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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): August 31, 1999
H&R BLOCK, INC.
---------------
(Exact name of registrant as specified in charter)
MISSOURI 1-6089 44-0607856
-------- ------ ----------
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification
Number)
4400 MAIN STREET, KANSAS CITY, MO 64111
--------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(816) 753-6900
--------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On August 31, 1999, H&R Block, Inc. ("Block"), Block Financial
Corporation ("BFC"), Olde Financial Corporation ("Olde"), Financial Marketing
Services, Inc. ("FMS") and the shareholders of Olde and FMS (collectively, the
"Sellers") entered into a Stock Purchase Agreement (the "Purchase Agreement")
providing for Block's purchase, through BFC, of all of the issued and
outstanding common stock of Olde and FMS for a cash purchase price of $850
million, subject to adjustment at closing and certain possible additional
payments based on future performance.
The closing of the transaction is subject to the expiration or
early termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act, certain other regulatory approvals and other customary closing
conditions.
The foregoing description of the Purchase Agreement and the
related transaction does not purport to be complete and is qualified in its
entirety by reference to the Purchase Agreement, a copy of which is attached
hereto and filed herewith as Exhibit 10.1, and which is incorporated herein by
reference.
The information contained in this Current Report on Form 8-K
and the exhibits hereto may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements are based upon current
information, expectations, estimates and projections regarding Block, Olde, and
the industries and markets in which Block and Olde operate, and management's
assumptions and beliefs relating thereto. Words such as "will," "expects,"
"intends" and variations thereof and similar expressions are intended to
identify such forward-looking statements. These statements speak only as of the
date on which they are made, are not guarantees of future performance, and
involve certain risks, uncertainties and assumptions that are difficult to
predict. Therefore, actual outcomes and results could materially differ from
what is expressed, implied or forecast in such forward-looking statements. Such
differences could be caused by a number of factors including, but not limited
to, the uncertainty of the satisfaction of all closing conditions set forth in
the Purchase Agreement and the completion of the Olde transaction; the
uncertainty that the acquisition will be accretive to earnings and the extent of
any accretion to earnings; changes in economic, political or regulatory
environments; changes in competition and the effects of such changes; changes in
strategies; Block's inability to successfully implement its strategies; and
risks described from time to time in reports and registration statements filed
by Block and its subsidiaries with the Securities and Exchange Commission.
Readers should take these factors and risks into account in evaluating any such
forward-looking statements. Block undertakes no obligation to update publicly or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(C) EXHIBITS
Exhibit No. Description of Exhibit
10.1 Stock Purchase Agreement dated August 31, 1999 among Block
Financial Corporation, H&R Block, Inc., Olde Financial
Corporation, Financial Marketing Services, Inc. and the
Shareholders of Olde Financial Corporation and Financial
Marketing Services, Inc.
99.1 Press release dated September 1, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
H&R BLOCK, INC.
Date: September 10, 1999 By: /s/ James H. Ingraham
--------------------------------
James H. Ingraham
Vice President-General Counsel
and Secretary
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
10.1 Stock Purchase Agreement dated August 31, 1999 among Block
Financial Corporation, H&R Block, Inc., Olde Financial
Corporation, Financial Marketing Services, Inc. and the
Shareholders of Olde Financial Corporation and Financial
Marketing Services, Inc.
99.1 Press release dated September 1, 1999.
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EXHIBIT 10.1
EXHIBIT 10.1 TO FORM 8-K
STOCK PURCHASE AGREEMENT
Dated as of
August 31, 1999
Among
BLOCK FINANCIAL CORPORATION,
H&R BLOCK, INC.,
OLDE FINANCIAL CORPORATION,
FINANCIAL MARKETING SERVICES, INC.
and
THE SHAREHOLDERS OF
OLDE FINANCIAL CORPORATION
and
FINANCIAL MARKETING SERVICES, INC.
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TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
ARTICLE 1 DEFINITIONS.............................................................................................1
ARTICLE 2 SALE AND TRANSFER OF SHARES AND FMS SHARES; CLOSING....................................................12
2.1 Shares and FMS Shares..............................................................................12
2.2 Purchase Price.....................................................................................13
2.3 Earnest Money......................................................................................13
2.4 Closing............................................................................................13
2.5 Closing Obligations................................................................................14
2.6 Adjustment Amount..................................................................................15
2.7 Adjustment Procedure...............................................................................15
2.8 SmartVest Earnout Amount...........................................................................17
2.9 Earnout Procedure..................................................................................17
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS..............................................................19
3.1 Authority; No Conflict.............................................................................19
3.2 Title to Shares and FMS Shares.....................................................................20
3.3 Brokers or Finders.................................................................................20
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND FMS..................................................20
4.1 Organization and Good Standing.....................................................................20
4.2 Authority; No Conflict.............................................................................21
4.3 Capitalization.....................................................................................22
4.4 Financial Statements; Reports......................................................................22
4.5 Books and Records..................................................................................23
4.6 Title to Properties; Encumbrances..................................................................23
4.7 Condition and Sufficiency of Assets................................................................24
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<TABLE>
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4.8 Accounts Receivable................................................................................25
4.9 No Undisclosed Liabilities.........................................................................25
4.10 Taxes..............................................................................................25
4.11 No Material Adverse Change........................................................................27
4.12 ERISA and Related Employee Benefit Matters........................................................27
4.13 Governmental Authorizations; Compliance with Legal Requirements...................................29
4.14 Legal Proceedings; Orders.........................................................................32
4.15 Absence of Certain Changes and Events.............................................................33
4.16 Contracts; No Defaults............................................................................34
4.17 Insurance.........................................................................................36
4.18 Environmental Matters.............................................................................38
4.19 Employees.........................................................................................40
4.20 Labor Relations; Compliance.......................................................................41
4.21 Intellectual Property.............................................................................41
4.22 Certain Payments..................................................................................45
4.23 Relationships with Related Persons................................................................45
4.24 Brokers or Finders................................................................................45
4.25 Customer Contracts................................................................................45
4.26 Customers.........................................................................................46
4.27 Year 2000.........................................................................................46
4.28 Disclosure........................................................................................46
4.29 True and Complete Copies..........................................................................47
4.30 Acquired Investment Companies.....................................................................47
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER AND BLOCK......................................................47
5.1 Organization and Good Standing.....................................................................47
5.2 Authority; No Conflict.............................................................................47
5.3 Investment Intent..................................................................................48
5.4 Certain Proceedings................................................................................48
5.5 Brokers or Finders.................................................................................49
5.6 Section 15 of the 1940 Act.........................................................................49
</TABLE>
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<TABLE>
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5.7 Ineligible Persons.................................................................................49
5.8 SEC Reports........................................................................................49
5.9 Financing..........................................................................................50
ARTICLE 6 COVENANTS OF SELLERS PRIOR TO CLOSING DATE.............................................................50
6.1 Access and Investigation...........................................................................50
6.2 Operation of the Businesses of the Acquired Companies..............................................50
6.3 Negative Covenant..................................................................................51
6.4 Required Approvals.................................................................................51
6.5 Notification.......................................................................................52
6.6 Payment of Indebtedness by Related Persons.........................................................52
6.7 No Negotiation.....................................................................................52
6.8 Best Efforts.......................................................................................52
6.9 Title Insurance....................................................................................53
6.10 Merger of International Partners, Inc.............................................................53
ARTICLE 7 COVENANTS OF BUYER AND BLOCK PRIOR TO CLOSING DATE.....................................................54
7.1 Approvals of Governmental Bodies...................................................................54
7.2 Best Efforts.......................................................................................54
7.3 Notification.......................................................................................54
7.4 Section 15 of the 1940 Act.........................................................................55
7.5 Books and Records..................................................................................55
7.6 Covenant of Block..................................................................................55
ARTICLE 8 CERTAIN OTHER COVENANTS................................................................................55
8.1 Agreement to Defend................................................................................55
8.2 Breaches That Become Known; Supplemental Schedules.................................................56
8.3 Payment of Bonuses.................................................................................56
8.4 Directors'and Officers' Indemnification and Insurance..............................................56
8.5 Further Assurances.................................................................................58
8.6 Tax Matters........................................................................................58
8.7 Indemnity Insurance................................................................................59
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 9 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE....................................................59
9.1 Accuracy of Representations........................................................................59
9.2 Sellers' Performance...............................................................................60
9.3 Consents...........................................................................................60
9.4 Additional Documents...............................................................................60
9.5 No Claim Regarding Stock Ownership or Sale Proceeds................................................61
9.6 No Prohibition.....................................................................................61
9.7 Minimum Book Value.................................................................................61
ARTICLE 10 CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE..................................................61
10.1 Accuracy of Representations.......................................................................62
10.2 Buyer's Performance...............................................................................62
10.3 Additional Documents..............................................................................62
10.4 No Injunction.....................................................................................62
10.5 Consents..........................................................................................62
10.6 Minimum Book Value................................................................................63
ARTICLE 11 TERMINATION...........................................................................................63
11.1 Termination Events................................................................................63
11.2 Certain Effects of Termination....................................................................64
ARTICLE 12 INDEMNIFICATION; REMEDIES.............................................................................66
12.1 Survival; Right to Indemnification Not Affected by Knowledge; Exclusive Remedy....................66
12.2 Indemnification and Payment of Damages by Sellers.................................................66
12.3 Indemnification and Payment of Damages by Buyer...................................................68
12.4 Time Limitations..................................................................................68
12.5 Limitations on Amount-Sellers.....................................................................68
12.6 Limitations on Amount-Buyer.......................................................................69
12.7 Escrow; Offset....................................................................................69
12.8 Procedure for Indemnification - Third-Party Claims................................................69
</TABLE>
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<TABLE>
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12.9 Procedure for Indemnification - Other Claims......................................................71
ARTICLE 13 GENERAL PROVISIONS....................................................................................71
13.1 Expenses..........................................................................................71
13.2 Public Announcements..............................................................................72
13.3 Confidentiality...................................................................................72
13.4 Notices...........................................................................................72
13.5 Further Assurances................................................................................73
13.6 Waiver............................................................................................74
13.7 Entire Agreement and Modification.................................................................74
13.8 Disclosure Schedule...............................................................................74
13.9 Assignments, Successors, and No Third-Party Rights................................................74
13.10 Severability.....................................................................................75
13.11 Section Headings; Construction...................................................................75
13.12 Time of Essence..................................................................................75
13.13 Governing Law....................................................................................75
13.14 Counterparts.....................................................................................75
13.15 Sellers'Representative...........................................................................75
13.16 Alternative Dispute Resolution...................................................................75
</TABLE>
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LIST OF EXHIBITS
2.5(a)(ii) Seller's Release
2.5(a)(iii) Noncompetition/Nonsolicitation Agreement
2.5(a)(iv) Sellers' Certificate
2.5(a)(v) Tax Procedures Agreement
2.5(b)(iii) Buyer's Certificate
2.5(c)-1 First Escrow Agreement
2.5(c)-2 Second Escrow Agreement
6.8 Estoppel Certificate
9.4(a) Opinion of Sellers' Counsel
10.3(a) Opinion of Buyer's Counsel
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LIST OF SCHEDULES
Schedule A List of Persons with Knowledge
Schedule B Data Room Index
Sellers Disclosure Schedule
Schedule 2.8 SmartVest Earnout
Buyer Disclosure Schedule
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
August 31, 1999, is made by and among BLOCK FINANCIAL CORPORATION, a Delaware
corporation ("BUYER"), H&R BLOCK, INC., a Missouri corporation ("BLOCK") OLDE
FINANCIAL CORPORATION, a Michigan corporation (the "COMPANY"), FINANCIAL
MARKETING SERVICES, INC., a Michigan corporation ("FMS"), and the parties
identified on the signature page hereto as "Sellers" (each a "SELLER" and
collectively, "SELLERS").
RECITAL
WHEREAS, Sellers desire to sell, and Buyer desires to
purchase, all of the issued and outstanding shares of capital stock of the
Company (the "SHARES") and FMS (the "FMS SHARES"), for the consideration and on
the terms and conditions set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Article 1:
"1940 Act" - the Investment Company Act of 1940, as amended.
"1999 Form 10-K" - as defined in Section 5.8.
"Accounting" - as defined in Section 2.9(a).
"Accounts Receivable" - as defined in Section 4.8.
"Acquired Companies" - the Company, its Subsidiaries, FMS,
International Partners, Inc. and their respective Subsidiaries, collectively.
"Acquired Investment Companies" - as defined in Section 4.30.
"Adjustment Amount" - as defined in Section 2.6.
"Adjustment Amount Documents" - as defined in Section 2.7(a).
"Advisers Act" - as defined in Section 4.13(c).
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"Aggregate Consolidated Net Tangible Book Value" - the
aggregate consolidated stockholders equity minus goodwill, if any, of the
Acquired Companies as of the close of business on the day prior to the Closing
Date, as determined in accordance with GAAP; provided, however, that reserves in
addition to those required by GAAP may be established in Sellers' sole
discretion.
"Agreement" - as defined in the first paragraph of this
Agreement.
"Annual Financial Statement" - as defined in Section 2.9(a).
"Applicable Contract" - any Contract (i) under which any
Acquired Company has any rights, (ii) under which any Acquired Company is
subject to any obligation or liability, or (iii) by which any Acquired Company
or any of the assets owned or used by it is bound.
"Balance Sheet" - as defined in Section 4.4.
"Base Purchase Price" - as defined in Section 2.2.
"Best Efforts" - the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
"Block SEC Reports" - as defined in Section 5.8.
"Breach" - a "Breach" of a representation, warranty, covenant,
obligation or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (i) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation or other provision, or
(ii) any other occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation or other provision, and the term
"Breach" means any such inaccuracy, breach, failure, occurrence or circumstance.
"Breach Event" - as defined in Section 8.2.
"Broker-Dealer Subsidiaries" - as defined in Section 4.4.
"Business" - the existing business, operations, facilities and
other assets, financial condition, results of operations, finances, markets,
products, customers and customer relations and personnel of the Acquired
Companies.
"Buyer" - as defined in the first paragraph of this Agreement.
"Buyer Disclosure Schedule" - the disclosure schedule
delivered by Buyer to Sellers concurrently with the execution and delivery of
this Agreement.
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"Buyer's Advisors" - as defined in Section 6.1.
"Buyer's Certificate" - as defined in Section 2.5(b)(ii).
"Buyer's Closing Documents" - as defined in Section 5.2.
"Canadian Subsidiaries" - OLDE Discount of Canada
(which is a subsidiary of the Company), 2430472 Nova Scotia Co., North American
Printing Co. and Sumner Canadian Direct Holdings Company (which are or will be
subsidiaries of FMS).
"Closing" - as defined in Section 2.4.
"Closing Balance Sheet" - as defined in Section 2.7(a).
"Closing Date" - the date and time as of which the Closing
actually takes place.
"Closing Financial Statements" - as defined in Section 2.7(a).
"Company" - as defined in the first paragraph of this
Agreement.
"Company Material Adverse Effect" - with respect to any matter
or matters affecting the Company, any of its Subsidiaries or FMS or any of its
Subsidiaries, a material adverse effect on the business, assets, financial
condition or results of operations of the Company, its Subsidiaries, FMS and its
Subsidiaries taken as a whole or on the ability of any of the Company, FMS or
the Sellers to complete the Closing, other than any change, effect, event or
occurrence (i) relating to the United States or global economy or securities
markets in general, (ii) resulting from changes in legal, regulatory or economic
or business conditions generally affecting the businesses in which the Company,
its Subsidiaries or FMS and its Subsidiaries are engaged or (iii) resulting from
the announcement or consummation of this Agreement or the Contemplated
Transactions to the extent such announcement affects the customer base or
employees of the Company.
"Company Purchase Price" - as defined in Section 2.2.
"Competing Business" - as defined in Section 4.23.
"Consent" - any approval, consent, ratification, waiver or
other authorization (including any Governmental Authorization).
"Contemplated Transactions" - all of the transactions
contemplated by this Agreement, including the sale of the Shares and FMS Shares
by Sellers to Buyer.
"Contract" - any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Covered Claims" - as defined in Section 8.4(a).
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"Covered Costs" - as defined in Section 8.4(a).
"Covered D&O Indemnitees" - as defined in Section 8.4(a).
"Damages" - any and all (i) claims, losses, liabilities,
costs, penalties, fines and amounts paid or expenses incurred (including
reasonable fees for attorneys, accountants, consultants and experts), (ii)
damages as agreed to by the Sellers' Representative and Buyer or established in
an arbitration proceeding pursuant to Section 13.16 which arise from the subject
Breach or Fraud, (iii) obligations to third parties, (iii) expenditures, and/or
(iv) judgments, awards or settlements that are imposed upon the party seeking
Damages or otherwise incurred by such party resulting from or arising out of the
subject Breach or Fraud of another party, less the amount of insurance coverage
relating to such Damages paid to the party seeking Damages (net of any
deductibles or similar amounts payable with respect to such insured Damages;
provided that to the extent that any such amounts that would otherwise be
considered "Damages" hereunder constitute Ordinary Course Liabilities, such
amounts shall not be considered Damages.
"Default" - (i) a breach of or default under any Contract,
(ii) the occurrence of an event that with the passage of time or the giving of
notice or both would constitute a breach of or default under any Contract, or
(iii) the occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract.
"Defense Exception" - as defined in Section 12.8(b).
"Disagreement" - as defined in Section 2.7(b).
"Dispute" - as defined in Section 13.16(a).
"Earnest Money" - as defined in Section 2.3.
"Encumbrance" - any charge, claim, community property
interest, condition, equitable interest, Lien, option, pledge, security
interest, right of first refusal or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise of any other
attribute of ownership.
"Environment" - soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"Environmental, Health and Safety Liabilities" - any cost,
damage, expense, liability, obligation or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and consisting of
or relating to:
(a) any environmental, health or safety matters or
conditions (including on-site or off-site contamination, occupational
safety and health, and regulation of chemical substances or products);
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(b) fines, penalties, judgments, awards, settlements,
legal or administrative proceedings, damages, losses, claims, demands
and responses, investigative, remedial or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment or
other remediation or response actions ("CLEANUP") required by
applicable Environmental Law or Occupational Safety and Health Law
(whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, investigative or
remedial measures required under Environmental Law or Occupational
Safety and Health Law.
The terms "removal," "remedial" and "response action" include
the types of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq., as amended
("CERCLA").
"Environmental Law" - any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and of the commencement of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the
release of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated,
packaged and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;
(e) protecting resources, species or ecological
amenities;
(f) reducing to acceptable levels the risks inherent in
the transportation of hazardous substances, pollutants, oil or other
potentially harmful substances;
(g) cleaning up pollutants that have been released,
preventing the threat of release or paying the costs of such Cleanup or
prevention; or
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(h) making responsible parties pay private parties, or
groups of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"ERISA" - the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"Escrow Agreements" - as defined in Section 2.5(c).
"Estimated Adjustment Amount" - a bona fide estimate of
the Adjustment Amount calculated in accordance with Section 2.6 hereof less
$5,000,000; provided that in computing the Estimated Adjustment Amount, the
Aggregate Consolidated Net Tangible Book Value of the Company and FMS shall be
estimated by the Company and FMS, respectively, as of the close of business five
(5) business days prior to the Closing Date (the "ESTIMATION DATE") rather than
as of the close of business on the Closing Date, which estimate shall be based
on the unaudited consolidated balance sheets of the Company and FMS as of the
month-end immediately preceding the Estimation Date, adjusted to reflect changes
through and including the Estimation Date and changes reasonably expected to
occur thereafter through the close of business on the day immediately preceding
the Closing Date. In no event shall the Estimated Adjustment Amount exceed
$50,000,000, unless the Closing occurs after December 31, 1999, in which case
the Estimated Adjustment Amount shall not exceed $60,000,000; provided, however,
that such limitations shall not apply to, or in any manner limit, the Adjustment
Amount.
"Exchange Act" - the Securities Exchange Act of 1934 or any
successor law, and regulations and rules pursuant to that Act or any successor
law.
"Existing Claims" - as defined in Section 8.4(c).
"Facilities" - any real property, leaseholds or other
interests currently or formerly owned or operated by any Acquired Company and
any buildings, plants, structures or equipment (including motor vehicles, tank
cars and rolling stock) currently or formerly owned or operated by any Acquired
Company.
"Fee" - as defined in Section 11.2(e).
"Financing Termination" - as defined in Section 2.3(c).
"First Escrow Agent" - as defined in Section 2.5(c).
"First Escrow Agreement" - as defined in Section 2.5(c).
"FMS" - as defined in the first paragraph of this Agreement.
"FMS Purchase Price" - as defined in Section 2.2.
"FMS Shares" - as defined in the Recital of this Agreement.
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"FOCUS Reports" - as defined in Section 4.4.
"Form BD" - as defined in Section 4.13(e).
"Fraud"--a material misrepresentation, omission, misstatement
or Breach made by a party under this Agreement or in connection with the
Contemplated Transactions with the intent by such party to mislead another party
and upon which such other party relied to its detriment.
"GAAP" - generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 4.4 were
prepared and with respect to any Canadian Subsidiaries of any Acquired Company,
generally accepted Canadian accounting principles.
"Governmental Authorization" - any approval, consent,
qualification, license, registration, permit, exemption, waiver or other
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement.
"Governmental Body" - any:
(i) nation, state, county, city, town, village,
district or other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign or
other government;
(iii) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department,
official or entity and any court or other tribunal of competent
jurisdiction) including any domestic or foreign industry
self-regulating organization, domestic or foreign exchange, board of
trade, clearing house or association or similar organization; or
(iv) multinational organization or body.
"Hazardous Activity" - the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about or from the Facilities or any part thereof into the Environment, and any
other act, business, operation or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may adversely affect the value of the Facilities or the
Acquired Companies.
"Hazardous Materials" - any waste or other substance that is
listed, defined, designated or classified as, or otherwise determined to be,
hazardous, radioactive or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
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"HSR Act" - the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Indemnified Persons" - as defined in Section 12.2(a).
"Independent Accounting Firm" - as defined in Section 2.7(d).
"Intellectual Property Assets" - as defined in Section 4.21.
"Interim Balance Sheet" - as defined in Section 4.4.
"IRC" - the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS" - the United States Internal Revenue Service or any
successor agency and, to the extent relevant, the United States Department of
Treasury.
