AGREEMENT OF MERGER
AND
PLAN OF REORGANIZATION
by and among
CLARK/BARDES HOLDINGS, INC.
CLARK/BARDES ACQUISITION, INC.
and
COMPENSATION RESOURCE GROUP, INC.
and
WILLIAM L. MACDONALD, SR.
August 15, 2000
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TABLE OF CONTENTS
ARTICLE 1
THE MERGER 2
1.1 The Merger 2
1.2 Effective Time; Consummation of Merger 2
1.3 Conversion of Shares 2
1.4 Surrender of Certificates and Payment of Merger Consideration 4
1.5 Stock Options; Phantom Stock; Dissenting Shares 6
1.6 Payment of CRG Closing Expenses 8
1.7 Purchase Price Adjustment 8
1.8 Procedures for Final Determination of Purchase Price Adjustment 8
1.9 Required Cash Amount and Cash Deficit Definition 9
1.10 Excess Liabilities Defined 9
1.11 Chargebacks 9
1.12 Escrow 9
1.13 Escheat 10
1.14 Certificate of Incorporation 10
1.15 By-Laws 10
1.16 Directors and Officers 10
1.17 Effect of Merger 10
1.18 Appointment of Shareholders' Representative 10
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
CRG AND MACDONALD 11
2.1 Organization and Power 11
2.2 Capitalization; Subsidiaries 12
2.3 Authorization; No Breach 13
2.4 Financial Statements 14
2.5 Absence of Undisclosed Liabilities 14
2.6 No Material Adverse Changes 14
2.7 Absence of Certain Developments 15
2.8 Title and Condition of Properties 16
2.9 Tax Matters 17
2.10 Contracts and Commitments 18
2.11 Proprietary Rights 20
2.12 Litigation; Proceedings 21
2.13 Brokerage 21
2.14 Governmental Consent, etc. 21
2.15 Employees/Independent Contractors 21
2.16 Employee Benefit Plans 22
2.17 Insurance 23
2.18 Affiliated Transactions 24
2.19 Compliance with Laws; Permits; Certain Operations 24
2.20 Environmental Health and Safety 24
2.21 Product and Warranty Claims; Warranties 25
2.22 Disclosure 26
2.23 Closing Date 26
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASERS 26
3.1 Corporate Organization and Power 26
3.2 Authorization 26
3.3 No Violation 27
3.4 Litigation 27
3.5 Closing Date 27
3.6 Brokerage 27
3.7 Governmental Consent, etc. 27
3.8 Disclosure 27
ARTICLE 4
COVENANTS 27
4.1 CRG's Affirmative Covenants 27
4.2 CRG's Negative Covenants 29
4.3 Due Diligence Covenants 30
4.4 Hart-Scott-Rodino Act Filing 30
4.5 Shareholders Meeting/Consent 31
4.6 Tax Consequences 31
4.7 Insurance. 31
4.8 Financial Statements. 31
ARTICLE 5
CONDITIONS TO PURCHASERS' OBLIGATION TO CLOSE 32
5.1 Conditions to Purchasers' Obligation 32
ARTICLE 6
CONDITIONS TO CRG'S AND MACDONALD'S OBLIGATION TO CLOSE 34
6.1 Conditions to CRG's and MacDonald's Obligations 34
ARTICLE 7
CLOSING TRANSACTIONS 36
7.1 The Closing 36
7.2 Action to Be Taken at the Closing 36
7.3 Closing Documents 36
ARTICLE 8
INDEMNIFICATION 38
8.1 Indemnification by MacDonald 38
8.2 Indemnification by Purchasers 39
8.3 Method of Asserting Claims 39
8.4 Escrow Amount; Bonus Plan. 40
8.5 Limitation of Losses 41
8.6 Sole Remedy 42
ARTICLE 9
TERMINATION 42
9.1 Termination 42
9.2 Effect of Termination 42
9.3 Effect of Closing 43
ARTICLE 10
ADDITIONAL AGREEMENTS 43
10.1 Survival 43
10.2 Mutual Assistance 43
10.3 Press Release and Announcements 44
10.4 Expenses 44
10.5 Further Transfers 44
10.6 Confidentiality 44
10.7 Remittances 44
10.8 Best Efforts to Consummate Closing Transactions 44
10.9 Non-Compete; Non-Solicitation. 45
ARTICLE 11
MISCELLANEOUS 46
11.1 Amendment and Waiver 46
11.2 Notices 46
11.3 Assignment 46
11.4 Severability 47
11.5 No Third Party Beneficiaries 47
11.6 No Strict Construction 47
11.7 Captions 47
11.8 Complete Agreement 47
11.9 Counterparts 47
11.10 Governing Law 47
11.11 Remedies Cumulative 48
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EXHIBITS
Exhibit A -- Officer's Certificate of CRG
Exhibit B -- Officers' Certificates of Holdings and MergerSub
Exhibit C -- Escrow Agreement
Exhibit D -- Investment Agreement
Exhibit E -- Certificates of Merger (California and Delaware)
Exhibit F -- Cancellation Agreement
Exhibit G -- Opinion of Munger, Tolles & Olson, LLP
Exhibit H-1 -- MacDonald Employment Agreement
Exhibit H-2 -- MacDonald Note
Exhibit I -- Opinion of Vedder, Price, Kaufman & Kammholz
Exhibit J -- Bonus Plan Summary
Exhibit K -- Amended and Restated Employment Agreement of Robin
Urban
<PAGE>
Disclosure Schedules
Schedule 1.3(d) -- Initial; Per Share Stock Distribution/Initial Per
Share Cash Payment
Schedule 1.6 -- Estimated CRG Closing Expenses
Schedule 2.1 -- Qualifications Schedule
Schedule 2.2 -- Capitalization; Subsidiaries Schedule
Schedule 2.3 -- Authorization/No Breach Schedule
Schedule 2.5 -- Liabilities Schedule
Schedule 2.6 -- No Material Adverse Change Schedule
Schedule 2.7 -- Developments Schedule
Schedule 2.8(b) -- Leases Schedule
Schedule 2.9 -- Tax Matters Schedule
Schedule 2.10(a) -- Contracts Schedule
Schedule 2.10(d) -- Customer Contracts Schedule
Schedule 2.11 -- Proprietary Rights Schedule
Schedule 2.12 -- Litigation Schedule
Schedule 2.14 -- Consents Schedule
Schedule 2.15 -- Employees/Independent Contractors Schedule
Schedule 2.16 -- Employee Benefits Schedule
Schedule 2.17 -- Insurance Schedule
Schedule 2.18 -- Affiliated Transactions Schedule
Schedule 2.19(a) -- Compliance Schedule
Schedule 2.19(b) -- Permits Schedule
Schedule 2.21 -- Claims Schedule
Schedule 3.4 -- Purchasers Litigation Schedule
Schedule 4.2(l) -- Permitted Payments Schedule
Schedule 4.2(m) -- Permitted Charitable Contributions Schedule
Schedule 5.1(d) -- Excluded Consents Schedule
Schedule 5.2(j) -- Approvals Schedule
<PAGE>
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION is entered into as of
August 15, 2000 (this "Agreement") by and among CLARK/BARDES HOLDINGS, INC., a
Delaware corporation ("Holdings"), CLARK/BARDES ACQUISITION, INC., a Delaware
corporation ("MergerSub" and, together with Holdings, "Purchasers"),
COMPENSATION RESOURCE GROUP, INC., a California corporation ("CRG"), and WILLIAM
L. MACDONALD, SR. ("MacDonald").
W I T N E S S E T H
WHEREAS, CRG and its Subsidiaries (as defined below) are engaged in the
business of placing life insurance policies and providing consulting services
regarding compensation, salary and benefit plans to large corporations and
financial institutions (the "Business");
WHEREAS, the parties hereto desire that CRG be acquired by Purchasers
through the merger of CRG with and into MergerSub (the "Merger") upon the terms
and conditions herein contained and in accordance with the Delaware General
Corporation Law ("DGCL") and Chapter 11 (Sections 1100 et. seq.) of the
California General Corporation Law ("CGCL");
WHEREAS, the Board of Directors of CRG deems the Merger advisable and
in the best interests of CRG and its shareholders (the "Shareholders") and has
adopted a resolution approving this Agreement and the transactions contemplated
hereby and directing that this Agreement be submitted for consideration of the
Shareholders;
WHEREAS, the Boards of Directors of Holdings and MergerSub have adopted
resolutions approving this Agreement and the transactions contemplated hereby,
and Holdings, as the sole stockholder of MergerSub, has approved this Agreement
and the transactions contemplated hereby;
WHEREAS, MergerSub shall be the surviving corporation of the Merger
(the "Surviving Corporation"), and the Merger shall become effective as set
forth in Article 1 of this Agreement, and as a result of the Merger, the
Shareholders shall be entitled to receive shares of the common stock, $0.01 par
value, of Holdings (the "Holdings Shares") and cash consideration in accordance
with the terms of this Agreement in exchange for all of the issued and
outstanding shares of common stock, no par value per share of CRG ("CRG Common
Stock"; the shares of CRG Common Stock are sometimes referred to herein as the
"CRG Shares");
WHEREAS, it is understood by each of the parties hereto that MergerSub
seeks, as a result of the Merger, to acquire CRG and all of its assets and
liabilities, including, without limitation, each of CRG's wholly owned
subsidiaries (collectively, the "Subsidiaries"), CRG Financial Services, Inc.
("CRG Financial"), CRG Insurance Agency, Inc. ("CRG Insurance"), COLI Insurance
Agency, Inc. ("CRG COLI"), ECB Insurance Agency, Inc. ("ECB Insurance"), CRG
Fiduciary Services, Inc. ("CRG Fiduciary") and Executive Benefit Services, Inc.
("CRG Executive") subject to the terms and conditions of this Agreement, and all
parties to this Agreement will exert their best efforts to obtain such
regulatory approvals and to effect such other actions as are necessary or
appropriate to consummate the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
The Merger
ARTICLE 1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (defined below), CRG shall merge with and into MergerSub,
which shall be the corporation surviving the Merger, and the separate corporate
existence of CRG shall cease, all in accordance with Section 252 of the DGCL and
Section 1108 of the CGCL.
ARTICLE 1.2 Effective Time; Consummation of Merger. The date and time on which
the parties hereto file or cause to be filed with the Secretary of State of
Delaware and the Secretary of State of California, the applicable "Certificate
of Merger", substantially in the form of Exhibit E (and any other required
filings including, if applicable, a copy of this Agreement), is referred to
herein as the "Effective Time." Subject to the terms and conditions of this
Agreement, the parties hereto, as among themselves, will cause the Merger to
become effective on the date of the Closing (as defined in Article 7) by
executing, acknowledging and filing on that date, in accordance with the DGCL
and the CGCL, the Certificates of Merger (and any other required filings
including, if applicable, a copy of this Agreement).
ARTICLE 1.3 Conversion of Shares. At and as of the Effective Time, by virtue of
this Agreement, each CRG Share issued and outstanding as of the Effective Time
and not owned by CRG, other than Dissenting Shares (as defined in Section
1.3(e)), shall by operation of law and without any action on the part of the
holders thereof, be converted into the right to receive Holdings Shares and cash
(collectively, the "Merger Consideration"), as hereafter set forth, subject to
any adjustments required by Section 1.5 (Stock Options; Phantom Stock;
Dissenting Shares) and 1.7 (Purchase Price Adjustment), and subject to the
provisions of Section 1.12 (Escrow):
(a) The right to receive (the "Per Share Stock Consideration") from
Holdings the Per Share Amount (as hereafter defined) of the Stock
Consideration (as hereafter defined). The "Per Share Amount" of any
aggregate amount (e.g., Stock Consideration) shall mean the quotient
obtained by dividing such aggregate amount by the total number of CRG
Shares issued and outstanding as of the Effective Time, other than CRG
Shares owned by CRG, and including Dissenting Shares. "Stock Consideration"
means that number of fully paid nonassessable Holdings Shares equal to the
quotient obtained by dividing (x) Six Million Dollars ($6,000,000.00) by
(y) the Value Price (as hereinafter defined). "Value Price" means the
average closing price per share for each Holdings Share on the NASDAQ
National Market, as published in the Wall Street Journal, for the twenty
(20) trading days immediately prior to the Effective Time.
(b) The right to receive (the "Per Share Cash Amount") the Per Share
Amount of cash in an aggregate amount equal to Six Million Three Hundred
Six Thousand Thirty-Four Dollars ($6,306,034.00) (the "Cash Consideration")
from Holdings. At the Effective Time, CRG will transfer to Holdings by wire
transfer of immediately available funds an amount equal to the Deposit.
"Deposit" means the principal amount of Two Hundred Fifty Thousand Dollars
($250,000.00) deposited by Purchasers with CRG pursuant to the terms of
that certain Letter of Intent dated June 19, 2000 ("LOI"), as may be
amended, by and among Holdings, CRG, Clark/Bardes, Inc. ("CBI") and
MacDonald, plus all interest and earnings accrued thereon as of the
Effective Time.
(c) The Merger Consideration (other than the Escrow Amount) shall be
payable as set forth in Section 1.4 (Surrender of Certificates and Payment
of Merger Consideration). The Escrow Amount (as defined in Section 1.12)
shall be payable as set forth in Section 1.12 hereof and the Escrow
Agreement (as defined in Section 1.12). As of the Effective Time, the
holders of CRG Shares (other than Dissenting Shares) converted into the
right to receive Merger Consideration ("Merger Consideration Recipients")
shall have no rights with respect to the Surviving Corporation by virtue of
their ownership of the CRG Shares immediately prior to the Effective Time,
except for the right to receive Merger Consideration pursuant to this
Section 1.3 and Section 1.4 and, with respect to the Escrow Amount, Section
1.12 and the Escrow Agreement, and each certificate which formerly
represented a CRG Share (other than Dissenting Shares) shall, from and
after the Effective Time, represent only the right to receive the Merger
Consideration with respect to such CRG Share. Any CRG Share owned by CRG as
of the Effective Time shall be canceled and no Merger Consideration will be
payable or distributable in respect thereof.
(d) Notwithstanding anything to the contrary contained herein, at the
Effective Time, each holder of CRG Shares (other than Dissenting Shares)
shall have the right to receive only the Initial Per Share Stock
Distribution (as hereafter defined) and Initial Per Share Cash Payment (as
hereafter defined), which distribution will be distributed and payable in
the manner set forth in Section 1.4. The Initial Per Share Stock
Distribution means the Per Share Stock Consideration less the Per Share
Amount of (A) the Aggregate Cancellation Amount (as defined in Section 1.5)
paid in Holdings Shares pursuant to Section 1.5 and (B) forty-nine percent
(49%) of the amount of any purchase price adjustment (as converted into
Holdings Shares using the Value Price) pursuant to Section 1.7,
respectively. The Initial Per Share Cash Payment means the Per Share Cash
Consideration less the Per Share Amount of (A) fifty-one percent (51%) of
the amount of any purchase price adjustment pursuant to Section 1.7, (B)
the Aggregate Cancellation Amount paid in cash pursuant to Section 1.5, (C)
the Aggregate Option/Phantom Stock Holdback (as defined in Section 1.5) and
(D) an amount equal to Escrow Amount, less, the Two Hundred Fifty Thousand
Dollars ($250,000) paid from the proceeds of the loan to MacDonald referred
to in Section 5.1(i), less, the aggregate portion of the Escrow Amount
funded at the Effective Time by the Option Holders and Phantom Stock
Holders pursuant to the Cancellation Agreements, which amount is included
in the Aggregate Cancellation Amount (as such terms are defined in Section
1.5(a)). The Escrow Amount, shall be deposited at the Effective Time into
the Escrow Account (as defined in Section 1.12). As of the Effective Time,
the parties hereto shall agree upon the amounts of Initial Per Share Stock
Distribution and Initial Per Share Cash Payment which amounts shall be set
forth at such time on Schedule 1.3(d) to this Agreement. Prior to the
Effective Time, CRG will provide Purchasers with a letter of direction (the
"Letter of Direction"), in form and substance reasonably acceptable to
Purchasers, certifying the names, addresses and amounts to be received by
the Merger Consideration Recipients, and holders of Options and Phantom
Stock and any other recipients of Merger Consideration as provided for in
this Agreement. In no event will Purchasers be liable to any person or
entity for making such distribution in accordance with such certification.
