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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 25, 1998
-----------------
Penn Treaty American Corporation
--------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 0-15972 23-1664166
- ------------ ------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3440 Lehigh Street, Allentown, Pennsylvania 18103
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 965-2222
--------------
Not Applicable
--------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On December 2, 1998, the Registrant announced that it had entered
into a definitive agreement to purchase all of the outstanding capital stock
of United Insurance Group ("UIG") of South Lyon, Michigan. A press release
announcing the acquisition and issued by the Registrant on December 2, 1998,
is filed as Exhibit 99.1 hereto and incorporated by reference herein.
In connection with the acquisition of UIG, the Registrant entered
into a Stock Purchase Agreement with Patrick Patterson dated as of November
25, 1998 (the "Patterson Stock Purchase Agreement"), and a Stock Purchase
Agreement with Gregory Thaens dated as of November 25, 1998 (the "Thaens
Stock Purchase Agreement") (collectively, the "Stock Purchase Agreements").
Pursuant to the Stock Purchase Agreements, the Registrant shall purchase all
of the outstanding capital stock of UIG, effective as of January 1, 1999. The
Patterson Stock Purchase Agreement and the Thaens Stock Purchase Agreement
are filed as Exhibit 99.2 and 99.3 hereto, respectively.
Item 7. Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
99.1 Press Release dated December 2, 1998
99.2 Stock Purchase Agreement between Patrick Patterson and Penn
Treaty American Corporation dated as of November 25, 1998
99.3 Stock Purchase Agreement between Gregory D. Thaens and Penn
Treaty American Corporation dated as of November 25, 1998
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PENN TREATY AMERICAN CORPORATION
Date: December 7, 1998 By:
-------------------------------------
Cameron B. Waite
Chief Financial Officer
EXHIBIT INDEX
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<CAPTION>
Exhibit Number Description
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<S> <C>
99.1 Press Release dated December 2, 1998
99.2 Stock Purchase Agreement between Patrick Patterson and Penn Treaty American
Corporation dated as of November 25, 1998
99.3 Stock Purchase Agreement between Gregory D. Thaens and Penn Treaty
American Corporation dated as of November 25, 1998
</TABLE>
<PAGE>
Exhibit 99.1
FOR IMMEDIATE RELEASE CONTACT: CAMERON WAITE
FOR: PENN TREATY AMERICAN CORP. 1-800-222-3469
PENN TREATY AMERICAN CORPORATION
COMPLETES DEFINITIVE PURCHASE AGREEMENT
ALLENTOWN, PA - December 2, 1998 - Penn Treaty American Corporation (NASDAQ -
PTAC) today announced its completion of a definitive agreement to purchase
United Insurance Group (UIG) of South Lyon, Michigan.
PTAC will purchase UIG for an undisclosed amount, effective January 1, 1999.
UIG, a private consortium of insurance agencies, is a leading sales force of
long-term care insurance products, licensed with a variety of insurers in all 50
states. In 1997, UIG wrote approximately $42 million of premium, yielding
pre-tax earnings before owner compensation of approximately $2.9 million. PTAC
expects the acquisition of UIG to be accretive to diluted earnings per share
after goodwill amortization and foregone interest income. The acquisition will
be accounted for as a purchase.
Penn Treaty American Corporation, through its wholly owned direct and indirect
subsidiaries, Penn Treaty Network America Insurance Company, American Network
Insurance Company, American Independent Network Insurance Company of New York,
and Senior Financial Consultants Company, is primarily engaged in the
underwriting, marketing, and sale of individual fixed, defined benefit, accident
and health insurance products principally covering long-term nursing home care
and home health care. The Company is licensed to conduct business in 50 states
and the District of Columbia.
Certain statements made by the Company may be considered forward-looking within
the meaning of the private securities litigation reform act of 1995. Although
the Company believes that its expectations are based on reasonable assumptions
within the bounds of its knowledge of its business and operations, there can be
no assurance that actual results of the Company's operations will not differ
materially from its expectations. Factors which could cause actual results to
differ from expectations include, among others, the adequacy of the Company's
loss reserves, the Company's ability to qualify new insurance products for sale
in the states in which it is licensed and the acceptance of such products, the
Company's ability to comply with government regulations, the ability of senior
citizens to purchase the Company's products in light of the increasing costs of
health care, and the Company's ability to expand its network of productive
independent agents.
<PAGE>
Exhibit 99.2
STOCK PURCHASE AGREEMENT
BETWEEN
PATRICK PATTERSON
AND
PENN TREATY AMERICAN CORPORATION
Dated as of November 25th, 1998
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TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Definitions..............................................................................................1
2. Purchase and Sale of Seller's Company Shares.............................................................5
a. Basic Transaction......................................................................5
b. Purchase Price.........................................................................5
e. Deliveries at the Closing..............................................................6
3. Representations and Warranties Concerning the Transaction................................................6
a. Representations and Warranties of the Seller...........................................6
b. Representations and Warranties of the Buyer............................................7
4. Representations and Warranties Concerning the Company and Its Subsidiaries...............................8
a. Organization, Qualification, and Corporate Power.......................................8
b. Capitalization.........................................................................9
c. Noncontravention.......................................................................9
d. Brokers' Fees..........................................................................9
e. Title to Assets........................................................................9
f. Subsidiaries...........................................................................9
g. Financial Statements..................................................................10
h. Events Subsequent to Most Recent Fiscal Year End......................................10
i. Undisclosed Liabilities...............................................................10
j. Legal Compliance......................................................................10
k. Tax Matters...........................................................................11
l. Real Property.........................................................................12
m. Intellectual Property.................................................................13
n. Tangible Assets.......................................................................16
o. Contracts.............................................................................16
p. Notes and Accounts Receivable.........................................................17
q. Powers of Attorney....................................................................17
r. Insurance.............................................................................17
s. Litigation............................................................................18
t. Employees.............................................................................18
u. Employee Benefits.....................................................................19
v. Guaranties............................................................................21
w. Environment, Health, and Safety.......................................................21
x. Certain Business Relationships With the Company and Its Subsidiaries..................22
y. Disclosure............................................................................22
5. Pre-Closing Covenants...................................................................................22
a. General...............................................................................22
b. Notices and Consents..................................................................22
c. Operation of Business.................................................................22
d. Preservation of Business..............................................................23
e. Full Access...........................................................................23
</TABLE>
<PAGE>
<TABLE>
<S> <C>
f. Notice of Developments................................................................23
g. Exclusivity...........................................................................23
6. Post-Closing Covenants..................................................................................23
a. General...............................................................................23
b. Litigation Support....................................................................24
c. Transition............................................................................24
d. Confidentiality.......................................................................24
7. Conditions to Obligation to Close.......................................................................25
a. Conditions to Obligation of the Buyer.................................................25
b. Conditions to Obligation of the Seller................................................27
8. Remedies for Breaches of This Agreement.................................................................28
a. Survival of Representations and Warranties............................................28
b. Indemnification Provisions for Benefit of the Buyer...................................28
c. Indemnification Provisions for Benefit of the Seller..................................29
d. Matters Involving Third Parties.......................................................29
e. Determination of Adverse Consequences.................................................30
g. Other Indemnification Provisions......................................................31
9. Termination.............................................................................................31
a. Termination of Agreement..............................................................31
b. Effect of Termination.................................................................32
10. Miscellaneous...........................................................................................32
a. Press Releases and Public Announcements...............................................32
b. No Third Party Beneficiaries..........................................................32
c. Entire Agreement......................................................................32
d. Succession and Assignment.............................................................32
e. Counterparts..........................................................................32
f. Headings..............................................................................32
g. Notices...............................................................................33
h. Governing Law.........................................................................33
i. Amendments and Waivers................................................................33
j. Severability..........................................................................34
k. Expenses..............................................................................34
l. Construction..........................................................................34
m. Incorporation of Exhibits, Annexes, and Schedules.....................................34
n. Specific Performance..................................................................34
o. Submission to Jurisdiction............................................................34
</TABLE>
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EXHIBITS
Exhibit A - Form of Buyer Note
Exhibit B - Most Recent Financial Statements
Exhibit C - Form of Opinion of Counsel to the Seller
Exhibit D - Form of Employment Agreement
Exhibit E - Form of Opinion of Counsel to the Buyer
Exhibit F - Form of Pledge Agreement
ANNEXES
Annex I - Exceptions to the Seller's Representations and Warranties Concerning
the Transaction
Annex II - Exceptions to the Buyer's Representations and Warranties Concerning
the Transaction
Disclosure Schedule - Exceptions to Representations and Warranties Concerning
the Company and Its Subsidiaries
iii
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STOCK PURCHASE AGREEMENT
Agreement entered into as of November 25th, 1998, by and
----
between PENN TREATY AMERICAN CORPORATION, a Pennsylvania corporation (the
"Buyer"), and PATRICK PATTERSON, an individual (the "Seller"). The Buyer and the
Seller are referred to together herein as the "Parties."
The Seller owns fifty percent (50%) of the shares of
outstanding capital stock of the Company.
This Agreement contemplates a transaction in which the Buyer
will purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of United Insurance Group Agency, Inc., a Michigan
corporation (the "Company") owned by the Seller in return for cash and the Buyer
Note.
Now, therefore, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation
D under the Securities Act.
"Adjusted Balance Sheet" has the meaning set forth in Section
2(c) below.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the
meaning of Code Section 1504 or any similar group defined under a similar
provision of state, local, or foreign law.
"Applicable Rate" means the corporate base rate of interest
publicly announced from time to time by First Union National Bank.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Note" has the meaning set forth in Section 2(b) below.
"Closing" has the meaning set forth in Section 2(d) below.
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"Closing Date" has the meaning set forth in Section 2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Share" means any share of the Common Stock, par value
$1.00 per share, of the Company.
- -----
"Confidential Information" means any information concerning
the businesses and affairs of the Company and its Subsidiaries that is not
already generally available to the public.
"Controlled Group of Corporations" has the meaning set forth
in Code Section 1563.
"Deferred Intercompany Transaction" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
"Disclosure Schedule" has the meaning set forth in Section 4
below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Extremely Hazardous Substance" has the meaning set forth in
Section 302 of the Emergency Planning and Community Right-to-Know Act of 1986,
as amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
2
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"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Indemnified Party" has the meaning set forth in Section 8(d)
below.
"Indemnifying Party" has the meaning set forth in Section 8(d)
below.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable
investigation.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth
in Section 4(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in
Section 4(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
3
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"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Pledge Agreement" means the Pledge and Security Agreement in
the form of Exhibit F hereto pursuant to which the Buyer will pledge the Company
Shares to the Seller as security for the Buyer's payment obligations with
respect to the Buyer Note.
"Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(b)
below.
"Reportable Event" has the meaning set forth in ERISA Section
4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
----------
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Seller Obligations" has the meaning set forth in Section 6(e)
below.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
"Target Capital and Surplus" has the meaning set forth in
Section 2(c) below.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
4
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"Thaens Purchase Agreement" has the meaning set forth in
Section 7(a) below.
"Third Party Claim" has the meaning set forth in Section 8(d)
below.
2. Purchase and Sale of Seller's Company Shares.
a. Basic Transaction. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from the
Seller, and the Seller agrees to sell to the Buyer, all of his
Company Shares for the consideration specified below in this
Section 2.
b. Purchase Price. Subject to the terms and conditions of this
Agreement (including but not limited to Section 2(c) below),
and as consideration for the sale of the Seller's Company
Shares to the buyer, the Buyer agrees to pay to the Seller at
the Closing $9,250,000 (the "Purchase Price") by delivery of
(i) its promissory note (the "Buyer Note") in the form of
Exhibit A attached hereto in a principal amount equal to
$8,222,222 and (ii) cash for the balance of the Purchase Price
payable by wire transfer or delivery of other immediately
available funds.
c. Adjustments to the Purchase Price. Prior to the Closing, the
Seller shall cause the Company to prepare, or cause Follmer,
Rudzewicz and Company of South Lyon, Michigan, to prepare (in
either case with the assistance and participation of Buyer),
in substantial accordance with GAAP, a condensed balance sheet
of the Company as of the close of business on November 27,
1998, which balance sheet shall consist of the Company's
fiscal-year end balance sheet as of September 30, 1998, as
reviewed by Follmer, Rudzewicz and Company, with such material
adjustments thereto as shall be mutually agreed by the Buyer
and the Seller (the "Adjusted Balance Sheet"). The Parties
agree that an adjustment to the Purchase Price will be made if
the capital and surplus of the Company reflected on the
Adjusted Balance Sheet is greater or less than Five Hundred
Thousand Dollars ($500,000) (the "Target Capital and
Surplus"). If the Target Capital and Surplus exceeds the
capital and surplus of the Company reflected on the Adjusted
Balance Sheet, the Purchase Price shall be decreased on a
dollar for dollar basis by one-half of the amount of the
excess. Similarly, if the capital and surplus of the Company
reflected on the Adjusted Balance Sheet exceeds the Target
Capital and Surplus, the Purchase Price shall be increased on
a dollar for dollar basis by the one-half of amount of the
excess.
d. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices
of the Buyer in Allentown, Pennsylvania commencing at 9:00
a.m. local time on the business day following the satisfaction
or waiver of all conditions to the obligations of the Parties
to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will
take at the Closing itself) or such other date as the Buyer
and the Seller may mutually determine (the "Closing Date");
provided, however, that the Closing shall be deemed to have
-------- -------
occurred at 12:01 a.m. on January 1, 1999.
e. Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments,
and documents referred to in Section 7(a) below, (ii) the
Buyer
5
<PAGE>
will deliver to the Seller the various certificates,
instruments, and documents referred to in Section 7(b) below,
(iii) the Seller will deliver to the Buyer stock certificates
representing all of his Company Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (iv)
the Buyer will deliver to the Seller the consideration
specified in Section 2(b) above.
3. Representations and Warranties Concerning the Transaction.
a. Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements
contained in this Section 3(a) are correct and complete as of
the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to himself, except
as set forth in Annex I attached hereto.
i. Authorization of Transaction. The Seller has full
power and authority to execute and deliver this
Agreement and to perform his obligations hereunder.
