Leases, except in compliance with all
Environmental Laws. To Seller's Knowledge, no generation, treatment,
manufacture, processing, distribution, use, storage, discharge, release,
disposal, transport or handling of any Hazardous Materials has occurred at any
of the properties or facilities used in connection with the Business, including
the Owned Real Property and the premises subject to the Real Property Leases,
except in compliance with all Environmental Laws.
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(c) Existence of an Action. Seller has not received any
notice from any Governmental Authority or other Person alleging or concerning
any Claim against Seller under any Environmental Law, whether for personal
injuries or property damages. There is no Action pending or, to Seller's
Knowledge, threatened affecting Seller with respect to the Business alleging or
concerning any Claim under any Environmental Law, whether for personal injuries
or property damages, nor does Seller have any knowledge of any fact or
condition that could give rise to such a Claim.
(d) Environmental Permits. To Seller's Knowledge, Seller is
in possession of and in compliance with all Permits required under the
Environmental Laws with respect to the operation of the Business. There are no
Actions pending or, to Seller's Knowledge, threatened which seek to modify,
revoke or deny renewal of any of such Permit. Seller has no knowledge of any
fact or condition that is reasonably likely to give rise to any Action to
modify, revoke or deny renewal of any of such Permit. No Consent from any
Person is necessary for the transfer of any such Permit, and the consummation
of the transactions contemplated by this Agreement will not violate, alter,
impair or invalidate, in any respect, any such Permit.
(e) Miscellaneous. Without in any way limiting the generality
of the foregoing, to Seller's Knowledge (i) none of the off-site locations
where Seller has transported, released, discharged, stored, disposed or
arranged for the disposal of Hazardous Materials has been identified as a
facility that is subject to an existing Claim under any Environmental Law or is
the subject of any threatened Claim by any Person, (ii) no underground
improvement regulated by any Environmental Law, including any storage or
treatment tank, is located on the Owned Real Property or the premises subject
to the Real Property Leases, (iii) there is no asbestos contained in or forming
part of any Purchased Assets, and no polychlorinated biphenyls or
polychlorinated biphenyls-containing items are used or stored at the Owned Real
Property or the premises subject to the Real Property Leases.
Section 4.19 Permits. Schedule 4.19 lists all the Permits related to
the Purchased Assets or operation of the Business, and indicates those Permits
for which the Consent of any Person is required to assign such Permit. Seller
has obtained, maintains in effect, and complies with the terms and conditions
of all Permits required by Law. There is no Action pending or, to Seller's
Knowledge, threatened in writing to revoke or limit any Permit listed on
Schedule 4.19.
Section 4.20 Intangible Assets.
(a) Owned Intangible Assets. Schedule 4.20(a) lists all the
Intangible Assets used in the Business and owned by Seller as of the Signing
Date. With respect to the Intangible Assets listed on Schedule 4.20(a) and all
the Intangible Assets obtained or developed prior to the Closing, (i) Seller
owns all right, title and interest in and to such Intangible Assets free and
clear of all Encumbrances, (ii) Seller has not sold, transferred, licensed,
sub-licensed or conveyed any interest in any of such Intangible Assets, and
(iii) no Person has infringed upon or misappropriated any of such Intangible
Assets.
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(b) Licensed Intangible Assets. Schedule 4.20(b) lists all
licenses and contracts related to any Intangible Asset used by Seller in the
Business as of the Signing Date. Each license or contract listed on Schedule
4.20(b) and each license or contract related to an Intangible Asset which is
entered into after the Signing Date in accordance with Section 6.3 is valid,
binding and in full force and effect. Seller has not infringed upon or
misappropriated any Intangible Asset owned by another Person.
Section 4.21 Employees.
(a) Employees. Schedule 4.21(a) lists the name, job title,
date of employment and current annual compensation (salary, bonus and all
amounts paid pursuant to an Employee Benefit Plan) for each employee of Seller
employed in the conduct of the Business as of the Signing Date (collectively,
the "EMPLOYEES"). All Employees are either United States citizens or resident
aliens specifically authorized to engage in employment in the United States in
accordance with all Laws. All sums due for employee compensation and benefits
and all vacation time owing to any employee of Seller (including all persons
whose employment by Seller terminated prior to the Signing Date) have been duly
and adequately accrued on the accounting Books and Records of Seller.
(b) Contracts. Schedule 4.21(b) lists each (i) contract
between Seller and an Employee, and (ii) collective bargaining agreement and
other contract to or with any labor union, employee representative or group of
employees. Other than the contracts listed on Schedule 4.21(b), Seller's
employment of each Employee is terminable at will without any penalty or
severance obligation of any kind on the part of Seller.
(c) Compliance with Labor Laws. Seller has complied and is
presently complying with all Laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and is not
engaged in any unfair labor practice or unlawful employment practice.
(d) Labor Actions and Relations. There is no unfair labor
practice charge or complaint against Seller pending or threatened before the
National Labor Relations Board nor is there any grievance nor any arbitration
proceeding arising out of or under any collective bargaining agreement pending
and, to Seller's Knowledge, no basis for any such charge, complaint or
grievance exists. There is no labor strike, slowdown or work stoppage pending
or threatened against Seller. Seller has neither experienced any significant
work stoppages nor been a party to any Action before the National Labor
Relations Board involving any issue for the past three years nor been a party
to any arbitration proceeding arising out of or under any collective bargaining
agreement for the past three years. There is no charge or complaint pending or
threatened against Seller before the Equal Employment Opportunity Commission or
the Department of Labor or any state or local agency of similar jurisdiction.
Section 4.22 Employee Benefits.
(a) Welfare Benefit Plan. Schedule 4.22(a) lists, as of the
Signing Date, each Welfare Benefit Plan maintained by Seller or to which Seller
contributes or is required to contribute with respect to any Person. True,
correct and complete copies of the plan documents for each of
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Seller's Welfare Benefit Plans and all related summary plan descriptions have
been provided to Purchaser. Except as provided for in the Year-End Balance
Sheet (or in the footnotes thereto), as of the Signing Date Seller has no
liability for contributions or payments more than 30 days past due with respect
to any of its Welfare Benefit Plans or for any retiree benefits under any such
Welfare Benefit Plan to current or retired employees of Seller (other than as
required by Section 601 of ERISA).
(b) Pension Benefit Plans. Schedule 4.22(b) lists, as of the
Signing Date, each Pension Benefit Plan maintained by Seller or to which Seller
contributes or is required to contribute with respect to any Person. True,
correct and complete copies of the plan and related trust documents for each of
Seller's Pension Benefit Plan and all related summary plan descriptions have
been provided to Purchaser. Seller does not presently maintain and has never
maintained, nor has had any obligation of any nature (whether contingent or
otherwise) to contribute to, a "defined benefit plan" (as defined in Section
414(j) of the Code), without regard to whether such defined benefit plan met
the requirements of Section 401(a) of the Code. Except as provided for in the
Year-End Balance Sheet (or in the footnotes thereto), as of the Signing Date
Seller has no liability for contributions due with respect to its Pension
Benefit Plans, including any "individual account plan" (as defined in Section
3(34) of ERISA).
(c) Employee Arrangements. Schedule 4.22(c) lists each
Employee Benefit Plan not otherwise disclosed in Schedules 4.22(a) or 4.22(b)
maintained by Seller with respect to any past or present employee of Seller.
(d) Benefit Plan Compliance. All of Seller's Employee Benefit
Plans and any related trust agreements or annuity contracts (or any other
funding instruments) currently comply in all respects, and have so complied in
the past, both as to form and operation, with all applicable Laws, including
ERISA and the Code.
(e) No Title IV Liability. No liability under Title IV of
ERISA has been or will be incurred by Seller on or prior to the Closing Date.
(f) Effect of Consummation. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee of Seller or any other individual to a bonus, severance pay,
unemployment compensation or similar payment, or (ii) otherwise accelerate the
time of payment or vesting, or increase the amount of any compensation due to
any current or former employee of Seller.
(g) WARN Act. Neither Seller nor any Person with whom Seller
would be treated as an "employer" for purposes of the Worker Adjustment and
Retraining Notification Act or any similar state law has incurred any liability
or obligation under such laws.
Section 4.23 Taxes.
(a) Tax Returns. All Tax returns, reports, and declarations
of estimated Tax (collectively, "RETURNS") which were required to be filed by
Seller with any Governmental Authority have been timely filed. All Returns are
true and correct and accurately reflect the Tax liabilities of Seller. All
Taxes shown to be due pursuant to such Returns, other than Taxes being
contested in good faith and for which adequate reserves are reflected on the
Interim Balance Sheet, have been paid.
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(b) Statute of Limitations and Tax Actions. Seller has not
executed any presently effective waiver or extension of any statute of
limitations against assessments and collection of Taxes. There are no pending
or, to Seller's Knowledge, threatened Claims, assessments, notices, proposals
to assess, deficiencies or audits with respect to Taxes.
(c) Miscellaneous Tax Representations. Proper and accurate
amounts have been withheld and remitted by Seller from and in respect of all
Persons from whom it is required by applicable law to withhold for all periods
in compliance with the tax withholding provisions of all Laws. Neither Seller
nor, to Seller's Knowledge, any other corporation has filed an election under
Section 341(f) of Code that is applicable to Seller or any of the Purchased
Assets. Seller is not a party to any tax sharing agreement. There is no
contract, plan or arrangement covering any Person that, individually or
collectively, would give rise to the payment of any amount that would not be
deductible by Seller by reason of Section 280G of the Code. Seller is not a
"foreign person" within the meaning of Section 1445(f)(3) of the Code. Seller
has never been a member of any group that filed a consolidated federal income
tax return.
Section 4.24 Bank Accounts; Powers of Attorney. Schedule 4.24 lists
the names of (a) each bank, trust company and stock or other broker with which
Seller has an account, credit line or safe deposit box or vault, or otherwise
maintains relations (the "BANK ACCOUNTS"), (b) all Persons authorized to draw
on, or to have access to, each of the Accounts, and (c) all Persons authorized
by proxies, powers of attorney or other like instrument to act on behalf of
Seller in any matter concerning the Business. Each of the Accounts has a
positive cash balance. No proxies, powers of attorney or other like instruments
are irrevocable.
Section 4.25 Suppliers and Customers. The relationships of Seller with
its suppliers and customers are satisfactory. No such material customer or
supplier has canceled or otherwise terminated, or threatened to cancel or
otherwise terminate, its relationship with Seller, or to materially decrease
its services to Seller or its usage of the services of Seller.
Section 4.26 Affiliated Transactions. Since the Year-End Balance Sheet
Date, except as listed on Schedule 4.26 Seller has not paid, loaned or advanced
any amount to, or sold, transferred or leased any properties or assets
(tangible or intangible) to, or entered into any agreement or arrangement with,
any of the officers, directors or stockholders of Seller or any of its
affiliates, except for compensation to officers at rates not exceeding the
rates of compensation paid during the fiscal year ended on the Year-End Balance
Sheet Date and routine travel advances to officers and employees.
Section 4.27 Books and Records. The Books and Records of Seller, all
of which have been made available to Purchaser, are complete and correct and
have been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls.
Section 4.28 Full Disclosure. No representation or warranty of Seller
made in this Agreement, nor any written statement furnished to Purchaser
pursuant hereto or in connection
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with the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact which affects the Business or financial condition
of Seller, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading.
Section 4.29 Brokers. No Person is or will become entitled to receive
any brokerage or finder's fee, advisory fee or other similar payment for the
transactions contemplated by this Agreement by virtue of having been engaged by
or acted on behalf of Seller.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that the statements
set forth in this Article V are correct and complete.
Section 5.1 Organization; Good Standing; Delivery of Charter
Documents. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. Purchaser is duly qualified
or licensed as a foreign corporation in each jurisdiction in which its assets
are owned or leased, or the nature of its business makes such qualification or
licensing necessary, except those jurisdictions wherein the failure to so
qualify could not have a Material Adverse Effect on Purchaser. Prior to the
Signing Date, Purchaser has delivered to Seller true and complete copies of
Purchaser's Charter Documents as in effect on the Signing Date.
Section 5.2 Power and Authority. Purchaser has all requisite corporate
power and authority necessary to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby, including the execution, delivery and performance of all the other
Transaction Documents to which Purchaser is a party. Purchaser has all
requisite corporate power and authority necessary to own, operate and lease its
assets and to carry on its business as and where conducted.
Section 5.3 Authorization; Execution and Validity. Each of the
Transaction Documents, when executed by Purchaser and delivered to Seller, will
be duly authorized, executed and delivered, and will constitute a valid, legal
and binding obligation of Purchaser, enforceable against Purchaser in
accordance with the terms of such Transaction Document, subject to any Law
Affecting Creditors' Rights.
Section 5.4 No Conflict; Purchaser Consents. The execution, delivery
and performance by Purchaser of each Transaction Document to which it is a
party will not (a) violate any Law, (b) violate any Charter Document of
Purchaser, (c) violate any Order to which Purchaser is a party or by which
Purchaser or its assets is bound, or (d) require any Consent from any Person.
Section 5.5 Full Disclosure. No representation or warranty of
Purchaser made in this Agreement, nor any written statement furnished to Seller
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact which affects
the business or financial condition of Purchaser, or omits or will omit to
state a material fact necessary to make the statements or facts contained
herein or therein not misleading.
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Section 5.6 Brokers. No Person is or will become entitled to receive
any brokerage or finder's fee, advisory fee or other similar payment for the
transactions contemplated by this Agreement by virtue of having been engaged by
or acted on behalf of Purchaser.
ARTICLE VI.
COVENANTS OF SELLER
Section 6.1 Cooperation by Seller. From the Signing Date through the
Closing Date, Seller will use all reasonable efforts (a) to take all actions
and to do all things necessary or advisable to consummate the transactions
contemplated by this Agreement, (b) to cooperate with Purchaser in connection
with the foregoing, including using reasonable efforts to obtain all of the
Consents, and (c) subject to the other terms and conditions of this Agreement,
to cause all the conditions set forth in Section 9.1, the satisfaction of which
is in the reasonable control of Seller, to be satisfied on or prior to Closing.
Section 6.2 Pre-Closing Access to Information. From the Signing Date
through the Closing Date, Seller will afford to Purchaser its Representatives
access to the properties and the Books and Records of Seller.
Section 6.3 Conduct of Business.
(a) Ordinary Course. From the Signing Date through the
Closing Date, Seller, in connection with the conduct of the Business, will use
all reasonable efforts to (i) preserve substantially the relationships with its
Representatives, suppliers and customers, (ii) perform its obligations under
all contracts, leases and Permits in all material respects, (iii) comply with
all Laws, (iv) confer with Purchaser regarding operational matters of a
material nature, (v) report periodically to Purchaser regarding the status of
the Businesses and the results of operations of Seller, and (vi) conduct the
Businesses in the ordinary course and consistent with past practices.
(b) Prohibited Actions. Except as otherwise required or
permitted by this Agreement or listed on Schedule 6.3(b), from the Signing Date
through the Closing Date Seller will not, without the prior written consent of
Purchaser, take or fail to take any action as a result of which any of the
changes or events listed in Section 4.7 occur or become likely to occur.
Section 6.4 Supplements to Schedules. If, between the Signing Date and
the Closing Date, Seller becomes aware that any of its representations and
warranties in this Agreement or the schedules to this Agreement was inaccurate
when made or if during such period any event occurs or condition changes that
causes any of such representations and warranties to be inaccurate, then Seller
will notify Purchaser thereof in writing and supplement the schedules hereto to
account for any such inaccuracy, event or change. Any such supplement to the
schedules will not be deemed to have been disclosed as of the Signing Date or
to have cured any breach of a representations and warranties made in this
Agreement, unless so agreed to in writing by Purchaser.
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Section 6.5 Post-Closing Conduct of Business. Immediately following
the Closing, Seller will take all actions and do all things necessary to (a)
cease all activities which constitute the conduct of the Businesses (other than
matters related to the transition of the Businesses to Purchaser), (b) change
the name of Seller to a name that is not similar to its current corporate name,
and (c) terminate all of its assumed name filings.
Section 6.6 Standstill. Until the earlier to occur of the Closing or
the termination of this Agreement pursuant to Article X, Seller will not, nor
will Seller permit any of its Representatives to, (a) directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations
with, or provide any information or assistance to, any Person (other than
Purchaser and its Representatives) concerning any merger, sale of securities,
sale of substantial assets, investment proposals or similar transaction
involving Seller, (b) entertain or discuss any acquisition or investment
proposals whatsoever, (c) disclose to any third party any non-published
information concerning Seller, the Business or Seller's financial condition, or
(d) withdraw Seller's intention to sell the Purchased Assets to Purchaser.
Section 6.7 Discharge of Encumbrances. Seller will take all actions
and do all things necessary to cause all Encumbrances other than Permitted
Encumbrances on any Purchased Assets to be terminated or otherwise discharged
at or prior to the Closing.
Section 6.8 Non-Disclosure; Non-Competition; Non-Solicitation.