"Knowledge" - an individual will be deemed to have "Knowledge"
of a particular fact or other matter if such individual is actually aware of
such fact or other matter. The Acquired Companies will be deemed to have
"Knowledge" of a particular fact or other matter if any of the persons set forth
in Schedule A has Knowledge of such fact or other matter.
"Lease" - as defined in Section 9.3.
"Legal Requirement" - any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, rule, ordinance, principle of common law, regulation, statute
or treaty of any Governmental Body.
"Law" - any statute, law, ordinance, regulation, decision,
order or rule of any Governmental.
"LCIA" - as defined in Section 13.16(a).
"License" - any license, franchise, permit, profit, easement,
right, authorization, approval, consent, waiver or certification.
"Lien" - any mortgage, lien, security interest, pledge,
Encumbrance, restriction on transferability, defect of title, charge or claim of
any nature whatsoever on any property or property interest.
"Material Contracts" - as defined in Section 4.16(a).
"NASD" - the National Association of Securities Dealers, Inc.
"Noncompetition/Nonsolicitation Agreements" - as defined in
Section 2.5(a).
"Notice of Disagreement" - as defined in Section 2.7(b).
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"Notified Party" - as defined in Section 11.1(a).
"Notifying Party" - as defined in Section 11.1(a).
"NYSE" - the New York Stock Exchange, Inc.
"Occupational Safety and Health Law" - any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
"Order" - any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any arbitrator.
"Ordinary Course Liabilities" - as defined in Section 4.9.
"Ordinary Course of Business" - an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if
such action is consistent with the past practices of such Person and is taken in
the ordinary course of the normal operations of such Person.
"Organizational Documents" - (a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) the articles or
certificate of organization and the operating agreement of a limited liability
company; (c) the partnership agreement and any statement of partnership of a
general partnership; (d) the limited partnership agreement and the certificate
of limited partnership of a limited partnership; (e) any charter or similar
document adopted or filed in connection with the creation, formation or
organization of a Person; and (f) any amendment to any of the foregoing.
"Pension Benefit Plan" - as defined in Section 4.12(b).
"Person" - any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union or
other entity or Governmental Body.
"Prime Rate" - a fluctuating interest rate that is equal to
the rate of interest from time to time announced in The Wall Street Journal
under the "Money Rates" section as the "prime rate."
"Proceeding" - any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"Proprietary Rights Agreement" - as defined in Section
4.19(b).
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"Purchase Price" - as defined in Section 2.2.
"Records" - as defined in Section 4.5.
"Registrations" - as defined in Section 4.13(c).
"Regulatory Agencies" - as defined in Section 4.13(c).
"Related Person" - with respect to a particular individual:
(i) each other member of such individual's Family;
(ii) any Person that is directly or indirectly
controlled by such individual or one or more members of such
individual's Family; and
(iii) any Person in which such individual or members
of such individual's Family hold (individually or in the aggregate) a
Material Interest.
With respect to a specified Person other than an individual:
(i) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
(ii) any Person that holds a Material Interest in
such specified Person;
(iii) each Person that serves as a director, officer,
partner, executor or trustee of such specified Person (or in a similar
capacity);
(iv) any Person in which such specified Person holds
a Material Interest; and
(v) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar
capacity).
For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, and (iii)
any other natural person who resides with such individual, and (b) "Material
Interest" means direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Exchange Act) of voting securities or other voting interests
representing at least 25% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 25% of the
outstanding equity securities or equity interests in a Person.
"Release" - any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping or other releasing into the Environment,
whether intentional or unintentional.
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"Representative" - with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor or other representative
of such Person, including legal counsel, accountants and financial advisors.
"Required Governmental Authorizations" - as defined as Section
4.13(a).
"Reserve" - as defined in Section 12.5.
"Sale" - as defined in Section 11.2(e).
"SEC" - the United States Securities and Exchange Commission.
"Second Escrow Agent" - as defined in Section 2.5(c).
"Second Escrow Agreement" - as defined in Section 2.5(c).
"Securities Act" - the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Seller(s)" - as defined in the first paragraph of this
Agreement.
"Sellers' Certificate" - as defined in Section 2.5(a).
"Seller's Closing Documents" - as defined in Section 3.1(a).
"Sellers Disclosure Schedule" - the disclosure schedule
delivered by Sellers to Buyer concurrently with the execution and delivery of
this Agreement.
"Sellers' Releases" - as defined in Section 2.5(a).
"Sellers' Representative" - as defined in Section 13.15.
"Shares" - as defined in the Recital of this Agreement.
"Significant Employee" - any employee who is either employed
as a regional or district manager or has earned in excess of $400,000 in either
of the last two (2) fiscal years.
"specifically identified and made available" - with respect to
any documents or materials, such documents or materials (i) listed in Schedule B
attached hereto, (ii) contained within the due diligence materials in the "data
room" of the Company visited by Buyer (or its representatives), or (iii)
specifically identified in such materials and access to Buyer (or its
representatives) to such materials was provided by the Acquired Companies (or
their representatives).
"SRO" - as defined in Section 4.13(c).
"Subsidiary" - with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that
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corporation's or other Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having
such power only upon the happening of a contingency that has not occurred) are
held by the Owner or one or more of its Subsidiaries; when used without
reference to a particular Person, "Subsidiary" means a Subsidiary of the
Company.
"Subsequent Development" - as defined in Section 8.2.
"Supplemental Closing" - as defined in Section 2.7(e).
"Supplemental Closing Date" - as defined in Section 2.7(e).
"Supplemental Schedule" - as defined in Section 8.2.
"Tax Return" - any return (including any information return),
report, statement, schedule, notice, form or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any tax.
"Third-Party Claim" - as defined in Section 12.8(a).
"Threat of Release" - a substantial likelihood of a Release
that is reasonably expected to require action in order to prevent or mitigate
damage to the Environment that is reasonably expected to result from such
Release.
"Threatened" - a claim, Proceeding, dispute, action or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made in writing to the Person so Threatened or any notice has been given in
writing to the Person so Threatened.
"Welfare Benefit Plan" - as defined in Section 4.12(a).
"Wire Transfer" - a payment in immediately available funds by
wire transfer in lawful money of the United States of America to such account or
to a number of accounts as shall have been designated by written notice from the
receiving party to the paying party.
ARTICLE 2
SALE AND TRANSFER OF SHARES AND FMS SHARES; CLOSING
2.1. SHARES AND FMS SHARES
Subject to the terms and conditions of this Agreement, at the Closing
Sellers shall sell and transfer the Shares and FMS Shares to Buyer, and Buyer
shall purchase the Shares and FMS Shares from Sellers.
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2.2. PURCHASE PRICE
The aggregate total purchase price for the Shares and FMS Shares (the
"PURCHASE PRICE") shall be (i) $850,000,000 (the "BASE PURCHASE PRICE"), plus
(if positive) or minus (if negative) (ii) the Adjustment Amount plus (iii) the
Earnout Amount. The Base Purchase Price shall consist of (i) $13,543,000 (the
"FMS PURCHASE PRICE") and (ii) $836,457,000 (the "COMPANY PURCHASE PRICE"), to
be paid respectively to those Sellers identified in Part 2.2 of the Sellers
Disclosure Schedule. The Adjustment Amount and the SmartVest Earnout Amount
shall be paid to Sellers in the proportions set forth in Part 2.5(b)(i) of the
Sellers Disclosure Schedule.
2.3. EARNEST MONEY
(a) Contemporaneously with the execution hereof, Buyer has
deposited the sum of $25,000,000 with J.P Morgan Investment Management,
Inc., New York, New York as earnest money (the "EARNEST MONEY"), which sum
may be in the form of cash, cash equivalents, debt securities with an
investment grade rating or commercial paper with a rating of at least
A-1/P-1. Until paid out at the Closing, all net interest income and gain
accrued, earned or resulting from investments of the Earnest Money shall be
for the account of Buyer.
(b) At the Closing or upon a Financing Termination, the
Earnest Money shall either be (i) liquidated to cash in an amount of at
least $25,000,000, with $25,000,000 paid to Sellers and the remainder paid
to Buyer or (ii) repaid to Buyer upon Buyer providing $25,000,000 in
immediately available funds to Sellers (in lieu of the payment to Sellers
pursuant to clause (i) above). Any payment made to Sellers pursuant to the
previous sentence shall be applied dollar for dollar as a credit against the
Base Purchase Price.
(c) If Closing does not occur pursuant to the terms and
conditions of this Agreement, the Earnest Money shall be repaid to Buyer
unless this Agreement is terminated by Sellers pursuant to Section
11.1(a)(ii) [Termination Events] (based upon Breach of Section 5.9
[Financing]) (a "FINANCING TERMINATION"). In the event of a Financing
Termination, the Earnest Money shall be paid to Sellers (but which payment
shall not be intended by the parties to constitute liquidated damages) in
the manner provided in Section 2.3(b).
2.4. CLOSING
The purchase and sale provided for in this Agreement (the "CLOSING")
will take place at the offices of Buyer's counsel, Bryan Cave LLP, 3500 One
Kansas City Place, 1200 Main Street, Kansas City, Missouri 64105, at 10:00 a.m.
(local time) on the date that is five (5) business days following satisfaction
or waiver of the closing conditions set forth in Articles 9 and 10 (other than
those conditions that relate to actions to be taken at Closing), or at such
other time and place as the parties may agree; provided, however, that if the
Closing has not occurred prior to December 22, 1999, and the closing conditions
set forth in Articles 9 and 10 (other than those conditions that relate to
actions to be taken at Closing) have been satisfied or are satisfied on or
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prior to January 17, 2000, then the Closing shall occur on January 18, 2000 or
such other date as agreed upon by the parties hereto. The parties hereto agree
that they will use their Best Efforts to cause the Closing to occur prior to
December 15, 1999. Except as provided in Article 11, failure to consummate the
purchase and sale of the Shares and FMS Shares provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.4 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement.
2.5. CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares and FMS
Shares, duly endorsed and accompanied by duly executed stock powers for
transfer to Buyer;
(ii) releases substantially in the form of Exhibit
2.5(a)(ii) executed by Sellers ("SELLERS' RELEASES");
(iii) a noncompetition/nonsolicitation agreement
substantially in the form of Exhibit 2.5(a)(iii) executed by each
Seller identified therein (the "NONCOMPETITION/NONSOLICITATION
AGREEMENTS");
(iv) a certificate substantially in the form of
Exhibit 2.5(a)(iv) executed by Sellers' Representative (the "SELLERS'
CERTIFICATE"); and
(v) a counterpart of a tax procedures agreement
substantially in the form of Exhibit 2.5(a)(v) executed by Sellers (the
"TAX PROCEDURES AGREEMENT").
(b) Buyer will deliver to Sellers:
(i) the Base Purchase Price consisting of (A)
$725,000,000 in the amounts set forth opposite the names of the
respective Sellers in Part 2.5(b)(i) of the Sellers Disclosure Schedule
(by Wire Transfer pursuant to instructions delivered by Sellers'
Representative to Buyer not less than five (5) business days prior to
Closing); (B) surrender of the Earnest Money or delivery of $25,000,000
in lieu thereof as provided in Section 2.3; (C) payment of the sum of
$35,000,000 to the First Escrow Agent (by Wire Transfer pursuant to
instructions delivered by the First Escrow Agent to Buyer not less than
five (5) business days prior to Closing); (D) payment of the sum of
$65,000,000 to the Second Escrow Agent (by Wire Transfer pursuant to
instructions delivered by the Second Escrow Agent to Buyer not less
than five (5) business days prior to Closing) and (E) payment of the
Estimated Adjustment Amount;
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(ii) a certificate substantially in the form of
Exhibit 2.5(b)(ii) executed by Buyer (the "BUYER'S CERTIFICATE"); and
(iii) a counterpart of the Tax Procedures Agreement
executed by Buyer.
(c) Buyer and Sellers' Representative will enter into
escrow agreements, substantially in the form of Exhibit 2.5(c)-1 (the
"FIRST ESCROW AGREEMENT") with the escrow agent designated therein (the
"First Escrow Agent") and substantially in the form of Exhibit 2.5(c)-2
(the "SECOND ESCROW AGREEMENT") with the escrow agent designated
therein (the "Second Escrow Agent") (collectively, the First Escrow
Agreement and the Second Escrow Agreement are referred to herein as the
"ESCROW AGREEMENTS").
2.6. ADJUSTMENT AMOUNT
If the Aggregate Consolidated Net Tangible Book Value is greater than
$350,000,000, the Adjustment Amount is deemed positive (i.e., will increase the
Purchase Price) and will be an amount equal to the difference between the
Aggregate Consolidated Net Tangible Book Value and $350,000,000. If the
Aggregate Consolidated Net Tangible Book Value is less than $350,000,000, the
Adjustment Amount is deemed negative (i.e., will reduce the Purchase Price) and
will be an amount equal to the difference between $350,000,000 and the Aggregate
Consolidated Net Tangible Book Value.
2.7. ADJUSTMENT PROCEDURE
(a) As soon as reasonably practicable following the Closing
Date, and in no event more than sixty (60) days thereafter, Buyer shall
cause the Company and FMS to cause PriceWaterhouseCoopers LLP to
prepare and deliver to Buyer and to Sellers' Representative
consolidated financial statements (the "CLOSING FINANCIAL STATEMENTS")
of the Acquired Companies as of the Closing Date, which shall include a
Balance Sheet of the Acquired Companies as of the Closing Date (THE
"CLOSING BALANCE SHEET") and schedules calculating the amount of the
Adjustment Amount and setting forth such calculations in reasonable
detail (collectively, the "ADJUSTMENT AMOUNT DOCUMENTS"). Reserves or
accruals (the "RESERVE") on the Closing Financial Statements shall
exist for potential or contingent liabilities in aggregate amount equal
to the greater of (i) $7,500,000 or (ii) the amount required to be
recorded for the Reserve in accordance with GAAP. The parties shall
consult with one another and PriceWaterhouseCoopers LLP and cooperate
with each other and with PriceWaterhouseCoopers LLP in the preparation
of the Adjustment Amount Documents in accordance with this Section 2.7,
and Buyer shall cause the Company and FMS to cause
PriceWaterhouseCoopers LLP to provide access to such working papers and
information relating to the preparation thereof as reasonably requested
by the parties. Buyer, on the one hand, and Sellers, on the other hand,
shall share equally all expenses of PriceWaterhouseCoopers LLP incurred
in connection with the preparation of the Adjustment Amount Documents
and determination of the Adjustment Amount.
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(b) Within thirty (30) days after delivery of the Adjustment
Amount Documents to Buyer and Sellers' Representative, Buyer and
Sellers' Representative may dispute all or any portion of the
Adjustment Amount Documents by giving written notice (a "NOTICE OF
DISAGREEMENT") to Sellers' Representative or Buyer, respectively, and
to PriceWaterhouseCoopers LLP setting forth in reasonable detail the
basis for any such dispute (any such dispute being hereinafter called a
"DISAGREEMENT"). The parties shall promptly commence good faith
negotiations with a view to resolving all such Disagreements. If
neither Buyer nor Sellers' Representative provides a Notice of
Disagreement to the other within the thirty (30) day period set forth
in this subsection (b), the parties shall be deemed to have accepted
such Adjustment Amount Documents in the form delivered to them by
PriceWaterhouseCoopers LLP.
(c) If only Buyer shall deliver a Notice of Disagreement and
Sellers' Representative does not dispute all or any portion of such
Notice of Disagreement by giving written notice to Buyer setting forth
in reasonable detail the basis for such dispute within thirty (30) days
following the delivery of such Notice of Disagreement, Sellers shall be
deemed to have irrevocably accepted the Adjustment Amount Documents as
modified in the manner described in the Notice of Disagreement. If only
Sellers' Representative shall deliver a Notice of Disagreement and
Buyer does not dispute all or any portion of such Notice of
Disagreement by giving written notice to the Sellers' Representative
setting forth in reasonable detail the basis for such dispute within
thirty (30) days following the delivery of such Notice of Disagreement,
Buyer shall be deemed to have irrevocably accepted the Adjustment
Amount Documents as modified in the manner described in the Notice of
Disagreement.
(d) If (i) both Buyer and Sellers' Representative deliver a
Notice of Disagreement within the thirty (30) day period set froth in
the preceding subsection (b) or (ii) Buyer or Sellers' Representative
shall dispute a Notice of Disagreement delivered by the other within
the thirty (30) day period set forth in the preceding subsection (c),
and within thirty (30) days following the delivery to Buyer or Sellers'
Representative, as the case may be, of the notice of such dispute,
Sellers' Representative and Buyer do not resolve the Disagreement (as
evidenced by a written agreement between them), in each case such
Disagreement shall thereafter be referred to Deloitte & Touche LLP (the
"INDEPENDENT ACCOUNTING FIRM") for a resolution of such Disagreement in
accordance with the terms of this Agreement. The determinations of the
Independent Accounting Firm with respect to any Disagreement shall be
rendered within thirty (30) days after referral of the Disagreement to
such firm or as soon thereafter as reasonably possible, shall be final
and binding upon the parties, the amount so determined shall be used to
complete the final Adjustment Amount Documents and the parties agree
that the procedures set forth in this Section 2.7 shall be the sole and
exclusive remedy with respect to the determination of the Adjustment
Amount. Buyer and Sellers' Representative shall use their Best Efforts
to cause the Independent Accounting Firm to render its determination
within the thirty (30) day period described in the previous sentence,
and each shall cooperate with the Independent Accounting Firm and
provide the Independent Accounting Firm with access to the books,
records, personnel and representatives of it and such other information
as such firm may require in order to render its determination. All
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of the fees and expenses of any Independent Accounting Firm retained
pursuant to this subsection (d) shall be shared equally by Buyer, on
the one hand, and Sellers, on the other hand.
(e) Promptly after the Adjustment Amount Documents have been
finally determined in accordance with subsections (a), (b), (c) and (d)
of this Section 2.7 (including by means of a deemed acceptance of such
documents by Buyer or by Sellers' Representative as provided in
subsections (b) and (c), respectively), but in no event later than ten
(10) business days following such final determination (the
"SUPPLEMENTAL CLOSING DATE"), the parties hereto shall hold a
supplemental closing (the "SUPPLEMENTAL CLOSING"), either by telephone
or in person at a mutually convenient location. If the Adjustment
Amount is greater than the Estimated Adjustment Amount, Buyer shall
deliver, or shall cause to be delivered, to each Seller on the
Supplemental Closing Date an amount in cash equal to such Seller's
portion of the difference (allocated in the proportions set forth in
Part 2.5(b)(i) of the Sellers Disclosure Schedule) by check or Wire
Transfer as set forth in instructions from such Seller. If the
Adjustment Amount is less than the Estimated Adjustment Amount, each
Seller shall deliver to Buyer on the Supplemental Closing Date an
amount in cash equal to such Seller's portion of the difference
(allocated in the proportions set forth in Part 2.5(b)(i) of the
Sellers Disclosure Schedule) by Wire Transfer. In any case, the amount
payable at the Supplemental Closing shall be accompanied by interest
thereon calculated at the Prime Rate compounded daily for the period
from the Closing Date up to but not including the Supplemental Closing
Date.
2.8. SMARTVEST EARNOUT AMOUNT
In addition to the Base Purchase Price as affected by the Adjustment
Amount, Buyer shall pay to Sellers an amount equal to the SmartVest Earnout
Amount (as defined in Schedule 2.8) payable in accordance with the terms and
conditions set forth on Schedule 2.8.
2.9. EARNOUT PROCEDURE
(a) From and after the Closing Date, Buyer shall deliver to
the Sellers' Representative, for each interim fiscal quarter, for each
fiscal year and for any period ending on a Payment Acceleration Date:
(i) a statement (an "ACCOUNTING") setting forth the Revenues for such
quarterly period of (x) Block Broker Dealers derived from Non-Broker
Assisted Online Services and (y) Block Broker Dealers derived from
Broker Assisted Online Accounts and SmartVest Earnout Amount for the
applicable period, which shall set forth in reasonable detail the
calculation of such Revenues and SmartVest Earnout Amount, which
calculation shall be made in a manner consistent in all respects with
the provisions of this Agreement, including the definition of terms and
calculations provided in Schedule 2.8 hereto, and (ii) a letter from
PriceWaterhouseCoopers LLP (or such other firm as may be acting as the
independent accountants for Buyer) certifying as to the procedures and
principles used to calculate such Revenues for such period. Commencing
on the first anniversary of the Closing, Buyer shall also deliver to
the Sellers' Representative a consolidated balance sheet of SmartVest,
Inc. as of the close of each
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fiscal year and the related statements of income and cash flows of the
Acquired Companies for such fiscal year, prepared in accordance with
GAAP (an "ANNUAL FINANCIAL STATEMENT"). Each Accounting shall be
provided by Buyer to Sellers' Representative within forty-five (45)
days of the end of the applicable fiscal quarter within ninety (90)
days of the end of the applicable fiscal year and within forty-five
(45) days of any other event requiring Buyer to deliver an Accounting.
Each Annual Financial Statement shall be provided by Buyer to Sellers'
Representative within ninety (90) days of the end of the applicable
fiscal year or such shorter period as Buyer may be required under the
Exchange Act to file reports on Form 10-K (or any successor report)
with the SEC).
(b) Following the receipt by the Sellers' Representative of an
Accounting or Annual Financial Statement, Buyer shall provide to the
Sellers' Representative reasonable access to the books and records of
SmartVest, Inc. and the other entities responsible for the Revenues and
to their personnel and accountants (including the independent
accountants referred to subsection (a) of this Section 2.9), during
normal business hours, at the request of the Sellers' Representative
for the sole purpose of reviewing the Accounting or Annual Financial
Statement, as the case may be; provided, however, that such access
shall be conducted in a manner intended to preserve the confidentiality
of such information and not unreasonably interfere with the operation
of the business of SmartVest, Inc. and the other entities responsible
for the Revenues and Buyer.
(c) Within twenty (20) business days after delivery of an
Accounting or Annual Financial Statement, as the case may be, the
Sellers' Representative may dispute all or any portion of the
Accounting or Annual Financial Statement, as the case may be, by giving
a Notice of Disagreement in the manner provided in Section 2.7. Such
Disagreement, if any, shall be resolved in the manner provided in
Section 2.7. If the Sellers' Representative has not given Buyer a
Notice of Disagreement, then the Accounting or Annual Financial
Statement, as the case may be, shall be binding upon the parties.