(e) Notwithstanding any provision of this Agreement to the contrary,
any CRG Shares ("Dissenting Shares") held by a holder ("Dissenting
Shareholder") who has demanded and perfected appraisal rights for such
shares in accordance with California Law and who, as of the Effective Time,
has not effectively withdrawn or lost such appraisal rights, shall not be
converted into any applicable Per Share Merger Consideration pursuant to
Section 1.3, and the holder thereof shall only be entitled to such rights
as are granted by California Law. Any Shareholder which has not approved
the Merger (pursuant to vote or written consent, as applicable) as of the
Effective Time shall be deemed to be a Dissenting Shareholder and the CRG
Shares held by such Shareholder shall be deemed to be Dissenting Shares
until such time as such Shareholder withdraws or loses (through failure to
perfect or otherwise) the right to dissent. If any Dissenting Shareholder
shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to dissent, then, as of the later of the Effective
Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
applicable Initial Per Share Cash Consideration and Initial Per Share Stock
Consideration to which such Dissenting Shareholder is then entitled under
this Agreement, without interest thereon and upon surrender of the
certificate representing such shares. CRG shall give Purchasers (i)
immediate written notice if any person demands appraisal or seeks
dissenters rights, (ii) prompt notice of any written demands on CRG to
purchase any CRG Shares, withdrawals of such demands, and any other
instruments served pursuant to California law and received by CRG in
connection with any Dissenting Shareholder or otherwise and (iii) the
opportunity to participate in all negotiations and proceedings with respect
to such demands under California law. CRG shall not, except with the prior
written consent of Purchasers, voluntarily make any payments with respect
to such demands or settle or make any offer to settle any such demands. CRG
shall certify in writing to Purchasers, as of the Effective Time, the
number of CRG Shares held by Shareholders that have approved the Merger in
accordance with California law and the number Dissenting Shares as of such
date.
ARTICLE 1.4 Surrender of Certificates and Payment of Merger Consideration. At
the Effective Time, Purchasers shall deliver to each Merger Consideration
Recipient who has surrendered to Purchasers the certificate or certificates
representing CRG Shares together with any other customary instruments of
transfer that may be required by Purchasers (which instruments will contain,
among other things, a representation and warranty from such Merger Consideration
Recipient that such CRG Shares are free and clear of any and all liens, claims
and encumbrances), (i) certificates representing that number of Holdings Shares
which is equal to the Initial Per Share Stock Distribution multiplied by the
number of CRG Shares represented by the certificates(s) so surrendered by such
holder and (ii) the issuance of a check (or, if required by the next sentence,
immediately available funds by wire transfer to the account designated in
writing by such holder at least three days prior to the Effective Time) for an
amount equal to the Initial Per Share Cash Payment multiplied by the number of
CRG Shares represented by the certificate(s) so surrendered by such holder. At
the Effective Time, Purchasers shall make delivery of the Initial Per Share Cash
Payment to each such holder by wire transfer in immediately available funds,
provided Purchasers are in receipt of the certificate(s) held by such holder and
the customary instruments of transfer referred to above at or prior to Closing
and a written request containing all of the necessary information to effectuate
a wire transfer to such holder of such certificate(s) no later than 3:00 p.m.
Chicago time on the third business day prior to the Closing. It is anticipated
that fractional shares shall not be issued as part of the Merger Consideration,
but in the case where a holder of CRG Shares would, except for this provision be
entitled under the terms of this Agreement to receive a fractional share of
Holdings Shares, Holdings shall deliver to such holder of CRG Shares that amount
of cash equal to the value of such fractional share. The Holdings Shares issued
pursuant to Section 1.4 or Section 1.5, and any shares of capital stock of
Holdings issued or delivered with respect to such shares as a result of any
stock split, stock dividend, stock distribution, recapitalization or similar
transaction, shall be subject to the terms, conditions and restrictions provided
for in that certain Investment Agreement of even date herewith among Holdings,
the Merger Consideration Recipients, Option Holders and Phantom Stock Holders
receiving Holdings Shares, substantially in the form attached hereto as Exhibit
D (the "Investment Agreement"). Such persons shall receive piggyback
registration rights as provided for in the Investment Agreement. At the
Effective Time, Purchasers shall make delivery of the Escrow Amount pursuant to
Section 1.12 to the Escrow Agent (as defined in Section 1.12) by wire transfer
of the Escrow Amount to the Escrow Account under the Escrow Agreement. There
shall be no obligation to deliver the Merger Consideration (except for the
Escrow Amount to be delivered to the Escrow Agent, as defined herein) in respect
of any CRG Shares until (and then only to the extent that) the holder thereof
(i) surrenders its certificate(s) representing the CRG Shares for exchange as
provided in this Section 1.4, or, in lieu thereof, delivers to the Purchasers an
appropriate affidavit of loss and an indemnity agreement and/or a bond as may be
reasonably acceptable to Purchasers in any such case, and (ii) executes and
delivers to Purchasers the Investment Agreement. If any payment for CRG Shares
is to be made in a name other than that in which the certificate for CRG Shares
surrendered for exchange is registered, it shall be a condition to the payment
that the certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer, that all signatures shall be guaranteed by a member
firm of any national securities exchange in the United States or the National
Association of Securities Dealers, Inc., or by a commercial bank or trust
company having an office in the United States, and that the person requesting
the payment shall either (a) pay to the Purchasers any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the certificate surrendered or (b) establish to the reasonable satisfaction
of the Purchasers that such taxes have been paid or are not payable. From and
after the date hereof, there shall be no transfers on the stock transfer books
of CRG of any CRG Shares outstanding immediately prior to the Effective Time
and, following the Effective Time, any such CRG Shares presented to the
Purchasers shall be canceled in exchange for the Merger Consideration payable
with respect thereto as provided in Section 1.3.
ARTICLE 1.5 Stock Options; Phantom Stock; Dissenting Shares.
(a) As a condition to Purchasers's obligation to close the
transactions, the holders ("Option Holder" or "Phantom Stock Holder", as
applicable) of at least eighty percent (80%) of (i) of all outstanding
options, warrants or the like, whether written or oral, granted to purchase
CRG Shares or any other equity of CRG or any of its Subsidiaries
(collectively, "Options") and (ii) all stock appreciation rights, phantom
stock or similar interests, whether written or oral ("Phantom Stock"), are
required to deliver to Purchasers a Cancellation Agreement substantially in
the form of Exhibit F hereto (a "Cancellation Agreement"), which shall set
forth the portion of the Merger Consideration to be paid to such Option
Holder or Phantom Stock Holder, as applicable, in satisfaction of all of
CRG's, the Subsidiaries' and Purchasers' obligations with respect to the
Options or Phantom Stock, as applicable (the "Cancellation Amount"; the
Cancellation Amounts paid to all such Option Holders and Phantom Stock
Holders is sometimes herein referred to as the "Aggregate Cancellation
Amount"). Notwithstanding the foregoing, a portion of the Cancellation
Amount as provided for in the applicable Cancellation Agreement will not be
paid directly to the Option Holder or Phantom Stock Holder, as applicable,
but will be paid into the Escrow Account at the Effective Time and become
part of the Escrow Amount to distributed in accordance with this Agreement
and the Merger Agreement. Without any action by the Option Holders or
Phantom Stock Holders, each of the Options and each share of Phantom Stock
covered thereby shall be canceled and terminated and shall convert into the
right to receive the Cancellation Amount set forth in the applicable
Cancellation Agreement as of the Effective Time. The Cancellation Amounts
may be paid in cash or, with the advance written consent of Holdings,
Holdings Shares (determined using the Value Price), provided, that the
aggregate cash payable to all such Option Holders and Phantom Stock Holders
shall not exceed the aggregate value (determined using the Value Price) of
the Holdings Shares distributed to such Option Holders and Phantom Stock
Holders. The Merger Consideration will be reduced by the Aggregate
Cancellation Amount (applied to the Cash Consideration and the Stock
Consideration, as appropriate). The parties hereto acknowledge and agree
that (i) CRG has entered or will enter prior to the Effective Time a
settlement agreement with Sheldon L. Ausman pursuant to which CRG will make
certain payments to Sheldon L. Ausman in consideration for, among other
things, the release by Sheldon L. Ausman of all claims against CRG, and
(ii) for purposes of this Agreement, such amounts shall be included in the
Aggregate Cancellation Amount and shall reduce the Merger Consideration.
(b) In the event that CRG does not obtain a Cancellation Agreement
from each Option Holder and Phantom Stock Holder as of the Effective Time,
the cash portion of the Merger Consideration shall be reduced (the
"Aggregate Option/Phantom Stock Holdback") in an amount equal to the
product of $13 and the aggregate number of Options and shares of Phantom
Stock held by all such Option Holders and Phantom Stock Holders who fail to
deliver a Cancellation Agreement as of the Effective Time. Upon receipt of
a Cancellation Agreement from any such Option Holder or Phantom Stock
Holder, as applicable, in respect of any and all such holder's Options and
Phantom Stock, and such other documents as may be reasonably required by
Purchasers (including, without limitation, a release of Purchasers),
Purchasers shall pay to such Option Holder or Phantom Stock Holder, as
applicable, the applicable portion of the Aggregate Option/Phantom Stock
Holdback. Purchasers may recover payments, on a per share basis, made to
any such Phantom Stock Holder or Option Holder in excess of $13 per share,
plus all out-of-pocket costs, fees and expenses reasonably incurred by
Purchasers (including reasonable attorneys' fees) in administering and
handling the claims of such Option Holders and Phantom Stock Holders (such
excess, together with such costs, fees and expenses, the "Option/Phantom
Stock Costs"), from the Escrow Account, pursuant to the indemnification
provisions of Article 8 and by way of setoff or offset against any amounts
that are then or thereafter become payable pursuant to that certain
"Employee Benefit Plan" (the "Bonus Plan") in form and substance to be
mutually agreed upon by the parties hereto prior to, and as a condition of,
the Closing. Upon the request of Purchasers, the Shareholders'
Representative (as defined in Section 1.18), subject to the provisions of
the Escrow Agreement, will jointly with Purchasers promptly instruct the
Escrow Agent from time to time to disburse to Purchasers an amount from the
Escrow Account equal to any Option/Phantom Stock Costs. If the Aggregate
Option/Phantom Stock Holdback exceeds the aggregate payments by Purchasers
to all such Option Holders and Phantom Stock Holders who fail to deliver a
Cancellation Agreement at the Closing Time, plus all out-of-pocket costs,
fees and expenses reasonably incurred by Purchasers (including reasonable
attorneys' fees) in administering and handling such claims, after all such
claims have been fully and finally settled and after the claims of all
Dissenting Shareholders have been fully and finally settled, then
Purchasers shall distribute such excess amount to the Merger Consideration
Recipients according to their proportionate interest in CRG. At the time of
such distribution, the Shareholders' Representative shall certify in
writing to Purchasers the names, addresses and amounts to be received by
the Merger Consideration Recipients. In no event will Purchasers be liable
to any person or entity for making such distribution in accordance with
such certification. CRG shall certify in writing to Purchasers, as of the
Effective Time, the number of Options and shares of Phantom Stock which
have not been terminated as of the Effective Time, the holders thereof, and
the terms of such Options and Phantom Stock, as applicable. The
Shareholders' Representative shall have the right to settle all claims
related to such Option Holders and Phantom Stock Holders, subject to
approval from the Purchasers, which approval will not be unreasonably
withheld.
(c) Purchasers may recover the excess of any payments, on a per share
basis, to any Dissenting Shareholder for any CRG Shares held by such
Dissenting Shareholder over the sum of the Initial Per Share Stock
Distribution (determined using the Value Price) and Initial Per Share Cash
Payment (the Initial Per Share Stock Distribution and Initial Per Share
Cash Payment are sometimes hereafter collectively referred to as the
"Initial Per Share Amount"), plus all out-of-pocket costs, fees and
expenses reasonably incurred by Purchasers (including reasonable attorneys'
fees) in administering and handling the claims of any Dissenting
Shareholders (such excess, together with such costs, fees and expenses, the
"Dissenting Shareholder Costs"), from the Escrow Account, pursuant to the
indemnification provisions of Article 8 and by way of setoff or offset
against any amounts that are then or thereafter become payable pursuant to
the Bonus Plan. Upon the request of Purchasers, the Shareholders'
Representative will jointly with Purchasers promptly instruct the Escrow
Agent from time to time to disburse to Purchasers such Dissenting
Shareholder Costs from the Escrow Account. If the product of (i) the
Initial Per Share Amount and (ii) the number of all such Dissenting Shares,
exceeds the aggregate payments by Purchasers to all Dissenting
Shareholders, plus all out-of-pocket costs, fees and expenses reasonably
incurred by Purchasers (including reasonable attorneys' fees) in
administering and handling such claims, after the claims of all Dissenting
Shareholders have been fully and finally settled, then Purchasers shall
distribute such excess amount to the Merger Consideration Recipients
according to their proportionate interest in CRG. At the time of such
distribution, the Shareholders' Representative shall certify in writing to
Purchasers the names, addresses and amounts to be received by the Merger
Consideration Recipients. In no event will Purchasers be liable to any
person or entity for making such distribution in accordance with such
certification.
ARTICLE 1.6 Payment of CRG Closing Expenses. On or prior to the Closing Date,
CRG shall pay all Estimated CRG Closing Expenses (as hereafter defined). In the
event the CRG Closing Expenses (as hereafter defined) exceed the amount set
forth opposite the term "Estimated CRG Closing Expenses" on the "CRG Closing
Expense Schedule" attached hereto as Schedule 1.6, the Purchasers and the
Shareholders' Representative shall immediately jointly instruct the Escrow Agent
to pay the amount of such excess from the Escrow Account to the Surviving
Corporation. In the event that the funds held under the Escrow Agreement are
insufficient to satisfy in full such excess amount, the Purchasers may recover
any unsatisfied amount pursuant to the indemnification provisions of Article 8
and by way of setoff or offset against any amount then or thereafter payable
under the Bonus Plan. "CRG Closing Expenses" shall mean, as of the Closing Date,
the aggregate total costs, fees and expenses incurred by CRG and its
Subsidiaries in connection with the transactions contemplated hereby, including,
without limitation, costs, fees and expenses of legal counsel. Estimated CRG
Closing Expenses means CRG's good faith estimate of the CRG Closing Expenses as
set forth on Schedule 1.6.
ARTICLE 1.7 Purchase Price Adjustment. Within three (3) days prior to the
Closing, CRG shall notify Purchasers in writing of its good faith estimate of
(i) the Required Cash Amount (as defined in Section 1.9 below) (the "Estimated
Required Cash Amount") and any Cash Deficit (as defined in Section 1.9 below )
(the "Estimated Cash Deficit"), and (ii) the Excess Liabilities (as defined in
Section 1.10 below) (the "Estimated Excess Liabilities"), in each case, as of
the opening of business on the Closing Date. Any Estimated Cash Deficit and
Estimated Excess Liabilities shall reduce the Merger Consideration paid as of
the Closing Date. Upon the final determination of any Cash Deficit and any
Excess Liabilities pursuant to Section 1.8 below, the Purchasers may recover an
amount equal to the sum of (x) any excess of the Cash Deficit over the Estimated
Cash Deficit, and (y) any excess of the Excess Liabilities over the Estimated
Excess Liabilities, from funds being held under the Escrow Agreement, pursuant
to the indemnification provisions of Article 8 and by way of setoff or offset
against any amounts that are then or thereafter become payable pursuant to the
Bonus Plan. Upon the request of Purchasers, subject to the provision of the
Escrow Agreement, the Shareholders' Representative will jointly with Purchasers
promptly instruct the Escrow Agent to disburse to Purchasers such amount from
the Escrow Account.
ARTICLE 1.8 Procedures for Final Determination of Purchase Price Adjustment.
Within thirty (30) days after the Closing Date, Purchasers shall prepare and
deliver to the Shareholders' Representative, at Purchasers' expense, a statement
setting forth Purchasers' determination of the Required Cash Amount, any Cash
Deficit and any Excess Liabilities. Within thirty (30) days after receipt
thereof, Shareholders' Representative shall deliver to Purchasers a detailed
written statement describing his objections, if any, to such determination of
the Required Cash Amount, any Cash Deficit and any Excess Liabilities. If the
Shareholders' Representative does not raise any objections within the thirty
(30) day period, Purchasers' determination of the Required Cash Amount, any Cash
Deficit and any Excess Liabilities, as applicable, shall become final and
binding upon all parties hereto. Upon request by the Shareholders'
Representative at any time after receipt of the aforementioned statement,
Purchasers shall make available to the Shareholders' Representative and his
accountants and other representatives the work papers used in determining
Purchasers' calculation of the Required Cash Amount, any Cash Deficit and any
Excess Liabilities. If the Shareholders' Representative raises any objections,
Purchasers and the Shareholders' Representative shall use reasonable efforts to
resolve any such disputes. If a final resolution is not obtained within thirty
(30) days after the Shareholders' Representative shall have submitted his
objections to Purchasers, any remaining disputes shall be resolved by a
"big-five" accounting firm mutually agreeable to Purchasers and the
Shareholders' Representative. If Purchasers and the Shareholders' Representative
are unable to mutually agree on such an accounting firm within five (5) days
after the expiration of said thirty (30) day period, a "big-five" accounting
firm shall be selected by lot after elimination of one such firm by Purchasers
and one such firm by the Shareholders' Representative. The determination of the
accounting firm so selected shall be set forth in writing and shall be
conclusive and binding upon the parties. Purchasers shall pay one-half of the
fees and expenses of such accounting firm; the other one-half of such fees and
expenses shall be paid from Escrow Account.