(a) Non-Disclosure Agreement. Seller acknowledges, for itself
and each of its Affiliates, that it has and may have access to Confidential
Information and that such Confidential Information does and will constitute
valuable, special and unique property of Purchaser. At no time will Seller, and
at no time will Seller allow its Affiliates or its Representatives to, (i) use
any Confidential Information in any manner adverse to the business interests of
Purchaser, or (ii) disclose any such Confidential Information to any Person for
any reason or purpose whatsoever. Upon the request of Purchaser, Seller will,
and will cause its Affiliates and Representatives to, deliver to Purchaser all
letters, notes, computer disks, software, notebooks, reports and other
materials which contain Confidential Information and which are in the
possession or under the control of Seller, Affiliate or Representative.
(b) Non-Competition Agreement. Seller agrees, and will cause
each of its Affiliates, not to provide, either directly or indirectly, any of
the Restricted Services within the United States of America for so long as
Purchaser provides services to Seller or any Affiliate of Seller (such time
period, the "RESTRICTIVE PERIOD").
(c) Non-Solicitation Agreement. For a period equal to the
Restrictive Period, Seller will not, and will cause each of its Affiliates not
to, either on its own behalf or on behalf of any entity providing Restrictive
Services, directly or indirectly to the extent that Seller is prohibited in
engaging in such business pursuant to this Section, (i) solicit or induce, or
in any manner attempt to solicit or induce any person employed by, or an agent
of, Purchaser (including those Employees who accept employment with Purchaser
pursuant to Article XI) to terminate such person's employment or agency, as the
case may be, with Purchaser, or (ii) solicit, divert, or attempt to solicit or
divert, or otherwise accept as a supplier or customer, any Person which sells
any products and services of Purchaser, furnishes products or services to, or
receives products and services from, Purchaser, nor will Seller attempt to
induce any such supplier or customer to cease being (or any prospective
supplier or customer not to become) a supplier or customer of Purchaser.
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(d) Independent Covenants. The covenants contained in this
Section are independent and separate, and in the event that any provision
contained herein is declared invalid or illegal, the other provisions hereof
will not be affected or impaired thereby and will remain valid and enforceable.
(e) Injunctive Relief. In the event of a breach or threatened
breach by Seller of any provision of this Section, Purchaser will be entitled
to an injunction to prevent irreparable injury to such Purchaser. Nothing
herein will be construed as prohibiting Purchaser from pursuing any other
remedies available to Purchaser for such breach or threatened breach, including
the recovery of damages from Seller.
(f) Acknowledgments of Seller. Seller acknowledges that (i)
any public disclosure of the Confidential Information will have an adverse
effect on Purchaser and the Business, (ii) Purchaser would suffer irreparable
injury if Seller breaches any of the terms of this Section, (iii) Purchaser
will be at a substantial competitive disadvantage if Purchaser fails to acquire
and maintain exclusive ownership of the Confidential Information or to abide by
the restrictions provided for in this Section, (iv) the scope of the protective
restrictions provided for in this Section are reasonable when taking into
account (A) the negotiations between the Parties and (B) that Seller is the
direct beneficiary of the Purchase Price paid pursuant to this Agreement, (v)
the consideration being paid to Seller pursuant to this Agreement is sufficient
inducement for Seller to agree to the terms hereof, (vi) the provisions of this
Section are reasonable and necessary to protect the Business, to prevent the
improper use or disclosure of the Confidential Information and to provide
Purchaser with exclusive ownership of all such Confidential Information and
(vii) the terms of this Section preclude Seller from providing the Restricted
Services. Without limiting the foregoing, in the event that a court of
competent jurisdiction determines that the Restriction Period exceeds the
maximum reasonable and enforceable time period or that the designated area
exceeds the maximum reasonable and enforceable area, the Restriction Period or
designated area shall be deemed to become and thereafter shall be the maximum
time period or area which such court deems reasonable and enforceable.
ARTICLE VII.
COVENANTS OF PURCHASER
Section 7.1 Cooperation by Purchaser. From the Signing Date through
the Closing Date, Purchaser will use all reasonable efforts (a) to take all
actions and to do all things necessary or advisable to consummate the
transactions contemplated by this Agreement, (b) to cooperate with Seller in
connection with the foregoing, including using reasonable efforts to obtain all
of the Consents and the Releases, and (c) subject to the other terms and
conditions of this Agreement, to cause all the conditions set forth in Section
9.2, the satisfaction of which is in the reasonable control of Purchaser, to be
satisfied on or prior to Closing.
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Section 7.2 Pre-Closing Access to Information. Purchaser will
refrain from imposing any undue burden upon Seller and from interfering with
the operations and conduct of the Business.
Section 7.3 Purchasers' Consent. If Seller gives written notice to
Purchaser that Seller proposes to take any action for which Purchaser's consent
is required under Section 6.3 and if Purchaser has not delivered to Seller a
written objection to such proposed action within 10 business days of Seller's
notice, then Purchaser will be deemed to have consented to such proposed action.
Purchaser's consent to any such proposed action will not be unreasonably
withheld.
Section 7.4 Maintenance of the Segregated Account. Until the earlier
to occur of the Closing or the termination of this Agreement pursuant to Article
X, Purchaser will maintain in the Segregated Account a balance equal to the
lesser of the Base Purchase Price or the Final Purchase Price.
ARTICLE VIII.
MUTUAL COVENANTS
Section 8.1 Governmental Consents.
(a) HSR Filing. Within five business days after the Signing
Date, each Party will take all actions and do all things necessary to file the
notification required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR ACT"). The Parties will use all reasonable efforts
to comply as promptly as practicable with any request made pursuant to the HSR
Act for additional information. Purchaser will pay the statutory filing fees
required by the HSR Act. The Parties anticipate all applicable waiting periods
under the HSR Act to be expired or terminated within 30 days of the filing of
the initial notification required under the HSR Act.
(b) Other Governmental Consents. Promptly after the Signing
Date, each Party will take all actions and do all things necessary to obtain
all Consents required by any Governmental Authority to consummate the
transactions contemplated hereby. Each Party will reasonably cooperate with the
other Parties in obtaining the Consents specified in this Section.
Section 8.2 Consents to Assign Leases and Contracts.
(a) Cooperation and Reasonable Efforts. Each Party hereby
agrees to use reasonable efforts, to take reasonable actions (including
Purchaser's delivery to third parties of its financial statements) and to
cooperate with each other as may be necessary to obtain Consents to transfer
and assign the Encumbered Instruments. Except as expressly provided herein,
neither Party will be required to pay any sum, to incur any obligation or to
agree to any amendment of any Encumbered Instrument in order to obtain any such
Consent to transfer and assign the Encumbered Instrument.
(b) Pre-Closing; Required Consents. Schedule 8.2(b) lists the
Encumbered Instruments to which a Consent to transfer and assign must be
obtained from the appropriate
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third party prior to Closing (collectively, the "REQUIRED CONSENTS"). Except
for the Required Consents, the obtaining of any Consents related to the
Encumbered Instruments will not be a condition to Closing, and Closing will
occur irrespective of whether any such Consent has been obtained.
(c) Post-Closing Efforts to Obtain Consents. In the event any
Consent necessary to effect the transfer and assignment of any Encumbered
Instrument is not obtained on or prior to Closing, each Party will, for a
period of one year following the Closing Date, (i) abide by the requirements of
Section 8.2(a), and (ii) cooperate with each other in any lawful and reasonable
arrangement to provide that Purchaser will receive the benefits under any
Encumbered Instrument not assigned and transferred at the Closing by reason of
the failure to obtain such Consent (a "NON-TRANSFERRED INSTRUMENT"), including,
if necessary, at the request and expense (unless any such failure of
performance by a third party is due to the failure to obtain the Consent of
such third party to the transfer and assignment of the Non-Transferred
Instrument) of Seller, enforcing performance by any third party of its
obligations in respect of such Non-Transferred Instrument; provided that, to
the extent the Parties are successful in providing the material benefits of any
Non-Transferred Instrument to Purchaser, such Purchaser will pay, honor and
discharge when due all liabilities of Seller related thereto to the extent the
liabilities were incurred after the Closing Date. Seller will immediately
transfer and assign to Purchaser any Non-Transferred Instrument for which a
Consent has been received.
(d) No Assignment. Notwithstanding anything to the contrary
in this Agreement, Seller will not transfer or assign any interest in any
Encumbered Instrument, and Purchaser will not assume any liability arising
thereunder or resulting therefrom, if an assignment or transfer or an attempt
to make an assignment or transfer of such Encumbered Instrument without the
Consent of a third party would constitute a breach or violation thereof or a
violation of Law, or affect adversely the rights of Purchaser or Seller
thereunder, until such Consent has been obtained.
Section 8.3 Permits.
(a) Cooperation and Reasonable Efforts. Each Party hereby
agrees to use reasonable efforts, to take reasonable actions (including
Purchaser's delivery to any Governmental Authority of its financial statements)
and to cooperate with each other as may be necessary to transfer to Purchaser,
or assist Purchaser in obtaining, all Permits required to conduct the Business.
On or as soon as practicable after the Signing Date, each Party will file,
separately or jointly with the other Party, as the case may be, all
applications necessary to transfer or obtain the Permits. Each Party will use
reasonable efforts to resolve such objections, if any, as may be asserted by
any Governmental Authority with respect to the applications contemplated
hereby. Seller and Purchaser will each pay one-half of the fees and expenses
incurred in connection with transferring or obtaining all Permits.
(b) Pre-Closing; Required Permits. Schedule 8.3(b) lists the
Permits which must be transferred to or obtained by Purchaser prior to Closing
(the "REQUIRED PERMITS"). Except for the Required Permits, the transfer or
issuance to Purchaser of any Permit will not be a condition to Closing, and
Closing will occur irrespective of whether any such Permit has been transferred
or obtained.
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(c) Post-Closing Efforts to Obtain Permits. In the event any
Permit is not obtained on or prior to Closing, each Party will, for a period of
one year following the Closing Date, (i) abide by the requirements of Section
8.3(a), and (ii) cooperate with each other in any lawful and reasonable
arrangement to provide that Purchaser will receive the benefits under any
Permit not transferred to or obtained by Purchaser at the Closing (a
"NON-TRANSFERRED PERMIT"); provided that, to the extent the Parties are
successful in providing the material benefits of any Non-Transferred Permit to
Purchaser, Purchaser will pay, honor and discharge when due all liabilities of
Seller related thereto to the extent the liabilities were incurred after the
Closing Date. Seller will immediately transfer and assign to Purchaser any
Non-Transferred Permit for which a Consent has been received.
(d) No Assignment. Notwithstanding anything to the contrary
in this Agreement, Seller will not transfer or assign any interest in any
Permit, and Purchaser will not assume any liability arising thereunder or
resulting therefrom, if an assignment or transfer or an attempt to make an
assignment or transfer of such Permit without the Consent of a Governmental
Authority would constitute a breach or violation thereof or a violation of Law,
or affect adversely the rights of Purchaser or Seller thereunder, until such
Consent has been obtained.
Section 8.4 Taxes. The Parties will provide each other with such
assistance as may reasonably be requested by them in connection with the
preparation of any Return, any Tax audit or other examination by any
Governmental Authority, or any judicial or administrative proceedings related
to liability for Taxes. The Parties will retain and provide each other with any
records or information which may be relevant to such preparation, audit,
examination, proceeding or determination. Such assistance will include making
employees available on a mutually convenient basis to provide and explain such
records and information, and will include providing copies of any relevant
Returns and supporting work schedules. The Party requesting assistance
hereunder will reimburse the other for reasonable out-of-pocket expenses
incurred in providing such assistance.
Section 8.5 Books and Records.
(a) Access. For a period of six years after Closing, each
Party will provide the other Party with reasonable access during normal
business hours to its Books and Records relating to the Business (other than
books and records protected by the attorney-client privilege) to the extent
that they relate to the condition or operation of the Business prior to Closing
and are requested by such Party to prepare its Returns, to respond to third
party Claims or for any other legitimate purpose specified in writing. Each
Party will have the right, at its own expense, to make copies of any such Books
and Records.
(b) Destruction. For a period of six years after the Closing
(unless otherwise required by Law) no Party will dispose of or destroy any
Books and Records relating to the Business to the extent that they relate to
the condition or operation of the Business prior to the Closing without first
offering to turn over possession thereof to the other Party by written notice
at least 30 days prior to the proposed date of disposition or destruction.
(c) Confidentiality. Each Party may take such action as it
deems reasonably appropriate to separate or redact information unrelated to the
Business from documents and other
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materials requested and made available pursuant to this Section and may
condition the other Party's access to documents and other materials that it
deems confidential to the execution and delivery of an agreement by the other
Party not to disclose or misuse such information.
(d) Assistance. Each Party will, upon written request and at
the requesting Party's expense, make personnel available to assist in locating
and obtaining any Books and Records relating to the Business to the extent that
they relate to the condition or operation of the Business prior to Closing and
make personnel available whose assistance, participation or testimony is
reasonably required in anticipation of, preparation for or the prosecution or
defense of any third party Claim in which the other Party does not have any
adverse interest.
Section 8.6 Further Assurances. Subject to the other terms and
conditions of this Agreement, at any time and from time to time, whether before
or after Closing, each Party will execute and deliver all instruments and
documents and take all other action that the other Party may reasonably request
to consummate or to evidence the consummation of the transactions contemplated
by this Agreement.
ARTICLE IX.
CONDITIONS PRECEDENT TO CLOSING
Section 9.1 Conditions Precedent to Purchaser's Obligations. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement will be subject to the satisfaction of the following conditions, any
of which may be waived in writing by Purchaser.
(a) Accuracy of Representations and Warranties. The
representations and warranties made by Seller in this Agreement will have been
true and complete as of the Signing Date and as of the Closing Date as though
made as of the Closing Date, except to the extent such representations or
warranties made as of a specific date will have been correct and complete as of
the specified date.
(b) Performance of Covenants. Seller will have performed and
complied with all agreements, covenants and obligations required by this
Agreement to be performed by Seller prior to or at the Closing.
(c) Consents. Seller will have received and delivered to
Purchaser all the Required Consents and the Required Permits, each in form and
substance satisfactory to Purchaser, and will have given all notices required
to be given to any Persons prior to the consummation of the transactions
contemplated by this Agreement.
(d) Closing Certificate. An executive officer of Seller will
have delivered to Purchaser a certificate confirming the satisfaction of the
conditions set forth in Sections 9.1(a) and 9.1(b), and the continuing force
and effect of the Required Consents and Required Permits.
(e) Secretary's Certificate. Seller will have delivered to
Purchaser a certificate executed by the Secretary or an Assistant Secretary of
Seller certifying as to (i) Seller's Charter Documents, (ii) Seller's good
standing, (iii) the resolutions in which Seller's board of directors approved
this Agreement and the transactions contemplated hereby, and (iv) the
incumbency of Seller's officers who execute any documents on behalf of Seller in
connection with this Agreement.
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(f) Legal Opinion. Seller will have delivered to Purchaser
the legal opinion referred to in Section 3.2(h).
(g) Deliveries. Seller will have delivered to Purchaser the
documents required by Section 3.2 and such other documents as Purchaser may
reasonably require.
(h) Compliance with HSR Act. All applicable waiting periods
under the HSR Act will have expired or been terminated.
(i) No Order or Action. No Order will be in effect forbidding
or enjoining the consummation of the transactions contemplated hereby. No
Action will be pending or threatened before any court or other Governmental
Authority seeking to enjoin the Closing or seeking damages against Purchaser or
any of its Representatives as a result of any of the transactions contemplated
by this Agreement, provided that neither Purchaser nor any of its affiliates
instituted such Action.
(j) Consummation of Stock Purchase. The consummation of the
transactions set forth in that certain Stock Purchase Agreement, dated the
Signing Date, between Purchaser, Arrow Claims Management, Inc. and all the
shareholders of Arrow Claims Management, Inc.
(k) Claims and Policy Administration Services Agreements. The
execution and delivery by each of Arrowhead Management Company, Inc., Arrowhead
General Insurance Agency, Inc. and the transferee of the Transferred Assets of
(i) a Claims Administration Services Agreement in substantially the form
attached hereto as Exhibit 9.1(k)(1) and (ii) a Policy Administration Services
Agreement in substantially the form attached hereto as Exhibit 9.1(k)(2).
(l) Establishment of a Ethical Wall. Company and each of
Arrowhead Management Company, Inc. and Arrowhead General Insurance Agency, Inc.
will have agreed to the establishment of written procedures related to the use
by Company of the software applications listed on Schedule 9.1(l).
(m) No Material Adverse Change. Seller has not undergone any
Material Adverse Change since the Signing Date.
Section 9.2 Conditions Precedent to Seller's Obligations. The
obligation of Seller to consummate the transactions contemplated by this
Agreement will be subject to the satisfaction of the following conditions, any
of which may be waived in writing by Seller.