(d) On the tenth business day following the final
determination of the SmartVest Earnout Amount for each quarter or for
the period ending on the date on which a payment of a Qualifying
Acquisition Earnout Amount is due, Buyer will pay the SmartVest Earnout
Amount for such period, or the Qualifying Acquisition Earnout Amount,
as the case may be, to Sellers. Payments shall be made in immediately
available funds and shall be made in the manner and allocated to the
respective Sellers in the proportions set forth in Part 2.5(b)(i) of
the Sellers Disclosure Schedule.
(e) The provisions of this Section 2.9 shall terminate and be
of no further force and effect as set forth in Schedule 2.8.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller severally, for himself, herself or itself, represents and
warrants to Buyer and Block as follows:
3.1. AUTHORITY; NO CONFLICT
(a) Assuming due authorization, execution and delivery hereof
by the other parties hereto, this Agreement constitutes the legal, valid and
binding obligation of such Seller, enforceable against him/her/it in
accordance with its terms, except to the extent that (i) enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other
laws affecting the enforcement of creditor's rights generally, (ii) the
availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any such Proceeding may
be brought and (iii) restrictions of public policy apply. Upon the execution
and delivery of the Escrow Agreements by Sellers' Representative and by the
other parties thereto and the Seller's Release, the
Noncompetition/Nonsolicitation Agreement (if applicable) and the Tax
Procedures Agreement by such Seller and by the other parties thereto
(collectively, "SELLER'S CLOSING DOCUMENTS"), such Seller's Closing
Documents will constitute the legal, valid and binding obligations of such
Seller, enforceable against him/her/it in accordance with their respective
terms, except to the extent that (i) enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting
the enforcement of creditor's rights generally, (ii) the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any such Proceeding may be brought and
(iii) restrictions of public policy apply. Such Seller has the absolute and
unrestricted right, power, authority and capacity to execute and deliver
this Agreement and such Seller's Closing Documents and to perform
his/her/its obligations under this Agreement and such Seller's Closing
Documents.
(b) Except as set forth in Part 3.1 of the Sellers Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time) contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Contemplated Transactions,
any Legal Requirement or any Order to which such Seller may be subject and
which would prevent or materially delay completion of the Contemplated
Transactions.
Except as set forth in Part 3.1 of the Sellers Disclosure Schedule,
such Seller is not required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions by such
Seller.
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3.2. TITLE TO SHARES AND FMS SHARES
Such Seller is and will be on the Closing Date the record and
beneficial owner and holder of the number of Shares and FMS Shares set forth
opposite the name of such Seller in Part 3.2 of the Sellers Disclosure Schedule,
free and clear of all Encumbrances. No legend or other reference to any
purported Encumbrance appears upon any certificate representing Shares or FMS
Shares held by such Seller. All of the Shares and/or FMS Shares held by such
Seller have been duly authorized, validly issued and are fully paid and
nonassessable. Except for this Agreement, there are no Contracts relating to the
sale or transfer of any Shares or FMS Shares held by such Seller.
3.3. BROKERS OR FINDERS
Such Seller has incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement except for fees payable to
Goldman, Sachs & Co.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND FMS
The Company, on behalf of itself and its Subsidiaries, and FMS, on
behalf of itself and its Subsidiaries, represent and warrant, except as set
forth in the Sellers Disclosure Schedule (it being agreed that the mere
inclusion of an item in the Sellers Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission that such item
represents a material exception of fact, event or circumstance or that such item
is reasonably likely to result in a Company Material Adverse Effect; it being
also agreed that items disclosed in a particular section of the Sellers
Disclosure Schedule shall be deemed disclosed only with respect to the
corresponding section(s) of this Agreement to which it expressly refers) to
Buyer and Block as follows (it being agreed that to the extent reference is made
in this Article 4 to the Acquired Companies, the Company and FMS will be deemed
to represent and warrant only with respect to themselves individually and their
respective Subsidiaries):
4.1. ORGANIZATION AND GOOD STANDING
(a) Part 4.1 of the Sellers Disclosure Schedule contains a
complete and accurate list for each Acquired Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized
to do business and its capitalization (including the identity of each
shareholder and the number of shares held by each). Each Acquired Company is
a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation, with full corporate power and
authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use and to perform
all its obligations under Applicable Contracts. Each Acquired Company is
duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of
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the activities conducted by it, requires such qualification, all of which
jurisdictions are disclosed in Part 4.1 of the Sellers Disclosure Schedule.
(b) The Company and FMS have delivered or specifically
identified and made available to Buyer copies of the Organizational
Documents of each Acquired Company, as currently in effect.
4.2. AUTHORITY; NO CONFLICT
(a) Assuming the due authorization, execution and delivery of
this Agreement by the other parties hereto, this Agreement constitutes the
legal, valid and binding obligation of the Company and FMS enforceable
against each of them in accordance with its terms, except to the extent that
(i) enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors rights
generally, (ii) the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any such
Proceeding may be brought and (iii) restrictions of public policy apply. The
Company and FMS have the absolute and unrestricted right, power, authority
and capacity to execute and deliver this Agreement and to perform their
obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement nor
the consummation or performance of any of the Contemplated Transactions
will, directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with or result in a violation of
(A) any provision of the Organizational Documents of the Acquired
Companies, or (B) any resolution adopted by the board of directors or
the shareholders of any Acquired Company;
(ii) contravene, conflict with or result in a violation of
any Legal Requirement or any Order to which any Acquired Company, or
any of the assets owned or used by any Acquired Company, may be
subject;
(iii) contravene, conflict with or result in a violation
of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate or modify,
any Governmental Authorization that is held by any Acquired Company or
that otherwise relates to the business of, or any of the assets owned
or used by, any Acquired Company;
(iv) result in a violation or breach of any provision of,
or give any Person the right to declare a Default or exercise any
remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate or modify, any Material Contract; or
(v) result in the imposition or creation of any material
Encumbrance upon or with respect to any of the assets owned or used by
any Acquired Company.
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Except for (x) Consents, approvals and notices as are set forth in Part
4.2 of the Sellers Disclosure Schedule, (y) the applicable filings under the HSR
Act and (z) Consents, approvals and notices the failure to obtain which will not
prevent or materially delay consummation of the Contemplated Transactions or
otherwise materially adversely affect the business, operation or ownership of
the Acquired Companies, no Acquired Company is or will be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3. CAPITALIZATION
The authorized equity securities of the Company consist of 40,000,000
shares of common stock, par value $0.10 per share, of which 30,520,225 shares
are issued and outstanding and constitute the Shares. The authorized equity
securities of FMS consists of 50,000 shares of common stock, par value $1.00 per
share, of which 1,000 shares are issued and outstanding and constitute the FMS
Shares. Sellers are the record owners and holders of all of the Shares and FMS
Shares, to the Knowledge of the Company or FMS, free and clear of all
Encumbrances. With the exception of the Shares and FMS Shares (which are owned
by Sellers), all of the outstanding equity securities and other securities of
each Acquired Company are owned of record and beneficially by one or more of the
Acquired Companies, free and clear of all Encumbrances. No legend or other
reference to any purported Encumbrance appears upon any certificate representing
equity securities of any Acquired Company. All of the outstanding equity
securities of each Acquired Company have been duly authorized, validly issued
and are fully paid and nonassessable. There are no Contracts relating to the
issuance, sale or transfer of any equity securities or other securities of any
Acquired Company. None of the outstanding equity securities or other securities
of any Acquired Company was issued in violation of the Securities Act or any
other Legal Requirement. No Acquired Company owns, or has any Contract
obligating it to acquire, any equity securities or other securities of any
Person (other than Acquired Companies) or any direct or indirect equity or
ownership interest in any other business. No former holder of equity securities
of any Acquired Company previously redeemed by any Acquired Company has any
valid claim for additional payment for any such equity securities so redeemed.
4.4. FINANCIAL STATEMENTS; REPORTS
The Company and FMS each have delivered to Buyer: (a) consolidated
balance sheets of it and its Subsidiaries as at December 31 in each of the years
1996 and 1997, and the related consolidated statements of income, changes in
stockholders' equity and cash flow for each of the fiscal years then ended, and
with respect to the Company but not FMS the report thereon of Ernst & Young LLP,
independent certified public accountants, (b) a consolidated balance sheet of it
and its Subsidiaries as at December 31, 1998 (including the notes thereto, the
"BALANCE Sheet"), and the related consolidated statements of income, changes in
stockholders' equity and cash flow for the fiscal year then ended, and with
respect to the Company but not FMS the report thereon of Ernst & Young LLP,
independent certified public accountants, and (c) an unaudited consolidated
balance sheet of it and its Subsidiaries as at June 25, 1999 (with respect to
the Company and its Subsidiaries)(the "INTERIM BALANCE SHEET") and as at June
30, 1999 (with respect to FMS and its Subsidiaries) and the related unaudited
consolidated statements of income,
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changes in stockholders' equity and cash flow for the six (6) months then ended,
including in each case the notes thereto. Such financial statements and notes
fairly present in all material respects the financial condition and the results
of operations, changes in stockholders' equity and cash flow of the applicable
Acquired Companies as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP (except as indicated
in the notes thereto), subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and the absence of
notes. The financial statements referred to in this Section 4.4 reflect in all
material respects the consistent application of such accounting principles
throughout the periods involved, except as disclosed in the notes to such
financial statements. No financial statements of any Person other than the
Acquired Companies are required by GAAP to be included in the consolidated
financial statements of the Company or FMS, as the case may be. The Company has
delivered to Buyer true and complete copies of the FOCUS Reports filed on Form
X-17A-5 (the "FOCUS REPORTS") as of June 30, 1999 by each Subsidiary that is a
"broker" or "dealer", as such terms are defined in Sections 2(a)(6) and 2(a)(11)
of the 1940 Act (collectively, the "BROKER-DEALER SUBSIDIARIES"). Each such
FOCUS Report complied (and with respect to FOCUS Reports filed after the date
hereof and prior to the Closing Date, will comply) in all material respects at
the date thereof with the rules and regulations of the SEC relating thereto and
fairly present in all material respects the information required to be presented
therein pursuant to Rule 17a-5 under the Exchange Act. The Company and FMS have
delivered or specifically identified and made available to Buyer copies of all
material reports and other filings required to be filed by any Acquired Company
with all Governmental Bodies since January 1, 1996, including without limitation
Form BD and all amendments thereto, and Form ADV and all amendments thereto. All
such reports and filings were at the time of filing true and accurate in all
material respects, and were prepared in compliance with all applicable Laws.
4.5. BOOKS AND RECORDS
The books of account, minute books, stock record books and other
records of the Acquired Companies (the "Records"), all of which Records which
are material have been specifically identified and made available to Buyer, are
complete and correct in all material respects and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of the Acquired Companies
contain records, accurate and complete in all material respects, of meetings
held of, and corporate action taken by, the shareholders, the Boards of
Directors and committees of the Boards of Directors of the Acquired Companies,
and no meeting of any such shareholders, Board of Directors or committee
material to the Contemplated Transactions or the Business of the Acquired
Companies or the other representations and warranties of the Company contained
herein has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Acquired Companies.
4.6. TITLE TO PROPERTIES; ENCUMBRANCES
Part 4.6 of the Sellers Disclosure Schedule contains a complete and
accurate list of all real property, leaseholds or other interests therein owned
by any Acquired Company. The
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Company and FMS have delivered or specifically identified and made available to
Buyer copies of the deeds and other instruments (as recorded) by which the
Acquired Companies acquired such real property and interests, and copies of all
title insurance policies, opinions, abstracts and surveys in the possession of
the Acquired Companies and relating to such property or interests. The Acquired
Companies own (with good and marketable title in the case of real property,
subject only to the matters permitted by the following sentence) all the
properties and assets (whether real, personal or mixed and whether tangible or
intangible) that they purport to own located in the facilities currently owned
or operated by the Acquired Companies or reflected as owned in the books and
records of the Acquired Companies, including all of the properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet (except for assets
held under capitalized leases disclosed or not required to be disclosed in Part
4.6 of the Sellers Disclosure Schedule and personal property and assets sold
since the date of the Balance Sheet and the Interim Balance Sheet, as the case
may be, in the Ordinary Course of Business), and all of the properties and
assets purchased or otherwise acquired by the Acquired Companies since the date
of the Balance Sheet (except for personal property acquired and sold since the
date of the Balance Sheet in the Ordinary Course of Business and consistent with
past practice), which subsequently purchased or acquired properties and assets
(other than inventory and short-term investments) are listed in Part 4.6 of the
Sellers Disclosure Schedule. All material properties and assets reflected in the
Balance Sheet and the Interim Balance Sheet are free and clear of all
Encumbrances and are not, in the case of real property, subject to any
rights-of-way, building use restrictions, exceptions, variances, reservations or
limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Balance Sheet or the
Interim Balance Sheet as securing specified liabilities or obligations, with
respect to which no Default (or event that, with notice or lapse of time or
both, would constitute a Default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the Interim Balance Sheet, with respect to which no Default (or event that, with
notice or lapse of time or both, would constitute a Default) exists, (c) Liens
for current taxes not yet due, and (d) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or materially impairs the use of the property
subject thereto, or materially impairs the operations of any Acquired Company,
and (ii) zoning laws and other land use restrictions that do not impair the
present use, or use currently contemplated by any Acquired Company, of the
property subject thereto. All buildings, plants and structures owned by the
Acquired Companies lie wholly within the boundaries of the real property owned
by the Acquired Companies and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person (except to the extent
such failures would be covered by title insurance policies).
4.7. CONDITION AND SUFFICIENCY OF ASSETS
As of the date hereof, the buildings, plants, structures and equipment
of the Acquired Companies are (i) structurally sound in all material respects
(with respect to owned buildings, plants, structures and equipment), (ii)
structurally sound in all material respects to the Knowledge of the Acquired
Companies and Sellers (with respect to leased buildings, plants, structures and
equipment), (iii) in satisfactory operating condition and repair (ordinary wear
and tear excepted), and (iv) adequate for the uses to which they are being put.
The buildings, plants, structures and equipment of the Acquired Companies are
sufficient for the continued conduct of
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the Acquired Companies' businesses after the Closing in substantially the same
manner as conducted prior to the Closing.
4.8. ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies that are reflected on
the Balance Sheet or the Interim Balance Sheet or on the accounting records of
the Acquired Companies as of the Closing Date (collectively, the "ACCOUNTS
RECEIVABLE") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business
or fully secured margin accounts except for such failures to represent valid
obligations or fully secured margin accounts for which there are adequate
reserves. As of the Closing Date, the reserves that are established with respect
to Accounts Receivable on the Closing Balance Sheet will be adequate and
calculated consistent with past practice. There is no contest, claim or right of
set-off, other than in the Ordinary Course of Business, under any Contract with
any obligor of any Accounts Receivable relating to the amount or validity of
such Accounts Receivable. Part 4.8 of the Sellers Disclosure Schedule contains a
complete and accurate list of all Accounts Receivable in excess of $100,000 (for
margin accounts) and $50,000 (for non-margin accounts) per account debtor as of
the date of the Interim Balance Sheet, which list sets forth for such non-margin
accounts the aging of such Accounts Receivable.
4.9. NO UNDISCLOSED LIABILITIES
Except (i) as set forth in Part 4.9 of the Sellers Disclosure Schedule,
and (ii) as of the Closing Date, as computed as part of the Estimated Adjustment
Amount, the Acquired Companies have no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent or
otherwise) except for (A) liabilities that are reflected or reserved against in
the Balance Sheet or the Interim Balance Sheet (including any notes thereto
previously provided to Buyer), (B) liabilities that are reflected or reserved
for in the Closing Balance Sheet (when prepared) and (C) liabilities which are
not so reflected or reserved for with respect to pending or potential future
customer arbitrations and other ordinary course liabilities and potential future
expenses relating to pre-Closing conditions which do not exceed $10,000,000 in
the aggregate in the period beginning the date hereof and ending March 31, 2001
which may arise in the Ordinary Course of Business ("ORDINARY COURSE
LIABILITIES").
4.10 TAXES
(a) The Acquired Companies have filed or caused to be filed (on a
timely basis since December 31, 1995) all income and other material Tax
Returns that are or were required to be filed by or with respect to any of
them, either separately or as a member of a group of corporations, pursuant
to applicable Legal Requirements. The Company has delivered or specifically
identified and made available to Buyer copies of all such Tax Returns filed
since December 31, 1995.
(b) The Acquired Companies have paid, or made provision for the
payment of, all Taxes required to be paid, or for which any Acquired Company
may be liable, under applicable Legal Requirements for any taxable
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period or portion of a taxable period ending on or before the Closing Date
to the proper Governmental Bodies, and there are no grounds for the
assessment of any additional Taxes against any or all of the Acquired
Companies or their respective assets or property with respect to such
periods or portions of such periods, except for those Taxes, if any, listed
in Part 4.10 of the Disclosure Statement and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet and the Interim Balance Sheet.
(c) The United States Federal and state income Tax Returns of
each Acquired Company subject to such Taxes have been audited by the IRS or
relevant state Tax authorities or are closed by the applicable statute of
limitations for all taxable years through 1995. Part 4.10 of the Disclosure
Schedule contains a complete and accurate list of all current audits of all
such Tax Returns, including a reasonably detailed description of the nature
of each audit. All deficiencies proposed as a result of such audits have
been paid, reserved against, settled or are being contested in good faith by
appropriate proceedings. Part 4.10 of the Disclosure Schedule describes all
adjustments to the United States Federal income Tax Returns filed by any
Acquired Company or any group of corporations including any Acquired Company
for all taxable years since 1995, and the resulting deficiencies proposed by
the IRS. Except as described in Part 4.10 of the Disclosure Schedule, no
Acquired Company has given or been requested to give waivers or extensions
(or is or would be subject to a waiver or extension given by any other
Person) of any statute of limitations relating to the payment of Taxes of
any Acquired Company or for which any Acquired Company may be liable.
(d) There exists no proposed Tax assessment against any Acquired
Company except as disclosed in the Balance Sheet or in Part 4.10 of the
Disclosure Schedule. No consent to the application of Section 341(f)(2) of
the IRC has been filed, or been agreed to be filed, with respect to any
property or assets held, acquired or to be acquired by any Acquired Company.
All Taxes that any Acquired Company is or was required by Legal Requirements
to withhold or collect (other than a de minimis amount not to exceed $10,000
in the aggregate) have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person.
(e) All Tax Returns filed by (or that include on a consolidated
basis) any Acquired Company are true, correct and complete in all material
respects. There is no Tax sharing agreement that will require any payment by
any Acquired Company after the date of this Agreement other than a payment
to another Acquired Company.
(f) No Acquired Company is required to include in income any
adjustment under Section 481(a) of the IRC by reason of a change in
accounting method initiated by any Acquired Company or any other person and
the IRS has not proposed any such adjustment or change in accounting method.
(g) No Acquired Company is a party to any safe harbor lease
within the meaning of Section 168(f)(8) of the IRC, as in effect prior to
amendment by the Tax Equity and Fiscal Responsibility Act of 1982. None of
the assets of any Acquired Company have been
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financed with, or directly or indirectly secures, any industrial revenue
bonds or debt the interest on which is tax-exempt under Section 103(a) of
the IRC. No Acquired Company is the borrower or guarantor of any outstanding
industrial revenue bonds and is not a tenant, principal user or related
person to any principal user (within the meaning of Section 144(a) of the
IRC) of any property which has been financed or improved with the proceeds
of any industrial revenue bonds.
(h) No Acquired Company is a party to any agreement, contract,
arrangement, or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the IRC or result in a Tax to the recipient of
such payment pursuant to Section 4999 of the IRC, other than those retention
bonuses awarded in anticipation of or in connection with the transactions
contemplated by this Agreement which are either listed in Part 4.10 of the
Disclosure Schedule or otherwise consented to in writing by Buyer.
(i) No Acquired Company is a partner in any joint venture,
partnership or other arrangement or contract that could be treated as a
partnership for Federal income Tax purposes.
4.11. NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any adverse
change in the business, operations, properties, assets or financial condition of
any Acquired Company, and no event has occurred or circumstance exists that is
reasonably likely to result in a Company Material Adverse Effect.
4.12. ERISA AND RELATED EMPLOYEE BENEFIT MATTERS
(a) Welfare Benefit Plans. Part 4.12 of the Sellers Disclosure
Schedule lists each "employee welfare benefit plan" (within the meaning of
Section 3(1) of ERISA) maintained by each Acquired Company or to which each
Acquired Company contributes or is required to contribute, including any
multiemployer plan ("WELFARE BENEFIT PLAN"). Without limiting the foregoing,
Part 4.12 of the Sellers Disclosure Schedule discloses any obligations of
each Acquired Company to provide retiree health benefits to current or
former employees of each Acquired Company.
(b) Pension Benefit Plans. Part 4.12 of the Sellers Disclosure
Schedule lists each "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) maintained by each Acquired Company or to which each
Acquired Company contributes or is required to contribute, including any
multiemployer plan ("PENSION BENEFIT PLAN"). To the Knowledge of the Company
or FMS, all costs of the Pension Benefit Plans have been provided for on the
basis of consistent methods and, if applicable, in accordance with sound
actuarial assumptions and practices that are acceptable under ERISA.
(c) Compliance with Applicable Law. To the Knowledge of the
Company or FMS, each of the Welfare Benefit Plans, Pension Benefit Plans,
any related trust agreements, annuity contracts and other funding
instruments substantially comply
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with the material provisions of ERISA and the IRC and all other statutes,
orders, governmental rules and regulations applicable to such Welfare
Benefit Plans and Pension Benefit Plans. To the Knowledge of the Company or
FMS, each Acquired Company has performed all of its material obligations
currently required to have been performed under all Welfare Benefit Plans
and Pension Benefit Plans. To the Knowledge of the Company or FMS, there
are no actions, suits or claims (other than routine claims for benefits)
pending or threatened against or with respect to any Welfare Benefit Plans,
Pension Benefit Plans or the assets of such plans, and to the Knowledge of
the Company or FMS, no facts exist that could give rise to any actions,
suits or claims (other than routine claims for benefits) against such plans
or the assets of such plans. To the Knowledge of the Company or FMS, each
Pension Benefit Plan is qualified in form and operation under IRC Section
401(a). To the Knowledge of the Company or FMS, no event has occurred that
will or could reasonably be expected to give rise to a disqualification of
any Pension Benefit Plan under IRC Section 401(a). To the Knowledge of the
Company or FMS, no event has occurred that will or could reasonably be
expected to subject any Welfare Benefit Plan or Pension Benefit Plan to tax
under IRC Section 511.