ARTICLE 1.9 Required Cash Amount and Cash Deficit Definition. For purposes
hereof, the "Required Cash Amount" shall be determined as of the opening of
business on the Closing Date and shall be cash in an amount equal to the gross
revenues earned by CRG on or after July 1, 2000 to the Closing Date, less
expenses directly related to such gross revenues (including, without limitation,
finders fees and commissions payable) that are incurred during such period in
the ordinary course of business of CRG, consistent with past practices, after
eliminating any excess compensation included in such expenses. "Cash Deficit"
means the excess of the Required Cash Amount over the cash in CRG as of the
opening of business on the Closing Date.
ARTICLE 1.10 Excess Liabilities Defined. For purposes hereof, "Excess
Liabilities" shall mean the excess, if any, of the aggregate amount of Borrowed
Money (as defined in Section 2.5), as of the opening of business on the Closing
Date, over Thirteen Million Dollars ($13,000,000.00).
ARTICLE 1.11 Chargebacks. Any chargebacks, set-offs, or other rights to payment
by any life insurance company doing business with CRG, and any refunds of
prepaid client fees, in each case, with respect to business done by CRG prior to
the Closing Date (collectively, "Chargebacks"), shall be paid by CRG on or prior
to the Closing Date. Purchasers may, subject to the terms of the Escrow
Agreement, draw upon the Escrow Account, may seek reimbursement by way of
setoff, offset or otherwise against any amounts then or thereafter payable under
the Bonus Plan for, without limitation, any Chargebacks arising after the
Closing Date. At the request of Purchasers, the Shareholders' Representative
shall jointly with the Purchasers promptly instruct the Escrow Agent to disburse
to the Purchasers the amount of such Chargebacks.
ARTICLE 1.12 Escrow. The Purchasers and the Shareholders' Representative will
enter into an Escrow Agreement substantially in the form attached hereto as
Exhibit C (the "Escrow Agreement"), with such changes as may be requested by the
"Escrow Agent" appointed pursuant to the terms of the Escrow Agreement. On the
Closing Date, the Purchasers will place in the "Escrow Account" (as defined in
the Escrow Agreement) cash in the amount of Five Hundred Thousand Dollars
($500,000) (the "Escrow Amount"), which amount will reduce the cash portion of
the Merger Consideration to be paid at the Effective Time by Two Hundred Fifty
Thousand Dollars ($250,000) and the cash to be disbursed to MacDonald at the
Effective Time in connection with the loan referenced in Section 5.1(i).
ARTICLE 1.13 Escheat. Notwithstanding anything in Section 1.4 or elsewhere in
this Agreement to the contrary, no party hereto shall be liable to a former
holder of CRG Shares for any cash delivered to a public official pursuant to
applicable escheat or abandoned property laws.
ARTICLE 1.14 Certificate of Incorporation. The Certificate of Incorporation of
MergerSub, as in effect as of the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until otherwise amended as provided
by law or by such Certificate of Incorporation.
ARTICLE 1.15 By-Laws. The By-laws of MergerSub, as in effect at the Effective
Time, shall be the By-laws of the Surviving Corporation from and after the
Effective Time until otherwise amended as provided by law or by such By-laws.
ARTICLE 1.16 Directors and Officers. The directors and officers of MergerSub at
the Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation and shall hold office from and after the Effective Time
until their respective successors are duly elected or appointed and qualified.
ARTICLE 1.17 Effect of Merger. Following the Merger, the Surviving Corporation
will continue its corporate existence under Delaware law, and the separate
corporate existence of CRG shall cease. The Merger shall have the further
effects set forth under the DGCL and the CGCL.
ARTICLE 1.18 Appointment of Shareholders' Representative. CRG does hereby
designate and appoint, and the Merger Consideration Recipients by their vote or
written consent for the Merger and acceptance of the Merger Consideration, and
the Option Holders and Phantom Stock Holders by their execution and delivery of
the Cancellation Agreements, shall be deemed for themselves and their personal
representatives and other successors, to have constituted and appointed,
effective from and after the Effective Time, MacDonald, the agent and
attorney-in-fact of the Merger Consideration Recipients, such Option Holders and
such Phantom Stock Holders and their respective successors, assigns, heirs,
executors and legal representatives (the "Shareholders' Representative") to act
as Shareholders' Representative under this Agreement and the Escrow Agreement
for the purpose of carrying out the provisions of this Agreement and the Escrow
Agreement and to take any action and to execute any instruments which the
Shareholders' Representative may deem necessary or advisable to accomplish the
purposes hereof or thereof, including, without limitation, (a) to receive all
notices or other documents given or to be given to the Merger Consideration
Recipients, such Option Holders and/or such Phantom Stock Holders by Purchasers
under this Agreement or the Escrow Agreement; (b) to receive and accept service
of legal process in connection with any claim or other proceeding against CRG or
the Merger Consideration Recipients, such Option Holders and/or such Phantom
Stock Holders arising under this Agreement or the Escrow Agreement; (c) to
undertake, compromise, defend and settle any such suit or proceeding; (d) to
engage special counsel, accountants and other advisors and incur such other
expenses on behalf of the Merger Consideration Recipients, such Option Holders
and/or such Phantom Stock Holders in connection with any matter arising under
this Agreement or the Escrow Agreement as the Shareholders' Representative deems
appropriate; (e) to agree to any modification or amendment of this Agreement or
the Escrow Agreement and to execute and deliver an agreement of such
modification or amendment; and (f) to take any actions required or permitted
under this Agreement or the Escrow Agreement to protect or enforce the rights of
the Merger Consideration Recipients, such Option Holders and/or such Phantom
Stock Holders hereunder or thereunder. The appointment of the Shareholders'
Representative as attorney-in-fact is irrevocable and coupled with an interest.
Each of the Merger Consideration Recipients by acceptance of the Merger
Consideration and each Option Holder and Phantom Stock Holder by acceptance of
the amounts provided for under the applicable Cancellation Agreement, hereby
releases the Shareholders' Representative from liability for any action taken or
not taken by him in such capacity except for any liability resulting from
willful misconduct or gross negligence of the Shareholders' Representative in
carrying out his duties hereunder. The Shareholders' Representative may resign
and be discharged from his duties hereunder at any time by giving at least 30
days' notice of such resignation to the Purchasers, and specifying therein a
date upon which such resignation shall take effect (the "Resignation Notice");
provided, however, that the Shareholders' Representative shall continue to serve
until a successor reasonably acceptable to the Purchasers accepts the
Shareholders' Representative's obligations under this Agreement. Upon receipt of
any Resignation Notice, a successor Shareholders' Representative shall be
appointed by the Merger Consideration Recipients, such successor Shareholders'
Representative to become the Shareholders' Representative hereunder on the later
of the date set forth in the Resignation Notice and the date on which the
successor Shareholders' Representative accepts such appointment. Each of the
Merger Consideration Recipients, by acceptance of the Merger Consideration, and
each Option Holder and Phantom Stock Holder, by acceptance of the amounts set
forth in the applicable Cancellation Agreement, hereby agrees not to sue or make
a claim against the Shareholders' Representative in his capacity as a
Shareholders' Representative.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CRG AND MACDONALD
As an inducement to Purchasers to enter into this Agreement, CRG and
MacDonald hereby, jointly and severally, represent and warrant to Purchasers as
of the date hereof and as of the Closing Date that:
ARTICLE 2.1 Organization and Power. Each of CRG and the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization. Each of CRG and the Subsidiaries is
qualified to do business as a foreign corporation and is in good standing in the
jurisdictions specified on the "Qualifications Schedule" attached hereto as
Schedule 2.1, which are all jurisdictions in which ownership of its properties
or the conduct of its business requires it to be so qualified, except where the
failure to do so would not reasonably be expected to have a Material Adverse
Effect. For purposes of this Agreement, "Material Adverse Effect", as it relates
to each of CRG and the Subsidiaries, means any material adverse effect on (a)
the financial condition, credit, business, prospects, properties or operations
of CRG and its Subsidiaries, taken as a whole or (b) the ability of CRG or
MacDonald to perform their respective obligations under this Agreement. Except
as set forth in Schedule 2.1, each of CRG and the Subsidiaries has all requisite
power and authority and all material licenses, permits and other authorizations
necessary to own and operate its properties and to carry on its business as now
conducted as they relate to the Business. The copies of the articles of
incorporation and by-laws of each of CRG and the Subsidiaries, which have been
previously furnished to Purchasers, reflect all amendments made thereto at any
time prior to the date of this Agreement and are correct and complete in all
material respects.
ARTICLE 2.2 Capitalization; Subsidiaries.
(a) The authorized capital stock of CRG consists solely of 1,176,470
shares of CRG Common Stock, of which 1,008,633 are outstanding and are
validly issued, fully paid, and nonassessable; provided, however, that
2,750 of such shares are unvested shares granted to an employee that will
vest on August 31, 2000. No other shares of CRG Common Stock are issued or
outstanding. Other than as set forth on the "Capitalization; Subsidiaries
Schedule" attached hereto as Schedule 2.2, (i) there are no outstanding
options, warrants, or other rights in or with respect to the unissued
shares of CRG Common Stock or any treasury shares of CRG Common Stock, nor
any securities convertible into such stock, and (ii) CRG is not obligated
to issue any additional shares of CRG Common Stock or any options,
warrants, or other rights in or with respect to the unissued or any
treasury shares of CRG Common Stock or any other securities convertible
into CRG Common Stock. Other than as set forth on Schedule 2.2, there are
no obligations (contingent or otherwise) of CRG or the Subsidiaries to
repurchase, redeem, or otherwise acquire any shares of CRG Common Stock.
Other than as set forth on Schedule 2.2, CRG has not granted, nor is
obligated to grant, any stock appreciation rights, phantom stock or similar
interests.
(b) Schedule 2.2 contains a true, accurate, and complete list of the
names of the Shareholders of record and the number and class of shares held
of record by each Shareholder as of the date hereof and as of the Closing
Date. All issued and outstanding shares of CRG Common Stock are owned of
record by the Shareholders as set forth in Schedule 2.2. By Closing, all
such shares shall be owned by the Shareholders free and clear of any liens,
encumbrances, security agreements, claims, equities, charges, restrictions,
voting agreements, proxies, options, rights of first refusal, calls,
contractual rights or other interests. Other than as set forth on Schedule
2.2, CRG does not have any agreements with any Shareholder in relationship
to CRG Common Stock including, without limitation, any buy-sell agreement,
shareholder agreement or agreement granting registration rights.
(c) Except as set forth on Schedule 2.2 hereof, neither CRG nor the
Subsidiaries owns any stock, partnership interest, joint venture interest
or other security or interest in any other corporation, organization or
entity related to the Business (other than CRG's interest in the
Subsidiaries).
(d) The authorized capital stock of (collectively, the "Subsidiary
Common Stock") (i) CRG Financial consists solely of 1,000 shares of common
stock, no par value per share, of which 1,000 are outstanding and are
validly issued, fully paid, and nonassessable, (ii) CRG Insurance consists
solely of 1,000 shares of common stock, no par value per share, of which
140 are outstanding and are validly issued, fully paid, and nonassessable,
(iii) CRG COLI consists solely of 1,000 shares of common stock, no par
value per share, of which 100 are outstanding and are validly issued, fully
paid, and nonassessable, (iv) ECB Insurance consists solely of 10,000
shares of common stock, no par value per share, of which 1,020 are
outstanding and are validly issued, fully paid, and nonassessable, (v) CRG
Fiduciary consists solely of 100 shares of common stock, no par value per
share, of which 100 are outstanding and are validly issued, fully paid, and
nonassessable, and (vi) CRG Executive consists solely of 10,000 shares of
common stock, no par value per share, of which 10,000 are outstanding and
are validly issued, fully paid, and nonassessable. No other shares of
Subsidiary Common Stock are issued or outstanding. Other than as set forth
on Schedule 2.2, there are no outstanding options, warrants, or other
rights in or with respect to the unissued or any treasury shares of
Subsidiary Common Stock, nor any securities convertible into such stock,
and CRG is not obligated to issue any additional shares of Subsidiary
Common Stock or any options, warrants, or other rights in or with respect
to the unissued or any treasury shares of Subsidiary Common Stock or any
other securities convertible into Subsidiary Common Stock. Other than as
set forth on Schedule 2.2, there are no obligations (contingent or
otherwise) of Subsidiaries or CRG to repurchase, redeem, or otherwise
acquire any shares of Subsidiary Common Stock. All issued and outstanding
Subsidiary Common Stock is owned of record by CRG free and clear of any
liens, encumbrances, security agreements, claims, equities, charges,
restrictions, voting agreements, proxies, options, rights of first refusal,
calls, contractual rights or other interests. Other than as set forth on
Schedule 2.2, none of the Subsidiaries has granted, nor is obligated to
grant, any stock appreciation rights, phantom stock or similar rights.
ARTICLE 2.3 Authorization; No Breach. The execution, delivery and performance
of this Agreement and the other agreements contemplated hereby and the
transactions contemplated hereby and thereby have been duly and validly
authorized by CRG's Board of Directors, subject to the approval of the holders
of a majority of the CRG Shares. The approval by the holders of a majority of
the CRG Shares at a special shareholders' meeting to be held to consider and
vote upon the Merger (or by written consent for such purpose) will be sufficient
to approve the Merger in accordance with the requirements of California law and
CRG's articles of incorporation and by-laws. No other corporate act or
proceeding on the part of CRG, its Board of Directors, its Shareholders, the
Subsidiaries or their respective Boards of Directors or Shareholders, is
necessary to authorize the execution, delivery or performance of this Agreement
or any other agreement contemplated hereby or the consummation of the
transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by CRG and MacDonald and this Agreement constitutes, and
the other agreements contemplated hereby upon execution and delivery by CRG and
MacDonald shall each constitute, a valid and binding obligation of CRG and
MacDonald enforceable in accordance with their respective terms. Except as set
forth on Schedule 2.3, the execution, delivery and performance of this Agreement
and the other agreements contemplated hereby by CRG and MacDonald and the
consummation of the transactions contemplated hereby and thereby do not and
shall not (i) conflict with or result in any breach of any of the provisions of,
(ii) constitute a default under, result in a violation of, or cause the
acceleration of any obligation under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon any of the CRG Common Stock or the
assets or properties of CRG or any Subsidiary, including without limitation the
Subsidiary Common Stock and any "key man" life insurance policies (collectively,
the "CRG Assets") under, or (iv) require any authorization, consent, approval,
exemption or other action by or notice to any court or other governmental body
or any third party under, the provisions of the articles of incorporation, or
by-laws of CRG or the Subsidiaries, or any material indenture, mortgage, lease,
loan agreement or other agreement or instrument by which CRG or any Subsidiary
is bound or affected. Without limiting the generality of any of the foregoing,
CRG will timely comply with the requirements of the CGCL, which must be complied
with prior to the Effective Time, with respect to any dissenting shares
including, without limitation, the notice requirements of Section 603(b)(1), if
applicable.
ARTICLE 2.4 Financial Statements. The (i) audited consolidated financial
statements of the Company and its Subsidiaries as at June 30, 1999, and (ii)
interim consolidated balance sheet and income statement of CRG and the
Subsidiaries for the eleven months ending as at May 31, 2000, copies of each of
which have been delivered to Purchasers, were prepared in accordance with
generally accepted accounting principles (subject, in the case of such interim
statements, to the absence of footnotes and to normal year-end adjustments) and
present fairly the consolidated financial condition of such entities as at such
dates and the results of their operations for the periods then ended.