(a) Accuracy of Representations and Warranties. The
representations and warranties made by Purchaser in this Agreement will have
been true and complete as of the Signing Date and as of the Closing Date as
though made as of the Closing Date, except to the extent such representations
or warranties made as of a specific date will have been correct and complete as
of the specified date.
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(b) Performance of Covenants. Purchaser will have performed
and complied with all agreements, covenants and obligations required by this
Agreement to be performed by Purchaser prior to or at the Closing.
(c) Closing Certificate. An executive officer of Purchaser
will have delivered to Seller a certificate confirming the satisfaction of the
conditions set forth in Sections 9.2(a) and 9.2(b).
(d) Secretary's Certificate. Purchaser will have delivered to
Seller a certificate executed by the Secretary or an Assistant Secretary of
Purchaser certifying as to (i) Purchaser's Charter Documents, (ii) Purchaser's
good standing, (iii) the resolutions in which Purchaser's board of directors
approved this Agreement and the transactions contemplated hereby, and (iv) the
incumbency of Purchaser's officers who execute any documents on behalf of
Purchaser in connection with this Agreement.
(e) Legal Opinion. Purchaser will have delivered to Seller
the legal opinion referred to in Section 3.3(d).
(f) Deliveries. Purchaser will have delivered to Seller the
documents required by Section 3.3 and such other documents as Seller may
reasonably require.
(g) Compliance with HSR Act. All applicable waiting periods
under the HSR Act will have expired or been terminated.
(h) Consummation of Stock Purchase. The consummation of the
transactions set forth in that certain Stock Purchase Agreement, dated the
Signing Date, between Purchaser, Arrow Claims Management, Inc. and all the
shareholders of Arrow Claims Management, Inc.
(i) No Order. No Order will be in effect forbidding or
enjoining the consummation of the transactions contemplated hereby. No Action
will be pending or threatened before any court or other Governmental Authority
seeking to enjoin the Closing or seeking damages against Seller or any of its
Representatives as a result of any of the transactions contemplated by this
Agreement, provided that neither Seller nor any of its affiliates instituted
such Action.
Section 9.3 If Conditions Not Satisfied. In the event that any of the
conditions set forth in this Article IX are not satisfied, and the Parties
nevertheless consummate the transactions contemplated by this Agreement to take
place at the Closing, the Parties will not be deemed to have waived any Claim
for damages or other relief arising from or in connection with such
non-satisfaction.
ARTICLE X.
TERMINATION PRIOR TO CLOSING
Section 10.1 Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual agreement of the Parties;
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(b) by Purchaser at any time after the occurrence of a
Material Adverse Change in Seller; or
(c) by Purchaser or Seller at any time on or after December
31, 1998 if any of the conditions provided for in Section 9.1 or 9.2,
respectively, will not have been met or waived in writing prior to such date.
Section 10.2 Procedure Upon Termination. In the event of termination
pursuant to Section 10.1, written notice thereof will be immediately given to
the other Party and the transactions contemplated by this Agreement will be
terminated, without any further action by either Party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(a) each Party will return all documents, work papers and
other materials of the other party, whether obtained before or after the
execution hereof, to the party furnishing the same; and
(b) such termination will not in any way limit, restrict or
relieve any Party of liability for any breach of this Agreement.
ARTICLE XI.
EMPLOYEE MATTERS
Section 11.1 Offer of Employment. Effective as of the Closing Date,
Purchaser will offer those Employees specified on Schedule 11.1 an employment
at will position with such Purchaser in connection with the Business
(collectively, the "RETAINED EMPLOYEES"). Each Retained Employee will be
offered employment with Purchaser at substantially the same position and salary
at which such Retained Employee is employed by Seller as of the Closing Date.
Section 11.2 Benefit Plans, Accrued Benefits, etc. The Parties
acknowledge that Purchaser is not under any obligation whatsoever to provide
any benefits to the Retained Employees other than those benefits currently
offered or provided to the employees of Purchaser in a comparable position. The
Parties further acknowledge that Purchaser is not assuming any obligation of
Seller under any Employee Benefit Plans or under any policy of Seller related
to its Employees, including any obligations related to overtime pay.
Section 11.3 COBRA.
(a) COBRA Liability. Seller agrees to provide any and all
continuation coverage to Employees (other than Retained Employees) and their
qualified beneficiaries (as defined in Section 4980B(g)(1) of the Code) that
may be required under Section 4980B of the Code or Part 6 of Title I of ERISA
as a result of any events that occur on or prior to the Closing Date, including
the consummation of the transactions contemplated by this Agreement.
(b) COBRA Information. Seller agrees to use its best efforts
to provide expeditiously to Purchaser or its Representatives all information
that such Person deems necessary to determine whether there has been any
failure to comply with the continuation health
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care requirements of Section 4980B of the Code and Part 6 of Title I of ERISA
as such requirements have applied to any group health plan maintained by or for
Seller which failure occurred with respect to any current or former employee of
Seller or any spouse, former spouse, dependent child, or former dependent child
of any such employee, on or prior to the Closing Date. Seller further agrees to
use its best efforts to provide expeditiously to Purchaser or its
Representatives all information that such Person deems necessary to correct any
failures to comply with such continuation health care coverage requirements.
Such information will include the identification of all covered employees (as
defined in Section 4980(B)(f)(7) of the Code) and their qualified beneficiaries
(as defined in Section 4980B(g)(1) of the Code), the identification of all
qualifying events with respect to such covered employees or qualified
beneficiaries (as defined in Section 4980B(f)(3) of the Code) and information
otherwise demonstrating compliance with all of the continuation health coverage
requirements of Section 4980B of the Code and Part 6 of Title I of ERISA.
ARTICLE XII.
INDEMNIFICATION
Section 12.1 Indemnification of Purchaser. Seller will indemnify,
defend, and hold Purchaser harmless from any and all Claims directly or
indirectly related or arising with respect to:
(a) Breaches of Representations and Warranties. Any
inaccuracy in any representation or warranty of Seller under this Agreement;
(b) Breaches of Covenants. Any failure to perform or observe
any covenant or agreement to be performed by Seller set forth in this Agreement
or any document delivered to Purchaser pursuant to this Agreement, including
the agreement of Seller contained in Section 11.3(a); or
(c) Failure to Pay or Perform Excluded Liabilities. Any
failure of Seller to pay or perform any of the Excluded Liabilities.
(d) Failure to Comply with Laws. Any failure of Seller to
comply with all Laws in the conduct of the Business on or prior to the Closing
Date.
Section 12.2 Indemnification of Seller. Purchaser will indemnify,
defend, and hold Seller harmless from any and all Claims directly or indirectly
related or arising with respect to:
(a) Breaches of Representations and Warranties. Any
inaccuracy in any representation or warranty of Purchaser under this Agreement;
(b) Breaches of Covenants. Any failure to perform or observe
any covenant or agreement to be performed by Purchaser set forth in this
Agreement or any document delivered to Seller pursuant to this Agreement; or
(c) Failure to Pay or Perform Assumed Liabilities. Any
failure of Purchaser to pay or perform any of the Assumed Liabilities.
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Section 12.3 Indemnification Procedure. The indemnification
obligations under this Agreement will be subject to the following procedures:
(a) Defense of Claim. Within five days after a Party entitled
to indemnification (an "INDEMNITEE") receives a notice of any Claim that may
give rise to an indemnification obligation under this Agreement, the Indemnitee
will give the Party responsible for providing indemnification with respect to
such Claim (the "INDEMNITOR") notice of such Claim, together with a copy of all
documents relating to such Claim that the Indemnitee possesses. The Indemnitor
will then immediately undertake the defense of such Claim by representatives of
its own choosing, provided that the Indemnitee will have the right to control
and undertake such defense by representatives of its own choosing if the Claim
could have a continuing effect upon the Indemnitee or involves any
Environmental Law or Hazardous Material. The Indemnitor will notify the
Indemnitee of the Indemnitor's undertaking of the defense of a Claim promptly
after receiving the notice of the Claim. Similarly, the Indemnitee will notify
the Indemnitor of the Indemnitee's election of its right to control such
defense under the circumstances described above. The failure to give notice of
a Claim within the period described above will not affect the Indemnitee's
rights to indemnification under this Agreement unless such delay prejudices the
Indemnitor.
(b) Participation of the Indemnitee. If ten days after
delivering notice of a Claim to the Indemnitor or such shorter period necessary
to prevent judgment by default in favor of the Person asserting the Claim, the
Indemnitor has not begun to defend against such Claim, the Indemnitee will have
the right to defend or settle such Claim on behalf of the Indemnitor.
Notwithstanding whether the Indemnitor commences at any time to defend against
a Claim, the Indemnitee will have the right to participate in such defense by
representatives of its own choosing. The Indemnitee will bear any expense of
such participation if the Indemnitor is defending against the Claim unless
defenses exist to the Indemnitee that are unavailable to the Indemnitor or the
Indemnitor otherwise possesses a conflict of interest with respect to the
Indemnitee. Under such circumstances, the Indemnitor will reimburse the
Indemnitee for the Indemnitee's reasonable attorneys' fees and expenses. In
addition, the Indemnitor will reimburse the Indemnitee for the Indemnitee's
reasonable attorneys' fees and expenses incurred during the period when the
Indemnitor did not defend against the Claim and in connection with Claims that
Purchaser possesses the right to defend. Notwithstanding whether the Claim
involves a purported breach of the Indemnitor's representations and warranties,
the Indemnitor's obligation to reimburse such fees and expenses will not be
subject to the Indemnitor's Basket. The Indemnitor will make such reimbursement
payments to the Indemnitee upon the Indemnitee's submission of periodic
invoices describing such fees and expenses in reasonable detail.
(c) Settlement of Claims. The Indemnitor may settle any Claim
at its own expense, provided that the Indemnitor will not settle any Claim or
consent to the entry of any judgment without the consent of the Indemnitee if
such settlement or judgment (i) includes any admission of wrongdoing by the
Indemnitee or any of the Indemnitee's Representatives, (ii) includes any
consent to any type of injunctive relief affecting the Indemnitee or any of the
Indemnitee's Representatives, (iii) excludes an unconditional release by the
Person asserting the Claim of the Indemnitee and the Indemnitee's
Representatives from all liability with respect to such Claim, or (iv) requires
the Indemnitee or any of the Indemnitee's Representatives.
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(d) Reimbursement. If an Indemnitor undertakes the defense of
any Claim or settles any Claim and such Claim was not within the scope of the
Indemnitor's indemnification obligations under this Agreement, the Indemnitee
will promptly reimburse the Indemnitor for all expenses with respect to such
defense or settlement, including the Indemnitor's reasonable attorneys' fees
and expenses.
(e) Cooperation. In connection with any indemnity obligation,
the Indemnitee will cooperate with all reasonable requests of the Indemnitor.
(f) Payment--Net of Insurance Proceeds. The amount of any
damage or indemnification payable pursuant to this Article XII will be net of
any insurance proceeds actually received by the Indemnitee in connection with
the circumstances giving rise to the Claim. The calculation of net insurance
proceeds will give effect to all costs incurred by the Indemnitee for such
insurance recovery, including all costs associated with retrospective premium
adjustments, experienced-based premium adjustments, and indemnification
obligations. Nothing in this section will be construed or interpreted as a
guaranty of any level or amount of insurance recovery with respect to any Claim
hereunder.
(g) Payment--Net of Tax Benefit and Detriment. The Parties
will treat any payment or receipt of damages or indemnification hereunder as an
adjustment to the Final Purchase Price on all Tax Returns, except for the
interest component of any such payment, which the Parties will treat as
interest income or expense, as the case may be. To the extent that any damage
or indemnification payment exclusive of the interest component constitutes
taxable income to the Indemnitee, the amount of such damage or indemnification
payment will be increased by the amount of any income Tax attributable to such
payment and the reimbursement of any related income Taxes. To the extent that
any damage or indemnification payment exclusive of the interest component
constitutes a reduction of taxable income to the Indemnitee, the amount of such
damage or indemnification payment will be decreased by the amount of any income
Tax attributable to such reduction of taxable income.
Section 12.4 Meritless Third Party Claims, If a third party makes a
Claim against the Indemnitee that ultimately proves to be meritless, the
Indemnitee may nevertheless require the Indemnitor to defend such Claim and
reimburse the Indemnitee for its reasonable attorneys' fees and expenses in
connection with such Claim if such Claim was within the scope of the
Indemnitor's indemnification obligations under this Agreement.
Section 12.5 Assignment of Claims. If any amounts for which the
Indemnitor is responsible are recoverable from a third party, the Indemnitee
will assign any rights that it may have to recover such amounts to the
Indemnitor.
Section 12.6 Other Indemnitees. Upon Purchaser's request, Seller will
indemnify any of Purchaser's Representatives to the same extent as Purchaser.
Conversely, upon Seller's request Purchaser will indemnify any of Seller's
Representatives to the same extent as Seller. No Representative of any Party,
however, will be a third party beneficiary of the indemnification provisions
contained in this Agreement. In addition, a Party may release or waive any
Claim to which such Party previously requested another Party to indemnify such
Party's Representatives, and such Representatives will have no recourse against
the Party releasing or waiving such
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Claim. To the extent that a Party requests another Party to indemnify such
Party's Representatives, such Party will cause its Representatives to comply
with the indemnification provisions and abide by the indemnification
limitations set forth in this Agreement.
Section 12.7 Contribution. If the indemnity obligations provided for
in this Agreement are held unenforceable in whole or in part for any reason,
each Party will perform such indemnity obligations to the extent enforceable.
To the extent that such indemnity obligations are unenforceable, the Party that
would have been the Indemnitor with respect to a Claim except for such
unenforceability will contribute to such Claim in such proportion as
appropriate to reflect the relative fault of such Party as opposed to the
relative fault of the Person who would have been the Indemnitee, as well as any
other relevant equitable considerations.
Section 12.8 Damages Without Indemnification. A Party may assert a
Claim for damages against another Party for a breach of this Agreement even
though the Party seeking such damages has not incurred a liability or made a
payment to another Person.
Section 12.9 Basket. The Parties acknowledge that all the
representations and warranties contained in this Agreement are without
qualification as to materiality and that the provisions of this Section
regarding the Basket are intended to serve as the exclusive standard of
materiality for purposes of this Agreement. No Party will be liable for any
Claim for damages or indemnification with respect to a breach of such Party's
representations and warranties under this Agreement until the aggregate amount
of such Claims for damages and indemnification for which such Party would
otherwise be responsible concerning breaches of its representations and
warranties exceeds $10,000 (the "BASKET"). If the aggregate amount of such
Claims for which a Party is responsible exceeds the Basket, such Party will
then only be responsible for the amount of such excess.
Section 12.10 Liability Not Limited to Set-Off Under the Option
Agreement. Each Party acknowledges and agrees that (a) the value of the Option
Shares (as defined in the Option Agreement) is not intended to be, nor will
that amount be construed as, Seller's maximum amount of damages or
indemnification with respect to any Claim for a breach of representations and
warranties under this Agreement and (b) Purchaser may pursue any rights or
remedies available at law or in equity in connection with this Agreement
notwithstanding the availability of the right of set-off under the Option
Agreement.
Section 12.11 Liabilities for Special Indemnities and Breaches of
Covenants. Seller's Basket will be inapplicable with respect to any Claim for
damages or indemnification concerning Seller's breach of any representation and
warranty that the indemnities pursuant to Sections 12.1(c) and 12.1(d) cover.
Any damages or indemnification with respect to any such Claims will not count
toward Seller's Basket. A Party's Basket will be inapplicable with respect to
any Claim for damages or indemnification concerning such Party's breach of any
of its covenants under this Agreement or any other terms of this Agreement
applicable to such Party, other than the representations and warranties to
which such Party's Basket apply.
Section 12.12 Consequential Damages. A Party will be (a) liable for
any consequential, incidental, punitive, or special damages with respect to any
breach of this Agreement, and (b) responsible for indemnifying an Indemnitee
for any consequential, incidental, punitive, or special damages that such
Indemnitee incurs if within the scope of such Party's indemnification
obligation.
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Section 12.13 Interest. A Party will pay interest computed at the then
current prime rate on (a) any Claim for damages with respect to such Party's
breach of this Agreement from the date of the breach through the date that the
Party pays such damages, and (b) any Claim for indemnification under this
Agreement for which such Party is the Indemnitor from the date of the
Indemnitee's indemnifiable out-of-pocket expenditure through the date that the
Party pays such Claim.
Section 12.14 Notice of Breach. If before the Closing a Party notifies
another Party of its breach of this Agreement, such notification will neither
prevent such other Party from seeking damages for such breach nor decrease or
mitigate such damages if such other Party still closes the transactions
contemplated by this Agreement.
Section 12.15 Discovery of Breach. If before the Closing a Party
discovers that another Party has breached this Agreement, such discovery will
neither prevent such Party from seeking damages for such breach nor decrease or
mitigate such damages if such Party still closes the transactions contemplated
by this Agreement.