This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in
accordance with its terms and conditions. The Seller
need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any
government or governmental agency in order to
consummate the transactions contemplated by this
Agreement.
ii. Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, will (A)
violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental
agency, or court to which the Seller is subject or
(B) conflict with, result in a breach of, constitute
a default under, result in the acceleration of,
create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller
is a party or by which he is bound or to which any of
his assets is subject.
iii. Brokers' Fees. The Seller has no Liability or
obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
iv. Investment. The Seller (A) understands that the Buyer
Note has not been, and will not be, registered under
the Securities Act, or under any state securities
laws, and is being offered and sold in reliance upon
federal and state exemptions for transactions not
involving any public offering, (B) is acquiring the
Buyer Note solely for his own account for investment
purposes, and not with a view to the distribution
thereof, (C) is a sophisticated investor with
knowledge and experience in business and financial
matters, (D) has received certain information
concerning the Buyer and has had the opportunity to
obtain additional information as desired in order to
evaluate the merits and the risks inherent in
6
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holding the Buyer Note, (E) is able to bear the
economic risk and lack of liquidity inherent in
holding the Buyer Note, and (F) is an Accredited
Investor for the reasons set forth on Annex I.
v. Company Shares. The Seller holds of record and owns
beneficially the number of Company Shares set forth
next to his name in Section 4(b) of the Disclosure
Schedule, free and clear of any restrictions on
transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and
demands. The Seller is not a party to any option,
warrant, purchase right, or other contract or
commitment that could require the Seller to sell,
transfer, or otherwise dispose of any capital stock
of the Company (other than this Agreement). The
Seller is not a party to any voting trust, proxy, or
other agreement or understanding with respect to the
voting of any capital stock of the Company.
b. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller that the statements
contained in this Section 3(b) are correct and complete as of
the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)), except as set forth in Annex II
attached hereto.
i. Organization of the Buyer. The Buyer is a corporation
duly incorporated and validly subsisting under the
laws of the Commonwealth of Pennsylvania.
ii. Authorization of Transaction. The Buyer has full
power and authority (including full corporate power
and authority) to execute and deliver this Agreement
and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance
with its terms and conditions. The Buyer need not
give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any
government or governmental agency in order to
consummate the transactions contemplated by this
Agreement.
iii. Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, will (A)
violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental
agency, or court to which the Buyer is subject or any
provision of its charter or bylaws or (B) conflict
with, result in a breach of, constitute a default
under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which
it is bound or to which any of its assets is subject.
iv. Brokers' Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the
transactions
7
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contemplated by this Agreement for which the Seller
could become liable or obligated.
v. Investment. The Buyer is not acquiring the Seller's
Company Shares with a view to or for sale in
connection with any distribution thereof within the
meaning of the Securities Act.
4. Representations and Warranties Concerning the Company and Its
Subsidiaries. The Seller represents and warrants to the Buyer that the
statements contained in this Section 4 are correct and complete as of
the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4),
except as set forth in the disclosure schedule delivered by the Seller
to the Buyer on the date hereof and initialed by the Parties (the
"Disclosure Schedule"). Nothing in the Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. The Seller will indicate any
item required on the Disclosure Schedule (except with respect to
Section 4(a)) which the Seller warrants to be immaterial in its
financial impact, by "N/M." In no event will the Seller withhold any
requested document, regardless of materiality, if specifically
requested by the Buyer as part of its due diligence process. The
Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 4.
a. Organization, Qualification, and Corporate Power. Each of the
Company and its Subsidiaries is a corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Each of the Company and its
Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such
qualification is required. Each of the Company and its
Subsidiaries has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and in which it
presently proposes to engage and to own and use the properties
owned and used by it. Section 4(a) of the Disclosure Schedule
lists the directors and officers of each of the Company and
its Subsidiaries. The Seller has delivered to the Buyer
correct and complete copies of the charter and bylaws of each
of the Company and its Subsidiaries (as amended to date). The
minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of
the board of directors), the stock certificate books, and the
stock record books of each of the Company and its Subsidiaries
are correct and complete. None of the Company or its
Subsidiaries is in default under or in violation of any
provision of its charter or bylaws.
b. Capitalization. The entire authorized capital stock of the
Company consists of 50,000 Company Shares, of which 2,000
------ -----
Company Shares are issued and outstanding and no Company
Shares are held in treasury. All of the issued and outstanding
Company Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the
Persons set forth in Section 4(b) of the Disclosure Schedule.
There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could
require the Company to issue, sell, or otherwise cause to
become outstanding any of its capital
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stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar
rights with respect to the Company. There are no voting
trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of the Company.
c. Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any of the
Company or its Subsidiaries is subject or any provision of the
charter or bylaws of any of the Company or its Subsidiaries or
(ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which any of the
Company or its Subsidiaries is a party or by which it is bound
or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets).
None of the Company or its Subsidiaries is required to give
any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
d. Brokers' Fees. None of the Company or its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
e. Title to Assets. The Company and its Subsidiaries have good
and marketable title to, or a valid leasehold interest in, the
properties and assets used by them, located on their premises,
or shown on the Most Recent Balance Sheet or acquired after
the date thereof, free and clear of all Security Interests,
except for properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance
Sheet.
f. Subsidiaries. Section 4(f) of the Disclosure Schedule sets
forth for each Subsidiary of the Company (i) its name and
jurisdiction of incorporation, (ii) the number of shares of
authorized capital stock of each class of its capital stock,
(iii) the number of issued and outstanding shares of each
class of its capital stock, the names of the holders thereof,
and the number of shares held by each such holder, and (iv)
the number of shares of its capital stock held in treasury.
All of the issued and outstanding shares of capital stock of
each Subsidiary of the Company have been duly authorized and
are validly issued, fully paid, and nonassessable. The Company
holds of record and owns beneficially all of the outstanding
shares of each Subsidiary of the Company, free and clear of
any restrictions on transfer (other than restrictions under
the Securities Act and state securities laws), Taxes, Security
Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. There are no
outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require any of the
Company or its Subsidiaries to sell, transfer, or otherwise
dispose of any capital stock of any of its Subsidiaries or
that could require any Subsidiary of the Company to issue,
sell, or otherwise cause to become
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outstanding any of its own capital stock. There are no
outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any
Subsidiary of the Company. There are no voting trusts,
proxies, or other agreements or understandings with respect to
the voting of any capital stock of any Subsidiary of the
Company. None of the Company or its Subsidiaries controls
directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust, or other
business association which is not a Subsidiary of the Company.
g. Financial Statements. Attached hereto as Exhibit B are the
following financial statements (the "Most Recent Financial
Statements"): reviewed consolidated and unaudited
consolidating balance sheets and statements of income, changes
in stockholders' equity, cash flow, and accompanying notes
thereto as of and for the fiscal year ended September 30, 1998
(the "Most Recent Fiscal Year End") for the Company and its
Subsidiaries.
h. Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any
undisclosed material adverse change (deemed to be in excess of
$100,000) in the business, financial condition, operations,
results of operations, or future prospects of any of the
Company and its Subsidiaries. There has not been any other
material occurrence, event, incident, action, failure to act,
or transaction outside the Ordinary Course of Business
involving any of the Company or its Subsidiaries.
i. Undisclosed Liabilities. None of the Company or its
Subsidiaries has any Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any
of them giving rise to any Liability), except for (i)
Liabilities set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) and (ii) Liabilities
which have arisen after the Most Recent Fiscal Year End in the
Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused
by any breach of contract, breach of warranty, tort,
infringement, or violation of law.
j. Legal Compliance. Each of the Company, its Subsidiaries, and
their respective predecessors and Affiliates has complied with
all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
k. Tax Matters.
i. Each of the Company and its Subsidiaries has filed
all Tax Returns that it was required to file. All
such Tax Returns were correct and complete in all
respects. All Taxes owed by any of the Company and
its Subsidiaries (whether or not shown on any Tax
Return) have been paid. None of the Company or its
Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax
Return. No claim has ever been made by an authority
in a jurisdiction where any of the Company or its
Subsidiaries does not file Tax
10
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Returns that it is or may be subject to taxation by
that jurisdiction. There are no Security Interests on
any of the assets of any of the Company and its
Subsidiaries that arose in connection with any
failure (or alleged failure) to pay any Tax.
ii. Each of the Company and its Subsidiaries has withheld
and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any
employee, independent contractor, creditor,
stockholder, or other third party.
iii. Neither the Seller nor any director or officer (or
employee responsible for Tax matters) of any of the
Company or its Subsidiaries expects any authority to
assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of any of the
Company and its Subsidiaries either (A) claimed or
raised by any authority in writing or (B) as to which
the Seller or any of the directors or officers (or
employees responsible for Tax matters) of the Company
and its Subsidiaries has Knowledge based upon
personal contact with any agent of such authority.
Section 4(k) of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns
filed with respect to any of the Company and its
Subsidiaries for taxable periods ended on or after
September 30, 1997, indicates those Tax Returns that
have been audited, and indicates those Tax Returns
that currently are the subject of audit. The Seller
has delivered or made available to the Buyer correct
and complete copies of all federal income Tax
Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of
the Company and its Subsidiaries since September 30,
1995.
iv. None of the Company or its Subsidiaries has waived
any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax
assessment or deficiency.
v. None of the Company or its Subsidiaries has filed a
consent under Code Section 341(f) concerning
collapsible corporations. None of the Company or its
Subsidiaries has made any payments, is obligated to
make any payments, or is a party to any agreement
that under certain circumstances could obligate it to
make any payments that will not be deductible under
Code Section 280G. None of the Company or its
Subsidiaries has been a United States real property
holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). Each of
the Company and its Subsidiaries has disclosed on its
federal income Tax Returns all positions taken
therein that could give rise to a substantial
understatement of federal income Tax within the
meaning of Code Section 6662. None of the Company or
its Subsidiaries is a party to any Tax allocation or
sharing agreement. None of the Company or its
Subsidiaries (A) has been a member of an Affiliated
Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was
the Company) or (B) has any Liability for the Taxes
of any Person (other than any of the Company and its
Subsidiaries) under Treas. Reg. Section 1.1502-
11
<PAGE>
6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by
contract, or otherwise.
vi. Section 4(k) of the Disclosure Schedule sets forth
the following information with respect to each of the
Company and its Subsidiaries (or, in the case of
clause (B) below, with respect to each of the
Subsidiaries) as of the most recent practicable date
(as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the
transactions contemplated hereby): (A) the basis of
the Company or Subsidiary in its assets; (B) the
basis of the stockholder(s) of the Subsidiary in its
stock; (C) the amount of any net operating loss, net
capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution
allocable to the Company or Subsidiary; and (D) the
amount of any deferred gain or loss allocable to the
Company or Subsidiary arising out of any Deferred
Intercompany Transaction.
vii. The unpaid Taxes of the Company and its Subsidiaries
(A) did not, as of the Most Recent Fiscal year End,
exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set
forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (B) do not
exceed that reserve as adjusted for the passage of
time through the Closing Date in accordance with the
past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns.
l. Real Property.
i. Neither the Company nor any of its Subsidiaries owns
any real property.
ii. Section 4(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or
subleased to any of the Company and its Subsidiaries.
The Seller has delivered or made available to the
Buyer correct and complete copies of the leases and
subleases listed in Section 4(l)(ii) of the
Disclosure Schedule (as amended to date). With
respect to each lease and sublease listed in Section
4(l)(ii) of the Disclosure Schedule:
(1) the lease or sublease is legal, valid,
binding, enforceable, and in full force and
effect;
(2) the lease or sublease will continue to be
legal, valid, binding, enforceable, and in
full force and effect on identical terms
following the consummation of the
transactions contemplated hereby;
(3) no party to the lease or sublease is in
breach or default, and no event has occurred
which, with notice or lapse of time, would
constitute a breach or default or permit
termination, modification, or acceleration
thereunder;
(4) no party to the lease or sublease has
repudiated any provision thereof;
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<PAGE>
(5) there are no disputes, oral agreements, or
forbearance programs in effect as to the
lease or sublease;
(6) with respect to each sublease, the
representations and warranties set forth in
subsections (1) through (5) above are true
and correct with respect to the underlying
lease;
(7) none of the Company or its Subsidiaries has
assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest
in the leasehold or subleasehold;
(8) all facilities leased or subleased
thereunder have received all approvals of
governmental authorities (including licenses
and permits) required in connection with the
operation thereof and have been operated and
maintained in accordance with applicable
laws, rules, and regulations;
(9) all facilities leased or subleased
thereunder are supplied with utilities and
other services necessary for the operation
of said facilities; and
(10) the owner of the facility leased or
subleased has good and marketable title to
the parcel of real property, free and clear
of any Security Interest, easement,
covenant, or other restriction, except for
installments of special easements not yet
delinquent and recorded easements,
covenants, and other restrictions which do
not impair the current use, occupancy, or
value, or the marketability of title, of the
property subject thereto.
m. Intellectual Property.
i. The Company and its Subsidiaries own or have the
right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the
Company and its Subsidiaries as presently conducted
and as presently proposed to be conducted. Each item
of Intellectual Property owned or used by any of the
Company and its Subsidiaries immediately prior to the
Closing hereunder will be owned or available for use
by the Company or the Subsidiary on identical terms
and conditions immediately subsequent to the Closing
hereunder. Each of the Company and its Subsidiaries
has taken all necessary action to maintain and
protect each item of Intellectual Property that it
owns or uses.
ii. None of the Company and its Subsidiaries has
interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual
Property rights of third parties, and neither the
Seller nor any of the directors and officers (or
employees with responsibility for Intellectual
Property matters) of the Company or its Subsidiaries
has ever received any charge, complaint, claim,
demand, or notice alleging any such interference,
infringement, misappropriation, or violation
(including any claim that any of the Company or its
13
<PAGE>
Subsidiaries must license or refrain from using any
Intellectual Property rights of any third party). To
the Knowledge of the Seller and the directors and
officers (and employees with responsibility for
Intellectual Property matters) of the Company and its
Subsidiaries, no third party has interfered with,
infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights
of any of the Company and its Subsidiaries.
iii. Section 4(m)(iii) of the Disclosure Schedule
identifies each patent or registration which has been
issued to any of the Company and its Subsidiaries
with respect to any of its Intellectual Property,
identifies each pending patent application or
application for registration which any of the Company
and its Subsidiaries has made with respect to any of
its Intellectual Property, and identifies each
license, agreement, or other permission which any of
the Company and its Subsidiaries has granted to any
third party with respect to any of its Intellectual
Property (together with any exceptions). The Seller
has delivered or made available to the Buyer correct
and complete copies of all such patents,
registrations, applications, licenses, agreements,
and permissions (as amended to date) and has made
available to the Buyer correct and complete copies of
all other written documentation evidencing ownership
and prosecution (if applicable) of each such item.