(d) Administration of Plans. To the Knowledge of the Company or
FMS, each Welfare Benefit Plan and each Pension Benefit Plan has been
administered to date in substantial compliance with the material
requirements of ERISA and the IRC. To the Knowledge of the Company or FMS,
no plan fiduciary of any Welfare Benefit Plan or Pension Benefit Plan has
engaged in (i) any transaction in violation of Section 406(a) or (b) of
ERISA, or (ii) any "prohibited transaction" (within the meaning of Section
4975(c)(1) of the IRC or Section 406 of ERISA) for which no exemption exists
under Section 408 of ERISA or Section 4975(d) of the IRC which (in case of
either clauses (i) or (ii)) could reasonably be expected to result in a tax
or penalty under Section 502 of ERISA or Section 4975 of the IRC.
(e) Title IV Plans. There is no Pension Benefit Plan which is
subject to the provisions of Title IV of ERISA in which any Acquired Company
(for purposes of this Section each Acquired Company shall include each trade
or business, whether or not incorporated, which is a member of a group of
which each Acquired Company is a member and which is under common control
within the meaning of IRC Section 414 and the regulations thereunder)
participates or has participated during the six (6) years prior to the date
hereof. No Acquired Company has any liability to any multiemployer plan
maintained for the benefit of any of its present or former employees.
(f) Other Employee Benefit Plans and Agreements. Part 4.16 of the
Sellers Disclosure Schedule lists each material fringe benefit, profit
sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement, welfare or other incentive plan
or agreement or employment agreement maintained by an Acquired Company for
the benefit of its employees that is not terminable on thirty (30) days or
less written notice, and any other material employee benefit plan,
agreement, arrangement or commitment not previously listed in Part 4.12 of
the Sellers Disclosure Schedule that is maintained by any Acquired Company
or to which each
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Acquired Company contributes or is required to contribute for the benefit of
its employees.
(g) Continuation Coverage Requirements for Health Plans. To the
Knowledge of the Company or FMS, all Welfare Benefit Plans of each Acquired
Company (including any group health plans maintained for the benefit of
employees of affiliates of each Acquired Company that must be taken into
account under IRC Section 4980B) have been operated in material compliance
with the group health plan continuation coverage requirements of Section
4980B of the IRC and Title I, Part 6 of ERISA.
(h) Valid Obligations. To the Knowledge of the Company or FMS,
all Welfare Benefit Plans, Pension Benefit Plans, related trust agreements,
annuity contracts or other funding instruments, and all plans, agreements,
arrangements and commitments referred to in clause (f) of this Section are
legal, valid and binding and in full force and effect, and to the Knowledge
of the Company or FMS, there are no Defaults thereunder that could
reasonably be expected to result in a liability to any Acquired Company.
(i) Severance; Non-Deductible Payments. Except as set forth in
Part 4.12 of the Sellers Disclosure Schedule, the consummation of the
Contemplated Transactions will not (A) entitle any current or former
employee of any Acquired Company to severance pay, unemployment compensation
or any other payment, except as expressly provided in this Agreement and (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee or former employee.
(j) Compliance with Certain Laws. To the Knowledge of the Company
or FMS, the Acquired Companies are in material compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours including, without limitation,
the Fair Labor Standards Act, the Family and Medical Leave Act of 1993, the
Americans with Disabilities Act of 1990, ERISA, the Equal Employment
Opportunities Act, as amended by the Civil Rights Act of 1991, the
Occupational Safety and Health Act, the Immigration Reform and Control Act
of 1986, the Age Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964, the Older Workers Benefit Protection Act, and all other
applicable Laws, each as amended to date.
4.13. GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LEGAL REQUIREMENTS
(a) Each of the Acquired Companies holds all Governmental
Authorizations that are necessary for the lawful ownership, operation and
use of its properties and assets and the conduct of its businesses under and
pursuant to all applicable Laws relating to the Acquired Companies or any of
their respective assets, properties or operations (the "REQUIRED
GOVERNMENTAL AUTHORIZATIONS"). The Governmental Authorizations that are
material to the business or operations of the Acquired Companies are listed
on Part 4.13 of the Sellers Disclosure Schedule. Each Required Governmental
Authorization is valid and in full force and effect.
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(b) (i) Each Acquired Company is, and at all times since December
31, 1997, has been, in full compliance with all of the terms and
requirements of each Required Governmental Authorization;
(ii) No event has occurred or circumstance exists that is
reasonably likely to (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of or a failure
to comply with any term or requirement of any Required Governmental
Authorization, or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation or termination of, or any modification
to, any Required Governmental Authorization;
(iii) No Acquired Company has received, at any time since
December 31, 1997, any written notice or other communication (whether oral
or written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible or potential violation of or failure to comply
with any term or requirement of any Required Governmental Authorization, or
(B) any actual, proposed, possible or potential revocation, withdrawal,
suspension, cancellation, termination of or materially adverse modification
to any Governmental Authorization; and
(iv) All applications required to have been filed for the
renewal of the Required Governmental Authorizations have been duly filed on
a timely basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such Required
Governmental Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
(c) In particular, but without limiting the generality of the
foregoing: each Acquired Company has filed all material reports, registrations,
notifications and statements, together with any amendments required to be made
with respect thereto (collectively, the "REGISTRATIONS"), that any Acquired
Company was required to file with (i) the SEC, (ii) any applicable domestic or
foreign industry self-regulating organization ("SRO"), (iii) the NASD, (iv) the
NYSE and (v) any other federal, state or foreign exchange, quotation system or
governmental or regulatory agency or authority (together with the SEC, the SROs,
the NASD and the NYSE are collectively referred to as the "REGULATORY AGENCIES")
since January 1, 1996. All Registrations filed by each Acquired Company with the
Regulatory Agencies are currently in full force and effect (if required to be)
and no Acquired Company has received any written notice from any Regulatory
Agency to the contrary. Each Broker-Dealer Subsidiary is, and on the Closing
Date will be, duly registered under the Exchange Act as a broker-dealer with the
SEC, and is, and on the Closing Date will be, in compliance in all material
respects with the applicable provisions of the Exchange Act and the applicable
rules and regulations thereunder, including, but not limited to the net capital
requirements thereof. Each Broker-Dealer Subsidiary is, and on the Closing Date
will be, a member in good standing with all required SROs and in compliance in
all material respects with all applicable rules and regulations of the SROs.
Each Broker-Dealer Subsidiary is, and on the Closing Date will be, duly
registered as a broker-dealer under, and in compliance in all material respects
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with, the applicable laws, rules and regulations of all 50 states and all other
jurisdictions in which it is required to be so registered. Each Acquired Company
is in compliance in all material respects with all applicable laws relating in
any way to (i) the conduct of its business, including, but not limited to, the
Investment Advisers Act of 1940, as amended (the "ADVISERS ACT"), the 1940 Act,
the Exchange Act and all Laws promulgated thereunder and all other applicable
Laws promulgated by the SEC or the NASD, and (ii) anti-competitive practices,
price fixing, health and safety, environmental, employment and discrimination
matters.
(d) The Company and FMS have provided or specifically identified
and made available to Buyer true and complete copies of (1) all written policies
and procedures adopted by each Acquired Company pursuant to Section 204A of the
Advisers Act and the Insider Trading and Securities Fraud Enforcement Act of
1988, as amended, and any written Chinese Wall policies and procedures, (2) any
Code of Ethics or policies governing the personal securities transactions of any
of the Acquired Companies' employees, (3) a list of all of each Acquired
Company's employees reporting personal securities transactions to such Acquired
Company pursuant to Rule 204-2(a)(12) under the Advisers Act, (4) each Acquired
Company's proxy voting policies and procedures and (5) all audit reports issued
by the SEC or the NASD.
(e) The Company and FMS have delivered or specifically identified
and made available to Buyer true, correct and complete copies of each
Broker-Dealer Subsidiary's Uniform Application for Broker-Dealer Registration on
Form BD (the "FORM BD"), reflecting all amendments thereto filed with the SEC to
the date hereof. The Forms BD of the Broker-Dealer Subsidiaries are in
compliance in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations thereunder and do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each director,
officer, agent and employee of each Broker-Dealer Subsidiary who is required to
be registered as a representative, principal or agent with the securities
commission of any state or with any SRO is duly registered as such and such
registration is in full force and effect. Each registered representative and
principal of each Broker-Dealer Subsidiary has at least the minimum series
license for the activities which such registered representative or principal
performs for such Broker-Dealer Subsidiary.
(f) The net capital, as such term is defined in Rule 15c3-1 under
the Exchange Act, of each Broker-Dealer Subsidiary satisfies, and since their
inception has satisfied, the minimum net capital requirements of the Exchange
Act and of the Laws of any jurisdiction in which the Broker-Dealer Subsidiary
conducts business, and has been sufficient to permit each Broker-Dealer
Subsidiary to operate without restriction on its ability to expand its business
under NASD Conduct Rule 3130 or NYSE Rule 326.
(g) None of the Broker-Dealer Subsidiaries nor any "associated
person" thereof is subject to a "statutory disqualification" as such term is
defined in Section 3(39) of the Exchange Act or is ineligible to serve as a
broker-dealer or as an
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associated person to a registered broker-dealer or otherwise subject to censure
or other remedies pursuant to Section 15(b) of the Exchange Act. None of the
Acquired Companies or any of their officers or directors is subject to any
order, proceeding, judgment or decree which would result in the applicability of
Rule 262(b) or (c) under the Securities Act. No officer or director of any
Acquired Company has been subject to any order, Proceeding, judgment or decree
which would be required to be disclosed pursuant to Item 401(f) of Regulation
S-K of the SEC.
4.14. LEGAL PROCEEDINGS; ORDERS
(a) There is no pending Proceeding:
(i) that has been commenced by or against any Acquired
Company or otherwise relates to any Acquired Company; or
(ii) against any Acquired Company that challenges, or that is
reasonably likely to have the effect of preventing, materially
delaying, making illegal or otherwise materially interfering with, any
of the Contemplated Transactions.
To the Knowledge of the Company or FMS, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or circumstance exists that
is reasonably likely to give rise to or serve as a basis for the commencement of
any such Proceeding. The Proceedings listed in Part 4.14 of the Sellers
Disclosure Schedule are not reasonably expected to have a material adverse
effect on the business, operations, assets or financial condition of the
Acquired Companies, taken as a whole.
(b) (i) There is no Order to which any of the Acquired Companies,
or any of the material assets owned or used by any Acquired Company, is
subject;
(ii) No Seller is subject to any Order that relates to the
business of, or any of the material assets owned or used by, any
Acquired Company; and
(iii) No officer, director or Significant Employee of any
Acquired Company is subject to any Order that prohibits such officer or
director from engaging in or continuing any conduct, activity or
practice relating to the business of any Acquired Company.
(c) (i) Each Acquired Company is, and at all times since December
31, 1997, has been, in compliance in all material respects with all of
the terms and requirements of each Order to which it, or any of the
assets owned or used by it, is or has been subject;
(ii) No event has occurred or circumstance exists that is
reasonably likely to constitute or result in (with or without notice or
lapse of time) a material violation of or material failure to comply
with any material term or
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requirement of any Order to which any Acquired Company, or any of the
material assets owned or used by any Acquired Company, is subject; and
(iii) No Acquired Company has received, at any time since
December 31, 1997, any written notice from any Governmental Body or any
other Person regarding any actual or alleged violation of, or failure
to comply with, any term or requirement of any Order to which any
Acquired Company, or any of the material assets owned or used by any
Acquired Company, is or has been subject.
4.15. ABSENCE OF CERTAIN CHANGES AND EVENTS
Since the date of the Balance Sheet, the Acquired Companies have
conducted their businesses only in the Ordinary Course of Business and there has
not been any:
(a) change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital
stock of any Acquired Company; issuance of any security of any Acquired
Company convertible into such capital stock; grant of any registration
rights with respect to any security of any Acquired Company; purchase,
redemption, retirement or other acquisition by any Acquired Company of any
shares of capital stock of any Acquired Company; or declaration or payment
of any dividend or other distribution or payment in respect of shares of
capital stock of any Acquired Company that would reduce the Aggregate
Consolidated Net Tangible Book Value to an amount less than $340,000,000;
(b) amendment to the Organizational Documents of any Acquired
Company;
(c) payment or increase by any Acquired Company of any bonuses
(not referred to in Section 8.3 [Payment of Bonuses]), salaries or other
compensation (except in the Ordinary Course of Business) to any shareholder,
director, officer or employee, or entry into any employment, severance or
similar Contract with any director, officer or employee that obligates an
Acquired Company to pay annual salary in excess of $400,000;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement or other employee benefit plan for or with any employees
of any Acquired Company, except for annual increases in the Ordinary Course
of Business;
(e) damage to or destruction or loss of any asset or property of
any Acquired Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, operations or
financial condition of the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit or similar agreement (other than in
the Ordinary Course of Business), or (ii) any Contract or
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transaction involving a total remaining commitment by or to any Acquired
Company of at least $500,000 (other than Contracts in the Ordinary Course of
Business);
(g) sale, lease or other disposition of any material asset or
property of any Acquired Company or mortgage, pledge or imposition of any
material lien or other material encumbrance on any material asset or
property of any Acquired Company (other than in the Ordinary Course of
Business);
(h) cancellation or waiver of any claims or rights with a value
to any Acquired Company in excess of $500,000;
(i) material change in the accounting methods used by any
Acquired Company (except as required by GAAP or any applicable Law); or
(j) agreement, whether oral or written, by any Acquired Company
to do any of the foregoing.
4.16. CONTRACTS; NO DEFAULTS
(a) Part 4.16(a) of the Sellers Disclosure Schedule contains a
complete and accurate list as of the date hereof, and the Company has
delivered or specifically identified and made available to Buyer true and
complete copies, of the following Contracts (other than those that were
entered into in the Ordinary Course of Business consistent with past
practice or that will terminate by their terms within sixty (60) days of the
date hereof or that are terminable upon no more than sixty (60) days' notice
without any material termination or similar fee coming due from the
applicable Acquired Company) (the "MATERIAL CONTRACTS"):
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by one or more Acquired
Companies of an amount or value in excess of $250,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to one or more Acquired
Companies of an amount or value in excess of $250,000;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or
receipts of one or more Acquired Companies in excess of $250,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of or
any leasehold or other interest in, any real or personal property
(except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than
$250,000 and with terms of less than one year);
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(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights or other intellectual
property, including agreements with current or former employees,
consultants or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership and other Applicable
Contract (however named) involving a sharing of profits, losses, costs
or liabilities by any Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of any Acquired
Company or any affiliate of an Acquired Company or limit the freedom of
any Acquired Company or any affiliate of an Acquired Company to engage
in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or by
any Person based on sales, purchases or profits, other than direct
payments for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by any Acquired Company to be responsible for consequential
damages;
(xii) each Applicable Contract for capital expenditures in
excess of $500,000;
(xiii) each written warranty, guaranty and or other similar
undertaking with respect to contractual performance extended by any
Acquired Company other than in the Ordinary Course of Business;
(xiv) each Applicable Contract granting the right to acquire
assets, equity securities or other securities of or other direct or
indirect ownership interest in any Person (other than Acquired
Companies) of a value in excess of $250,000; and
(xv) each amendment, supplement and modification (whether
oral or written) in respect of any of the foregoing.
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(b) (i) No Seller (and no Related Person) has or may acquire
any rights under, and no Seller has or may become subject to any
obligation or liability under, any Material Contract; and
(ii) No officer, director or Significant Employee of any
Acquired Company is bound by any Contract that purports to limit the
ability of such officer or director to (A) engage in or continue any
conduct, activity or practice relating to the business of any Acquired
Company, or (B) assign to any Acquired Company or to any other Person
any rights to any invention, improvement or discovery.
(c) Each Material Contract is in full force and effect and is
valid and enforceable in accordance with its terms, except to the extent
that (i) enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditor's rights
generally, (ii) the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
Proceeding may be brought, and (iii) restrictions of public policy apply.
(d) (i) Each Acquired Company has performed all material
obligations required to be performed by it to date under the Material
Contracts;
(ii) Each other Person that has or had any obligation or
liability under any Material Contract under which an Acquired Company
has or had any rights, to the Knowledge of the Company or FMS, has
performed all material obligations required to be performed by it to
date under the Material Contracts;
(iii) No event has occurred or circumstance exists that
(with or without notice or lapse of time) is reasonably likely to
result in a violation or breach of, or give any third party the right
to declare a Default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate or modify, any
Material Contract; and
(iv) No Acquired Company has given to or received from
any other Person, at any time since December 31, 1998, any written
notice or other communication (whether oral or written) regarding any
actual, alleged, possible or potential violation or breach of, or
Default under, any Material Contract.
(e) The Material Contracts relating to the sale or provision
of products or services by the Acquired Companies have been entered into
without the commission of any act, alone or in concert with any other
Person, or any consideration having been paid or promised, that is or would
be in violation of any Legal Requirement.
4.17. INSURANCE
(a) The Company and FMS have delivered or specifically
identified and made available to Buyer:
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(i) true and complete copies of all policies of insurance to
which any Acquired Company is a party or under which any Acquired
Company, or any director of any Acquired Company, is covered at the
date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance;
(iii) any statement by the auditor of any Acquired Company's
financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims;
(iv) true and complete copies of any self-insurance
arrangement by or affecting any Acquired Company, including any
reserves established thereunder;
(v) true and complete copies of any contract or arrangement,
other than a policy of insurance, for the transfer or sharing of any
risk by any Acquired Company; and
(vi) true and complete copies of all obligations of the
Acquired Companies to third parties with respect to insurance
(including such obligations under leases and service agreements) and
identifies the policy under which such coverage is provided.
(b) Part 4.17(b) of the Sellers Disclosure Schedule sets forth,
by year, for the current policy year and each of the two (2) preceding
policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $100,000, which sets forth:
(1) the name of the claimant;
(2) a description of the policy by insurer, type of
insurance and period of coverage; and
(3) the amount and a brief description of the claim;
and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost
of such claims.
(c) (i) All policies to which any Acquired Company is a party or
that provide coverage to any Acquired Company or any director or officer of
an Acquired Company:
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(1) are valid, outstanding and enforceable;
(2) are issued by an insurer that is reasonably believed
to be financially sound and reputable;
(3) taken together, provide reasonable insurance
coverage for the risks customarily insured against by companies
engaged in the industries in which the Acquired Companies are
engaged and comparable in size and operations to the Acquired
Companies;
(4) are sufficient for compliance with all Legal
Requirements and Contracts to which any Acquired Company is a
party or by which any of them is bound;
(5) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(6) do not provide for any adverse retrospective premium
adjustment or other experienced-based liability on the part of any
Acquired Company.
(ii) No Acquired Company has received within the twelve (12)
months prior to the date hereof (A) any refusal of coverage or any
notice that a defense will be afforded with reservation of rights, or
(B) any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(iii) The Acquired Companies have paid all premiums due and
have otherwise performed all of their respective material obligations
under each policy to which any Acquired Company is a party or that
provides coverage to any Acquired Company or director thereof.
(iv) The Acquired Companies have given notice to the insurer
of all claims that may be insured thereby.
4.18. ENVIRONMENTAL MATTERS
(a) Each Acquired Company is, and at all times has been, in
compliance in all material respects with, and has not been and is not in
violation of or liable in any material respect under, any Environmental Law. No
Acquired Company has any reasonable basis to expect, nor has any of them or to
their Knowledge, any other Person for whose conduct they are or may be held to
be responsible received, any actual or Threatened Order, notice or other similar
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the
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cost of any Environmental, Health and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal or mixed) in which any Acquired Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used or processed by
any Acquired Company or any other Person for whose conduct they are or may be
held responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled or received.
(b) There are no pending or, to the Knowledge of the Company or
FMS, Threatened claims, Encumbrances or other restrictions of any nature,
resulting from any Environmental, Health and Safety Liabilities or arising under
or pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal or mixed)
in which any Acquired Company has or had an interest.
(c) No Acquired Company has any reasonable basis to expect, nor
has any of them or to their Knowledge, any other Person for whose conduct they
are or may be held responsible received, any citation, directive, inquiry,
notice, Order, summons, warning or other communication that relates to Hazardous
Activity, Hazardous Materials or any alleged, actual or potential violation or
failure to comply with any Environmental Law, or of any alleged, actual or
potential obligation to undertake or bear the cost of any Environmental, Health
and Safety Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal or mixed) in which any Acquired
Company had an interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred, imported,
used or processed by any Acquired Company or any other Person for whose conduct
they are or may be held responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled or received.
(d) No Acquired Company, nor to their Knowledge, any other Person
for whose conduct they are or may be held responsible, has any material
Environmental, Health and Safety Liabilities with respect to the Facilities or
with respect to any other properties and assets (whether real, personal or
mixed) in which any Acquired Company (or any predecessor), has or had an
interest, or at any property geologically or hydrologically adjoining the
Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or at any geologically or hydrologically adjoining
property, including any Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps or any other part of the Facilities
or such adjoining property, or incorporated into any structure therein or
thereon. None of the Acquired Companies or any other Person for whose conduct
they are or may be held responsible, nor any other Person, has permitted or
conducted, or is aware of, any Hazardous Activity conducted with respect to the
Facilities or any other
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properties or assets (whether real, personal or mixed) in which any Acquired
Company has or had an interest.
(f) There has been no Release or Threat of Release, of any
Hazardous Materials at or from the Facilities or at any other locations where
any Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used or processed from or by the Facilities, or from or by
any other properties and assets (whether real, personal or mixed) in which any
Acquired Company has or had an interest, or any geologically or hydrologically
adjoining property, whether by any Acquired Company or any other Person.
(g) The Company and FMS have delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests or monitoring
possessed or initiated by any Seller or Acquired Company pertaining to Hazardous
Materials or Hazardous Activities in, on or under the Facilities, or concerning
compliance by any Acquired Company or any other Person for whose conduct they
are or may be held responsible, with Environmental Laws.