Section 12.16 Survival of Terms. The agreements, covenants, indemnity
obligations, representations and warranties, and other terms of this Agreement,
Purchaser's closing certificate, Seller's closing certificate, and any other
documents contemplated under this Agreement will survive the Closing and any
investigation or notice by any Party, provided that the representations and
warranties of each Party under this Agreement will expire 30 days after the
expiration of the applicable statute of limitations, as such statutory period
may be extended from time to time. Notwithstanding the general expiration of
each Party's representations and warranties described above, Seller's
representations and warranties contained in Sections 4.2 (Power and Authority),
4.3 (Authorization; Execution and Validity), 4.4 (No Conflict), 4.9(c) (Title
to Purchased Assets), 4.28 (Full Disclosure) and 4.29 (Brokers) will survive
forever, subject to all defenses available under Law, including the expiration
of any applicable statute of limitations. A Party will not be responsible with
respect to any Claim for damages or indemnification with respect to any
inaccuracy in any of such Party's representations or warranties unless such
Party receives notice of the Claim with respect to such inaccuracy before such
representation and warranty expires. With respect to any such Claim received
before the expiration of a particular representation or warranty, the Party
responsible for such representation or warranty will remain responsible for any
damage or indemnification amounts claimed notwithstanding the subsequent
expiration of such representation or warranty.
Section 12.17 Negligence and Strict Liability. THE PROVISIONS OF THIS
AGREEMENT CONCERNING CLAIMS FOR DAMAGES AND INDEMNIFICATION WILL APPLY WHETHER
OR NOT THE PARTY OR OTHER PERSON CLAIMING SUCH DAMAGES OR INDEMNIFICATION WAS
NEGLIGENT, GROSSLY NEGLIGENT, OR STRICTLY LIABLE IN CONNECTION WITH THE EVENTS
GIVING RISE TO SUCH CLAIM.
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ARTICLE XIII.
MISCELLANEOUS
Section 13.1 Amendment. No amendment of this Agreement will be
effective unless in a writing signed by the Parties.
Section 13.2 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original
agreement, but all of which will constitute one and the same agreement. Any
Party may execute and deliver this Agreement by an executed signature page
transmitted by a facsimile machine. If a Party transmits its signature page by
a facsimile machine, such Party will promptly thereafter deliver an originally
executed signature page to the other Party, provided that any failure to
deliver such an originally executed signature page will not affect the
validity, legality, or enforceability of this Agreement.
Section 13.3 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the Parties and supersedes all prior
agreements and understandings, both written and oral, with respect to the
subject matter of this Agreement.
Section 13.4 Expenses. Each Party will bear its own expenses with
respect to the negotiation and preparation of this Agreement and the Closing,
including any fees and expenses of its Representatives, provided that if a
Party terminates this Agreement because of another Party's breach of this
Agreement, the non-breaching Party will be entitled to seek reimbursement of
its expenses as part of its damages with respect to such breach. Seller will
bear any Tax imposed in connection with the transfer of the Purchased Assets to
Purchaser pursuant to this Agreement.
Section 13.5 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY THE
LAWS OF THE STATE OF DELAWARE REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.
Section 13.6 No Assignment. No Party may assign its benefits or
delegate its duties under this Agreement without the prior consent of the other
Party. Any attempted assignment or delegation without such prior consent will
be void. Notwithstanding the foregoing, after the Closing each Party may assign
its rights under this Agreement to a purchaser of all of the assets or equity
of such Party without the other Party's consent, and any such purchaser and any
subsequent purchasers of all of the assets or equity of a Party may similarly
assign such rights.
Section 13.7 No Third Party Beneficiaries. This Agreement is solely
for the benefit of the Parties and no other Person will have any right,
interest, or claim under this Agreement.
Section 13.8 Notices. All claims, consents, designations, notices,
waivers, and other communications in connection with this Agreement will be in
writing. Such claims, consents, designations, notices, waivers, and other
communications will be considered received (a) on the day of actual transmittal
when transmitted by facsimile with written confirmation of such transmittal,
(b) on the next business day following actual transmittal when transmitted by a
nationally recognized overnight courier, or (c) on the third business day
following actual
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transmittal when transmitted by certified mail, postage prepaid, return receipt
requested; in each case when transmitted to a Party at its address set forth on
Schedule 13.8 (or to such other address to which such Party has notified the
other Parties in accordance with this Section to send such claims, consents,
designations, notices, waivers, and other communications).
Section 13.9 Public Announcements. The Parties will agree on the terms
of any press releases or other public announcements related to this Agreement,
and will consult with each other before issuing any press releases or other
public announcements related to this Agreement; provided, however, that any
Party may make a public disclosure if in the opinion of such party's counsel it
is required by Law or the rules of the New York Stock Exchange or the Nasdaq
National Market to make such disclosure. The parties agree, to the extent
practicable, to consult with each other regarding any such public announcement
in advance thereof.
Section 13.10 Representation by Legal Counsel. Each Party is a
sophisticated Person that was advised by experienced legal counsel and other
advisors in the negotiation and preparation of this Agreement.
Section 13.11 Schedules. All references in this Agreement to schedules
will mean the schedules identified in this Agreement, which are incorporated
into this Agreement and will be deemed a part of this Agreement for all
purposes. Each Section of this Agreement that refers to a schedule will have a
separate schedule. In addition, any disclosure under a particular section's
schedule will be made under the heading of any relevant subsection of such
section. A disclosure of an item in a schedule for a particular section or
under a heading in a schedule corresponding to a particular subsection will not
be a disclosure under any other section's schedule or any other subsection,
unless so noted specifically on such schedule. Seller has delivered to
Purchaser a correct and complete copy of each document described on each
schedule to this Agreement and a correct and complete written description of
each unwritten arrangement or other item described on each such schedule.
Section 13.12 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will not invalidate the
remaining provisions of this Agreement or affect the validity or enforceability
of such provision in any other jurisdiction. In addition, any such prohibited
or unenforceable provision will be given effect to the extent possible in the
jurisdiction where such provision is prohibited or unenforceable.
Section 13.13 Successors. This Agreement will be binding upon and will
inure to the benefit of each Party and its heirs, legal representatives,
permitted assigns, and successors, provided that this Section will not permit
the assignment or other transfer of this Agreement, whether by operation of law
or otherwise, if such assignment of other transfer is not otherwise permitted
under this Agreement.
Section 13.14 Time of the Essence. Time is of the essence in the
performance of this Agreement and all dates and periods specified in this
Agreement.
Section 13.15 Waiver. No provision of this Agreement will be
considered waived unless such waiver is in writing and signed by the Party that
benefits from the enforcement of such provision. No waiver of any provision in
this Agreement, however, will be deemed a waiver of a
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subsequent breach of such provision or a waiver of a similar provision. In
addition, a waiver of any breach or a failure to enforce any term or condition
of this Agreement will not in any way affect, limit, or waive a Party's rights
under this Agreement at any time to enforce strict compliance thereafter with
every term and condition of this Agreement.
Section 13.16 Attorney's Fees. In the event of any Action among the
Parties seeking enforcement of any of the terms and conditions of this
Agreement, the prevailing party in such Action will be awarded its reasonable
costs and expenses, including its court costs and reasonable attorneys' fees.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by a duly authorized officer as of the Signing Date.
SELLER: ARROWHEAD GENERAL INSURANCE AGENCY, INC.
By: /s/ PATRICK J. KILKENNY
-------------------------------------
Patrick J. Kilkenny, President
PURCHASER: INSpire INSURANCE SOLUTIONS, INC.
By: /s/ WILLIAM J. SMITH, III
--------------------------------------
William J. Smith, III, President
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APPENDIX A
DEFINITIONS AND RULES OF INTERPRETATION
Definitions. Unless the context otherwise requires, the terms defined
in this Appendix will have the meanings specified below for all purposes of
this Agreement:
(a) "ACCOUNTS RECEIVABLE" will have the meaning set forth in
Section 4.10.
(b) "ACTION" means any action, arbitration proceeding, cause
of action, charge, counterclaim, cross claim, inquiry, investigation, legal
action, litigation, Order, proceeding, or suit.
(c) "AFFILIATE" means with respect to a Person means any
other Person that directly or indirectly controls, is controlled by, or is
under common control with such Person. For the purposes of this definition,
control means the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise. Control shall be presumed by an individual that is a
director, executive officer, general partner, manager, or similar functionary
of a Person, or a Person that beneficially owns more than 10% of any class of
securities of such Person having general voting rights. For purpose of this
Agreement, each of Patrick Kilkenny and Arrowhead Management Company, Inc., and
each Affiliate of such Person shall be considered an Affiliate of each Seller.
(d) "AGREEMENT" will have the meaning set forth in the first
paragraph.
(e) "ALLOCATION STATEMENT" will have the meaning set forth in
Section 2.3.
(f) "ASSUMED LIABILITIES" will have the meaning set forth in
Section 1.3.
(g) "BALANCE SHEET DATE" will have the meaning set forth in
Section 4.5(a).
(h) "BANK ACCOUNTS" will have the meaning set forth in
Section 4.24.
(i) "BASE PURCHASE PRICE" will have the meaning set forth in
Section 2.1.
(j) "BASKET" will have the meaning set forth in Section 12.9.
(k) "BOOKS AND RECORDS" will mean all the books and records
maintained by or for Seller, including all accounting records, minute books,
stock records, computerized records and storage media and the software used in
connection therewith.
(l) "BUSINESS" will have the meaning set forth in Recital A.
(m) "CHARTER DOCUMENTS" will mean (i) in the case of a
corporation, its articles or certificate of incorporation and its bylaws, (ii)
in the case of a partnership, its partnership certificate and its partnership
agreement, and (iii) in the case of any other Person, its organic and governing
documents; in each case as such document has been amended or supplemented from
time to time prior to the Signing Date.
<PAGE> 40
(n) "CLAIM" will mean any arbitration award, assessment,
charge, citation, claim, damage, demand, directive, expense, fine, interest,
joint or several liability, Lawsuit, notice, obligation, payment, penalty, or
summons of any kind or nature whatsoever, including any damages incurred
because of the claimant's negligence or gross negligence or any strict
liability imposed upon the claimant, any consequential or punitive damages, and
any reasonable attorneys' fees and expenses. A Claim will be considered to
exist even though it may be conditional, contingent, indirect, potential,
secondary, unaccrued, unasserted, unknown, unliquidated, or unmatured.
(o) "CLOSING" will have the meaning set forth in Section 3.1.
(p) "CLOSING CASH PAYMENT" will have the meaning set forth in
Section 2.2.
(q) "CLOSING DATE" will have the meaning set forth in Section
3.1.
(r) "CLOSING PREMIUM STATEMENT" will have the meaning set
forth in Section 2.4(a).
(s) "CODE" will mean the Internal Revenue Code of 1986, as
amended.
(t) "CONFIDENTIAL INFORMATION" means any proprietary
information, and any information which Purchaser reasonably considers to be
proprietary, pertaining to each of Seller's and Purchaser's past, present or
prospective business secrets, methods or policies, earnings, finances, security
holders, lenders, key employees, nature of services performed by such entity's
sales personnel, procedures, standards and methods, information relating to
arrangements with suppliers, the identity and requirements of arrangements with
customers, the type, volume or profitability of services or products for
customers, drawings, records, reports, documents, manuals, techniques, ratings,
information, data, statistics, trade secrets and all other information of any
kind or character relating to each of the Parties, whether or not reduced to
writing.
(u) "CONFIDENTIALITY AGREEMENT" will have the meaning set
forth in Section 6.2.
(v) "CONSENT" will mean a consent, approval, order,
authorization or waiver from, notice to or declaration, registration or filing
with any Person.
(w) "DIRECT WRITTEN PREMIUMS" will mean the sum of (i) with
respect to all insurance policies except personal automobile insurance
policies, the aggregate amount of premiums payable to Purchaser on all the
insurance policies issued by Purchaser during a time particular period, plus
(ii) with respect to personal automobile insurance policies, the aggregate
amount of premiums paid to Purchaser by insureds during a particular time
period.
(x) "DIVISION" will have the meaning set forth in Recital A.
(y) "EMPLOYEE BENEFIT PLAN" will mean any (i) Pension Benefit
Plan, (ii) Welfare Benefit Plan, (iii) accident, dental, disability, health,
life, medical, or vision plan or insurance policy, (iv) bonus, executive,
incentive or deferred compensation plan, (v) change in control plan, (vi)
fringe benefits and perquisites, (vii) holiday, sick pay, leave, vacation,
moving
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or tuition reimbursement or other similar policy, (viii) stock option,
stock purchase, phantom stock, restricted stock or stock appreciation plan,
(ix) severance plan, or (x) other employee arrangement, commitment, custom,
policy or practice.
(z) "EMPLOYEES" will have the meaning set forth in Section
4.21(a).
(aa) "ENCUMBERED INSTRUMENT" will mean any the contract and
lease to be assigned by Seller and assumed by Purchaser pursuant to the terms
of this Agreement that by its terms require Consent from a third party in order
to transfer and assign the rights and obligations thereunder.
(bb) "ENCUMBRANCE" will mean any title defect or objection,
mortgage, lien, deed of trust, equity, judgment, claim, restrictive covenant,
use restriction, charge, pledge, security interest or other encumbrance of any
nature whatsoever, including all leases, chattel mortgages, conditional sales
contracts, collateral security arrangements and other title or interest
retention arrangements.
(cc) "ENVIRONMENTAL LAW" will mean (i) the Clean Air Act (42
U.S.C. Section 7401 et seq.), (ii) the Clean Water Act (33 U.S.C. Section 1251
et seq.), (iii) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act
of 1986 (42 U.S.C. Section 9601 et seq.), (iv) the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), (v) the Hazardous Materials
Transportation Act (49 U.S.C. Section 5101 et seq.), (vi) the National
Environmental Policy Act (42 U.S.C. Section 4321 et seq.), (vii) the Oil
Pollution Act of 1990 (33 U.S.C. Section 2701 et seq.), (viii) the Resource
Conservation and Recovery Act, as amended by the Hazardous and Solid Waste
Amendments of 1984 (42 U.S.C. Section 6901 et seq.), (ix) the Safe Drinking
Water Act (42 U.S.C. Section 300f et seq.), (x) the Toxic Substances Control
Act (15 U.S.C. Section 2601 et seq.), (xi) any state, local, tribal, or foreign
law, ordinance, regulation, or statute analogous to any of the foregoing
statutes, or (xii) any other federal, state, local, tribal, or foreign law,
ordinance, regulation, or statute prohibiting, regulating, or restricting the
disposal, generation, handling, placement, recycling, release, storage, or
treatment of any contaminant, liquid, mass, material, matter, pollutant, solid,
substance, or waste classified or considered to be hazardous or toxic to human
health or the environment or otherwise related to environmental protection or
health and safety.
(dd) "ERISA" will mean the Employee Retirement Income
Security Act of 1974, as amended.
(ee) "EXCLUDED ASSETS" will have the meaning set forth in
Section 1.2.
(ff) "EXCLUDED LIABILITIES" will have the meaning set forth
in Section 1.4.
(gg) "FINAL CLOSING PREMIUM STATEMENT" will have the meaning
set forth in Section 2.4(b).
(hh) "FINAL PURCHASE PRICE" will have the meaning set forth
in Section 2.1.
3
<PAGE> 42
(ii) "GAAP" will mean generally accepted accounting
principles in effect in the United States of America as of the Signing Date.
(jj) "GOVERNMENTAL AUTHORITY" will mean any federal, state,
local, tribal, foreign or other governmental agency, department, branch,
commission, board, bureau, court, instrumentality or body.
(kk) "HAZARDOUS MATERIAL" will mean (i) any contaminant,
liquid, mass, material, matter, pollutant, solid, substance, or waste for which
any Environmental Law limits, prohibits, or regulates its disposal, generation,
handling, placement, recycling, release, storage, or treatment, (ii) any
carcinogenic, corrosive, explosive, flammable, infectious, mutagenic,
radioactive, or toxic substance, (iii) any diesel fuel, gasoline, or other
petroleum product in an unconfined manner, (iv) any substance that contains
polychlorinated biphenyls, (v) any substance that contains asbestos, (vi) any
substance that contains urea formaldehyde foam installation, (vii) any
substance that constitutes a nuisance upon any property, or (viii) any
substance that imposes a hazard to the health or safety of any individual.
(ll) "HSR ACT" will have the meaning set forth in Section
8.1.
(mm) "INDEMNITEE" will have the meaning set forth in Section
12.3(a).
(nn) "INDEMNITOR" will have the meaning set forth in Section
12.3(a).
(oo) "INSURANCE POLICIES" will have the meaning set forth in
Section 4.15.
(pp) "INTANGIBLE ASSET" will mean any patent, trademark,
trademark license, computer software, trade name, masthead, brand name, slogan,
copyright, reprint right, franchise, license, process, authorization,
invention, know-how, formula, trade secret and other intangible asset, together
with any pending application, continuation-in-part or extension therefor.
