<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
[X] Filed by the Company
[ ] Filed by a Party other than the Company
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
WESTFORD GROUP, INC.
Name of Company as Specified in its Charter
Name(s) of Person(s) Filing Proxy Statement, if other than the Company
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[x] Fee paid previously with preliminary materials.
<PAGE> 2
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $200
(2) Form, Schedule or Registration Statement No.: Preliminary Schedule 14A
(3) Filing Party: Westford Group, Inc.
(4) Date Filed: August 4, 1999
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WESTFORD GROUP, INC.
(formerly known as Community Bancorporation, Inc.)
20 E. Broad St.
Columbus, Ohio 43215
__________________ __, 2000
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of Westford Group, Inc. (the "Company") to be held on _____________ __, 2000, at
the offices of Porter, Wright, Morris & Arthur LLP, at 41 South High Street,
29th Floor, Columbus, Ohio 43215, commencing at 9:30 a.m., local time. The
matters to be considered and voted upon at this meeting are of great importance
to your investment in, and the future of, the Company.
At the Special Meeting, the Company's shareholders will be asked to
consider and vote upon the approval and adoption of an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of July 19, 1999, among Bancinsurance
Corporation ("Bancinsurance"), Bancinsurance Acquisitions, Inc. ("Acquisitions")
and the Company, providing for the merger of the Company with and into
Acquisitions (the "Merger"). If the Merger Agreement is approved and adopted by
the shareholders and the Merger becomes effective, the separate corporate
existence of the Company shall cease and Acquisitions will change its name to
Westford Group, Inc. and will remain a wholly-owned subsidiary of Bancinsurance,
and each outstanding share of the Company's common stock will be converted into
the right to receive $0.70 in cash (the "Share Price"). A detailed description
of the proposed Merger and other important information is set forth in the
accompanying Proxy Statement, and we urge you to read it carefully.
The Company's Board of Directors has determined that the Merger is
advisable and in the best interests of the Company and its shareholders. In
arriving at its decision, the Board of Directors considered, among other things,
the fairness opinion of The Harman Group Corporate Finance, Inc. showing that
the Share Price is fair from a financial point of view to holders of the
outstanding equity interests of the Company (a copy of which is set forth as
Appendix B to the Proxy Statement), the premium the Share Price represents in
comparison to other acquisition offers received by the Company from third party
competitors of the Company within the last nine months, the premium the Share
Price represents over the current trading price of the Company's common stock in
a highly limited trading market, and the fact that the Share Price is payable
entirely in cash. Accordingly, the Board of Directors has unanimously approved
the Merger Agreement and the Merger and recommends that you vote FOR approval
and adoption of the Merger Agreement.
The affirmative vote of holders of a majority of the outstanding shares
of the Company's common stock is required to approve and adopt the Merger
Agreement. Whether or not you plan to attend the Special Meeting in person and
regardless of the number of shares you own, your representation and vote are
very important. Accordingly, please complete, date and sign the enclosed proxy
card and promptly return it in the enclosed envelope (which requires no postage
if mailed in the United States). If you attend the meeting, you may vote in
person if you wish, even though you have previously returned your proxy.
We look forward to seeing you at the meeting.
Very truly yours,
Si Sokol
Chairman, President and
Chief Executive Officer
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WESTFORD GROUP, INC.
20 E. Broad St.
Columbus, Ohio 43215
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _________________ __, 2000
A Special Meeting of Shareholders of Westford Group, Inc. (the
"Company") will be held on __________________ __, 2000, commencing at 9:30 a.m.,
local time, at the offices of Porter, Wright, Morris & Arthur LLP, located at 41
South High Street, 29th Floor, Columbus, Ohio 43215 to consider and act upon the
following matters:
1. To approve and adopt an Agreement and Plan of Merger among
Bancinsurance Corporation ("Bancinsurance"), Bancinsurance Acquisitions, Inc.
("Acquisitions") and the Company (the "Merger Agreement") providing for the
merger of the Company into Acquisitions, upon the terms and subject to the
conditions set forth therein (the "Merger"), pursuant to which (i) the Company's
separate corporate existence shall cease and Acquisitions, as the surviving
corporation of the Merger, will remain a wholly-owned subsidiary of
Bancinsurance; and (ii) each holder of shares of the Company's common stock,
without par value (the "Common Stock"), outstanding at the time of effectiveness
of the Merger (the "Effective Time"), except for shares owned by the Company,
Bancinsurance, Acquisitions or shareholders exercising their appraisal rights,
will become entitled to receive $0.70 in cash per share.
2. To transact such other business as may properly come before the
meeting.
Shareholders of record as of the close of business on ______________
__, 1999 are entitled to notice of and to vote at the meeting.
Under Ohio law, appraisal rights will be available to shareholders of
the Company. In order for shareholders to exercise their appraisal rights, they
must follow the procedures prescribed by Ohio law, which are summarized under
"The Merger -- Appraisal Rights" and Appendix C in the accompanying Proxy
Statement.
By Order of the Board of Directors
Sally J. Cress
Secretary
Columbus, Ohio
___________ __, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. YOU MAY REVOKE THE PROXY AT ANY TIME
BEFORE THE CLOSE OF VOTING AT THE SPECIAL MEETING.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY
Special Meeting.................................................................................... 1
Quorum; Vote Required.............................................................................. 1
The Merger........................................................................................... 2
SPECIAL MEETING...................................................................................... 6
Purpose of the Meeting and Voting of Proxies....................................................... 6
Quorum; Vote Required.............................................................................. 6
Other Matters and Solicitation of Proxies.......................................................... 7
SPECIAL FACTORS...................................................................................... 8
Information About the Merger....................................................................... 8
Background of the Merger........................................................................... 10
Reasons for the Merger............................................................................. 11
Fairness Opinion................................................................................... 12
Interests and Intentions of Certain Persons........................................................ 13
Accounting Treatment............................................................................... 13
Federal Income Tax Consequences.................................................................... 14
Certain Effects of the Merger...................................................................... 14
THE MERGER........................................................................................... 14
Structure and Effect of the Merger................................................................. 14
Regulatory Compliance.............................................................................. 14
Appraisal Rights................................................................................... 14
Merger Consideration............................................................................... 16
Procedure For Payment.............................................................................. 16
Representations and Warranties..................................................................... 16
Pre-Closing Covenants.............................................................................. 17
No Solicitation.................................................................................... 17
Conditions to Closing.............................................................................. 17
Termination........................................................................................ 18
Indemnification.................................................................................... 18
Amendment.......................................................................................... 18
Source of Funds/Fees............................................................................... 18
INFORMATION REGARDING BANCINSURANCE.................................................................. 19
Bancinsurance Selected Financial Data.............................................................. 19
INFORMATION REGARDING THE COMPANY.................................................................... 20
Properties......................................................................................... 21
Legal Proceedings.................................................................................. 21
Market for the Company's Common Stock and Related Security Holders Matters......................... 21
Company Selected Financial Data.................................................................... 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................ 23
Summary............................................................................................ 23
Results of Operations.............................................................................. 23
Liquidity and Capital Resources.................................................................... 25
Intangible Asset................................................................................... 25
Inflation.......................................................................................... 25
Impact of the Year 2000 Issue...................................................................... 25
Trends............................................................................................. 25
Forward-Looking Information........................................................................ 26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....................................... 27
Principal Accountants.............................................................................. 28
Quantitative and Qualitative Disclosures About Market Risk......................................... 29
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............... 29
AVAILABLE INFORMATION................................................................................ 29
</TABLE>
i
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<TABLE>
<S> <C>
FINANCIAL STATEMENTS OF THE COMPANY.................................................................. F-1
APPENDIX A: AGREEMENT AND PLAN OF MERGER............................................................. A-1
APPENDIX B: FAIRNESS OPINION OF THE HARMAN GROUP..................................................... B-1
APPENDIX C: SECTION 1701.85 OHIO GENERAL CORPORATION LAW............................................ C-1
</TABLE>
ii
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WESTFORD GROUP, INC.
20 E. Broad St.
Columbus, Ohio 43215
PROXY STATEMENT FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _____________ __, 2000
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
SUMMARY
The following is a summary of certain information presented elsewhere
in this Proxy Statement. Reference is made to, and this Summary is qualified in
its entirety by, the more detailed information presented in this Proxy
Statement, including the Appendices hereto. For a more complete description and
to obtain a better understanding of the Merger, you should carefully read this
entire Proxy Statement. Capitalized terms, not otherwise defined herein, are
used herein as defined in the Merger Agreement, which is annexed hereto as
Appendix A.
SPECIAL MEETING
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Westford Group, Inc. (the "Company") for
use at a Special Meeting of Shareholders to be held on ____________ __, 2000
(the "Special Meeting"), to consider and vote upon the proposal to approve and
adopt the Agreement and Plan of Merger, dated as of July 19, 1999, among
Bancinsurance Corporation ("Bancinsurance"), Bancinsurance Acquisitions, Inc.
("Acquisitions") and the Company (the "Merger Agreement"), pursuant to which the
Company will be merged with Acquisitions, a wholly-owned subsidiary of
Bancinsurance, with the Company's separate corporate existence ceasing upon
consummation of the merger and Acquisitions surviving the merger under the name
Westford Group, Inc. (the "Merger"). The Special Meeting will be held at the
offices of Porter, Wright, Morris & Arthur LLP at 41 South High Street, 29th
Floor, Columbus, Ohio 43215, commencing at 9:30 a.m., local time.
QUORUM; VOTE REQUIRED
At the close of business on _____________ __, 2000, the record date for
the determination of shareholders entitled to vote at the Special Meeting (the
"Record Date"), there were outstanding and entitled to vote an aggregate of
____________ shares of the common stock, without par value, of the Company (the
"Common Stock"). Shareholders are entitled to one vote per share.
A majority of the shares of Common Stock outstanding on the Record Date
must be represented at the meeting in person or by proxy for a quorum to be
present to conduct the business of the meeting. The affirmative vote of the
holders of a majority of the shares of Common Stock outstanding on the Record
Date is required to adopt the Merger Agreement. Because the required vote to
approve the Merger Agreement is based on the total number of outstanding shares
of Common Stock, the failure to vote will have the same effect as a vote against
the Merger.
Si Sokol, the Company's Chairman, President and Chief Executive
Officer, and his wife (together, the "Principal Shareholders"), collectively,
including trusts they control, have the power to vote 726,773
<PAGE> 8
shares of Common Stock, or approximately 42.4% of the number of shares of Common
Stock outstanding on the Record Date, have indicated to the Company that they
will cause their shares to be voted at the Special Meeting to approve and adopt
the Merger Agreement. In addition, each of the Company's directors (not
including Mr. Sokol) have advised the Company that they currently intend to vote
the outstanding shares of Common Stock beneficially owned by them (collectively,
51,250 shares of Common Stock, or approximately 3.0% of the number of shares
outstanding on the Record Date) to approve and adopt the Merger Agreement
(although no such director is legally bound to do so).
THE MERGER
Purpose and Effect of the Merger. During the Fall of 1997, the
Company's management decided to investigate the benefits to the Company's
shareholders of merging the Company with another entity. Management wanted to
explore such opportunities because of the increased costs associated with being
a micro-cap publicly held company; the need for increased capital and the
difficulty faced by the Company in raising such capital; rapid changes in
technology that could impair the Company's existing business; and the lack of a
liquid trading market for the Company's shares. The Company received offers from
two competitors, but the offers were rejected by the Company's Board of
Directors. In July 1999, the Company's Board of Directors approved the terms of
the Merger. See "SPECIAL FACTORS - Reasons for the Merger."
The purpose of the Merger is to enable Bancinsurance to acquire all of
the business and assets of the Company, subject to its liabilities. The Merger
will become effective at the time of filing of a Certificate of Merger relating
to the Merger, in accordance with the Ohio General Corporation Law, with the
Office of the Secretary of State of Ohio, or at such later time as is specified
therein (the "Effective Time"). At the Effective Time, the Company will merge
with and into the Acquisitions, which, as the surviving corporation of the
Merger, will continue to be a wholly-owned subsidiary of Bancinsurance, and each
holder of shares of Common Stock outstanding at the Effective Time will become
entitled to receive in respect of each such share cash in an amount $0.70 per
share (the "Share Price"). The Share Price places a valuation on the Company of
approximately $1,200,000. If approved and consummated, Bancinsurance will
acquire 1,368,706 shares of Common Stock, and the 345,000 shares of Common Stock
held by Acquisitions that were issued on August 30, 1999 (80% of the Outstanding
Common Stock) upon conversion of the Company's $50,000 Convertible Subordinated
Debenture held by Acquisitions will be cancelled.
Interests and Intentions of Certain Persons. In considering the
recommendation of the Company's Board of Directors to adopt the Merger
Agreement, shareholders should be aware that certain directors and executive
officers of the Company have interests that are in addition to or may be
different from the interests of the Company's shareholders generally, and that
the directors having such interests participated in the discussion, deliberation
and voting of the Company's Board of Directors to adopt the Merger Agreement.
Si Sokol, the Company's Chairman, President and Chief Executive Officer
is also the Chairman and Chief Executive Officer of Bancinsurance. Additionally,
Mr. Sokol is a director and officer of Acquisitions. Mr. Sokol, together with
his wife, beneficially owns 2,811,900 shares or 45.8% of the outstanding common
stock, without par value, of Bancinsurance (the "Bancinsurance Stock"). As an
owner of 45.8% of the Bancinsurance Stock, Mr. Si Sokol's interest, as a
stockholder, in the net book value and net earnings of the Company will increase
3.4% from his 42.4% ownership of the Common Stock. The Company paid Mr. Si Sokol
$10,800, $31,250 and $11,000 for his services as an officer and director of the
Company for the fiscal years ended December 31, 1997 and 1998 and the six months
ended and June 30, 1999, respectively. Mr. Sokol has personally guaranteed the
Company's credit line for up to $100,000.
James R. Davis, a director of the Company, is also a Vice President and
Director of Bancinsurance. Mr. Davis beneficially owns 42,000 shares or 0.7% of
the Bancinsurance Stock. As an owner of 0.7% of the Bancinsurance Stock, Mr.
Davis's interest, as a stockholder, in the net book value and net earnings of
the Company will increase 0.6% from his 0.1% ownership of the Common Stock.
2
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Daniel D. Harkins, a director of the Company, is also a director of
Bancinsurance. Mr. Harkins beneficially owns 58,500 shares or 1.0% of the
Bancinsurance Stock. As an owner of 1.0% of the Bancinsurance Stock, Mr.
Harkins' interest, as a stockholder, in the net book value and net earnings of
the Company will increase 1.0% from his 0% ownership of the Common Stock.
John S. Sokol, son of Si Sokol, is a director of the Company and the
President and a director of Bancinsurance. Additionally, Mr. John Sokol is a
director of Acquisitions. Mr. John Sokol beneficially owns 293,140 shares or
4.8% of the Bancinsurance Stock. As an owner of 4.8% of the Bancinsurance Stock,
Mr. John Sokol's interest, as a stockholder, in the net book value and net
earnings of the Company will increase 0.5% from his 4.3% ownership of the Common
Stock.
Messrs. Si Sokol, John Sokol, and Davis will exchange their shares at
the same price as all other shareholders of the Company and each intends to vote
his shares of Common Stock for approval of the Merger.
David White, a director of the Company, is not a director, officer or
affiliate of Bancinsurance or Acquisitions, and, therefore, does not have a
competing interest in the Merger.
Recommendation of the Company's Board of Directors. The Board of
Directors of the Company has unanimously approved the Merger Agreement and
recommends a vote FOR the Merger Agreement. The Company's Board of Directors
believes the Merger Agreement is fair to and in the best interests of the
Company and its shareholders. In reaching its conclusions, the Company's Board
of Directors considered the following material factors that weighed in favor of
approving the Merger Agreement:
1. The Board of Directors observed that the Share Price (as calculated
on July 15, 1999, the trading day immediately preceding the date the Merger
Agreement was approved by the Company's Board of Directors) reflected a premium
of 1,300% over the last reported closing price of the Common Stock on July 15,
1999 and a premium of 67% over the Company's net book value per share of $0.42
as of June 30, 1999 (calculated as if Bancinsurance had exercised its conversion
rights under the $50,000 Convertible Subordinated Debenture). On July 15, 1999,
the closing price of the Common Stock was $0.05 per share. On August 4, 1999,
the date the Merger was announced, the closing price of the Common stock was
$0.0312 per share. Since the Company has a limited trading market for its Common
Stock on the OTC Bulletin Board, the trading price multiplied by the price per
share may not alone reflect the accurate value of the Company. Additionally, the
Board noted that there is a limited trading market for the Company's Common
Stock on the OTC Bulletin Board and that the Merger would provide liquidity for
the Company's shareholders which currently does not exist for such shareholders.
2. The Company's Board of Directors also noted that despite the
Company's prospects and improvements, the market price of the Common Stock had
traded within a relatively narrow range, which, in the Board's view, did not
reflect the success achieved and the prospects for future growth of the Company.
During the 52-weeks prior to December 13, 1999, the Common Stock has had a
low/high price range of $.0312 to $.5625 per share. The last trade in the Common
Stock took place on July 26, 1999 at a bid price of $0.50 per share. The Board
also noted the failure of stocks in the "microcap" market to keep pace with the
growth rate of larger companies during the last several years. Accordingly, the
Board believed that the premium reflected by the Share Price over the historical
trading market prices presented an opportunity to the Company's shareholders
which they might not be able to realize in the public trading markets.
3. The Company obtained a fairness opinion from The Harman Group
Corporate Finance, Inc. ("The Harman Group") that indicates the Share Price is
fair from a financial point of view to the Company's shareholders.
4. Based on the experience of the Company's management in the course of
its discussions with Bancinsurance, the terms and conditions of the Merger,
specifically that the Merger Consideration is payable entirely in cash and is
not subject to any financing contingencies and that the Merger is not subject
3
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to approval of Bancinsurance's shareholders, made the Merger an attractive
alternative other offers received by the Company.
5. Mr. Sokol, who together with his wife, has the power to vote
approximately 42.4% of the outstanding Common Stock, had advised the Board that
in his view the Merger presented an attractive opportunity for himself and the
Company's other shareholders and that he intended to endorse Bancinsurance's
proposal and to vote his shares (and that Mrs. Sokol would vote her shares) in
favor of the Merger. Shareholders should note that Mr. Sokol had previously
received offers from unaffiliated third parties to acquire only the shares held
by him and his wife at lesser per share prices. Mr. Sokol deferred accepting
such offers to allow all of the Company's shareholders to obtain liquidity in
their Common Stock at the same price that he was willing to accept for his
control stake in the Company.
6. The Company had previously attempted to negotiate the sale of the
Company with unaffiliated third parties in arms length transactions. These
negotiations aided the directors decision to sell the Company at the Share Price
given that it was higher than the price that an unaffiliated third party was
willing to offer. The Share Price represents a premium of $0.11 (19%) or $0.18
(35%) per share form the highest prices offered by unaffiliated third parties,
respectively, during the previous nine month period.
Other than relying on the fairness opinion from The Harman Group, the
Board of Directors did not undertake an analysis of the going concern value or
liquidation value of the Company. The Board of Directors did not undertake these
analysis because in its business judgement the costs of remaining an independent
publicly traded company and the lack of any reasonable trading market for the
Common Stock outweighed any going concern value. Additionally, the value of the
Company is in its primary asset, its customer contacts, which have no value in
the event of liquidation of the Company.
The factors discussed above related to the Board's determination to
recommend approval of the Merger. The Board also considered as a potentially
negative factor in its deliberations concerning the fairness of the Merger, that
as a result of the transaction the public shareholders would cease to have
ownership interests in the Company and would no longer have the opportunity to
benefit from any future increases in the value of the Company, including a sale
to an unaffiliated third party.
In the course of structuring the Merger, there was not an unaffiliated
representative retained to act solely on behalf of unaffiliated shareholders for
the purposes of negotiating the terms of the Merger or to prepare a report
concerning the fairness of the Merger. Additionally, the transaction was not
structured so that approval of at least a majority of unaffiliated shareholders
would be required for approval.
From a procedural standpoint, despite the lack of an unaffiliated
representative to act solely on behalf of unaffiliated shareholders and the fact
that the transaction was not structured so that approval of at least a majority
of unaffiliated shareholders would be required for approval, the Board of
Directors believes the transaction is procedurally fair to unaffiliated
shareholders because:
(i) The shareholders will have an opportunity to vote on the
approval of the Merger; and
(ii) Any dissenting shareholders would have the right to request
appraisal rights for their shares of Common Stock under Ohio
law in accordance with the procedures more fully described in
Appendix C.
Fairness Opinion. The Board of Directors of the Company engaged The
Harman Group to conduct a fairness opinion regarding the Merger. The Harman
Group concluded that the Share Price in the Merger is fair to the Company's
shareholders from a financial point of view.
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Exchange of Certificates. As soon as reasonably practicable on or after
the Effective Time, transmittal materials will be provided to each holder of
record of Common Stock for use in exchanging such holder's stock certificates
for the Share Price to which such holders are entitled. Shareholders should not
surrender their stock certificates until the letter of transmittal and
instructions are obtained and then only in accordance with such instructions.
See "The Merger Agreement -- Procedure for Payment."
Regulatory Approvals. None of the Company, Acquisitions or
Bancinsurance is required to obtain any regulatory approvals from any
governmental authority in order to consummate the Merger.
Closing Conditions. Under the Merger Agreement, the closing of the
Merger (the "Closing") is subject to several conditions, including, among
others, the approval of the Merger Agreement by the Company's shareholders;
conversion of the Debenture issued by the Company and held by Acquisitions; the
absence of any injunction or other order restraining or challenging the Merger
or any proceeding by a governmental authority seeking such an injunction or
order; performance by the parties of their respective obligations under the
Merger Agreement; receipt by Bancinsurance of financial statements for the
Company in form and substance reasonably satisfactory to Bancinsurance;
Bancinsurance's satisfactory completion of its financial due diligence of the
Company; and the Company being current in all of its payments to its directors
and officers.
Restrictions on the Company's Operations and Solicitation of
Alternative Proposals Prior to the Effective Time. Until the earlier of the
Effective Time and the termination of the Merger Agreement:
(i) The Company is subject to various restrictions on its business and
operations and limitations on its ability to make capital expenditures, incur
indebtedness, make loans or advances, acquire or dispose of assets, amend its
Articles of Incorporation or Code of Regulations, hire employees or independent
contractors or increase the compensation thereof; and
(ii) The Company may not directly or indirectly, encourage, solicit or
initiate any discussions, submissions of proposals or offers or negotiations
with, or, participate in any negotiations or discussions with, or provide any
information or data of any nature whatsoever to, or otherwise cooperate in any
other way with, or assist or participate in, facilitate or encourage any effort
or attempt by, any person, other than Bancinsurance and its affiliates,
representatives and agents, concerning any merger, consolidation, sale of
substantial assets, sale of shares of capital stock or other equity securities,
recapitalization, debt restructuring or similar transaction involving the
Company.