ARTICLE 2.5 Absence of Undisclosed Liabilities. As of the Closing Date, each of
CRG and its Subsidiaries shall have no liabilities of any nature whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due, arising out of or related to transactions entered into at or prior
to the Closing Date, or out of any action or inaction by CRG, any Subsidiary, or
any employee, agent, licensee or contractor of any of them at or prior to the
Closing Date, or out of any state of facts existing at or prior to the Closing
Date, regardless of when any such liability is asserted, including, without
limitation, taxes with respect to or based upon transactions or events occurring
on or before the Closing Date, except (a) liabilities under agreements,
contracts, leases or commitments described on Schedule 2.8 (b) and Schedule 2.10
(a) and (d) or under agreements, leases, contracts and commitments which are not
required pursuant to this Agreement to be disclosed thereon (but not liabilities
for breaches thereof), (b) liabilities and obligations which have arisen after
the Closing Date in the ordinary course of business (none of which is a
liability for breach of contract, breach of warranty, tort, infringement, claim
or lawsuit), (c) liabilities set forth in Schedule 2.5, and (d) liabilities
reflected on the unaudited interim May 31, 2000 balance sheet and related
financial statements and current liabilities arising since May 31, 2000 in the
ordinary course of business of CRG, consistent with past practices. The
aggregate amount of liability of CRG and the Subsidiaries for amounts owing to
Sun Life Assurance Company of Canada, Bank One, Colorado, N.A., and for any
other borrowed money (including, without limitation, principal, interest and
fees then owing) ("Borrowed Money"), is accurately set forth on Schedule 2.5
next to the heading "Borrowed Money".
ARTICLE 2.6 No Material Adverse Changes. Except as set forth in Schedule 2.6
hereto, since May 31, 2000, there has been no material adverse change in the
financial condition, operating results, assets, operations, employee relations
or customer relations of CRG and the Subsidiaries, taken as a whole.
ARTICLE 2.7 Absence of Certain Developments. Except as set forth in the
"Developments Schedule" attached hereto as Schedule 2.7 or as otherwise
contemplated hereby, since May 31, 2000, each of CRG and the Subsidiaries has
not:
(a) borrowed or agreed to borrow any amount or incurred or become
subject to any material liabilities, except current liabilities incurred in
the ordinary course of business and liabilities under contracts entered
into in the ordinary course of business;
(b) discharged or satisfied, or agreed to discharge or satisfy, any
material lien or encumbrance or paid any material liability, other than
current liabilities paid in the ordinary course of business;
(c) mortgaged, pledged or subjected to any lien, charge or any other
encumbrance, any portion of the CRG Assets, except liens for current taxes
not yet due and payable;
(d) sold, assigned or transferred, or agreed to do so, any of the CRG
Assets, except in the ordinary course of business, or canceled without fair
consideration any material debts or claims owing to or held by it;
(e) sold, assigned, transferred, abandoned or permitted to lapse any
patents, trademarks, trade names, copyrights, trade secrets or other
intangible assets, or disclosed any material proprietary confidential
information to any person;
(f) made or granted, or agreed to make or grant, any bonus or any wage
or salary increase to any employee or group of employees or made or granted
any increase in any employee benefit plan or arrangement (except, in each
case, in the ordinary course of business in accordance with past custom and
practice), or amended or terminated, or agreed to amend or terminate, any
existing employee benefit plan or arrangement or adopted any new employee
benefit plan or arrangement;
(g) made, or agreed to make, any capital expenditures or commitments
therefor that aggregate in excess of $10,000.00, other than in the ordinary
course of business consistent with past practices;
(h) made, or agreed to make, any loans or advances to, or guaranties
for the benefit of, any persons;
(i) suffered any extraordinary losses or waived any rights of material
value, whether or not in the ordinary course of business or consistent with
past practice;
(j) entered into, or agreed to enter into, any other material
transaction other than in the ordinary course of business;
(k) made, or agreed to make, any charitable contributions or pledges
in excess of $10,000, individually or in the aggregate, and has no
continuing obligations to make any future payments;
(l) made any purchase commitment in excess of the normal, ordinary and
usual requirements of its business or at any price in excess of the then
current market price or upon terms and conditions more onerous than those
usual and customary in the industry, or made any change in its selling,
pricing, advertising or personnel practices inconsistent with its prior
practices and prudent business practices prevailing in the industry; or
(m) suffered any material damage, destruction or casualty loss to the
CRG Assets, whether or not covered by insurance.
ARTICLE 2.8 Title and Condition of Properties.
(a) Each of CRG and the Subsidiaries owns no real estate.
(b) The leases described on the "Leases Schedule" attached hereto as
Schedule 2.8 (the "Lease Agreements") are in full force and effect, and
each of CRG or applicable Subsidiaries (as indicated on such schedule) (and
licenses listed thereon) holds a valid and existing leasehold interest
under the Lease Agreement to which it is a party for the term set forth on
the Leases Schedule. The Lease Agreements described on the Leases Schedule
constitute the only leases under which CRG and the Subsidiaries hold
leasehold interests in real estate. Each of CRG and the Subsidiaries has
delivered to Purchasers complete and accurate copies of the Lease
Agreements described on the Leases Schedule, and such Lease Agreements have
not been modified in any respect (other than by the obtaining of consents
to assignment in conjunction with the Merger), except to the extent that
such modifications are disclosed by the copies delivered to Purchasers.
Except as set forth in Schedule 2.8, neither CRG nor any Subsidiary is in
default under any such Lease Agreement, and no other party to such Lease
Agreement has a matured or vested right to terminate, accelerate
performance under or otherwise modify such Lease Agreement, including upon
the giving of notice or the passage of time. To the best of CRG's Knowledge
(as hereafter defined), no third party to such Lease Agreement is in
default under such Lease Agreement. "Knowledge" shall mean the actual
knowledge of such person, after a reasonable and diligent investigation.
With respect to CRG, "Knowledge" means to the actual knowledge of the Chief
Executive Officer, any Executive Vice President, and any Vice-President, of
CRG and the Subsidiaries, including, without limitation, MacDonald, after a
reasonable and diligent investigation.
(c) Each of CRG and the Subsidiaries owns good and marketable title,
free and clear of all liens, charges, security interests, encumbrances,
encroachments and claims of others, to the CRG Assets, except for (i)
leased equipment, (ii) liens of current taxes or other governmental charges
not yet due and payable and (iii) statutory liens of materialmen, carriers
and like persons for amounts not yet due and payable and which do not
exceed $5,000 individually or in the aggregate ("Permitted Encumbrances").
At the Closing Date, upon the transfer to Purchasers, each of the CRG
Shares and CRG Assets shall be free and clear of all liens, security
interests, charges, encumbrances and claims of others, other than Permitted
Encumbrances.
(d) Each of CRG's and the Subsidiaries' machinery, equipment and other
tangible assets are in good condition and repair in all material respects
(other than normal wear and tear), have been maintained in accordance with
normal industry standards and are usable in the ordinary course of
business.
(e) Since the commencement of each of CRG's and the Subsidiaries', as
applicable, tenancy under each applicable Lease Agreement, CRG has received
no notice of any violation (which has not been cured) of any applicable
zoning, building, fire or other ordinance or other law, regulation or
requirement relating to the operation of the leased real property that is
the subject of the Lease Agreement and none of CRG or the Subsidiaries has
within three years prior to the date of this Agreement received any such
notice with respect to owned or leased personal property included in the
CRG Assets, including, without limitation, applicable environmental
protection and occupational health and safety laws and regulations or any
condemnation proceeding with respect to any properties owned, used or
leased by CRG or any Subsidiary.
(f) The CRG Assets, together with the services and arrangements
described on the Contracts Schedule, comprise all assets and services
required for the continued conduct by MergerSub of the Business as now
being conducted by CRG and the Subsidiaries. The CRG Assets, taken as a
whole, constitute all the properties and assets relating to or used or held
for use in connection with the Business during the past twelve months
(except supplies utilized, cash disposed of, accounts receivable collected,
prepaid expenses realized, contracts fully performed, properties or assets
replaced by equivalent or superior properties or assets, in each case in
the ordinary course of business). There are no assets or properties used in
the operation of the Business and owned by any person other than CRG or the
Subsidiaries that are not included in the CRG Assets. The CRG Assets are in
all material respects adequate for the purposes for which such assets are
currently used or are held for use, and are in reasonably good repair and
operating condition (subject to normal wear and tear).
ARTICLE 2.9 Tax Matters.
(a) Each of CRG and the Subsidiaries has duly filed all federal,
foreign, state and local tax information and tax returns of any and every
nature and description (the "Returns") required to be filed by it (all such
returns being accurate and complete in all respects) and has duly paid or
made provision for the payment of all taxes and other governmental charges
(including without limitation any interest, penalty or additions to tax
thereto) which have been incurred or are shown to be due on said Returns or
are claimed in writing to be due from it or imposed on it or its respective
properties, assets, income, franchises, leases, licenses, sales or use, by
any federal, state, local or foreign taxing authorities (collectively, the
"Taxes") on or prior to the date hereof, other than Taxes which are being
contested in good faith and by appropriate proceedings and as to which it
has set aside on its books adequate reserves or which may be attributable
to the transactions contemplated hereby. Except as set forth on the Tax
Matters Schedule attached hereto as Schedule 2.9, (i) neither the IRS nor
any foreign, state, local or other taxing authority is in the process of
examining any federal, foreign, state, local or other tax return of CRG or
any Subsidiary, (ii) there are no disputes pending, or claims asserted, for
Taxes upon CRG or any Subsidiary, (iii) neither CRG nor any Subsidiary has
been required to give any currently effective waivers extending the
statutory period of limitation applicable to any foreign, federal, state or
local tax return or agreed to an extension of time with respect to a Tax
assessment or deficiency, (iv) neither CRG nor any Subsidiary has in effect
any power of attorney or authorization of anyone to represent it with
respect to any Taxes, and (v) no claim has ever been made by an authority
in a jurisdiction where CRG or any Subsidiary files Returns that CRG or any
Subsidiary is or may be subject to taxation by that jurisdiction. Neither
CRG nor any Subsidiary has filed any consolidated federal income tax return
with an "affiliated group" (within the meaning of Section 1504 of the
Code), where CRG was not the common parent of the group. Neither CRG nor
any Subsidiary is, nor has it been, a party to any tax allocation agreement
or arrangement pursuant to which it has any contingent or outstanding
liability to anyone other than CRG or its Subsidiaries. Neither CRG nor any
Subsidiary has any liability for Taxes as a transferee of, or successor to,
any other person. Neither CRG nor any Subsidiary has filed a consent under
Section 341(f) of the Code. Each of CRG and the Subsidiaries has provided
to Purchasers or their representatives complete and correct copies of its
respective federal, state and local income tax returns filed on or prior to
the date hereof and all examination reports, if any, relating to the audit
of such returns by the IRS or other tax authority for each taxable year
beginning on or after January 1, 1992. There exists no proposed assessment
against CRG, the Subsidiaries or the Shareholders or notice, whether formal
or informal, of any deficiency or claim for additional Tax (including,
without limitation, interest, additions to tax or penalties).
(b) All monies required to be withheld from employees and, to CRG's
Knowledge, from independent contractors, shareholders, or creditors of CRG
and the Subsidiaries for Taxes, including, but not limited to, income
taxes, back-up withholding taxes, social security and unemployment
insurance taxes, or collected from customers or others as Taxes, including,
but not limited to, sales, use or other taxes, have been withheld or
collected and paid, when due, to the appropriate governmental authority, or
if such payment is not yet due, an adequate reserve has been established
for such Taxes.
(c) Neither CRG nor any Subsidiary has any arrangement of the type
described in Code Section 280G.
ARTICLE 2.10 Contracts and Commitments.
(a) Except as set forth in Section 2.16 or in the "Contracts Schedule"
attached hereto as Schedule 2.10(a) or in the "Customer Contracts Schedule"
attached hereto as Schedule 2.10(d) (such contracts and agreements listed
on such schedules are referred to herein as the "Contracts"), neither CRG
nor any Subsidiary is a party to any:
(i) bonus, pension, profit sharing, retirement or deferred
compensation plan or stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether
formal or informal, or severance agreements or arrangements;
(ii) contract with any labor union or contract for the
employment of any officer, individual employee or other person on
a full-time, part-time or consulting basis for aggregate
consideration, or requiring aggregate payments, of more than
$10,000 per annum;
(iii) mortgage, pledge or other lien placed on any of the
CRG Assets;
(iv) guarantee of any obligation for borrowed money or
otherwise, other than endorsements made for collection in the
ordinary course of business;
(v) agreement or commitment with respect to the lending or
investing of funds to or in other persons or entities;
(vi) license or royalty agreement related to the Business;
(vii) lease or agreement related to the Business under which
it is lessee of or holds or operates any personal property owned
by any other party;
(viii) lease or agreement related to the Business under
which it is lessor of or permits any third party to hold or
operate any property, real or personal, owned or controlled by
it;
(ix) contract or group of related contracts related to the
Business with the same party for the purchase or sale of products
or services other than the Customer Contracts (as defined in
Section 2.10(d) hereof);
(x) other contract related to the Business with any party
continuing over a period of more than six months from the date or
dates thereof, not terminable by it on thirty (30) days' or less
notice without penalties;
(xi) contract which prohibits it from freely engaging in
business anywhere in the world;
(xii) contract relating to the distribution of its products
as it relates to the Business; or
(xiii) other agreements related to the Business whether or
not entered into in the ordinary course of business.
(b) Except as specifically disclosed in the Contracts Schedule or the
Customer Contracts Schedule; (i) no material contract or commitment related
to the Business has been breached in any respect by CRG or the
Subsidiaries, and to CRG's Knowledge, no material contract or commitment
related to the Business has been breached in any respect by the other party
thereto or canceled by the other party; (ii) since May 31, 1999, no
supplier of the Business has notified CRG or the Subsidiaries that it shall
stop or decrease in any material respect the rate of business done with CRG
or the Subsidiaries, as applicable; (iii) each of CRG and the Subsidiaries
has in all material respects performed all the obligations required to be
performed by them to the Closing Date and are not in receipt of any claim
of default under any material lease, contract, commitment or other
agreement related to the Business to which it is a party; (iv) no event has
occurred which with the passage of time or the giving of notice or both
would result in a breach or default under any lease, contract, instrument
or other agreement related to the Business to which CRG or any Subsidiary
is a party, except for any such event that would not have a Material
Adverse Effect; (v) no contract or agreement has been amended or otherwise
modified, or exchanged (pursuant to a Code Section 1035 exchange or
otherwise), the effect of which amendment, modification or exchange would
be to reduce the commissions or revenue payable in respect of such contract
or agreement; and (vi) neither CRG nor any Subsidiary is a party to any
contract which is adverse to the Business's operations, financial
condition, operating results or business prospects.
(c) Purchasers have been supplied with a true and correct copy of each
written contract which is referred to on the Contract Schedule and Customer
Contracts Schedule, together with all amendments, waivers or other changes
thereto.
(d) Except as set forth on Schedule 2.10(d), CRG has no Knowledge of
any (i) pending or threatened termination, cancellation, limitation,
modification or change in any of its business relationships with any
customer or group of customers related to the Business or (ii) changes or
pending changes in any business relationship or other circumstance that
could result in the loss of any customers related to the Business after the
date hereof. Each contract, agreement or lease with customers of each of
CRG and the Subsidiaries relating to the Business ("Customer Contracts")
are listed in the "Customer Contracts Schedule" attached hereto as Schedule
2.10(d). Except as indicated on Schedule 2.10(d), (A) each of the Customer
Contracts is valid, enforceable and in full force and effect in accordance
with the terms thereof, (B) there is no existing default or event or
condition which, with notice or lapse of time or both, would constitute an
event of default under any Customer Contract, (C) no Customer Contract has
been amended, modified, supplemented or otherwise altered orally, in
writing or by course of conduct, (D) no Customer Contract requires the
consent of the customer or any other party to effect a valid assignment
thereof to MergerSub without causing a default or giving rise to a right of
termination thereunder, and (E) to CRG's Knowledge, each Customer Contract
complies with all applicable laws, rules and regulations.
ARTICLE 2.11 Proprietary Rights. Set forth on the "Proprietary Rights Schedule"
attached hereto as Schedule 2.11 is a list and summary description of all
patents, patent applications, trademarks, service marks, trade names, corporate
names and copyrights owned by each of CRG and the Subsidiaries which are related
to the Business or used by it in the conduct of its Business ("Proprietary
Rights"). Each of CRG and the Subsidiaries owns and possesses all right, title
and interest in and to the Proprietary Rights necessary to conduct the Business
as presently conducted by it. Each of CRG and the Subsidiaries has taken all
necessary or desirable action to protect the Proprietary Rights necessary or
desirable to conduct the Business as presently conducted by it. None of CRG nor
the Subsidiaries has received any notice of infringement, misappropriation,
invalidity or conflict from any third party with respect to any of the
Proprietary Rights. Except as set forth on Schedule 2.11, none of CRG nor the
Subsidiaries has infringed, misappropriated or otherwise conflicted with any
proprietary rights of any third parties.