(qq) "INTERIM BALANCE SHEET" will have the meaning set forth
in Section 4.5(b).
(rr) "LAW" will mean any applicable code, statute, law,
common law, rule, regulation, order, ordinance, judgment, decree, order, writ
or injunction of any Governmental Authority.
(ss) "LAW AFFECTING CREDITORS' RIGHTS" will mean any
bankruptcy, fraudulent conveyance or transfer, insolvency, moratorium,
reorganization, or other law affecting the enforcement of creditors' rights
generally, and any general principles of equity.
(tt) "MATERIAL ADVERSE CHANGE" will mean, with respect to a
Person, that such Person has (i) breached a Material Contract, (ii) incurred a
Claim or become a party to an Action that could have a significant and
detrimental effect upon it, (iii) suffered a Material Adverse Effect, or (iv)
violated any Law or Order to which it or any of its assets is subject or bound.
(uu) "MATERIAL ADVERSE EFFECT" will mean, with respect to a
Person, the occurrence of an event or the existence of a circumstance that has
a material adverse effect on such Person's assets, business, cash flows,
financial condition, liabilities, operations, prospects,
4
<PAGE> 43
or relationships, including the occurrence of any event or the existence of any
circumstance that could cause such an effect in the future.
(vv) "MATERIAL CONTRACTS" will have the meaning set forth in
Section 4.16.
(ww) "NON-TRANSFERRED INSTRUMENT" will have the meaning set
forth in Section 8.2(c).
(xx) "NON-TRANSFERRED PERMIT" will have the meaning set forth
in Section 8.3(c).
(yy) "OBJECTION NOTICE" will have the meaning set forth in
Section 2.4(b).
(zz) "OPTION AGREEMENT" will have the meaning set forth in
Section 2.2.
(aaa) "ORDER" will mean any consent decree, decree,
determination, injunction, judgment, order, or writ of any arbitrator or
Governmental Authority.
(bbb) "OWNED REAL PROPERTY" will have the meaning set forth
in Section 4.12(a).
(ccc) "PARTY" will have the meaning set forth in the first
paragraph.
(ddd) "PENSION BENEFIT PLAN" will mean an "employee pension
benefit plan" as defined in Section 3(2) of ERISA, and a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA.
(eee) "PERMIT" will mean any license, approval, certificate,
franchise, registration, permit or authorization issuable by any Governmental
Authority.
(fff) "PERMITTED ENCUMBRANCE" will mean any Encumbrance
directly related to (i) Taxes that are not yet due and payable or Taxes that
are being contested in good faith by an appropriate proceeding, and in each
case as to which adequate reserves have been established in accordance with
GAAP, (ii) Encumbrances shown on the Interim Balance Sheet as securing
specified Claims with respect to which no breach or default exists, (iii)
workers', repairmen's and similar Encumbrances imposed by Law that have been
incurred in the ordinary course of business, (iv) retention of title agreements
with suppliers entered into in the ordinary course of business, and (v) the
rights of others to customer deposits.
(ggg) "PERSON" will mean any association, bank, business
trust, corporation, estate, general partnership, Governmental Authority,
individual, joint stock company, joint venture, labor union, limited liability
company, limited partnership, non-profit corporation, professional association,
professional corporation, trust, or any other organization or entity.
(hhh) "PERSONAL PROPERTY LEASES" will have the meaning set
forth in Section 4.13(b).
(iii) "PLAN" will mean any bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance,
hospitalization or other medical, life or
5
<PAGE> 44
other insurance, supplemental unemployment benefit, profit sharing, pension, or
retirement plan, program, agreement or arrangement.
(jjj) "PURCHASED ASSETS" will have the meaning set forth in
Section 1.1.
(kkk) "PURCHASER" will have the meaning set forth in first
paragraph.
(lll) "REAL PROPERTY LEASES" will have the meaning set forth
in Section 4.12(a).
(mmm) "REGISTRATION RIGHTS AGREEMENT" will have the meaning
set forth in Section 3.2(i).
(nnn) "REPRESENTATIVES" will mean, with respect to a Person,
such Person's directors, employees, officers, agents, accountants, affiliates,
consultants, investment bankers, attorneys, lenders, representatives and
shareholders.
(ooo) "REQUIRED CONSENT" will have the meaning set forth in
Section 8.2(b).
(ppp) "REQUIRED PERMIT" will have the meaning set forth in
Section 8.3(b).
(qqq) "RESTRICTED SERVICES" means any actions directly or
indirectly related to providing or soliciting third party administrator
services in connection with property and casualty insurance lines.
(rrr) "RESTRICTION PERIOD" will have the meaning set forth in
Section 6.8(b).
(sss) "RETAINED EMPLOYEES" will have the meaning set forth in
Section 11.1.
(ttt) "RETURNS" will have the meaning set forth in Section
4.23(a).
(uuu) "SEGREGATED ACCOUNT" will have the meaning set forth in
Section 2.2.
(vvv) "SELLER" will have the meaning set forth in the first
paragraph.
(www) "SELLER'S KNOWLEDGE" will mean the actual knowledge as
of the date that a specific representation or warranty is made or deemed made,
after reasonable inquiry, of Patrick Kilkenny, Marianne Harmon, Myron Sima,
Gary Kadota, Sue Brown and Kevin McDonald.
(xxx) "SIGNING DATE" will have the meaning set forth in the
first paragraph.
(yyy) "TAX" will mean any assessment, charge, duty, fee,
impost, levy, tariff, or tax of any nature whatsoever imposed by any
Governmental Authority or payable pursuant to any tax sharing agreement,
including any income, payroll, withholding, excise, gift, alternative minimum,
capital gain, added value, social security, sales, use, real and personal
property, use and occupancy, business and occupation, mercantile, real estate,
capital stock, and franchise tax or charge, together with any related interest,
penalties or additions thereon.
(zzz) "TRANSACTION DOCUMENTS" will have the meaning set forth
in Section 4.2.
6
<PAGE> 45
(aaaa) "INTERIM FINANCIAL STATEMENTS" will have the meaning
set forth in Section 4.5(b).
(bbbb) "WELFARE BENEFIT PLAN" will mean an "employee welfare
benefit plan" as defined in Section 3(1) of ERISA, including an employee
welfare benefit plan which is a "multiemployer welfare plan" as defined in
Section 3(37) of ERISA and a "multiple employer welfare arrangement" as defined
in Section 3(40) of ERISA.
(cccc) "WRITTEN PREMIUM AMOUNT" will have the meaning set
forth in Section 2.4(b).
(dddd) "YEAR-END BALANCE SHEET" will have the meaning set
forth in Section 4.5(a).
(eeee) "YEAR-END FINANCIAL STATEMENTS" will have the meaning
set forth in Section 4.5(a).
Accounting Terms. Except as otherwise provided in this Agreement, all
accounting terms defined in this Agreement, whether defined in this Article or
otherwise, will be construed in accordance with GAAP on a consolidated basis.
Articles, Sections, Exhibits and Schedules. Except as specifically
stated otherwise, references to Articles, Sections, Exhibits and Schedules
refer to the Articles, Sections, Exhibits and Schedules of this Agreement.
Attorneys' Fees. Whenever this Agreement refers to a Person's
"attorneys' fees and expenses," such reference also will include any fees and
expenses of accountants, experts, investigators, and other professional
advisors whose services such Person's attorney considered advisable in
connection with the prosecution or defense of the particular matter.
Breach. The term "breach" with respect to any contract or instrument
means any breach or violation of, or default under, such contract or
instrument, any conflict with another contract or instrument or any emergence
of a right of another party to such contract or instrument to accelerate,
cancel, modify or terminate such contract or instrument, including any such
breach, violation, default, conflict, or right that will arise after notice or
lapse of time.
Disclosure Thresholds. The establishment of any monetary thresholds
for the disclosure of particular items will not create a materiality standard
under this Agreement.
Drafting. Neither this Agreement nor any provision contained in this
Agreement will be interpreted in favor of or against either Party because such
Party or its legal counsel drafted this Agreement or such provision. No prior
draft of this Agreement or any provision contained in this Agreement will be
used when interpreting this Agreement or its provisions.
Headings. Article and section headings are used in this Agreement only
as a matter of convenience and will not have any effect upon the construction
or interpretation of this Agreement.
7
<PAGE> 46
Include. The term "include" or any derivative of such term does not
mean that the items following such term are the only types of such items.
Or. The term "or" will not be interpreted as excluding any of the
items described.
Plural and Singular Words. Whenever the plural form of a word is used
in this Agreement, that word will include the singular form of that word.
Whenever the singular form of a word is used in this Agreement, that word will
include the plural form of that word.
Predecessors. Any of Seller's representations and warranties
concerning any Claim against Seller, any liability or obligation of Seller, or
any violation of Law by Seller will include any Claims with respect to each
predecessor of Seller, including all direct and indirect predecessors of any
such predecessor.
Pronouns. Whenever a pronoun of a particular gender is used in this
Agreement, if appropriate that pronoun also will refer to the other gender and
the neuter. Whenever a neuter pronoun is used in this Agreement, if appropriate
that pronoun also will refer to the masculine and feminine gender.
Representations and Warranties. Seller's representations and
warranties under this Agreement will mean the representations and warranties
contained in Article IV and the reaffirmation of Seller's representations and
warranties in Seller's Closing Certificate. Purchaser's representations and
warranties under this Agreement will mean the representations and warranties
contained in Article V and the reaffirmation of those representations and
warranties in Purchaser's Closing Certificate.
Statutes. Any reference to Law or any specific statute will include
any changes to such law or statute after the Signing Date, any successor law or
statute, and any regulations and rules promulgated under such law or statute
and any successor law or statute, whether promulgated before or after the
Signing Date.
8
<PAGE> 47
reaffirmation of Seller's representations and warranties in Seller's Closing
Certificate. Purchaser's representations and warranties under this Agreement
will mean the representations and warranties contained in Article V and the
reaffirmation of those representations and warranties in Purchaser's Closing
Certificate.
Statutes. Any reference to Law or any specific statute will include
any changes to such law or statute after the Signing Date, any successor law or
statute, and any regulations and rules promulgated under such law or statute
and any successor law or statute, whether promulgated before or after the
Signing Date.
9
<PAGE> 1
EXHIBIT 10.1
================================================================================
OPTION AGREEMENT
by and between
INSpire INSURANCE SOLUTIONS, INC.,
and
ARROWHEAD GENERAL INSURANCE AGENCY, INC.
dated as of December 1, 1998
================================================================================
<PAGE> 2
THIS OPTION AGREEMENT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES ACTS
OF ANY STATE AND MAY NOT BE TRANSFERRED OR SOLD IN VIOLATION OF SUCH ACTS OR THE
RULES AND REGULATIONS PROMULGATED THEREUNDER.
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "AGREEMENT"), dated as of December 1,
1998, (the "SIGNING DATE"), is between INSpire Insurance Solutions, Inc., a
Texas corporation ("INSPIRE"), and Arrowhead General Insurance Agency, Inc., a
Minnesota corporation ("ARROWHEAD"). INSpire and Arrowhead are sometimes
collectively referred to as the "PARTIES," and individually referred to as a
"PARTY."
RECITALS
A. This Agreement was entered into in connection with, and was a
condition to the consummation of, that certain (i) Stock Purchase Agreement,
dated as of October 29, 1998, between INSpire, Arrow Claims Management, Inc. and
the stockholders of Arrow Claims Management, Inc. (the "STOCK PURCHASE
AGREEMENT") and (ii) Asset Purchase Agreement, dated as of October 29, 1998,
between the Parties (the "ASSET PURCHASE AGREEMENT").
B. In connection with the consummation of the transactions set forth
in the Asset Purchase Agreement, INSpire desires to grant Arrowhead an option to
purchase from INSpire a certain number of shares of common stock of INSpire, par
value $.01 per share (the "COMMON STOCK"), on the terms and conditions set forth
in this Agreement.
C. Capitalized terms used in this Agreement are defined or indexed in
Appendix A for the convenience of the reader and in order to eliminate the need
for cross-references. Appendix A is incorporated herein by this reference.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties set forth in this
Agreement and for other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I.
THE OPTION; VESTING
Section 1.1 Number of Option Shares. Subject to the terms and
conditions set forth in this Agreement, INSpire hereby grants to Arrowhead an
option to purchase at the Option Price Per Share, the number of shares of Common
Stock (the "OPTION) equal to the quotient (rounded up to the next whole number)
of (a) 7,000,000, divided by (b) the closing price per share of Common Stock on
October 29, 1998 as quoted on the Nasdaq National Market (such number of shares
of Common Stock as may be adjusted as provided herein, the "OPTION SHARES").
<PAGE> 3
Section 1.2 Year One Vesting. Subject to the terms and conditions set
forth in this Agreement and in addition to any Option Shares which vest pursuant
to Sections 1.3 and 1.4, the Option Shares will vest pursuant to the following:
(a) if the amount of Direct Written Premiums related to the
policies processed by INSpire and its Affiliates on behalf of Arrowhead and its
Affiliates for the period commencing January 1, 1999 and ending on December 31,
1999 (such amount, the "YEAR 1999 PREMIUM AMOUNT") is less than $182,750,000,
then no Option Shares will vest as of January 1, 2000; and
(b) if the Year 1999 Premium Amount is equal to or greater
than $182,750,000, then the number of Option Shares to vest as of January 1,
2000 will equal the lesser of (i) 50% of the Option Shares or (ii) the product
of (A) 50% of the Option Shares multiplied by (B) a fraction consisting of a
numerator equal to the Year 1999 Premium Amount and a denominator equal to
$215,000,000 (such number of Options Shares that vest pursuant to this
subsection (b), the "YEAR 1999 VESTED SHARES").
Section 1.3 Year Two Vesting. Subject to the terms and conditions set
forth in this Agreement and in addition to any Option Shares which vest pursuant
to Sections 1.2 and 1.4, the Option Shares will vest pursuant to the following:
(a) if the amount of Direct Written Premiums related to the
policies processed by INSpire and its Affiliates on behalf of Arrowhead and its
Affiliates for the period commencing January 1, 2000 and ending on December 31,
2000 (such amount, the "YEAR 2000 PREMIUM AMOUNT") is less than $182,750,000,
then no Option Shares will vest as of January 1, 2001; and
(b) if the Year 2000 Premium Amount is equal to or greater
than $182,750,000, then the number of Option Shares to vest as of January 1,
2001 will equal the lesser of (i) 50% of the Option Shares or (ii) to the
product of (A) 50% of the Option Shares multiplied by (B) a fraction consisting
of a numerator equal to the Year 2000 Premium Amount and a denominator equal to
$215,000,000 (such number of Options Shares that vest pursuant to this
subsection (b), the "YEAR 2000 VESTED SHARES").
Section 1.4 Additional Vesting. Subject to the terms and conditions
set forth in this Agreement and in addition to any Option Shares which vest
pursuant to Sections 1.2 and 1.3, the Option Shares will vest pursuant to the
following (such total number of Options Shares that vest pursuant to this
Section 1.4, the "ADDITIONAL VESTED SHARES"):
(a) if the Year 1999 Premium Amount is greater than
$215,000,000 and the Year 2000 Premium Amount is less than $215,000,000, then
the number of Option Shares to vest as of January 1, 2001 will equal the lesser
of (i) the difference of 50% of the Option Shares minus the Year 2000 Vested
Shares or (ii) to the product of (A) 50% of the Option Shares multiplied by (B)
a fraction consisting of a numerator equal to (1) the difference of the Year
1999 Premium Amount minus $215,000,000 and (2) a denominator equal to
$215,000,000; provided, however, that if the Year 2000 Premium Amount is less
than $182,750,000, then the numerator will equal the greater of zero or the
difference of (I) the difference of the Year 1999
<PAGE> 4
Premium Amount minus $215,000,000, minus (II) the difference of $182,750,000
minus the Year 2000 Premium Amount.
(b) if the Year 2000 Premium Amount is greater than
$215,000,000 and the Year 1999 Premium Amount is less than $215,000,000, then
the number of Option Shares to vest as of January 1, 2001 will equal the lesser
of (i) the difference of 50% of the Option Shares minus the Year 1999 Vested
Shares or (ii) to the product of (A) 50% of the Option Shares multiplied by (B)
a fraction consisting of a numerator equal to (1) the difference of the Year
2000 Premium Amount minus $215,000,000 and (2) a denominator equal to
$215,000,000; provided, however, that if the Year 1999 Premium Amount is less
than $182,750,000, then the numerator will equal the greater of zero or the
difference of (I) the difference of the Year 2000 Premium Amount minus
$215,000,000, minus (II) the difference of $182,750,000 minus the Year 1999
Premium Amount.
(c) if (i) either of the Year 1999 Premium Amount or the Year
2000 Premium Amount is less than $182,750,000 and (ii) the sum of the Year 1999
Premium Amount plus the Year 2000 Premium Amount is greater than $365,500,000,
then the number of Option Shares to vest as of January 1, 2001 will equal 42.5%
of the Option Shares.