Section 4(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark
used by any of the Company and its Subsidiaries in
connection with any of its businesses. With respect
to each item of Intellectual Property required to be
identified in Section 4(m)(iii) of the Disclosure
Schedule:
(1) the Company and its Subsidiaries possess all
right, title, and interest in and to the
item, free and clear of any Security
Interest, license, or other restriction;
(2) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling,
or charge;
(3) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or
demand is pending or threatened which
challenges the legality, validity,
enforceability, use, or ownership of the
item; and
(4) none of the Company or its Subsidiaries has
ever agreed to indemnify any Person for or
against any interference, infringement,
misappropriation, or other conflict with
respect to the item.
iv. Section 4(m)(iv) of the Disclosure Schedule
identifies each item of Intellectual Property that
any third party owns and that any of the Company or
its Subsidiaries uses pursuant to license,
sublicense, agreement, or permission. The Seller has
delivered or made available to the Buyer correct and
complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date).
With respect to each item of Intellectual Property
required to be identified in Section 4(m)(iv) of the
Disclosure Schedule:
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<PAGE>
(1) the license, sublicense, agreement, or
permission covering the item is legal,
valid, binding, enforceable, and in full
force and effect;
(2) the license, sublicense, agreement, or
permission will continue to be legal, valid,
binding, enforceable, and in full force and
effect on identical terms following the
consummation of the transactions
contemplated hereby;
(3) no party to the license, sublicense,
agreement, or permission is in breach or
default, and no event has occurred which
with notice or lapse of time would
constitute a breach or default or permit
termination, modification, or acceleration
thereunder;
(4) no party to the license, sublicense,
agreement, or permission has repudiated any
provision thereof;
(5) with respect to each sublicense, the
representations and warranties set forth in
subsections (A) through (D) above are true
and correct with respect to the underlying
license;
(6) the underlying item of Intellectual Property
is not subject to any outstanding
injunction, judgment, order, decree, ruling,
or charge;
(7) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or
demand is pending or threatened which
challenges the legality, validity, or
enforceability of the underlying item of
Intellectual Property; and
(8) none of the Company or its Subsidiaries has
granted any sublicense or similar right with
respect to the license, sublicense,
agreement, or permission.
v. To the Knowledge of the Seller and the directors and
officers (and employees with responsibility for
Intellectual Property matters) of the Company and its
Subsidiaries, none of the Company or its Subsidiaries
will interfere with, infringe upon, misappropriate,
or otherwise come into conflict with, any
Intellectual Property rights of third parties as a
result of the continued operation of its businesses
as presently conducted and as presently proposed to
be conducted.
n. Tangible Assets. The Company and its Subsidiaries own or lease
all buildings, machinery, equipment, and other tangible assets
necessary for the conduct of their businesses as presently
conducted and as presently proposed to be conducted. Each such
tangible asset is free from defects (patent and latent), has
been maintained in accordance with normal industry practice,
is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it
presently is used and presently is proposed to be used.
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o. Contracts. Section 4(0) of the Disclosure Schedule lists the
following contracts and other agreements to which any of the
Company and its Subsidiaries is a party:
i. any agreement (or group of related agreements) for
the lease of personal property to or from any Person
providing for lease payments in excess of $50,000 per
annum;
ii. any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or
for the furnishing or receipt of services, the
performance of which will extend over a period of
more than one year, result in a loss to any of the
Company and its Subsidiaries, or involve
consideration in excess of $50,000;
iii. any agreement concerning a partnership or joint
venture;
iv. any agreement (or group of related agreements) under
which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or
any capitalized lease obligation, in excess of
$50,000 or under which it has imposed a Security
Interest on any of its assets, tangible or
intangible;
v. any agreement concerning confidentiality or
noncompetition;
vi. any agreement with the Seller or any of his
Affiliates (other than the Company and its
Subsidiaries);
vii. any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance,
or other plan or arrangement for the benefit of its
current or former directors, officers, and employees;
viii. any collective bargaining agreement;
ix. any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis
providing annual compensation in excess of $50,000 or
providing severance benefits;
x. any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and
employees outside the Ordinary Course of Business;
xi. any agreement under which the consequences of a
default or termination could have a material adverse
effect on the business, financial condition,
operations, results of operations, or future
prospects of any of the Company or its Subsidiaries;
xii. any other agreement (or group of related agreements)
the performance of which involves consideration in
excess of $50,000; and
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<PAGE>
xiii. any agreement or arrangement pursuant to which the
Company or any of its Subsidiaries acts as agent,
general agent, master general agent, marketing agent
or in a similar capacity for any insurance company.
The Seller has delivered or made available to the Buyer a correct and complete
copy of each written agreement listed in Section 4(o) of the Disclosure Schedule
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 4(o) of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (B) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
p. Notes and Accounts Receivable. All notes and accounts
receivable of the Company and its Subsidiaries are reflected
properly on their books and records, are valid receivables
subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their
terms at their recorded amounts, subject only to the reserve
for bad debts set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with
the past custom and practice of the Company and its
Subsidiaries.
q. Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of any of the Company and its
Subsidiaries.
r. Insurance. Section 4(r) of the Disclosure Schedule sets forth
the following information with respect to each insurance
policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and
surety arrangements) under which any of the Company or its
Subsidiaries has been a named insured or otherwise the
beneficiary of coverage at any time within the past five
years:
i. the name, address, and telephone number of the agent;
ii. the name of the insurer, the name of the
policyholder, and the name of each covered insured;
iii. the policy number and the period of coverage;
iv. the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how
deductibles and ceilings are calculated and operate)
of coverage; and
v. a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and
17
<PAGE>
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither any of the Company or its Subsidiaries nor any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (D) no
party to the policy has repudiated any provision thereof. Each of the Company
and its Subsidiaries has been covered during the past five years by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. Section 4(r) of the Disclosure
Schedule describes any self-insurance arrangements affecting any of the Company
and its Subsidiaries.
s. Litigation. Section 4(s) of the Disclosure Schedule sets forth
each instance in which any of the Company or its Subsidiaries
(i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or is threatened
to be made a party to any action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. None
of the actions, suits, proceedings, hearings, and investi
gations set forth in Section 4(s) of the Disclosure Schedule
could result in any material adverse change in the business,
financial condition, operations, results of operations, or
future prospects of any of the Company and its Subsidiaries.
Neither the Seller nor any of the directors or officers (or
employees with responsibility for litigation matters) of the
Company or its Subsidiaries has any reason to believe that any
such action, suit, proceeding, hearing, or investigation may
be brought or threatened against any of the Company or its
Subsidiaries.
t. Employees. To the Knowledge of the Seller and the directors
and officers (and employees with responsibility for employment
matters) of the Company and its Subsidiaries, no executive,
key employee, or group of employees has any plans to terminate
employment with any of the Company and its Subsidiaries, other
than the Seller in connection with this Agreement. None of the
Company or its Subsidiaries is a party to or bound by any
collective bargaining agreement, nor has any of them
experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. None of
the Company or its Subsidiaries has committed any unfair labor
practice. Neither the Seller nor any of the directors or
officers (or employees with responsibility for employment
matters) of the Company or its Subsidiaries has any Knowledge
of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to
employees of any of the Company or its Subsidiaries.
u. Employee Benefits.
i. Section 4(u) of the Disclosure Schedule lists each
Employee Benefit Plan that any of the Company or its
Subsidiaries maintains or to which any of the Company
or its Subsidiaries contributes.
(1) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund)
complies in form and in operation in all
respects with the applicable requirements of
ERISA, the Code, and other applicable laws.
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<PAGE>
(2) All required reports and descriptions
(including Form 5500 Annual Reports, Summary
Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed
appropriately with respect to each such
Employee Benefit Plan. The requirements of
Part 6 of Subtitle B of Title I of ERISA and
of Code Section 4980B have been met with
respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(3) All contributions (including all employer
contributions and employee salary reduction
contributions) which are due have been paid
to each such Employee Benefit Plan which is
an Employee Pension Benefit Plan and all
contributions for any period ending on or
before the Closing Date which are not yet
due have been paid to each such Employee
Pension Benefit Plan or accrued in
accordance with the past custom and practice
of the Company and its Subsidiaries. All
premiums or other payments for all periods
ending on or before the Closing Date have
been paid with respect to each such Employee
Benefit Plan which is an Employee Welfare
Benefit Plan.
(4) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the
requirements of a "qualified plan" under
Code Section 401(a) and has received, within
the last two years, a favorable
determination letter from the Internal
Revenue Service.
(5) The market value of assets under each such
Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the
present value of all vested and nonvested
Liabilities thereunder determined in
accordance with PBGC methods, factors, and
assumptions applicable to an Employee
Pension Benefit Plan terminating on the date
for determination.
(6) The Seller has delivered or made available
to the Buyer correct and complete copies of
the plan documents and summary plan
descriptions, the most recent determination
letter received from the Internal Revenue
Service, the most recent Form 5500 Annual
Report, and all related trust agreements,
insurance contracts, and other funding
agreements which implement each such
Employee Benefit Plan.
ii. With respect to each Employee Benefit Plan that any
of the Company, its Subsidiaries, and the Controlled
Group of Corporations which includes the Company and
its Subsidiaries maintains or ever has maintained or
to which any of them contributes, ever has
contributed, or ever has been required to contribute:
(1) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than
any Multiemployer Plan) has been completely
or partially terminated or been the subject
of a Reportable Event as to
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<PAGE>
which notices would be required to be filed
with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has
been instituted or threatened.
(2) There have been no Prohibited Transactions
with respect to any such Employee Benefit
Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other
failure to act or comply in connection with
the administration or investment of the
assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or
investigation with respect to the
administration or the investment of the
assets of any such Employee Benefit Plan
(other than routine claims for benefits) is
pending or threatened. Neither the Seller
nor any of the directors or officers (or
employees with responsibility for employee
benefits matters) of the Company or its
Subsidiaries has any Knowledge of any Basis
for any such action, suit, proceeding,
hearing, or investigation.
(3) None of the Company or its Subsidiaries has
incurred, and neither the Seller nor any of
the directors or officers (or employees with
responsibility for employee benefits
matters) of the Company and its Subsidiaries
has any reason to expect that any of the
Company or its Subsidiaries will incur, any
Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title
IV of ERISA (including any withdrawal
Liability) or under the Code with respect to
any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
iii. None of the Company, its Subsidiaries, or the other
members of the Controlled Group of Corporations that
includes the Company and its Subsidiaries contributes
to, ever has contributed to, or ever has been
required to contribute to any Multiemployer Plan or
has any Liability (including withdrawal Liability)
under any Multiemployer Plan.
iv. None of the Company or its Subsidiaries maintains or
ever has maintained or contributes, ever has
contributed, or ever has been required to contribute
to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other
welfare-type benefits for current or future retired
or terminated employees, their spouses, or their
dependents (other than in accordance with Code
Section 4980B).
v. Guaranties. None of the Company or its Subsidiaries is a
guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person.
w. Environment, Health, and Safety.
i. Each of the Company, its Subsidiaries, and their
respective predecessors and Affiliates has complied
with all Environmental, Health, and Safety Laws, and
no action, suit, proceeding, hearing, investigation,
charge, complaint, claim,
20
<PAGE>
demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
Without limiting the generality of the preceding
sentence, each of the Company, its Subsidiaries, and
their respective predecessors and Affiliates has
obtained and been in compliance with all of the terms
and conditions of all permits, licenses, and other
authorizations which are required under, and has
complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety
Laws.
ii. None of the Company or its Subsidiaries has any
Liability (and none of the Company, its Subsidiaries,
and their respective predecessors and Affiliates has
handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee
or other individual to any substance or condition, or
owned or operated any property or facility in any
manner that could form the Basis for any present or
future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand
against any of the Company and its Subsidiaries
giving rise to any Liability) for damage to any site,
location, or body of water (surface or subsurface),
for any illness of or personal injury to any employee
or other individual, or for any reason under any
Environmental, Health, and Safety Law.
iii. All properties and equipment used in the business of
the Company, its Subsidiaries, and their respective
predecessors and Affiliates have been free of
asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloro ethylene,
dioxins, dibenzofurans, and Extremely Hazardous
Substances.
x. Certain Business Relationships With the Company and Its
Subsidiaries. Except as set forth on Section 4(x) of the
Disclosure Schedule, (i) neither the Seller nor any of his
Affiliates has been involved in any business arrangement or
relationship with any of the Company or its Subsidiaries
within the past 12 months, and (ii) neither the Seller nor any
of his Affiliates owns any asset, tangible or intangible,
which is used in the business of any of the Company and its
Subsidiaries.
y. Disclosure. The representations and warranties contained in
this Section 4 do not contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements and information contained in this
Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
a. General. Each of the Parties will use his or its reasonable
best efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and
make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing
conditions set forth in Section 7 below).
b. Notices and Consents. The Seller will, and will cause the
Company and its Subsidiaries to, give any notices to third
parties, and the Seller will, and will cause the Company and
21
<PAGE>
its Subsidiaries to, use its reasonable best efforts to obtain
any third party consents, that the Buyer may request in
connection with the matters referred to in Section 4(c) above.