ARTICLE 2.12 Litigation; Proceedings. Except as disclosed on Schedule 2.12,
there are no actions, suits, proceedings, orders or investigations pending
against or affecting any of CRG or the Subsidiaries at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, and
to CRG's Knowledge, there are no threatened actions or disputes which may result
in such actions and, to CRG's Knowledge, there is no basis for any of the
foregoing. No officer, director, employee or agent of CRG or any Subsidiary has
been or is authorized to make or receive, and to CRG's Knowledge there is no
such person making or receiving, any bribe, kickback or other illegal payment at
any time.
ARTICLE 2.13 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of CRG
or the Subsidiaries other than any amounts paid pursuant to the Bonus Plan or
the MacDonald Employment Agreement (as defined in Section 5.1(i)).
ARTICLE 2.14 Governmental Consent, etc.
(a) No permit, consent, approval or authorization of, or declaration
to or filing with, any governmental or regulatory authority is required in
connection with the execution, delivery or performance of this Agreement by
CRG or MacDonald or the consummation by CRG or MacDonald of any of the
transactions contemplated hereby, except as disclosed on the "Consents
Schedule" attached hereto as Schedule 2.14 and except as required by the
Hart-Scott-Rodino Antitrust Improvement Act of 1976.
(b) The Consents Schedule attached hereto as Schedule 2.14 sets forth
all governmental approvals or consents required for the conduct of the
Business as presently conducted. Except as set forth on Schedule 2.14, all
such governmental approvals and consents have been duly obtained and are in
full force and effect, and each of CRG, the Subsidiaries and the
Shareholders, as applicable, are in compliance with each of such
governmental approvals and consents held by it with respect to CRG Assets
and the Business.
ARTICLE 2.15 Employees/Independent Contractors. Except as set forth on Schedule
2.15, to CRG's Knowledge, no key employee, nor group of employees of any of CRG
or the Subsidiaries, has any plans to terminate employment with CRG or
Subsidiary other than to become employed by MergerSub on the Closing Date.
Except as set forth on Schedule 2.15, to CRG's Knowledge, no key independent
producer or other independent contractor (or group thereof) has any plans to
terminate its agreement with any of CRG or the Subsidiaries. Each of CRG and the
Subsidiaries has complied in all material respects with all applicable laws
relating to the employment of labor and, to CRG's Knowledge, the engagement of
independent contractors related to the Business, including provisions thereof
relating to wages, hours, equal opportunity, immigration, collective bargaining,
disabilities, family leave and the payment of social security and other taxes.
Neither CRG nor any Subsidiary has any existing relationships with any union or
employee representative or any labor relations problems, and to CRG's Knowledge,
there have been no union organization efforts with respect to the Business
within the last five (5) years.
ARTICLE 2.16 Employee Benefit Plans.
(a) The "Employee Benefits Schedule" attached hereto as Schedule 2.16
contains a list, including all amendments thereto, of any employee benefit
plan, within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (i) which any of CRG or the
Subsidiaries and/or any corporation, partnership or other trade or business
which is or would be a member of a controlled group of corporations, group
of trades or business under common control, or an affiliated service group
including the Shareholders, under the provisions of Code Section 414(b),
(c), (m) or (o) (each an "ERISA Affiliate") maintains, (ii) to which any of
CRG or the Subsidiaries or any ERISA Affiliate contributes, or is obligated
to contribute, or under which any employee or former employee, officer or
former officer, director or former director, shareholder or former
shareholder of any of CRG or the Subsidiaries or any ERISA Affiliate
(collectively, "Participants"), or any beneficiary of any Participant, is
covered or has benefit rights, and (iii) pursuant to which any liability of
any of CRG or the Subsidiaries or any ERISA Affiliate exists or is
reasonably likely to occur, and each other arrangement, program or plan
sponsored by CRG, any Subsidiary or any ERISA Affiliate pursuant to which
any benefit is or shall be provided to any Participant or any Participant's
beneficiary, whether formal or informal, including, without limitation,
those providing any form of medical, health or dental insurance, life,
disability and accidental death and dismemberment insurance, severance pay
or benefits continuation, nonqualified deferred compensation, relocation
assistance, vacation pay, tuition aid, apprenticeship benefits or matching
gifts for charitable contributions to educational or cultural institutions
(collectively, the "Benefit Plans"). Except as set forth on the Employee
Benefits Schedule, neither CRG, the Subsidiaries nor any ERISA Affiliate
maintains or has entered into any Benefit Plan or other document, plan or
agreement which contains any change in control provisions which would cause
an increase or acceleration of benefits or benefit entitlements to
Participants or their beneficiaries, or other provisions which would cause
an increase in liability of any of CRG or the Subsidiaries or to Purchasers
as a result of the transactions contemplated by this Agreement or any
related action thereafter. Each of such plans that is an employee pension
benefit plan within the meaning of Section 3(2) of ERISA that is intended
to be a qualified plan under Section 401(a) of the Code has been amended to
comply in all material respects with current law as required, and each such
plan has obtained a favorable determination letter with respect to such
amendment. To CRG's Knowledge, there are no facts or circumstances that
might jeopardize the qualified status of any such Benefit Plan.
(b) Except as set forth in the Employee Benefits Schedule, all accrued
contributions and other payments to be made by any of CRG or the
Subsidiaries or any ERISA Affiliate to any Benefit Plan through the Closing
Date have been made, or reserves adequate for such purposes have been set
aside therefor, as of the Closing Date. Neither CRG, the Subsidiaries, nor
any ERISA Affiliate is in default in performing any of its material
contractual obligations under any of the Benefit Plans or any related trust
agreement or insurance contract, and there are no outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
Participants and beneficiaries in such Benefit Plan in the ordinary course
of business.
(c) There is no pending litigation or, to CRG's Knowledge, overtly
threatened litigation or pending claim (other than benefit claims made in
the ordinary course) by or on behalf of or against any of the Benefit Plans
(or with respect to the administration of any of the Benefit Plans) now or
heretofore maintained by any of CRG or the Subsidiaries or any ERISA
Affiliate which alleges violations of applicable state or federal law.
(d) Each Benefit Plan is and has been in compliance in all material
respects with, and each such Plan is and has been operated in accordance in
all material respects with, the applicable laws, rules and regulations
governing such Plan, including, without limitation, the rules and
regulations promulgated by the Department of Labor, the Pension Benefit
Guaranty Corporation ("PBGC") and the IRS under ERISA, the Code or any
other applicable law.
(e) None of the Benefit Plans is or ever has been subject to Title IV
of ERISA, and neither CRG, the Subsidiaries, nor any ERISA Affiliate is or
has been required to contribute to an employee benefit plan that is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA nor has
been so required during the five-year period ending on the Closing Date.
(f) All reporting and disclosure requirements of ERISA and the Code
applicable to the Benefit Plans have been satisfied in all material
respects.
(g) Neither CRG, the Subsidiaries, nor any ERISA Affiliate has any
liability on account of any accumulated funding deficiency (as defined in
Section 412 of the Code) or on account of any failure to make contributions
to or pay benefits under any Benefit Plan, nor does CRG have Knowledge of
any claim pending or threatened to be brought by any party regarding such
matters. No prohibited transaction has occurred with respect to any Benefit
Plan that would result, directly or indirectly, in the imposition of any
excise tax under Section 4975 of the Code.
(h) None of the Benefit Plans provides for (or has ever provided for)
medical or health care or benefits for any former employee of any of CRG or
the Subsidiaries or any ERISA Affiliate, except to the extent required by
Section 4980B of the Code or Part 6 of Title I of ERISA.
(i) The transactions contemplated by this Agreement will not entitle
any Participant or any Participant's beneficiary in any Benefit Plan to any
severance benefit under the terms of any Benefit Plan or any personnel or
employment policy of any of CRG or the Subsidiaries or any ERISA Affiliate.
ARTICLE 2.17 Insurance. The "Insurance Schedule" attached hereto as Schedule
2.17 lists each insurance policy maintained by any of CRG or the Subsidiaries
with respect to CRG Assets and each "key man" life insurance policy. Each of CRG
and the Subsidiaries has delivered to Purchasers complete and correct copies of
all such policies together with all riders and amendments thereto. All of such
insurance policies are in full force and effect, and none of CRG nor the
Subsidiaries is in default with respect to its obligations under any of such
insurance policies.
ARTICLE 2.18 Affiliated Transactions. Except as set forth on the "Affiliated
Transactions Schedule" attached hereto as Schedule 2.18, no officer, director,
shareholder or affiliate of any of CRG or the Subsidiaries or any person related
by blood or marriage to any such person or any entity in which any such person
owns any beneficial interest is a party to any agreement, contract, commitment
or transaction related to the Business or has any interest in any property that,
in each case, is included in CRG Assets.
ARTICLE 2.19 Compliance with Laws; Permits; Certain Operations.
(a) Each of CRG and the Subsidiaries and its officers, directors,
employees, and to CRG's Knowledge, their agents and employees have complied
in all material respects with all applicable laws and regulations of
foreign, federal, state and local governments and all agencies thereof
which affect the Business or CRG Assets or to which any of CRG or the
Subsidiaries may otherwise be subject, and, to CRG's Knowledge, no claims
have been filed against any of CRG or the Subsidiaries alleging a material
violation of any such law or regulation, except as set forth on Schedule
2.19(a) (the "Compliance Schedule"). In particular, but without limiting
the generality of the foregoing, each of CRG and the Subsidiaries has
complied in all material respects with, and has not received a notice or
charge asserting any material violation of, the Immigration Reform and
Control Act of 1986, the Occupational Safety and Health Act of 1970, the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976, the Toxic
Substances Control Act of 1976, the Americans With Disabilities Act, or any
other state or federal act (including rules and regulations thereunder)
regulating or otherwise affecting the employment of aliens, employee health
and safety, the environment, zoning, building, fire or other ordinances or
any other aspect of the Business.
(b) Each of CRG and the Subsidiaries holds all of the material
permits, licenses, certificates and other authorizations of foreign,
federal, state and local governmental agencies required for the conduct of
the Business, all of which are set forth on Schedule 2.19(b) (the "Permits
Schedule"). Neither CRG nor any Subsidiary has received any notice (or has
any reason to believe) that revocation is being considered with respect to
any of such licenses, permits, certificates or authorizations, or that any
of CRG or the Subsidiaries is in violation of any such license, permit,
certificate or authorization.
ARTICLE 2.20 Environmental Health and Safety.
(a) Each of CRG and the Subsidiaries has complied in all material
respects with, and is currently in material compliance with all
Environmental, Health and Safety Laws, and, to CRG's Knowledge, no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand
or notice has been threatened, filed or commenced against it alleging any
failure so to comply, alleging any liability under any Environmental,
Health and Safety Laws or requesting any investigation related thereto. No
condition exists or event has occurred which, with or without notice or the
passage of time, would constitute a violation of or give rise to a lien
under any Environmental, Health and Safety Laws, except for violations or
liens that would not have a Material Adverse Effect. Without limiting the
generality of the preceding sentences, each of CRG and the Subsidiaries has
obtained and been in compliance in all material respects, and is currently
in compliance in all material respects, with all of the terms and
conditions of all permits, licenses and other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules
and timetables which are contained in, all Environmental, Health and Safety
Laws. For purposes hereof, "Environmental, Health and Safety Laws" means
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976 and the
Occupational Safety and Health Act of 1970, each as amended, together with
all other laws (including statutes, rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies
thereof) relating to fines, injunctions, penalties, damages, liability,
contribution, cost recovery, compensation for losses or injuries concerning
pollution or protection of the environment, natural resources, public
health and safety, or employee health and safety, or the protection of
human, plant or animal welfare or health, including laws relating to use,
emissions, discharges, releases, or threatened releases of Hazardous
Materials, Extremely Hazardous Substances, pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes into or onto
ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of Hazardous Materials, Extremely
Hazardous Substances, pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes. For purposes hereof, "Extremely
Hazardous Substance" means such term as set forth in ss.302 of the
Emergency Planning and Community Right-to-Know Act of 1986, as amended. For
purposes hereof, "Hazardous Materials" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or substance as
defined in, regulated by or governed by any Environmental, Health and
Safety Laws, federal, state, local or foreign law, statute, code,
ordinance, regulation, rule or other requirement relating to such substance
or otherwise relating to the environment or human health or safety,
including without limitation any waste, material, substance, pollutant or
contaminant that might cause any injury to human health or safety or to the
environment or might subject any of CRG or the Subsidiaries to any
imposition of penalties, fines, orders, decrees, licenses, permits,
judgments, costs or liability under any Environmental, Health and Safety
Laws.
(b) To CRG's Knowledge, all properties and equipment used in the
Business have been free of asbestos, PCBs, methylene chloride,
trichlorethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans and
other hazardous substances.
ARTICLE 2.21 Product and Warranty Claims; Warranties. Except as disclosed in the
"Claims Schedule" attached hereto as Schedule 2.21, none of CRG nor the
Subsidiaries have received, and CRG has no Knowledge of, during the past five
(5) years, any claim or notice with respect to any occurrences arising out of
the use of, or related to, the insurance products, policies and services
designed, sold, implemented or serviced by or on behalf of any of CRG or the
Subsidiaries related to the Business, which has resulted in any claim or notice
that any such products do not conform to any agreement, representation or
warranty made by any of CRG or the Subsidiaries (or implied by law) with respect
to such products. Each of CRG and the Subsidiaries is insured against all
damages, liability and expenses for any claims based upon products designed,
sold, implemented or serviced by or on behalf of it (including, but not limited
to, costs of investigation and attorneys' fees and expenses) under policies of
insurance described on the Insurance Schedule, except as to claims for breach of
any agreement, representation or warranty made with respect to such products
against which it has established good and sufficient reserves therefor on its
books and records and except for claims which would not reasonably be expected
to be material individually or in the aggregate.
ARTICLE 2.22 Disclosure. There is no material fact which has not been disclosed
in writing to Purchasers of which CRG has Knowledge and which could reasonably
be anticipated to have a Material Adverse Effect. All facts set forth in one
schedule hereto, which are cross-referenced on another schedule hereto, shall be
considered disclosed for purposes of such other schedule.
ARTICLE 2.23 Closing Date. All of the representations and warranties of the CRG
and MacDonald in this Article 2 and elsewhere in this Agreement and all
information delivered by CRG or MacDonald in any schedule, attachment or exhibit
hereto or in any certificate delivered by CRG or MacDonald to Purchasers are
true and correct in all respects on the date of this Agreement and shall be true
and correct in all respects on the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchasers hereby, jointly and severally, represent and warrant to the
CRG as of the date hereof and as of the Closing Date that:
ARTICLE 3.1 Corporate Organization and Power . Each of Holdings and MergerSub is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and, with respect to Holdings, any state
in which it conducts business, except where the failure to do so would not have
a Material Adverse Effect on Purchasers. For purposes of this Agreement,
"Material Adverse Effect," as it relates to Purchasers, means any material
adverse effect on (a) the financial condition, credit, business, prospects,
properties or operations of Holdings and its subsidiaries, taken as whole, or
(b) the ability of the Purchasers to perform their obligations under this
Agreement. Holdings has all requisite power and authority and all material
licenses, permits and other authorizations necessary to own and operate its
properties and to carry on its business as now conducted as such licenses and
permits relate to its business. The copies of the certificate of incorporation
and by-laws of each of Holdings and MergerSub which have been previously
furnished to CRG reflect all amendments made thereto at any time prior to the
date of this Agreement and are correct and complete in all material respects.
ARTICLE 3.2 Authorization. The execution, delivery and performance by
Purchasers of this Agreement and the other agreements contemplated hereby and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all requisite corporate action, and no other
corporate proceedings on the part of either Holdings or MergerSub is necessary
to authorize the execution, delivery or performance of this Agreement or the
other agreements contemplated hereby. This Agreement constitutes and, upon
execution and delivery by Purchasers, the other agreements contemplated hereby
to which they are a party shall each constitute, a valid and binding obligation
of Purchasers enforceable against Purchasers in accordance with their respective
terms.
ARTICLE 3.3 No Violation. No Purchaser is subject to or obligated under its
respective articles of incorporation, any applicable law, rule or regulation of
any governmental authority, or any agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction or decree which
would materially adversely affect its ability to perform this Agreement or the
other agreements contemplated hereby.