Section 1.5 Exercise Period. Arrowhead's right to purchase the Total
Vested Shares will commence on the date the calculation of the number of Total
Vested Shares is deemed final in accordance with Section 2.4 and will expire 90
days thereafter (such period, the "EXERCISE PERIOD").
ARTICLE II.
DETERMINATION OF VESTED SHARES; SET-OFF SHARES
Section 2.1 Annual Premium Statement. As soon as reasonably
practicable, but not later than 90 days after the end of each of calendar years
1999 and 2000, Arrowhead will delivery to INSpire a statement detailing the
amount of Direct Written Premiums for the applicable calendar year (such
statement, together with the supporting workpapers, the "ANNUAL PREMIUM
STATEMENT"). The amount set forth on the Annual Premium Statement will be
calculated in accordance with the definition of Direct Written Premium and
generally accepted accounting principles. Arrowhead will give INSpire and its
representatives reasonable access to Arrowhead's facilities and its books and
records so as to enable INSpire to verify the amounts set forth on the Annual
Premium Statement.
Section 2.2 Review of Annual Premium Statement. As soon as
practicable, but not later than 30 days after the delivery of the Annual Premium
Statement, INSpire will inform Arrowhead in writing of any objection to the
Annual Premium Statement, which objection, if any, will set forth in reasonable
detail INSpire's objections and the basis for those objections (the "OBJECTION
NOTICE"). If INSpire so objects and the Parties do not resolve such objections
on a mutually agreeable basis within 45 days after the delivery of the Annual
Premium Statement, then the disagreement will be resolved as soon as practicable
thereafter, but not later than 75 days after the delivery of the Annual Premium
Statement, by one of the largest four national accounting firms, which
accounting firm will be selected jointly by INSpire on the one hand and
Arrowhead on the other hand. The Parties acknowledge that the scope of such
accounting firm's
<PAGE> 5
work will be limited to resolving the objections set forth in the Objection
Notice. The decision of such accounting firm will be final and binding upon the
Parties. The Annual Premium Statement and the amount of Direct Written Premiums
recognized by Arrowhead for such applicable calendar year will be deemed final
upon the earlier to occur of (i) the agreement of the Parties, (ii) the decision
of the accounting firm, or (iii) the failure of INSpire to deliver an Objection
Notice to Arrowhead within 30 days after the delivery of the Annual Premium
Statement. Each Party will bear the fees, costs and expenses of its own
accountants, will share equally (between INSpire on the one hand and Arrowhead
on the other hand) the fees, costs and expenses of the accounting firm selected
by the Parties to resolve any disagreements regarding the Objection Notice and
will permit each other and each other's representatives reasonable access to the
books and records necessary to perform the analysis contemplated by this
Section.
Section 2.3 Set-off.
(a) Right of Set-off. INSpire will have the right to set-off
against or reduce the number of Year 1999 Vested Shares, Year 2000 Vested Shares
and the Additional Vested Shares for any (a) Claim existing as of December 31,
2000 against Sellers or Company (as each such term is defined in the Stock
Purchase Agreement) pursuant to Article XI of the Stock Purchase Agreement and
(b) Claim existing as of December 31, 2000 against Arrowhead pursuant to Article
XII of the Asset Purchase Agreement.
(b) Determination of Claim Amount. Any Claim pending as of
December 31, 2000 and any Claim for which INSpire has provided a notice
(specifying in reasonable detail the nature of such Claim) on or before December
31, 2000 will be used in the calculation of the aggregate amount of Claims for
which INSpire has the right of set-off pursuant to subsection (a) above. The
final amount of any such Claims will be established in accordance with the terms
of the Stock Purchase Agreement or the Asset Purchase Agreement, as appropriate.
(c) Set-off Shares. The number of Year 1999 Vested Shares,
Year 2000 Vested Shares and the Additional Vested Shares will be reduced by the
number of Set-off Shares. The number of Set-off Shares equals the aggregate of
(i) the amount of each individual Claim under the Stock Purchase Agreement and
Asset Purchase Agreement existing as of December 31, 2000 (as calculated in
subsection (b) above) divided by (ii) the closing price per share of Common
Stock as quoted on the Nasdaq National Market on the date that the existence and
amount of each such individual Claim was conclusively determined (such aggregate
number of Options Shares, the "SET-OFF SHARES").
Section 2.4 Calculation of Total Vested Shares. The Parties will
calculate the amount of Total Vested Shares upon (a) the Annual Premium
Statement for each of calendar year 1999 and 2000 being deemed final in
accordance with Section 2.2 and (b) the final determination of the number of
Set-off Shares in accordance with Section 2.3(c).
ARTICLE III.
EXERCISE OF OPTION
Section 3.1 Manner of Exercise. At any time during the Exercise
Period, Arrowhead may exercise the Option to purchase any number of Total Vested
Shares by delivering to INSpire
<PAGE> 6
(a) a written notice in substantially the form attached hereto as Exhibit 3.1
(the "EXERCISE NOTICE") and (b) payment of the Total Option Price in immediately
available funds by wire transfer to such account as INSpire directs in writing
on or prior to the Exercise Date.
Section 3.2 Closing. Upon receipt of the Exercise Notice, INSpire
will, as promptly as practicable, and in any event within ten business days
after the Exercise Date, cause to be executed and delivered to Arrowhead a stock
certificate or certificates representing the aggregate number of Option Shares
issuable upon such exercise. The stock certificate or certificates so delivered
will be registered in the name of Arrowhead. This Option will be deemed to have
been exercised and such stock certificate or certificates will be deemed to have
been issued, and Arrowhead will be deemed to have become a holder of record of
the Option Shares for all purposes, as of the date (a) the Exercise Notice and
the Total Option Price is received by INSpire, (b) all Taxes required to be paid
by Arrowhead, if any, pursuant to Section 3.3 have been paid and (c) the
conditions precedent set forth in Article IV have been satisfied or waived in
writing by INSpire.
Section 3.3 Payment of Taxes. INSpire will pay all expenses in
connection with, and all Taxes that may be imposed with respect to, the issue or
delivery of the Option Shares, unless such Taxes are imposed by law upon
Arrowhead, in which case such Taxes will be paid by Arrowhead.
Section 3.4 Fractional Shares. INSpire will not be required to issue a
fractional share of Common Stock upon exercise of the Option. As to any fraction
of a share of Common Stock which Arrowhead would otherwise be entitled to
purchase upon such exercise, INSpire will pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the fair market value
(as determined in good faith by the Board) per share of Common Stock on the
Exercise Date.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Conditions Precedent to Exercise of the Option and
Delivery of the Option Shares. INSpire's obligation to deliver the Options
Shares is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order
issued by any court of competent jurisdiction prohibiting the exercise of the
Option or the delivery of the Total Vested Shares;
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 will have expired or been terminated; and
(c) Arrowhead will not be in material default under the Stock
Purchase Agreement, the Asset Purchase Agreement, that certain Claims
Administration Services Agreement, dated the Signing Date, between the INSpire
and INSpire Claims Management, Inc. and that certain Policy Administration
Services Agreement, dated the Signing Date, between the Parties.
<PAGE> 7
ARTICLE V.
ADJUSTMENTS
Section 5.1 General. The number of Option Shares, the Option Price Per
Share and the Set-off Shares will each be subject to adjustment from time to
time as set forth in this Article.
Section 5.2 Stock Dividends, Subdivisions and Combinations. If at any
time INSpire will:
(a) pay a dividend on its Common Stock in, or make a
distribution on its Common Stock that is paid or made in, additional shares of
Common Stock;
(b) subdivide its outstanding shares of Common Stock into a
greater number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then (i) number of Option Shares and Set-off Shares to be used in the
calculation of the Total Vested Shares immediately after the occurrence of any
such event will be adjusted to equal the number of shares of Common Stock which
a record holder of the same number of Option Shares or Set-off Shares
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event and (ii) the Option Price Per Share
will be adjusted to equal (A) the then current Option Price Per Share multiplied
by the number of Option Shares immediately prior to the adjustment divided by
(B) the number of Option Shares for which the Option is exercisable immediately
after such adjustment. An adjustment made pursuant to this Section 5.2 will
become effective immediately after the record date in the case of a dividend or
distribution and will become effective immediately after the effective date in
the case of a subdivision or combination. An adjustment will be made
successively whenever any such distribution is made. In computing adjustments
under this Section 5.2, fractional interests in Common Stock will be taken into
account to the nearest 1/10th of a share of Common Stock.
Section 5.3 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case INSpire reorganizes its capital, reclassifies its
capital stock, consolidates or merges with or into another corporation (where
INSpire is not the surviving corporation or where there is a change in or
distribution with respect to Common Stock of INSpire), or sells, transfers or
otherwise disposes of all or substantially all its property, assets or business
to another corporation and, pursuant to the terms of such reorganization,
reclassification, merger, consolidation or disposition of assets, shares of
common stock of the successor or acquiring corporation, or any cash, shares of
stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation ("OTHER PROPERTY"), are
to be received by or distributed to the holders of Common Stock, then Arrowhead
will have the right thereafter to receive, upon exercise of the Option, the
number of shares of common stock of the successor or acquiring corporation or of
INSpire, if it is the surviving corporation, and Other Property receivable upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a holder of the number of Option Shares immediately
prior to such event.
<PAGE> 8
In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than
INSpire) will expressly assume the due and punctual observance and performance
of each and every covenant of this Agreement to be performed and observed by
INSpire and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board) in order to provide for adjustments of Option Shares
which will be as nearly equivalent as practicable to the adjustments provided
for in this Article V. The foregoing provisions of this Section 5.3 will
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
ARTICLE VI.
SHARE RESERVATION
Section 6.1 Reservation and Authorization of Common Stock From and
after the Signing Date, INSpire will at all times reserve and keep available for
issue upon the exercise of the Option such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
the Option. All shares of Common Stock which will be so issuable, when issued
upon exercise of the Option and payment therefor in accordance with the terms of
such Option, will be duly and validly issued and fully paid and nonassessable,
and not subject to statutory preemptive rights.
Section 6.2 Approval of Any Governmental Authority. Before taking any
action which would result in an adjustment in the number of shares of Common
Stock for which this Option is exercisable or in the Option Price Per Share,
INSpire will obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any Governmental Authority.
ARTICLE VII.
MISCELLANEOUS
Section 7.1 Amendment. No amendment of this Agreement will be
effective unless in a writing signed by the Parties.
Section 7.2 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed to be an original agreement, but
all of which will constitute one and the same agreement.
Section 7.3 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the Parties and supersedes all prior
agreements and understandings, both written and oral, with respect to the
subject matter of this Agreement.
Section 7.4 Expenses. Each Party will bear its own expenses with
respect to the negotiation and preparation of this Agreement.
Section 7.5 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS
OF THE STATE OF DELAWARE REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN
UNDER THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.
<PAGE> 9
Section 7.6 No Assignment. No Party may assign its benefits or
delegate its duties under this Agreement without the prior consent of the other
Party. Any attempted assignment or delegation without such prior consent will be
void.
Section 7.7 No Third Party Beneficiaries. This Agreement is solely for
the benefit of the Parties and no other Person will have any right, interest, or
claim under this Agreement.
Section 7.8 Notices. All claims, consents, designations, notices,
waivers, and other communications in connection with this Agreement will be in
writing. Such claims, consents, designations, notices, waivers, and other
communications will be considered received (a) on the day of actual transmittal
when transmitted by facsimile with written confirmation of such transmittal, (b)
on the next business day following actual transmittal when transmitted by a
nationally recognized overnight courier, or (c) on the third business day
following actual transmittal when transmitted by certified mail, postage
prepaid, return receipt requested; in each case when transmitted to a Party at
its address set forth on Schedule 12.8 of the Asset Purchase Agreement (or to
such other address to which such Party has notified the other Parties in
accordance with this Section to send such claims, consents, designations,
notices, waivers, and other communications).
Section 7.9 Public Announcements. The Parties will agree on the terms
of any press releases or other public announcements related to this Agreement,
and will consult with each other before issuing any press releases or other
public announcements related to this Agreement; provided, however, that any
Party may make a public disclosure if in the opinion of such Party's counsel it
is required by law or the rules of the Nasdaq National Market to make such
disclosure. The Parties agree, to the extent practicable, to consult with each
other regarding any such public announcement in advance thereof.
Section 7.10 Representation by Legal Counsel. Each Party is a
sophisticated entity that was advised by experienced legal counsel and other
advisors in the negotiation and preparation of this Agreement.
Section 7.11 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will not invalidate the
remaining provisions of this Agreement or affect the validity or enforceability
of such provision in any other jurisdiction. In addition, any such prohibited or
unenforceable provision will be given effect to the extent possible in the
jurisdiction where such provision is prohibited or unenforceable.
Section 7.12 Successors. This Agreement will be binding upon and will
inure to the benefit of each Party and its heirs, legal representatives,
permitted assigns, and successors, provided that this Section will not permit
the assignment or other transfer of this Agreement, whether by operation of law
or otherwise, if such assignment of other transfer is not otherwise permitted
under this Agreement.
Section 7.13 Time of the Essence. Time is of the essence in the
performance of this Agreement and all dates and periods specified in this
Agreement.
Section 7.14 Waiver. No provision of this Agreement will be considered
waived unless such waiver is in writing and signed by the Party that benefits
from the enforcement of such
<PAGE> 10
provision. No waiver of any provision in this Agreement, however, will be deemed
a waiver of a subsequent breach of such provision or a waiver of a similar
provision. In addition, a waiver of any breach or a failure to enforce any term
or condition of this Agreement will not in any way affect, limit, or waive a
Party's rights under this Agreement at any time to enforce strict compliance
thereafter with every term and condition of this Agreement.
Section 7.15 Attorney's Fees. In the event of any action, arbitration,
claim, proceeding or suit between Arrowhead and INSpire seeking enforcement of
any of the terms and conditions of this Agreement, the prevailing party in such
action, arbitration, claim, proceeding or suit will be awarded its reasonable
costs and expenses, including its court costs and reasonable attorneys' fees.
Section 7.16 Relationship of the Parties. The Parties are independent
contractors of one another, and there should be no instance in which they should
be construed as partners or joint venturers.
Section 7.17 Drafting. Neither this Agreement nor any provision
contained in this Agreement will be interpreted in favor of or against either
Party because such Party or its legal counsel drafted this Agreement or such
provision. No prior draft of this Agreement or any provision contained in this
Agreement will be used when interpreting this Agreement or its provisions.
Section 7.18 Headings. Article and section headings are used in this
Agreement only as a matter of convenience and will not have any effect upon the
construction or interpretation of this Agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 11
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed and delivered by a duly authorized officer as of the Signing Date.
INSPIRE: INSpire INSURANCE SOLUTIONS, INC.
By: /s/ WILLIAM J. SMITH
-------------------------------------------
William J. Smith, III, President
ARROWHEAD: ARROWHEAD GENERAL INSURANCE AGENCY, INC.
By: /s/ PATRICK J. KILKENNY
-------------------------------------------
Patrick J. Kilkenny, President
<PAGE> 12
APPENDIX A.
DEFINITIONS AND INTERPRETATION
Definitions. As used in this Agreement, the following terms will have
the meanings ascribed below:
(a) "ADDITIONAL VESTED SHARES" has the meaning set forth in
Section 1.4.
(b) "AGREEMENT" has the meaning set forth in the
introductory paragraph.
(c) "ANNUAL PREMIUM STATEMENT" has the meaning set forth in
Section 2.1.
(d) "ASSET PURCHASE AGREEMENT" has the meaning set forth in
Recital A.
(e) "ARROWHEAD" has the meaning set forth in the
introductory paragraph
(f) "BOARD" means the board of directors of INSpire.
(g) "CLAIMS" has the meaning set forth in the Asset Purchase
Agreement and Stock Purchase Agreement.
(h) "COMMON STOCK" has the meaning set forth in Recital B.
(i) "DIRECT WRITTEN PREMIUMS" means the sum of (i) with
respect to all insurance policies except personal automobile insurance
policies, the aggregate amount of premiums payable to Purchaser on all
the insurance policies issued by Purchaser during a time particular
period, plus (ii) with respect to personal automobile insurance
policies, the aggregate amount of premiums paid to Purchaser by
insureds during a particular time period.
(j) "EXERCISE DATE" means the date on which Arrowhead
properly exercises the Option in accordance with Section 3.1.
(k) "EXERCISE NOTICE" has the meaning set forth in Section
3.1.
(l) "EXERCISE PRICE" has the meaning set forth in Section
1.5.
(m) "INSPIRE" has the meaning set forth in the introductory
paragraph.
(n) "OBJECTION NOTICE" has the meaning set forth in Section
2.2.
(o) "OPTION" has the meaning set forth in Section 1.1.
(p) "OPTION PRICE PER SHARE" means, in respect of a share of
Common Stock at any date, the price per share at which a share of
Common Stock may be purchased pursuant to this Option on such date,
and will equal $.01 per share (subject to adjustment as provided
herein) as of the Signing Date.