4.19. EMPLOYEES
(a) Part 4.19 of the Sellers Disclosure Schedule contains a
complete and accurate list of the following information for each officer,
director or Significant Employee of the Acquired Companies (including each
employee on leave of absence or layoff status) who received aggregate
compensation in excess of $250,000 in the most recent fiscal year: employer;
name; job title; current compensation paid or payable and any change in
compensation since June 25, 1999; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under any Acquired Company's
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, vacation plan, other Pension Benefit Plan or Welfare Benefit
Plan, or any other employee benefit plan or any director plan.
(b) To the Knowledge of the Company or FMS, no officer, director
or Significant Employee of any Acquired Company is a party to, or is otherwise
bound by, any agreement or arrangement, including any confidentiality,
noncompetition or proprietary rights agreement, between such officer, director
or Significant Employee and any other Person ("PROPRIETARY RIGHTS AGREEMENT")
that in any way could reasonably be expected to affect adversely (i) the
performance of his or her duties as an officer, director or Significant Employee
of the Acquired Companies, or (ii) the ability of any Acquired Company to
conduct its business as currently conducted, including any Proprietary Rights
Agreement with the Acquired Companies by any such officer, director or
Significant Employee. To the Knowledge of the Company or FMS, as of the date
hereof, no director, officer or Significant Employee of any Acquired Company
intends to terminate his employment with such Acquired Company.
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(c) Part 4.19 of the Sellers Disclosure Schedule also contains a
complete and accurate list of the following information for each retired
officer, Significant Employee or director of the Acquired Companies or their
dependents receiving benefits or scheduled to receive benefits in the future:
name, pension benefit, pension option election, retiree medical insurance
coverage, retiree life insurance coverage and any other benefits.
4.20. LABOR RELATIONS; COMPLIANCE
Since December 31, 1996, no Acquired Company has been or is a party to
any collective bargaining or other labor Contract. Since December 31, 1998,
there has not been, there is not presently pending or existing, and there is not
Threatened, (a) any strike, slowdown, picketing, work stoppage or employee
grievance process, (b) any Proceeding against or affecting any Acquired Company
relating to the alleged violation of any Legal Requirement by any Acquired
Company pertaining to labor relations or employment matters, including any
charge or complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission or any comparable
Governmental Body, organizational activity or other labor or employment dispute
against or affecting any of the Acquired Companies or their premises, or (c) any
application for certification of a collective bargaining agent. No event has
occurred or circumstance exists that is reasonably likely to provide the basis
for any work stoppage or other labor dispute. There is no lockout of any
employees by any Acquired Company, and no such action is contemplated by any
Acquired Company.
4.21. INTELLECTUAL PROPERTY
(a) Intellectual Property Assets of the Acquired Companies -
The term "INTELLECTUAL PROPERTY ASSETS" includes:
(i) the names OLDE FINANCIAL CORPORATION, OLDE DISCOUNT
CORPORATION, OLDE & CO., INCORPORATED, and all other trade names
(including all fictitious business names), registered and unregistered
trademarks and service marks, and all trademark, service mark, and
trade name applications (collectively, "MARKS");
(ii) all patents, patent applications, and patentable
inventions and discoveries (collectively, "PATENTS");
(iii) all copyrights in both published works and unpublished
works, all copyright registrations and registration applications, and
all underlying works of authorship (collectively, "COPYRIGHTS"); and
(iv) all trade secrets, know-how, show-how and confidential
information, including customer lists, software, plans, business and
financial methods, drawings, and unpatentable inventions and
discoveries (collectively, "TRADE SECRETS").
(b) Agreements - Part 4.21(b) of the Sellers Disclosure Schedule
contains a complete and accurate list and summary description, including any
royalties
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paid or received by the Acquired Companies, of (i) all Contracts relating
to the Intellectual Property Assets to which any Acquired Company is a
party or by which any Acquired Company is bound and (ii) all Contracts
relating to any other intellectual property to which any Acquired Company
is a party or by which any Acquired Company is a party or by which any
Acquired Company is bound (including software licenses), except for (x) any
"licenses out" implied by the sale of products or the rendering of services
by an Acquired Company and (y) perpetual, fully paid-up "licenses in" for
commonly available software programs with a value of less than $1,000 under
which an Acquired Company is the licensee. There are no outstanding and, to
the Knowledge of the Company or FMS, no Threatened disputes or disagreements
with respect to any such Contract, license or other agreement.
(c) Intellectual Property Necessary for the Business
(i) The Intellectual Property Assets constitute all the
intellectual property necessary for the operation of the Acquired
Companies' businesses as they are currently conducted. One or more of
the Acquired Companies is the owner of all right, title, and interest
in and to each of the Intellectual Property Assets, free and clear of
all Liens, security interests, charges, Encumbrances, equities, and
other adverse claims, and each of the Acquired Companies has the right
to use each of the Intellectual Property Assets without payment to a
third party.
(ii) Except as set forth in Part 4.21(c) of the Sellers
Disclosure Schedule, all former and current employees of each Acquired
Company have executed written Contracts with one or more of the
Acquired Companies that assign to one or more of the Acquired Companies
all right, title and interest in and to any inventions, improvements,
discoveries, works of authorship, or other information relating to the
business of any Acquired Company, including trade secrets, know-how,
show-how, and confidential information. All such Contracts are valid,
binding and enforceable. No employee of any Acquired Company has
entered into any Contract that restricts or limits in any way the scope
or type of work in which the employee may be engaged by or for the
Acquired Company or that or requires the employee to disclose or assign
or otherwise transfer any information of any nature concerning his or
her work or the business of the Acquired Companies to anyone other than
one or more of the Acquired Companies.
(d) Patents
(i) Part 4.21(d) of the Sellers Disclosure Schedule contains
a complete and accurate list and summary description of all Patents.
One or more of the Acquired Companies is the owner of all right, title,
and interest in and to each of the Patents, free and clear of all
Liens, security interests, charges, Encumbrances, equities, and other
adverse claims.
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(ii) All of the issued Patents are currently in compliance
with all formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use), are
valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety (90) days after the Closing
Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination, revocation, cancellation, or
opposition proceeding and to the Knowledge of the Company or FMS, no
such action is Threatened with respect to any of the Patents. To the
Knowledge of the Company or FMS, there is no potentially or actually
interfering patent or patent application of any third party.
(iv) No Patent is infringed or, to the Knowledge of the
Company or FMS, has been challenged or Threatened in any way. None of
the products manufactured, sold, offered for sale, imported, or used,
none of the services rendered, and none of the methods, processes,
works of authorship, trade secrets, know-how, show-how, or confidential
information used, by any Acquired Company infringes or is or has been
alleged to infringe any patent or other proprietary right of any third
party.
(v) All products and services marketed under the Patents have
been marked with the proper patent notice.
(e) Trademarks
(i) Part 4.21(e) of the Sellers Disclosure Schedule contains
a complete and accurate list and summary description of all Marks. One
or more of the Acquired Companies is the owner of all right, title, and
interest in and to each of the Marks, free and clear of all liens,
security interests, charges, Encumbrances, equities, and other adverse
claims.
(ii) All Marks that have been registered with the United
States Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90)
days after the Closing Date.
(iii) No Mark has been or is now involved in any opposition,
invalidation, revocation or cancellation and, to the Knowledge of the
Company or FMS, no such action is Threatened with the respect to any of
the Marks.
(iv) To the Knowledge of the Company or FMS, there is no
potentially or actually interfering trademark or trademark application
of any third party.
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(v) No Mark is infringed or, to the Knowledge of the Company
or FMS, has been challenged or Threatened in any way. None of the Marks
used by any Acquired Company infringes or is or has been alleged to
infringe any trade name, trademark, service mark, or other proprietary
right of any third party.
(vi) All products and materials containing a Mark bear the
proper federal registration notice where permitted by law.
(f) Copyrights
(i) Part 4.21(f) of the Sellers Disclosure Schedule contains
a complete and accurate list and summary description of all Copyrights
and an indication of whether it is registered. One or more of the
Acquired Companies is the owner of all right, title, and interest in
and to each of the Copyrights, free and clear of all Liens, security
interests, charges, Encumbrances, equities, and other adverse claims.
(ii) All of the Copyrights that have been registered are
currently in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within ninety (90) days after the date of Closing.
(iii) No Copyright is infringed or, to the Knowledge of the
Company or FMS, has been challenged or Threatened in any way. None of
the subject matter of any of the Copyrights and no work of authorship
used or distributed by the Acquired Companies infringes or is or has
been alleged to infringe any copyright of any third party or is a
derivative work based on the work of a third party.
(iv) All copies of works of authorship covered by the
registered Copyrights have been marked with the proper copyright
notice.
(g) Trade Secrets
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate and sufficient in
detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any
individual.
(ii) The Acquired Companies have taken all reasonable
precautions to protect the secrecy, confidentiality and value of their
Trade Secrets.
(iii) One or more of the Acquired Companies has good title
and an absolute (but not necessarily exclusive) right to use the Trade
Secrets. The Trade Secrets are not part of the public knowledge or
literature and, to the Knowledge of the Company or FMS, have not been
used, divulged or appropriated either for the benefit of any Person
(other than one or more of the Acquired
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Companies) or to the detriment of the Acquired Companies. No Trade
Secret is subject to any adverse claim or has been challenged or
Threatened in any way.
4.22. CERTAIN PAYMENTS
To the Knowledge of the Company or FMS, since December 31, 1997, no
Acquired Company or director, officer, agent or employee of any Acquired
Company, or any other Person associated with or acting for or on behalf of any
Acquired Company, has directly or indirectly (a) made any improper contribution,
gift, bribe, rebate, payoff, influence payment, kickback or other payment to any
Person, private or public, regardless of form, whether in money, property or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained for or in respect of any Acquired
Company or any affiliate of an Acquired Company, or (iv) in violation of any
Legal Requirement, or (b) established or maintained any fund or asset that has
not been recorded in the books and records of the Acquired Companies.
4.23. RELATIONSHIPS WITH RELATED PERSONS
No Related Person of any Acquired Company has, or since December 31,
1996, has had, any material interest in any property (whether real, personal or
mixed and whether tangible or intangible), used in the Acquired Companies'
businesses. No Related Person of any Acquired Company is, or has owned (of
record or as a beneficial owner) an equity interest or any other financial or
profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with any Acquired Company other than
business dealings or transactions conducted in the Ordinary Course of Business
with the Acquired Companies at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition with any
Acquired Company with respect to any line of the products or services of such
Acquired Company (a "COMPETING BUSINESS") in any market presently served by such
Acquired Company, except for less than one percent (1%) of the outstanding
capital stock of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market. Except as set forth in
Part 4.23 of the Sellers Disclosure Schedule, no Related Person of any Acquired
Company is a party to any Contract with, or has any claim or right against, any
Acquired Company.
4.24. BROKERS OR FINDERS
No Acquired Company has incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement except for fees
payable to Goldman, Sachs & Co.
4.25. CUSTOMER CONTRACTS
The Company and FMS have specifically identified and made available
true and correct copies of each form of written contract presently in force with
any customer of the Business. Each written agreement by which each Acquired
Company provides service to a customer of the Business was entered into in the
ordinary course of business. To the Knowledge of the Company or FMS,
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neither any Acquired Company nor any other party to any such agreement is in
Breach thereunder with respect to obligations in excess of $50,000. No Acquired
Company has given or received any written notice of any claimed Default
thereunder. No Acquired Company is aware of any material customer of the
Business that intends to terminate its contract or service with such Acquired
Company.
4.26. CUSTOMERS
Since December 31, 1998, no customer or client of any Acquired Company
that is a party to any investment advisory contract with such Acquired Company
has (a) ceased or informed any Acquired Company that it will cease doing
business with such Acquired Company or (b) informed any Acquired Company that it
will not consent to or approve the transfer or assignment of such investment
management contract or investment advisory contract from such Acquired Company
in connection with the Contemplated Transactions. Each Investment Company
Advisory Agreement subject to Section 15 of the 1940 Act to which any Acquired
Company is a party has been duly approved and continued and has been at all
times in compliance in all material respects with the 1940 Act. Each such
Investment Company Advisory Agreement has been performed by the Acquired Company
in accordance with its terms and with the 1940 Act and all other applicable laws
in all material respects.
4.27. YEAR 2000
To the Knowledge of the Company or FMS, all computer systems and
computer software used by each Acquired Company (i) recognize or are being
adapted so that, on or prior to December 31, 1999, they shall recognize the
advent of the year A.D. 2000 without any adverse change in operation associated
with such recognition, (ii) can correctly recognize and manipulate date
information relating to dates before, on or after January 1, 2000, including
accepting date input, performing calculations on dates or portion of dates and
providing date output, and the operation and functionality of such computer
systems and such computer software will not be adversely affected by the advent
of the year A.D. 2000 or any manipulation of data featuring information relating
to dates before, on or after January 1, 2000, and (iii) can suitably interact or
are being adapted so that they can, on or prior to December 31, 1999, suitably
interact with other computer systems and computer software in a way that does
not compromise (x) its ability to correctly recognize the advent of the year
A.D. 2000 or (y) its ability to correctly recognize and manipulate the date
information relating to dates before, on or after January 1, 2000.
4.28. DISCLOSURE
(a) No representation or warranty of the Company in this
Agreement and no statement in the Sellers Disclosure Schedule omits to state
a material fact necessary to make the statements herein or therein, in light
of the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 6.5 [Notification] will
contain any untrue statement or omit to state a material fact necessary to
make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
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4.29. TRUE AND COMPLETE COPIES
Copies of all agreements, Contracts and documents delivered and to be
delivered hereunder by Sellers or received by Buyer as part of the Buyer's due
diligence are and will be true and complete copies of such agreements, Contracts
and documents.
4.30. ACQUIRED INVESTMENT COMPANIES
Olde Custodian Fund is a registered investment company under the 1940
Act (the "ACQUIRED INVESTMENT COMPANIES").
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER AND BLOCK
Buyer and Block represent and warrant, with respect to Buyer and/or
Block, as set forth herein, and except as set forth in the Buyer Disclosure
Schedule (it being agreed that the mere inclusion of an item in the Buyer
Disclosure Schedule as an exception to a representation or warranty shall not be
deemed an admission that such item represents a material exception of fact,
event or circumstance, or that such item is reasonably likely to result in a
material adverse effect on Buyer; it being also agreed that items disclosed in a
particular section of the Buyer Disclosure Schedule shall be deemed disclosed
only with respect to the corresponding section(s) of this Agreement to which it
expressly refers) to Sellers as follows:
5.1. ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Block is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Missouri.
5.2. AUTHORITY; NO CONFLICT
(a) Assuming the due authorization, execution and delivery of this
Agreement by the other parties hereto, this Agreement constitutes the legal,
valid and binding obligation of Buyer and Block, respectively, enforceable
against Buyer and Block, respectively, in accordance with its terms, except
to the extent that (i) enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditor's rights generally, (ii) the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any such Proceeding may be brought and
(iii) restrictions of public policy apply. Upon the execution and delivery
by Buyer and the other parties thereto of the Escrow Agreements, the
Non-Competition Agreement and the Tax Procedures Agreement (collectively,
the "BUYER'S CLOSING DOCUMENTS"), such Buyer's Closing Documents will
constitute the legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms except to the extent
that (i) enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditor's rights
generally, (ii) the availability of equitable remedies, including specific
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performance, is subject to the discretion of the court before which any such
Proceeding may be brought and (iii) restrictions of public policy apply.
Buyer and Block each have the absolute and unrestricted right, power and
authority to execute and deliver this Agreement and to perform their
respective obligations under this Agreement. Buyer has the absolute and
unrestricted right, power and authority to execute and deliver the Buyer's
Closing Documents and to perform its obligations under the Buyer's Closing
Documents.
(b) Neither the execution and delivery of this Agreement by Buyer
or Block nor the consummation or performance of any of the Contemplated
Transactions by Buyer or Block will give any Person the right to prevent,
delay or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer's or Block's Organizational
Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer or Block;
(iii) any Legal Requirement or Order to which Buyer or Block
may be subject; or
(iv) any Contract to which Buyer or Block is a party or by
which Buyer or Block may be bound.
Except for (x) Consents, approvals and notices as are set forth in Part
4.2 of the Seller's Disclosure Schedule and (y) the applicable filings and
expiration or termination of the waiting period under the HSR Act, neither Buyer
nor Block is or will be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
5.3. INVESTMENT INTENT
Buyer is acquiring the Shares and FMS Shares for its own account and
not with a view to their distribution within the meaning of Section 2(11) of the
Securities Act.
5.4. CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Block,
Buyer or a Subsidiary of Buyer and that challenges, or is reasonably likely to
have the effect of preventing, materially delaying, making illegal or otherwise
materially interfering with, any of the Contemplated Transactions. To the
Knowledge of Buyer and Block, no such Proceeding has been Threatened and no
event or circumstance exists that is reasonably likely to give rise to or serve
as a basis for the commencement of any such Proceeding.
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5.5. BROKERS OR FINDERS
Neither Block, Buyer nor their respective Subsidiaries and their
respective officers and agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement. Block and Buyer will
indemnify and hold Sellers harmless from any such payment alleged to be due by
or through Buyer or Block as a result of the action of Buyer or Block or their
respective officers or agents.
5.6. SECTION 15 OF THE 1940 ACT
Neither Buyer nor any of its affiliates has any express or implied
understanding or arrangement which would reasonably be expected to impose an
unfair burden on any of the Acquired Investment Companies for purposes of
Section 15(f) of the 1940 Act as a result of the Contemplated Transactions.
5.7. INELIGIBLE PERSONS
At Closing:
a) neither Buyer nor any "affiliated person" (as defined in the
1940 Act) of any Acquired Investment Company (excluding any "affiliated persons"
thereof as of the date hereof), as applicable, is ineligible pursuant to Section
9(a) or 9(b) of the 1940 Act to serve as an investment adviser (or in any other
capacity contemplated by the 1940 Act) to a registered investment company;
b) neither Buyer nor any "associated person" (as defined in the
Advisers Act) of any of the Acquired Companies that currently serve as an
investment adviser (excluding any "associated persons" thereof as of the date
hereof), as applicable, is ineligible pursuant to Section 203 of the Advisers
Act to serve as an investment adviser or as an associated person to a registered
investment adviser; and
c) neither Buyer nor any "associated person" (as defined in the
Exchange Act) of any of the Acquired Companies that currently serve as a broker
dealer (excluding any "associated persons" thereof as of the date hereof), as
applicable, is ineligible pursuant to Section 15(b) of the Exchange Act to serve
as a broker-dealer or as an associated person to a registered broker-dealer.
5.8. SEC REPORTS
Block has filed all forms, reports and documents required to be filed
by it with the SEC since the filing of its annual report on Form 10-K for the
fiscal year ended April 30, 1999 ("1999 FORM 10-K"). Buyer or Block has
delivered or made available to Sellers' Representative copies in the form filed
with the SEC (and as amended, if applicable) of Block's:
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(i) 1999 Form 10-K;
(ii) current reports on Form 8-K filed since April 30, 1999;
(iii) proxy statement for the 1999 annual meeting of shareholders
and special meeting of shareholders, if any, held since such meeting; and
(iv) other forms, reports, registration statements and other
documents (other than preliminary materials if the corresponding definitive
materials have been provided to Sellers' Representative and materials for
which confidential treatment has been granted) filed by Block with the SEC
since April 30, 1999 (the forms, reports, registration statements and other
documents referred to herein in clauses (i), (ii), (iii) and (iv) above are,
collectively, the "BLOCK SEC REPORTS").
The Block SEC Reports conform in all material respects to the
requirements of the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations thereunder.
5.9. FINANCING
At or prior to the Closing Date, Buyer (whether directly or through Block or
a subsidiary of Block) will have the financing required to pay the Purchase
Price under this Agreement and pay all fees and expenses borne by it or Block
relating to the consummation of the Contemplated Transactions.
ARTICLE 6
COVENANTS OF SELLERS PRIOR TO CLOSING DATE
6.1. ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers will,
and will use Best Efforts to cause each Acquired Company and its Representatives
to, (a) afford Buyer and its Representatives (collectively, "BUYER'S ADVISORS")
reasonable access to each Acquired Company's personnel, properties (including
subsurface testing), Contracts, books and records, and other documents and data,
(b) furnish Buyer and Buyer's Advisors with copies of all such Contracts, books
and records, and other existing documents and data as Buyer may reasonably
request, and (c) furnish Buyer and Buyer's Advisors with such additional
financial, operating and other data and information as Buyer may reasonably
request.
6.2. OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date except with the
consent of Buyer (which consent shall not be unreasonably withheld) or as set
forth on Part 6.2 of the
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Sellers Disclosure Schedule, Sellers will, and will use Best Efforts to cause
each Acquired Company to:
(a) conduct the business of such Acquired Company only in the
Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current business
organization of such Acquired Company (except as set forth in Section 6.10
[Merger of International Partners, Inc.] hereof), keep available the
services of the current officers, employees and agents of such Acquired
Company, and maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents and others having business
relationships with such Acquired Company;
(c) confer with Buyer concerning operational matters of a material
nature;
(d) keep in full force and effect insurance covering the Acquired
Companies and their businesses not less in amount and coverage than that now
maintained, but in no event less than prudent industry standards, and
operate, maintain and repair all property in a careful, prudent and
efficient manner;
(e) maintain the books and financial records of the Acquired
Companies in accordance with GAAP consistently applied, and on a basis
consistent with past practices; and
(f) otherwise report periodically to Buyer concerning the status
of the business, operations and finances of such Acquired Company.
6.3. NEGATIVE COVENANT
Except (i) as otherwise expressly permitted by this Agreement, (ii)
with the prior written consent of Buyer (such consent not to be unreasonably
withheld), (iii) as set forth in Part 6.3 of the Sellers Disclosure Schedule,
(iv) as provided in Section 6.10 [Merger of International Partners, Inc.] or (v)
with respect to obtaining director and officer indemnification insurance for
departing officers or directors, between the date of this Agreement and the
Closing Date, Sellers will not, and will use Best Efforts to cause each Acquired
Company not to, without the prior consent of Buyer, take any affirmative action,
or fail to take any reasonable action within their or its control, as a result
of which any of the changes or events listed in Section 4.15 [Absence of Certain
Changes and Events] is likely to occur.
6.4. REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers
will, and will cause each Acquired Company to, use Best Efforts to make all
filings required by Legal Requirements to be made by them in order to consummate
the Contemplated Transactions (including cooperating in making all filings under
the HSR Act). Between the date of this Agreement and the Closing Date, Sellers
will, and will use Best Efforts to cause each Acquired
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Company to, (a) cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) cooperate with Buyer in obtaining all
Consents identified in Part 4.2 of the Sellers' Disclosure Schedule (including
taking all actions reasonably requested by Buyer to cause early termination of
any applicable waiting period under the HSR Act).