ARTICLE 3.4 Litigation. Except as set forth in the "Purchasers Litigation
Schedule" attached hereto as Schedule 3.4, there are no actions, suits,
proceedings, orders or investigations pending or, to the best of Purchasers'
knowledge, threatened against or affecting Purchasers at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
would reasonably be expected to materially adversely affect Purchasers'
performance under this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE 3.5 Closing Date. All of the representations and warranties of
Purchasers contained in this Article 3 and elsewhere in this Agreement and all
information delivered by Purchasers in any schedule, attachment or exhibit
hereto or in any certificate delivered by Purchasers to CRG are true and correct
in all respects as of the date of this Agreement and shall be true and correct
in all respects as of the Closing Date.
ARTICLE 3.6 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Purchasers.
ARTICLE 3.7 Governmental Consent, etc. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental or
regulatory authority is required in connection with the execution, delivery or
performance of this Agreement by Purchasers, or the consummation by Purchasers
of any of the transactions contemplated hereby other than as required by the
Hart-Scott-Rodino Antitrust Improvement Act of 1976.
ARTICLE 3.8 Disclosure. There is no material fact which has not been disclosed
in writing to CRG of which any officer, director or key employee of Purchasers
has Knowledge which could reasonably be anticipated to have a Material Adverse
Effect.
ARTICLE 4
COVENANTS
ARTICLE 4.1 CRG's Affirmative Covenants : Prior to the Closing, CRG shall,
and shall cause each Subsidiary to:
(a) conduct the Business only in the usual and ordinary course of
business in accordance with past custom and practice;
(b) keep in full force and effect its corporate existence and all
material rights, franchises and intellectual property;
(c) use commercially reasonable efforts to retain its employees and
sales agents and preserve its present business relationships and continue
to compensate such employees and sales agents in accordance with past
custom and practice;
(d) maintain the CRG Assets in good and customary repair, order and
condition and maintain insurance reasonably comparable to that in effect on
the date of this Agreement; replace in accordance with past practice its
inoperable, worn out and obsolete assets with assets of comparable quality;
in the event of any casualty, loss or damage to any of the CRG Assets,
prior to Closing, either repair or replace such assets with assets of
comparable quality or, if Purchasers agree, transfer to Purchasers at
Closing the proceeds of any insurance recovery with respect thereto;
(e) maintain its books, accounts and records in accordance with past
custom and practice as used in the preparation of the financial statements
described in Section 2.4 hereof and file with the appropriate taxing
authorities any and all returns required to be filed by them for the
periods covered thereby;
(f) use its best efforts to obtain all consents and approvals
necessary or desirable to consummate the transactions contemplated hereby
and to cause the other conditions to Purchasers' obligation to close to be
satisfied;
(g) pay accounts payable and other obligations of the Business when
they become due and payable or in the ordinary course of business
consistent with prior practice;
(h) promptly inform Purchasers in writing of any material variances
from the representations and warranties contained in Article 2 hereof;
(i) maintain in full force and effect at current levels all currently
existing insurance; and
(j) contribute to each Benefit Plan that is intended to be a
qualified plan under Code Section 401(a) an amount sufficient to satisfy
any benefit or expense obligation that will have accrued thereunder as of
the Closing Date and as to which they have not, as of the Closing Date,
made a full and complete contribution, whether or not the legal deadline
for making a contribution has then yet arrived.
ARTICLE 4.2 CRG's Negative Covenants. Prior to the Closing, without the prior
written consent of Purchasers, CRG will not, and will not permit any Subsidiary
to:
(a) subject to the fiduciary duties of CRG's executive officers and
Board of Directors and California law (and any actions taken pursuant
thereto, or in accordance therewith, are excluded from this subsection
(a)), directly or indirectly (including through any agent, broker, finder
or other third party), offer to sell, merge, consolidate or otherwise
dispose of, initiate, or continue discussions concerning, or negotiate for
the sale, merger, consolidation or other disposition of any of CRG or the
Subsidiaries, or the sale or other disposition of any shares of capital
stock of any of the Subsidiaries or any of the CRG Assets (other than
inventory in the ordinary course of business) and MacDonald shall not offer
to sell, initiate or continue discussions concerning, or negotiate for the
sale of, any of the CRG Shares;
(b) make any increase in the compensation payable or to become payable
by it to any employee or contribute or make any commitment to or
representation that it will contribute any amounts to any bonus or other
employee benefit plan for employees of CRG, any Subsidiary or the CRG
Division, except as required by law or by the terms of any such plan or in
the ordinary course of business consistent with past practice;
(c) make any amendment to its organizational documents, except as
required or permitted herein;
(d) incur any obligation or liability (fixed or contingent)
individually exceeding $10,000, or in the aggregate exceeding $30,000
except for current liabilities in the ordinary course of business
consistent with past practices;
(e) mortgage, pledge, transfer or otherwise dispose of or subject to
any lien, security interest or other encumbrance any of the CRG Assets,
except for liens for current taxes not yet due and payable;
(f) acquire any assets or properties, except for inventory in the
ordinary course of business consistent with past practice or otherwise
permitted by Section 4.2(k);
(g) expressly waive or release any rights of material value;
(h) transfer, grant or terminate any contract, lease, arrangement or
commitment rights under any concessions, leases, licenses, agreements, or
intellectual property;
(i) undertake any borrowing of money other than under the existing
bank debt;
(j) make any loans or extensions of credit for the benefit of any
Person other than to employees and customers in the ordinary course of
business;
(k) make or become obligated to make any capital expenditures or enter
into commitments therefor exceeding $10,000 individually or in the
aggregate in excess of $30,000;
(l) discharge or satisfy or agree to discharge or satisfy, any lien or
encumbrance or any material liability other than current liabilities in the
ordinary course of business, as otherwise required herein, and the items
listed in Schedule 4.2(l) ("Permitted Payments Schedule");
(m) make, or agree to make, any charitable contributions or pledges
individually or in the aggregate exceeding $10,000, other than the items
listed in Schedule 4.2(m) ("Permitted Charitable Contributions Schedule");
(n) sell, pledge, transfer or otherwise encumber any stock of any
subsidiary or split, combine or reclassify any shares of its capital stock,
or enter into any agreement to do any of the foregoing;
(o) (i) issue, authorize the issuance of or sell any additional shares
of, or issue, reissue or grant any option, warrant, call, commitment,
subscription, stock appreciation right, phantom stock, right to purchase or
agreement of any character to acquire any shares of, its capital stock; or
(ii) redeem, purchase or otherwise acquire or offer to acquire, directly or
indirectly, any of its capital stock (except as required hereby pursuant to
Section 1.5);
(p) declare, set aside, or pay any dividend or make any distribution
with respect to its capital stock or redeem, purchase or otherwise acquire
any of its capital stock; or
(q) make any material change in the character of its business or take
or omit to take any action, or permit its affiliates to take or omit to
take any action, which would reasonably be anticipated to have a Material
Adverse Effect.
ARTICLE 4.3 Due Diligence Covenants. Prior to Closing, CRG will, and will cause
each Subsidiary to, subject to the succeeding sentence, afford to Purchasers and
their accountants, counsel and other representatives reasonable access to CRG
and the Subsidiaries, and shall furnish to Purchasers all information concerning
the Business and CRG Assets reasonably requested by Purchasers for the purpose
of closing on the transactions contemplated hereby. Further, CRG shall promptly
inform Purchasers in writing of any material variances from the representations
and warranties contained in Article 2 hereof.
ARTICLE 4.4 Hart-Scott-Rodino Act Filing. As required under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976:
(a) Holdings shall file the Notification and Request Form with respect
to the transactions contemplated by this Agreement;
(b) CRG shall file its required Notification and Request Form with or
promptly after Holdings' Form is filed; and
(c) Purchasers and CRG and MacDonald shall cooperate with each other,
provide all necessary information and diligently process such filings and
resulting proceedings, if any, to a conclusion without the entry of an
injunction prohibiting (or permitting with conditions unacceptable to the
parties hereto) the consummation of the transactions contemplated by this
Agreement.
ARTICLE 4.5 Shareholders Meeting/Consent. CRG shall, in accordance with
California law and its organizational documents, call a special meeting of the
Shareholders as promptly as practicable after the date hereof to consider and
vote upon the approval of this Agreement and the Merger and the other
transactions contemplated hereby or shall seek the written consent of the
Shareholders for such purposes. Subject to the fiduciary duties of CRG's Board
of Directors under California law, CRG shall recommend to its Shareholders the
approval of this Agreement and the Merger and other transactions contemplated
hereby and shall use its best efforts to obtain Shareholder approval or consent,
as applicable. All notices, proxy solicitations, consents and other materials
delivered to the CRG Shareholders in connection with CRG's solicitation of
Shareholder approval or consent as applicable shall comply with all applicable
laws and CRG's organizational documents.
ARTICLE 4.6 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code. The parties hereto agree to report the Merger
consistent with the preceding sentence for tax and financial accounting
purposes. No party hereto (or any Shareholder) shall be responsible or in any
way liable to any other party hereto or any other person or entity (including
any other Shareholder) for any taxes, assessments and other charges imposed on
such other party or such other person or entity (including any other
Shareholder) as a result of the Merger failing to qualify as a tax-free
reorganization under Section 368 of the Code.
ARTICLE 4.7 Insurance. Promptly after the Effective Time, Purchaser will add
MacDonald and any other additional officers of CRG which become employees of
MergerSub as additional insureds under Purchasers' "errors and omissions"
insurance policy and "directors and officers" insurance policy. MergerSub shall
pay for any available tail coverage on all existing errors and omissions and
directors and officers insurance policies of CRG listing the Shareholders that
are CRG employees and officers and directors as beneficiaries or additional
insureds, as applicable, for a period of three (3) years from the date hereof to
cover any claims covered by such policies following the Closing Date.
ARTICLE 4.8 Financial Statements. As soon as practicable, but in no event later
than five days prior to the Closing, CRG shall provide Purchasers with its
unaudited financial statements as of June 30, 2000. All taxes due but not paid
shall be accrued in such financial statements.
ARTICLE 5
CONDITIONS TO PURCHASERS' OBLIGATION TO CLOSE
ARTICLE 5.1 Conditions to Purchasers' Obligation. The obligation of Purchasers
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article 2 hereof
shall be true and correct in all material respects at and as of the Closing
Date as though then made and as though the Closing Date was substituted for
the date of this Agreement;
(b) MacDonald and CRG shall have performed in all material respects
all of the covenants and agreements required to be performed by them under
this Agreement prior to the Closing Date;
(c) no event shall have occurred which has caused, or is reasonably
likely to cause, a Material Adverse Effect in respect of CRG or MacDonald;
(d) Except as set forth on Schedule 5.1(d) ("Excluded Consents
Schedule"), all consents by third parties that are required for the
transfer of the CRG Assets, the Business and CRG Shares to MergerSub as
contemplated hereby, which are required for the consummation of the
transactions contemplated hereby or that are required to prevent a breach
of or a default under or a termination or modification of any instrument,
contract, license, lease or other agreement to which CRG is a party or to
which any of the CRG Shares or the CRG Assets are subject, and releases of
all liens, charges, security interests, encumbrances and claims of others
on or with respect to the CRG Shares and the CRG Assets shall have been
obtained on terms and conditions satisfactory to Purchasers in their sole
discretion; CRG shall have delivered to Purchasers written confirmations,
in form and substance reasonably acceptable to Purchasers, from the
applicable insurance carriers confirming at least ninety-five (95%) of
CRG's renewal commission projections contained in CRG's Confidential
Offering Memorandum dated June 2000, and confirming that such renewal
commissions are assignable to a third party. CRG and Robin Urban shall have
entered into an Amended and Restated Employment Agreement in the form
attached hereto as Exhibit K;
(e) no action or proceeding before any court or government body shall
be pending or threatened which, in the judgment of Purchasers, made in good
faith and upon the advice of counsel, makes it inadvisable or undesirable
to consummate the transactions contemplated hereby by reason of the
probability that the action or proceeding shall result in a judgment,
decree or order which would prevent the carrying out of this Agreement or
any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially adversely affect the value or use of the CRG
Assets, Business or the CRG Shares;
(f) Purchasers shall have received from CRG's and the Shareholders'
counsel, Munger, Tolles & Olson, LLP, an opinion addressed to Holdings and
MergerSub and dated the Closing Date, substantially in the form of Exhibit
G hereto (the "MTO Opinion");
(g) Purchasers may obtain UCC search reports ("UCC Searches") of CRG,
the Subsidiaries and MacDonald. If the UCC Searches disclose any title
encumbrances, defects, liens, encumbrances or matters other than Permitted
Encumbrances, CRG or the Shareholders, as applicable, shall have caused the
same to be removed;
(h) all proceedings to be taken by CRG or the Shareholders in
connection with the consummation of the Merger and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby
reasonably requested by Purchasers shall be reasonably satisfactory in form
and substance to Purchasers and their counsel;
(i) CBI and MacDonald shall have entered into an employment and
non-competition agreement substantially in the form attached hereto as
Exhibit H-1 (the "MacDonald Employment Agreement"); MacDonald shall have
executed and delivered to Holdings a promissory note in favor of Holdings
(or its assignee) substantially in the form attached hereto as Exhibit H-2
(the "MacDonald Note") and Holdings shall have made a loan to MacDonald in
the amount and on the terms referred to in such promissory note ($250,000
of which will be immediately deposited into the Escrow Account);
(j) all required filings have been made with, and all consents and
approvals shall have been obtained from, all applicable regulatory and
other governmental authorities and, except as set forth on Schedule 5.2(j)
("Approvals Schedule"), third parties, including, but not limited to, a
Hart-Scott Rodino filing, if necessary;
(k) all action required to be taken by or on the part of CRG to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly
and validly taken by the Board of Directors and Shareholders, and
Purchasers shall received certified copies of the resolutions evidencing
such authorization;
(l) Purchasers shall have received a duly executed Cancellation
Agreement from the Option Holders and Phantom Stock Holders holding at
least 80% of the Options and shares of Phantom Stock;
(m) Purchasers shall have received a payoff letter from each obligee
of Borrowed Money, which shall provide for, among other things, upon
payment of the amounts set forth therein (which shall not exceed
$13,000,000 in the aggregate for all Borrowed Money), the termination of
all agreements and liens relating to such obligations, and shall otherwise
be in form and substance reasonably acceptable to Purchasers;
(n) holders of not less than 90% of the CRG Shares, (not less than
905,295 CRG Shares), shall have voted in favor of the Merger, this
Agreement and the transactions contemplated hereby, and the same shall be
in full force and effect;
(o) holders of CRG Shares holding not more than 10% (not more than
100,558 CRG Shares) of the CRG Shares outstanding shall have exercised or
have the right or ability to exercise dissenters or appraisal rights under
California law;
(p) CRG shall have executed and delivered a written certificate
certifying (i) the number of CRG Shares held by Shareholders approving this
Agreement and the Merger and the number of Dissenting Shares, as of the
Closing Date and (ii) the number of Options and shares of Phantom Stock
which have not been terminated pursuant to a duly executed and delivered
Cancellation Agreement, the holders thereof and the terms of such Options
and Phantom Stock, as applicable; CRG shall have executed and delivered to
Purchasers the Letter of Direction;
(q) Purchasers' existing lenders shall have consented to the
consummation of the transactions contemplated in this Agreement and
Purchasers shall have exercised their best efforts to obtain such consent;
and
(r) the Bonus Plan shall incorporate the terms set forth in the
summary of the Bonus Plan attached hereto as Exhibit J and be in form and
substance reasonably agreeable to the parties hereto.
Any conditions specified in this Section 5.1 may be waived by Purchasers;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Purchasers, except as otherwise provided in Section 9.3.