(q) "OPTION SHARES" has the meaning set forth in Section
1.1.
<PAGE> 13
(r) "OTHER PROPERTY" has the meaning set forth in Section
5.3.
(s) "PARTY" has the meaning set forth in the introductory
paragraph.
(t) "SET-OFF SHARES" has the meaning set forth in Section
2.3(c).
(u) "SIGNING DATE" has the meaning set forth in the
introductory paragraph.
(v) "STOCK PURCHASE AGREEMENT" has the meaning set forth in
Recital A.
(w) "TOTAL OPTION PRICE" means an amount equal to the
product of (i) the number of Total Vested Shares being purchased upon
exercise of the Option multiplied by (ii) the Option Price Per Share
as of the Exercise Date.
(x) "TOTAL VESTED SHARES" means an amount equal to the
difference of (i) the sum of the Year 1999 Vested Shares, plus the
Year 2000 Vested Shares plus the Additional Vested Shares, minus (ii)
Set-Off Shares. See, Appendix B for and example of the Total Vested
Shares calculation.
(y) "YEAR 1999 PREMIUM AMOUNT" has the meaning set forth in
Section 1.2(a).
(z) "YEAR 1999 VESTED SHARES" has the meaning set forth in
Section 1.2.(b).
(aa) "YEAR 2000 PREMIUM AMOUNT" has the meaning set forth in
Section 1.3(a).
(bb) "YEAR 2000 VESTED SHARES" has the meaning set forth in
Section 1.3(b).
<PAGE> 14
APPENDIX B.
EXAMPLES OF THE TOTAL VESTED SHARES CALCULATION
EXAMPLE 1
<TABLE>
<S> <C>
Assumptions:
- ------------
Number of Option Shares: 300,000
Year 1999 Premium Amount: $200,000,000
Year 2000 Premium Amount: $240,000,000
Set-off Shares: 7,500
Year 1999 Vested Shares: 139,535
Calculation:
------------
Section 1.2(b): the lesser of:
(i) 50% of 300,000 = 150,000
(ii) 150,000 X (200,000,000/215,000,000) = 139,535
Year 2000 Vested Shares: 150,000
Calculation:
------------
Section 1.3(b): the lesser of:
(i) 50% of 300,000 = 150,000
(ii) 150,000 X (240,000,000/215,000,000) = 167,442
Additional Vested Shares: 10,465
Calculation:
------------
Section 1.4(b): the lesser of:
(i) 50% of 300,000 - 139,535 = 10,465
(ii) 50% of 300,000 X ((240,000,000 - 215,000,000)/215,000,000) = 17,442
Total Vested Shares: 292,500
Calculation:
------------
Definition "Total Vested Share:" 139,535 + 150,000 + 10,465 - 7,500 = 292,500
</TABLE>
<PAGE> 15
EXAMPLE 2
<TABLE>
<S> <C>
Assumptions:
- ------------
Number of Option Shares: 300,000
Year 1999 Premium Amount: $175,000,000
Year 2000 Premium Amount: $240,000,000
Set-off Shares: 7,500
Year 1999 Vested Shares: 0
Calculation:
------------
Section 1.2(a): 0.
Year 2000 Vested Shares: 150,000
Calculation:
------------
Section 1.3(b): the lesser of:
(i) 50% of 300,000 = 150,000
(ii) 150,000 X (240,000,000/215,000,000) = 167,442
Additional Vested Shares: 139,535
Calculation:
------------
Section 1.4(b): the lesser of:
(i) 50% of 300,000 - None = 150,000
(ii) 50% of 300,000 X (((240,000,000 - 215,000,000) - (182,750,000 -
175,000,000))/215,000,000)= 12,035
plus
Section 1.4(c): 42.5% of 300,000 = 127,500
Total Vested Shares: 282,035
Calculation:
------------
Definition "Total Vested Share:" 0 + 150,000 + 139,535 - 7,500 = 282,035
</TABLE>
<PAGE> 16
EXAMPLE 3
<TABLE>
<S> <C>
Assumptions:
- ------------
Number of Option Shares: 300,000
Year 1999 Premium Amount: $175,000,000
Year 2000 Premium Amount: $220,000,000
Set-off Shares: 7,500
Year 1999 Vested Shares: 0
Calculation:
------------
Section 1.2(a): 0.
Year 2000 Vested Shares: 150,000
Calculation:
------------
Section 1.3(b): the lesser of:
(i) 50% of 300,000 = 150,000
(ii) 150,000 X (220,000,000/215,000,000) = 153,489
Additional Vested Shares: 127,500
Calculation:
------------
Section 1.4(b): the lesser of:
(i) 50% of 300,000 - None = 150,000
(ii) 50% of 300,000 X (((220,000,000 - 215,000,000) - (182,750,000 -
175,000,000))/215,000,000)= 0
plus
Section 1.4(c): 42.5% of 300,000 = 127,500
Total Vested Shares: 270,000
Calculation:
------------
Definition "Total Vested Share:" 0 + 150,000 + 127,500 - 7,500 = 270,000
</TABLE>
<PAGE> 17
EXHIBIT A
NOTICE OF EXERCISE
INSpire Insurance Solutions, Inc.
Attn: Chief Executive Officer
300 Burnett Street
Fort Worth, Texas 76012
Dear ____________:
Reference is made to that certain Option Agreement (the "OPTION
AGREEMENT"), dated December 1, 1998, between INSpire Insurance Solutions, Inc.,
a Texas corporation ("INSPIRE"), and Arrowhead General Insurance Agency, Inc., a
Minnesota corporation ("ARROWHEAD"). Capitalized terms used in this notice, but
not otherwise defined, will have the meanings assigned to such terms in the
Option Agreement.
1. Exercise of Options. Arrowhead hereby elects to exercise its option
to purchase _______ Option Shares at the Option Price Per Share. The aggregate
purchase price of the Option Shares purchased pursuant to this Notice is
$_________ (the "PURCHASE PRICE").
2. Issuance of the Option Shares. Arrowhead hereby directs INSpire to
issue the Option Shares in the name of Arrowhead
3. Tender of Purchase Price. Arrowhead hereby tenders the Purchase
Price in the manner provided in Section 3.1 of the Option Agreement.
4. Representations and Warranties. Arrowhead hereby represents and
warrants to INSpire that each of the following statements is true and correct:
(a) Investor Status. Arrowhead hereby acknowledges that the
acquisition of the Option Shares pursuant to the Option Agreement is suitable
only for sophisticated investors and that the Option Shares are being offered
and issued under an exemption from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended, (the "SECURITIES ACT") and the Rules and
Regulations promulgated thereunder and the applicable state securities laws and
that the Option Agreement has not been submitted to or reviewed by the
Securities and Exchange Commission (the "SEC") or the securities regulation
agency of any state or any other governmental agency. In accordance with such
rules applicable to the issuance of the Option Shares under an exemption from
registration, Arrowhead acknowledges that Arrowhead (i) has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks incident to the acquisition of the Option Shares, (ii) has
adequate means of providing for Arrowhead's current needs and possible
contingencies and has no need for immediate liquidity of the Option Shares,
(iii) has made its own examination of INSpire and has depended on the advice of
its own counsel and advisors and (iv) acknowledges that the terms of the Option
Agreement were the subject of arms-length negotiations between the Arrowhead and
INSpire.
<PAGE> 18
(b) Absence of Market. Arrowhead acknowledges that Arrowhead must bear
the economic risk of its investment in the Option Shares for an indefinite
period of time since the Option Shares acquired pursuant to the Option Agreement
have not been registered under the Securities Act, nor any state securities
laws, and therefore cannot be sold unless such Shares are subsequently
registered under the Securities Act and applicable state laws or an exemption
from registration is available.
(c) Access to Information. Arrowhead represents that it has received
and reviewed to its satisfaction all documents and information that it considers
material to its acquisition of the Option Shares. Arrowhead acknowledges that
all documents, records, and books (including books and records of INSpire) have
been made available for inspection by Arrowhead's attorney and/or accountant and
appropriate representatives of Arrowhead, and that Arrowhead has received copies
of all documents requested by Arrowhead in connection with his evaluation of
this investment. Arrowhead represents that it and its representatives have had
an opportunity to ask questions of and receive answers from INSpire regarding
INSpire and all questions and inquiries made by Arrowhead have been responded to
satisfactorily.
(d) No Assurances. Arrowhead represents that none of the following has
been represented, guaranteed, or warranted to Arrowhead by INSpire or its agents
or employees, or any other person, expressly or by implication:
(i) the length of time that Arrowhead will be required to remain
as the owner of the Option Shares;
(ii) the profit to be realized, if any, as a result of the
acquisition of the Option Shares;
(iii) that the past performance or experience on the part of
INSpire, or any officer, director or affiliate, their partners, salesmen,
associates, agents, or employees, or of any other person, will in any way
guarantee the actual results of the ownership of the Option Shares; or
(iv) that any projections, forecasts or other forward looking
information ("OBJECTIVES") constitute a guarantee, representation or warranty
that such Objectives can, or will, be achieved.
(e) Investment Purposes. Arrowhead is acquiring the Option Shares for
investment purposes only, for Arrowhead's own account, and not as nominee or
agent for any other person or entity, and not with a view to, or for resale in
connection with, any distribution thereof within the meaning of the Securities
Act. Arrowhead has no agreements or other arrangements with any person or entity
to sell, transfer or pledge any part of the Option Shares, and has no plans to
enter into any such agreement or arrangement.
(f) Legend. Arrowhead acknowledges that the certificates representing
the Option Shares to be delivered by INSpire will bear the following restrictive
legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
<PAGE> 19
AMENDED, OR THE SECURITIES ACTS OF ANY STATE AND MAY NOT
BE TRANSFERRED IN VIOLATION OF SUCH ACTS OR THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
IN WITNESS WHEREOF, Arrowhead has caused this Notice of Exercise to be
executed as of the ____ day of _________, _____.
ARROWHEAD GENERAL INSURANCE AGENCY, INC.
By:
-------------------------------------------
[Name, Title]
<PAGE> 1
EXHIBIT 10.2
===============================================================================
REGISTRATION RIGHTS AGREEMENT
by and between
INSpire INSURANCE SOLUTIONS, INC.
and
ARROWHEAD GENERAL INSURANCE AGENCY, INC.
dated as of December 1, 1998
===============================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
December 1, 1998 (the "SIGNING Date"), is made by and between INSpire Insurance
Solutions, Inc., a Texas corporation ("INSPIRE") and Arrowhead General Insurance
Agency, Inc., a Minnesota corporation ("AGIA"). INSpire and AGIA are sometimes
together referred to as the "PARTIES," and individually referred to as a
"PARTY."
PRELIMINARY STATEMENTS
A. INSpire and AGIA are parties to that certain Option Agreement dated
as of the Signing Date (the "OPTION AGREEMENT");
B. Pursuant to the Option Agreement, INSpire granted to AGIA an Option
(as defined in the Option Agreement) to purchase the Option Shares (as defined
in the Option Agreement); and
C. In order to induce AGIA to enter into the Option Agreement, INSpire
has agreed to provide to AGIA the registration rights set forth in this
Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties set forth in this
Agreement and for other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions. As used in this Agreement, the following terms
will have the meanings ascribed below:
(a) "1933 ACT" will mean the Securities Act of 1933, as
amended.
(b) "AFFILIATE" means with respect to a Holder, any other
Person that directly or indirectly controls, is controlled by, or is under
common control with such Holder. For the purposes of this definition, control
means the power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by contract, or
otherwise. Control will be presumed by an individual that is a director,
executive officer, general partner, manager, or similar functionary of a Person,
or a Person that beneficially owns more than 10% of any class of securities of
such Person having general voting rights.
(c) "COMMISSION" will mean the Securities and Exchange
Commission and any successor agency.
2
<PAGE> 3
(d) "COMMON STOCK" will mean the common stock of INSpire, par
value $.01 per share.
(e) "HOLDER" will mean AGIA.
(f) "PERSON" will mean any association, bank, business trust,
corporation, estate, general partnership, Governmental Authority, individual,
joint stock company, joint venture, labor union, limited liability company,
limited partnership, non-profit corporation, professional association,
professional corporation, trust, or any other organization or entity.
(g) "REGISTER," "REGISTERED" and "REGISTRATION" will refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act (as herein defined) and the
declaration or ordering of effectiveness of such registration statement or
document.
(h) "REGISTRABLE STOCK" will mean (i) any shares of Common
Stock issued or issuable upon the exercise of all or any portion of the Option,
(ii) any Common Stock issued under this Agreement by way of a stock split, and
(iii) any Common Stock issued as a stock dividend of the Option Shares. For
purposes of this Agreement, any Registrable Stock will cease to be Registrable
Stock when (i) a registration statement covering such Registrable Stock has been
declared effective and such Registrable Stock has been disposed of pursuant to
such effective registration statement, (ii) such Registrable Stock is sold
pursuant to Rule 144 (or any similar provision then in force) under the 1933
Act, (iii) such Registrable Stock is eligible to be sold pursuant to Rule 144(k)
under the 1933 Act, (iv) such Registrable Stock has been otherwise transferred,
no stop transfer order affecting such stock is in effect and INSpire has
delivered new certificates or other evidences of ownership for such Registrable
Stock not bearing any legend indicating that such shares have not been
registered under the 1933 Act, or (v) such Registrable Stock is sold by a Person
in a transaction in which the rights under the provisions of this Agreement are
not assigned.
(i) "REQUESTING HOLDERS" will mean a Holder or Holders of, in
the aggregate, at least a majority of the Registrable Stock.
Section 1.2 References. References in this Agreement to any rules,
regulations or forms promulgated by the Commission will include rules,
regulations and forms succeeding to the functions thereof, whether or not
bearing the same designation.
ARTICLE II.
REGISTRATION RIGHTS
Section 2.1 Demand Registration.
(a) At any time after the calculation of the number of Total
Vested Shares (as defined in the Option Agreement) is deemed final in accordance
with Section 2.4 of the Option Agreement (the "DETERMINATION Date"), any
Requesting Holders may make a written request to INSpire (specifying that it is
being made pursuant to this Section 2.1) that INSpire file a registration
statement under the 1933 Act (or a similar document pursuant to any other
statute then in effect corresponding to thc 1933 Act) covering the registration
of Registrable Stock. In
3
<PAGE> 4
such event, INSpire will (x) within sixty (60) days thereafter notify in writing
all other Holders of Registrable Stock of such request, and (y) use its best
efforts to cause to be registered under the 1933 Act all Registrable Stock that
the Requesting Holders and such other Holders have, within ninety (90) days
after INSpire has given such notice, requested be registered.
(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an underwritten offering,
they will so advise INSpire as a part of their request pursuant to Section
2.1(a) above, and INSpire will include such information in the written notice
referred to in clause (x) of Section 2.1(a) above. In such event, the Holder's
right to include its Registrable Stock in such registration will be conditioned
upon such Holder's participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering to the extent
provided in this Section 2.1. All Holders proposing to distribute Registrable
Stock through such underwritten offering will enter into an underwriting
agreement in customary form with the underwriter or underwriters and execute and
deliver powers of attorney, custody agreements or other underwriting documents
in customary form. Such underwriter or underwriters will be selected by INSpire
subject to the approval of a majority in interest of the Requesting Holders,
which approval will not be unreasonably withheld; provided, that no Holder will
be required to make any representations or warranties to or agreements with
INSpire or the underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such Holder's
intended method of distribution and any other representation required by law or
reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2.1 to
the contrary, if the managing underwriter of an underwritten offering of the
Registrable Stock requested to be registered pursuant to this Section 2.1
advises the Requesting Holders in writing that in its opinion marketing factors
require a limitation of the number of shares to be underwritten, the Requesting
Holders will so advise all Holders of Registrable Stock that would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Stock that
may be included in such underwritten offering will be allocated among all such
Holders, including the Requesting Holders, in proportion (as nearly as
practicable) to the amount of Registrable Stock requested to be included in such
registration by each Holder at the time of filing the registration statement.
(d) Notwithstanding any provision of this Agreement to the
contrary, INSpire will not be required to effect a registration pursuant to this
Section 2.1 during the period starting with the thirtieth (30th) day immediately
preceding the date of an anticipated filing by INSpire of, and ending on a date
one hundred eighty (180) days following the effective date of, a registration
statement pertaining to a public offering of securities for the account of
INSpire; provided, that INSpire will actively employ in good faith reasonable
efforts to cause such registration statement to become effective; and provided
further, that INSpire's estimate of the date of filing such registration
statement will be made in good faith.
(e) INSpire will be obligated to effect and pay for a total of
only one (1) registration pursuant to this Section 2.1; provided, that a
registration requested pursuant to this Section 2.1 will not be deemed to have
been effected for purposes of this Section 2.1(e), unless (i) it has been
declared effective by the Commission, (ii) if it is a shelf registration, it has
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remained effective for the period set forth in Section 2.2(b) and (iii) the
offering of Registrable Stock pursuant to such registration is not subject to
any stop order, injunction or other order or requirement of the Commission
(other than any such action prompted by any act or omission of the Holders).