6.5. NOTIFICATION
Between the date of this Agreement and the Closing Date, Sellers or the
applicable Acquired Company will promptly notify Buyer in writing if any Seller
or any Acquired Company, as the case may be, becomes aware of any fact or
condition that causes or constitutes a Breach of any of Sellers', the Company's
or FMS' representations and warranties as of the date of this Agreement, or if
any Seller or any Acquired Company, as the case may be, becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the Sellers
Disclosure Schedule if the Sellers Disclosure Schedule were dated the date of
the occurrence or discovery of any such fact or condition, Sellers will promptly
deliver to Buyer a supplement to the Sellers Disclosure Schedule specifying such
change. During the same period, Sellers will promptly notify Buyer of the
occurrence of any Breach of any covenant of Sellers in this Article 6 or Article
8, or of the occurrence of any event that may make the satisfaction of the
conditions in Article 9 impossible or unlikely.
6.6. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Sellers will cause all
indebtedness owed to an Acquired Company by any Seller or any Related Person of
any Seller to be paid in full prior to Closing.
6.7. NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Article 11, no Seller will, and will use Best Efforts to cause each Acquired
Company and each of his or her Representatives not to, directly or indirectly
solicit, initiate or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer or its
affiliates) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of any Acquired Company,
or any of the capital stock of any Acquired Company, or any merger,
consolidation, business combination or similar transaction involving any
Acquired Company.
6.8. BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers will
use their Best Efforts to cause the conditions in Articles 9 and 10 to be
satisfied and to deliver to Buyer
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estoppel certificates executed on behalf of the lessor of each parcel of real
property leased (as lessee) by each Acquired Company, dated as of a date not
more than 60 days prior to the Closing Date, each substantially in the form of
Exhibit 6.8.
6.9. TITLE INSURANCE
Sellers will use Best Efforts to cause the Acquired Companies to obtain
the following title insurance commitments, policies and riders in preparation
for the Closing:
(a) with respect to each parcel of real estate that any Acquired
Company owns, an ALTA Owner's Policy of Title Insurance Form B-1992 (or
equivalent policy reasonably acceptable to Buyer if the real property is
located in a state in which an ALTA Owner's Policy of Title Insurance Form
B-1992 is not available) issued by a title insurer reasonably satisfactory
to Buyer (and, if requested by Buyer, reinsured in whole or in part by one
or more insurance companies and pursuant to a direct access agreement
reasonably acceptable to Buyer), in such amount as Buyer reasonably may
determine to be the fair market value of such real property (including all
improvements located thereon), insuring title to such real property to be in
one of the Acquired Companies as of the Closing (subject only to the title
exceptions described in Part 6.9 of the Sellers Disclosure Schedule) or to
the extent that the Acquired Companies currently hold title insurance
policies acceptable to Buyer, updates to such policies; and
(b) Each title insurance policy delivered under clause (a) above
shall (A) insure title to the real property and all recorded easements
benefiting such real property, (B) contain an "extended coverage
endorsement" insuring over the general exceptions contained customarily in
such policies, (C) contain an ALTA Zoning Endorsement 3.1 (or equivalent),
(D) contain an endorsement insuring that the real property described in the
title insurance policy is the same real estate as shown on the survey
delivered with respect to such property, (E) contain an endorsement insuring
that each street adjacent to the real property is a public street and that
there is direct and unencumbered pedestrian and vehicular access to such
street from the real property, (F) contain an inflation endorsement
providing for annual adjustments in the amount of coverage corresponding to
the annual percentage increase, if any, in the United States Department of
Commerce Composite Construction Cost Index (Base year = 1995), (G) if the
real property consists of more than one record parcel, contain a
"contiguity" endorsement insuring that all of the record parcels are
contiguous to one another, and (H) contain a "non-imputation" endorsement to
the effect that title defects known to the officers, directors and
shareholders of the owner prior to the Closing shall not be deemed "facts
known to the insured" for purposes of the policy.
6.10. MERGER OF INTERNATIONAL PARTNERS, INC.
The Acquired Companies shall use their Best Efforts to, and Ernest J.
Olde shall, cause the outstanding capital stock of International Partners, Inc.
to be contributed as a capital contribution to FMS, such contribution to be
effective prior to the Closing Date and not involve payment of purchase price
consideration except for necessary payments or allocations between
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the Acquired Companies or Sellers (or such comparable arrangement as the parties
may mutually agree in good faith).
ARTICLE 7
COVENANTS OF BUYER AND BLOCK PRIOR TO CLOSING DATE
7.1. APPROVALS OF GOVERNMENTAL BODIES
No later than thirty (30) business days after the date of this
Agreement, Buyer will, and will cause each of its Related Persons to, make all
filings required by Legal Requirements to be made by them to consummate the
Contemplated Transactions (including all filings under the HSR Act). Between the
date of this Agreement and the Closing Date, Buyer will, and will cause each of
its Related Person to, (i) cooperate with Sellers with respect to all filings
that Sellers are required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with Sellers in obtaining all
Consents identified in Part 4.2 of the Sellers Disclosure Schedule. Buyer will
use its Best Efforts to obtain all necessary regulatory approvals and Consents
and make all necessary filings to permit consummation of the Contemplated
Transactions on or prior to December 15, 1999; provided that this Agreement will
not require Buyer to dispose of or make any change in any portion of its
business or to incur any other burden to obtain a Governmental Authorization
which shall have or result in a material adverse effect on Buyer and its Related
Persons taken as a whole.
7.2. BEST EFFORTS
Except as set forth in the proviso to Section 7.1 [Approvals of
Government Bodies], between the date of this Agreement and the Closing Date,
Buyer will use its Best Efforts and will cause its Related Persons to use their
Best Efforts to cause the conditions in Articles 9 [Conditions Precedent to
Buyer's Obligations to Close] and 10 [Conditions Precedent to Seller's
Obligations to Close] to be satisfied.
7.3. NOTIFICATION
Between the date of this Agreement and the Closing Date, Buyer will
promptly notify Sellers in writing if Buyer becomes aware of any fact or
condition that causes or constitutes a Breach of any of the Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Buyer Disclosure Schedule if the Buyer Disclosure Schedule were dated the
date of the occurrence or discovery of any such fact or condition, Buyer will
promptly deliver to Sellers' Representative a supplement to the Buyer Disclosure
Schedule specifying such change. During the same period, Buyer will promptly
notify Sellers' Representative of the occurrence of any Breach of any covenant
of Buyer in this Article 7 or
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Article 8, or of the occurrence of any event that may make the satisfaction
of the conditions in Article 10 impossible or unlikely.
7.4. SECTION 15 OF THE 1940 ACT
Buyer agrees to use its Best Efforts to cause the following to be true
following the Closing: (a) for a period of not less than three (3) years from
and after the Closing Date, no more than 25% of the members of the board of
directors of the Acquired Investment Companies shall be "interested persons" (as
defined for purposes of Section 15(f)(1)(A) of the 1940 Act) of Buyer (or such
other entity which acts as adviser or subadviser to the Acquired Investment
Companies); and (b) neither Buyer nor any of its affiliates (or any entity which
will act as adviser to the Acquired Investment Companies), for a period of not
less than two (2) years after the Closing Date, shall have any express or
implied understanding, arrangement or intention to impose an unfair burden on
any of the Acquired Investment Companies as a result of the Contemplated
Transactions.
7.5. BOOK AND RECORDS
From and after the Closing Date, Buyer and, if applicable, any
affiliate of, or successor to, Buyer or, if applicable, any affiliate, shall
permit the Sellers' Representative and the Sellers reasonable access to any
Records in its possession reasonably necessary in connection with any claim,
action, litigation or other Proceeding involving or otherwise relating to the
party requesting access to such Records or in connection with any legal
obligation owed by such party to any Governmental Body or any present or former
client of the Company (at the expense of the requesting party). For a period of
not less than six (6) years after the Closing Date, none of Buyer or any
applicable affiliate or successor shall dispose of or destroy any Records, and
thereafter, such Records shall not be disposed of or destroyed without giving
advanced written notice to the Sellers' Representative, and the Sellers'
Representative or any Seller may within thirty (30) days of such notice request
such Records (at the expense of the requesting party).
7.6. COVENANT OF BLOCK
Block will cause Buyer to perform its covenants under this Article 7
and its other agreements and obligations under this Agreement.
ARTICLE 8
CERTAIN OTHER COVENANTS
8.1. AGREEMENT TO DEFEND
All parties agree to use their Best Efforts, and to otherwise
cooperate, to defend any action, suit, Proceeding or investigation which is
commenced, seeking to restrain, prevent, delay or change the Contemplated
Transactions or questioning the validity or legality of any of such transactions
or seeking damages in connection with any such transactions.
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8.2. BREACHES THAT BECOME KNOWN; SUPPLEMENTAL SCHEDULES
Buyer, on one hand, and Sellers, on the other hand, each shall promptly
notify the other party in writing if they become aware after the date hereof and
before the Closing of any fact, information or condition that causes or
constitutes a Breach of any representation or any warranty made by them in this
Agreement, whether such fact, information or condition (i) existed (whether or
not known by the representing/warranting party for representations or warranties
not predicated on such party's Knowledge) before the date hereof (a "BREACH
EVENT") or (ii) came into existence after the date hereof (a "SUBSEQUENT
DEVELOPMENT"). Such fact, information or condition shall be set forth in a
supplemental schedule specifying the applicable section of this Agreement to
which such information relates (a "SUPPLEMENTAL SCHEDULE"). The Supplemental
Schedule shall be delivered to the other party, and upon the other party's
approval thereof, shall amend and, if applicable, replace the section of the
original Sellers Disclosure Schedule or Buyer Disclosure Schedule to which it
relates.
8.3. PAYMENT OF BONUSES
After the Closing, Buyer will cause the Company or FMS (or a subsidiary
of either) to pay all bonuses to persons who were employees of the Company or
FMS (or a subsidiary of either) immediately prior to the Closing, as and when
directed by Sellers, that have been accrued for and reflected in the Closing
Financial Statements and not previously paid by the Company, and the Company may
pay bonuses to the members of its management committee at or prior to the
Closing.
8.4. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE
(a) Maintenance of Indemnity. For a period of six (6) years after
the Closing Date, Block and Buyer shall cause the Acquired Companies (or
their successors, as the case may be) to indemnify and hold harmless to the
fullest extent permitted under applicable Law but solely in such capacities
each present and former director, officer, employee, fiduciary, agent or
control person of any of the Acquired Companies, determined as of the
Closing Date (the "COVERED D&O INDEMNITEES"), against any costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages (including, but not limited to, punitive, aggravated or exemplary)
or liabilities (collectively, "COVERED COSTS") incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative ("COVERED CLAIMS"), arising out of
or pertaining to matters existing or occurring prior to or at the Closing
Date, whether asserted or claimed prior to, at or after the Closing Date,
and Buyer shall, and shall cause its Related Parties to, advance expenses
relating thereto as incurred to the fullest extent permitted by applicable
Law; provided, however, that any amount owed by any Covered D&O Indemnitee
to Block or Buyer pursuant to Article 12 hereof shall offset, dollar for
dollar, any amounts Block or Buyer owes to any Covered D&O Indemnitee
pursuant to this Section 8.4(a).
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(b) Insurance Coverage. For a period of six (6) years after the
Closing Date, Buyer shall cause the Acquired Companies to (or in lieu
thereof Buyer shall) maintain in effect policies of liability insurance with
coverage in amount and scope at least as favorable as the Acquired
Companies' respective existing liability insurance policies to the extent
such policies cover Covered Costs incurred in connection with Covered Claims
against Covered D&O Indemnitees arising from facts or events that occurred
prior to the Closing Date. At the request of Sellers at or after Closing,
Buyer shall purchase or cause the Acquired Companies to purchase such
directors and officers liability insurance in such coverage and amounts as
desired by Sellers so long as Sellers pay to Buyer the cost thereof prior to
or at the time such insurance is obtained.
(c) Control of Defense. Buyer (or at Buyer's election, the
Acquired Company involved) shall be entitled to assume and control the
defense of any Covered Claim with counsel reasonably acceptable to the
Covered D&O Indemnitee; provided that the Sellers set forth on Part 8.4 of
the Sellers Disclosure Schedule shall be entitled to control the defense of
the matters (the "EXISTING CLAIMS") set forth thereon to the extent that
liability of other defendants to such matters is not disproportionately
compromised; and provided further that if (i) Buyer (or at Buyer's election,
the Acquired Company involved) has not assumed the defense of a Covered
Claim within thirty (30) days of notice thereof, (ii) Buyer, an Acquired
Company or an affiliate of Buyer is also a party to the Covered Claim and
the Covered D&O Indemnitee determines in good faith after consultation with
independent legal counsel that joint representation would be inappropriate
due to a conflict of interest, or (iii) the indemnifying party fails to
provide reasonable assurance to the Covered D&O Indemnitee of its financial
capacity to defend such Covered Claim and provide indemnification with
respect to such Covered Claim in accordance with this Section 8.4, the
Covered D&O Indemnitee may assume and control such Covered Claim. The
Covered D&O Indemnitee involved in any such Covered Claim shall be permitted
to retain and employ such separate legal counsel at its elects, provided
that such Covered D&O Indemnitee shall bear the cost (subject to applicable
advance or reimbursement as provided above) of such counsel with respect to
Covered Claims the defense of which has been assumed by Buyer (or at Buyer's
election, the Acquired Company involved); provided that if Buyer has not so
elected to assume and control such defense, Buyer shall bear such cost; and
provided further that the Sellers set forth on Part 8.4 of the Sellers
Disclosure Schedule shall be entitled to employ the counsel set forth
thereon with respect to the defense of the matters set forth thereon and
separate counsel (but no more than one firm or counsel with respect to any
single proceeding) in the event that the applicable Covered Claim seeks
injunctive or similar equitable relief, or damages in excess of $50,000, and
in each such case Buyer shall bear such cost. If Buyer has assumed the
Covered Claim, the Covered D&O Indemnitee shall have the right to
participate in defense of Covered Claims.
(d) Certain Exclusions. Nothing in this Section 8.4 shall be
construed to require or effect the indemnification of Covered D&O
Indemnitees or any other persons from and against Covered Costs or other
costs incurred in connection with claims, actions, suits, proceedings or
investigations, whether civil, criminal, administrative or investigative,
involving the gross negligence or intentional misconduct of a Covered D&O
Indemnitee.
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(e) Benefit; Binding Effect. This Section 8.4 is intended to be
for the benefit of, and shall be enforceable by, the Covered D&O
Indemnitees, their heirs and personal representatives, and shall be binding
on Buyer and its successors and assigns. If Buyer or any of the Acquired
Companies (i) shall consolidate with or merge into any other corporation or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) shall transfer all or substantially all
of its properties and assets or outstanding voting securities to any
individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns of Buyer or the
Acquired Company, as the case may be, shall assume all of the obligations
set forth in this Section 8.4.
(f) Release. Effective as of the Closing, Buyer and the Acquired
Companies hereby release, remise and acquit each Covered D&O Indemnitee who
is a control person, director, officer, or employee of the Acquired
Companies but, solely in such capacity as control person, director, officer
or employee, from any and all claims, known or unknown, that the Acquired
Companies (or any successor thereto) have or may have against any such
Person arising prior to or at the Closing and any and all liability which
any of such parties may then have to any of the Acquired Companies (or any
successor thereto), whether denominated claims, demands, causes of action,
obligations, damages or liabilities arising from any and all bases, however
denominated, including but not limited to all contractual claims and any
claims under law, excluding any claim to the extent resulting from gross
negligence or intentional misconduct by the Covered D&O Indemnitee damaging
in a material manner to any of the Acquired Companies and any claim of Buyer
or its Affiliates pursuant to a right granted pursuant to this Agreement,
(including but not limited to under Article 12 hereof). This release is for
any relief, no matter how denominated, including injunctive relief,
compensatory damages or punitive damages.
(g) Prompt Notification. Any Covered D&O Indemnitee wishing to
claim indemnification under Section 8.4 (a) - (c) shall, upon learning of
any such claim, action, suit, proceeding or investigation, promptly notify
the Acquired Company involved or Buyer thereof, but the failure to so notify
shall not relieve such Acquired Company or Buyer of any liability it may
have to such Covered D&O Indemnitee except to the extent that such Acquired
Company or Buyer demonstrates that it has been materially prejudiced by the
Covered D&O Indemnitee's failure to give such notice.
8.5. FURTHER ASSURANCES
Each party to this Agreement shall execute such documents and other
papers and perform such further acts as may be reasonably required to carry out
the provisions hereof and the transactions contemplated hereby.
8.6. TAX MATTERS
Each of the Sellers shall pay all applicable sales, use or other
similar transfer or income or gain taxes that are, or become, due or payable
from or by it as a result of the
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Contemplated Transaction. Each of the Sellers shall prepare and timely file any
Tax Returns required to be filed by it in respect of such taxes.
8.7. INDEMNITY INSURANCE
In the event that Sellers desire to select and obtain, at or prior to
Closing and at their sole expense, a policy of insurance benefitting and payable
to Buyer and Block from an insurance company unaffiliated with Sellers to cover
Sellers' real (if any) and potential indemnification obligations under this
Agreement in an amount of up to $100 million through March 31, 2001 and on
substantially the same payment terms as provided in the Escrow Agreements and
consistent with Section 12.7 of this Agreement, Sellers shall so notify Buyer
and Block at least thirty (30) days prior to Closing and provide a detailed
description of such insurance policy and insurance company. Buyer and Block
shall then be afforded the opportunity to discuss such policy and related
insurance matters (including creditworthiness of the insurer and other due
diligence matters) with the insurer and/or the Sellers, and, if such policy and
insurer is satisfactory to Buyer and Block, at their good faith discretion, then
Buyer and Block shall so notify Sellers' Representative at least ten (10) days
prior to Closing. If the Sellers then obtain such insurance policy, as approved,
to become effective at the Closing, then the parties shall work together in good
faith to amend this Agreement (including elimination of the Escrow Agreements)
accordingly at least three (3) days prior to Closing.
ARTICLE 9
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and FMS Shares and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
9.1. ACCURACY OF REPRESENTATIONS
(a) Each of Sellers' representations and warranties must have been
accurate in all respects as of the date of this Agreement, and must be
accurate in all respects as of the Closing Date as if made on the Closing
Date, without giving effect to any Supplemental Schedule, except any Breach
that is not material and does not, and is not reasonable likely to, have a
Company Material Adverse Effect or prevent, materially delay, make illegal
or materially interfere with the consummation of the Contemplated
Transactions and/or the realization by Buyer of the benefits therefrom.
(b) All of the Company's and FMS' representations and warranties
in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must
be accurate in all material respects as of the Closing Date as if made on
the Closing Date (except to the extent such representation or warranty
expressly relates to an earlier date), without giving effect to any
Supplemental Schedule. For
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purposes of this Agreement, the Company's and FMS' representations and
warranties will be deemed to be accurate in all material respects so long
as Buyer, as a result of any misrepresentation or breach of warranty, and
after giving effect to any reserves established with respect to such
matters on the Closing Balance Sheet (which reserves shall be as required
by GAAP or as may be voluntarily established in Sellers' sole discretion
above such amounts) is not reasonably likely to incur Damages (whether or
not subject to indemnification) in excess of $20,000,000 in the aggregate.
9.2. SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to Section
2.5(a) [Closing Obligations] must have been delivered.
9.3. CONSENTS
Consents identified in Parts 3.1 or 4.2 of Sellers Disclosure Schedule
that relate to any Applicable Contract to lease real property (a "LEASE") shall
have been obtained and are in full force and effect or no such Consent is
required, with respect to at least 80% (calculated in terms of annual Lease
payments) of such Leases. All Consents identified in Parts 3.1 or 4.2 of Sellers
Disclosure Schedule, the failure of which to obtain would be reasonably likely
to have a Company Material Adverse Effect or prevent, materially delay, make
illegal or otherwise materially interfere with the consummation of the
Contemplated Transactions and/or the realization by Buyer of the benefits
therefrom, shall have been obtained and are in full force and effect. Any
waiting period (and any extension thereof) applicable to the consummation of the
Contemplated Transactions under the HSR Act shall have expired or been
terminated.
9.4. ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Wachtell, Lipton, Rosen & Katz, Wilson, Walker,
Hochberg & Slopen and/or such other legal counsel to the Acquired Companies
and/or Sellers as are reasonably satisfactory to Buyer, dated the Closing
Date, substantially (in the aggregate for all such opinions) in the form of
Exhibit 9.4(a);
(b) the title insurance policies (or updates, as the case may be)
referred to in Section 6.9 [Title Insurance];
(c) such other documents as Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 10.3(a), (ii) evidencing the accuracy of any of Sellers', the
Company's or FMS's representations and warranties, (iii) evidencing the
performance by Sellers of, or the compliance by Sellers
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with, any covenant or obligation required to be performed or complied with
by Sellers, (iv) evidencing the satisfaction of any condition referred to
in this Article 9, or (v) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
9.5. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim (or
in the aggregate, claims) asserting that such Person (a) is the holder or the
beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any stock of, or any other voting, equity or ownership interest
in, any of the Acquired Companies, (b) is entitled to all or any portion of the
Purchase Price (exceeding $20,000,000 in the aggregate for all such claims)
payable for the Shares or FMS Shares or (c) is entitled to any additional
payment (exceeding $20,000,000 in the aggregate for all such claims) for any
shares of stock of the Company previously redeemed by the Company (collectively,
the "STOCKHOLDER CLAIMS"); provided, however, that this Section 9.5 shall not be
a condition to Buyer's obligation to close if Sellers have agreed to increase
the amount of funds in escrow under either or both of the Escrow Agreements by
an amount sufficient in Buyer's reasonable judgment to cover any Damages
reasonably likely to result from such Stockholder Claims (and provided that,
following the satisfaction of such claims, the additional escrow amount added
for such claims pursuant to this clause shall be repaid to Sellers to the extent
not paid to satisfy such claims).
9.6. NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published, introduced
or otherwise proposed by or before any Governmental Body.