ARTICLE 6
CONDITIONS TO CRG'S AND MACDONALD'S OBLIGATION TO CLOSE
ARTICLE 6.1 Conditions to CRG's and MacDonald's Obligations. The obligation of
CRG and MacDonald to consummate the transactions contemplated by this Agreement
are subject to the satisfaction of the following conditions on or before the
Closing Date:
(a) the representations and warranties set forth in Article 3 hereof
shall be true and correct in all material respects at and as of the Closing
Date as though then made and as though the Closing Date was substituted for
the date of this Agreement;
(b) Purchasers shall have performed in all material respects all the
covenants and agreements required to be performed by them under this
Agreement prior to the Closing Date;
(c) CRG shall have received from Purchasers' counsel, Vedder, Price,
Kaufman & Kammholz, an opinion, addressed to CRG and dated the Closing
Date, substantially in the form of Exhibit I hereto (the "VPKK Opinion");
(d) CBI and MacDonald shall have entered the MacDonald Employment
Agreement; MacDonald shall have executed and delivered to Holdings the
MacDonald Promissory Note and Holdings shall have made a loan to MacDonald
in the amount and on the terms referred to in such promissory note
($250,000 of which will be immediately deposited into the Escrow Account);
(e) proceedings required to be taken by Purchasers and, if applicable,
their shareholders, in connection with the consummation of the Closing and
the other transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the transactions
contemplated hereby reasonably requested by CRG shall be reasonably
satisfactory in form and substance to CRG and its counsel;
(f) all agreements, notes and pledges relating to the Borrowed Money
shall have been terminated and be of no further force and effect;
(g) Purchasers shall have paid the Deposit and funded the Escrow
Account as described in Section 1.12; and
(h) all required filings have been made with, and all consents and
approvals shall have been obtained from, all applicable, regulatory and
other governmental authorities and third parties, including, but not
limited to a Hart-Scott Rodino filing, if necessary;
(i) no action or proceeding before any court or government body shall
be pending or threatened which, in the judgment of CRG or MacDonald, made
in good faith and upon the advice of counsel, makes it inadvisable or
undesirable to consummate the transactions contemplated hereby by reason of
the probability that the action or proceeding shall result in a judgment,
decree or order which would prevent the carrying out of this Agreement or
any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement or cause such transactions to
be rescinded;
(j) all action required to be taken by or on the part of Purchasers to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly
and validly taken by the Board of Directors and, if necessary, the
shareholders of Purchasers, and CRG and MacDonald shall received certified
copies of the resolutions evidencing such authorization; and
(k) the Bonus Plan shall incorporate the terms set forth in the
summary of the Bonus Plan attached hereto as Exhibit J and be in form and
substance reasonably agreeable to the parties hereto.
Any condition specified in this Section 6.1 may be waived by CRG and MacDonald
provided that no such waiver shall be effective against the CRG and MacDonald
unless it is set forth in a writing executed by CRG and MacDonald except as
otherwise provided in Section 9.3.
ARTICLE 7
CLOSING TRANSACTIONS
ARTICLE 7.1 The Closing. Subject to the conditions contained in this Agreement,
the "Closing" of the transactions contemplated by this Agreement shall take
place at the offices of Vedder, Price, Kaufman & Kammholz at 9:00 a.m. local
time on September 6, 2000, or at such other place or on such other date as may
be mutually agreeable to the parties. The date and time of the Closing are
referred to herein as the "Closing Date."
ARTICLE 7.2 Action to Be Taken at the Closing. The sale, conveyance, assignment
and delivery of the CRG Shares and the payment of the Merger Consideration
pursuant to the terms of this Agreement shall take place at the Closing, and,
simultaneously, the other transactions contemplated by this Agreement shall take
place by the delivery of all of the closing documents set forth in Section 7.3.
ARTICLE 7.3 Closing Documents.
(a) CRG and MacDonald shall deliver or cause to be delivered to
Purchasers at the Closing the following documents, duly executed by CRG and
the Shareholders where necessary to make them effective:
(i) an officer's certificate substantially in the form set forth
in Exhibit A attached hereto, stating that the preconditions specified
in Section 5.1(a) through (r) have been satisfied;
(ii) copies of all necessary third party and governmental
consents, approvals, releases and filings and third party consents
required in order to effect the transactions contemplated by this
Agreement;
(iii) the minute book of CRG;
(iv) such estoppel certificates and assignments of leases as
MergerSub may reasonably request;
(v) certified copies of the resolutions duly adopted by the Board
of Directors and Shareholders of CRG authorizing the execution,
delivery and performance of this Agreement and each of the other
agreements contemplated hereby, and the consummation of all other
transactions contemplated by this Agreement;
(vi) effective control over all of CRG's contracts and
commitments, files, books, records and other data relating to the
Business, the CRG Assets and each of CRG and the Subsidiaries;
(vii) copies of good standing certificates in the jurisdiction of
incorporation of each of CRG and the Subsidiaries;
(viii) certificates of the Secretary of each of CRG and the
Subsidiaries, certifying as to the correctness and completeness of the
articles of incorporation and by-laws of each of CRG and the
Subsidiaries and all amendments thereto;
(ix) the MacDonald Employment Agreement;
(x) the MacDonald Note;
(xi) the MTO Opinion;
(xii) Certificate of Merger (or other required filings) filed
with the Secretary of State of California and with the Secretary of
State of Delaware;
(xiii) the Escrow Agreement;
(xiv) the Investment Agreement;
(xv) any executed Cancellation Agreements; and
(xvi) such other documents or instruments as Purchasers may
reasonably request to effect the transactions contemplated hereby.
All of the foregoing documents in this Section 7.3(a) shall be reasonably
satisfactory in form and substance to Purchasers and shall be dated as of the
Closing Date.
(b) Purchasers shall deliver or cause to be delivered to the CRG at
the Closing the following items, duly executed by Purchasers where
necessary to make them effective:
(i) officers' certificates substantially in the form set forth as
Exhibit B attached hereto, stating that the preconditions specified in
Section 6.1(a) through (k) hereof have been satisfied;
(ii) copies of all necessary third party and governmental
consents, approvals, releases and filings required in order for
Purchasers to effect the transactions contemplated by this Agreement;
(iii) the MacDonald Employment Agreement;
(iv) the Investment Agreement;
(v) the Escrow Agreement;
(vi) the VPKK Opinion;
(vii) Certificate of Merger (or other required filings) filed
with the Secretary of State of California and with the Secretary of
State of Delaware; and
(viii) such other documents or instruments as CRG reasonably may
request to effect the transactions contemplated hereby.
All of the foregoing documents in this Section 7.3(b) shall be reasonably
satisfactory in form and substance to CRG and shall be dated as of the Closing
Date.
ARTICLE 8
INDEMNIFICATION
ARTICLE 8.1 Indemnification by MacDonald. MacDonald hereby agrees to indemnify
in full, Purchasers, their subsidiaries and affiliates, and each of their
respective officers, directors, employees, agents, shareholders and partners
(collectively, the "Purchaser Indemnified Parties") and defend and hold them
harmless against any loss, liability, deficiency, damage, expense or cost
(including reasonable legal expenses), other than losses, liabilities,
deficiencies, damages, expenses or costs satisfied or partially satisfied (to
the extent satisfied) from funds held under the Escrow Agreement, that Purchaser
Indemnified Parties may suffer, sustain or become subject to as a result of (a)
any misrepresentation in any of the representations or breach of any of the
warranties of CRG or MacDonald or Shareholders' Representative contained in this
Agreement or in any exhibits, schedules, certificates or other agreements or
documents delivered or to be delivered pursuant to the terms of this Agreement
or otherwise incorporated in this Agreement (collectively, the "Related
Documents"), (b) any breach of, or failure to perform, any agreement or covenant
of CRG (in the case of agreements or covenants to be performed prior to the
Effective Time) or MacDonald or Shareholders' Representative contained in this
Agreement or any of the Related Documents, except for the MacDonald Employment
Agreement, (c) any Taxes incurred by CRG on or prior to the date of this
Agreement, other than current Taxes (excluding interest, penalties or additions
to tax) which are not yet due and payable and which are properly accrued as
liabilities on CRG's June 30, 2000 balance sheet (a "Tax Loss"); (d) the payment
by Purchasers of any Dissenting Shareholder Costs, (e) any cost or claims
arising out of or related to the cancellation of the Options or Phantom Stock in
excess, on a per share basis of the Cancellation Payments determined and paid as
of the Closing plus all out-of-pocket costs, fees and expenses reasonably
incurred by Purchasers (including reasonable attorneys fees) in connection
therewith, (f) payment by Purchasers of any Option/Phantom Stock Costs, (g) any
costs arising out of any claim or lawsuit filed by any Shareholders related to
the entering of this Agreement or Related Documents, or the transactions
contemplated hereby or thereby, including without limitation the MacDonald
Employment Agreement and transactions contemplated thereby and any
redistribution of the Merger Consideration among any of the Shareholders, (h)
any amount due Purchasers pursuant to Section 1.6 (Payment of CRG Closing
Expenses) which is not paid as of the Effective Time, or (i) any amount due
Purchasers pursuant to Section 1.7 (Purchase Price Adjustment) other than
amounts which reduce the Merger Consideration (collectively, "Purchaser
Losses"), in each case, provided that the Purchaser Indemnified Party provides
written notice of a claim with respect thereto as required by Section 8.3 prior
to the end of the applicable survival period set forth in Section 10.1.
ARTICLE 8.2 Indemnification by Purchasers. Purchasers agree to indemnify in
full the Shareholders (the "Seller Indemnified Parties" ) and hold them harmless
against any loss, liability, deficiency, damage, expense or cost (including
reasonable legal expenses), which the Seller Indemnified Parties may suffer,
sustain or become subject to as a result of (a) any misrepresentation in any of
the representations or breaches of any of the warranties of Purchasers contained
in this Agreement or in any of the Related Documents or (b) any breach of, or
failure to perform, any agreement or covenant of Purchasers contained in this
Agreement or any of the Related Documents (collectively, "Seller Losses")
(Purchaser Losses and Seller Losses shall collectively be referred to as the
"Losses") in each case, provided that the Seller Indemnified Party provides
written notice of a claim with respect thereto as required by Section 8.3 prior
to the end of the applicable survival period set forth in Section 10.1.
ARTICLE 8.3 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a "Purchaser Indemnified Party" or "Seller Indemnified Party," as
applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for the liability or the
costs or expenses of which are Seller Losses or Purchaser Losses, as the
case may be (any such third party action or proceeding being referred to as
a "Claim"), the Notifying Party shall give the Indemnifying Party prompt
notice thereof. The failure to give such notice shall not affect any
Indemnified Party's ability to seek reimbursement unless such failure has
materially and adversely affected the Indemnifying Party's ability to
defend successfully a Claim. The Indemnifying Party shall be entitled to
contest and defend such Claim; provided, that the Indemnifying Party (i)
has a reasonable basis for concluding that such defense may be successful
and (ii) diligently contests and defends such Claim. Notice of the
intention so to contest and defend shall be given by the Indemnifying Party
to the Notifying Party within twenty (20) business days after the Notifying
Party's notice of such Claim (but, in all events, at least five (5)
business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the Indemnifying Party. The Notifying Party shall be entitled
at any time, at its own cost and expense (which expense shall not
constitute a Loss unless the Notifying Party reasonably determines that the
Indemnifying Party is not adequately representing or, because of a conflict
of interest, may not adequately represent, any interests of the Indemnified
Parties), to participate in such contest and defense and to be represented
by attorneys of its or their own choosing. If the Notifying Party elects to
participate in such defense, the Notifying Party shall cooperate with the
Indemnifying Party in the conduct of such defense. Neither the Notifying
Party nor the Indemnifying Party may concede, settle or compromise any
Claim without the consent of the other party, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, in the
event the Indemnifying Party fails or is not entitled to contest and defend
a claim, the Notifying Party shall be entitled to contest, defend and
settle such Claim.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Notifying Party
that it does not dispute the claim described in such notice or fails to
notify the Notifying Party within thirty (30) days after delivery of such
notice by the Notifying Party whether the Indemnifying Party disputes the
claim described in such notice, the Loss in the amount specified in the
Notifying Party's notice shall be conclusively deemed a liability of the
Indemnifying Party, and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand. If the Indemnifying Party has
timely disputed its liability with respect to such claim, a representative
of each of the Indemnifying Party and the Notifying Party (or their
respective designees) shall proceed in good faith to negotiate a resolution
of such dispute, and if not resolved through the negotiations of such
representatives or designees within sixty (60) days after the delivery of
the Notifying Party's notice of such claim, such dispute (except for any
such dispute that gives rise or could give rise to equitable relief under
this Agreement) shall be resolved fully and finally in Chicago, Illinois,
by an arbitrator selected pursuant to, and an arbitration governed by, the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrator shall resolve the dispute within thirty (30) days after
selection and judgment upon the award rendered by such arbitrator may be
entered in any court of competent jurisdiction.
ARTICLE 8.4 Escrow Amount; Bonus Plan. CRG and MacDonald agree that in addition
to any other rights or remedies available to Purchasers, subject to the terms of
the Escrow Agreement, Purchasers may draw upon the Escrow Account pursuant to
the Escrow Agreement and may seek reimbursement from, by way of setoff, offset
or otherwise, any amounts that are then or thereafter become payable under the
Bonus Plan for, without limitation, (i) any of the obligations of MacDonald
under Section 8.1 of this Agreement, and (ii) any amount due to Purchasers
pursuant to the provisions of Section 1.5 (Stock Options; Phantom Stock;
Dissenting Shares), Section 1.6 (Payment of CRG Closing Expenses), Section 1.7
(Purchase Price Adjustment) and Section 1.11 (Chargebacks). During the term of
the Escrow Agreement, if MacDonald is determined to owe an indemnification
amount pursuant to the procedures set forth in this Article 8, then the amount
due the Indemnified Parties shall be satisfied or partially satisfied first by
the delivery to the Indemnified Parties pursuant to the Escrow Agreement of
funds equal to such indemnification amount, or if the value of the funds being
held under the Escrow Agreement is less than such indemnification amount, by
delivery of all of the funds in partial satisfaction of such indemnification
amount, with any remaining balance to be satisfied, in Purchasers' sole
discretion, from MacDonald directly or by setoff or offset against any amounts
that are then due and payable under the Bonus Plan; provided, however, if such
indemnification amount results from the payment by Purchasers of Dissenting
Shareholder Costs or Option/Phantom Stock Costs, the Purchasers may proceed
directly against MacDonald without proceeding first against the funds being held
under the Escrow Agreement. Purchasers acknowledge and agree that any
obligations and liabilities of MacDonald under Section 8.1 for Purchaser Losses
that are satisfied from the funds held under the Escrow Agreement, from proceeds
of insurance policies (pursuant to Section 8.5(b)) or from amounts then or
thereafter owing under the Bonus Plan (as a result of a setoff, offset or
otherwise by Purchasers), shall not thereafter be recoverable from MacDonald
(i.e., Purchasers shall not receive more than one satisfaction of any Purchaser
Losses).
ARTICLE 8.5 Limitation of Losses.
(a) The liabilities and obligations of the parties (including the
Indemnifying Parties) under this Agreement shall be subject to the
limitation (in addition to the other applicable limitations contained in
this Article 8) that no Indemnifying Parties shall be responsible for any
Losses until the cumulative aggregate amount thereof shall exceed Fifteen
Thousand Dollars ($15,000.00) (the "Minimum Amount") in which case such
Indemnifying Parties shall then be liable for all Losses; provided,
however, MacDonald shall not be responsible for any Purchaser Losses
resulting from the breach of any of the representations or warranties in
Section 2.5 or Section 2.22 until the cumulative aggregate amount thereof
shall exceed One Hundred Thousand Dollars ($100,000) (the "Basket Amount")
in which case MacDonald will then be liable for all such Purchaser Losses;
provided, further, however, if the facts or events giving rise to the
breach of the representations or warranties in Section 2.5 or Section 2.22,
would also independently breach other representations or warranties
contained in other sections of Article 2, the Minimum Amount (rather than
the Basket Amount) would apply to the breach of such other representations
or warranties. The aggregate liability of (i) MacDonald for Purchaser
Losses under Section 8.1(a), (c), (d), (e), (f), (g), (h) or (i) shall be
Eleven Million Five Hundred Thousand Dollars ($11,500,000), and (ii) the
Purchasers for Seller Losses under Section 8.2(a) shall be Eleven Million
Five Hundred Thousand Dollars ($11,500,000). Notwithstanding anything to
the contrary set forth in this Section 8.5, the dollar limitations in
respect of the Minimum Amount and Basket Amount set forth in this Section
8.5 shall not apply to any claim relating to breach of a representation or
warranty under Sections 2.1, 2.2, 2.3, 2.8, or 2.9, any claim related to a
breach of a representation or warranty where CRG had Knowledge of such
breach at Closing, any claim related to the payment by Purchasers of
Dissenting Shareholder Costs or Option/Phantom Stock Costs, or any claim
for any Tax Loss.