Termination. The Merger Agreement may be terminated prior to the
Effective Time, whether or not the Merger Agreement has been approved by the
shareholders of the Company: (i) by the mutual action of the Boards of Directors
of Bancinsurance and the Company; (ii) by the Company if the conditions for the
Company's performance have not been met; (iii) by Bancinsurance or Acquisitions
if the conditions for either of their performance have not been met; or (iv) by
Bancinsurance or the Company if there has been a material breach of a term of
the Merger Agreement or of a representation or warranty contained in the
Agreement by the other party.
Federal Income Tax Consequences. The Merger will be a taxable
transaction to the Company's shareholders. For federal income tax purposes, the
Company's shareholders will generally recognize gain or loss in the Merger in an
amount determined by the difference between the cash received and their tax
basis in the Common Stock exchanged therefor. For further information regarding
certain federal income tax consequences to the Company's shareholders, see "The
Merger -- Federal Income Tax Consequences."
Accounting Treatment. The Merger will be treated as a "purchase" for
accounting purposes. See "The Merger -- Accounting Treatment."
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Appraisal Rights. Under Section 1701.85 of the Ohio Revised Code,
holders of the Common Stock who properly exercise and perfect dissenters' rights
with respect to the Merger will have the right to receive the "fair cash value"
of their shares (excluding any appreciation or depreciation in market value
resulting from the Merger). In order to exercise such rights, shareholders must
comply with the procedural requirements of Section 1701.85 of the Ohio Revised
Code, the full text of which is attached to this Proxy Statement as Appendix C.
Failure to vote against the Merger proposal will not constitute a waiver of
dissenters' appraisal rights. However, failure to take any of the steps required
under Section 1701.85 on a timely basis may result in the loss of dissenter's
rights. See "The Merger - Appraisal Rights."
SPECIAL MEETING
PURPOSE OF THE MEETING AND VOTING OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Company's Board of Directors for use at a Special Meeting of
Shareholders to be held on __________ __, 2000, commencing at 9:30 a.m., local
time, at the offices of Porter, Wright, Morris & Arthur LLP, 41 South High
Street, 29th Floor, Columbus, Ohio 43215, to consider and vote upon the proposal
(i) to approve and adopt the Merger Agreement, and (ii) to transact such other
business as may properly come before the meeting. All proxies will be voted in
accordance with a shareholder's instructions and, if no choice is specified, the
proxies will be voted in favor of the matters set forth in the accompanying
Notice of Meeting. Any proxy may be revoked by a shareholder at any time before
the close of voting at the Special Meeting by delivery of written revocation or
a subsequently dated proxy to the Secretary of the Company or by voting in
person at the Special Meeting. Any written notice revoking a proxy should be
sent to: Westford Group, Inc., 20 East Broad Street, Columbus, Ohio 43215,
Attention: Secretary, for delivery before the close of voting at the Special
Meeting.
QUORUM; VOTE REQUIRED
At the close of business on __________ __, 1999, the Record Date for
the determination of shareholders entitled to vote at the Special Meeting, there
were outstanding and entitled to vote an aggregate of ______________ shares of
Common Stock. Shareholders are entitled to one vote per share.
A majority of the shares of Common Stock outstanding on the Record Date
must be represented at the meeting in person or by proxy for a quorum to be
present to conduct the business of the meeting. The affirmative vote of the
holders of a majority of the shares of Common Stock outstanding on the Record
Date is required to adopt the Merger Agreement. Abstentions will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but will not be counted as a vote in favor of such matter.
Accordingly, an abstention from voting on a matter has the same effect as a vote
against the matter. A broker or nominee holding shares in "street name" will not
have discretionary authority to vote with respect to the Merger ("broker
non-votes"), and those shares will not be considered as present for determining
the presence of a quorum at the meeting, will not be entitled to vote with
respect to the Merger and will, therefore, have the same effect as a vote
against approval of the Merger.
The Principal Shareholders have agreed to cause their shares to be
voted at the Special Meeting to approve and adopt the Merger Agreement. In
addition, each of the Company's directors (not including Mr. Sokol) has advised
the Company that he currently intends to vote the outstanding shares of Common
Stock beneficially owned by him (collectively, approximately 3.0% of the number
of shares outstanding on the Record Date) to approve and adopt the Merger
Agreement (although no such director is legally bound to do so).
A complete alphabetical list of all holders of record of Common Stock
on the Record Date, including such holder's address and the number of shares of
Common Stock registered in the name of such holder, will be open to examination
by any such holder for any purpose germane to the Special Meeting during
ordinary business hours at the offices of the Company beginning at least ten
days prior to the Special Meeting and during the Special Meeting the list will
be available at the offices of Porter, Wright, Morris & Arthur LLP.
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OTHER MATTERS AND SOLICITATION OF PROXIES
Management does not know of any other matters which may come before the
Special Meeting. However, if any other matters are properly presented at the
Special Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph, facsimile, mail and personal interviews, and the Company reserves the
right to compensate outside agencies for the purpose of soliciting proxies.
Brokers, custodians and fiduciaries will be requested to forward proxy
soliciting material to the beneficial owners of shares held of record in their
names and the Company will reimburse them for out-of-pocket expenses incurred on
behalf of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY IS REQUIRED TO
ADOPT THE MERGER AGREEMENT.
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SPECIAL FACTORS
INFORMATION ABOUT THE MERGER
The Merger Agreement provides for the acquisition of the Company by
means of the merger of the Company and Acquisitions with Acquisitions surviving
the Merger. Following the Merger, the Acquisitions will change its name to
Westford Group, Inc. and will remain a wholly-owned subsidiary of Bancinsurance.
In the Merger, each holder of shares of Common Stock outstanding at the
Effective Time, other than a holder who exercises its appraisal rights under
Ohio law, will become entitled to receive the Share Price. Bancinsurance is an
affiliate of the Company because (i) Mr. Si Sokol, the Company's Chairman,
President and Chief Executive Officer, is also the Chairman and Chief Executive
Officer of Bancinsurance, a director and officer of Acquisitions and owns a
substantial amount of stock in both the Company and Acquisitions, (ii) Mr. John
Sokol, a director of the Company, is also the President and a director of
Bancinsurance, (iii) Mr. James Davis, a director of the Company, is also a Vice
President and a director of Bancinsurance and a director of Acquisitions, and
(iv) Mr. Daniel Harkins, a director of the Company, is also a director of
Bancinsurance. The Share Price places a valuation on the Company of
approximately $1,200,000. If approved and consummated, Bancinsurance will
acquire 1,368,706 shares of Common Stock (80% of the Outstanding Common Stock),
and the 345,000 shares of Common Stock held by Acquisitions that were issued on
August 30, 1999 upon conversion of the Company's $50,000 Convertible
Subordinated Debenture held by Acquisitions will be cancelled.
BACKGROUND OF THE MERGER
During October and November 1997, the Company was approached by a
potential acquiror, Vizia, Inc. ("VI"), regarding a potential business
combination. VI is an affiliate of one of the Company's competitors, General
Code, offering similar products and services to those of the Company. After
discussions with VI, the parties decided to proceed with further discussions
after the Company's audited fiscal 1997 results were available.
Further, during November and December 1997, the Company was approached
by another potential acquiror, Municipal Code ("MC"), regarding its interest in
a potential acquisition of the Company's business. Similar to VI, MC was also
one of the Company's competitors. Again, after discussions with MC, the parties
decided to proceed with further discussions after the Company's audited fiscal
1997 results were available.
At the March 13, 1998 meeting of the Company's Board of Directors, the
Board of Directors authorized the Company's management to continue discussions
regarding potential business combinations with VI and MC to determine whether a
viable business combination with one of the entities was possible.
In March 1998, representatives of VI and MC each visited the Company's
headquarters and commenced discussions regarding a potential acquisition of the
Company. Further, in April 1998, the Company forwarded its audited fiscal 1997
financial results to VI and MC for their review. Throughout the Spring of 1998,
the Company continued its negotiations with VI and MC.
In late May 1998, VI made a verbal offer to the Company to acquire 100%
of the Company's Common Stock for up to $700,000, payable in a combination of
cash and debt. This offer would have resulted in a price per share of
approximately $0.52 to the Company's shareholders. Around the same time, MC also
made a verbal proposal to the Company to acquire 100% of the common stock of
American Legal Publishing, the Company's operating subsidiary, for up to
$700,000 payable in cash. This offer would have resulted in a price per share
(exclusive of the tax impact of the gain realized by the Company) of
approximately $0.52 to the Company's shareholders. After due deliberation at the
June 1, 1998 Board of Directors meeting, the Company's Board of Directors
rejected the verbal offers received from VI and MC because the Board considered
the offers to be inadequate for the acquisition of the Company.
From July 1998 through October 1998, VI and the Company continued
negotiations regarding the acquisition of the Company and began preparing an
acquisition agreement.
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<PAGE> 15
In September 1998, MC approached the Company again and made another
verbal proposal to acquire the Company's operating subsidiary for $1,000,000,
payable in cash. This offer would have resulted in a price per share (exclusive
of the tax impact of the gain realized by the Company) of approximately $0.74 to
the Company's shareholders (approximately $0.59 if Bancinsurance exercised its
conversion rights under the $50,000 Convertible Subordinated Debenture). The
Company's Board of Directors rejected the new proposal by MC, because the Board
of Directors considered the price inadequate and because of the negative tax
implications of the proposed deal structure. The sale of American Legal
Publishing to MC would have resulted to effectively double tax the Company's
shareholders. The sale of the subsidiary would have required the Company to pay
tax on the gain realized on the sale, and the shareholders would have been
subject to pay tax on the proceeds from the distribution of cash from the
Company to the shareholders. Additionally, the Company would have had to incur
the costs and expenses associated with the subsequent liquidation and winding up
of the Company's operations.
In October 1998, VI submitted a proposed agreement to the Company's
Board of Directors for the acquisition of the Company. The basic terms of VI's
new proposal was to acquire the Company for $800,000, payable in a combination
of cash and debt. This offer would have resulted in a per share price of
approximately $0.60 per share (approximately $0.48 if Bancinsurance exercised
its conversion rights under the $50,000 Convertible Subordinated Debenture) to
the Company's shareholders. Although the price offered was adequate in the
Board's opinion and reflected an appropriate value based on an appraisal
completed by The Harman Group, in November 1998, the Company's Board of
Directors rejected VI's proposal because the parties could not reach agreement
on some of the terms like indemnification. Additionally, the Board was also
concerned about VI's ability to obtain adequate financing for the acquisition
and whether the Company's business with the liability of the financing would be
able to generate sufficient cash flow to service the Company's debt and finance
it ongoing business.
Despite the inability to come to a suitable agreement with VI or MC,
the Company's Board still believed that it made business sense to give their
shareholders some liquidity in a highly illiquid security, as well as to reduce
the Company of the burden, time, and expense associated with remaining a
publicly-traded company without any benefit of being able to access the capital
markets. During early 1999, no other parties showed any interest in pursuing an
acquisition with the Company. After examining the economics of the business, in
April 1999, Bancinsurance initiated discussions with the Company's Board of
Directors. During that time, Bancinsurance believed that they could offer the
Company's shareholders cash for their stock at a value higher than the proposals
received from VI and MC. At the April 30, 1999 Board of Directors meeting, the
Company's Board of Directors authorized the Company to pursue merger discussions
with Bancinsurance.
In May 1999, the Company's Board of Directors engaged The Harman Group
to update their previous appraisal of the Company. On June 4, 1999, the updated
valuation of the Company by The Harman Group was finalized and delivered to the
Company.
In June 1999, Bancinsurance made a verbal offer to buy the Company for
cash subject to agreement on price and deal structure. At the June 25, 1999
Board of Directors meeting, the Company's Board of Directors authorized the
Company's management to continue negotiating the final terms for a potential
merger with Bancinsurance. At the July 16, 1999 Board of Directors meeting, the
Company's Board of Directors approved the terms of the Merger and the Merger
Agreement, based on The Harman Group appraisal and the value offered by VI and
MC who were unaffiliated third parties.
On August 2, 1999, The Harman Group delivered a formal fairness opinion
to the Board of Directors to the effect that the Share Price is fair to the
Company's shareholders from a financial point of view. A copy of the fairness
opinion is set forth in Appendix B of this Proxy Statement.
The Company did not retain an unaffiliated representative to act on
behalf of unaffiliated security holders in negotiating the Merger.
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<PAGE> 16
REASONS FOR THE MERGER
The Company's Board of Directors has determined that the Merger is
advisable and in the best interests of the Company and its shareholders and has
unanimously approved and recommends that the Company's shareholders vote to
adopt the Merger Agreement. In determining to recommend approval of the Merger,
the Board considered the following factors that weighed in favor of approval,
among others:
1. The Board of Directors observed that the Share Price (as calculated
on July 15, 1999, the trading day immediately preceding the date the Merger
Agreement was approved by the Company's Board of Directors) reflected a premium
of 1,300% over the last reported closing price of the Common Stock on July 15,
1999 and a premium of 67% over the Company's net book value per share of $0.42
as of June 30, 1999 (calculated as if Bancinsurance had exercised its conversion
rights under the $50,000 Convertible Subordinated Debenture). On July 15, 1999,
the closing price of the Common Stock was $0.05 per share. On August 4, 1999,
the date the Merger was announced, the closing price of the Common stock was
$0.0312 per share. Since the Company has a limited trading market for its Common
Stock on the OTC Bulletin Board, the trading price multiplied by the price per
share may not alone reflect the accurate value of the Company. Additionally, the
Board noted that there is a limited trading market for the Company's Common
Stock on the OTC Bulletin Board and that the Merger would provide liquidity for
the Company's shareholders which currently does not exist for such shareholders.
2. The Company's Board of Directors also noted that despite the
Company's prospects and improvements, the market price of the Common Stock had
traded within a relatively narrow range, which, in the Board's view, did not
reflect the success achieved and the prospects for future growth of the Company.
During the 52-weeks prior to December 13, 1999, the Common Stock has had a low/
high closing price within the range of $0.0312 to $0.5625 per share. The last
trade in the Common Stock took place on July 26, 1999 at a price of $0.50 per
share. The Board also noted the failure of stocks in the "microcap" market to
keep pace with the growth rate of larger companies during the last several
years. Accordingly, the Board believed that the premium reflected by the Share
Price over the historical trading market prices presented an opportunity to the
Company's shareholders which they might not be able to realize in the public
trading markets.
3. The Company obtained a fairness opinion from The Harman Group
Corporate Finance, Inc. ("The Harman Group") that indicates the Share Price is
fair from a financial point of view to the Company's shareholders.
4. Based on the experience of the Company's management in the course of
its discussions with Bancinsurance, the terms and conditions of the Merger,
specifically that the Merger Consideration is payable entirely in cash and is
not subject to any financing contingencies and that the Merger is not subject to
approval of Bancinsurance's shareholders, made the Merger an attractive
alternative other offers received by the Company.
5. Mr. Sokol, who together with his wife, has the power to vote
approximately 42.4% of the outstanding Common Stock, had advised the Board that
in his view the Merger presented an attractive opportunity for himself and the
Company's other shareholders and that he intended to endorse Bancinsurance's
proposal and to vote his shares (and that Mrs. Sokol would vote her shares) in
favor of the Merger. Shareholders should note that Mr. Sokol had previously
received offers from unaffiliated third parties to acquire only the shares held
by him and his wife at lesser per share prices. Mr. Sokol deferred accepting
such offers to allow all of the Company's shareholders to obtain liquidity in
their Common Stock at the same price that he was willing to accept for his
control stake in the Company.
6. The Company had previously attempted to negotiate the sale of the
Company with unaffiliated third parties in arms length transactions. These
negotiations aided the directors decision to sell the Company at the Share Price
given that it was higher than the price that an unaffiliated third party was
willing to offer. The Share Price represents a premium of $0.11 (19%) or $0.18
(35%) per share form the highest prices offered by unaffiliated third parties,
respectively, during the previous nine month period.
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<PAGE> 17
Other than relying on the fairness opinion from The Harman Group, the
Board of Directors did not undertake an analysis of the going concern value or
liquidation value of the Company. The Board of Directors did not undertake these
analysis because in its business judgement the costs of remaining an independent
publicly traded company and the lack of any reasonable trading market for the
Common Stock outweighed any going concern value. Additionally, the value of the
Company is in its primary asset, its customer contacts, which have no value in
the event of liquidation of the Company.
The factors discussed above related to the Board's determination to
recommend approval of the Merger. The Board also considered as a potentially
negative factor in its deliberations concerning the fairness of the Merger, that
as a result of the transaction the public shareholders would cease to have
ownership interests in the Company and would no longer have the opportunity to
benefit from any future increases in the value of the Company, including a sale
to an unaffiliated third party.
In the course of structuring the Merger, there was not an unaffiliated
representative retained to act solely on behalf of unaffiliated shareholders for
the purposes of negotiating the terms of the Merger or to prepare a report
concerning the fairness of the Merger. Additionally, the transaction was not
structured so that approval of at least a majority of unaffiliated shareholders
would be required for approval.
From a procedural standpoint, despite the lack of an unaffiliated
representative to act solely on behalf of unaffiliated shareholders and the fact
that the transaction was not structured so that approval of at least a majority
of unaffiliated shareholders would be required for approval, the Board of
Directors believes the transaction is procedurally fair to unaffiliated
shareholders because:
(i) The shareholders will have an opportunity to vote on the
approval of the Merger; and
(ii) Any dissenting shareholders would have the right to request
appraisal rights for their shares of Common Stock under Ohio
law in accordance with the procedures more fully described in
Appendix C.
The foregoing discussion of the information and factors considered by
the Board of Directors of the Company addresses the material factors considered
by the Board in its consideration of the Merger. The Board did not quantify or
attach any particular weight to the various factors that it considered in
reaching its determination that the Merger Agreement and the transactions
contemplated thereby, including the Merger, are advisable and in the best
interests of the Company's shareholders. In reaching its determination, the
Board of Directors took the various factors into account collectively. The Board
did not perform a factor-by-factor analysis, but rather its determination was
made in consideration of all of the factors as a whole.
Messrs. Si Sokol, John Sokol, Davis and Harkins and the Board of
Directors of Bancinsurance and Acquisitions have reviewed the fairness opinion
of The Harman Group provided to the Company and the deliberations of the
Company's Board and believe, based solely upon these reports and deliberations,
that this transaction is fair to unaffiliated security holders of the Company.
The Company, Acquisitions, Bancinsurance, and Messrs. Si Sokol, John
Sokol, Harkins and Davis anticipate that the Company's employees and assets will
be utilized in the same manner after the transaction as they were before the
transaction.
FAIRNESS OPINION
The Harman Group is a regional investment banking firm headquartered in
Columbus, Ohio, that as a part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers, acquisitions, divestitures and other corporate
transactions. The Harman Group was founded in Columbus, Ohio in 1988.
The Harman Group was selected to opine on the fairness of this
transaction because of its expertise and familiarity with the Company and its
business. The Company has engaged The Harman Group in the past for valuation
advice. The Harman Group has no material relationship with the Company,
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<PAGE> 18
Bancinsurance, Acquisitions, Mr. Si Sokol, Mr. John Sokol, Mr. Harkins or Mr.
Davis. The Harman Group's fees for the fairness opinion and the valuations it
prepared of the Company are payable on a non-contingent basis. The final fees
are dependent upon actual time spent by The Harman Group preparing the fairness
opinion, which will be charged at an hourly rate. The Company has not received
The Harman Group's final invoice for the fairness opinion and valuations, but
the total fee payable to The Harman Group is capped at $20,000. The Harman Group
has consented to the use of its fairness opinion as an annex to this Proxy
Statement.
The Harman Group has delivered its written fairness opinion to the
Board of Directors of the Company, which opinion states that the consideration
to be received by the shareholders of the Company in the Merger is fair from a
financial point of view. Shareholders are encouraged to read The Harman Group's
fairness opinion (attached hereto as Appendix B) in its entirety. In rendering
its opinion, The Harman Group undertook the following analyses, each of which
supported a finding of fairness to unaffiliated shareholders from a financial
point of view (i) reviewed the Agreement from a financial point of view; (ii)
reviewed various current and historical financial statements and information of
the Company, provided by the Company, including audited financial statements for
the last six years, latest available unaudited quarterly statements, and certain
other business and financial information supplied to us by the Company with
respect to the Company's operating performance and condition; (iii) conducted
discussions with the senior management of the Company regarding its assets and
operations, business plans and strategies, past and current financial
performance, financial condition and future prospects; (iv) reviewed forecasts
for the Company prepared by the Company's management; (v) considered the
capitalization and financial condition of the Company; (vi) considered the
discounted cash flow value of the Company, which indicated a value of $0.65 per
share; (vii) analyzed available information concerning other companies whose
business or businesses it believed to be generally comparable, in whole or in
part, to that of the Company; and (viii) reviewed such other materials and
conducted such other investigations as it deemed appropriate.
The fairness opinion is annexed to this Proxy Statement as Appendix B.
In addition, the fairness opinion will be made available for inspection and
copying at the principal executive offices of the Company during regular
business hours by any interested equity security holder of the Company or his or
her representative who has been so designated in writing. A copy of the fairness
opinion will be transmitted by the Company to any interested equity security
holder of the Company or his or her representative who has been so designated in
writing, without charge.
INTERESTS AND INTENTIONS OF CERTAIN PERSONS
In considering the recommendation of the Company's Board of Directors
to adopt the Merger Agreement, shareholders should be aware that certain
directors and executive officers of the Company have interests that are in
addition to or may be different from the interests of the Company's shareholders
generally, and that the directors having such interests participated in the
discussion, deliberation and voting of the Company's Board of Directors to adopt
the Merger Agreement.
Si Sokol, the Company's Chairman, President and Chief Executive Officer
is also the Chairman and Chief Executive Officer of Bancinsurance. Additionally,
Mr. Sokol is a director and officer of Acquisitions. Mr. Sokol, together with
his wife, beneficially owns 2,811,900 shares or 45.8% of the outstanding common
stock, without par value, of Bancinsurance (the "Bancinsurance Stock"). As an
owner of 45.8% of the Bancinsurance Stock, Mr. Si Sokol's interest, as a
stockholder, in the net book value and net earnings of the Company will increase
3.4% from his 42.4% ownership of the Common Stock. The Company paid Mr. Si Sokol
$10,800, $31,250 and $11,000 for his services as an officer and director of the
Company for the fiscal years ended December 31, 1997 and 1998 and the six months
ended and June 30, 1999, respectively. Mr. Sokol has personally guaranteed the
Company's credit line for up to $100,000.
James R. Davis, a director of the Company, is also a Vice President and
Director of Bancinsurance. Mr. Davis beneficially owns 42,000 shares or 0.7% of
the Bancinsurance Stock. As an owner of 0.7% of the Bancinsurance Stock, Mr.
Davis's interest, as a stockholder, in the net book value and net earnings of
the Company will increase 0.6% from his 0.1% ownership of the Common Stock.
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Daniel D. Harkins, a director of the Company, is also a director of
Bancinsurance. Mr. Harkins beneficially owns 58,500 shares or 1.0% of the
Bancinsurance Stock. As an owner of 1% of the Bancinsurance Stock, Mr. Harkins'
interest, as a stockholder, in the net book value and net earnings of the
Company will increase 1% from his 0% ownership of the Common Stock.