Each of the Parties will (and the Seller will cause the
Company and its Subsidiaries to) give any notices to, make any
filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred
to in Section 3(a)(ii), Section 3(b)(ii), and Section 4(c)
above. Without limiting the generality of the foregoing, each
of the Parties will file (and the Seller will cause the
Company and its Subsidiaries to file) any Notification and
Report Forms and related material that he or it may be
required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice
under the Hart-Scott-Rodino Act, will use his or its
reasonable best efforts to obtain (and the Seller will cause
the Company and its Subsidiaries to use their reasonable best
efforts to obtain) an early termination of the applicable
waiting period, and will make (and the Seller will cause the
Company and its Subsidiaries to make) any further filings
pursuant thereto that may be necessary, proper, or advisable
in connection therewith.
c. Operation of Business. The Seller will not cause or permit the
Company or any of its Subsidiaries to engage in any practice,
take any action, or enter into any transaction outside the
Ordinary Course of Business. Without limiting the generality
of the foregoing, the Seller will not cause or permit the
Company or any of its Subsidiaries to (i) declare, set aside,
or pay any dividend or make any distribution with respect to
its capital stock or redeem, purchase, or otherwise acquire
any of its capital stock or (ii) otherwise engage in any
practice, take any action, or enter into any transaction of
the sort described in Section 4(h) above.
d. Preservation of Business. The Seller will cause the Company
and its Subsidiaries to keep its business and properties
substantially intact, including its present operations,
physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers, and employees.
e. Full Access. The Seller will cause the Company and its
Subsidiaries to permit representatives of the Buyer to have
full access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of the
Company and its Subsidiaries, to all premises, properties,
personnel, books, records (including Tax records), contracts,
and documents of or pertaining to each of the Company and its
Subsidiaries.
f. Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material adverse development
causing a breach of any of the representations and warranties
in Section 4 above. Each Party will give prompt written notice
to the other of any material adverse development causing a
breach of any of his or its own representations and warranties
in Section 3 above. No disclosure by either Party pursuant to
this Section 5(f), however, shall be deemed to amend or
supplement Annex I, Annex II, or the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
22
<PAGE>
g. Exclusivity. The Seller will not, and will not cause or permit
the Company or its Subsidiaries to (i) solicit, initiate, or
encourage the submission of any proposal or offer from any
Person relating to the acquisition of any capital stock or
other voting securities, or any substantial portion of the
assets, of any of the Company or its Subsidiaries (including
any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other
manner any effort or attempt by any Person to do or seek any
of the foregoing. The Seller will not vote his Company Shares
in favor of any such acquisition structured as a merger,
consolidation, or share exchange. The Seller will notify the
Buyer immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
a. General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of
this Agreement, each of the Parties will take such further
action (including the execution and delivery of such further
instruments and documents) as the other Party reasonably may
request, all the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification
therefor under Section 8 below). The Seller acknowledges and
agrees that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of
any sort relating to the Company and its Subsidiaries.
b. Litigation Support. In the event and for so long as either
Party actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving any of
the Company and its Subsidiaries, the other Party will
cooperate with him or it and his or its counsel in the contest
or defense, make available his or its personnel, and provide
such testimony and access to his or its books and records as
shall be necessary in connection with the contest or defense,
all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 below).
Notwithstanding the foregoing, in connection with the
litigation between the Company and [Trigon] which is pending
as of the date of this Agreement, any amounts to which the
Company becomes entitled after the Closing Date as a result of
the settlement or successful conclusion of such litigation
shall be payable one-half to the Seller and one-half to
Gregory Thaens; provided however, that there shall be deducted
-------- -------
from any such payments to the Seller and Mr. Thaens the amount
of all expenses incurred by or billed to the Company after the
Closing Date in connection with such litigation, and provided
--------
further, that the Seller agrees to use his reasonable best
-------
efforts to resolve such litigation expeditiously.
c. Transition. The Seller will not take, and will not cause or
permit the Company or its Subsidiaries to take, any action
that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or
other business associate of any
23
<PAGE>
of the Company or its Subsidiaries from maintaining the same
business relationships with the Company and its Subsidiaries
after the Closing as it maintained with the Company and its
Subsidiaries prior to the Closing. The Seller will refer all
customer inquiries relating to the businesses of the Company
and its Subsidiaries to the Buyer from and after the Closing.
d. Confidentiality. The Seller will treat and hold as such all of
the Confidential Information, refrain from using any of the
Confidential Information except in connection with this
Agreement, and deliver promptly to the Buyer or destroy, at
the request and option of the Buyer, all tangible embodiments
(and all copies) of the Confidential Information which are in
his possession. In the event that the Seller is requested or
required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose
any Confidential Information, that Seller will notify the
Buyer promptly of the request or requirement so that the Buyer
may seek an appropriate protective order or waive compliance
with the provisions of this Section 6(d). If, in the absence
of a protective order or the receipt of a waiver hereunder,
the Seller is, on the advice of counsel, compelled to disclose
any Confidential Information to any tribunal or else stand
liable for contempt, the Seller may disclose the Confidential
Information to the tribunal; provided, however, that the
-------- -------
Seller shall use his or its reasonable best efforts to obtain,
at the reasonable request of the Buyer, an order or other
assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be
disclosed as the Buyer shall designate.
e. Seller's Obligations to the Company. Any obligations owed by
the Seller to the Company or any of its Subsidiaries on the
Closing Date, as reflected on the Adjusted Balance Sheet
(collectively, "Seller Obligations"), shall be repaid or
otherwise satisfied in accordance with their respective terms.
If at the time the final installment payment under the Buyer
Note is due, any default by the Seller with respect to any
Seller Obligation has occurred and is continuing or any
amounts remain outstanding with respect to any Seller
Obligation, the Buyer shall be entitled to deduct from the
amount of the final payment under the Buyer Note the aggregate
amount of all Seller Obligations then outstanding.
f. Buyer Note. The Buyer Note will be imprinted with a legend
substantially in the following form:
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT
TO CERTAIN RECOUPMENT PROVISIONS SET FORTH IN A STOCK PURCHASE
AGREEMENT DATED AS OF NOVEMBER 25, 1998 (THE 'PURCHASE
--
AGREEMENT') BETWEEN THE ISSUER OF THIS NOTE AND THE PERSON TO
WHOM THIS NOTE ORIGINALLY WAS ISSUED. THIS NOTE WAS ORIGINALLY
ISSUED ON JANUARY 1, 1999, AND HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE TRANSFER OF THIS
NOTE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN THE
PURCHASE AGREEMENT. THE ISSUER OF THIS NOTE WILL FURNISH A
COPY OF THESE PROVISIONS TO THE HOLDER HEREOF WITHOUT CHARGE
UPON WRITTEN REQUEST.
24
<PAGE>
If the Seller desires to transfer the Buyer Note, he must first furnish the
Buyer with (i) a written opinion reasonably satisfactory to the Buyer in form
and substance from counsel reasonably satisfactory to the Buyer by reason of
experience to the effect that the Seller may transfer the Buyer Note as desired
without registration under the Securities Act and (ii) a written undertaking
executed by the desired transferee reasonably satisfactory to the Buyer in form
and substance agreeing to be bound by the recoupment provisions and the
restrictions on transfer contained herein.
7. Conditions to Obligation to Close.
a. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
i. the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and
correct in all material respects at and as of the
Closing Date;
ii. the Seller shall have performed and complied with all
of his covenants hereunder in all material respects
through the Closing;
iii. the Seller shall have procured all of the third party
consents specified in Section 5(b) above;
iv. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the
right of the Buyer to own the Seller's Company Shares
and to control the Company and its Subsidiaries, or
(D) affect adversely the right of any of the Company
or its Subsidiaries to own its assets and to operate
its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
v. no material adverse change shall have occurred in the
condition, financial or otherwise, of the Company or
its Subsidiaries since the dated of the Most Recent
Financial Statements;
vi. the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions
specified above in Section 7(a)(i)-(v) is satisfied
in all respects;
vii. all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated and the Parties,
the Company and its Subsidiaries shall have received
all other authorizations, consents, and approvals of
governments and governmental agencies referred to in
Section 3(a)(ii), Section 3(b)(ii), and Section 4(c)
above;
25
<PAGE>
viii. the Buyer shall have received from counsel to the
Seller an opinion in form and substance as set forth
in Exhibit C attached hereto, addressed to the Buyer,
and dated as of the Closing Date;
ix. the Buyer and the Seller shall have entered into an
Employment Agreement in the form of Exhibit D hereto;
x. the closing under the Stock Purchase Agreement of
even date herewith between the Buyer and Gregory
Thaens (the "Thaens Purchase Agreement") shall have
occurred or shall occur simultaneously with the
Closing hereunder; and
xi. all actions to be taken by the Seller and the Company
in connection with consummation of the transactions
contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect
the transactions contemplated hereby will be
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
b. Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by him
in connection with the Closing is subject to satisfaction of
the following conditions:
i. the representations and warranties set forth in
Section 3(b) above shall be true and correct in all
material respects at and as of the Closing Date;
ii. the Buyer shall have performed and complied with all
of its covenants hereunder in all material respects
through the Closing;
iii. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be
rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or
charge shall be in effect);
iv. the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions
specified above in Section 7(b)(i)-(iii) is satisfied
in all respects;
v. all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated and the Parties,
the Company and its Subsidiaries shall have received
all other authorizations, consents, and approvals of
governments and governmental agencies referred to in
Section 3(a)(ii), Section 3(b)(ii), and Section 4(c)
above;
26
<PAGE>
vi. the Buyer and the Seller shall have entered into the
Pledge Agreement, and the Company Shares shall have
been deposited in accordance therewith;
vii. the Seller shall have received from counsel to the
Buyer an opinion in form and substance as set forth
in Exhibit E attached hereto, addressed to the Seller
and dated as of the Closing Date; and
viii. all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments,
and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this Section 7(b) if he executes
a writing so stating at or prior to the Closing.
27
<PAGE>
8. Remedies for Breaches of This Agreement.
a. Survival of Representations and Warranties.
All of the representations and warranties of the Seller
contained in Section 4(a)-(j) and Section 4(l)-(y) above shall survive the
Closing hereunder (even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of three years thereafter. All of the other
representations and warranties of the Parties contained in this Agreement
(including the representations and warranties of the Seller contained in Section
4(k) above) shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect forever thereafter (subject to
any applicable statutes of limitations).
b. Indemnification Provisions for Benefit of the Buyer.
i. In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean
the Seller has breached) any of his representations,
warranties, and covenants contained herein (other
than the covenants in Section 2(a) above and the
representations and warranties in Section 3(a)
above), and, if there is an applicable survival
period pursuant to Section 8(a) above, provided that
the Buyer makes a written claim for indemnification
against the Seller pursuant to Section 10(g) below
within such survival period, then the Seller agrees
to indemnify the Buyer from and against the entirety
of any Adverse Consequences the Buyer may suffer
through and after the date of the claim for
indemnification (including any Adverse Consequences
the Buyer may suffer after the end of any applicable
survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the
breach (or the alleged breach).
ii. In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean
that the Seller has breached) any of his covenants in
Section 2(a) above or any of his representations and
warranties in Section 3(a) above, and, if there is an
applicable survival period pursuant to Section 8(a)
above, provided that the Buyer makes a written claim
for indemnification against the Seller pursuant to
Section 10(g) below within such survival period, then
the Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the
Buyer may suffer through and after the date of the
claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of
any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).
iii. The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the
Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any
Liability of any of the Company and its Subsidiaries
for the unpaid Taxes of any Person (other than any of
the Company and its Subsidiaries) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor,
by contract, or otherwise.
28
<PAGE>
iv. The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the
Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the
operation or business of the Company and its
Subsidiaries on or prior to the Closing Date.
c. Indemnification Provisions for Benefit of the Seller.
i. In the event the Buyer breaches (or in the event any
third party alleges facts that, if true, would mean
the Buyer has breached) any of its representations,
warranties, and covenants contained herein, and, if
there is an applicable survival period pursuant to
Section 8(a) above, provided that the Seller makes a
written claim for indemnification against the Buyer
pursuant to Section 10(g) below within such survival
period, then the Buyer agrees to indemnify the Seller
from and against the entirety of any Adverse
Consequences the Seller may suffer through and after
the date of the claim for indemnification (including
any Adverse Consequences the Seller may suffer after
the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach).
ii. The Buyer agrees to indemnify the Seller from and
against the entirety of any Adverse Consequences the
Seller may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the
operation or business of the Company and its
Subsidiaries after to the Closing Date, except to the
extent such Adverse Consequences involve, or are
alleged to involve, fraud or willful misconduct on
the part of the Seller.
d. Matters Involving Third Parties.
i. If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a
"Third Party Claim") which may give rise to a claim
for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided,
--------
however, that no delay on the part of the Indemnified
-------
Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
ii. Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim
with counsel of its choice reasonably satisfactory to
the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying
Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by
the Third Party Claim, (B) the Indemnifying Party
provides the Indemnified Party with evidence
reasonably acceptable to the
29
<PAGE>
Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the
Third Party Claim and fulfill its indemnification
obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement
of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business
interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently.
iii. So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with
Section 8(d)(ii) above, (A) the Indemnified Party may
retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third
Party Claim, (B) the Indemnified Party will not
consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying
Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with
respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be
withheld unreasonably).
iv. In the event any of the conditions in Section
8(d)(ii) above is or becomes unsatisfied, however,
(A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim
in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties
will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the
Third Party Claim (including reasonable attorneys'
fees and expenses), and (C) the Indemnifying Parties
will remain responsible for any Adverse Consequences
the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 8.
e. Determination of Adverse Consequences. The Parties shall take
into account the time cost of money (using the Applicable Rate
as the discount rate) in determining Adverse Consequences for
purposes of this Section 8. All indemnification payments under
this Section 8 shall be deemed adjustments to the Purchase
Price.
f. Recoupment Under Buyer Note. The Buyer shall have the option
of recouping all or any part of any Adverse Consequences it
may suffer (in lieu of seeking any indemnification to which it
is entitled under this Section 8) by notifying the Seller that
the Buyer is reducing the principal amount outstanding under
his Buyer Note. This shall affect the timing and amount of
payments required under the Buyer Note in the same manner as
if the Buyer had made a permitted prepayment (without premium
or penalty) thereunder.
30
<PAGE>
g. Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in
derogation of, any statutory, equitable, or common law remedy
any Party may have for breach of representation, warranty, or
covenant. The Seller hereby agrees that he will not make any
claim for indemnification against any of the Company and its
Subsidiaries by reason of the fact that he or it was a
director, officer, employee, or agent of any such entity or
was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another
entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such claim is pursuant to
any statute, charter document, bylaw, agreement, or otherwise)
with respect to any action, suit, proceeding, complaint,
claim, or demand brought by the Buyer against the Seller
(whether such action, suit, proceeding, complaint, claim, or
demand is pursuant to this Agreement, applicable law, or
otherwise).