9.7. MINIMUM BOOK VALUE
The Aggregate Consolidated Net Tangible Book Value on the Closing Date
shall be not less than $340,000,000 and Sellers' Representative shall have
delivered to Buyer a certificate to such effect.
ARTICLE 10
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and FMS Shares and to take the
other actions required to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Sellers, in whole or in part):
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10.1. ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
Supplemental Schedule.
10.2. BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
(b) Each document required to be delivered pursuant to Section
2.5(b) [Closing Obligations] must have been delivered and Buyer must have
made the cash payments required to be made by Buyer pursuant to Section
2.5(b)(i).
10.3. ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Sellers:
(a) an opinion of Bryan Cave LLP, dated the Closing Date,
substantially in the form of Exhibit 10.3(a); and
(b) such other documents as Sellers may reasonably request for the
purpose of (i) enabling their counsel to provide the opinion referred to in
Section 9.4(a), (ii) evidencing the accuracy of any representation or
warranty of Buyer, (iii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (iv) evidencing the satisfaction of any
condition referred to in this Article 10, or (v) otherwise facilitating the
consummation of any of the Contemplated Transactions.
10.4. NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that prohibits the sale of the Shares and FMS Shares by Sellers to
Buyer.
10.5. CONSENTS
Any waiting period (and any extension thereof) applicable to the
consummation of the Contemplated Transactions under the HSR Act shall have
expired or been terminated.
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10.6. MINIMUM BOOK VALUE
The Aggregate Consolidated Net Tangible Book Value on the Closing Date
shall be not less than $340,000,000 and Sellers' Representative shall have
delivered to Buyer a certificate to such effect, provided, however, that for
purposes of this Section 10.6 only no dividends or other similar distributions
by any of the Acquired Companies to any Seller made after the date of the
Interim Balance Sheet shall have been taken into account with respect to the
computation of the Aggregate Consolidated Net Tangible Book Value.
ARTICLE 11
TERMINATION
11.1. TERMINATION EVENTS
(a) This Agreement may be terminated on or prior to the Closing
Date as follows:
(i) by mutual consent of all parties hereto;
(ii) by the Sellers holding at least 90% of the Shares and the
FMS Shares or Buyer (the "NOTIFYING PARTY") if Buyer or Sellers, as the
case may be (the "NOTIFIED PARTY"), shall have failed to perform and
comply in all material respects with its or their respective agreements
and covenants hereunder and, if such failure is reasonably capable of
being remedied, such failure to perform or comply shall not have been
remedied within thirty (30) days after receipt by the Notified Party of
notice in writing from the Notifying Party, specifying the nature of
such failure and requesting that such failure be remedied, provided,
that the Notifying Party may not terminate this Agreement pursuant to
this subsection (ii) for an additional thirty (30) days if (x) the
Notified Party continues in good faith to use its Best Efforts to
perform or comply with such agreements and covenants, and (y) such
failure to perform or comply is reasonably capable of being remedied
within such additional thirty (30) day period and in any event prior to
the Closing;
(iii) by Buyer or Sellers holding at least 90% of the Shares
and FMS Shares, because of a misrepresentation or breach of warranty
(whether or not constituting a Breach Event or Subsequent Development)
by Seller(s) or the Company (in the case of termination by Buyer) or by
Buyer (in the case of termination by Sellers) that would cause the
conditions set forth in Section 9.1 [Accuracy of Representations
-Seller] or 10.1[Accuracy of Representations -Buyer], as the case may
be, to not be satisfied and, if such failure is reasonably capable of
being remedied, such failure to perform or comply shall not have been
remedied within thirty (30) days after receipt by the breaching party
of notice in writing from the party seeking to terminate, specifying
the nature of such failure and requesting that such failure be
remedied; provided, that the party seeking to terminate may not
terminate this Agreement pursuant to this subsection (iii) for an
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additional thirty (30) days if (x) the breaching party continues in
good faith to use its Best Efforts to perform or comply with such
agreements and covenants, and (y) such failure to perform or comply is
reasonably capable of being remedied within such additional thirty (30)
day period and in any event prior to the Closing (and the terminating
party is not itself in material breach of this Agreement); or
(iv) by Buyer or Sellers holding at least 90% of the Shares
and FMS Shares, if the Closing has not occurred by March 31, 2000.
(b) In the event of termination by any party pursuant to Section
11.1(a), written notice thereof shall promptly be given by the terminating
party to the other party.
11.2. CERTAIN EFFECTS OF TERMINATION
(a) In the event of termination by any party pursuant to Section
11.1(a)(i) or (iv), each party shall pay its own expenses incident to the
preparation for the consummation of this Agreement and the Contemplated
Transactions.
(b) In the event of termination pursuant to Section 11.1(a)(ii) or
(iii), the Company (for itself if it is the misrepresenting/breaching party)
or the Sellers (for any and all Sellers if any or all Sellers are the
misrepresenting/breaching party) shall, if such Breach or Breaches
constituted a Breach Event or were willful, pay to the terminating party the
sum of $2,000,000 for reimbursement of the terminating party's costs in
connection with the Contemplated Transactions (and not as liquidated
damages).
(c) Except for and with respect to Sections 2.3, 11.2(b), 11.2(c),
11.2(e), 13.1 [Expenses], 13.4 [Notices] and 13.15 [Sellers' Representative]
hereof, in the event of termination of this Agreement pursuant to Section
11.1(a) [Termination Events], this Agreement shall forthwith become void,
there shall be no liability under this Agreement on the part of any of the
parties hereto or any of their respective directors, officers, agents and
counsel and all rights and obligations of each party hereto shall cease;
provided, however, that nothing herein shall relieve any party from
liability for, or eliminate the rights of any other party relating to, Fraud
by any party, the willful breach of any of such party's representations and
warranties or the willful breach of any of such party's covenants and
agreements set forth in this Agreement.
(d) In the event that (i) a party is notified by the other party
of a Subsequent Development prior to Closing, (ii) the notified party either
accepts the Draft Supplemental Schedule addressing such Subsequent
Development in accordance with Section 8.2 [Breaches That Become Known;
Supplemental Schedules] or does not elect to terminate this Agreement
because of such Subsequent Development pursuant to Section 11.1(a)(iii) or
otherwise, and (iii) the Closing occurs, then the notified party shall be
deemed to have waived such Subsequent Development (and the resulting
misrepresentation or breach of warranty) and shall not be entitled to
indemnification for Damages relating thereto under Article 12
[Indemnification].
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(e) In the event that (A) this Agreement is terminated by Buyer
pursuant to Section 11.1(a)(ii) or (iii) as a result of Fraud or a Breach
that was willful and (B) Sellers and/or the Company (or any, some or all of
the Acquired Companies with an aggregate price value greater than $400
million) enter into a definitive agreement within nine (9) months of such
termination date that leads to the sale of all or substantially all of the
assets or stock of the Company or such Acquired Company or the merger or
consolidation of the Company or such Acquired Company with another entity
(as a result of which the individuals or entities who were the beneficial
owners of the capital stock of the Company or such Acquired Company
immediately prior to the consummation thereof do not own at least a majority
of such interests immediately after consummation thereof) (a "SALE"), then
Sellers and the Company shall notify Buyer thereof and the Company (or the
surviving entity, as the case may be) shall pay Buyer a fee of $25 million
(the "FEE"), payable in immediately available funds, within three (3)
business days after the consummation of such Sale. In the event that Sellers
shall fail to pay the Fee when due, Sellers shall reimburse Buyer for the
costs and expenses actually incurred or accrued by Buyer (including, without
limitation, reasonable fees and expenses of counsel) in connection with the
enforcement of this Section 11.2(e), together with interest on such unpaid
Fee, commencing on the date that the Fee became due, at a rate equal to the
Prime Rate plus five percent (5%).
(F) IN THE EVENT THAT THIS AGREEMENT IS TERMINATED BY EITHER PARTY
PRIOR TO CLOSING, ALL PARTIES HERETO AGREE THAT ANY SUIT ARISING OUT OF OR
RELATING TO THIS AGREEMENT (OR BREACH THEREOF), MAY BE BROUGHT IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI OR THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN AND THE PARTIES
HERETO EXPRESSLY SUBMIT AND CONSENT TO THE EXCLUSIVE JURISDICTION OF SUCH
COURTS. THE PARTIES HERETO AGREE THAT SERVICE OF PROCESS MAY BE MADE UPON
BUYER AND BLOCK BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 13.4, AND UPON
SELLERS, THE COMPANY AND FMS BY MAIL TO RANDAL MUDGE, C/O OLDE FINANCIAL
CORPORATION, 131 WEST LAFAYETTE, DETROIT, MICHIGAN 48226, WHO IS HEREBY
APPOINTED AGENT FOR SERVICE OF PROCESS FOR THE SELLERS, THE COMPANY AND FMS.
THE PARTIES HEREBY WAIVE ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT
IN AN INCONVENIENT COURT.
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ARTICLE 12
INDEMNIFICATION; REMEDIES
12.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE;
EXCLUSIVE REMEDY
(a) All representations, warranties, covenants and obligations in
this Agreement, the Sellers Disclosure Schedule, the Buyer Disclosure
Schedule, any Supplemental Schedules, the certificate delivered pursuant to
Section 2.5(a)(iv) [Closing Obligations], and any other certificate or
document delivered pursuant to this Agreement will survive the Closing as
provided in Section 12.4 [Time Limitations].
(b) The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants and obligations
will not be affected by any investigation conducted with respect to, or any
Knowledge acquired (or knowledge capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or obligation. The waiver
of any condition based on the accuracy of any representation or warranty, or
on the performance of or compliance with any covenant or obligation, will
not affect the right to indemnification, payment of Damages or other remedy
based on such representations, warranties, covenants and obligations.
(c) Following the Closing, the sole and exclusive remedy of any
party hereto with respect to any and all monetary claims arising from any
misrepresentation or Breach, except for claims involving Fraud, shall be
pursuant to the indemnification provisions set forth in this Article 12 or
Section 8.4.
12.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
(a) Each of the Sellers, severally but not jointly, shall
indemnify and hold harmless Buyer, the Acquired Companies and their
respective Representatives, stockholders, controlling persons and affiliates
(collectively, the "INDEMNIFIED PERSONS") for, and will pay to the
Indemnified Persons the amount of Damages suffered or incurred by the
Indemnified Persons, arising, directly or indirectly, from or in connection
with any Breach of any representation or warranty made by such Sellers in
Article 3 of this Agreement (without giving effect to any Supplemental
Schedules, Sellers Disclosure Schedule, Supplemental Schedules, or any other
certificate or document delivered by Sellers pursuant to this Agreement in
connection with or related to this Agreement).
(b) Sellers, severally but not jointly (in proportion to such
Seller's relative ownership of the Shares), shall indemnify and hold
harmless the Indemnified Persons for, and will pay to the Indemnified
Persons the amount of, any Damages suffered
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or incurred by the Indemnified Persons, arising, directly or indirectly,
from or in connection with:
(i) any Breach of any representation or warranty made by the
Company in this Agreement (without giving effect to any Supplemental
Schedules), and/or the Sellers Disclosure Schedule, the Supplemental
Schedules, or any other certificate or document delivered by Sellers
pursuant to this Agreement;
(ii) any Breach by any Seller or the Company of any covenant
or obligation of such Seller or the Company in (except, if Closing
occurs as provided herein) those covenants in Sections 6.1 [Access and
Investigation], 6.4 [Required Approvals], 6.7 [No Negotiation], 6.8
[Best Efforts], 6.9 [Title Insurance] and 8.2 [Breaches That Become
Known; Supplemental Schedules] of this Agreement;
(iii) any matter disclosed in Part 4.10 [Taxes] of the Sellers
Disclosure Schedule shall be indemnified as set forth in the Tax
Procedures Agreement; or
(iv) any claim by any Person for additional payment for any
shares of stock of the Company redeemed by the Company prior to the
Closing Date.
(c) Ernest J. Olde shall indemnify and hold harmless the
Indemnified Persons for, and will pay to the Indemnified Persons the amount
of, any Damages suffered or incurred by the Indemnified Persons arising,
directly or indirectly, from or in connection with:
(i) any Breach of any representation or warranty made by FMS
in this Agreement (without giving effect to any Supplemental
Schedules), and/or the Sellers Disclosure Schedule and the Supplemental
Schedules;
(ii) any Breach by FMS of any covenant or obligation of FMS
(except, if Closing occurs as provided herein, for those covenants in
Sections 6.1 [Access and Investigation], 6.4 [Required Approvals], 6.7
[No Negotiation], 6.8 [Best Efforts], 6.9 [Title Insurance] and 8.2
[Breaches That Become Known; Supplemental Schedules] of this Agreement;
or
(iii) any matter disclosed in Part 4.10 [Taxes] of the Sellers
Disclosure Schedule shall be indemnified as set forth in the Tax
Procedures Agreement.
(d) In the event that there is a claim for Damages based upon
actions or omissions which constitute a Breach of both Section 4.9 [No
Undisclosed Liabilities] and any of Sections 4.11 [No Material Adverse
Change], 4.16(a) [Contracts; No Defaults], 4.21(b-first sentence only),
(d)(i--first sentence only), (e)(i--firsT sentence only) and
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(f)(i--first sentence only) [Intellectual Property], 4.25 (last sentence
only) [Customer Contracts], then such claim for Damages shall be made only
with respect to Section 4.9.
12.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers and will pay to Sellers
the amount of any Damages suffered or incurred by the Seller arising, directly
or indirectly, from or in connection with (a) any Breach of any representation
or warranty made by Buyer in this Agreement or in any certificate delivered by
Buyer pursuant to this Agreement or (b) any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement.
12.4. TIME LIMITATIONS
(a) If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, other than those in Sections 3.1(a) [Authority; No
Conflict], 3.2 (first and last sentence only) [Title to Shares and FMS
Shares] and 4.10 [Taxes], unless on or before March 31, 2001, Buyer notifies
Sellers' Representative of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer; a claim with
respect to Section 4.10 [Taxes] may be made at any time prior to the
expiration of the applicable statute of limitations with respect to the
subject matter of such claim; a claim with respect to Section 3.1(a)
[Authority; No Conflict] or 3.2 (first and last sentence only) [Title to
Shares and FMS Shares], or any claim for Fraud, may be made at any time.
(b) If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, unless on or before March 31, 2001, Sellers'
Representative notifies Buyer of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Sellers.
12.5. LIMITATIONS ON AMOUNT - SELLERS
Sellers will have no liability (for indemnification or otherwise) with
respect to the matters described in Sections 12.2(b)(i) and 12.2(c)(i) until the
total of all Damages with respect to such matters exceeds $2,500,000; provided,
however, that the foregoing limitation shall not apply to (w) any Breach of any
of Sellers' representations and warranties in Section 3.1(a) [Authority; No
Conflict] or 3.2 (first and last sentence only) [Title to Shares and FMS Shares]
or Breach of any of the Company's or FMS' representations and warranties in
Sections 4.10 [Taxes]or 4.24 [Brokers or Finders], (x) the matters referred to
in Sections 12.2(b)(iv)or (y) any Damages resulting from Fraud by any Seller. In
no event shall the aggregate liability of Sellers hereunder (except any claim
for Fraud) exceed the amount of $100,000,000 during the period from the Closing
Date until March 31, 2001, or the amount of $60,000,000 (less any indemnity
payments aggregating in excess of $40,000,000 and paid prior to March 31, 2001)
after March 31, 2001. In no event shall Sellers be liable for any liability or
obligation to the extent that it has
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been disclosed on the Sellers Disclosure Schedule (without giving effect to
Section 4.10 of the Sellers' Disclosure Schedule or any Supplemental Schedule).
12.6. LIMITATIONS ON AMOUNT - BUYER
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a) of Section 12.3 until the total
of all Damages with respect to such matters exceeds $2,500,000; provided,
however, that the foregoing limitation shall not apply to any Damages resulting
from Fraud by Buyer. In no event shall the aggregate liability of Buyer
hereunder (except any claim for Fraud) exceed the amount of $100,000,000 during
the period from the Closing Date until March 31, 2001, or the amount of
$60,000,000 (less any indemnity payments aggregating in excess of $40,000,000
and paid prior to March 31, 2001) after March 31, 2001.
12.7. ESCROW; OFFSET
(a) Upon notice to Sellers' Representative specifying in
reasonable detail the basis for such claim, Buyer may give notice of a claim
under either or both (as its discretion) of the Escrow Agreements. Neither
the exercise of nor the failure to give a notice of a claim under the Escrow
Agreements will constitute an election of remedies or limit Buyer in any
manner in the enforcement of any other remedies that may be available to it,
provided, however, that Buyer shall collect any Damages owed to it under
Section 12.2(a) first from the funds escrowed under the First Escrow
Agreement (to the extent of such funds), second from the funds escrowed
under the Second Escrow Agreement (to the extent of such funds) and
thereafter may seek to collect Damages in any manner available to it.
(b) Buyer shall have the right to offset against any amounts
payable to Sellers pursuant to Section 2.9 [Earnout Procedures] the amount,
dollar for dollar, of any Damages Buyer may sustain or incur for which it is
entitled to indemnification hereunder.
12.8. PROCEDURE FOR INDEMNIFICATION - THIRD-PARTY CLAIMS
(a) Promptly after receipt by an Indemnified Person under Section
12.2 or 12.3 of notice of a claim made by any person against the Indemnified
Person (a "THIRD-PARTY CLAIM"), such Indemnified Person must, if a claim is
to be made against an indemnifying party under such Section, give written
notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any Indemnified Person, except to
the extent that the indemnifying party demonstrates that it has been
materially prejudiced by the Indemnified Person's failure to give such
notice.
(b) If any Third-Party Claim is brought against an Indemnified
Person, the indemnifying party will, unless the claim involves taxes (which
Proceedings shall be governed exclusively by the Tax Procedures Agreement),
be entitled to participate in such
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Third-Party Claim and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Third-Party Claim and the
indemnifying party determines in good faith after consultation with
independent legal counsel that joint representation would be inappropriate
due to a conflict of interest, or (ii) the indemnifying party fails to
provide reasonable assurance to the Indemnified Person of its financial
capacity to defend such Third-Party Claim and provide indemnification with
respect to such Third-Party Claim in accordance with the terms of this
Article 12 (a "DEFENSE EXCEPTION")), to assume and control the defense of
such Third-Party Claim with counsel reasonably satisfactory to the
Indemnified Person and the indemnifying party will not be liable to the
Indemnified Person for any fees of other counsel or any other expenses with
respect to the defense of such Third-Party Claim, other than reasonable fees
and expenses of counsel employed by the indemnifying party for any period
during which the indemnifying party has not assumed the defense thereof
after being given notice of such Third Party Claim (provided that such
counsel is not reasonably objected to by the indemnifying party). If notice
is given in accordance with Sections 12.8(a) [Procedure for
Indemnification--Third Party Claims] and 13.4 [Notices]to an indemnifying
party of the commencement of any Third-Party Claim and the indemnifying
party does not, within thirty (30) days after the Indemnified Person's
notice is given, give notice to the Indemnified Person of its election to
assume the defense of such Third-Party Claim, the indemnifying party will be
bound by any determination made in such Third-Party Claim or any compromise
or settlement effected by the Indemnified Person; provided, however, that
the indemnifying party shall not be bound by any compromise or settlement
effected without its consent (which consent shall not be unreasonably
withheld). If the indemnifying party chooses to defend or prosecute a Third
Party Claim, all Indemnified Persons shall cooperate in the defense or
prosecution thereof. Such cooperation shall include the retention and (upon
the indemnifying party's request) the provision to the indemnifying party of
records and information that are reasonably relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. If the indemnifying party assumes the defense of a Third Party
Claim, the Indemnified Person shall not admit any liability with respect to,
or settle, compromise or discharge, such Third Party Claim without the
indemnifying party's prior written consent (which consent shall not be
unreasonably withheld); provided, however, that if the indemnifying party
withholds its consent to a settlement of a Third Party Claim for an amount
equal to or less than $100,000,000 (prior to March 31, 2001) or $60,000,000
(after March 31, 2001 and prior to termination of applicable statute of
limitations) less any indemnity payments aggregating in excess of
$40,000,000 and paid prior to March 31, 2001, as the case may be, minus any
amounts previously paid under Section 12.2 or 12.3, as applicable, and the
Third Party Claim ultimately results in Damage in excess of such amount, the
indemnifying party shall be liable to the Indemnified Person for all Damage
from such Claim (notwithstanding the limitations set forth in Section 12.5
or 12.6, as applicable), and the Third Party Claim ultimately results in
Damage in excess of the proposed settlement amount, the indemnifying party
shall be liable to the Indemnified Person (notwithstanding the limitations
set forth in Section 12.5 or 12.6, as applicable) for all Damage from such
Claim less an amount equal to the difference between (A) the amount of the
proposed settlement to which the indemnifying
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party did not consent and (B) $100,000,000 (prior to March 31, 2001 or
$60,000,000 (after March 31, 2001 and prior to termination of the applicable
statute of limitations) less any indemnity payments aggregating in excess of
$40,000,000 and paid prior to March 31, 2001, as the case may be, minus any
amount previously paid under Section 12.2 and 12.3, as applicable. If the
indemnifying party assumes the defense of a Third Party Claim, the
Indemnified Person shall agree to any reasonable settlement, compromise or
discharge of a Third Party Claim and shall agree to any settlement,
compromise or discharge of a Third Party Claim that the indemnifying party
may recommend and that by its terms obligates the indemnifying party to pay
the full amount of the liability in connection with such Third Party Claim,
which releases the Indemnified Person completely in connection with such
Third Party Claim and that would not otherwise materially adversely affect
the Indemnified Person.
(c) If an Indemnified Person is controlling the defense of a Third
Party Claim, such Indemnified Person shall manage such Third Party Claim in
a manner consistent with past practice and in settling such Third Party
Claim shall seek in good faith to agree to a reasonable settlement amount.
In the event that, after February 1, 2001 and before March 31, 2001, an
Indemnified Person is controlling the defense of a Third Party Claim and is
considering settlement of such claim, then such Indemnified Person shall
promptly notify Sellers' Representative thereof, including the amount of
considered settlement. Seller's Representative shall then have the option,
for ten (10) days after such notification, of assuming control of such Third
Party Claim upon notification thereof to the Indemnified Person, with all
subsequent costs and expenses relating thereto (including settlement costs)
being borne solely by Sellers and Sellers indemnifying and holding harmless
the Indemnified Person, Buyer and Block from any costs, damages and
liability therefor, and any actions taken by or on behalf of Sellers with
respect thereto being done in a good faith, reasonable manner consistent
with the Company's past practices prior to the date hereof.