John S. Sokol, son of Si Sokol, is a director of the Company and the
President and a director of Bancinsurance. Additionally, Mr. John Sokol is a
director of Acquisitions. Mr. John Sokol beneficially owns 293,140 shares or
4.8% of the Bancinsurance Stock. As an owner of 4.8% of the Bancinsurance Stock,
Mr. John Sokol's interest, as a stockholder, in the net book value and net
earnings of the Company will increase 0.5% from his 4.3% ownership of the Common
Stock.
Messrs. Si Sokol, John Sokol, and Davis will exchange their shares at
the same price as all other shareholders of the Company and each intends to vote
for approval of the Merger.
As a result of the Merger, the separate corporate existence of the
Company will terminate and Acquisitions will change its name to Westford Group,
Inc. and will be the parent of American Legal Publishing, Inc. ("ALP"),
currently the Company's wholly-owned subsidiary. If the Merger is consummated,
Bancinsurance intends to merge ALP into Westford Group, Inc., with ALP being the
surviving entity of the merger and a wholly-owned subsidiary of Bancinsurance.
After the Merger, the directors and officers of Acquisitions will be directors
and officers of Westford Group, Inc.
Under a Management Fee Agreement, dated January 1, 1999, the Company
pays Bancinsurance $5,000 per month for rent, equipment and bookkeeping
services. Prior to January 1, 1999, the Company paid Ohio Indemnity Company,
Bancinsurance's wholly owned subsidiary, $735.00 per quarter for such services.
ACCOUNTING TREATMENT
The Merger will be treated as a "purchase" for financial accounting and
reporting purposes, in accordance with generally accepted accounting principles.
The aggregate purchase price for the acquisition of the Company will be
allocated to the assets acquired and the liabilities assumed as a result of the
Merger based on their respective fair market values. The excess, if any, of cost
over fair value of the net tangible assets of the Company will be recorded as
goodwill and other intangible assets.
FEDERAL INCOME TAX CONSEQUENCES
The following summary of the principal United States federal income tax
consequences of the Merger is presented for general informational purposes only,
based upon currently applicable law. EACH HOLDER OF COMMON STOCK IS URGED TO
CONSULT A TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE MERGER,
INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL OR OTHER TAX LAWS.
The receipt of cash in exchange for the shares being sold pursuant to
the Merger (the "Shares") will constitute a taxable transaction for federal
income tax purposes under the Internal Revenue Code of 1986, as amended (the
"Code") (and may also constitute a taxable transaction under applicable state,
local, foreign and other tax laws). As a result, a holder of Shares will
generally recognize gain or loss for federal income tax purposes in an amount
equal to the difference between the amount of cash received by such holder
pursuant to the Merger and such holder's aggregate adjusted tax basis in the
Shares. If the Shares are held as capital assets (within the meaning of Section
1221 of the Code), any gain or loss recognized by the holder of such Shares will
constitute capital gain or loss, and will constitute long-term capital gain or
loss if the Shares are held for more than 12 months as of the Effective Date.
For noncorporate shareholders, long-term capital gain generally will be
subject to federal income regular tax at a maximum rate of 20%, if the
underlying Shares have been held for more than 12 months as of the Effective
Date. Certain limitations apply to the deductibility of capital losses.
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A shareholder (other than certain exempt shareholders including, among
others, all corporations and certain foreign individuals) that receives the
Merger Consideration may be subject to backup withholding at a rate of 31%
unless the shareholder provides its correct Taxpayer Identification Number
("TIN") (or certifies that it has applied for a TIN), certifies as to no loss of
exemption from backup withholding and otherwise complies with the applicable
requirements of the backup withholding rules. A shareholder that does furnish
its correct TIN in the prescribed manner or that does not otherwise establish a
basis for an exemption from backup withholding may be subject to a penalty
imposed by the IRS, and gross proceeds of the Merger payable to such shareholder
may be subject to backup withholding by the Paying Agent at a rate of 31%. Each
shareholder should complete and sign the Substitute Form W-9 to be included as
part of the letter of transmittal to be sent after the Merger so as to provide
the information and certification necessary to avoid backup withholding.
Backup withholding is not an additional tax. Rather, the amount of the
backup withholding can be credited against the federal income tax liability of
the person subject to the backup withholding, provided that the required
information is given to the IRS. If backup withholding results in an overpayment
of tax, a refund can be obtained by the shareholder upon filing an income tax
return.
CERTAIN EFFECTS OF THE MERGER
If the proposed transaction is completed, the Company will no longer
have a filing obligation pursuant to any Securities Laws as it will have only
one stockholder. At present, the acquiring company, Bancinsurance, does not own
any shares of Common Stock in the Company although it is considered an affiliate
of the Company. Acquisitions owns 345,000 shares of Common Stock that were
issued on August 30, 1999 upon conversion of the Company's $50,000 Convertible
Subordinated Debenture. If the Merger is consummated, the shares held by
Acquisitions will be cancelled. Existing stockholders, other than Acquisitions,
will be paid $0.70 for each share of Common Stock held by them and will no
longer be shareholders of the Company. The shareholders of the Company will no
longer benefit from any increases in the value of the Company, including a sale
to an unaffiliated third party, or any payment of dividends on the Common Stock
(although the Company has not paid a dividend during the last ten years) and
will no longer bear the risk of any decreases in the value of the Company.
THE MERGER
STRUCTURE AND EFFECT OF THE MERGER
The Merger Agreement provides for the acquisition of the Company by
means of the merger of the Company and Acquisitions with Acquisitions surviving
the Merger. Following the Merger, the Acquisitions will change its name to
Westford Group, Inc. and will remain a wholly-owned subsidiary of Bancinsurance.
In the Merger, each holder of shares of Common Stock outstanding at the
Effective Time, other than a holder who exercises its appraisal rights under
Ohio law, will become entitled to receive the Share Price. The Share Price
places a valuation on the Company of approximately $1,200,000. If approved and
consummated, Bancinsurance will acquire 1,368,706 shares of Common Stock, and
the 345,000 shares of Common Stock held by Acquisitions that were issued on
August 30, 1999 (80% of the Outstanding Common Stock) upon conversion of the
Company's $50,000 Convertible Subordinated Debenture held by Acquisitions will
be cancelled.
REGULATORY COMPLIANCE
The Company is not aware of any filing, registration, notice or other
action that must be made with, given to or taken by any governmental authority
in connection with the Merger, other than the filing of the Certificate of
Merger with the Office of the Secretary of State of Ohio. The Company is also
not aware of any license, permit or authorization that is material to the
Company's business and that would be affected by the Merger.
14
<PAGE> 21
APPRAISAL RIGHTS
Under Section 1701.85 of the Ohio Revised Code, holders of the Common
Stock who properly exercise and perfect dissenters' rights with respect to the
Merger will have the right to receive the "fair cash value" of their shares
(excluding any appreciation or depreciation in market value resulting from the
Merger). In order to exercise such rights, shareholders must comply with the
procedural requirements of Section 1701.85 of the Ohio Revised Code, the full
text of which is attached to this Proxy Statement as Appendix C. Failure to vote
against the Merger proposal will not constitute a waiver of dissenters'
appraisal rights. However, failure to take any of the steps required under
Section 1701.85 on a timely basis may result in the loss of dissenter's rights.
The following discussion is not a complete statement of the law
pertaining to dissenting shareholder rights under the Ohio Law and is qualified
in its entirety by the full text of Section 1701.85 which is reprinted in its
entirety as Appendix C to this Proxy Statement.
Shareholders of the Company who (i) are shareholders of record on the
______________, 1999 record date established for determining who is entitled to
notice of the meeting called for the purpose of approving the Merger, (ii) do
not vote in favor of the Merger, and (iii) who, within 10 days after the date of
the vote on the Merger is taken, deliver written demand in compliance with the
provisions of Section 1701.85(A)(2) of the Ohio Revised Code, shall be entitled
to receive the fair cash value of the shares that were not voted in favor of the
Merger (the "Dissenting Shares"). A vote against the Merger proposal will not
satisfy the notice requirement. The written demand must set forth the
shareholder's address, the number of shares as to which the shareholder seeks
relief and the amount the shareholder claims as the fair cash value of the
Dissenting Shares. Shareholders will not be notified of the expiration of the 10
day notice period. However, if the vote on the Merger proposal is held as
scheduled on __________, 2000, then the 10 day period would end on ___________,
2000.
If the Company receives a written demand from a shareholder seeking the
fair cash value of Dissenting Shares, it may request delivery of the certificate
or certificates that represent the Dissenting Shares. The dissenting shareholder
must deliver the certificate or certificates representing the Dissenting Shares
to the Company within 15 days of the date of its request therefor or the
shareholder's rights with respect to the Dissenting Shares will terminate. If
the certificate or certificates representing the Dissenting Shares are delivered
to the Company, it must promptly endorse the certificates with a legend to the
effect that a demand for the fair cash value for the Dissenting Shares has been
made and return the certificates to the dissenting shareholder.
If the Company and the dissenting shareholder cannot agree on the fair
cash value of the Dissenting Shares, then either may, within three months after
the date of the service of the demand for fair cash value was made by the
dissenting shareholder, file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the
Dissenting Shares is located or was located when the Merger proposal was adopted
by the shareholders of that corporation, i.e., the Franklin County, Ohio Court
of Common Pleas. The court will first make a determination if the dissenting
shareholder is entitled to receive the fair cash value for the Dissenting
Shares. If the court determines that the dissenting shareholder is entitled to
fair cash value for the Dissenting Shares, the court will appoint an appraiser
or appraisers to make a finding as to the fair cash value of the Dissenting
Shares.
The fair cash value will be determined based on what a willing seller
who is under no compulsion to sell would be willing to accept and that which a
willing buyer who is under no compulsion to purchase would be willing to pay for
the Dissenting Shares. In no event will the fair cash value exceed the amount
stated in the written demand by the dissenting shareholder. In computing the
fair cash value, any appreciation or depreciation in the market value resulting
from the Merger shall be excluded.
The fair cash value that is agreed upon between the parties or that is
determined by the court shall be paid within 30 days after the date of the final
determination of such value or the consummation of the Merger, whichever occurs
last. Payment shall be made only upon and simultaneously with the surrender of
the certificate or certificates representing the Dissenting Shares.
15
<PAGE> 22
The costs of the action, including reasonable compensation to the
appraisers, will be fixed by the court and will be assessed or apportioned as
the court considers equitable.
A shareholder's right to receive the fair cash value for the Dissenting
Shares terminates if (i) the dissenting shareholder does not strictly comply
with the requirements of Section 1701.85, (ii) the Merger is abandoned, (iii)
the dissenting shareholder withdraws the demand for fair cash value, or (iv)
Bancinsurance and the dissenting shareholder have not come to an agreement
regarding the fair cash value of the Dissenting Shares and neither has filed a
complaint with the court of common pleas within the time period described in
Section 1701.85(B).
Failure to follow the steps required by Section 1701.85 of the Ohio
Revised Code for perfecting dissenting shareholder rights may result in the loss
of such rights, in which event a holder of the Common Stock will be entitled to
receive the consideration to be issued with respect to such shares in accordance
with the Merger Agreement.
MERGER CONSIDERATION
By virtue of the Merger and without any action on the part of the
shareholders of the Common Stock, at the Effective Time, all outstanding shares
of Common Stock (excluding shares held in the treasury of the Company, and
shares held by Bancinsurance or Acquisitions, which shall be cancelled) will be
converted into the right to receive in cash $0.70 per share.
Notwithstanding the foregoing, shares of capital stock of Common Stock
that are outstanding immediately prior to the Effective Time and that are held
by shareholders who have not voted such shares in favor of the approval and
adoption of the Merger Agreement and who have delivered a written demand for
appraisal of such shares in the manner provided in Section 1701.85 of the Ohio
Law ("Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive the Share Price, but the holders of such shares shall be
entitled to payment of the appraised value of such shares in accordance with the
provisions of Section 1701.85 of the Ohio Law; provided, however, that (i) if
any holder of Dissenting Shares shall subsequently deliver a written withdrawal
of his demand for appraisal of such shares (with the written approval of the
Surviving Corporation, if such withdrawal is not tendered within ten (10) days
after the Effective Time), or (ii) if any holder fails to perfect or loses his
appraisal rights as provided in Section 1701.85 of the Ohio Law, or (iii) if any
holder of Dissenting Shares fails to demand payment within the time period
provided in Section 1701.85 of the Ohio Law, such holder shall forfeit the right
to appraisal of such shares and such shares shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the Share Price, without any interest thereon.
Dissenting Shares, if any, after payments of fair value in respect thereto have
been made to dissenting shareholders of the Company pursuant to the Ohio Law,
shall be cancelled.
PROCEDURE FOR PAYMENT
Concurrent with the Effective Time, Bancinsurance will deliver to Fifth
Third Bank (the "Paying Agent") cash in an amount sufficient to pay in full the
Share Price to the holders of Common Stock at the Effective Time. The Paying
Agent will mail a letter of transmittal (with instructions) to each record
holder of Common Stock at the Effective Time for such holder to use in
surrendering the certificate which represents its shares of Common Stock.
REPRESENTATIONS AND WARRANTIES
To induce Bancinsurance and Acquisitions to enter into the Merger
Agreement and to consummate the Merger, the Company made numerous
representations and warranties, including with respect to (i) the organization,
qualification and capitalization of the Company; (ii) the power of the Company
to enter into the Merger Agreement; (iii) necessary consents to consummate the
Merger; (iv) the accuracy of the Company's financial statements; (v) the absence
of certain changes or events; (vi) the status of litigation and claims pending;
(vii) title to the Company's properties; (viii) status of intellectual property
16
<PAGE> 23
rights; (ix) status of labor matters; (x) the existences of severance
arrangements; (xi) the payment of taxes; (xii) compliance with law and permits;
(xiii) the status of the Company's employee benefit plans; (xiv) compliance with
environmental laws; (xv) the condition of the Company's assets; (xvi) the status
of the Company's material contracts; (xvii) the sufficiency and existence of
insurance; (xviii) pending transactions; (xix) claims against officers and
directors; (xx) customers; (xxi) the properness of certain payments; (xxii) the
use of a business broker; (xxiii) the status of accounts receivables; (xxiv) the
Company's filings with the Securities and Exchange Commission; and (xxv) the
accuracy of certain statements.
PRE-CLOSING COVENANTS
Until the Effective Time, the Company is required (except as otherwise
agreed by Bancinsurance), among other things, to conduct its businesses in the
ordinary course, consistent with past practice and use its best efforts to
preserve its present business organization, keep available the services of its
current officers and employees, maintain its assets in good repair and
condition, maintain its books of account and records in the usual manner, and to
preserve its goodwill and ongoing business. The Company has agreed to take
certain actions and to refrain from taking certain actions during such period
that are customary in merger transactions. These provisions limit, among other
things, the Company's ability to amend its Articles of Incorporation and Code of
Regulations, to pay dividends, to change its capital structure, to borrow money,
to acquire or dispose of property and to increase the compensation of its
directors, officers and employees in excess of certain limits, in each case
without the approval of Bancinsurance. These restrictions could prevent the
Company from entering into certain transactions during such period that may have
been in the best interests of the Company's shareholders.
NO SOLICITATION
Until the earlier of the Effective Time and the termination of the
Merger Agreement, the Company may not directly or indirectly, encourage, solicit
or initiate any discussions, submissions of proposals or offers or negotiations
with, or, participate in any negotiations or discussions with, or provide any
information or data of any nature whatsoever to, or otherwise cooperate in any
other way with, or assist or participate in, facilitate or encourage any effort
or attempt by, any person, other than Bancinsurance and its affiliates,
representatives and agents, concerning any merger, consolidation, sale of
substantial assets, sale of shares of capital stock or other equity securities,
recapitalization, debt restructuring or similar transaction involving the
Company (such transactions being hereinafter referred to as "Alternative
Transactions"). The Company must immediately notify Bancinsurance if any
proposal, offer, inquiry or other contact is received by, any information is
requested from, or any discussions or negotiations are sought to be initiated or
continued with, the Company in respect of an Alternative Transaction.
CONDITIONS TO CLOSING
The obligations of the parties to close the Merger is subject to
several conditions, including:
(a) the accuracy of the other party's representations and warranties in
all material respects and the performance of the other party's material
obligations under the Merger Agreement;
(b) the absence of any injunction or other order restraining or
challenging the Merger or any proceeding by a governmental authority seeking
such an injunction or order;
(c) the absence of material adverse changes in the business,
operations, affairs, properties, assets, liabilities, obligations, profits or
condition (financial or otherwise) of the Company and its subsidiaries taken as
a whole;
(d) the approval of the Merger by the Company's shareholders;
(e) the conversion option in the Debenture issued by the Company and
held by Acquisitions shall have been exercised by Acquisitions;
17
<PAGE> 24
(f) receipt by Bancinsurance of Financial Statements for the Company in
form and substance reasonably satisfactory to Bancinsurance;
(g) Bancinsurance's satisfactory completion of its financial due
diligence of the Company to its satisfaction; and
(f) the Company being current in all of its payments to its directors
and officers.
TERMINATION
The Merger Agreement may be terminated prior to the Effective Time,
whether or not the Merger Agreement has been approved by the shareholders of the
Company, if, among other things, (i) by the mutual action of the Boards of
Directors of Bancinsurance and the Company; (ii) by the Company if the
conditions for the Company's performance have not been met; (iii) by
Bancinsurance or Acquisitions if the conditions for either of their performance
have not been met; or (iv) by Bancinsurance or the Company if their has been a
material breach of a term of the Merger Agreement or of a representation or
warranty contained in the Agreement by the other party.
INDEMNIFICATION
The Company has agreed to indemnify Bancinsurance and Acquisitions from
any losses incurred or suffered by them relating to a material breach of or any
inaccuracy in any representation or warranty made by the Company to
Bancinsurance or Acquisitions in the Merger Agreement or any document delivered
by the Company at Closing. Bancinsurance and Acquisitions have agreed to
indemnify the Company from any losses incurred or suffered by it relating to a
material breach of or any inaccuracy in any representation or warranty made by
the Bancinsurance or Acquisitions to the Company in the Merger Agreement or any
document delivered by Bancinsurance or Acquisitions at Closing.
AMENDMENT
The Merger Agreement may be amended by the parties thereto, by action
taken by the respective Boards of Directors of the parties, at any time before
or after shareholder approval of the Merger. After shareholder approval,
however, no amendment may be made which changes the Merger Consideration without
the further approval of shareholders. The Merger Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
thereto.
SOURCE OF FUNDS/FEES
Bancinsurance will pay for the exchange of the 1,368,706 outstanding
shares (constituting 80% of the outstanding shares) at $0.70 per share
($958,094) by utilizing its line of credit. Bancinsurance has an
uncollateralized $10,000,000 revolving credit line with Fifth Third Bank. The
revolving credit agreement provides for interest payable quarterly at the bank's
prime rate less one-half percent (7 -3/4% at August 30, 1999). The balance of
expenses will be funded by the Company from working capital. Total expenses and
anticipated fees or costs to be paid in connection with this transaction are
estimated to be:
<TABLE>
<CAPTION>
<S> <C>
Exchange of common stock .......... $ 958,094
Legal.............................. $ 40,000
Fairness opinion .................. $ 20,000
Accounting......................... $ 10,000
Printing .......................... $ 5,000
Transfer and Exchange
Agent fees...................... $ 20,000
Filing fees (Form 13E3)............ $ 200
TOTAL.............................. $1,053,294
</TABLE>
18
<PAGE> 25
INFORMATION REGARDING BANCINSURANCE AND ACQUISITIONS
Bancinsurance is an Ohio insurance holding company engaged primarily in
the underwriting of specialized and niche insurance products and related
services through its wholly-owned insurance subsidiary, Ohio Indemnity Company
("Ohio Indemnity"). Ohio Indemnity is licensed to transact business in 47 states
and the District of Columbia and on a surplus lines basis in Texas. BCIS
Services, Inc. ("BCIS Services"), an Ohio corporation and a wholly-owned
subsidiary of Bancinsurance is a non-risk bearing provider of workers'
compensation administration and cost control services to employers who retain
and transfer their workers' compensation risk. Custom Title Services, Inc.
(formerly known as Title Research Corporation) ("Custom Title"), an Ohio
corporation and a wholly-owned subsidiary of Bancinsurance specializes in title,
appraisal and related services which support documentation needs for first and
second mortgage lending requirements. Acquisitions is a wholly owned subsidiary
of Bancinsurance. Bancinsurance's and Acquisitions' address and phone number
are: Bancinsurance Corporation, 20 East Broad Street, Columbus, Ohio 43215,
(614) 228-2800.
BANCINSURANCE SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Six Months Ended
September 30,
(unaudited) Year Ended December 31,
------------------------- -------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Premiums earned $19,375,160 $13,917,183 $20,869,288 $11,226,584 $10,138,104 $19,783,307 $25,535,824
Investment & other
income 4,497,003 4,154,011 5,328,425 4,661,158 2,566,770 2,027,037 2,140,734
Total revenues 23,872,163 18,071,194 26,197,713 15,830,401 12,704,874 21,810,344 27,676,558
Losses and loss
adjustment expenses
net of
reinsurance
recoveries 12,019,266 8,768,324 13,340,737 6,070,954 5,404,484 12,760,094 15,564,508
Operating expenses 7,476,580 5,946,089 8,106,214 6,090,799 4,179,093 7,452,466 9,459,652
Operating income 4,376,317 3,356,781 4,750,762 3,668,648 3,121,297 1,597,784 2,652,398
Income taxes 1,277,601 934,148 1,356,342 967,354 780,249 176,698 335,403
Net income 3,098,716 2,422,633 3,394,420 2,701,294 2,341,048 1,421,086 2,316,995
Net income per
common share,
diluted (1) $ .55 $ .39 $ .55 $ .44 $ .38 $ .23 $ .37
</TABLE>
Selected Balance Sheet Data
<TABLE>
<CAPTION>
Six Months Ended
September 30,
(unaudited) Year Ended December 31,
------------------------- -------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $42,636,635 $34,349,379 $35,948,667 $31,404,432 $28,274,952 $27,750,234 $43,774,264
Note payable to bank 5,200,000 5,000,000 4,250,000 5,000,000 5,600,000 5,616,132 5,916,132
Net shareholders'
equity 24,823,751 21,364,979 $22,504,482 $19,079,801 $15,906,817 $13,710,410 $11,838,424
</TABLE>
(1) Earnings per share assuming dilution is computed by dividing net income
available to common shareholders by the weighted-average number of
common shares outstanding adjusted for any dilutive potential common
shares for the period, restated for common stock dividends.
19
<PAGE> 26
INFORMATION REGARDING THE COMPANY
The Company was incorporated in Ohio in 1972 and was a bank holding
company prior to August 15, 1978. Effective as of that date, the Company sold
all of its controlling interest in the Community National Bank of Mt. Gilead,
Ohio ("Mt. Gilead Bank").