(b) In the event that any claim for indemnification asserted hereunder
by Purchasers is, or may be, subject to coverage under CRG's insurance,
upon the request of the Shareholders' Representative, the Purchasers shall
cause the applicable insurance carrier promptly to be notified of any such
claim or loss and tender defense thereof to such carrier. Subject to the
outcome of the insurance claim, Purchasers may make a claim for
indemnification pursuant to the provisions of this Agreement and the Escrow
Agreement. If such insurance carrier shall deny coverage or deny tender,
Purchasers may proceed further with their indemnification claim pursuant to
the provisions of this Agreement. In the event a payment is made from the
Escrow Account on a claim which has been tendered to such insurance
carrier, the Shareholders' Representative shall be subrogated to the rights
of Purchasers against such insurance carrier. In the event the Purchasers
shall receive insurance benefits from an insurance policy with respect to
any event or circumstance for which the Purchasers shall receive
indemnification hereunder out of the Escrow Amount, such monies shall be
deposited (less expenses incurred to receive or collect such insurance
benefits) in the Escrow Account and disbursed as provided for in this
Agreement and in the Escrow Agreement.
ARTICLE 8.6 Sole Remedy. In the absence of fraud, (in which event the affected
party shall have all remedies available at law or in equity) the foregoing
indemnification provisions and rights and remedies referred to in Section 8.4,
constitute the sole remedy any party may have with respect to any breach of the
representation and warranties contained in Sections 2 and 3 of this Agreement.
Except with respect to any breach of any representation or warranty contained in
Sections 2 and 3 of the Merger Agreement, the foregoing indemnification
provisions and rights and remedies referred to in Section 8.4, are in addition
to, and not in derogation of, any statutory, equitable, or common law remedy any
party may have with respect to Purchasers, CRG, its Subsidiaries, MacDonald or
the transactions contemplated by this Agreement.
ARTICLE 9
TERMINATION
ARTICLE 9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the shareholders of CRG
and MergerSub:
(a) by mutual written consent of Purchasers, CRG and MacDonald;
(b) by Purchasers or CRG or MacDonald if there has been a material
misrepresentation or breach of warranty or breach of covenant on the part
of the other party in the representations and warranties or covenants set
forth in this Agreement and any such misrepresentation or breach, if
capable of cure, is not cured within fifteen (15) days after written notice
thereof to such other party, or if events have occurred which have made it
impossible to satisfy a condition precedent to the terminating party's
obligations to consummate the transactions contemplated hereby (other than
as a result of any willful act or omission by the terminating party); or
(c) by Purchasers or CRG or MacDonald if the transactions contemplated
hereby have not been consummated by August 31, 2000; provided, that neither
Purchasers nor CRG nor MacDonald shall be entitled to terminate this
Agreement pursuant to this subsection (c) if such party's willful breach of
this Agreement, has prevented the consummation of the transactions
contemplated hereby.
ARTICLE 9.2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void, and
there shall be no liability on the part of either the CRG or MacDonald or
Purchasers, except (i) for willful breaches of this Agreement prior to the time
of such termination, (ii) for the provisions of Section 10.6, and (iii) that CRG
shall return the Deposit, together with any actual interest earned on the
Deposit while held by the Company, forthwith upon any termination.
ARTICLE 9.3 Effect of Closing. CRG, MacDonald and Purchasers shall be deemed to
have waived their respective rights to terminate this Agreement upon the
completion of the Closing. No such waiver shall constitute a waiver of any other
rights arising from the non-fulfillment of any condition precedent set forth in
Article 6 or 7 unless such waiver is made in writing.
ARTICLE 10
ADDITIONAL AGREEMENTS
ARTICLE 10.1 Survival.
(a) Subject to subsection (c), below, the representations, warranties,
covenants and agreements set forth in this Agreement or in any writing delivered
to Purchasers or CRG in connection with this Agreement shall survive the Closing
Date as provided herein and the consummation of the transactions contemplated
hereby and shall not be affected by any examination made for or on behalf of
Purchasers or CRG, the knowledge of any of Purchasers' or CRG's officers,
directors, shareholders, employees or agents, or the acceptance by Purchasers or
CRG of any certificate or opinion;
(b) all covenants and agreements made under this Agreement shall survive
the Closing Date and shall continue in full force and effect thereafter
according to their terms for the applicable statute of limitations or such other
period as shall be provided in this Agreement; and
(c) the representations and warranties made under this Agreement shall
survive the Closing Date and shall continue in full force and effect thereafter
for a period of two years, except that (i) the representations and warranties
contained in Section 2.9 shall survive until the expiration of the applicable
periods (including any extensions) of the respective statutes of limitation
applicable to the payment of the Taxes to which such representations and
warranties relate, (ii) the representations and warranties contained in Sections
2.1, 2.2, 2.3, 2.8 and 2.16 shall survive until the expiration of the applicable
statute of limitations, and (iii) the representations and warranties contained
in Section 2.5 shall survive for a period of one year after the Closing Date.
Notwithstanding the foregoing survival periods set forth in this Section 10.1,
the termination of a survival period shall not affect the rights of an
Indemnified Party in respect of any claim made by such party with specificity,
in good faith and in writing to the Indemnifying Party in accordance with
Section 8.3 hereof prior to the expiration of the applicable survival period.
ARTICLE 10.2 Mutual Assistance. Subsequent to the Closing, MacDonald on the one
hand and Purchasers on the other, shall assist each other (including making
records available) in the preparation of their respective tax returns and the
filing and execution of tax elections, if required, as well as any audits or
litigation that may ensue as a result of the filing thereof, to the extent that
such assistance is reasonably requested.
ARTICLE 10.3 Press Release and Announcements. No press release related to this
Agreement or the transactions contemplated hereby, or other announcements to the
employees, customers or suppliers of CRG, shall be issued without the joint
approval of Purchasers and CRG. No other public announcement related to this
Agreement or the transactions contemplated hereby shall be made by either party,
except as required by law, in which event the parties shall consult as to the
form and substance of any such announcement required by law.
ARTICLE 10.4 Expenses. Each party hereto shall pay all of its expenses in
connection with the negotiation of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated by
this Agreement.
ARTICLE 10.5 Further Transfers. After the Closing, MacDonald shall, and shall
use his best efforts to cause the other Shareholders to, execute and deliver
such further instruments of conveyance and transfer and take such additional
action as Purchasers may reasonably request to effect, consummate, confirm or
evidence the transfer to MergerSub of the CRG Shares. MacDonald shall, and shall
use his best efforts to cause the other Shareholders to execute such documents
as may be necessary to assist Purchasers (or their designees) in preserving or
perfecting their rights in the CRG Shares.
ARTICLE 10.6 Confidentiality. If the transactions contemplated by this Agreement
are not consummated, Purchasers shall maintain the confidentiality of all
information and materials received by it reasonably designated by CRG as
confidential, and Purchasers shall return to CRG or destroy any materials (and
copies thereof) obtained from CRG in connection with the transactions
contemplated hereby. Whether or not the transactions contemplated hereby are
consummated, CRG and MacDonald shall maintain the confidentiality of all
information and materials regarding Purchasers and their affiliates reasonably
designated as confidential by Purchasers.
ARTICLE 10.7 Remittances. All remittances, mail and other communications
relating to the Business, CRG or the Subsidiaries received by MacDonald or, to
the Knowledge of MacDonald, the other Shareholders, at any time after the
Closing Date shall be immediately turned over to Purchasers by such parties.
MacDonald shall cooperate, and shall use his best efforts to cause the other
Shareholders to cooperate, with Purchasers and take such actions as Purchasers
reasonably request, to assure that customers of the Business send their
remittances directly to Purchasers and to assure that remittances from customers
of the Business that are improperly sent to the Shareholders are not commingled
with their assets and are turned over to Purchasers.
ARTICLE 10.8 Best Efforts to Consummate Closing Transactions. On the terms and
subject to the conditions contained in this Agreement, Purchasers and CRG and
MacDonald agree to use their respective best efforts to take, or to cause to be
taken, all reasonable actions, and to do, or to cause to be done, all reasonable
things necessary, proper or advisable under applicable laws and regulations to
consummate, as soon as reasonably practicable, the Closing, including the
satisfaction of all conditions thereto set forth herein, including, with respect
to Purchasers, their best efforts to obtain the consent of their existing
lenders as to the consummation of the transactions contemplated by this
Agreement.
ARTICLE 10.9 Non-Compete; Non-Solicitation.
(a) Although it is understood among the parties that MacDonald desires
to no longer engage in business operations similar to that of the Business,
other than as an employee of MergerSub, as an additional inducement to
Purchasers to enter into and to perform their obligations under this
Agreement, MacDonald agrees that, for a period of five (5) years after the
Closing Date (the "Non-Competition Period"), MacDonald shall not:
(i) accept employment with or render services for compensation
(including without limitation, consultation or research) to, or
acquire any kind of ownership in, any person or entity that is engaged
in the design, development, marketing, sale or support of any
competitive product or service in the United States if that
relationship includes any responsibilities whatsoever with respect to
developing, promoting, marketing, soliciting or selling any product or
service, (including without limitation, any life insurance or other
insurance product or policy) to any third party in any state in which
the Purchasers or their subsidiaries or affiliates promotes, markets
or sells any product or program to any third party;
(ii) promote, market, solicit, or sell any product or service,
including without any limitation, any life insurance or other
insurance product or policy, similar to or competitive with any
program or product sold by any of the Purchasers or their subsidiaries
or affiliates; and
(iii) induce or attempt to induce (A) any purchaser of any
program or product of the Purchasers or their subsidiaries or
affiliates to cancel, allow to lapse, fail to renew or replace any
program or product of the Purchasers or their subsidiaries or
affiliates, (B) any other employee or any representative of the
Purchasers or their subsidiaries or affiliates to terminate or alter
his, her, or its relationship with the Purchasers or their
subsidiaries or affiliates, (C) any insurance company to terminate or
alter its relationship with the Purchasers or their subsidiaries or
affiliates, (D) any banking association or other trade organization to
terminate or alter its relationship with the Purchasers or their
subsidiaries or affiliates, or (E) any employee of the Purchasers or
their subsidiaries or affiliates to terminate his or her employment
with the Purchasers or their subsidiaries or affiliates.
(b) If, at the time of enforcement of this Section 10.9, a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall
be substituted for the stated duration, scope or area.
(c) MacDonald recognizes and affirms that in the event of breach by
him of any of the provisions of this Section 10.9 money damages would be
inadequate and Purchasers would have any adequate remedy at law.
Accordingly, MacDonald agrees that the Purchasers shall have the right, in
addition to any other rights and remedies existing in their favor, to
enforce their rights and the obligations under this Section 10.9 by an
action or actions for specific performance, injunction and/or other
equitable relief without posting any bond or security to enforce or prevent
any violations, whether anticipatory, continuing or future, of the
provisions of this Section 10.9, including, without limitation, the
extension of the Non-Competition Period by a period equal to (i) the length
of the violation of this Section 10.9 plus (ii) the length of any court
proceedings necessary to stop such violation. In the event of a breach or
violation by the MacDonald of any of the provisions of this Section 10.9,
the running of the Non-Competition Period, but not of such party's
obligations under this Section 10.9, shall be tolled during the period
during which the occurrence of any such breach or violation is investigated
and during the continuance of any such breach or violation.
ARTICLE 11
MISCELLANEOUS
ARTICLE 11.1 Amendment and Waiver. This Agreement may be amended at any time
before or after the approval of this Agreement by the shareholders of MergerSub
and CRG, and any provision of this Agreement may be waived; provided that any
such amendment or waiver shall be binding on the CRG and MacDonald only if such
amendment or waiver is set forth in a writing executed by the CRG and MacDonald
and that any such amendment or waiver shall be binding upon Purchasers only if
such amendment or waiver is set forth in a writing executed by Purchasers. No
course of dealing between or among any persons having any interest in this
Agreement shall be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any person under or by reason of
this Agreement.
ARTICLE 11.2 Notices. Any notice, consent or other communication provided for in
this Agreement shall be delivered in writing personally (effective upon
delivery), via facsimile (effective upon confirmation of transmission), via
overnight courier (effective the next business day after dispatch if instructed
to deliver on next business day) or via U.S. Mail (effective three (3) business
days after mailing, postage prepaid, first class) to each party at such party's
address(es) and/or facsimile number(s) set forth below such party's signature of
the applicable signature page hereto, or to such other address as either party
shall specify to the other in writing from time to time.
ARTICLE 11.3 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legatees, personal representatives, successors and permitted
assigns as the case may be, but neither this Agreement nor any of the rights,
interests or obligations hereunder of the CRG or MacDonald shall be assignable
by CRG or MacDonald without the prior written consent of Purchasers. This
Agreement may not be assigned by Purchasers without the written consent of CRG
and MacDonald, except for an assignment (i) to an affiliate of Purchasers
(existing as of the date hereof or in the future; provided Purchasers
unconditionally guarantee to CRG and MacDonald at the time of such assignment
the prompt and complete performance of all of such affiliates' obligations
hereunder), (ii) to a purchaser of substantially all of the assets or stock of
Purchasers or the CBI or (iii) by operation of law.
ARTICLE 11.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
ARTICLE 11.5 No Third Party Beneficiaries. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any other persons other than the parties hereto and
the indemnified parties under Sections 8.1 and 8.2 hereof and their respective
successors, permitted assigns, heirs, legatees and personal representatives, as
the case may be, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third parties to any person, nor
shall any provision give any third parties, except the indemnified parties under
Sections 8.1 and 8.2 hereof, any right of subrogation or action over or against
any party. This Agreement is not intended to and does not create any third party
beneficiary rights whatsoever, except the indemnified parties under Sections 8.1
and 8.2 hereof.
ARTICLE 11.6 No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
person.
ARTICLE 11.7 Captions. The captions used in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and shall not
be deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no captions had been used in this Agreement.
ARTICLE 11.8 Complete Agreement. This document and the documents referred to
herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
ARTICLE 11.9 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile shall also deliver a manually executed
counterpart of this Agreement, but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
ARTICLE 11.10 Governing Law. The internal law, not the law of conflicts, of the
State of Delaware shall govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement. Each of the parties hereto consents to
the jurisdiction of any state or federal court located in the State of Illinois
and irrevocably agrees that all actions and proceedings relating to this
Agreement or to the transactions contemplated hereby may be properly be
litigated in such courts.
ARTICLE 11.11 Remedies Cumulative. Except as set forth in Section 8.3(b) and
Section 8.6, all remedies of the parties provided herein shall, to the extent
permitted by law, be deemed cumulative and not exclusive of any thereof or of
any other remedies available to the parties, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained herein, and every remedy given herein or by law to any
party hereto may be exercised from time to time, and as often as shall be deemed
expedient, by such party.
Signature Page Follows
Agreement of Merger and Plan of Reorganization Signature Page
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CLARK/BARDES HOLDINGS, INC.
Name: /s/ Thomas Pyra
Title: Chief Financial Officer and
Chief Operating Officer
CLARK/BARDES ACQUISITION, INC.
Name: /s/ Thomas Pyra
Title: Vice President
Address:
102 South Wynstone Park Drive, Suite 200
North Barrington, Illinois 60010
Attention: Thomas Pyra
Phone: (800) 597-7976
FAX: (847)304-7977
with a copy to:
--------------
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Attention: Lane R. Moyer, Esq.
Phone: (312) 609-7500
FAX: (312) 609-5005
Agreement of Merger and Plan of Reorganization Signature Page
COMPENSATION RESOURCE GROUP, INC.
By: /s/ William L. MacDonald, Sr.
William L. MacDonald, Sr.
President and Chairman of the Board
By: /s/ Robin F.P. Urban
Robin F. P. Urban
Chief Operating Officer
Address:
Compensation Resource Group
633 West Fifth Street, 52nd Floor
Los Angeles, CA 90071-2086
Attention: Robin F.P. Urban, Esq.
Phone: (213) 438-6300
FAX: (213) 438-6600
with a copy to:
Munger, Tolles & Olson, LLP
355 South Grand Avenue, 35th Floor
Los Angeles, CA 90071-1560
Attention: Brian T. Daly
Phone: (213) 683-9100
FAX: (213) 687-3702
Agreement of Merger and Plan of Reorganization Signature Page
/s/ William L. MacDonald, Sr.
William L. MacDonald, Sr.,
individually and as Shareholders'
Representative
Address:
Compensation Resource Group
633 West Fifth Street, 52nd Floor
Los Angeles, CA 90071-2086
Attention: William L. MacDonald, Sr.
Phone: (213) 438-6300
FAX: (213) 438-6600
with a copy to:
Munger, Tolles & Olson, LLP
355 South Grand Avenue, 35th Floor
Los Angeles, CA 90071-1560
Attention: Brian T. Daly
Phone: (213) 683-9100
FAX: (213) 687-3702