9. Termination.
a. Termination of Agreement. The Parties may terminate this
Agreement as provided below:
i. the Buyer and the Seller may terminate this Agreement
by mutual written consent at any time prior to the
Closing;
ii. the Buyer may terminate this Agreement by giving
written notice to the Seller on or before the 30th
day following the date of this Agreement if the Buyer
is not satisfied with the results of its continuing
business, legal, and accounting due diligence
regarding the Company and its Subsidiaries;
iii. the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the
Closing (A) in the event the Seller has breached any
material representation, warranty, or covenant
contained in this Agreement in any material respect,
the Buyer has notified the Seller of the breach, and
the breach has continued without cure for a period of
30 days after the notice of breach or (B) if the
Closing shall not have occurred as of January 1,
1999, by reason of the failure of any condition
precedent under Section 7(a) hereof (unless the
failure results primarily from the Buyer itself
breaching any representation, warranty, or covenant
contained in this Agreement); and
iv. the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the
Closing (A) in the event the Buyer has breached any
material representation, warranty, or covenant
contained in this Agreement in any material respect,
the Seller has notified the Buyer of the breach, and
the breach has continued without cure for a period of
30 days after the notice of breach or (B) if the
Closing shall not have occurred as of January 1,
1999, by reason of the failure of any condition
precedent under Section 7(b) hereof (unless the
failure results primarily from the Seller himself
breaching any representation, warranty, or covenant
contained in this Agreement).
31
<PAGE>
b. Effect of Termination. If either Party terminates this
Agreement pursuant to Section 9(a) above, all rights and
obligations of the Parties hereunder shall terminate without
any Liability of a Party to the other Party (except for any
Liability of a Party then in breach).
10. Miscellaneous.
a. Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to
the subject matter of this Agreement prior to the Closing
without the prior written approval of the other Party;
provided, however, that a Party may make any public disclosure
-------- -------
it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to
making the disclosure).
b. No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties
and their respective successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between
the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the
subject matter hereof. Notwithstanding the foregoing, this
Agreement does not supersede the provisions of Section 6 of
that certain Letter of Intent dated October 15, 1998 between
the Parties.
d. Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party
may assign either this Agreement or any of his or its rights,
interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer
-------- -------
may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate
one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its
obligations hereunder).
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall
be deemed duly given if (and then two business days after) it
is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended
recipient as set forth below:
32
<PAGE>
If to the Seller: Copy to:
----------------- --------
Patrick Patterson Robert Pavlock, Esquire
125 N. Lafayette Pavlock and Pavlock
South Lyon, MI 48178 1540 American Center
c/o United Insurance Group 27777 Franklin Road
Southfield, MI 48034
If to the Buyer: Copy to:
---------------- --------
Penn Treaty American Corporation Ballard Spahr Andrews & Ingersoll, LLP
3440 Lehigh Street 1735 Market Street, 51st Floor
Allentown, PA 18103 Philadelphia, PA 19103
Attention: Cameron Waite Attention: Justin P. Klein, Esquire
A Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. A
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
h. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA WITHOUT GIVING EFFECT TO ANY
CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
COMMONWEALTH OF PENNSYLVANIA OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE COMMONWEALTH OF PENNSYLVANIA.
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing
and signed by the Buyer and the Seller. No waiver by a Party
of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder
or affect in any way any rights arising by virtue of any prior
or subsequent such occurrence.
j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
k. Expenses. Each of the Parties, the Company and its
Subsidiaries will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
The Seller agrees that none of the Company or its Subsidiaries
has borne or will bear any of the Seller's costs and expenses
33
<PAGE>
(including any of his legal fees and expenses) in connection
with this Agreement or any of the transactions contemplated
hereby.
l. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the
Parties and no presumption or burden of proof shall arise
favoring or disfavoring a Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. The
Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance.
If a Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating
to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
m. Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement
are incorporated herein by reference and made a part hereof.
n. Specific Performance. Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in
the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the
other Party shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over
the Parties and the matter (subject to the provisions set
forth in Section 10(p) below), in addition to any other remedy
to which he or it may be entitled, at law or in equity.
o. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in
Allentown, Pennsylvania in any action or proceeding arising
out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to
bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives
any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety,
or other security that might be required of the other Party
with respect thereto. A Party may make service on the other
Party by sending or delivering a copy of the process to the
Party to be served at the address and in the manner provided
for the giving of notices in Section 10(h) above. Nothing in
this Section 10(p), however, shall affect the right of a Party
to serve legal process in any other manner permitted by law or
at equity. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be
enforced by suit on the judgment or in any other manner
provided by law or at equity.
34
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
PENN TREATY AMERICAN CORPORATION
Attest:
/s/ Michael F. Grill By: /s/ Cameron B. Waite
- -------------------- ---------------------
Title: Treasurer
Title: Chief Financial Officer
-----------------------
Witness:
/s/ Craig E. Buckley /s/ Patrick Patterson
- -------------------- ---------------------
Name: Patrick Patterson
35
<PAGE>
Exhibit 99.3
STOCK PURCHASE AGREEMENT
BETWEEN
GREGORY D. THAENS
AND
PENN TREATY AMERICAN CORPORATION
Dated as of November 25, 1998
--
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Definitions..............................................................................................1
2. Purchase and Sale of Seller's Company Shares.............................................................5
a. Basic Transaction......................................................................5
b. Purchase Price.........................................................................5
e. Deliveries at the Closing..............................................................6
3. Representations and Warranties Concerning the Transaction................................................6
a. Representations and Warranties of the Seller...........................................6
b. Representations and Warranties of the Buyer............................................7
4. Representations and Warranties Concerning the Company and Its Subsidiaries...............................8
a. Organization, Qualification, and Corporate Power.......................................8
b. Capitalization.........................................................................8
c. Noncontravention.......................................................................9
d. Brokers' Fees..........................................................................9
e. Title to Assets........................................................................9
f. Subsidiaries...........................................................................9
g. Financial Statements..................................................................10
h. Events Subsequent to Most Recent Fiscal Year End......................................10
i. Undisclosed Liabilities...............................................................10
j. Legal Compliance......................................................................10
k. Tax Matters...........................................................................10
l. Real Property.........................................................................12
m. Intellectual Property.................................................................13
n. Tangible Assets.......................................................................15
o. Contracts.............................................................................16
p. Notes and Accounts Receivable.........................................................17
q. Powers of Attorney....................................................................17
r. Insurance.............................................................................17
s. Litigation............................................................................18
t. Employees.............................................................................18
u. Employee Benefits.....................................................................18
v. Guaranties............................................................................20
w. Environment, Health, and Safety.......................................................21
x. Certain Business Relationships With the Company and Its Subsidiaries..................21
y. Disclosure............................................................................21
5. Pre-Closing Covenants...................................................................................21
a. General...............................................................................22
b. Notices and Consents..................................................................22
c. Operation of Business.................................................................22
d. Preservation of Business..............................................................22
e. Full Access...........................................................................22
</TABLE>
<PAGE>
<TABLE>
<S> <C>
f. Notice of Developments................................................................23
g. Exclusivity...........................................................................23
6. Post-Closing Covenants..................................................................................23
a. General...............................................................................23
b. Litigation Support....................................................................23
c. Transition............................................................................24
d. Confidentiality.......................................................................24
e. Covenant Not to Compete...............................................................24
7. Conditions to Obligation to Close.......................................................................25
a. Conditions to Obligation of the Buyer.................................................25
b. Conditions to Obligation of the Seller................................................26
8. Remedies for Breaches of This Agreement.................................................................27
a. Survival of Representations and Warranties............................................27
b. Indemnification Provisions for Benefit of the Buyer...................................27
c. Indemnification Provisions for Benefit of the Seller..................................28
d. Matters Involving Third Parties.......................................................29
e. Determination of Adverse Consequences.................................................30
f. Other Indemnification Provisions......................................................30
9. Termination.............................................................................................30
a. Termination of Agreement..............................................................30
b. Effect of Termination.................................................................31
10. Miscellaneous...........................................................................................31
a. Press Releases and Public Announcements...............................................31
b. No Third Party Beneficiaries..........................................................31
c. Entire Agreement......................................................................31
d. Succession and Assignment.............................................................32
e. Counterparts..........................................................................32
f. Headings..............................................................................32
g. Notices...............................................................................32
h. Governing Law.........................................................................33
i. Amendments and Waivers................................................................33
j. Severability..........................................................................33
k. Expenses..............................................................................33
l. Construction..........................................................................33
m. Incorporation of Exhibits, Annexes, and Schedules.....................................34
n. Specific Performance..................................................................34
o. Submission to Jurisdiction............................................................34
</TABLE>
ii
<PAGE>
EXHIBITS
Exhibit A - Most Recent Financial Statements
Exhibit B - Form of Opinion of Counsel to the Seller
Exhibit C - Form of Opinion of Counsel to the Buyer
ANNEXES
Annex I - Exceptions to the Seller's Representations and Warranties Concerning
the Transaction
Annex II - Exceptions to the Buyer's Representations and Warranties Concerning
the Transaction
Disclosure Schedule - Exceptions to Representations and Warranties Concerning
the Company and Its Subsidiaries
iii
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement entered into as of November 25, 1998, by and between
--
PENN TREATY AMERICAN CORPORATION, a Pennsylvania corporation (the "Buyer"), and
GREGORY D. THAENS, an individual (the "Seller"). The Buyer and the Seller are
referred to together herein as the "Parties."
The Seller owns fifty percent (50%) of the shares of
outstanding capital stock of the Company.
This Agreement contemplates a transaction in which the Buyer
will purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of United Insurance Group Agency, Inc., a Michigan
corporation (the "Company") owned by the Seller in return for cash.
Now, therefore, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Adjusted Balance Sheet" has the meaning set forth in Section
2(c) below.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the
meaning of Code Section 1504 or any similar group defined under a similar
provision of state, local, or foreign law.
"Applicable Rate" means the corporate base rate of interest
publicly announced from time to time by First Union National Bank.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
1
<PAGE>
"Company" has the meaning set forth in the preface above.
"Company Share" means any share of the Common Stock, par value
$1.00 per share, of the Company.
----
"Confidential Information" means any information concerning
the businesses and affairs of the Company and its Subsidiaries that is not
already generally available to the public.
"Controlled Group of Corporations" has the meaning set forth
in Code Section 1563.
"Deferred Intercompany Transaction" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
"Disclosure Schedule" has the meaning set forth in Section 4
below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Extremely Hazardous Substance" has the meaning set forth in
Section 302 of the Emergency Planning and Community Right-to-Know Act of 1986,
as amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
2
<PAGE>
"Indemnified Party" has the meaning set forth in Section 8(d)
below.
"Indemnifying Party" has the meaning set forth in Section 8(d)
below.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable
investigation.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth
in Section 4(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in
Section 4(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
"Patterson Purchase Agreement" has the meaning set forth in
Section 7(a) below.
"PBGC" means the Pension Benefit Guaranty Corporation.
3
<PAGE>
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(b)
below.
"Reportable Event" has the meaning set forth in ERISA Section
4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
----------
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
"Target Capital and Surplus" has the meaning set forth in
Section 2(c) below.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d)
below.
2. Purchase and Sale of Seller's Company Shares.
4
<PAGE>
a. Basic Transaction. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from the
Seller, and the Seller agrees to sell to the Buyer, all of his
Company Shares for the consideration specified below in this
Section 2.
b. Purchase Price. Subject to the terms and conditions of this
Agreement (including but not limited to Section 2(c) below),
and as consideration for the sale of the Seller's Company
Shares to the buyer, the Buyer agrees to pay to the Seller at
the Closing $9,250,000 (the "Purchase Price") by delivery of
cash payable by wire transfer or delivery of other immediately
available funds.
c. Adjustments to the Purchase Price. Prior to the Closing, the
Seller shall cause the Company to prepare, or cause Follmer,
Rudzewicz and Company of South Lyon, Michigan, to prepare (in
either case with the assistance and participation of Buyer),
in substantial accordance with GAAP, a condensed balance sheet
of the Company as of the close of business on November 27,
1998, which balance sheet shall consist of the Company's
fiscal-year end balance sheet as of September 30, 1998, as
reviewed by Follmer, Rudzewicz and Company, with such material
adjustments thereto as shall be mutually agreed by the Buyer
and the Seller (the "Adjusted Balance Sheet").
i. The Parties agree that an adjustment to the Purchase
Price will be made if the capital and surplus of the
Company reflected on the Adjusted Balance Sheet is
greater or less than Five Hundred Thousand Dollars
($500,000) (the "Target Capital and Surplus"). If the
Target Capital and Surplus exceeds the capital and
surplus of the Company reflected on the Adjusted
Balance Sheet, the Purchase Price shall be decreased
on a dollar for dollar basis by one-half of the
amount of the excess. Similarly, if the capital and
surplus of the Company reflected on the Adjusted
Balance Sheet exceeds the Target Capital and Surplus,
the Purchase Price shall be increased on a dollar for
dollar basis by the one-half of amount of the excess.
ii. The Parties further agree that a reduction of the
Purchase Price will be made in the amount of any
obligations owed by the Seller to the Company or any
of its Subsidiaries on the Closing Date, as reflected
on the Adjusted Balance Sheet, and that the Buyer
shall assume the liability for and satisfy all such
obligations as of the Closing Date.
d. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices
of the Buyer in Allentown, Pennsylvania commencing at 9:00
a.m. local time on the business day following the satisfaction
or waiver of all conditions to the obligations of the Parties
to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will
take at the Closing itself) or such other date as the Buyer
and the Seller may mutually determine (the "Closing Date");
provided, however, that the Closing shall be deemed to have
-------- -------
occurred at 12:01 a.m. on January 1, 1999.
e. Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments,
and documents referred to in Section 7(a) below, (ii) the
Buyer
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will deliver to the Seller the various certificates,
instruments, and documents referred to in Section 7(b) below,
(iii) the Seller will deliver to the Buyer stock certificates
representing all of his Company Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (iv)
the Buyer will deliver to the Seller the consideration
specified in Section 2(b) above.
3. Representations and Warranties Concerning the Transaction.
a. Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements
contained in this Section 3(a) are correct and complete as of
the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to himself, except
as set forth in Annex I attached hereto.
i. Authorization of Transaction. The Seller has full
power and authority to execute and deliver this
Agreement and to perform his obligations hereunder.