Following the disposition of the Mt. Gilead Bank, the intention of the
Company was to utilize a portion of the sale proceeds to commence operations as
a reinsurer in the credit life and disability reinsurance business. These
operations, however, were frustrated as a result of shareholder litigation which
was eventually settled and dismissed.
On January 12, 1988, American Legal Publishing Corporation ("ALP
Corporation"), a newly formed, wholly-owned subsidiary of Westford Group, Inc.,
purchased substantially all of the assets of AM Comp, Inc., formerly American
Legal Publishing Company. The acquired assets consisted generally of inventory,
equipment, supplies, computer software, contracts, leasehold interest and
various other intangibles. See note 1(f) to the consolidated financial
statements.
ALP Corporation's primary business consists of the codification of
municipal and county Codes of Ordinances and the supplementing thereof. The
services provided by ALP Corporation to a customer in providing codification
services include:
(1) A review of the municipal ordinances of the customer to detect
possible conflicts with state and federal law, state and
federal constitutions, and state and federal court decisions.
This review is done at the specific direction of the
customer's attorney.
(2) A review of the ordinances of the customer to make sure that
they do not conflict with other ordinances or the charter, if
one exists.
(3) Suggestions to the customer for changes, additions and
deletions to their ordinances. After editorial and indexing
work is concluded, the code is enacted into law and published
in a loose-leaf or electronic form to facilitate regular
supplementing to reflect changes in state and local law.
ALP Corporation believes that the additional services it provides in
codifying a customer's ordinances distinguish it from competitors.
Most of ALP Corporation's codification contracts include a provision to
supplement the customer's code for an additional fee, not less than annually,
for a period of five (5) years. Although the agreement may usually be terminated
by the customer by written notice prior to ninety (90) days before the
anticipated delivery date of the supplement, ALP Corporation has generally been
successful in retaining municipalities on supplemental contracts, and in having
these contracts renewed prior to expiration.
Some states now require that municipalities and/or counties each have a
Code of Ordinances. For this reason, ALP Corporation has prepared and marketed a
"Basic Code of Ordinances" to smaller municipalities in these states who do not
need or cannot afford a custom Code of Ordinances but who, by adoption of a
basic code, can meet state law requirements or receive the economic benefits of
having a local code. ALP Corporation has developed this basic or model Code of
Ordinances for the states of Ohio, Illinois, Indiana, Kentucky and North
Carolina. It has also developed, and is marketing with a Texas firm, a model
Code of Ordinances for Texas. In North Carolina, Kentucky, Oregon, Minnesota and
Nebraska, ALP Corporation serves as the official code consultant to the state
municipal leagues. Furthermore, in 1985, the State of Kentucky enacted
legislation providing grants to municipalities to fund a Code of Ordinances as
mandated by state law.
ALP Corporation presently has twenty-five full-time employees. The
staff consists of marketing, production, general administrative and editorial
personnel, eight of whom have law degrees.
20
<PAGE> 27
There are approximately twenty-five (25) companies involved in the
codification of local government ordinances. Five (5) companies operate on
either a national or regional basis, with the rest serving clients only within a
relatively small geographic area. ALP Corporation currently represents
approximately 1,000 local governmental units in thirty-two (32) states.
Rapid growth in the codification industry is most easily attainable
through acquisition of competitors. In recent years, ALP Corporation held
serious discussions with competitors regarding the purchase of such operations
by ALP Corporation. No agreements, however, have been reached to date.
The publication of local government material in electronic formats has
become a growing market segment. Local governments are looking for ways to
manage information electronically rather than to rely on growing stacks of paper
documents. ALP Corporation has developed programs for maintaining codes of
ordinances, meeting minutes, attorney opinions and other public documents in an
electronic format. In Ohio, California, Texas, Michigan and Wisconsin, ALP
Corporation contracts with the state municipal leagues to provide various
electronic records management services.
PROPERTIES
The executive offices of the Company are located in an office building
at 20 East Broad Street, Columbus, Ohio. The office facilities are shared with
other affiliated entities and rental and bookkeeping expenses are allocated
among them. The Company does not own any materially important property used in
its operations.
ALP Corporation occupies 5,558 square feet of rentable area on the 12th
floor of the building located at 432 Walnut Street, Cincinnati, Ohio under an
operating lease which will expire July 31, 2003. The lease provides for a
monthly rental of $5,442, net of reimbursements payable to the lessor for cost
of maintenance and operation of the building.
LEGAL PROCEEDINGS
The Company is routinely a party to litigation incidental to its
business, as well as to other nonmaterial litigation. Management believes that
no individual item of litigation, or group of similar items of litigation, is
likely to result in judgments that will have a material adverse effect on the
financial condition or results of operations of the Company.
MARKET FOR THE COMMON STOCK AND RELATED SECURITY HOLDERS MATTERS
There is no established public trading market for the Company's shares.
During the 52-weeks prior December 14, 1999, the Common Stock had a low/high
price range of $.0312 to $.5625 per share. The last trade in the Common Stock
took place on July 26, 1999 at a bid price of $.50 per share. The number of
holders of record of the Common Stock as of _____________, 1999, the record
date, was ______.
There has been no cash dividend declared or paid on the Company's
outstanding common stock for the two most recent fiscal years. The Company's
intent is to reinvest earnings to finance its growth for the purpose of
improving and increasing both earnings per share and net worth, and therefore it
is not anticipated that the Company will pay dividends in the foreseeable
future.
21
<PAGE> 28
COMPANY SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Six Months Ended
September 30,
(unaudited) Year Ended December 31,
-------------------------- ------------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $ 1,456,273 $ 1,335,680 $ 1,702,862 $ 1,440,738 $ 1,505,952 $ 1,389,459 $ 1,234,981
Cost of sales 732,953 613,368 832,748 773,756 817,434 815,399 731,089
Selling, general and
administrative
expenses 693,124 489,241 695,716 665,764 582,131 424,917 416,149
Income taxes 7,449 55,592 32,482 10,107 27,876 31,579 33,451
Net income (loss) 19,375 173,162 138,177 (15,159) 68,800 99,923 35,246
Net income (loss)
per common share,
diluted $ .01 $ .10 $ .08 $ (.01) $ .04 $ .06 $ .02
Average number of
shares of common
stock outstanding 1,712,937 1,696,206 1,696,042 1,681,165 1,666,219 1,664,842 1,661,226
</TABLE>
Selected Balance Sheet Data
<TABLE>
<CAPTION>
Six Months Ended
September 30,
(unaudited) Year Ended December 31,
------------------------ ------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets $ 893,478 $ 802,302 $ 815,871 $ 576,734 $ 532,313 $ 552,267 $ 406,434
Notes payable
to bank 0 0 -- 3,575 3,575 83,594 10,009
Current liabilities 369,037 232,377 273,091 214,060 144,969 266,150 276,422
Working capital 524,441 569,925 542,780 362,674 387,344 286,117 130,012
Total assets 1,098,238 972,812 978,542 782,586 733,543 791,060 669,359
Shareholders' equity 729,201 690,435 655,451 516,524 530,933 462,139 361,966
</TABLE>
22
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
The following table sets forth changes in certain items reflected in
the financial data as compared to the indicated prior period.
Increase (Decrease)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended December 31,
September 30, 1998-99 1997-98 1996-97
--------------------- -------- ----------
<S> <C> <C> <C>
Sales $120,593 $262,124 $(65,214)
Cost of sales 119,585 58,992 (43,678)
Selling, general and
administrative expenses 203,883 29,952 83,633
</TABLE>
RESULTS OF OPERATIONS
Three and Nine Months ended September 30, 1999 compared to Three and
Nine Months ended September 30, 1998
The Company's business is principally carried on through American Legal
Publishing Corporation ("ALP Corporation"), a consolidated subsidiary. ALP
Corporation's sales increased 9.0% during the first nine months of 1999 as
compared to the first nine months of 1998 and decreased 2.3% during the three
months ended September 30, 1999 as compared to the three months ended September
30, 1998. Codification revenue of $407,349 increased 39.8% during the first nine
months of 1999 as compared to $291,333 during the first nine months of 1998 and
increased 35.3% during the three months ended September 30, 1999 as compared to
the three months ended September 30, 1998 benefiting from a focus on new growth
areas, principally California and Texas. Sales responsibilities were shifted
among existing personnel and the Company was successful in contracting new work
in these states. The Company's subscription services provided to governmental
and emerging private industry markets marginally decreased from $286,470 during
the nine months ended September 30, 1998 to $282,606 for the nine months ended
September 30, 1999. Subscription services decreased 20.5% for the three months
ended September 30, 1999 as compared with the three months ended September 30,
1998 due to fewer sales of search and retrieval software products.
Supplementation services on existing codes of ordinance remained relatively
constant from $757,877 for the nine months ended September 30, 1998 as compared
to $766,317 for the nine months ended September 30, 1999 and decreased 7.4% for
the three months ended September 30, 1998 compared to the three months ended
September 30, 1999 due to longer than anticipated review periods of draft
manuscripts, therefore resulting in delayed supplementations. Cost of sales
increased 19.5% from $613,368 in the nine months ended September 30, 1998 as
compared to $732,953 for the nine months ended September 30, 1999 and increased
27.0% for the three months ended September 30, 1999 as compared with the three
months ended September 30, 1998 primarily due to increases in production
salaries and insurance. The addition of several new employees was the largest
factor in increases to administrative salaries. Many employees have both
administrative and production responsibilities and their percentages in each
area often vary throughout the year. Pay raises were within usual parameters.
Selling, general and administrative expenses increased 41.7% from $489,241 for
the nine months ended September 30, 1998 to $693,124 for the nine months ended
September 30, 1999 and increased $186,686 for the three months ended September
30, 1999 as compared with the three months ended September 30, 1998 primarily
due to increases in administrative salaries, consulting and shareholder expense
and legal fees. The executive offices of the Company are shared with
consolidated subsidiaries and other affiliated entities. Rental, equipment and
bookkeeping expenses are allocated among them pursuant to management fee
arrangements. The pre-existing management fee agreement with an affiliate was
amended January 1, 1999 which will result in a $4,265 increase in selling,
general and administrative expenses in the three months ended September 30, 1999
23
<PAGE> 30
as compared with the three months ended September 30, 1998 and a $12,795
increase in selling, general and administrative expenses for the nine months
ended September 30, 1999 as compared to the nine months ended September 30,
1998.
Year Ended December 31, 1998 and 1997
ALP Corporation's sales increased 18.2% from $1,440,738 during 1997 to
$1,702,862 during 1998 principally due to increases in subscription and
supplementation sales offset by a decrease in codification sales. Codification
revenue decreased 7.8% from $404,352 to $372,866 during 1997 as compared to
1998, respectively, principally due to a leveling of sales in the Company's key
growth areas coming into 1998. Immediately prior to 1998, the Company had
focused heavily on California and Texas as "key growth areas." Two new sales
representatives responsible for those areas in 1997 performed below
expectations. Each left the Company by the fall of 1997. As result, less
codification work was available to be produced in 1998. In 1998, sales
responsibilities were shifted among existing personnel and the Company was
successful in contracting for substantial new work in Texas and California
(Austin Technical Manuals, California Municipal Law Handbook and San Francisco
Municipal Code). In addition, the Company contracted for state league programs
in Minnesota, Oregon and Nebraska, thereby opening new growth areas.
Supplementation services on existing codes of ordinance increased 26.2%
from $787,434 to $994,119, due to maximizing revenue from existing clients and
accelerated job completions. The frequency with which clients supplement their
codes is heavily dependent upon regular contact from the Company to obtain the
necessary ordinances and establish regular production schedules. By increasing
customer service efforts and the frequency with which clients are contacted, the
Company is able to maximize the number of clients and supplement by scheduled
deadlines.
Subscription services provided both to governmental and emerging
private industry markets increased 45.2% from $248,686 during 1997 to $361,164
during 1998 due to subscription sales of expended search and retrieval software
products, including city league law handbooks, city production manuals, state
statutes in addition to sales of several significant customers manuals on CD.
Gross margin increased 30.5% in 1998 as compared to 1997 as sales
increased at a higher percentage rate than the percentage rate increase in cost
of sales, mainly reflecting lower costs resulting from production efficiencies.
Increased in gross margin resulted from several factors: daily operations
meetings increased project management efficiencies, revised incentive systems
helped limit production salary increases, and increased supplemental work and
subscription services work boosted gross margin as those products require less
direct labor. Costs of sales increased 7.7% from $773,356 to $832,748 during
1997 as compared to 1998, respectively, primarily due to increases in production
salaries, insurance, copier supplies and postage.
The executive offices of the Company are shared with consolidated
subsidiaries and other affiliated entities. Rental, equipment and bookkeeping
expense are allocated among them pursuant to management fee agreements. The
pre-existing management fee agreement with an affiliate was amended January 1,
1999, which will result in a $17,060 annual increase in selling, general and
administrative expenses as compared with fiscal 1998.
Year Ended December 31, 1997 and 1996
ALP Corporation's sales decreased 4.3% during 1997 as compared to 1996,
primarily due to a decline in new contract sales in 1995 and 1996 that limited
growth in 1997 and a one time republication for a significant customer in 1996.
As a result, codification revenue decreased 20.8% during 1997 as compared with
1996. Subscription services in existing codes of ordinance increased 4.1% due to
increased subscriptions sales of search and retrieval software. Gross margin
decreased in 1997 as compared to 1996 as sales decreased at a higher percentage
rate than the percentage rate decrease in cost of sales. Selling, general and
administrative expenses increased 13.3% in 1997 as compared to 1996 primarily
due to increases in salaries, legal and professional, commissions and travel.
Two discrimination changes were filed by an employee against ALP Corporation
with the Federal Equal Employment Opportunity Commission ("EEOC"). In the first
charge, filed on June 21, 1996, the employee alleged discrimination in pay on
the basis of age, sex and
24
<PAGE> 31
disability. The employee also alleged denial of accommodation for alleged
disabilities and oral intimidation and harassment in retaliation for the
employee's internal complaints. In the second discrimination charge, filed on
November 21, 1996, the employee claimed the Company has retaliated against the
employee for pursuing the first charge. ALP Corporation has submitted responses
to both discrimination charges. No determination has been made as yet by the
EEOC on either charge. On or about January 27, 1997, a tort claim was filed on
behalf of the same employee of ALP Corporation, in the Court of Common Pleas,
Hamilton County, Ohio. The complaint alleges that the employee's supervisors are
guilty of "intentional or negligent infliction of emotion distress" by their
"verbal and emotional abuse" of the employee. On October 28, 1997, the Company
and claimant reached an agreement to settle all claims for $24,000 to avoid
expense and disruption of protracted litigation. Accordingly, the Company has
recorded a charge of $24,000 for this settlement.
LIQUIDITY AND CAPITAL RESOURCES
Although it is impossible to estimate accurately the future cash flow
from the operations of the Company's codification business, management believes
the Company's effective capital costs may increase. All of the capital
expenditures for 1999 were funded from the Company's cash flow from operations.
Equipment additions in 1999 approximated $70,000 and were funded from the
Company's cash flow from operations. Management does not know of any trends,
events or uncertainties that will have or that are reasonably likely to have a
material effect on the Company's liquidity, capital resources or results of
operations.
INTANGIBLE ASSET
The excess of net assets acquired in a business combination over the
purchase price of approximately $165,000 was allocated to a database acquired.
The database is comprised of the municipal code data and related files.
Provision for amortization of the database is based on an estimated useful life
of forty years reflecting the long-lived nature of municipal codes.
INFLATION
Management does not consider the impact of changing prices to be
material in the analysis of the Company's overall operations.
IMPACT OF THE YEAR 2000 ISSUE
The Company utilizes management information systems and software
technology that may be affected by Year 2000 issues throughout its business.
During fiscal 1997, the Company began to implement plans at both of its
locations to ensure those systems continue to meet its internal and external
requirements. During fiscal 1997, the Company's Corporate office completed the
installation and testing of its internal financial systems which are Year 2000
compliant. The Corporate office utilizes the latest version of Year 2000
compliant Platinum SQL software for its internal financial system. All of ALP
Corporation's Folio products are Year 2000 compliant. During the fourth quarter
of 1998, ALP Corporation purchased the network enhancement pack which contained
Year 2000 compliance patches. The Company's invoicing database software is not
Year 2000 compliant. The Company is in the data gathering phase with regard to
applications, database software and hardware. The Company has retained MCSE
(Microsoft Certified Systems Engineer) consultant to review the impact of its
Year 2000 risks. Continuing evaluation by our MCSE in developing contingency
plans and to complete remediation work on separate portions of the project are
on-going. Expected completion of all phases is anticipated by third quarter end,
1999. If the Company is unable to achieve Year 2000 compliance for its invoice
database system, the Year 2000 would not have a material impact on the
operations of the Company as billings would be produced with alternative
procedures. The Company is developing a contingency plan for its database
software. Those plans include adapting and expanding the Company's existing
database system to be Year 2000 compliant. The cost of making these adaptations
is not expected to be material and will be expensed in the period incurred.
25
<PAGE> 32
TRENDS
The Company's results of operations have varied from quarter to quarter
principally because of fluctuations in production results. The Company's
experience indicates that sales increase during second and third quarters as a
result of sales to basic code subscribers. The Company expects that such
quarterly fluctuations may lessen as the percentage of the Company's new sales
are made to clients with fiscal years other than December 31, although there can
be no assurance that this will occur.
FORWARD-LOOKING INFORMATION
Statements in the preceding discussion that indicate the Company's or
management's intentions, hopes, beliefs, expectations or predictions of the
future are forward-looking statements. Additional information concerning factors
that could cause actual results to differ materially from those suggested in the
forward-looking statements is continued under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 filed
with the Securities and Exchange Commission, as the same may be amended from
time to time.
Forward-looking statements are not guarantees for performance. They
involve risks, uncertainties and assumptions. The future results and shareholder
values of the Company may differ materially from those expressed in these
forward-looking statements. Many factors that will determine these results and
values are beyond the Company's ability to control or predict. Shareholders are
cautioned not to put undue reliance on forward-looking statements. In addition,
the Company does not have an intention or obligation to update forward-looking
statements after the date hereof, even if new information, future events, or
other circumstances have made them incorrect or misleading.
26
<PAGE> 33
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth: (i) the name and address of each person
known by the Company to be the beneficial owner of more than 5% of any class of
the Company's voting securities and each director and each officer named in the
Summary Compensation Table of the Company's latest Proxy Statement; and (ii) the
number and percent of the Company's common shares beneficially owned by each
such person and by all directors and officers of the Company as a group as of
July 28, 1999:
<TABLE>
<CAPTION>
Number of Shares Percent
Beneficially of
Name of Beneficial Owner Owned (1) Class
- ------------------------ ---------------- -------
<S> <C> <C>
James R. Davis 2,000 0.1%
Director
20 East Broad Street
Columbus, Ohio 43215
Daniel D. Harkins 0 0.0%
Director
20 East Broad Street
Columbus, Ohio 43215
David White 25,000 1.5%
Director
20 East Broad Street
Columbus, Ohio 43215
John S. Sokol 74,250(2) 4.3%
Director
20 East Broad Street
Columbus, Ohio 43215
Barbara Sokol 726,773(2) 42.4%
20 East Broad Street
Columbus, Ohio 43215
Si Sokol 726,773(2) 42.4%
Chairman and President
20 East Broad Street
Columbus, Ohio 43215
All Directors and Officers 778,023 45.4%
as a group (six persons)
</TABLE>
- ------------------------------------
(1) Except as otherwise noted, none of the named individuals shares with
another person either voting or investment power as to the shares
reported.
(2) Includes 300,300 shares owned by Barbara Sokol, of which 150,000 shares
are owned by her a trustee for her children, including 50,000 shares as
trustee for John Sokol, and 426,473 shares owned by Si Sokol, her
husband. The rules of the Securities and Exchange Commission require
that Mr. and Mrs. Sokol's shares be aggregated for purposes of this
disclosure; however, Mr. and Mrs. Sokol each disclaim any beneficial
ownership of the other's shares.
27
<PAGE> 34
Additionally, Acquisitions holds 345,000 shares of Common Stock that
were issued to it upon conversion of a $50,000 Convertible Subordinated
Debenture issued by the Company. Acquisitions will not receive any consideration
for shares of the Common Stock held by it in connection with the Merger and such
shares will be cancelled as a result of the Merger.
PRINCIPAL ACCOUNTANTS
Representatives of PricewaterhouseCoopers LLP, the Company's
independent accountants, are expected to attend the Special Meeting and will
have the opportunity to make a statement if they desire to do so. Additionally,
the representatives of PricewaterhouseCoopers LLP are expected to be available
to respond to appropriate questions.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information filed by
the Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at its principal office at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: New York Regional Office, 7 World Trade
Center, 13th Floor, New York, New York 10048, and Chicago Regional Office,
Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661. Copies
of such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates, or, with respect to certain of such material, through the Commission's
World Wide Web site (http://www.sec.gov).
Shareholders who have any questions about the Merger or executing,
changing or revoking a proxy, should contact Sally J. Cress, Secretary of the
Company at Westford Group, Inc., 20 E. Broad St., Columbus, Ohio 43215,
telephone number (614) 228-2800, fax number (614) 228-5419.
THE BOARD OF DIRECTORS ENCOURAGES SHAREHOLDERS TO ATTEND THE SPECIAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. SHAREHOLDERS
WHO ATTEND THE SPECIAL MEETING MAY VOTE THEIR SHARES PERSONALLY, EVEN THOUGH
THEY HAVE SENT IN THEIR PROXIES.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE DELIVERY OF THIS PROXY
STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR PHOTOBITION SINCE THE DATE
OF THIS PROXY STATEMENT OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN IS CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROXY
STATEMENT.