12.9. PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by giving prompt written notice to the party from whom
indemnification is sought in accordance with the notice provisions of Section
13.4.
ARTICLE 13
GENERAL PROVISIONS
13.1. EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel and accountants. In the event of termination
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of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a Breach of this Agreement by
another party.
13.2. PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer and Seller agree. Unless consented to by Buyer,
on the one hand, or the Company, on the other hand, in advance or required by
Legal Requirements, prior to the Closing, Sellers, on the one hand, and Buyer,
on the other hand, shall, and shall cause its affiliates to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person. Sellers and Buyer will consult with each other concerning the means by
which the Acquired Companies' employees, customers and suppliers and others
having dealings with the Acquired Companies will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
13.3. CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and
Sellers will maintain in confidence, and will cause the directors, officers,
employees, agents and advisors of Buyer and the Acquired Companies to maintain
in confidence, and not use to the detriment of another party or an Acquired
Company any written, oral or other information obtained in confidence from
another party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
Consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
13.4. NOTICES
All notices, Consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
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Sellers:
Wilson, Walker, Hochberg, Slopen
443 Ouelette Avenue, Suite 300
Windsor, Ontario N9A 6R4
Canada
Attention: Jeffrey M. Slopen
Facsimile No.: 519-977-5349
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Craig M. Wasserman, Esq.
Facsimile No.: 212-403-2000
Buyer:
Block Financial Corporation
4400 Main Street
Kansas City, Missouri 64111
Attention: Bret G. Wilson
Facsimile No.: 816-753-8628
with a copy to:
Bryan Cave LLP
3500 One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105-2100
Attention: Gregory G. Johnson, Esq.
Morris K. Withers, Esq.
Facsimile No.: 816-374-3300
Block:
H&R Block, Inc.
4400 Main Street
Kansas City, Missouri 64111
Attention: James H. Ingraham
Facsimile No.: 816-753-8628
13.5. FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
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13.6. WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative unless expressly provided otherwise herein. Neither the
failure nor any delay by any party in exercising any right, power or privilege
under this Agreement or the documents referred to in this Agreement will operate
as a waiver of such right, power or privilege, and no single or partial exercise
of any such right, power or privilege will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. To the maximum extent permitted by applicable law, (a) no
claim or right arising out of this Agreement or the documents referred to in
this Agreement can be discharged by one party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents referred
to in this Agreement.
13.7. ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter (including the unexecuted letters of intent from
Block to the Company dated February 2, March 11 and March 31, 1999) and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
13.8. DISCLOSURE SCHEDULE
(a) The disclosures in the Sellers Disclosure Schedule and the
Buyer Disclosure Schedule, and those in any supplement thereto, must relate
only to the representations and warranties in the Section of the Agreement
to which they expressly relate and not to any other representation or
warranty in this Agreement.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Sellers Disclosure Schedule or
the Buyer Disclosure Schedule (other than an exception expressly set forth
as such in the Sellers Disclosure Schedule or the Buyer Disclosure Schedule,
respectively, with respect to a specifically identified representation,
warranty, covenant or agreement), the statements in the body of this
Agreement will control.
13.9. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be
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binding in all respects upon and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy or claim under or with respect to
this Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns. Notwithstanding the
foregoing, the covenants set forth in Section 8.4 [Directors' and Officers'
Indemnification and Insurance] shall apply to, be binding upon and inure to the
benefit of the Indemnified Parties.
13.10. SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect so long as the economic and legal substance of
the Contemplated Transactions is not affected in any manner materially adverse
to any party. If any provision of this Agreement is held invalid or
unenforceable, the parties will negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the Contemplated Transactions be
consummated as originally contemplated to the fullest extent possible.
13.11. SECTION HEADINGS; CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
13.12. TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
13.13. GOVERNING LAW
This Agreement will be governed by the laws of the State of Missouri
without regard to conflicts of laws principles. No provision of this Agreement
shall be construed to require any party hereto to take any action that would
violate applicable Law.
13.14. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
Executed counterparts of this Agreement may be delivered by facsimile
transmission.
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13.15. SELLERS' REPRESENTATIVE
Each Seller by executing this Agreement irrevocably appoints each of
Randal J. Mudge and Ernest J. Olde (the "SELLERS' REPRESENTATIVE") as his or her
agent and true and lawful attorney-in-fact, with full power of substitution,
with full capacity and authority and in his sole discretion, to act in the name
of and for and on behalf of each Seller in connection with all matters arising
out of, resulting from, contemplated by or related or incident to this
Agreement. Without limiting the generality of the foregoing, the powers of
Sellers' Representative shall include the power to represent each Seller with
respect to all aspects of this Agreement, which power shall include, without
limitation, the power to (i) receive any payment or transfer to be made pursuant
to this Agreement, (ii) waive any and all conditions of this Agreement, (iii)
amend this Agreement and any agreement executed in connection herewith in any
respect, (iv) settle claims for indemnity pursuant to Article 12 hereof, (v)
retain legal counsel and be reimbursed by Sellers for all fees, expenses and
other charges of such legal counsel, (vi) receive notices or other
communications, (vii) deliver any notices, certificates or other documents
required and (viii) take all such other action and to do all such other things
as Sellers' Representative deems necessary or advisable with respect to this
Agreement. Buyer shall have the absolute right and authority to rely upon the
acts taken or omitted to be taken by Sellers' Representative on behalf of
Sellers, and Buyer shall have no duty to inquire as to the acts and omissions of
Sellers' Representative. Each Seller hereby acknowledges and agrees that (i) all
deliveries by Buyer to Sellers' Representative shall be deemed deliveries to
Sellers, (ii) Buyer shall not have any liability with respect to any aspect of
the distribution or communication of such deliveries between Sellers'
Representative and any Seller or among Sellers, and (iii) any disclosure made to
Sellers' Representative by or on behalf of Buyer shall be deemed to be
disclosure made to each Seller. In the event such Sellers' Representative
refuses to, or is no longer capable of, serving as a Sellers' Representative
hereunder, Sellers shall promptly appoint a successor Sellers' Representative
who shall thereafter be a successor Sellers' Representative hereunder. The
Sellers' Representative shall not be liable to any of the Sellers or their
affiliates for any decisions made or actions taken by the Sellers'
Representative in good faith absent gross negligence by the Sellers'
Representative. Following the Closing, Buyer will cause the Acquired Companies
(or any successors thereto) to indemnify the Sellers' Representative in his
capacity as such and to release and to hold harmless the Sellers' Representative
from and against any Damages that the Sellers' Representative may incur as a
result of its acting as the Sellers' Representative hereunder or in connection
with the performance of any of his duties hereunder to the fullest extent
permitted by Law, except to the extent that such Damages are caused by actions
of the Sellers' Representative that were taken in bad faith or in a grossly
negligent manner.
13.16. ALTERNATIVE DISPUTE RESOLUTION.
(a) In the event of any disputes, claims, controversies or
disagreements ("DISPUTES") arising out of or relating to this Agreement (or
Breach thereof) after the Closing hereunder, such Dispute (including any
claim of alleged misrepresentation and any Dispute concerning arbitrability
or arbitral jurisdiction) shall be settled exclusively by final and binding
arbitration before three arbitrators. The arbitration shall have its seat in
London and shall be conducted in accordance with the rules of the London
Court of International Arbitration ("LCIA") as in force on the date of
commencement of the
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arbitration, and the LCIA shall administer the arbitration. In the event of
any conflict between the LCIA Rules and this Section 13.16, the provisions
of this Section 13.16 shall govern.
(b) The Chairman of the arbitration tribunal shall not be a
citizen of Granada, the Cayman Islands, Canada or the United States but
shall be an attorney, judge, solicitor or barrister of a common law
jurisdiction. No arbitrator shall be a current or former employee, director
or partner of the party who appoints him or of any company or business in
which such party holds a legal or beneficial interest consisting of 10% or
more of the controlling shares or other interests.
(c) This Agreement shall be construed and the obligations of the
parties shall be determined in accordance with the laws of Missouri,
excluding its conflict of laws provisions, except that the law of England
and Wales shall govern the parties' agreement to arbitrate and shall be the
procedural law of the arbitration. The language of the arbitration
proceedings shall be English.
(d) To the full extent permitted by law, the parties agree that
any service of process or notice of claim of arbitration may be made in
accordance with the notice provisions of this Agreement; that such service
shall have the same effect as though service had been made in accordance
with other applicable laws; and that such service shall confer jurisdiction
over the party served in the arbitral or judicial proceeding in which such
service was made. The parties agree that they are private parties, and they
irrevocably waive any claim of immunity from service of process, immunity
from court or arbitral jurisdiction, immunity from execution or attachment
and any other defense based on being an agency or instrumentality of a
government or sovereign. The parties further warrant that they have the
authority to appoint an agent for service of process and to agree to the
manner of service described in this Section 13.16(d) in lieu of other legal
requirements for service.
(e) In addition to any other discovery provided by the LCIA Rules
or the arbitral tribunal, each party shall produce to the other party, and
to any other parties in the arbitration, all relevant documents in his or
its possession or within his or its direct or indirect control, regardless
of whether the producing party intends to introduce such documents into
evidence. Such production shall be completed at least sixty (60) days prior
to the arbitration hearing. In addition, each party shall be entitled to
take the deposition of any five fact or expert witnesses it chooses, but
such depositions shall not relieve a party or witness of any obligation it
would otherwise have to present live testimony at the hearing.
(f) Any award rendered by the arbitrators shall be in writing,
setting forth the reason for the award, and shall be the final disposition
of the merits. Any award of money shall be payable in U.S. dollars using the
rates of exchange reported in The Wall Street Journal on the date or dates
of loss or Breach. On any monetary award, ten percent (10%) compound
interest shall be awarded from the date of the Breach or loss.
77
<PAGE> 86
(g) The costs of LCIA administration, the arbitrators' fees and
reasonable other related costs, including attorneys' and experts' fees and
expenses and travel expenses shall be borne by the parties incurring such
costs unless otherwise determined by the arbitrators to be equitable under
the circumstances of such proceeding. For purposes of this clause,
attorneys' fees shall include an allocated portion of the cost of in-house
legal counsel.
(h) The arbitrators may issue interim awards, and any interim or
final award of the arbitrators may be, alternatively or cumulatively, for
monetary damages, an order requiring the performance of non-monetary
obligations (including specific performance) or any other appropriate order
or remedy. Nothing in this Section 13.16, however, shall limit the right of
any party to apply to any court of competent jurisdiction for an order to
attach or preserve, or to permit examination of, any assets or evidence, or
for specific performance or other injunctive relief. Such application to a
court shall not constitute a waiver of the agreement to arbitrate hereunder.
(i) Any party may apply for enforcement of, or entry of judgment
upon, any interim or final award in any court having jurisdiction over the
person or any assets of the party against whom enforcement is sought. To the
full extent permitted by applicable law, the parties agree that, in the
courts of the Cayman Islands, Bermuda and any other Crown Colonies,
Territories, Dominions and Protectorates, the enforcement of this Section
13.16 and any interim or final award rendered hereunder shall be governed by
the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral
Awards.
(j) To the full extent permitted by applicable law, the parties
agree to exclude court jurisdiction under sections 45 and 69 of the
Arbitration Act 1996 and to waive any right to apply or appeal to any court
to contest the enforceability of this Section 13.16, to contest the
arbitrability of any Dispute or to set aside any interim or final award.
Except for the court applications expressly permitted under subsection
13.16(h), the parties also waive any right to apply to a court to review or
decide any question of law or fact arising in the course of the arbitration.
Each of the parties represents to the other parties that this waiver is made
knowingly and voluntarily after consultation with and upon the advice of
counsel and is a material part of this Agreement.
(k) In the event a court of competent jurisdiction determines that
this Agreement is invalid or unenforceable in whole or part for any reason,
this Section 13.16 shall not be affected thereby and shall be given full
effect without regard to the invalidity or unenforceability of the remainder
of this Agreement. This Section 13.16 shall not survive any termination, but
shall survive the Closing, of this Agreement.
(l) All information, data and documentation disclosed or delivered
by a party to another party or the arbitrators in consequence of or in
connection with the arbitration hereunder shall remain the property of the
party who originally disclosed or delivered the same (the "PRODUCING PARTY")
and shall be treated as confidential by the recipient. Except as required
for enforcement of an award or as otherwise ordered by a court or government
agency, such information, data and documentation shall not be
78
<PAGE> 87
disclosed by the recipient to any other person or entity, and all originals
and copies thereof shall be returned directly to the Producing Party within
ninety calendar days after the terms of the final award have been fully
satisfied.
79
<PAGE> 88
THIS CONTRACT CONTAINS A BINDING ARBITRATION
PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
"BUYER"
BLOCK FINANCIAL CORPORATION
By: /s/ Frank L. Salizzoni
--------------------------------
Name: Frank L. Salizzoni
------------------------------
Title: President
------------------------------
"BLOCK"
H&R BLOCK, INC.
By: /s/ Mark A. Ernst
--------------------------------
Name: Mark A. Ernst
Title: Executive Vice President
and Chief Operating Officer
"COMPANY"
OLDE FINANCIAL CORPORATION
By: /s/ Ernest J. Olde
--------------------------------
Name: Ernest J. Olde
------------------------------
Title: Chairman
------------------------------
"FMS"
FINANCIAL MARKETING SERVICES, INC.
By: /s/ Randal J. Mudge
--------------------------------
Name: Randal J. Mudge
-------------------------------
Title: President
------------------------------
80
<PAGE> 89
"SELLERS"
/s/ Ernest J. Olde
------------------------------------
Ernest J. Olde
/s/ Michael S. Dzialo
------------------------------------
Michael S. Dzialo
/s/ Thomas P. Fitzgerald
------------------------------------
Thomas P. Fitzgerald
/s/ Gregory A. Hohenshil
------------------------------------
Gregory A. Hohenshil
IRONROCK, LTD.
By: /s/ Jeffrey Slopen
------------------------------------
Name: Jeffrey Slopen
Title: President
HARVEY R. KROHN REVOCABLE
LIVING TRUST, UAD JUNE 14, 1991
By: /s/ Harvey R. Krohn
------------------------------------
Name: Harvey R. Krohn
Title: Senior Vice President
/s/ Kenneth A. Madsen
-----------------------------------
Kenneth A. Madsen
/s/ Dan M. McAskin
-----------------------------------
Dan M. McAskin
81
<PAGE> 90
RANDAL J. MUDGE ALASKA TRUST
UAD DECEMBER 31, 1997
By: /s/ Cory R. Borgeson
-----------------------------------
Name: Cory R. Borgeson
Title: Trustee
/s/ Greg C. Naypaver
-----------------------------------
Greg C. Naypaver
/s/ Brian F. Olde
-----------------------------------
Brian F. Olde
/s/ Eric J. Olde
-----------------------------------
Eric J. Olde
OLDE INTERNATIONAL TRUST
UAD JANUARY 22, 1997
By: /s/ J.M. Slopen
-----------------------------------
Name: J.M. Slopen
Title: Protector and Agent
SUSAN K. OLDE FAMILY TRUST
UAD NOVEMBER 28, 1983
By: /s/ Susan K. Olde
-----------------------------------
Name: Susan K. Olde
Title: Trustee
DANIEL S. PATTERSON LIVING TRUST
UAD NOVEMBER 10, 1993
By: /s/ Daniel S. Patterson
-----------------------------------
Name: Daniel S. Patterson
Title: Sr. Vice President
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<PAGE> 91
MACK H. SUTTON REVOCABLE
FAMILY TRUST, UAD APRIL 29, 1994
By: /s/ Mack H. Sutton
-----------------------------------
Name: Mack H. Sutton
Title: Trustee
MACK H. SUTTON REVOCABLE
MARITAL TRUST, UAD APRIL 29, 1994
By: /s/ Mack H. Sutton
-----------------------------------
Name: Mack H. Sutton
Title: Trustee
/s/ Jeffrey J. Votruba
-----------------------------------
Jeffrey J. Votruba
/s/ Christopher M. Zelesnick
-----------------------------------
Christopher M. Zelesnick
83
<PAGE> 1
[H&R BLOCK LETTERHEAD]
EXHIBIT 99.1
EXHIBIT 99.1 TO FORM 8-K
[H&R BLOCK NEWS RELEASE]
H&R BLOCK TO ACQUIRE OLDE FINANCIAL CORPORATION
ACCELERATES BLOCK'S STRATEGY TO OFFER FINANCIAL PRODUCTS AND SERVICES
FOR RELEASE SEPT. 1, 1999
KANSAS CITY, Mo. -- H&R Block Inc. (NYSE:HRB) today announced it has
reached a definitive agreement to acquire Olde Financial Corporation (Olde),
parent company of Olde Discount Corporation, the fourth largest discount
broker in the United States, for a purchase price of $850 million in cash.
Olde Financial Corporation, based in Detroit, Michigan, offers
brokerage and other financial services through Olde Discount's network of
approximately 1,200 registered representatives located in 181 branch offices
in 35 states. The company currently has more than 600,000 active accounts
with an aggregate equity in excess of $37 billion. For the six months ending
June 30, 1999, Olde reported revenues and pro forma net earnings of $171.5
million and $33.2 million respectively. Assuming the inclusion of six months
of operations in H&R Block's fiscal 2000 results, Olde is expected to provide
earnings per share accretion of 6 cents to 8 cents, and cash earnings per
share accretion of 18 cents to 20 cents in fiscal 2000. In fiscal 2001, the
transaction is expected to provide 20 cents to 30 cents earnings per share
accretion, and 45 cents to 55 cents cash earnings per share accretion.
The acquisition is a significant step in H&R Block's strategy to grow
its business by providing a wider range of financial products and services to
its tax clients as well as to a broader base of customers. Block customers
will have access to a full array of investment services - including
securities trading, mutual funds and investment research - through Olde
Discount's office network and via online services. The addition of these
capabilities will complement Block's existing operations in tax preparation,
financial planning, accounting and consulting, and mortgage origination and
will accelerate its creation of a powerful branded financial services
platform.
"With the acquisition of Olde, we will have in place the major building
blocks to achieve our vision of becoming the preferred tax and financial
partner for our clients while offering an attractive product portfolio for
new Block customers," said Frank L. Salizzoni, H&R Block's president and
chief executive officer.
- more -
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<PAGE> 2
H&R BLOCK - PAGE 2
"Over the last several years, we have pursued a strategy to expand into
new financial markets by leveraging our strong brand name and our existing
network of nearly 9,000 retail locations serving more than 16 million U.S.
tax customers," Salizzoni continued.
A key element of Block's financial services strategy was the
introduction and testing of H&R Block Financial Centers in four markets
during the 1999 tax season. Block plans to open up to 70 additional Financial
Centers, which offer financial planning and investment services, home
mortgages and tax preparation, by the end of 1999.
"The Olde acquisition will strengthen our Financial Center initiative
by providing the back office infrastructure, management experience and
product breadth for H&R Block to grow aggressively our investment advisory
business to meet our customers' needs," said Mark A. Ernst, Block's executive
vice president and chief operating officer. "The acquisition will enable us
to accelerate significantly the company's future earnings from financial
services."
"Olde shares H&R Block's commitment to making high-quality financial
services affordable," said Randal J. Mudge, chief executive officer of Olde
Financial Corporation. "Combining Olde's experience with Block's network of
offices will make full-service discount brokerage services more accessible
for millions of customers. It also will broaden opportunities for employees
of both companies."
Under its financial services strategy, Block is also building a
national accounting, tax and consulting practice and has acquired the
non-attest assets of McGladrey & Pullen, LLP, and seven other accounting
firms. In addition, Block has developed capabilities in retail mortgage
origination through H&R Block Mortgage Company and Assurance Mortgage
Corporation of America. Together with H&R Block's tax business, these
capabilities will enable the company to offer a full range of financial
products and services to a broader customer base. Block is also developing an
e-commerce strategy that will incorporate Olde's online investing capability.
Ernest J. Olde founded Olde Discount Corporation in 1971 and Olde
Financial Corporation in 1986. Although currently chairman of the board, he
has not been involved in the company's management since 1995 and will have no
ties with the company upon completion of the transaction.
The transaction, which is subject to regulatory approvals and other
normal closing conditions, is expected to be completed by the end of the
calendar year. The information contained in this press release may contain
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Such statements are based upon current information, expectations,
estimates and projections regarding H&R Block Inc., Olde, and the industries
and markets in which H&R Block and Olde operate, and management's
assumptions and beliefs relating thereto. Words such as "will," "expects,"
"intends" and variations thereof and similar expressions are intended to
identify such forward-looking statements. These statements speak only as of
the date on which they are made, are not guarantees of future performance,
and involve certain risks, uncertainties and assumptions that are difficult
to predict. Therefore, actual outcomes and results could materially differ
from what is expressed, implied or forecast in such forward-looking
statements. Such differences could be caused by a number of factors
including, but
- more -
2
<PAGE> 3
H&R BLOCK - PAGE 3
not limited to, the uncertainty of the satisfaction of all closing conditions
set forth in the definitive agreement and the completion of the Olde
transaction; the uncertainty that the acquisition will be accretive to
earnings and the extent of any accretion to earnings; changes in economic,
political or regulatory environments; changes in competition and the effects
of such changes; changes in strategies; Block's inability to successfully
implement its strategies; and risks described from time to time in reports
and registration statements filed by Block and its subsidiaries with the
Securities and Exchange Commission. Readers should take these factors and
risks into account in evaluating any such forward-looking statements. Block
undertakes no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Founded in 1955, H&R Block is a diversified company providing a wide
range of financial products and services through its subsidiaries. H&R Block
Tax Services Inc. served 18.9 million taxpayers in more than 10,000 offices
located primarily in the United States, Canada, Australia and the United
Kingdom in 1999. Option One Mortgage Corporation, Assurance Mortgage
Corporation of America and H&R Block Mortgage Company offer a full range of
home mortgage products. Through RSM McGladrey Inc. and HRB Business Services
Inc., the company has built a national accounting, tax and consulting firm.
Block Financial Corporation develops and publishes consumer financial and
personal productivity software, such as Kiplinger TaxCut(R). Quarterly
resultS and other information regarding H&R Block are available on the
company's web site at www.hrblock.com.
###
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