This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in
accordance with its terms and conditions. The Seller
need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any
government or governmental agency in order to
consummate the transactions contemplated by this
Agreement.
ii. Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, will (A)
violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental
agency, or court to which the Seller is subject or
(B) conflict with, result in a breach of, constitute
a default under, result in the acceleration of,
create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller
is a party or by which he is bound or to which any of
his assets is subject.
iii. Brokers' Fees. The Seller has no Liability or
obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
iv. Company Shares. The Seller holds of record and owns
beneficially the number of Company Shares set forth
next to his name in Section 4(b) of the Disclosure
Schedule, free and clear of any restrictions on
transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and
demands. The Seller is not a party to any option,
warrant, purchase right, or other contract or
commitment that could require the Seller to sell,
transfer, or otherwise dispose of any capital stock
of the Company (other than this Agreement). The
Seller is not a party to any voting trust, proxy, or
other
6
<PAGE>
agreement or understanding with respect to the voting
of any capital stock of the Company.
b. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller that the statements
contained in this Section 3(b) are correct and complete as of
the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)), except as set forth in Annex II
attached hereto.
i. Organization of the Buyer. The Buyer is a corporation
duly incorporated and validly subsisting under the
laws of the Commonwealth of Pennsylvania.
ii. Authorization of Transaction. The Buyer has full
power and authority (including full corporate power
and authority) to execute and deliver this Agreement
and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance
with its terms and conditions. The Buyer need not
give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any
government or governmental agency in order to
consummate the transactions contemplated by this
Agreement.
iii. Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, will (A)
violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental
agency, or court to which the Buyer is subject or any
provision of its charter or bylaws or (B) conflict
with, result in a breach of, constitute a default
under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which
it is bound or to which any of its assets is subject.
iv. Brokers' Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
v. Investment. The Buyer is not acquiring the Seller's
Company Shares with a view to or for sale in
connection with any distribution thereof within the
meaning of the Securities Act.
4. Representations and Warranties Concerning the Company and Its
Subsidiaries. The Seller represents and warrants to the Buyer that the
statements contained in this Section 4 are correct and complete as of
the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4),
except as set forth in the disclosure schedule delivered by the Seller
to the Buyer on the date hereof and initialed by the Parties (the
"Disclosure Schedule"). Nothing in the
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<PAGE>
Disclosure Schedule shall be deemed adequate to disclose an exception
to a representation or warranty made herein, however, unless the
Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail.
The Seller will indicate any item required on the Disclosure Schedule
(except with respect to Section 4(a)) which the Seller warrants to be
immaterial in its financial impact, by "N/M." In no event will the
Seller withhold any requested document, regardless of materiality, if
specifically requested by the Buyer as part of its due diligence
process. The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Section 4.
a. Organization, Qualification, and Corporate Power. Each of the
Company and its Subsidiaries is a corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Each of the Company and its
Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such
qualification is required. Each of the Company and its
Subsidiaries has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and in which it
presently proposes to engage and to own and use the properties
owned and used by it. Section 4(a) of the Disclosure Schedule
lists the directors and officers of each of the Company and
its Subsidiaries. The Seller has delivered to the Buyer
correct and complete copies of the charter and bylaws of each
of the Company and its Subsidiaries (as amended to date). The
minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of
the board of directors), the stock certificate books, and the
stock record books of each of the Company and its Subsidiaries
are correct and complete. None of the Company or its
Subsidiaries is in default under or in violation of any
provision of its charter or bylaws.
b. Capitalization. The entire authorized capital stock of the
Company consists of 50,000 Company Shares, of which 2,000
------ -----
Company Shares are issued and outstanding and no Company
Shares are held in treasury. All of the issued and outstanding
Company Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the
Persons set forth in Section 4(b) of the Disclosure Schedule.
There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could
require the Company to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the
Company. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the
capital stock of the Company.
c. Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any of the
Company or its Subsidiaries is subject or any provision of the
charter or bylaws of any of the Company or its Subsidiaries or
(ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease,
8
<PAGE>
license, instrument, or other arrangement to which any of the
Company or its Subsidiaries is a party or by which it is bound
or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets).
None of the Company or its Subsidiaries is required to give
any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
d. Brokers' Fees. None of the Company or its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
e. Title to Assets. The Company and its Subsidiaries have good
and marketable title to, or a valid leasehold interest in, the
properties and assets used by them, located on their premises,
or shown on the Most Recent Balance Sheet or acquired after
the date thereof, free and clear of all Security Interests,
except for properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance
Sheet.
f. Subsidiaries. Section 4(f) of the Disclosure Schedule sets
forth for each Subsidiary of the Company (i) its name and
jurisdiction of incorporation, (ii) the number of shares of
authorized capital stock of each class of its capital stock,
(iii) the number of issued and outstanding shares of each
class of its capital stock, the names of the holders thereof,
and the number of shares held by each such holder, and (iv)
the number of shares of its capital stock held in treasury.
All of the issued and outstanding shares of capital stock of
each Subsidiary of the Company have been duly authorized and
are validly issued, fully paid, and nonassessable. The Company
holds of record and owns beneficially all of the outstanding
shares of each Subsidiary of the Company, free and clear of
any restrictions on transfer (other than restrictions under
the Securities Act and state securities laws), Taxes, Security
Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. There are no
outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require any of the
Company or its Subsidiaries to sell, transfer, or otherwise
dispose of any capital stock of any of its Subsidiaries or
that could require any Subsidiary of the Company to issue,
sell, or otherwise cause to become outstanding any of its own
capital stock. There are no outstanding stock appreciation,
phantom stock, profit participation, or similar rights with
respect to any Subsidiary of the Company. There are no voting
trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary
of the Company. None of the Company or its Subsidiaries
controls directly or indirectly or has any direct or indirect
equity participation in any corporation, partnership, trust,
or other business association which is not a Subsidiary of the
Company.
g. Financial Statements. Attached hereto as Exhibit A are the
following financial statements (the "Most Recent Financial
Statements"): reviewed consolidated and unaudited
consolidating balance sheets and statements of income, changes
in stockholders' equity, cash flow, and accompanying notes
thereto as of and for the fiscal
9
<PAGE>
year ended September 30, 1998 (the "Most Recent Fiscal Year
End") for the Company and its Subsidiaries.
h. Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any
undisclosed material adverse change (deemed to be in excess of
$100,000) in the business, financial condition, operations,
results of operations, or future prospects of any of the
Company and its Subsidiaries. There has not been any other
material occurrence, event, incident, action, failure to act,
or transaction outside the Ordinary Course of Business
involving any of the Company or its Subsidiaries.
i. Undisclosed Liabilities. None of the Company or its
Subsidiaries has any Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any
of them giving rise to any Liability), except for (i)
Liabilities set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) and (ii) Liabilities
which have arisen after the Most Recent Fiscal Year End in the
Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused
by any breach of contract, breach of warranty, tort,
infringement, or violation of law.
j. Legal Compliance. Each of the Company, its Subsidiaries, and
their respective predecessors and Affiliates has complied with
all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
k. Tax Matters.
i. Each of the Company and its Subsidiaries has filed
all Tax Returns that it was required to file. All
such Tax Returns were correct and complete in all
respects. All Taxes owed by any of the Company and
its Subsidiaries (whether or not shown on any Tax
Return) have been paid. None of the Company or its
Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax
Return. No claim has ever been made by an authority
in a jurisdiction where any of the Company or its
Subsidiaries does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets
of any of the Company and its Subsidiaries that arose
in connection with any failure (or alleged failure)
to pay any Tax.
ii. Each of the Company and its Subsidiaries has withheld
and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any
employee, independent contractor, creditor,
stockholder, or other third party.
iii. Neither the Seller nor any director or officer (or
employee responsible for Tax matters) of any of the
Company or its Subsidiaries expects any authority to
10
<PAGE>
assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of any of the
Company and its Subsidiaries either (A) claimed or
raised by any authority in writing or (B) as to which
the Seller or any of the directors or officers (or
employees responsible for Tax matters) of the Company
and its Subsidiaries has Knowledge based upon
personal contact with any agent of such authority.
Section 4(k) of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns
filed with respect to any of the Company and its
Subsidiaries for taxable periods ended on or after
September 30, 1997, indicates those Tax Returns that
have been audited, and indicates those Tax Returns
that currently are the subject of audit. The Seller
has delivered or made available to the Buyer correct
and complete copies of all federal income Tax
Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of
the Company and its Subsidiaries since September 30,
1995.
iv. None of the Company or its Subsidiaries has waived
any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax
assessment or deficiency.
v. None of the Company or its Subsidiaries has filed a
consent under Code Section 341(f) concerning
collapsible corporations. None of the Company or its
Subsidiaries has made any payments, is obligated to
make any payments, or is a party to any agreement
that under certain circumstances could obligate it to
make any payments that will not be deductible under
Code Section 280G. None of the Company or its
Subsidiaries has been a United States real property
holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). Each of
the Company and its Subsidiaries has disclosed on its
federal income Tax Returns all positions taken
therein that could give rise to a substantial
understatement of federal income Tax within the
meaning of Code Section 6662. None of the Company or
its Subsidiaries is a party to any Tax allocation or
sharing agreement. None of the Company or its
Subsidiaries (A) has been a member of an Affiliated
Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was
the Company) or (B) has any Liability for the Taxes
of any Person (other than any of the Company and its
Subsidiaries) under Treas. Reg. Section 1.1502-6 (or
any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or
otherwise.
vi. Section 4(k) of the Disclosure Schedule sets forth
the following information with respect to each of the
Company and its Subsidiaries (or, in the case of
clause (B) below, with respect to each of the
Subsidiaries) as of the most recent practicable date
(as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the
transactions contemplated hereby): (A) the basis of
the Company or Subsidiary in its assets; (B) the
basis of the stockholder(s) of the Subsidiary in its
stock; (C) the amount of any net operating loss, net
capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution
allocable to the Company or Subsidiary; and (D) the
amount of any
11
<PAGE>
deferred gain or loss allocable to the Company or
Subsidiary arising out of any Deferred Intercompany
Transaction.
vii. The unpaid Taxes of the Company and its Subsidiaries
(A) did not, as of the Most Recent Fiscal Year End,
exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set
forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (B) do not
exceed that reserve as adjusted for the passage of
time through the Closing Date in accordance with the
past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns.
l. Real Property.
i. Neither the Company nor any of its Subsidiaries owns
any real property.
ii. Section 4(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or
subleased to any of the Company and its Subsidiaries.
The Seller has made available or delivered to the
Buyer correct and complete copies of the leases and
subleases listed in Section 4(l)(ii) of the
Disclosure Schedule (as amended to date). With
respect to each lease and sublease listed in Section
4(l)(ii) of the Disclosure Schedule:
(1) the lease or sublease is legal, valid,
binding, enforceable, and in full force and
effect;
(2) the lease or sublease will continue to be
legal, valid, binding, enforceable, and in
full force and effect on identical terms
following the consummation of the
transactions contemplated hereby;
(3) no party to the lease or sublease is in
breach or default, and no event has occurred
which, with notice or lapse of time, would
constitute a breach or default or permit
termination, modification, or acceleration
thereunder;
(4) no party to the lease or sublease has
repudiated any provision thereof;
(5) there are no disputes, oral agreements, or
forbearance programs in effect as to the
lease or sublease;
(6) with respect to each sublease, the
representations and warranties set forth in
subsections (1) through (5) above are true
and correct with respect to the underlying
lease;
(7) none of the Company or its Subsidiaries has
assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest
in the leasehold or subleasehold;
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(8) all facilities leased or subleased
thereunder have received all approvals of
governmental authorities (including licenses
and permits) required in connection with the
operation thereof and have been operated and
maintained in accordance with applicable
laws, rules, and regulations;
(9) all facilities leased or subleased
thereunder are supplied with utilities and
other services necessary for the operation
of said facilities; and
(10) the owner of the facility leased or
subleased has good and marketable title to
the parcel of real property, free and clear
of any Security Interest, easement,
covenant, or other restriction, except for
installments of special easements not yet
delinquent and recorded easements,
covenants, and other restrictions which do
not impair the current use, occupancy, or
value, or the marketability of title, of the
property subject thereto.
m. Intellectual Property.
i. The Company and its Subsidiaries own or have the
right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the
Company and its Subsidiaries as presently conducted
and as presently proposed to be conducted. Each item
of Intellectual Property owned or used by any of the
Company and its Subsidiaries immediately prior to the
Closing hereunder will be owned or available for use
by the Company or the Subsidiary on identical terms
and conditions immediately subsequent to the Closing
hereunder. Each of the Company and its Subsidiaries
has taken all necessary action to maintain and
protect each item of Intellectual Property that it
owns or uses.
ii. None of the Company and its Subsidiaries has
interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual
Property rights of third parties, and neither the
Seller nor any of the directors and officers (or
employees with responsibility for Intellectual
Property matters) of the Company or its Subsidiaries
has ever received any charge, complaint, claim,
demand, or notice alleging any such interference,
infringement, misappropriation, or violation
(including any claim that any of the Company or its
Subsidiaries must license or refrain from using any
Intellectual Property rights of any third party). To
the Knowledge of the Seller and the directors and
officers (and employees with responsibility for
Intellectual Property matters) of the Company and its
Subsidiaries, no third party has interfered with,
infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights
of any of the Company and its Subsidiaries.
iii. Section 4(m)(iii) of the Disclosure Schedule
identifies each patent or registration which has been
issued to any of the Company and its Subsidiaries
with respect to any of its Intellectual Property,
identifies each pending patent application or
application for registration which any of the Company
and its Subsidiaries has made with respect to any of
its Intellectual Property, and identifies each
license, agreement,
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or other permission which any of the Company and its
Subsidiaries has granted to any third party with
respect to any of its Intellectual Property (together
with any exceptions). The Seller has delivered or
made available to the Buyer correct and complete
copies of all such patents, registrations,
applications, licenses, agreements, and permissions
(as amended to date) and has made available to the
Buyer correct and complete copies of all other
written documentation evidencing ownership and
prosecution (if applicable) of each such item.
Section 4(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark
used by any of the Company and its Subsidiaries in
connection with any of its businesses. With respect
to each item of Intellectual Property required to be
identified in Section 4(m)(iii) of the Disclosure
Schedule:
(1) the Company and its Subsidiaries possess all
right, title, and interest in and to the
item, free and clear of any Security
Interest, license, or other restriction;
(2) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling,
or charge;
(3) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or
demand is pending or threatened which
challenges the legality, validity,
enforceability, use, or ownership of the
item; and
(4) none of the Company or its Subsidiaries has
ever agreed to indemnify any Person for or
against any interference, infringement,
misappropriation, or other conflict with
respect to the item.
iv. Section 4(m)(iv) of the Disclosure Schedule
identifies each item of Intellectual Property that
any third party owns and that any of the Company or
its Subsidiaries uses pursuant to license,
sublicense, agreement, or permission. The Seller has
delivered or made available to the Buyer correct and
complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date).