By Order of the Board of Directors
Sally J. Cress
Secretary
28
<PAGE> 35
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
Independent Auditors' Report...................................... F-2
Consolidated Balance Sheets....................................... F-3
Consolidated Statements of Operations............................. F-5
Consolidated Statements of Stockholders' Equity................... F-6
Consolidated Statements of Cash Flows............................. F-7
Notes to Consolidated Financial Statements........................ F-9
Unaudited Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets................... F-14
Unaudited Condensed Consolidated Statements of Operations......... F-16
Unaudited Condensed Consolidated Statements of Cash Flows......... F-17
Notes to Interim Unaudited Condensed Consolidated Financial
Statements....................................................... F-18
<PAGE> 36
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
and Stockholders
Westford Group, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
statements of income and shareholder's equity and of cash flows present fairly,
in all material respects, the financial position of Westford Group, Inc. and
subsidiary at December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Columbus, Ohio
March 5, 1999
F-2
<PAGE> 37
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
Assets 1998 1997
-------- --------
<S> <C> <C>
Current:
Cash $400,983 $195,371
Accounts receivable - trade 260,340 212,715
Estimated earnings in excess of billings on
uncompleted codification contracts 135,364 135,335
Costs of uncompleted code supplements 13,331 26,579
Deferred taxes -- 4,777
Other assets 5,853 1,957
-------- --------
Total current assets 815,871 576,734
Deferred taxes -- 24,414
Property and equipment, net 42,571 57,197
Intangible asset, net of accumulated amortization of
$45,555 in 1998 and $41,413 in 1997 120,100 124,241
-------- --------
$978,542 $782,586
======== ========
</TABLE>
(Continued)
F-3
<PAGE> 38
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets, Continued
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity 1998 1997
----------- -----------
<S> <C> <C>
Current liabilities:
Accounts payable $ 95,557 $ 75,411
Note payable - bank -- 3,575
Accrued salaries, commissions and payroll taxes
payable 102,577 70,002
Accrued legal and professional 6,845 24,000
Billings in excess of estimated earnings on
uncompleted codification contracts 39,142 24,878
Current portion of capital lease obligations 2,002 5,639
Deferred taxes 3,293 --
Deferred revenue 15,323 10,555
Other accrued liabilities 8,352
----------- -----------
Total current liabilities
273,091 214,060
Capital lease obligations, less current portion -- 2,002
Debenture payable 50,000 50,000
----------- -----------
Total liabilities
323,091 266,062
Commitments
Series two serial redeemable preference stock, 500 shares
authorized, none issued -- --
----------- -----------
Shareholders' Equity:
Serial preference stock, without par value: authorized
100,000 shares
Series one serial preference, authorized 100 shares;
none issued -- --
Class A preferred shares, par value $2,285; authorized
500 shares; none issued -- --
Class B preferred shares, par value $500; authorized
4,000 shares; none issued -- --
Common stock, without par value; authorized 2,000,000
shares; 1,434,202 shares issued 871,286 871,286
Additional paid-in capital
782,499 785,619
Accumulated deficit (976,925) (1,115,102)
----------- -----------
676,860 541,803
Less: Treasury stock, at cost (82,996 common shares
at December 31, 1998 and 97,996 at December
31, 1997) (21,409) (25,279)
----------- -----------
Total shareholders' equity 655,451 516,524
----------- -----------
Total liabilities and shareholders equity $ 978,542 $ 782,586
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 39
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Sales $ 1,702,862 $ 1,440,738 $ 1,505,952
Cost of sales 832,748 773,756 817,434
----------- ----------- -----------
870,114 666,982 688,518
----------- ----------- -----------
Selling, general and administrative expenses:
Salaries and related costs 324,773 320,814 289,782
Professional fees 149,897 102,443 79,832
Other 221,046 242,507 212,517
----------- ----------- -----------
695,716 665,764 582,131
----------- ----------- -----------
Non-operating income (expense):
Interest expense (5,838) (6,270) (9,740)
Other income 2,099 -- 29
----------- ----------- -----------
(3,739) (6,270) (9,711)
----------- ----------- -----------
Income (loss) before federal income
tax expense 170,659 (5,052) 96,676
Federal income tax expense 32,482 10,107 27,876
----------- ----------- -----------
Net income (loss) $ 138,177 $ (15,159) $ 68,800
=========== =========== ===========
Net income (loss) per common share $ .10 $ (.01) $ .05
=========== =========== ===========
Net income (loss) per common share,
assuming dilution $ .08 $ (.01) $ .04
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 40
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Additional Total
Common paid-in Accumulated Treasury shareholders'
stock capital deficit stock equity
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995 $ 871,286 $ 788,739 $(1,168,743) $ (29,143) $ 462,139
Net income -- -- 68,800 -- 68,800
Purchase of 20 treasury shares -- -- -- (6) (6)
----------- ----------- ----------- ----------- -----------
Balance December 31, 1996 871,286 788,739 (1,099,943) (29,149) 530,933
Net loss -- -- (15,159) -- (15,159)
Issuance of 15,000 treasury
shares as employee stock awards -- (3,120) -- 3,870 750
----------- ----------- ----------- ----------- -----------
Balance December 31, 1997 871,286 785,619 (1,115,102) (25,279) 516,524
Net income -- -- 138,177 -- 138,177
Issuance of 15,000 treasury
shares as employee stock awards -- (3,120) -- 3,870 750
----------- ----------- ----------- ----------- -----------
Balance December 31, 1998 $ 871,286 $ 782,499 $ (976,925) $ (21,409) $ 655,451
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 41
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 138,177 $ (15,159) $ 68,800
Adjustments to reconcile net income to cash
provided by operating activities:
Net realized gain on disposal of
equipment -- -- (29)
Depreciation and amortization 29,509 32,123 30,736
Deferred federal income tax expense 32,482 10,107 27,875
Employee stock awards 750 750 --
(Increase) decrease in accounts
receivable - trade (47,625) (5,380) 109,117
(Increase) decrease in estimated earnings
in excess of billings on uncompleted
codification contracts (29) (15,278) 34,150
(Increase) decrease in costs of uncompleted
code supplements 13,248 12,582 (11,500)
(Increase) decrease in other assets (3,896) 330 (82)
Increase (decrease) in accounts payable 20,146 21,958 (6,392)
Increase in accrued salaries, commissions
and payroll taxes payable 32,575 3,817 3,201
Increase (decrease) in accrued legal and
professional (17,155) 24,000 --
Increase (decrease) in billings in excess
of estimated earnings on uncompleted
codification contracts 14,264 8,252 (24,901)
Increase in other liabilities 13,120 10,555 --
--------- --------- ---------
Net cash provided by operating activities 225,566 87,907 230,975
--------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (10,740) (26,867) (20,953)
Sale of equipment -- -- 120
--------- --------- ---------
Net cash used in investing activities (10,740) (26,867) (20,833)
--------- --------- ---------
</TABLE>
(Continued)
F-7
<PAGE> 42
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from note payable to bank $ -- $ -- $ 68,981
Repayment of note payable to bank (3,575) -- (149,000)
Principal payments under capital lease
obligations (5,639) (5,130) (18,200)
Purchase of treasury shares -- -- (6)
--------- --------- ---------
Net cash used in financing activities (9,214) (5,130) (98,225)
--------- --------- ---------
Net increase in cash 205,612 56,660 111,917
--------- --------- ---------
Cash at beginning of year 195,371 138,711 26,794
--------- --------- ---------
Cash at end of year $ 400,983 $ 195,371 $ 138,711
========= ========= =========
Supplemental cash flow disclosure:
Interest paid $ 5,838 $ 6,720 $ 8,465
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 43
WESTFORD GROUP, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1998, 1997, and 1996
(1) Summary of Significant Accounting Policies
The accompanying consolidated financial statements include the following
significant accounting policies:
(a) Consolidation Policy
The accompanying financial statements include the accounts of
Westford Group, Inc. (the "Company") and its wholly-owned
subsidiary, American Legal Publishing Corporation ("ALP
Corporation"). ALP Corporation is engaged in the codification of
municipal and county codes of ordinances and the supplementing
thereof. All significant intercompany transactions and balances
have been eliminated in this consolidation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Note
1(b).
(b) Revenue and Cost Recognition
Revenue from municipal code contracts is recognized on the
percentage-of- completion method; completion is measured based
on the percentage of direct labor costs incurred to date to
estimated direct labor costs for each contract. While management
uses available information to estimate total direct labor costs
on each contract, actual experience may vary from estimated
amounts. Under this method, the costs incurred and the related
revenues are included in the statement of operations as work
progresses. Adjustments to contract cost estimates are made in
the periods in which the facts which require such revisions
become known. If a revised estimate indicates a loss, such loss
is provided for in its entirety. The amount by which revenues
are earned in advance of contractual collection dates is an
unbilled receivable and the amount by which contractual billings
exceed earned revenues is unrealized revenue which is carried as
a liability.
Revenue from code supplements is recognized on the
completed-contract method because the typical supplement is
completed in a few months. No progress payments are billed due
to the short production time and the low average supplement
contract price. Supplement contracts in process are valued at
the lower of cost or contract price less estimated cost of
completion. The asset, "Costs of uncompleted code supplements,"
represents all supplement costs incurred to date. Provisions for
estimated losses on uncompleted contracts are made in the period
in which losses are determined.
F-9
<PAGE> 44
WESTFORD GROUP, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(c) Property and Equipment
Property and equipment are recorded on a cost basis.
Depreciation is computed using the straight-line method in
amounts adequate to amortize costs over the estimated useful
life of the applicable asset generally ranging from three to
five years. Equipment under capital leases is stated at the
present value of the net minimum lease payments and is amortized
over the lease term. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is
recognized as income for the period. The cost of maintenance and
repairs is charged to income as incurred; significant renewals
and betterments are capitalized.
(d) Federal Income Taxes
The Company files a consolidated federal income tax return with
its subsidiary. Deferred tax liabilities and assets have been
recognized for the expected future tax consequences of events
that have been included in the financial statements or tax
returns. Deferred income taxes for temporary differences between
financial statement and income tax bases of assets and
liabilities and net operating loss carryforwards are recognized
at the average graduated tax rate for the estimated amount of
taxable income in future years.
(e) Earnings Per Share
Effective December 31, 1997, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share." The statement specified the computation, presentation
and disclosure requirements for earnings per share for entities
with publicly held common stock, and required restatement of all
prior period earnings per share data presented. The impact of
the statement on the company's earnings per share was not
material.
Net income per common share is presented in two prescribed
methods. Net Income Per Common Share is calculated by dividing
net income available to common stockholders by the
weighed-average number of common shares outstanding. Net Income
Per common Share-Assuming Dilution is calculated by dividing net
income available to common stockholders by the weighted-average
number of common shares outstanding adjusted for any dilutive
potential common shares for the period.
(f) Intangible Asset
During 1988, the Company acquired substantially all the assets
of AM Comp, Inc., in an acquisition accounted for as a purchase.
The excess of AM Comp, Inc.'s net assets acquired over the
purchase price of $165,654 was allocated to the database. The
database is comprised of the municipal code data and related
files. Provision for amortization of the database is based on an
estimated useful life of forty years and is computed on the
straight-line method.
(2) Uncompleted Contracts
Revenues earned on uncompleted codification contracts were $819,710 and
$512,671 and billings to date on those contracts were $723,488 and
$402,214 at December 31, 1998 and 1997, respectively. The excess of
billings and estimated earnings over billings to date are presented in
the accompanying consolidated balance sheets.
F-10
<PAGE> 45
WESTFORD GROUP, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(3) Property and Equipment
Property and equipment at December 31, consists of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Machinery and equipment $ 174,044 $ 164,860
Furniture and fixtures 8,455 6,897
Capital lease equipment 24,491 24,491
--------- ---------
206,990 196,248
Less: accumulated depreciation and
amortization (164,419) (139,051)
--------- ---------
$ 42,571 $ 57,197
========= =========
</TABLE>
(4) Note Payable - Bank
The Company has a revolving credit agreement with a bank to provide a
$250,000 note with repayment on demand by the lender with a maturity of
June 30, 1999. The Company had no outstanding balance at December 31,
1998 and had an outstanding balance of $3,575 at December 31, 1997 under
this arrangement. Advances under the revolving credit line bear interest
payable quarterly at the lending bank's prime rate (7.75% at December
31, 1998).
The note is personally guaranteed by the Company's Chief Executive
Officer up to $100,000 plus accrued interest and collateralized by the
assignment of the Company's property and equipment and accounts
receivable.
(5) Leases
The Company's office facilities are shared with other affiliated
entities and rental and bookkeeping expenses are allocated among them.
The Company's share of these expenses were $2,940 in 1998, 1997 and
1996.
ALP Corporation occupies space under an operating lease which will
expire July 31, 2003. It is also a party to a capital lease for
equipment.
The following is a schedule of ALP Corporation's future minimum lease
payments for capital and operating leases as of December 31, 1998.
<TABLE>
<CAPTION>
Capital Operating
Year ending lease lease
----------- ------- ---------
<S> <C> <C>
1999 $ 2,040 $ 65,307
2000 -- 65,307
2001 -- 66,580
2002 -- 68,363
2003 -- 39,879
-------- --------
Total minimum lease payments 2,040 $305,436
========
Less: Amount representing interest 38
--------
Present value of net minimum
lease payments 2,002
Less: Current installments of
obligations under capital lease 2,002
Long-term obligation under capital
lease $ --
========
</TABLE>
Total rental expenses under the operating lease were $62,818, $60,374,
and $61,313 in 1998, 1997 and 1996, respectively. Included in
accumulated depreciation and amortization is $23,243 and $18,350 of
accumulated amortization applicable to capital lease equipment at
December 31, 1998 and 1997, respectively.
F-11
<PAGE> 46
WESTFORD GROUP, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(6) Debenture Payable
On August 7, 1992, a resolution was adopted by the Company to authorize
a $50,000 convertible subordinated debenture, due December 31, 1995,
issued to Bancinsurance Corporation, an affiliate of the Company through
a common officer and principal shareholder. Each $1,000 of principal is
convertible into 6,900 shares of common stock at the holder's option.
The debenture may be prepaid, in whole or in part, by the Company upon
thirty days prior written notice without penalty. Interest accrues at
the rate of ten percent per annum and is payable quarterly on the last
day of each March, June, September, and December until the principal sum
has been paid. In the event of default, all obligations shall become
immediately due and payable at the option of the holder. On December 1,
1995, a resolution was adopted by the Company to renew the debenture.
The maturity was extended to December 31, 2000.
(7) Federal Income Taxes
Deferred income taxes for 1998 and 1997 reflect the impact of "temporary
differences" between amounts of assets and liabilities for financial
reporting purposes and such amounts as measured on an income tax basis.
Temporary differences and carryforwards which give rise to the net
deferred tax (liability) asset at December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Deferred tax asset:
Tax operating loss carryforwards $ 25,531 $ 68,504
Deferred tax liability:
Intangible asset (28,824) (29,818)
-------- --------
Net deferred tax (liability) asset (3,293) 38,686
Valuation allowance -- (9,495)
-------- --------
(3,293) 29,191
Less current portion -- (4,777)
-------- --------
Non-current deferred tax (liability) asset $ (3,293) $ 24,414
======== ========
</TABLE>
As of December 31, 1998, the Company has net operating loss ("NOL")
carryforwards of approximately $101,000 which would expire after the tax
year ending December 31, 2008. The valuation allowance at December 31,
1997 represented the portion of net operating loss carryforwards at
enacted tax rates not expected to be utilized through future taxable
income.
The provision for federal income taxes at December 31, consists of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Deferred, amortization of intangible
asset $ (994) $ (994) $ (994)
Utilization of NOL 42,971 117 22,815
Reversal of valuation allowance (9,495) -- --
Expiration of unutilized NOL -- 10,984 6,055
-------- -------- --------
Total deferred 32,482 10,107 27,876
-------- -------- --------
Federal income tax expense $ 32,482 $ 10,107 $ 27,876
======== ======== ========
</TABLE>
F-12
<PAGE> 47
WESTFORD GROUP, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
For 1998, 1997 and 1996, the federal income tax expense differs from
the amount computed by applying the normal tax rate of 34% to income
before federal income taxes as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Expected tax $ 58,024 $ (1,718) $ 32,870
Officers life insurance 315 292 272
Business meals and entertainment 1,326 1,591 1,379
Graduated rate differential (17,688) 9,942 (6,645)
Reversal of valuation allowance (9,495) -- --
-------- -------- --------
Federal income tax expense $ 32,482 $ 10,107 $ 27,876
======== ======== ========
</TABLE>
(8) Supplemental Disclosure for Earnings Per Share
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) $ 138,177 $ (15,159) $ 68,800
----------- ----------- -----------
Income (loss) available to common
stockholders, assuming dilution $ 138,177 $ (15,159) $ 68,800
----------- ----------- -----------
Weighted average common shares outstanding 1,351,042 1,336,165 1,321,219
Adjustments for dilutive securities:
Conversion of debentures 345,000 345,000 345,000
----------- ----------- -----------
Diluted common shares 1,696,042 1,681,165 1,666,219
=========== =========== ===========
Net income per common share $ .10 $ (.01) $ .05
Net income per common share, assuming
dilution $ .08 $ (.01) $ .04
</TABLE>
(9) Litigation
The Company is routinely a party to litigation incidental to its
business, as well as to other nonmaterial litigation. Management
believes that no individual item of litigation, or group of similar
items of litigation, is likely to result in judgments that will have a
material adverse effect on the financial condition or results of
operations of the Company.
F-13
<PAGE> 48
WESTFORD GROUP, INC.
AND SUBSIDIARY
Unaudited Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
Cash $ 358,702 $ 400,983
Accounts receivable - trade, net 320,277 260,340
Estimated earning in excess of billings on
uncompleted codification contracts 178,612 135,364
Costs of uncompleted code supplements 26,814 13,331
Other assets 9,073 5,853
---------- ----------
Total current assets 893,478 815,871
Property and equipment, net 87,766 42,571
Intangible asset, net of accumulated amortization of
$48,661 in 1999 and $45,555 in 1998 116,994 120,100
---------- ----------
Total assets $1,098,238 $ 978,542
========== ==========
</TABLE>
(Continued)
F-14
<PAGE> 49
WESTFORD GROUP, INC.
AND SUBSIDIARY
Unaudited Consolidated Balance Sheets, Continued
<TABLE>
<CAPTION>
September 30, December 31,
Liabilities and Shareholders' Equity 1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 55,667 $ 95,557
Accrued salaries, commissions and payroll taxes
payable 177,846 102,577
Accrued legal and professional 12,559 6,845
Billings in excess of costs and estimated earnings on
uncompleted codification contracts 67,875 39,142
Current portion of capital lease obligations -- 2,002
Deferred taxes 10,742 3,293
Deferred revenue -- 15,323
Other accrued liabilities 44,348 8,352
----------- -----------
Total current liabilities 369,037 273,091
----------- -----------
Debenture payable -- 50,000
----------- -----------
Total liabilities 369,037 323,091
----------- -----------
Commitments
Series two serial redeemable preference stock, 500 shares
authorized; none issued -- --
----------- -----------
Shareholders' equity:
Serial preference stock, without par value:
Series one serial preference, authorized 100 shares;
none issued -- --
Class A preferred shares, par value $2,285; authorized
500 shares; none issued -- --
Class B preferred shares, par value $500; authorized
4,000 shares; none issued -- --
Common stock, without par value; authorized 2,000,000
shares; 1,779,202 shares issued 921,286 871,286
Additional paid-in capital 782,360 782,499
Accumulated deficit (957,549) (976,925)
----------- -----------
746,097 676,860
Less: Treasury stock, at cost (65,496 common shares at September
30, 1999 and 82,996 at December 31, 1998) (16,896) (21,409)
----------- -----------
Total shareholders' equity 729,201 655,451
----------- -----------
Total liabilities and shareholders' equity $ 1,098,238 $ 978,542
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE> 50
WESTFORD GROUP, INC.
AND SUBSIDIARY
Unaudited Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 435,387 $ 445,440 $1,456,273 $1,335,680
Cost of sales 233,046 183,539 732,953 613,368
---------- ---------- ---------- ----------
202,341 261,901 723,320 722,312
---------- ---------- ---------- ----------
Selling, general and administrative expenses:
Salaries and related costs 86,175 71,115 270,939 215,888
Professional fees 92,694 42,817 177,589 102,416
Other 72,641 44,235 244,596 170,937
---------- ---------- ---------- ----------
251,510 158,167 693,124 489,241
---------- ---------- ---------- ----------
Non-operating expense:
Interest expense 833 1,354 3,372 4,317
---------- ---------- ---------- ----------
Income (loss) before federal income
tax expense (benefit) (50,002) 102,380 26,824 228,754
Federal income tax expense (benefit) (11,680) 24,852 7,449 55,592
---------- ---------- ---------- ----------
Net income $ (38,322) $ 77,528 $ 19,375 $ 173,162
========== ========== ========== ==========
Net income per common share $ (.03) $ .06 $ .01 $ .13
========== ========== ========== ==========
Net income per common share, assuming
dilution $ (.02) $ .04 $ .01 $ .10
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE> 51
WESTFORD GROUP, INC.
AND SUBSIDIARY
Unaudited Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,375 $ 173,162
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 29,116 21,301
Deferred federal income tax expense 7,449 55,592
Employee stock awards 4,375 750
Increase in accounts receivable - trade (59,937) (136,888)
Increase in costs and estimated earnings in excess of
billings on uncompleted codification contracts (43,248) (2,188)
(Increase) decrease in costs of uncompleted code
supplements (13,483) 19,856
Increase in other assets (3,220) (5,079)
Increase (decrease) in accounts payable (39,890) 15,991
(Increase) decrease in accrued salaries, commissions,
and payroll taxes payable 75,269 (9,037)
(Increase) decrease in accrued legal and professional 5,714 (16,300)
Increase in billings in excess of costs and estimated earnings
on uncompleted codification contracts 28,733 16,079
Decrease in deferred revenue (15,323) (9,065)
Increase in other accrued liabilities 35,996 --
--------- ---------
Net cash provided by operating activities 30,926 124,174
--------- ---------
Cash flows used in investing activities:
Purchase of property and equipment (71,205) (10,374)
--------- ---------
Net cash used in investing activities (71,205) (10,374)
--------- ---------
Cash flows used in financing activities:
Principal payments under capital lease obligations (2,002) (4,179)
Repayment of note payable to bank -- (3,575)
--------- ---------
Net cash used in financing activities (2,002) (7,754)
--------- ---------
Net increase (decrease) in cash (42,281) 106,046
Cash at December 31 400,983 195,371
--------- ---------
Cash at September 30 $ 358,702 $ 301,417
========= =========
Supplemental cash flow disclosure:
Interest paid $ 3,372 $ 4,317
========= =========
Supplemental schedule of noncash financing activities:
Common stock issued in debenture conversion $ 50,000 $ --
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE> 52
WESTFORD GROUP, INC.
AND SUBSIDIARY
Notes To Consolidated Financial Statements (Unaudited)
1. The Consolidated Balance Sheets as of September 30, 1999, the Consolidated
Statements of Income for the three months and nine months ended September 30,
1999 and 1998, and the Consolidated Statements of Cash Flows for the nine months
then ended have been prepared by Westford Group, Inc. (the "Company") without an
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flow at September 30, 1999 and for all periods
presented have been made.
2. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these unaudited Consolidated Financial
Statements be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K for the year ended December 31,
1998. The results of operations for the period ended September 30, 1999 are not
necessarily indicative of the results of operations for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. Supplemental Disclosure For Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss) $ (38,322) $ 77,528 $ 19,375 $ 173,162
----------- ----------- ----------- -----------
Income available to common
stockholders, assuming
dilution $ (38,322) $ 77,528 $ 19,375 $ 173,162
----------- ----------- ----------- -----------
Weighted average common
shares outstanding 1,488,706 1,351,206 1,408,376 1,351,206
Adjustments for dilutive
securities:
Dilutive effect of
outstanding options 225,000 345,000 304,561 345,000
----------- ----------- ----------- -----------
Diluted common shares 1,713,706 1,696,206 1,712,937 1,696,206
=========== =========== =========== ===========
Net income per common share $ (.03) $ .06 $ .01 $ .13
Net income per common share,
assuming dilution $ (.02) $ .04 $ .01 $ .10
</TABLE>
4. On August 7, 1992, a $50,000 convertible debenture was issued by the Company
to Bancinsurance Corporation, ("Bancinsurance"), an affiliate of the Company
through a common officer and principal shareholder. On December 1, 1995, a
resolution was adopted by the Company to renew the debenture. On August 30,
1999, Bancinsurance exercised their conversion for 345,000 shares of common
stock of the Company.