Section 2.2 Obligations of INSpire. Whenever required under Section 2.1
to use its best efforts to effect the registration of any Registrable Stock,
INSpire will, as expeditiously as possible:
(a) prepare and file with the Commission, not later than one
hundred twenty (120) days after receipt of a request to file a registration
statement with respect to such Registrable Stock, a registration statement on
any form for which INSpire then qualifies or which counsel for INSpire will deem
appropriate and which form will be available for the sale of such issue of
Registrable Stock in accordance with the intended method of distribution
thereof, and use its best efforts to cause such registration statement to become
effective as promptly as practicable thereafter; provided, that before filing a
registration statement or prospectus or any amendments or supplements thereto,
INSpire will (i) furnish to one (1) counsel selected by the Requesting Holders
copies of all such documents proposed to be filed, and (ii) notify each such
Holder of any stop order issued or threatened by the Commission and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than one hundred twenty (120) days or such shorter period
which will terminate when all Registrable Stock covered by such registration
statement has been sold (but not before the expiration of the forty (40) or
ninety (90) day period referred to in Section 4(3) of the 1933 Act and Rule 174
thereunder, if applicable), and comply with the provisions of the 1933 Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(c) furnish to each Holder and any underwriter of Registrable
Stock to be included in a registration statement copies of such registration
statement as filed and each amendment and supplement thereto (in each case
including all exhibits thereto), the prospectus included in such registration
statement (including each preliminary prospectus) and such other documents as
such Holder may reasonably request in order to facilitate the disposition of the
Registrable Stock owned by such Holder;
(d) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws of such
jurisdictions as any selling Holder or any underwriter of Registrable Stock
reasonably requests in writing, and do any and all other acts which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in such jurisdictions of the Registrable Stock owned by such Holder;
provided, that INSpire will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 2.2(d) hereof, (ii) subject itself to taxation in any such
jurisdiction, or (iii) consent to general service of process in any such
jurisdiction;
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(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with or approved by such
other governmental agencies or other authorities as may be necessary by virtue
of the business and operations of INSpire to enable the selling Holders thereof
to consummate the disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock and
any underwriter thereof, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act (even if such time is after the
period referred to in Section 2.2(b)), of the happening of any event as a result
of which the prospectus included in such registration statement contains an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein in light of the
circumstances being made not misleading, and prepare a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Stock, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances being
made not misleading;
(g) make available for inspection by any selling Holder, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any such
selling Holder or underwriter (collectively, the "INSPECTORS"), all financial
and other records, pertinent corporate documents and properties of INSpire
(collectively, the "RECORDS"), and cause INSpire's officers, directors and
employees to supply all information reasonably requested by any such Inspector,
as will be reasonably necessary to enable them to exercise their due diligence
responsibility, in connection with such registration statement. Records or other
information which INSpire determines, in good faith, to be confidential and
which it notifies the Inspectors are confidential need not be disclosed unless
the Inspectors execute a nondisclosure agreement confirming that such Records or
other information will not be disclosed by the Inspectors unless (i) the
disclosure of such Records or other information is necessary to avoid or correct
a misstatement or omission in the registration statement, or (ii) the release of
such Records or other information is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction. Each selling Holder will, upon
learning that disclosure of such Records or other information is sought in a
court of competent jurisdiction, give written notice to INSpire and allow
INSpire, at INSpire's expense, to undertake appropriate action to prevent
disclosure of the Records or other information deemed confidential;
(h) furnish, at the request of any Requesting Holder, on the
date that such shares of Registrable Stock are delivered to the underwriters for
sale pursuant to such registration or, if such Registrable Stock is not being
sold through underwriters, on the date that the registration statement with
respect to such shares of Registrable Stock becomes effective, (1) a signed
opinion, dated such date, of the legal counsel representing INSpire for the
purposes of such registration, addressed to the underwriters, if any, and if
such Registrable Stock is not being sold through underwriters, then to the
Requesting Holders as to such matters as such underwriters or the Requesting
Holders, as the case may be, may reasonably request and as would be customary in
such a transaction; and (2) a letter, dated such date, from the independent
certified public accountants of INSpire, addressed to the underwriters, if any,
and if such Registrable Stock is not being sold through underwriters, then to
the Requesting Holders and, if such accountants refuse to deliver such letter to
such Holders, then to INSpire (i) stating that they
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are independent certified public accountants within the meaning of the 1933 Act
and that, in the opinion of such accountants, the financial statements and other
financial data of INSpire included in the registration statement or the
prospectus, or any amendment or supplement thereto, comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act,
and (ii) covering such other financial matters (including information as to the
period ending not more than five (5) business days prior to the date of such
letter) with respect to the registration in respect of which such letter is
being given as the Requesting Holders may reasonably request and as would be
customary in such a transaction;
(i) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Stock to be so
included in the registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission; and
(k) use its best efforts to cause all such Registrable Stock
to be listed on the Nasdaq Stock Market and/or any other securities exchange on
which similar securities issued by INSpire are then listed or traded.
INSpire may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to INSpire such information
regarding the distribution of such Registrable Stock as INSpire may from time to
time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from INSpire of the
happening of any event of the kind described in Section 2.2(f) hereof, such
Holder will forthwith discontinue disposition of Registrable Stock pursuant to
the registration statement covering such Registrable Stock until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2.2(f) hereof, and, if so directed by INSpire, such Holder will deliver
to INSpire (at INSpire's expense) all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such Registrable
Stock current at the time of receipt of such notice. In the event INSpire will
give any such notice, INSpire will extend the period during which such
registration statement will be maintained effective pursuant to this Agreement
(including the period referred to in Section 2.2(b)) by the number of days
during the period from and including the date of the giving of such notice
pursuant to Section 2.2(f) hereof to and including the date when each selling
Holder of Registrable Stock covered by such registration statement will have
received the copies of the supplemented or amended prospectus contemplated by
Section 2.2(f) hereof.
Section 2.3 Incidental Registration. At any one time after the
Determination Date, if INSpire determines that it will file a registration
statement under the 1933 Act (other than a registration statement on a Form S-4
or S-8 or filed in connection with an exchange offer or an offering of
securities solely to INSpire's existing shareholders) on any form that would
also permit the registration of the Registrable Stock and such filing is to be
on its behalf and/or on behalf of selling holders of its securities for the
general registration of its common stock to be sold for cash, at such time
INSpire will within forty-five (45) days give each Holder written
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notice by registered mail of such determination setting forth the date on which
INSpire proposes to file such registration statement, which date will be no
earlier than thirty (30) days from the date of such notice, and advising each
Holder of its right to have Registrable Stock included in such registration.
Upon the written request of any Holder received by INSpire no later than thirty
(30) days after the date of INSpire's notice, INSpire will use its best efforts
to cause to be registered under the 1933 Act all of the Registrable Stock that
each such Holder has so requested to be registered. If, in the written opinion
of the managing underwriter or underwriters (or, in the case of a
non-underwritten offering, in the written opinion of the placement agent, or if
there is none, INSpire), the total amount of such securities to be so
registered, including such Registrable Stock, will exceed the maximum amount of
INSpire's securities which can be marketed (i) at a price reasonably related to
the then current market value of such securities, or (ii) without otherwise
materially and adversely affecting the entire offering, then the amount of
Registrable Stock to be offered for the accounts of Holders will be reduced pro
rata to the extent necessary to reduce the total amount of securities to be
included in such offering to the recommended amount; provided, that if
securities are being offered for the account of other Persons as well as
INSpire, such reduction will not represent a greater fraction of the number of
securities intended to be offered by Holders than the fraction of similar
reductions imposed on such other Persons other than INSpire over the amount of
securities they intended to offer.
ARTICLE III.
CERTAIN RESTRICTIONS
Section 3.1 Holdback Agreement - Restrictions on Public Sale by
Holders. To the extent not inconsistent with applicable law, each Holder whose
Registrable Stock is included in a registration statement agrees not to effect
any public sale or distribution of the issue being registered or a similar
security of INSpire, or securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 under the
1933 Act, during the thirty (30) days prior to, and during the one hundred
eighty (180) day period beginning on, the effective date of such registration
statement (except as part of the registration), if and to the extent requested
by INSpire in the case of a non-underwritten public offering or if and to the
extent requested by the managing underwriter or underwriters in the case of an
underwritten public offering.
Section 3.2 Restrictions on Public Sale by INSpire and Others. INSpire
agrees (i) not to effect any public sale or distribution of any securities
similar to those being registered, or any securities convertible into or
exchangeable or exercisable for such securities, during the fourteen (14) days
prior to, and during the ninety (90) day period beginning on, the effective date
of any registration statement in which Holders are participating (except as part
of such registration), if and to the extent requested by the Holders in the case
of a non-underwritten public offering or if and to the extent requested by the
managing underwriter or underwriters in the case of an underwritten public
offering; and (ii) that any agreement entered into after the Signing Date
pursuant to which INSpire issues or agrees to issue any securities convertible
into or exchangeable or exercisable for such securities (other than pursuant to
an effective registration statement) will contain a provision under which
holders of such securities agree not to effect any public sale or distribution
of any such securities during the periods described in (i) above, in each case
including a sale pursuant to Rule 144 under the 1933 Act.
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ARTICLE IV.
EXPENSES
Section 4.1 Expenses of Registration. INSpire will bear all expenses
incurred in connection with each registration pursuant to Sections 2.1 and 2.3
of this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance), exchange listing fees or National
Association of Securities Dealers' fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for INSpire. The selling Holders will bear and pay the
underwriting commissions and discounts applicable to the Registrable Stock
offered for their account and fees and disbursements of counsel to the selling
Holders in connection with any registrations, filings and qualifications made
pursuant to this Agreement.
ARTICLE V.
INDEMNIFICATION
Section 5.1 Indemnification by INSpire. INSpire agrees to indemnify, to
the full extent permitted by law, each Holder, its officers, directors and
agents and each Person who controls such Holder (within the meaning of the 1933
Act) against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement therein (in case of a prospectus or
preliminary prospectus, in the light of the circumstances under which they were
made) not misleading.
Section 5.2 Indemnification by Holders. In connection with any
registration statement in which a Holder is participating, each such Holder will
furnish to INSpire in writing such information with respect to such Holder as
INSpire reasonably requests for use in connection with any such registration
statement or prospectus and agrees to indemnify, to the extent permitted by law,
INSpire, its directors and officers and each Person who controls INSpire (within
the meaning of the 1933 Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact required to be
stated in the registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or necessary to make the statements
therein (in the case of a prospectus or preliminary prospectus, in the light of
the circumstances under which they were made) not misleading, to the extent that
such untrue statement or omission is contained in any information with respect
to such Holder so furnished by such Holder.
Section 5.3 Conduct of Indemnification Proceedings. Any Person entitled
to indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such Person of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which such Person will claim indemnification or contribution
pursuant to this Agreement and, unless in the reasonable judgment of such
indemnified party, a conflict of interest may exist between such indemnified
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party and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claims with counsel reasonably
satisfactory to such indemnified party. Whether or not such defense is assumed
by the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will not
be unreasonably withheld). Failure by such Person to provide said notice to the
indemnifying party will itself not create liability except to the extent of any
injury caused thereby. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation. If the
indemnifying party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
(1) counsel with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other such indemnified parties with respect to such claim, in
which event the indemnifying party will be obligated to pay the fees and
expenses of such additional counsel or counsels.
Section 5.4 Contribution. If for any reason the indemnity provided for
in this Article V is unavailable to, or is insufficient to hold harmless, an
indemnified party, then the indemnifying party will contribute to the amount
paid or payable by the indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
not only the relative benefits received by the indemnifying party on the one
hand and the indemnified party on the other but also the relative fault of the
indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties will be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties; and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above will be deemed to include, subject to the
limitations set forth in Section 5.3, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The Parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5.4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) will be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
If indemnification is available under this Article V, the indemnifying
parties will indemnify each indemnified party to the full extent provided in
Sections 5.1 and 5.2 without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Article V.
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ARTICLE VI.
PARTICIPATION AND MERGER
Section 6.1 Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
Section 6.2 Mergers, Etc. INSpire will not, directly or indirectly,
enter into any merger, consolidation or reorganization in which INSpire will not
be the surviving corporation unless the proposed surviving corporation will,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of INSpire under this Agreement, and for that purpose
references hereunder to "REGISTRABLE STOCK" will be deemed to be references to
the securities which the Holders would be entitled to receive in exchange for
Registrable Stock under any such merger, consolidation or reorganization;
provided, however, that the provisions of this Section 6.2 will not apply in the
event of any merger, consolidation or reorganization in which INSpire is not the
surviving corporation if each Holder is entitled to receive in exchange for its
Registrable Stock consideration consisting solely of (i) cash, (ii) securities
of the acquiring corporation which may be immediately sold to the public without
registration under the 1933 Act, or (iii) securities of the acquiring
corporation which the acquiring corporation has agreed to register within ninety
(90) days of completion of the transaction for resale to the public pursuant to
the 1933 Act.
ARTICLE VII.
MISCELLANEOUS
Section 7.1 Amendment. No amendment of this Agreement will be effective
unless in a writing signed by the Parties.
Section 7.2 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed to be an original agreement, but
all of which will constitute one and the same agreement. Any Party may execute
and deliver this Agreement by an executed signature page transmitted by a
facsimile machine. If a Party transmits its signature page by a facsimile
machine, such Party will promptly thereafter deliver an originally executed
signature page to the other Parties, provided that any failure to deliver such
an originally executed signature page will not affect the validity, legality, or
enforceability of this Agreement.
Section 7.3 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the Parties and supersedes all prior
agreements and understandings, both written and oral, with respect to the
subject matter of this Agreement.
Section 7.4 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS
OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN
UNDER THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.
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Section 7.5 No Assignment. No Party may assign its benefits or delegate
its duties under this Agreement without the prior consent of the other Party.
Any attempted assignment or delegation without such prior consent will be void.
Section 7.6 No Third Party Beneficiaries. Except as provided in
Sections 5.1 and 5.2, this Agreement is solely for the benefit of the Parties
and no other Person will have any right, interest, or claim under this
Agreement.
Section 7.7 Notices. All claims, consents, designations, notices,
waivers, and other communications in connection with this Agreement will be in
writing. Such claims, consents, designations, notices, waivers, and other
communications will be considered received (a) on the day of actual transmittal
when transmitted by facsimile with written confirmation of such transmittal, (b)
on the next business day following actual transmittal when transmitted by a
nationally recognized overnight courier, or (c) on the third business day
following actual transmittal when transmitted by certified mail, postage
prepaid, return receipt requested; in each case when transmitted to a Party at
the address or location set forth on Schedule 12.8 of that certain Stock
Purchase Agreement by and among INSpire, Arrow Claims Management, Inc. ("ACM")
and all the Shareholders of ACM, dated as of October 29, 1998 (or to such other
address to which such Party has notified the other Party in accordance with this
Section 7.7 to send such claims, consents, designations, notices, waivers, and
other communications).
Section 7.8 Representation by Legal Counsel. Each Party is a
sophisticated Person that was advised by experienced legal counsel and other
advisors in the negotiation and preparation of this Agreement.
Section 7.9 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will not invalidate the
remaining provisions of this Agreement or affect the validity or enforceability
of such provision in any other jurisdiction. In addition, any such prohibited or
unenforceable provision will be given effect to the extent possible in the
jurisdiction where such provision is prohibited or unenforceable.
Section 7.10 Successors. This Agreement will be binding upon and will
inure to the benefit of each Party and its heirs, legal representatives,
permitted assigns, and successors, provided that this Section will not permit
the assignment or other transfer of this Agreement, whether by operation of law
or otherwise, if such assignment of other transfer is not otherwise permitted
under this Agreement.
Section 7.11 Time of the Essence. Time is of the essence in the
performance of this Agreement and all dates and periods specified in this
Agreement.
Section 7.12 Waiver. No provision of this Agreement will be considered
waived unless such waiver is in writing and signed by the Party that benefits
from the enforcement of such provision. No waiver of any provision in this
Agreement, however, will be deemed a waiver of a subsequent breach of such
provision or a waiver of a similar provision. In addition, a waiver of any
breach or a failure to enforce any term or condition of this Agreement will not
in any way affect, limit, or waive a Party's rights under this Agreement at any
time to enforce strict compliance thereafter with every term and condition of
this Agreement.
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IN WITNESS WHEREOF, each Party has caused a duly authorized officer to
execute, this Agreement as of the Signing Date.
INSpire INSURANCE SOLUTIONS, INC.
By: /s/ WILLIAM J. SMITH
---------------------------------------
William J. Smith, III, President
ARROWHEAD GENERAL INSURANCE AGENCY, INC.
By: /s/ PATRICK J. KILKENNY
---------------------------------------
Patrick J. Kilkenny, President