With respect to each item of Intellectual Property
required to be identified in Section 4(m)(iv) of the
Disclosure Schedule:
(1) the license, sublicense, agreement, or
permission covering the item is legal,
valid, binding, enforceable, and in full
force and effect;
(2) the license, sublicense, agreement, or
permission will continue to be legal, valid,
binding, enforceable, and in full force and
effect on identical terms following the
consummation of the transactions
contemplated hereby;
(3) no party to the license, sublicense,
agreement, or permission is in breach or
default, and no event has occurred which
with notice or lapse of time would
constitute a breach or default or permit
termination, modification, or acceleration
thereunder;
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(4) no party to the license, sublicense,
agreement, or permission has repudiated any
provision thereof;
(5) with respect to each sublicense, the
representations and warranties set forth in
subsections (A) through (D) above are true
and correct with respect to the underlying
license;
(6) the underlying item of Intellectual Property
is not subject to any outstanding
injunction, judgment, order, decree, ruling,
or charge;
(7) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or
demand is pending or threatened which
challenges the legality, validity, or
enforceability of the underlying item of
Intellectual Property; and
(8) none of the Company or its Subsidiaries has
granted any sublicense or similar right with
respect to the license, sublicense,
agreement, or permission.
v. To the Knowledge of the Seller and the directors and
officers (and employees with responsibility for
Intellectual Property matters) of the Company and its
Subsidiaries, none of the Company or its Subsidiaries
will interfere with, infringe upon, misappropriate,
or otherwise come into conflict with, any
Intellectual Property rights of third parties as a
result of the continued operation of its businesses
as presently conducted and as presently proposed to
be conducted.
n. Tangible Assets. The Company and its Subsidiaries own or lease
all buildings, machinery, equipment, and other tangible assets
necessary for the conduct of their businesses as presently
conducted and as presently proposed to be conducted. Each such
tangible asset is free from defects (patent and latent), has
been maintained in accordance with normal industry practice,
is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it
presently is used and presently is proposed to be used.
o. Contracts. Section 4(o) of the Disclosure Schedule lists the
following contracts and other agreements to which any of the
Company and its Subsidiaries is a party:
i. any agreement (or group of related agreements) for
the lease of personal property to or from any Person
providing for lease payments in excess of $50,000 per
annum;
ii. any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or
for the furnishing or receipt of services, the
performance of which will extend over a period of
more than one year, result in a loss to any of the
Company and its Subsidiaries, or involve
consideration in excess of $50,000;
15
<PAGE>
iii. any agreement concerning a partnership or joint
venture;
iv. any agreement (or group of related agreements) under
which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or
any capitalized lease obligation, in excess of
$50,000 or under which it has imposed a Security
Interest on any of its assets, tangible or
intangible;
v. any agreement concerning confidentiality or
noncompetition;
vi. any agreement with the Seller or any of his
Affiliates (other than the Company and its
Subsidiaries);
vii. any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance,
or other plan or arrangement for the benefit of its
current or former directors, officers, and employees;
viii. any collective bargaining agreement;
ix. any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis
providing annual compensation in excess of $50,000 or
providing severance benefits;
x. any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and
employees outside the Ordinary Course of Business;
xi. any agreement under which the consequences of a
default or termination could have a material adverse
effect on the business, financial condition,
operations, results of operations, or future
prospects of any of the Company or its Subsidiaries;
xii. any other agreement (or group of related agreements)
the performance of which involves consideration in
excess of $50,000; and
xiii. any agreement or arrangement pursuant to which the
Company or any of its Subsidiaries acts as agent,
general agent, master general agent, marketing agent
or in a similar capacity for any insurance company.
The Seller has delivered or made available to the Buyer a correct and complete
copy of each written agreement listed in Section 4(o) of the Disclosure Schedule
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 4(o) of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (B) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
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<PAGE>
p. Notes and Accounts Receivable. All notes and accounts
receivable of the Company and its Subsidiaries are reflected
properly on their books and records, are valid receivables
subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their
terms at their recorded amounts, subject only to the reserve
for bad debts set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with
the past custom and practice of the Company and its
Subsidiaries.
q. Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of any of the Company and its
Subsidiaries.
r. Insurance. Section 4(r) of the Disclosure Schedule sets forth
the following information with respect to each insurance
policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and
surety arrangements) under which any of the Company or its
Subsidiaries has been a named insured or otherwise the
beneficiary of coverage at any time within the past five
years:
i. the name, address, and telephone number of the agent;
ii. the name of the insurer, the name of the
policyholder, and the name of each covered insured;
iii. the policy number and the period of coverage;
iv. the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how
deductibles and ceilings are calculated and operate)
of coverage; and
v. a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither any of the Company or its Subsidiaries nor any other party
to the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. Each of the Company and its
Subsidiaries has been covered during the past five years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period. Section 4(r) of the Disclosure Schedule
describes any self-insurance arrangements affecting any of the Company and its
Subsidiaries.
s. Litigation. Section 4(s) of the Disclosure Schedule sets forth
each instance in which any of the Company or its Subsidiaries
(i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or is threatened
to be made a party to any action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi-
17
<PAGE>
judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. None
of the actions, suits, proceedings, hearings, and
investigations set forth in Section 4(s) of the Disclosure
Schedule could result in any material adverse change in the
business, financial condition, operations, results of
operations, or future prospects of any of the Company and its
Subsidiaries. Neither the Seller nor any of the directors or
officers (or employees with responsibility for litigation
matters) of the Company or its Subsidiaries has any reason to
believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against any of the
Company or its Subsidiaries.
t. Employees. To the Knowledge of the Seller and the directors
and officers (and employees with responsibility for employment
matters) of the Company and its Subsidiaries, no executive,
key employee, or group of employees has any plans to terminate
employment with any of the Company and its Subsidiaries, other
than the Seller in connection with this Agreement. None of the
Company or its Subsidiaries is a party to or bound by any
collective bargaining agreement, nor has any of them
experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. None of
the Company or its Subsidiaries has committed any unfair labor
practice. Neither the Seller nor any of the directors or
officers (or employees with responsibility for employment
matters) of the Company or its Subsidiaries has any Knowledge
of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to
employees of any of the Company or its Subsidiaries.
u. Employee Benefits.
i. Section 4(u) of the Disclosure Schedule lists each
Employee Benefit Plan that any of the Company or its
Subsidiaries maintains or to which any of the Company
or its Subsidiaries contributes.
(1) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund)
complies in form and in operation in all
respects with the applicable requirements of
ERISA, the Code, and other applicable laws.
(2) All required reports and descriptions
(including Form 5500 Annual Reports, Summary
Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed
appropriately with respect to each such
Employee Benefit Plan. The requirements of
Part 6 of Subtitle B of Title I of ERISA and
of Code Section 4980B have been met with
respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(3) All contributions (including all employer
contributions and employee salary reduction
contributions) which are due have been paid
to each such Employee Benefit Plan which is
an Employee Pension Benefit Plan and all
contributions for any period ending on or
before the Closing Date which are not yet
due have been paid to each such Employee
Pension
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<PAGE>
Benefit Plan or accrued in accordance with
the past custom and practice of the Company
and its Subsidiaries. All premiums or other
payments for all periods ending on or before
the Closing Date have been paid with respect
to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
(4) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the
requirements of a "qualified plan" under
Code Section 401(a) and has received, within
the last two years, a favorable
determination letter from the Internal
Revenue Service.
(5) The market value of assets under each such
Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the
present value of all vested and nonvested
Liabilities thereunder determined in
accordance with PBGC methods, factors, and
assumptions applicable to an Employee
Pension Benefit Plan terminating on the date
for determination.
(6) The Seller has delivered or made available
to the Buyer correct and complete copies of
the plan documents and summary plan
descriptions, the most recent determination
letter received from the Internal Revenue
Service, the most recent Form 5500 Annual
Report, and all related trust agreements,
insurance contracts, and other funding
agreements which implement each such
Employee Benefit Plan.
ii. With respect to each Employee Benefit Plan that any
of the Company, its Subsidiaries, and the Controlled
Group of Corporations which includes the Company and
its Subsidiaries maintains or ever has maintained or
to which any of them contributes, ever has
contributed, or ever has been required to contribute:
(1) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than
any Multiemployer Plan) has been completely
or partially terminated or been the subject
of a Reportable Event as to which notices
would be required to be filed with the PBGC.
No proceeding by the PBGC to terminate any
such Employee Pension Benefit Plan (other
than any Multiemployer Plan) has been
instituted or threatened.
(2) There have been no Prohibited Transactions
with respect to any such Employee Benefit
Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other
failure to act or comply in connection with
the administration or investment of the
assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or
investigation with respect to the
administration or the investment of the
assets of any such Employee Benefit Plan
(other than routine claims for benefits) is
pending or threatened. Neither the Seller
nor any of the directors or officers (or
employees with responsibility for employee
benefits matters) of the
19
<PAGE>
Company or its Subsidiaries has any
Knowledge of any Basis for any such action,
suit, proceeding, hearing, or investigation.
(3) None of the Company or its Subsidiaries has
incurred, and neither the Seller nor any of
the directors or officers (or employees with
responsibility for employee benefits
matters) of the Company and its Subsidiaries
has any reason to expect that any of the
Company or its Subsidiaries will incur, any
Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title
IV of ERISA (including any withdrawal
Liability) or under the Code with respect to
any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
iii. None of the Company, its Subsidiaries, or the other
members of the Controlled Group of Corporations that
includes the Company and its Subsidiaries contributes
to, ever has contributed to, or ever has been
required to contribute to any Multiemployer Plan or
has any Liability (including withdrawal Liability)
under any Multiemployer Plan.
iv. None of the Company or its Subsidiaries maintains or
ever has maintained or contributes, ever has
contributed, or ever has been required to contribute
to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other
welfare-type benefits for current or future retired
or terminated employees, their spouses, or their
dependents (other than in accordance with Code
Section 4980B).
v. Guaranties. None of the Company or its Subsidiaries is a
guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person.
w. Environment, Health, and Safety.
i. Each of the Company, its Subsidiaries, and their
respective predecessors and Affiliates has complied
with all Environmental, Health, and Safety Laws, and
no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any
failure so to comply. Without limiting the generality
of the preceding sentence, each of the Company, its
Subsidiaries, and their respective predecessors and
Affiliates has obtained and been in compliance with
all of the terms and conditions of all permits,
licenses, and other authorizations which are required
under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables
which are contained in, all Environmental, Health,
and Safety Laws.
ii. None of the Company or its Subsidiaries has any
Liability (and none of the Company, its Subsidiaries,
and their respective predecessors and Affiliates has
handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee
or other individual to any substance or condition, or
owned or operated any property or facility in any
manner that could form the
20
<PAGE>
Basis for any present or future action, suit,
proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of the
Company and its Subsidiaries giving rise to any
Liability) for damage to any site, location, or body
of water (surface or subsurface), for any illness of
or personal injury to any employee or other
individual, or for any reason under any
Environmental, Health, and Safety Law.
iii. All properties and equipment used in the business of
the Company, its Subsidiaries, and their respective
predecessors and Affiliates have been free of
asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous
Substances.
x. Certain Business Relationships With the Company and Its
Subsidiaries. Except as set forth on Section 4(x) of the
Disclosure Schedule, (i) neither the Seller nor any of his
Affiliates has been involved in any business arrangement or
relationship with any of the Company or its Subsidiaries
within the past 12 months, and (ii) neither the Seller nor any
of his Affiliates owns any asset, tangible or intangible,
which is used in the business of any of the Company and its
Subsidiaries.
y. Disclosure. The representations and warranties contained in
this Section 4 do not contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements and information contained in this
Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
a. General. Each of the Parties will use his or its reasonable
best efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and
make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing
conditions set forth in Section 7 below).
b. Notices and Consents. The Seller will, and will cause the
Company and its Subsidiaries to, give any notices to third
parties, and the Seller will, and will cause the Company and
its Subsidiaries to, use its reasonable best efforts to obtain
any third party consents, that the Buyer may request in
connection with the matters referred to in Section 4(c) above.
Each of the Parties will (and the Seller will cause the
Company and its Subsidiaries to) give any notices to, make any
filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred
to in Section 3(a)(ii), Section 3(b)(ii), and Section 4(c)
above. Without limiting the generality of the foregoing, each
of the Parties will file (and the Seller will cause the
Company and its Subsidiaries to file) any Notification and
Report Forms and related material that he or it may be
required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice
under the Hart- Scott-Rodino Act, will use his or its
reasonable best efforts to obtain (and the Seller will cause
the Company and its Subsidiaries to use their reasonable best
efforts to obtain) an early termination of the applicable
waiting period, and will make (and the Seller will
21
<PAGE>
cause the Company and its Subsidiaries to make) any further
filings pursuant thereto that may be necessary, proper, or
advisable in connection therewith.
c. Operation of Business. The Seller will not cause or permit the
Company or any of its Subsidiaries to engage in any practice,
take any action, or enter into any transaction outside the
Ordinary Course of Business. Without limiting the generality
of the foregoing, the Seller will not cause or permit the
Company or any of its Subsidiaries to (i) declare, set aside,
or pay any dividend or make any distribution with respect to
its capital stock or redeem, purchase, or otherwise acquire
any of its capital stock or (ii) otherwise engage in any
practice, take any action, or enter into any transaction of
the sort described in Section 4(h) above.
d. Preservation of Business. The Seller will cause the Company
and its Subsidiaries to keep its business and properties
substantially intact, including its present operations,
physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers, and employees.