F-18
<PAGE> 53
WESTFORD GROUP, INC.
AND SUBSIDIARY
Notes To Consolidated Financial Statements (Unaudited)
(Continued)
5. Subsequent Events. On July 19, 1999, the Company entered into an Agreement
and Plan of Merger with Bancinsurance Corporation, an Ohio corporation
("Bancinsurance"), and Bancinsurance Acquisitions, Inc., an Ohio corporation and
a wholly-owned subsidiary of Bancinsurance ("Acquisitions"), whereby the Company
will be merged with and into Acquisitions, with Acquisitions being the surviving
entity as a wholly-owned subsidiary
F-19
<PAGE> 54
APPENDIX A
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
BANCINSURANCE CORPORATION
BANCINSURANCE ACQUISITIONS, INC.
and
WESTFORD GROUP, INC.
================================================================================
Dated as of July 19, 1999
A-1
<PAGE> 55
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is entered into as
of July 19, 1999, among BANCINSURANCE CORPORATION, an Ohio corporation
("BANCINSURANCE"), BANCINSURANCE ACQUISITIONS, INC., an Ohio corporation and a
wholly owned subsidiary of Bancinsurance ("ACQUISITIONS"), and WESTFORD GROUP,
INC., an Ohio corporation ("WESTFORD GROUP"). Westford Group and Acquisitions
are hereinafter sometimes referred to as the "CONSTITUENT CORPORATIONS" and
Acquisitions as the "SURVIVING CORPORATION."
RECITALS
--------
A. Bancinsurance, Acquisitions and Westford Group desire that Westford
Group merge with and into Acquisitions (the "MERGER"), upon the terms and
conditions set forth herein and in accordance with the Ohio General Corporation
Law (the "OHIO LAW") with the result that Acquisitions shall continue as the
surviving corporation and the separate existence of Westford Group (except as it
may be continued by operation of law) shall cease.
B. Bancinsurance, Acquisitions and Westford Group desire that at the
Effective Time (as hereinafter defined) all outstanding shares of the capital
stock of Westford Group (the "WESTFORD COMMON STOCK") be converted into the
right to receive a cash payment as provided herein.
C. Bancinsurance, Acquisitions and Westford Group desire that,
immediately after the Effective Time and solely as a result of the Merger,
Bancinsurance will own all the issued and outstanding shares of the capital
stock of the Surviving Corporation.
D. The respective Boards of Directors of Bancinsurance, Acquisitions
and Westford Group have approved the Merger.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, in accordance with this Agreement and the Ohio
Law, Westford Group shall be merged with and into Acquisitions, the separate
existence of Westford Group (except as it
A-2
<PAGE> 56
may be continued by operation of law) shall cease, and Acquisitions shall
continue as the Surviving Corporation under the name "Westford Group, Inc."
SECTION 1.02 EFFECT OF THE MERGER. Upon the effectiveness of the
Merger, the Surviving Corporation shall succeed to, and assume all the rights
and obligations of, Westford Group and Acquisitions in accordance with the Ohio
Law and the Merger shall otherwise have the effects set forth in Section 1701.82
of the Ohio Law.
SECTION 1.03 CONSUMMATION OF THE MERGER. As soon as practicable after
the satisfaction or waiver of the conditions to the obligations of the parties
to effect the Merger set forth herein, provided that this Agreement has not been
terminated previously, the parties hereto will cause the Merger to be
consummated by filing with the Secretary of State of the State of Ohio a
properly executed certificate of merger in accordance with the Ohio Law. The
Merger shall be effective upon filing such certificate of merger with the
Secretary of State of the State of Ohio (the "EFFECTIVE TIME").
SECTION 1.04 ARTICLES OF INCORPORATION; CODE OF REGULATIONS; DIRECTORS
AND OFFICERS. The Articles of Incorporation of the Surviving Corporation from
and after the Effective Time shall be the Articles of Incorporation of
Acquisitions as in effect immediately prior to the Effective Time, until
thereafter amended in accordance with the provisions thereof and as provided by
the Ohio Law. The Code of Regulations of the Surviving Corporation from and
after the Effective Time shall be the Code of Regulations of Acquisitions as in
effect immediately prior to the Effective Time, continuing until thereafter
amended in accordance with the provisions thereof and the Articles of
Incorporation of the Surviving Corporation and as provided by the Ohio Law. The
initial directors and officers of the Surviving Corporation shall be the
directors and officers of Acquisitions immediately prior to the Merger.
SECTION 1.05 FURTHER ASSURANCES. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of such Constituent Corporation, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Corporation and otherwise to carry out
the purposes of this Agreement.
A-3
<PAGE> 57
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 CONVERSION OF SECURITIES OF WESTFORD GROUP.
(a) OUTSTANDING SHARES. By virtue of the Merger and without
any action on the part of the holders of the capital stock of Westford Group, at
the Effective Time, all outstanding shares of Westford Group Common Stock
(excluding shares held in the treasury of Westford Group, which shall be
cancelled as provided in paragraph (b) below and shares held by Bancinsurance or
Acquisitions, which shall be cancelled as provided in paragraph (c) below) shall
be converted into the right to receive in cash $0.70 per share.
(b) TREASURY STOCK. Each share of capital stock that is held
in the treasury of Westford Group shall be cancelled and retired and no cash or
other consideration shall be paid or delivered in exchange therefor.
(c) SHARES HELD BY BANCINSURANCE OR ACQUISITIONS. Each of the
shares of Westford Common Stock held by Bancinsurance or Acquisitions, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
SECTION 2.02 CONVERSION OF ACQUISITIONS COMMON STOCK. At the Effective
Time, each share of Common Stock, without par value, of Acquisitions issued and
outstanding immediately prior to the Effective Time shall remain outstanding
and, by virtue of the Merger, automatically and without any action on the part
of the holder thereof, be converted into and become one validly issued, fully
paid and nonassessable share of common stock, without par value, of the
Surviving Corporation.
SECTION 2.03 SURRENDER AND EXCHANGE OF SHARES.
(a) At the Effective Time, each holder of an outstanding
certificate or certificates that prior thereto represented shares of the capital
stock of Westford Group shall surrender the same to Bancinsurance or its agent,
and each such holder shall be entitled upon such surrender to receive in
exchange therefor, without cost to it, cash as provided in Section 2.01 hereof,
and the certificate or certificates so surrendered in exchange for such
consideration shall forthwith be cancelled by Bancinsurance.
(b) If a certificate representing shares of the capital stock
of Westford Group has been lost, stolen or destroyed, the holder of such
certificate shall submit an affidavit describing the lost, stolen or destroyed
certificate, the number of shares evidenced thereby and affirming the status of
that certificate in lieu of surrendering such certificate to Bancinsurance,
which shall deem such certificate cancelled; provided that Bancinsurance may
require the holder of such certificate to provide Bancinsurance with a bond in
such amount as Bancinsurance may direct as a condition to paying any
consideration hereunder. Until so surrendered, the
A-4
<PAGE> 58
outstanding certificates that, prior to the Effective Time, represented shares
of the capital stock of Westford Group that shall have been converted as
aforesaid shall be deemed for all corporate purposes, except as hereinafter
provided, to evidence the ownership of the consideration into which such shares
have been so converted.
SECTION 2.04. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of capital stock of Westford Group that are
outstanding immediately prior to the Effective Time and that are held by
shareholders who have not voted such shares in favor of the approval and
adoption of this Agreement and who shall have delivered a written demand for
appraisal of such shares in the manner provided in Section 1701.85 of the Ohio
Law ("DISSENTING SHARES") shall not be converted into or be exchangeable for the
right to receive the consideration provided in Section 2.01 of this Agreement,
but the holders of such shares shall be entitled to payment of the appraised
value of such shares in accordance with the provisions of Section 1701.85 of the
Ohio Law; PROVIDED, HOWEVER, that (i) if any holder of Dissenting Shares shall
subsequently deliver a written withdrawal of his demand for appraisal of such
shares (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within ten (10) days after the Effective Time), or
(ii) if any holder fails to perfect or loses his appraisal rights as provided in
Section 1701.85 of the Ohio Law, or (iii) if any holder of Dissenting Shares
fails to demand payment within the time period provided in Section 1701.85 of
the Ohio Law, such holder shall forfeit the right to appraisal of such shares
and such shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Time, the right to receive the
consideration provided in Section 2.01 of this Agreement, without any interest
thereon. Dissenting Shares, if any, after payments of fair value in respect
thereto have been made to dissenting shareholders of Westford Group pursuant to
the Ohio Law, shall be cancelled.
SECTION 2.05 CLOSING OF STOCK TRANSFER BOOKS. On and after the
Effective Time, there shall be no transfers on the stock transfer books of
Westford Group, Acquisitions, or Bancinsurance of shares of Westford Common
Stock that were issued and outstanding immediately prior to the Effective Time.
SECTION 2.06 CLOSING. The closing (the "CLOSING") shall be scheduled to
occur at the offices of Porter, Wright, Morris & Arthur LLP, Columbus, Ohio, at
10:00 a.m. local time, as soon as practicable upon the satisfaction or waiver of
the conditions to the obligations of the parties to effect the Merger set forth
herein. The Closing, and all transactions to occur at the Closing, shall be
deemed to have taken place at the close of business on the date of closing (the
"CLOSING DATE").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF WESTFORD GROUP. Westford
Group represents and warrants to Bancinsurance and Acquisitions as follows:
A-5
<PAGE> 59
(a) ORGANIZATION AND QUALIFICATION. Westford Group and its
wholly owned subsidiary, American Legal Publishing, Inc. ("ALP") (Westford Group
and ALP are sometimes referred to herein as the "COMPANIES"), are each
corporations duly organized, validly existing and in good standing under the
laws of the State of Ohio and have all requisite corporate power and authority
to own or lease and operate their properties and assets and to carry on their
business as is now being conducted. Each of the Companies is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
in which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the financial condition,
operating results or business of the Companies.
(b) CAPITALIZATION. The authorized capital stock of Westford
Group consists of 2,000,000 shares of Westford Common Stock. As of the date of
this Agreement, 1,434,202 shares of Westford Common Stock are issued and
outstanding (65,496 shares of which are held as treasury shares), all of which
were duly authorized and validly issued and are fully paid and nonassessable.
The authorized capital stock of ALP consists of 750 shares of common stock,
without par value (the "ALP COMMON STOCK"). As of the date of this Agreement,
100 shares of ALP Common Stock are issued and outstanding, all of which are
owned by Westford Group and which were duly authorized and validly issued and
are fully paid and nonassessable. With the exception of a certain $50,000
convertible debenture issued to Bancinsurance and held by Acquisitions (the
"DEBENTURE"), Westford Group does not have any subscription, warrant, option,
convertible security, stock appreciation or other right (contingent or other) to
purchase or acquire any shares of any class of capital stock of Westford Group
authorized or outstanding and there is not any commitment of Westford Group to
issue any shares, warrants, options or other such rights or to distribute to
holders of any class of its capital stock any evidences of indebtedness or
assets. Westford Group does not have any obligation (contingent or other) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
(c) AUTHORITY RELATIVE TO AGREEMENT. Westford Group has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by Westford Group and the consummation by it of
the transactions contemplated hereby have been duly authorized by Westford
Group's Board of Directors. Except for shareholder approval, as provided herein,
no other corporate approvals or proceedings on the part of Westford Group are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Westford Group and
constitutes the legal, valid and binding obligation of Westford Group,
enforceable against Westford Group in accordance with its terms. Westford
Group's Board of Directors has by the requisite vote of all directors present at
a meeting duly called for such purpose determined that this Agreement and the
Merger is advisable and fair and in the best interests of Westford Group and its
shareholders.
(d) NON-CONTRAVENTION. The execution and delivery of this
Agreement by Westford Group and the consummation by Westford Group of the
transactions contemplated hereby will not (i) violate or conflict with any
provision of the Articles of Incorporation or Code
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of Regulations of either of the Companies or (ii) result in any violation of,
conflict with, or default (or an event which with notice or lapse of time or
both would constitute a default) or loss of a benefit under, or permit the
termination of or the acceleration of any obligation under, any mortgage,
indenture, lease, agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the business conducted by the Companies (the
"BUSINESS") or to the Companies or their properties, or (iii) result in the
creation or imposition of any Claim in favor of any third person or entity upon
any of the assets of the Companies or the Business, other than any such
violation, conflict, default, loss, termination or acceleration that would not
have a material adverse effect on the properties, assets, financial condition,
operating results or business of the Companies (a "WESTFORD MATERIAL ADVERSE
EFFECT").
(e) CONSENTS. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Federal, state, local or
foreign governmental or regulatory authority is required to be made or obtained
by Westford Group in connection with the execution and delivery of this
Agreement by Westford Group or the consummation by Westford Group of the
transactions contemplated hereby, except for (i) the filing of proxy statement
for a special meeting of shareholders to vote on this Agreement (as provided
herein), (ii) filing of a certificate of merger with the Secretary of State of
the State of Ohio in accordance with the Ohio Law, and (iii) such consents,
approvals, orders or authorizations which if not obtained, or registrations,
declarations or filings which if not made, would not have a Westford Material
Adverse Effect or materially adversely affect the ability of Westford Group to
consummate the transactions contemplated hereby or the ability of the Surviving
Corporation to conduct the Business after the Effective Time.
(f) FINANCIAL STATEMENTS, ETC. All financial statements (the
"FINANCIAL STATEMENTS") of the Companies (including any related schedules and/or
notes, if any) have been prepared in accordance with GAAP consistent with prior
periods. Such balance sheets fairly present in all material respects the
financial position of the Companies as of their respective dates, and such
statements of operations, stockholders' equity and cash flows fairly present in
all material respects the results of operations of the Companies for the
respective periods then ended, subject, in the case of unaudited financial
statements, to normal year-end adjustments and the absence of certain footnote
disclosures.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise
disclosed in the Financial Statements, since December 31, 1998, neither of the
Companies has (i) issued any stock, bonds or other corporate securities, (ii)
borrowed or refinanced any amount or incurred any liabilities (absolute or
contingent) in excess of $50,000, other than trade payables incurred in the
ordinary course of business consistent with past practice, (iii) discharged or
satisfied any claim in excess of $50,000 or incurred or paid any obligation or
liability (absolute or contingent) other than current liabilities shown on the
balance sheet of Westford Group as of December 31, 1998 and current liabilities
incurred since the date of such balance sheet in the ordinary course of business
consistent with past practice, (iv) declared or made any payment or distribution
to shareholders or purchased or redeemed any shares of its capital stock or
other securities, (v) mortgaged, pledged or subjected to lien any of its assets,
tangible or intangible, other than liens
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for current real property taxes not yet due and payable, (vi) sold, assigned or
transferred any of its tangible assets, or cancelled any debts or claims, except
in the ordinary course of business consistent with past practice or as otherwise
contemplated hereby, (vii) sold, assigned or transferred any Intellectual
Property Rights (as hereinafter defined) or other intangible assets, (viii)
waived any rights of substantial value, whether or not in the ordinary course of
business, (ix) except as otherwise provided in Section 5.03(f) below, entered
into, adopted, amended or terminated any bonus, profit sharing, compensation,
termination, stock option, stock appreciation right, restricted stock,
performance unit, pension, retirement, deferred compensation, employment,
severance or other employee benefit plan, agreement, trust, fund or other
arrangement for the benefit of any director, officer or employee, or increased
in any manner the compensation or fringe benefits of any director or officer, or
increased the compensation or fringe benefits of any executive officer other
than in the ordinary course of business consistent with past practices, or made
any payment of a cash bonus to any director or officer or to any employee of, or
consultant or agent to, Westford Group or made any other material change in the
terms or conditions of employment, (x) announced any plan or legally binding
commitment to create any employee benefit plan, program or arrangement or to
amend or modify in any material respect any existing employee benefit plan,
program or arrangement, (xi) eliminated the vesting conditions or otherwise
accelerated the payment of any compensation, including any stock options, (xii)
suffered any damage, destruction or loss to any of its assets or properties,
(xiii) made any change in its accounting systems, policies, principles or
practices, or (xiv) made any loans to any person.
(h) ACTIONS PENDING. There is no action, suit, dispute,
investigation, proceeding or claim pending or, to the best knowledge of Westford
Group, threatened against or affecting the Companies, their properties or
rights, or the Business, before any court, administrative agency, governmental
body, arbitrator, mediator or other dispute resolution body, and Westford Group
is not aware of any facts or circumstances which may give rise to any such
action, suit, dispute, investigation, proceeding or claim, (ii) the Companies
are not subject to any order, judgment, decree, injunction, stipulation, or
consent order of or with any court or other governmental agency, and (iii)
neither of the Companies has entered into any agreement to settle or compromise
any proceeding pending or threatened against it which has involved any
obligation other than the payment of money or for which it has any continuing
obligation, which (in the case of each of clauses (i), (ii) and (iii) of this
Section 3.01(h)) would have a Westford Material Adverse Effect or would affect
the ability of Westford Group to consummate the transactions contemplated
hereby, or the ability of Bancinsurance to conduct the Business after the
Effective Time.
(i) TITLE TO PROPERTIES. Westford Group or ALP, as
appropriate, has good title to the properties and assets reflected on the most
recent balance sheet of Westford Group other than non-material properties and
assets disposed of in the ordinary course of business consistent with past
practice since the date of such balance sheet, and all such properties and
assets are free and clear of any liens, claims, charges, restrictions, rights of
others, security interests, prior assignments or other encumbrances
(collectively "CLAIMS"), except (i) liens for current taxes not yet due and (ii)
minor imperfections of title, if any, not material in amount and not materially
detracting from the value or impairing the use of the property subject thereto
or impairing the
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operations or proposed operations of Westford Group (collectively, the
"PERMITTED LIENS"). Such properties and assets constitute all of the assets
necessary to conduct the Business substantially in the same manner as it has
been conducted prior to the date hereof.
(j) REAL PROPERTY INTERESTS. Westford Group owns no real
property. ALP has good leasehold title to its office space located in
Cincinnati, Ohio (the "LEASED PREMISES"). ALP is the lawful owners of all
improvements and fixtures located on the Leased Premises, free and clear of all
Claims except for Permitted Liens. The lease relating to the Leased Premises is
a valid and binding agreement, without any material default of ALP thereunder
and, to the best knowledge of Westford Group, without any material default
thereunder of the other party thereto, and such lease gives ALP the right to use
or occupy, as the case may be, all real properties as are sufficient and
adequate to operate the Business as it is currently being conducted.
(k) INTELLECTUAL PROPERTY RIGHTS. The patents, trademarks and
trade names, trademark and trade name registrations, servicemark, brandmark and
brand name registrations and copyrights, the applications therefor and the
licenses with respect thereto (collectively, the "INTELLECTUAL PROPERTY RIGHTS")
currently used by ALP constitute all material proprietary rights owned or held
by Westford Group that are reasonably necessary to the conduct of the Business.
The Companies conduct the Business without infringement or claim of infringement
of any Intellectual Property Right of others and the conduct by the Surviving
Corporation after the Effective Time of the Business, as it is currently
conducted, will not infringe or misappropriate or otherwise violate the
Intellectual Property Rights of any other person or constitute a breach or
violation of any agreement relating to the Intellectual Property Rights. To the
best knowledge of Westford Group, no person is challenging, infringing,
misappropriating or otherwise violating any such Intellectual Property Rights or
claiming that the conduct of the Business, infringes, misappropriates or
otherwise violates the Intellectual Property Rights of any third party.
(l) LABOR MATTERS. The Companies are not and have not been a
party to any collective bargaining or union agreement, and no such agreement is
or has been applicable to any employees of the Companies. There are not any
controversies between either of the Companies and any of such employees that
might reasonably be expected to materially adversely affect the conduct of the
Business, or any unresolved labor union grievances or unfair labor practice or
labor arbitration proceedings pending, or, to the best knowledge of Westford
Group, threatened relating to the Business. To the best knowledge of Westford
Group, there are no labor unions or other organizations representing or
purporting to represent any employees of the Companies and there are not any
organizational efforts currently being made or threatened involving any of such
employees. The Companies are in compliance in all material respects with all
laws and regulations or other legal or contractual requirements regarding the
terms and conditions of employment of employees, former employees or prospective
employees or other labor related matters, including, without limitation, laws,
rules, regulations, orders, rulings, conciliation agreements, decrees, judgments
and awards relating to wages, hours, the payment of social security and similar
taxes, equal employment opportunity, employment discrimination, fair labor
standards and occupational health and safety, wrongful discharge or violation of
the personal rights of employees, former employees or prospective employees,
except where failure to
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comply would not have a Westford Material Adverse Effect. The Companies are not
liable for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing, except where failure to comply would not have a
Westford Material Adverse Effect.
(m) SEVERANCE ARRANGEMENTS. Neither of the Companies is a
party to any agreement with any employee (i) the benefits of which (including,
without limitation, severance benefits) are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving either of
the Companies of the nature of any of the transactions contemplated by this
Agreement or (ii) providing severance benefits in excess of those generally
available under the Companies' severance policies or which are conditioned upon
a change of control, after the termination of employment of such employees
regardless of the reason for such termination of employment, and neither of the
Companies is a party to any employment agreement or compensation guarantee
extending for a period longer than one year.
(n) TAXES. The Companies have (A) timely filed all Federal and
all material state, local and foreign returns, declarations, reports, estimates,
information returns and statements ("RETURNS") required to be filed by it in
respect of any Taxes (as hereinafter defined), (B) timely paid all Taxes that
are due and payable with respect to the periods covered by the Tax Returns
referred to in clause (A) without regard to whether such Taxes have been
assessed (except for audit adjustments not material in the aggregate or to the
extent that liability therefor is reserved for in the Companies' most recent
financial statements), (C) established reserves that are adequate for the
payment of all Taxes not yet due and payable with respect to the results of
operations of Westford Group, and (D) complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and has in all material respects timely withheld from employee wages
and paid over to the proper governmental authorities all amounts required to be
so withheld and paid over. No Federal, state, local or foreign Tax audits or
other administrative proceedings or court proceedings are currently pending with
regard to any Federal or material state, local or foreign Taxes for which
Westford Group would be liable, and no deficiency for any such Taxes has been
proposed, asserted or assessed or, to the best knowledge of Westford Group,
threatened pursuant to such examination of Westford Group by such Federal,
state, local or foreign taxing authority with respect to any period.
For purposes of this Agreement, "TAXES" shall mean
all Federal, state, local, foreign or other taxing authority income, franchise,
sales, use, ad valorem, property, payroll, social security, unemployment,
assets, value added, withholding, excise, severance, transfer, employment,
alternative or add-on minimum and other taxes, charges, fees, levies, imposts,
duties, licenses or other assessments, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority.
(o) COMPLIANCE WITH LAW; PERMITS. The Companies are not in
default in any material respect under any order or decree of any court,
governmental authority, arbitrator or arbitration board or tribunal or under any
laws, ordinances, governmental rules or regulations to which Westford Group or
any of its properties or assets is subject, except where such default would not
have a Westford Material Adverse Effect. Copies of all material permits,
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authorizations, approvals, registrations, variances and licenses ("PERMITS")
issued to or used by the Companies in connection with the conduct of the
Business have been provided to Bancinsurance; such Permits constitute all
Permits necessary for the Companies to own, use and maintain their properties
and assets or required for the conduct of the Business in substantially the same
manner as it is currently conducted. Each Permit of the Companies is in full
force and effect and no proceeding is pending, or, to the best knowledge of
Westford Group, threatened, to modify, suspend, revoke or otherwise limit any of
such Permits and no administrative or governmental actions have been taken or,
to the best knowledge of Westford Group, threatened, in connection with the
expiration or renewal of any of such Permits. To the best knowledge of Westford
Group, the Companies will not be required, as a result of the consummation of
the transactions contemplated hereby, to obtain or renew any Permits.
(p) EMPLOYEE BENEFIT PLANS. The Companies have provided
Bancinsurance with copies of each employee benefit plan as defined in Section
3(3) of ERISA, or any other plan, program, policy or arrangement for or
regarding bonuses, commissions, incentive compensation, severance, vacation,
deferred compensation, pensions, profit sharing, retirement, payroll savings,
stock options, stock purchases, stock awards, stock ownership, phantom stock,
stock appreciation rights, medical/dental expense payment or reimbursement,
disability income or protection, sick pay, group insurance, self insurance,
death benefits, employee welfare or fringe benefits of any nature; but not
including employment Contracts with individual employees (any of the foregoing
being referred to as an "EMPLOYEE BENEFIT PLAN"). With respect to each Employee
Benefit Plan of the Companies, the Companies have operated and currently operate
such plan in material compliance with the plan documents and all applicable
laws, including without limitation ERISA and the Code (including, but not
limited to, Section 4980B thereof and the regulations thereunder).
(q) ENVIRONMENTAL MATTERS. The Companies are in compliance in
all material respects with all Federal, state or local statutes, ordinances,
orders, judgments, rulings or regulations relating to environmental pollution or
to environmental regulation or control. Neither of the Companies nor, to the
best knowledge of Westford Group, any of the Companies' officers, employees,
representatives or agents or any other person, have treated, stored, processed,
discharged, spilled or otherwise disposed of any substance defined as hazardous
or toxic by any applicable Federal, state or local law, rule, regulation, order
or directive, or any waste or by-product thereof, at any real property or any
other facility owned, leased or used by Westford Group, in violation of any
applicable statutes, regulations, ordinances or directives of any governmental
authority or court, which violations may result in any material liability to
Westford Group. To the best knowledge of Westford Group, no employee or other
person has ever made a claim or demand against Westford Group based on alleged
damage to health caused by any such hazardous or toxic substance or by any waste
or by-product thereof. Westford Group has not been charged by any governmental
authority with improperly using, handling, storing, discharging or disposing of
any such hazardous or toxic substance or waste or by-product thereof or with
causing or permitting any pollution of any body of water.
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(r) PERSONAL PROPERTY. All of the tangible personal property
of the Companies is presently utilized by the Companies in the ordinary course
of business and is in good repair, ordinary wear and tear excepted.
(s) CONTRACTS. The Companies have provided to Bancinsurance
lists all contracts and arrangements to which either of the Companies is a party
or by which it is bound and which are material to the conduct of the Business or
to the financial condition or results of operations of the Companies. Each such
contract or agreement is a valid and binding agreement, without any material
default of either of the Companies thereunder and, to the best knowledge of
Westford Group, without any material default thereunder of the other party
thereto. Westford Group has not received notice of any cancellation or
termination of, or of any threat to cancel or terminate, any such contracts or
agreements where such cancellation or termination would have a Westford Material
Adverse Effect.
(t) INSURANCE. All policies of fire, liability, workers'
compensation and other forms of insurance providing insurance coverage to or for
the Companies for events or occurrences arising or taking place in the case of
occurrence type insurance, and for claims made and/or suits commenced in the
case of claims-made type insurance are in full force and effect, and provide
insurance in such amounts and against such risks as is customary for companies
engaged in similar businesses to protect the employees, properties, assets,
businesses and operations of the Companies. All such policies will remain in
full force and effect and will not in any way be affected by, or terminate or
lapse by reason of, any of the transactions contemplated hereby, except by
reason of an insurer's assessment of Bancinsurance or the conduct of the
Business after the Effective Time. There are no pending or threatened claims
under any insurance policy, the outcome of which would have a Westford Material
Adverse Effect.
(u) PENDING TRANSACTIONS. Except for this Agreement and the
transactions contemplated hereby, Westford Group is not a party to or bound by
any agreement, negotiation, discussion, commitment or undertaking with respect
to a merger or consolidation with, or an acquisition of all or substantially all
of the property and assets of, any other corporation or person or the sale,
lease or exchange of all or substantially all of its properties and assets to
any other person.
(v) CLAIMS AGAINST OFFICERS AND DIRECTORS. To the best
knowledge of Westford Group, there are no pending or threatened claims against
any director, officer, employee or agent of the Companies or any other person
which could give rise to any claim for indemnification against the Companies.
(w) CUSTOMERS. Westford Group has provided Bancinsurance
information concerning the largest clients/customers of the Business ("MAJOR
CUSTOMERS"). Since December 31, 1998, there has not been any adverse change in
the business relationship, and there has been no material dispute, between the
Companies and any Major Customer and there are no indications that any Major
Customer intends to reduce its purchases from the Companies
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(x) IMPROPER AND OTHER PAYMENTS. To the best of Westford
Group's knowledge, neither of the Companies nor any director, officer, employee,
agent or representative of the Companies, nor any person acting on behalf of any
of them, has (i) made, paid or received any bribes, kickbacks or other similar
payments to or from any person, whether lawful or unlawful, (ii) made any
unlawful contributions, directly or indirectly, to a domestic or foreign
political party or candidate, or (iii) made any improper foreign payment (as
defined in the Foreign Corrupt Practices Act).
(y) BROKERS. The Companies have not used any broker or finder
in connection with the transactions contemplated hereby, and the Companies shall
not be liable for or otherwise suffer or incur any loss as a result of or in
connection with any brokerage or finder's fee or other commission of any person
retained by Westford Group in connection with any of the transactions
contemplated by this Agreement.
(z) ACCOUNTS RECEIVABLE AND ADVANCES. (i) Each account
receivable of Westford Group (collectively, the "ACCOUNTS RECEIVABLE")
represents a sale made in the ordinary course of business other than to
affiliates and which arose pursuant to an enforceable contract for a bona fide
sale of goods or for services performed, and Westford Group has performed all of
its obligations to produce the goods or perform the services to which such
Accounts Receivable relates, and (ii) to the best of knowledge of Westford
Group, no Accounts Receivable is subject to any claim for reduction,
counterclaim, set-off, recoupment or other claim for credit, allowances or
adjustments by the obligor thereof, in an amount individually or in the
aggregate that would have a Westford Material Adverse Effect.
(aa) REPORTS. Since December 31, 1993, Westford Group has
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, and Forms 8-K, or (ii)
other regulatory authorities, including any applicable state securities
authority (except, in the case of state securities authorities, failures to file
which are not reasonably likely to have, individually or in the aggregate, a
Westford Material Adverse Effect). As of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, in all
material respects, 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 made therein, in light of the circumstances under which they were
made, not misleading.
(bb) ACCURACY OF STATEMENTS. Neither this Agreement nor any
schedule, exhibit, statement, list, document, certificate or other information
furnished or to be furnished by or on behalf of Westford Group to Bancinsurance
in connection with this Agreement or any of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
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SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF BANCINSURANCE.
Bancinsurance represents and warrants to Westford Group as follows:
(a) ORGANIZATION AND QUALIFICATION. Bancinsurance is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio and has all requisite corporate power and authority to own
or lease and operate its properties and assets and to carry on its business as
it is now being conducted. Bancinsurance is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the financial condition,
operating results or business of Bancinsurance and its subsidiaries, taken as a
whole (a "BANCINSURANCE MATERIAL ADVERSE EFFECT"). Bancinsurance owns
beneficially and of record all the issued and outstanding capital stock of
Acquisitions, free and clear of all Claims.
(b) AUTHORITY RELATIVE TO AGREEMENTS. Bancinsurance has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Bancinsurance and the consummation by Bancinsurance of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Bancinsurance, no other corporate approvals or proceedings on the part of
Bancinsurance are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Bancinsurance and constitutes the legal, valid and binding obligation of
Bancinsurance, enforceable against Bancinsurance in accordance with its terms.
Bancinsurance's Board of Directors has by the unanimous written consent of all
directors determined that this Agreement and the Merger is advisable and fair
and in the best interests of Bancinsurance and its shareholders.
(c) NON-CONTRAVENTION. The execution and delivery of this
Agreement by Bancinsurance and the consummation by Bancinsurance of the
transactions contemplated hereby will not (i) violate or conflict with any
provision of the Articles of Incorporation or Code of Regulations of
Bancinsurance, (ii) result in any violation of, conflict with, or default (or an
event which with notice or lapse of time or both would constitute a default) or
loss of a benefit under, or permit the termination of or the acceleration of any
obligation under, any mortgage, indenture, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Bancinsurance or any of its
subsidiaries or their respective properties, or (iii) result in the creation or
imposition of any Claim in favor of any third person or entity upon the assets
of Bancinsurance or any of its subsidiaries, other than any such violation,
conflict, default, loss, termination or acceleration that would not have a
Bancinsurance Material Adverse Effect or materially adversely affect the ability
of Bancinsurance to consummate the transactions contemplated hereby or to
conduct the Business after the Effective Time.
(d) CONSENTS. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Federal, state, local or
foreign governmental or regulatory authority is required to be made or obtained
by Bancinsurance in connection with the execution
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and delivery of this Agreement by Bancinsurance or the consummation by
Bancinsurance of the transactions contemplated hereby, except for (i) any
necessary filings pursuant to Securities Act of 1933, as amended (the
"SECURITIES ACT"), and the rules and regulations promulgated by the SEC
thereunder, (ii) the filing of a certificate of merger with the Secretary of
State of the State of Ohio in accordance with the Ohio Law, (iii) any consents,
licenses, permits, franchises or other governmental authorizations pertaining to
the Business that are required as a result of the consummation of the
transactions contemplated hereby, and (iv) such consents, approvals, orders or
authorizations which if not obtained, or registrations, declarations or filings
which if not made, would not have a Bancinsurance Material Adverse Effect or
materially adversely affect the ability of Bancinsurance to consummate the
transactions contemplated hereby or to conduct the Business after the Effective
Time.
(e) ACTIONS PENDING. There is no action, suit, dispute,
investigation, proceeding or claim pending or, to the best knowledge of
Bancinsurance, threatened against or affecting Bancinsurance or any of its
subsidiaries, or their respective properties or rights, before any court,
administrative agency, governmental body, arbitrator, mediator or other dispute
resolution body that would have a Bancinsurance Material Adverse Effect or would
affect the ability of Bancinsurance or Acquisitions to consummate the
transactions contemplated hereby, or the ability of Bancinsurance or the
Surviving Corporation to conduct the Business after the Effective Time, and
Bancinsurance is not aware of any facts or circumstances which may give rise to
any of the foregoing. Bancinsurance is not subject to any order, judgment,
decree, injunction, stipulation, or consent order of or with any court or other
governmental agency. Bancinsurance has not entered into any agreement to settle
or compromise any proceeding pending or threatened against it which has involved
any obligation other than the payment of money or for which Bancinsurance has
any continuing obligation.
(f) BROKERS. Neither Bancinsurance nor any of its subsidiaries
has used any broker or finder in connection with the transactions contemplated
hereby, and neither Bancinsurance nor any of its subsidiaries has or shall have
any liability or otherwise suffer or incur any loss as a result of or in
connection with any brokerage or finder's fee or other commission of any person
retained by Bancinsurance or any of its subsidiaries in connection with any of
the transactions contemplated by this Agreement.
(g) ACCURACY OF STATEMENTS. Neither this Agreement nor any
schedule, exhibit, statement, list, document, certificate or other information
furnished or to be furnished by or on behalf of Bancinsurance to Westford Group
in connection with this Agreement or any of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
SECTION 3.03 REPRESENTATIONS AND WARRANTIES OF ACQUISITIONS.
Acquisitions represents and warrants to Westford Group as follows:
(a) ORGANIZATION AND QUALIFICATION. Acquisitions is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio and has all
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requisite corporate power and authority to own or lease and operate its
properties and assets and to carry on its business as it is now being conducted.
Acquisitions is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction in which the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not have a material
adverse effect on the financial condition, operating results or business of
Acquisitions.
(b) CAPITALIZATION. The authorized capital stock of
Acquisitions consists of 850 shares of common stock, without par value. As of
the date hereof, 100 shares of common stock are issued and outstanding, all of
which were duly authorized and validly issued and are fully paid and
nonassessable, and all such shares are owned of record and beneficially by
Bancinsurance, and no shares of common stock are held in the treasury of
Acquisitions. Acquisitions has no commitments to issue or sell any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for, or giving any person any right to subscribe for or acquire from
Acquisitions, any shares of its capital stock, and no securities or obligations
evidencing any such rights are outstanding.
(c) AUTHORITY RELATIVE TO AGREEMENT. Acquisitions has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Acquisitions and the consummation by Acquisitions of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Acquisitions and by Bancinsurance as its sole shareholder, and no other
corporate approvals or proceedings on the part of Acquisitions are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Acquisitions and constitutes
the legal, valid and binding obligation of Acquisitions, enforceable against
Acquisitions in accordance with its terms.
(d) NON-CONTRAVENTION. The execution and delivery of this
Agreement by Acquisitions and the consummation by Acquisitions of the
transactions contemplated hereby will not (i) violate or conflict with any
provision of the Articles of Incorporation or Code of Regulations of
Acquisitions or (ii) result in any violation of, conflict with, or default (or
an event which with notice or lapse of time or both would constitute a default)
or loss of a benefit under, or permit the termination of or the acceleration of
any obligation under, any mortgage, indenture, lease, agreement, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Acquisitions or its properties, other than any such violation, conflict,
default, loss, termination or acceleration that would not materially adversely
affect the ability of Acquisitions to consummate the transactions contemplated
hereby.
(e) CONSENTS. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Federal, state, local or
foreign governmental or regulatory authority is required to be made or obtained
by Acquisitions in connection with the execution and delivery of this Agreement
by Acquisitions or the consummation by Acquisitions of the transactions
contemplated hereby, except for (i) the filing of a certificate of merger with
the Secretary of State of the State of Ohio in accordance with the Ohio Law,
(ii) any consents, licenses, permits, franchises or other governmental
authorizations pertaining to the Business that
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are required as a result of the consummation of the transactions contemplated
hereby, and (iii) such consents, approvals, orders or authorizations which if
not obtained, or registrations, declarations or filings which if not made, would
not materially adversely affect the ability of Acquisitions to consummate the
transactions contemplated hereby.
(f) OTHER MATTERS. Acquisitions has been formed for the sole
purpose of effecting the Merger and, except as contemplated by this Agreement,
Acquisitions has not conducted any business activities and does not have any
material liabilities or obligations.
ARTICLE IV
COVENANTS
SECTION 4.01 CONDUCT OF WESTFORD GROUP'S BUSINESS. Westford Group
covenants and agrees that, prior to the Effective Time, unless Bancinsurance
shall otherwise consent in writing or as otherwise expressly contemplated by
this Agreement:
(a) The Business shall be conducted only in, and neither of
the Companies shall take any action except in, the ordinary course of business
consistent with past practice and the Companies shall use their best efforts to
preserve intact its present business organization, keep available the services
of its current officers and employees, maintain its assets (other than those
permitted to be disposed of hereunder) in good repair and condition, maintain
its books of account and records in the usual, regular and ordinary manner, and
preserve its goodwill and ongoing business;
(b) The Companies shall not directly or indirectly do any of
the following: (i) sell, pledge, dispose of or encumber any property or assets
(including Intellectual Property Rights) of the Companies, except inventory and
immaterial assets in the ordinary course of business consistent with past
practice; (ii) amend or propose to amend its Articles of Incorporation or Code
of Regulations of either of the Companies; (iii) split, combine or reclassify
any outstanding shares of its capital stock, or declare, set aside or pay any
dividend payable in cash, stock, property or otherwise with respect to such
shares; (iv) redeem, purchase, acquire or offer to acquire any shares of its
capital stock; or (v) enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this subsection (b);
(c) Neither of the Companies shall (i) issue, sell, pledge or
dispose of, or agree to issue, sell, pledge or dispose of, any additional shares
of, or securities convertible or exchangeable for, or any options, warrants or
rights of any kind to acquire any shares of, its capital stock of any class or
other property or assets, or modify the terms or any outstanding options,
warrants or rights to acquire the Companies' capital stock; (ii) acquire (by
merger, consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or any material
amount of assets; (iii) incur or guarantee any indebtedness for borrowed money
other than in the ordinary course of business and consistent with past
practices, or refinance any such indebtedness or issue or sell any debt
securities; (iv)
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enter into or modify any material contract, lease, agreement or commitment, or
permit or perform any act that would cause a material breach of any such
contract, lease, agreement or commitment; (v) terminate, modify, assign, waive,
release or relinquish any material contract rights or amend any material rights
or claims; (vi) discharge or satisfy any material Claim or settle or compromise
any material claim, action, suit or proceeding pending or threatened against the
Companies or, if the Companies may be liable or obligated to provide
indemnification, against the Companies' directors or officers, before any court,
governmental agency or arbitrator; (vii) make any loans, advances or capital
contributions to or investments in, any other person, except as may be required
under agreements in effect and upon prior notice to Bancinsurance; (viii) alter
through merger, liquidation, reorganization, restructuring or in any other
manner the corporate structure or ownership of the Companies; or (ix) violate or
fail to perform, in any material respect, any obligation imposed upon the
Companies by any applicable laws, orders or decrees, ordinances, government
rules or regulations or conciliation agreements where such violation or failure
would have a Westford Material Adverse Effect;
(d) The Companies shall not grant any increase in the salary
or other compensation of its directors, officers or employees not otherwise
contemplated by Section 5.03(f), except, in the case of employees who are not
directors or executive officers of the Companies, reasonable salary increases in
the ordinary course of business consistent with past practice, or grant any
bonus to any employee or enter into any employment agreement or make any loan to
or enter into any material transaction of any other nature with any employee of
the Companies;
(e) The Companies shall not take any action to institute any
new severance or termination pay practices with respect to any directors,
officers or employees of the Companies or to increase the benefits payable under
its severance or termination pay practices;
(f) The Companies shall not adopt or amend, in any material
respect, any plan for the benefit or welfare of any directors, officers or
employees, except as contemplated hereby or as may be required by applicable law
or regulation; and
(g) Each of the Companies shall use its best efforts, to the
extent not prohibited by the foregoing provisions of this Section 4.01, to
maintain its relationships with its suppliers and customers, clients, and others
having business dealings with it, and if and as requested by Bancinsurance or
Acquisitions, (i) Westford Group shall use its best efforts to make reasonable
arrangements for representatives of Bancinsurance or Acquisitions to meet with
customers and suppliers of the Companies, and (ii) the Companies shall schedule,
and the management of the Companies shall participate in, meetings of
representatives of Bancinsurance or Acquisitions with employees of the
Companies.
SECTION 4.02 SHAREHOLDER APPROVAL; ETC. As soon as reasonably
practicable after execution of this Agreement, Westford Group shall call a
shareholders' meeting, to be held as soon as reasonably practicable for the
purpose of voting upon approval of this Agreement and file a Proxy Statement
with the SEC, and shall furnish all information concerning it and the holders of
its capital stock as Bancinsurance may reasonably request in connection with
such
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action. The Board of Directors of Westford Group shall recommend (subject to
compliance with their fiduciary duties as advised by counsel) to Westford
Group's shareholders the approval of this Agreement.
SECTION 4.03 ACCESS TO INFORMATION.
(a) Each of Bancinsurance and Westford Group shall, and shall
cause its respective subsidiaries, officers, directors, employees,
representatives, advisors and agents to, afford, from the date hereof to the
Effective Time, the officers, employees, representatives, advisors and agents of
the other party complete access at all reasonable times to its officers,
employees, agents, properties, books, records and workpapers, and shall furnish
each other party all financial, operating and other information and data as
Bancinsurance or Westford Group, through its officers, employees or agents, may
reasonably request and shall promptly furnish to the other monthly operating and
financial reports in such form as Bancinsurance or Westford Group shall
reasonably request.
(b) Westford Group, at least three business days prior to the
Effective Date, shall deliver to Bancinsurance a list setting forth the names
and locations of each bank or other financial institution at which Westford
Group has an account (giving the account numbers) or safe deposit box and the
names of all persons authorized to draw thereon or have access thereto, and the
names of all persons, if any, now holding powers of attorney or comparable
delegation of authority from Westford Group and a summary statement thereof.
(c) Each of Bancinsurance and Westford Group shall, and shall
cause its respective officers, directors, employees, representatives, advisors
and agents to, afford the officers, employees, representatives, advisors and
agents of the other party with access to such information concerning
Bancinsurance or Westford Group as may be necessary for each party to ascertain
the accuracy and completeness of the information supplied by Bancinsurance or
Westford Group.
(d) If this Agreement is terminated, each of the parties
hereto shall, and shall cause its officers, employees, representatives, advisors
and agents to, destroy or deliver to the other party all confidential documents,
work papers and other materials, and all copies thereof, obtained by it or on
its behalf from such other party as a result of this Agreement or in connection
herewith, whether so obtained before or after the execution and delivery hereof.
(e) Each of the parties hereto and its officers and employees
shall not disclose or use any information so obtained, except as required by
applicable law or legal process or by any applicable rules or regulations of a
national securities exchange or the NASD upon the advice of counsel, without the
prior written consent of the other party; PROVIDED that any such information may
be disclosed to a party's financial advisors, accountants, counsel and other
representatives, as may be appropriate or required in connection with the
transactions contemplated hereby, but only if such persons shall be specifically
informed by such party of the confidential nature of such information and agree
to comply with the restrictions contained herein. The agreements contained in
this Section 4.03(e) do not apply to information that (i) is
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or becomes generally available to the public other than as a result of a
disclosure by a receiving party or its representatives, (ii) was known to the
receiving party on a non-confidential basis prior to its receipt, (iii) becomes
available to a party on a non-confidential basis from a source not bound by any
duty of confidentiality to the other party or (iv) is independently developed by
a receiving party without reference to any confidential information.
(f) No investigation pursuant to this Section 4.03 shall
affect, add to, or subtract from any representations or warranties of the
parties hereto or the conditions to the obligations of the parties hereto to
effect the Merger.
SECTION 4.04 FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings; PROVIDED that the foregoing shall not require
Bancinsurance to agree to make, or to permit Westford Group to make, any
divestiture of a significant asset in order to obtain any waiver, consent or
approval.
SECTION 4.05 INQUIRIES AND NEGOTIATIONS. Neither Westford Group nor any
of its affiliates, directors, officers, employees, representatives, advisors or
agents, shall, directly or indirectly, encourage, solicit or initiate any
discussions, submissions of proposals or offers or negotiations with, or,
participate in any negotiations or discussions with, or provide any information
or data of any nature whatsoever to, or otherwise cooperate in any other way
with, or assist or participate in, facilitate or encourage any effort or attempt
by, any person, other than Bancinsurance and its affiliates, representatives and
agents, concerning any merger, consolidation, sale of substantial assets, sale
of shares of capital stock or other equity securities, recapitalization, debt
restructuring or similar transaction involving Westford Group or any division of
Westford Group (such transactions being hereinafter referred to as "ALTERNATIVE
TRANSACTIONS"). Westford Group shall immediately notify Bancinsurance if any
proposal, offer, inquiry or other contact is received by, any information is
requested from, or any discussions or negotiations are sought to be initiated or
continued with, Westford Group in respect of an Alternative Transaction, and
shall, in any such notice to Bancinsurance, indicate the identity of the offeror
and the terms and conditions of any proposals or offers or the nature of any
inquiries or contacts, and thereafter shall keep Bancinsurance informed of the
status and terms of any such proposals or offers and the status of any such
discussions or negotiations. Westford Group shall not release any third party
from, or waive any provision of, any confidentiality or standstill agreement to
which Westford Group is a party.
SECTION 4.06 NOTIFICATION OF CERTAIN MATTERS. Westford Group shall give
prompt notice to Bancinsurance and Acquisitions, and Bancinsurance and
Acquisitions shall give prompt notice to Westford Group, of (i) the occurrence,
or failure to occur, of any event that such party believes would be likely to
cause any of its representations or warranties contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time and (ii) any material failure of Westford Group,
Bancinsurance or
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Acquisitions, as the case may be, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that failure to
give such notice shall not constitute a waiver of any defense that may be
validly asserted.
SECTION 4.07 EMPLOYEE MATTERS. Except as otherwise expressly agreed to
by Bancinsurance or Acquisitions, Westford Group acknowledges and understands
that nothing in this Agreement shall be deemed to create any employment status
other than employment at will for any Westford Group employees. Employees who
continue as employees of the Surviving Corporation shall be entitled to
participate in all employee benefit plans maintained by Bancinsurance or the
Surviving Corporation for employees of the Surviving Corporation generally. It
being understood and agreed, however, that nothing in this Section 4.07 shall
require Bancinsurance (i) to provide or continue for the benefit of any
employees any Plan currently maintained by Westford Group, or (ii) to maintain
the organizational structure of the Business as in effect on the date hereof.
ARTICLE V
CONDITIONS TO THE MERGER
SECTION 5.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) this Agreement and the Merger shall have been approved and
adopted by the requisite vote of the shareholders of Westford Group;
(b) the conversion option in the Debenture shall have been
exercised by Acquisitions in full; and
(c) no preliminary or permanent injunction or other order,
decree or ruling issued by any court of competent jurisdiction nor any statute,
rule, regulation or order entered, promulgated or enacted by any governmental,
regulatory or administrative agency or authority shall be in effect that would
prevent the consummation of the Merger as contemplated hereby.
SECTION 5.02 CONDITIONS TO THE OBLIGATION OF WESTFORD GROUP TO EFFECT
THE MERGER. The obligation of Westford Group to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) Bancinsurance shall have performed and complied in all
material respects with all obligations and agreements required to be performed
and complied with by it under this Agreement at or prior to the Effective Time;
(b) the representations and warranties of Bancinsurance
contained in this Agreement that are qualified as to materiality shall be true
and correct and all such
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representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case, as of the date hereof and at and
as of the Effective Time as if made at and as of such date, except to the extent
any such representation or warranty is expressly made as of the date hereof or
as of a specified date prior to the date hereof, in which case such
representation or warranty shall have been true and correct as of such date; and
(c) Westford Group shall have received a certificate from the
Chief Executive Officer of Bancinsurance, dated as of the Effective Time, to the
effect that the conditions set forth in paragraphs (a) and (b) above have been
satisfied.
SECTION 5.03 CONDITIONS TO THE OBLIGATION OF BANCINSURANCE AND
ACQUISITIONS TO EFFECT THE MERGER. The obligation of Bancinsurance and
Acquisitions to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following additional conditions:
(a) Westford Group shall have performed and complied in all
material respects with all obligations and agreements required to be performed
and complied with by it under this Agreement at or prior to the Effective Time;
(b) the representations and warranties of Westford Group
contained in this Agreement that are qualified as to materiality shall be true
and correct and all such representations and warranties that are not so
qualified shall be true and correct in all material respects, in each case, as
of the date hereof and at and as of the Effective Time as if made at and as of
such date, except to the extent any such representation or warranty is expressly
made as of the date hereof or as of a specified date prior to the date hereof,
in which case such representation or warranty shall have been true and correct
as of such date;
(c) Bancinsurance shall have received a certificate from the
Chief Executive Officer and the Chief Financial Officer of Westford Group, dated
as of the Effective Time, to the effect that the conditions set forth in
paragraphs (a) and (b) above have been satisfied;
(d) Bancinsurance shall have received from Westford Group the
Financial Statements, in form and in substance reasonably satisfactory to
Bancinsurance;
(e) Bancinsurance shall have completed its financial due
diligence review of all the assets, liabilities, net worth, revenues, expenses,
profitability and financial condition of Westford Group. This condition shall be
deemed to have been satisfied on the close of business on the day which is 30
business days after the date of the receipt of the last of the Financial
Statements, unless, prior to such time, Bancinsurance has notified Westford
Group that it is not satisfied with the results of its financial due diligence
review because such review disclosed one or more conditions with respect to the
assets, liabilities, net worth, revenues, expenses, profitability or financial
condition of Westford Group which, taken as a whole, is materially different
than the same were previously represented to Bancinsurance. If Bancinsurance so
notifies Westford Group, Westford Group shall have an additional period of five
business days to permit it to cure the defect, if it is so curable, to the
reasonable satisfaction of Bancinsurance. If
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Westford Group cures such defect within such period and Bancinsurance
acknowledges its satisfaction in writing, this condition shall be deemed to have
been satisfied; and
(f) Westford Group shall have paid (i) all bonuses payable to
Westford Group's directors and officers that are accrued on Westford Group's
books and records immediately prior to the Effective Time and (ii) a
bonus/honorarium to certain of Westford Group's directors in an amount not to
exceed $25,000 in the aggregate.
ARTICLE VI
TERMINATION AND ABANDONMENT
SECTION 6.01 TERMINATION AND ABANDONMENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after approval by the shareholders of Westford Group:
(a) by mutual action of the Boards of Directors of
Bancinsurance and Westford Group;
(b) by Westford Group, if the conditions set forth in Sections
5.01 and 5.02 shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Bancinsurance and Acquisitions on
or before December 31, 1999; or
(c) by Bancinsurance or Acquisitions, if the conditions set
forth in Sections 5.01 and 5.03 shall not have been complied with or performed
and such noncompliance or nonperformance shall not have been cured or eliminated
(or by its nature cannot be cured or eliminated) by Westford Group on or before
December 31, 1999; or
(d) by Bancinsurance or Westford Group (i) if there has been a
material breach of a representation or warranty made by the other party the
effect of which is a Westford Material Adverse Effect or a Bancinsurance
Material Adverse Effect, as the case may be, or (ii) if there has been a breach
by the other party in any material respect of the covenants set forth in this
Agreement which by its nature cannot be cured or eliminated.
SECTION 6.02 EFFECT OF TERMINATION. In the event of the termination of
this Agreement and the abandonment of the Merger pursuant to Section 6.01, this
Agreement shall thereafter become void and have no effect, and no party hereto
shall have any liability to any other party hereto or its shareholders or
directors or officers in respect thereof, and each party shall be responsible
for its own expenses, except as follows: (i) the obligations imposed by Sections
4.03(d) and 4.03(e) hereof shall survive the termination, and (ii) nothing
herein shall relieve any party from liability for any willful breach hereof.
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ARTICLE VII
INDEMNIFICATION
(a) Westford Group agrees to indemnify Bancinsurance and
Acquisitions against, and agrees to hold each of them harmless from, any and all
losses, costs, claims, damages (including consequential damages), penalties and
expenses (including attorneys' fees) (the "LOSSES"), incurred or suffered by
them relating to or arising out of or in connection any material breach of or
any material inaccuracy in any representation or warranty made by Westford Group
in this Agreement or any document delivered by Westford Group at the Closing.
(b) Bancinsurance agrees to indemnify Westford Group against,
and agrees to hold it harmless from, any and all Losses, incurred or suffered by
it relating to or arising out of or in connection with any material breach of or
any material inaccuracy in any representation or warranty made by Bancinsurance
or Acquisitions in this Agreement or any document delivered by Bancinsurance or
Acquisitions at the Closing.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The
respective representations, warranties, obligations, covenants, and agreements
of the parties shall not survive the Effective Time.
SECTION 8.02 EXPENSES, ETC. Whether or not the transactions
contemplated by this Agreement are consummated, neither Westford Group, on the
one hand, and Bancinsurance and Acquisitions, on the other hand, shall have any
obligation to pay any of the fees and expenses of the other incident to the
negotiation, preparation and execution of this Agreement, including the fees and
expenses of counsel, accountants, investment bankers and other experts and
Bancinsurance shall pay all such fees and expenses incurred by Acquisitions.
Westford Group, on the one hand, and Bancinsurance and Acquisitions, on the
other hand, shall indemnify the other and hold it harmless from and against any
claims for finders' fees or brokerage commissions in relation to or in
connection with such transactions as a result of any agreement or understanding
between such indemnifying party and any third party.
SECTION 8.03 PUBLICITY; CONFIDENTIALITY. Westford Group and
Bancinsurance agree that this Agreement and the exchange of information pursuant
thereto is confidential and they will not disclose or issue any press release or
make any other public announcement concerning this Agreement or the transactions
contemplated hereby without the prior consent of the other party, except that
Westford Group or Bancinsurance may make such public disclosure that it believes
in good faith to be required by law or any applicable rules and regulations of a
national securities exchange or the NASD (in which event such party shall
consult with the other prior to making such disclosure).
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SECTION 8.04 EXECUTION IN COUNTERPARTS. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 8.05 NOTICES. All notices that are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or national
overnight courier service, transmitted by telecopy or mailed by registered or
certified mail, postage prepaid, and shall be deemed given upon receipt, as
follows:
If to Bancinsurance or Acquisitions to:
BANCINSURANCE CORPORATION
20 E. Broad St., 4th Floor
Columbus, OH 43215
Fax Number: 614-228-5419
Attention: Si Sokol
If to Westford Group, to:
WESTFORD GROUP, INC.
20 E. Broad St., 4th Floor
Columbus, OH 43215
Fax Number: 614-228-5419
Attention: Si Sokol
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 8.06 WAIVERS. Westford Group, on the one hand, and
Bancinsurance and Acquisitions, on the other hand, may, by written notice to the
other, (i) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement; (ii) waive any inaccuracies in
the representations or warranties of the other contained in this Agreement or in
any document delivered pursuant to this Agreement; (iii) waive compliance with
any of the conditions of the other contained in this Agreement; or (iv) waive
performance of any of the obligations of the other under this Agreement. Except
as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
SECTION 8.07 AMENDMENTS, SUPPLEMENTS, ETC. At any time, this Agreement
may be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of
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this Agreement, or to clarify the intention of the parties hereto, or to add to
or modify the covenants, terms or conditions hereof or to effect or facilitate
any governmental approval or acceptance of this Agreement or to effect or
facilitate the filing or recording of this Agreement or the consummation of any
of the transactions contemplated hereby. Any such instrument must be in writing
and signed by all of the parties hereto.
SECTION 8.08 ENTIRE AGREEMENT. This Agreement and its schedules and
exhibits, and the documents to be executed or delivered at the Effective Time in
connection herewith, constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof. No representation, warranty, promise, inducement or
statement of intention has been made by any party that is not embodied in this
Agreement or such other documents, and none of the parties shall be bound by, or
be liable for, any alleged representation, warranty, promise, inducement or
statement of intention not embodied herein or therein. As used herein, the "best
knowledge" or "awareness" as to Westford Group shall refer to the actual
knowledge of each director and executive officer of Westford Group after due
inquiry.
SECTION 8.09 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without regard to
conflict of laws principles.
SECTION 8.10 BINDING EFFECT, BENEFITS. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 8.11 ASSIGNABILITY. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
SECTION 8.12 SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
SECTION 8.13 VARIATION AND AMENDMENT. This Agreement may be varied or
amended at any time before or after the approval and adoption of this Agreement
by the shareholders of Westford Group by action of the respective Boards of
Directors of Westford Group, Bancinsurance and Acquisitions, without action by
the shareholders thereof, provided that after approval and adoption of this
Agreement by Westford Group's shareholders no such variance or amendment shall,
without consent of such shareholders, reduce the consideration that the holders
of the capital stock of Westford Group shall be entitled to receive upon the
Effective Time pursuant to Section 2.01 hereof.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
BANCINSURANCE CORPORATION WESTFORD GROUP, INC.
By: /S/ SI SOKOL By: /S/ SI SOKOL
------------------------------- --------------------------------------
Title: CHAIRMAN Title: PRESIDENT
---------------------------- ------------------------------------
BANCINSURANCE ACQUISITIONS, INC.
By: /S/ SI SOKOL
-------------------------------
Title: PRESIDENT
----------------------------
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Appendix B
THE HARMAN GROUP
CORPORATE FINANCE
99 East Granville Rd.
Columbus, Ohio 43085
August 2, 1999
Board of Directors
Westford Group, Inc.
20 East Broad Street
Columbus, Ohio 43215
Members of the Board of Directors:
You have requested the opinion of The Harman Group Corporate Finance,
Inc. ("The Harman Group") as to the fairness, from a financial point of view, to
the common shareholders (the "Shareholders") of Westford Group, Inc. ("Westford
Group" or the "Company"), of the consideration to be received by the
Shareholders of Westford Group Common Stock, without par value (the "Common
Stock"), in the merger transaction (the "Merger") as indicated in the Agreement
and Plan of Merger (the "Agreement"), draft dated July 19, 1998 among
Bancinsurance Corporation, an Ohio corporation ("Bancinsurance"), Bancinsurance
Acquisitions, Inc., an Ohio corporation and a wholly owned subsidiary of
Bancinsurance ("Acquisitions"), Westford Group, Inc., an Ohio corporation
("Westford Group").
The Agreement states that each share of Westford Common Stock issued
and outstanding immediately prior to the Effective Time (as defined in the
Agreement) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive $0.70 in cash. The
Agreement states that Common Stock held in the Company's treasury will be
canceled, retired and shall cease to exist, without any conversion thereof.
The Harman Group has acted as financial advisor to the Company's Board
of Directors in connection with this transaction, for the purpose of rendering
an opinion with respect to the fairness, from a financial point of view, of the
consideration, to be paid in cash to the Shareholders, pursuant to the
Agreement. In this capacity, we have among other things, (i) reviewed the
Agreement from a financial point of view, (ii) reviewed various current and
historical financial statements and information of the Company, provided by the
Company,
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Board of Directors
Westford Group, Incorporated
August 2, 1999
Page 2
including audited financial statements for the last six years, latest available
unaudited quarterly statements, and certain other business and financial
information supplied to us by the Company with respect to the Company's
operating performance and condition, (iii) conducted discussions with the senior
management of the Company regarding its assets and operations, business plans
and strategies, past and current financial performance, financial condition and
future prospects, (iv) reviewed forecasts for the Company prepared by the
Company's management, (v) considered the capitalization and financial condition
of the Company, (vi) considered the discounted cash flow value of the Company,
(vii) analyzed available information concerning other companies whose business
or businesses it believed to be generally comparable, in whole or in part, to
that of the Company, and, (viii) reviewed such other materials and conducted
such other investigations as we deemed appropriate.
In our review and analysis, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information which the Company has provided to us or which is publicly
available. We have not made or obtained any independent evaluation or appraisal
of the properties, facilities, or assets of the Company. We have assumed that
the forecasts prepared by management reflected the best currently available
estimate and judgement of management as to the expected future financial
performance of the Company. We have relied upon the fact that the Company and
Westford Group's Board of Directors are advised by legal counsel, and we have
accordingly assumed, without independent verification, that the Agreement, all
other communications to the Shareholders regarding the Agreement and Per Share
Purchase Price, and all public filings, are and will be accurate and complete.
As provided for in our engagement letter dated May 6, 1999, our
engagement is limited to providing an opinion as to whether the Per Share
Purchase Price of $0.70 to be paid for the outstanding shares of the Common
Stock is fair, from a financial point of view, to the holders of such Common
Stock. We have not been retained to solicit other entities for purposes of a
business combination with the Company, provide advice with respect to, and have
not considered, any other matter, including without limitation, the legality of
the Agreement, the timing, structure, negotiation or disclosure of the
Agreement; the entire fairness of the transaction; or the satisfaction of the
duties owed by the Company's Board of Directors to the Shareholders.
Our opinion is based solely upon the information set forth herein as
reviewed by us and circumstances, including economic, market and financial
conditions, existing as of the date hereof. Events occurring after the date
hereof could materially affect the
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Board of Directors
Westford Group, Incorporated
August 2, 1999
Page 3
assumptions used both in preparing this opinion and in the documents reviewed by
us. We have not undertaken to reaffirm or revise this opinion or otherwise
comment upon any events occurring after the date hereof.
Subject to the foregoing and based on our analysis and upon such other
factors as we deem relevant, including our assessment of general economic and
market conditions, it is our opinion that as of the date hereof, the proposed
Per Share Purchase Price of $0.70, to be paid in cash, is fair to the
Shareholders, from a financial point of view.
Yours truly,
The Harman Group
Corporate Finance, Inc.
Howard P. Zitsman
President
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APPENDIX C
OHIO REVISED CODE
TITLE XVII. CORPORATIONS--PARTNERSHIPS
CHAPTER 1701. GENERAL CORPORATION LAW
MERGER AND CONSOLIDATION
Section 1701.85. Relief For Dissenting Shareholders; Qualifications;
Procedures.---(A)(1) A shareholder of a domestic corporation is entitled to
relief as a dissenting shareholder in respect of the proposals described in
sections 1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance
with this section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service
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of the demand by the dissenting shareholder, may file a complaint in the court
of common pleas of the county in which the principal office of the corporation
that issued the shares is located or was located when the proposal was adopted
by the shareholders of the corporation, or, if the proposal was not required to
be submitted to the shareholders, was approved by the directors. Other
dissenting shareholders, within that three-month period, may join as plaintiffs
or may be joined as defendants in any such proceeding, and any two or more such
proceedings may be consolidated. The complaint shall contain a brief statement
of the facts, including the vote and the facts entitling the dissenting
shareholder to the relief demanded. No answer to such a complaint is required.
Upon the filing of such a complaint, the court, on motion of the petitioner,
shall enter an order fixing a date for a hearing on the complaint and requiring
that a copy of the complaint and a notice of the filing and of the date for
hearing be given to the respondent or defendant in the manner in which summons
is required to be served or substituted service is required to be made in other
cases. On the day fixed for the hearing on the complaint or any adjournment of
it, the court shall determine from the complaint and from such evidence as is
submitted by either party whether the dissenting shareholder is entitled to be
paid the fair cash value of any shares and, if so, the number and class of such
shares. If the court finds that the dissenting shareholder is so entitled, the
court may appoint one or more persons as appraisers to receive evidence and to
recommend a decision on the amount of the fair cash value. The appraisers have
such power and authority as is specified in the order of their appointment. The
court thereupon shall make a finding as to the fair cash value of a share and
shall render judgment against the corporation for the payment of it, with
interest at such rate and from such date as the court considers equitable. The
costs of the proceeding, including reasonable compensation to the appraisers to
be fixed by the court, shall be assessed or apportioned as the court considers
equitable. The proceeding is a special proceeding and final orders in it may be
vacated, modified, or reversed on appeal pursuant to the Rules of Appellate
Procedure and, to the extent not in conflict with those rules, Chapter 2505. of
the Revised Code. If, during the pendency of any proceeding instituted under
this section, a suit or proceeding is or has been instituted to enjoin or
otherwise to prevent the carrying out of the action as to which the shareholder
has dissented, the proceeding instituted under this section shall be stayed
until the final determination of the other suit or proceeding. Unless any
provision in division (D) of this section is applicable, the fair cash value of
the shares that is agreed upon by the parties or fixed under this section shall
be paid within thirty days after the date of final determination of such value
under this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of
the corporation, fair cash value as to those shareholders shall be determined as
of the day prior to the day on which the vote by the shareholders was taken and,
in the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and to pay
the fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section, unless
the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally enjoined or
prevented from carrying it out, or the shareholders rescind their adoption of
the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent of
the corporation by its directors;
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(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder nor
the corporation has filed or joined in a complaint under division (B) of this
section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
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COMMON STOCK
PROXY - WESTFORD GROUP, INC.
The undersigned stockholder of Westford Group, Inc. (the "Company") hereby
appoints Si Sokol and Robert J. Tannous, or either one of them, as attorneys and
proxies with full power of substitution to vote all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders of the Company to be held at the offices of Porter, Wright, Morris
& Arthur LLP, 41 S. High St., Columbus, Ohio, on ________________, August __,
1999, at 9:30 a.m., local time, as follows:
1. TO APPROVE AND ADOPT AN AGREEMENT AND PLAN OF MERGER AMONG BANCINSURANCE
CORPORATION ("BANCINSURANCE"), BANCINSURANCE ACQUISITIONS, INC.
("ACQUISITIONS") AND THE COMPANY PROVIDING FOR THE MERGER OF THE COMPANY
INTO ACQUISITIONS, UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH
THEREIN (THE "MERGER"), PURSUANT TO WHICH THE COMPANY'S SEPARATE CORPORATE
EXISTENCE SHALL CEASE AND ACQUISITIONS, AS THE SURVIVING CORPORATION OF THE
MERGER, WILL REMAIN A WHOLLY-OWNED SUBSIDIARY OF BANCINSURANCE AND EACH
HOLDER OF SHARES OF THE COMPANY'S COMMON STOCK, WITHOUT PAR VALUE,
OUTSTANDING AT THE TIME OF EFFECTIVENESS OF THE MERGER, EXCEPT FOR SHARES
OWNED BY THE COMPANY, BANCINSURANCE, ACQUISITIONS OR SHAREHOLDERS
EXERCISING THEIR APPRAISAL RIGHTS, WILL BECOME ENTITLED TO RECEIVE $0.70 IN
CASH PER SHARE.
|_| FOR
|_| AGAINST
|_| ABSTAIN
2. IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
The undersigned hereby acknowledges receipt of the Notice of the Special
Meeting of Shareholders, dated ______ __, 2000 and the Proxy Statement furnished
therewith. Any proxy heretofore given to vote said shares hereby is revoked.
PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IN THE ENCLOSED ENVELOPE.
Dated:_____________________, 2000
---------------------------------
(Signature)
---------------------------------
(Signature)
Signature(s) must agree with the
name(s) printed on this Proxy. If
shares are registered in two
names, both stockholders should
sign this Proxy. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