In addition, the Seller will use his reasonable best efforts
to assign to the Company or one of its Subsidiaries, as
appropriate, any and all rights that the Seller has in his
individual capacity, including without limitation rights to
commissions, under any of the agreements described in Section
4(o)(xiii) of this Agreement, and will notify the Buyer
promptly if the counterparty to any such agreement refuses to
consent to such assignment.
e. Full Access. The Seller will cause the Company and its
Subsidiaries to permit representatives of the Buyer to have
full access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of the
Company and its Subsidiaries, to all premises, properties,
personnel, books, records (including Tax records), contracts,
and documents of or pertaining to each of the Company and its
Subsidiaries.
f. Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material adverse development
causing a breach of any of the representations and warranties
in Section 4 above. Each Party will give prompt written notice
to the other of any material adverse development causing a
breach of any of his or its own representations and warranties
in Section 3 above. No disclosure by either Party pursuant to
this Section 5(f), however, shall be deemed to amend or
supplement Annex I, Annex II, or the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
g. Exclusivity. The Seller will not, and will not cause or permit
the Company or its Subsidiaries to (i) solicit, initiate, or
encourage the submission of any proposal or offer from any
Person relating to the acquisition of any capital stock or
other voting securities, or any substantial portion of the
assets, of any of the Company or its Subsidiaries (including
any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other
manner any effort or attempt by any Person to do or seek any
of the foregoing. The Seller will not vote his Company Shares
in favor of any such acquisition structured as a merger,
consolidation, or share
22
<PAGE>
exchange. The Seller will notify the Buyer immediately if any
Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
a. General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of
this Agreement, each of the Parties will take such further
action (including the execution and delivery of such further
instruments and documents) as the other Party reasonably may
request, all the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification
therefor under Section 8 below). The Seller acknowledges and
agrees that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of
any sort relating to the Company and its Subsidiaries.
b. Litigation Support. In the event and for so long as either
Party actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving any of
the Company and its Subsidiaries, the other Party will
cooperate with him or it and his or its counsel in the contest
or defense, make available his or its personnel, and provide
such testimony and access to his or its books and records as
shall be necessary in connection with the contest or defense,
all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 below).
Notwithstanding the foregoing, in connection with the
litigation between the Company and [Trigon] which is pending
as of the date of this Agreement, any amounts to which the
Company becomes entitled after the Closing Date as a result of
the settlement or successful conclusion of such litigation
shall be payable one-half to the Seller and one-half to
Patrick Patterson, provided however, that there shall be
-------- -------
deducted from any such payments to the Seller and Mr.
Patterson the amount of all expenses incurred by or billed to
the Company after the Closing Date in connection with such
litigation, and provided further, that the Seller agrees to
-------- -------
use his reasonable best efforts to resolve such litigation
expeditiously.
c. Transition. The Seller will not take, and will not cause or
permit the Company or its Subsidiaries to take, any action
that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or
other business associate of any of the Company or its
Subsidiaries from maintaining the same business relationships
with the Company and its Subsidiaries after the Closing as it
maintained with the Company and its Subsidiaries prior to the
Closing. The Seller will refer all customer inquiries relat-
ing to the businesses of the Company and its Subsidiaries to
the Buyer from and after the Closing.
d. Confidentiality. The Seller will treat and hold as such all of
the Confidential Information, refrain from using any of the
Confidential Information except in connection with this
Agreement, and deliver promptly to the Buyer or destroy, at
the request and
23
<PAGE>
option of the Buyer, all tangible embodiments (and all copies)
of the Confidential Information which are in his possession.
In the event that the Seller is requested or required (by oral
question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Buyer promptly of the
request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the
provisions of this Section 6(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, the
Seller is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable
for contempt, the Seller may disclose the Confidential
Information to the tribunal; provided, however, that the
-------- -------
Seller shall use his or its reasonable best efforts to obtain,
at the reasonable request of the Buyer, an order or other
assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be
disclosed as the Buyer shall designate.
e. Covenant Not to Compete. For a period of two years from and
after the Closing Date, the Seller will not engage directly or
indirectly, or have any direct or indirect financial interest,
in any business which could reasonably be assumed to compete
with the business that any of the Company or its Subsidiaries
conducts as of the Closing Date in any geographic area in
which any of the Company and its Subsidiaries conducts that
business as of the Closing Date; provided, however, that no
-------- -------
owner of less than 1% of the outstanding stock of any
publicly-traded corporation shall be deemed to engage solely
by reason thereof in any of its businesses. If the final
judgment of a court of competent jurisdiction declares that
any term or provision of this Section 6(e) is invalid or
unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace
any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the
judgment may be appealed.
7. Conditions to Obligation to Close.
a. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
i. the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and
correct in all material respects at and as of the
Closing Date;
ii. the Seller shall have performed and complied with all
of his covenants hereunder in all material respects
through the Closing;
iii. the Seller shall have procured all of the third party
consents specified in Section 5(b) above;
24
<PAGE>
iv. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the
right of the Buyer to own the Seller's Company Shares
and to control the Company and its Subsidiaries, or
(D) affect adversely the right of any of the Company
or its Subsidiaries to own its assets and to operate
its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
v. no material adverse change shall have occurred in the
condition, financial or otherwise, of the Company or
its Subsidiaries since the dated of the Most Recent
Financial Statements;
vi. the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions
specified above in Section 7(a)(i)-(v) is satisfied
in all respects;
vii. all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated and the Parties,
the Company and its Subsidiaries shall have received
all other authorizations, consents, and approvals of
governments and governmental agencies referred to in
Section 3(a)(ii), Section 3(b)(ii), and Section 4(c)
above;
viii. the Buyer shall have received from counsel to the
Seller an opinion in form and substance as set forth
in Exhibit B attached hereto, addressed to the Buyer,
and dated as of the Closing Date;
ix. the closing under the Stock Purchase Agreement of
even date herewith between the Buyer and Patrick
Patterson (the "Patterson Purchase Agreement") shall
have occurred or shall occur simultaneously with the
Closing hereunder, and the Buyer and Mr. Patterson
shall have entered into the Employment Agreement
described in the Patterson Purchase Agreement;
x. the Buyer shall have received the resignation,
effective as of November 27, 1998, of the Seller in
his capacity as a director and officer of the Company
and its Subsidiaries;
xi. the Seller and the Company shall have terminated any
and all employment agreements or arrangements between
them, and the Seller shall have entered into a waiver
and release of all claims of the Seller against the
Company, whether arising under such employment
agreements or arrangements, with respect to
commissions or overrides, or otherwise; and
xii. all actions to be taken by the Seller and the Company
in connection with consummation of the transactions
contemplated hereby and all certificates,
25
<PAGE>
opinions, instruments, and other documents required
to effect the transactions contemplated hereby will
be satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
b. Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by him
in connection with the Closing is subject to satisfaction of
the following conditions:
i. the representations and warranties set forth in
Section 3(b) above shall be true and correct in all
material respects at and as of the Closing Date;
ii. the Buyer shall have performed and complied with all
of its covenants hereunder in all material respects
through the Closing;
iii. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be
rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or
charge shall be in effect);
iv. the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions
specified above in Section 7(b)(i)-(iii) is satisfied
in all respects;
v. all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated and the Parties,
the Company and its Subsidiaries shall have received
all other authorizations, consents, and approvals of
governments and governmental agencies referred to in
Section 3(a)(ii), Section 3(b)(ii), and Section 4(c)
above;
vi. the Seller shall have received from counsel to the
Buyer an opinion in form and substance as set forth
in Exhibit C attached hereto, addressed to the Seller
and dated as of the Closing Date; and
vii. all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments,
and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this Section 7(b) if he executes
a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
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<PAGE>
a. Survival of Representations and Warranties.
All of the representations and warranties of the Seller
contained in Section 4(a)-(j) and Section 4(l)-(y) above shall survive the
Closing hereunder (even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of three years thereafter. All of the other
representations and warranties of the Parties contained in this Agreement
(including the representations and warranties of the Seller contained in Section
4(k) above) shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect forever thereafter (subject to
any applicable statutes of limitations).
b. Indemnification Provisions for Benefit of the Buyer.
i. In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean
the Seller has breached) any of his representations,
warranties, and covenants contained herein (other
than the covenants in Section 2(a) above and the
representations and warranties in Section 3(a)
above), and, if there is an applicable survival
period pursuant to Section 8(a) above, provided that
the Buyer makes a written claim for indemnification
against the Seller pursuant to Section 10(g) below
within such survival period, then the Seller agrees
to indemnify the Buyer from and against the entirety
of any Adverse Consequences the Buyer may suffer
through and after the date of the claim for
indemnification (including any Adverse Consequences
the Buyer may suffer after the end of any applicable
survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the
breach (or the alleged breach).
ii. In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean
that the Seller has breached) any of his covenants in
Section 2(a) above or any of his representations and
warranties in Section 3(a) above, and, if there is an
applicable survival period pursuant to Section 8(a)
above, provided that the Buyer makes a written claim
for indemnification against the Seller pursuant to
Section 10(g) below within such survival period, then
the Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the
Buyer may suffer through and after the date of the
claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of
any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).
iii. The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the
Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any
Liability of any of the Company and its Subsidiaries
for the unpaid Taxes of any Person (other than any of
the Company and its Subsidiaries) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor,
by contract, or otherwise.
27
<PAGE>
iv. The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the
Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the
operation or business of the Company and its
Subsidiaries on or prior to the Closing Date.
c. Indemnification Provisions for Benefit of the Seller.
i. In the event the Buyer breaches (or in the event any
third party alleges facts that, if true, would mean
the Buyer has breached) any of its representations,
warranties, and covenants contained herein, and, if
there is an applicable survival period pursuant to
Section 8(a) above, provided that the Seller makes a
written claim for indemnification against the Buyer
pursuant to Section 10(g) below within such survival
period, then the Buyer agrees to indemnify the Seller
from and against the entirety of any Adverse
Consequences the Seller may suffer through and after
the date of the claim for indemnification (including
any Adverse Consequences the Seller may suffer after
the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach).
ii. The Buyer agrees to indemnify the Seller from and
against the entirety of any Adverse Consequences the
Seller may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the
operation or business of the Company and its
Subsidiaries after to the Closing Date, except to the
extent such Adverse Consequences involve, or are
alleged to involve, fraud or willful misconduct on
the part of the Seller.
d. Matters Involving Third Parties.
i. If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a
"Third Party Claim") which may give rise to a claim
for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided,
--------
however, that no delay on the part of the Indemnified
-------
Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
ii. Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim
with counsel of its choice reasonably satisfactory to
the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying
Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by
the Third Party Claim, (B) the Indemnifying Party
provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that
the Indemnifying Party will have the financial
resources
28
<PAGE>
to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder, (C) the
Third Party Claim involves only money damages and
does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the
good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice
adverse to the continuing business interests of the
Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim
actively and diligently.
iii. So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with
Section 8(d)(ii) above, (A) the Indemnified Party may
retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third
Party Claim, (B) the Indemnified Party will not
consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying
Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with
respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be
withheld unreasonably).
iv. In the event any of the conditions in Section
8(d)(ii) above is or becomes unsatisfied, however,
(A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim
in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties
will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the
Third Party Claim (including reasonable attorneys'
fees and expenses), and (C) the Indemnifying Parties
will remain responsible for any Adverse Consequences
the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 8.
e. Determination of Adverse Consequences. The Parties shall take
into account the time cost of money (using the Applicable Rate
as the discount rate) in determining Adverse Consequences for
purposes of this Section 8. All indemnification payments under
this Section 8 shall be deemed adjustments to the Purchase
Price.
f. Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in
derogation of, any statutory, equitable, or common law remedy
any Party may have for breach of representation, warranty, or
covenant. The Seller hereby agrees that he will not make any
claim for indemnification against any of the Company and its
Subsidiaries by reason of the fact that he or it was a
director, officer, employee, or agent of any such entity or
was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another
entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such claim is pursuant to
any statute, charter
29
<PAGE>
document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or demand brought
by the Buyer against the Seller (whether such action, suit,
proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
9. Termination.
a. Termination of Agreement. The Parties may terminate this
Agreement as provided below:
i. the Buyer and the Seller may terminate this Agreement
by mutual written consent at any time prior to the
Closing;
ii. the Buyer may terminate this Agreement by giving
written notice to the Seller on or before the 30th
day following the date of this Agreement if the Buyer
is not satisfied with the results of its continuing
business, legal, and accounting due diligence
regarding the Company and its Subsidiaries;
iii. the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the
Closing (A) in the event the Seller has breached any
material representation, warranty, or covenant
contained in this Agreement in any material respect,
the Buyer has notified the Seller of the breach, and
the breach has continued without cure for a period of
30 days after the notice of breach or (B) if the
Closing shall not have occurred as of January 1,
1999, by reason of the failure of any condition
precedent under Section 7(a) hereof (unless the
failure results primarily from the Buyer itself
breaching any representation, warranty, or covenant
contained in this Agreement); and
iv. the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the
Closing (A) in the event the Buyer has breached any
material representation, warranty, or covenant
contained in this Agreement in any material respect,
the Seller has notified the Buyer of the breach, and
the breach has continued without cure for a period of
30 days after the notice of breach or (B) if the
Closing shall not have occurred as of January 1,
1999, by reason of the failure of any condition
precedent under Section 7(b) hereof (unless the
failure results primarily from the Seller himself
breaching any representation, warranty, or covenant
contained in this Agreement).
b. Effect of Termination. If either Party terminates this
Agreement pursuant to Section 9(a) above, all rights and
obligations of the Parties hereunder shall terminate without
any Liability of a Party to the other Party (except for any
Liability of a Party then in breach).
10. Miscellaneous.
a. Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to
the subject matter of this Agreement prior to the Closing
without the prior written approval of the other Party;
provided, however, that
-------- -------
30
<PAGE>
a Party may make any public disclosure it believes in good
faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts
to advise the other Party prior to making the disclosure).
b. No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties
and their respective successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between
the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the
subject matter hereof. Notwithstanding the foregoing, this
Agreement does not supersede the provisions of Section 6 of
that certain Letter of Intent dated October 15, 1998 between
the Parties.
d. Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party
may assign either this Agreement or any of his or its rights,
interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer
-------- -------
may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate
one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its
obligations hereunder).
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall
be deemed duly given if (and then two business days after) it
is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended
recipient as set forth below:
<TABLE>
<CAPTION>
If to the Seller: Copy to:
----------------- --------
<S> <C>
Gregory D. Thaens Robert Pavlock, Esquire
9539 Viking Lane Pavlock and Pavlock
South Lyon, MI 48178 1540 American Center
27777 Franklin Road
Southfield, MI 48034
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
If to the Buyer: Copy to:
----------------- --------
<S> <C>
Penn Treaty American Corporation Ballard Spahr Andrews & Ingersoll, LLP
3440 Lehigh Street 1735 Market Street, 51st Floor
Allentown, PA 18103 Philadelphia, PA 19103
Attention: Cameron Waite Attention: Justin P. Klein, Esquire
</TABLE>
A Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. A
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
h. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA WITHOUT GIVING EFFECT TO ANY
CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
COMMONWEALTH OF PENNSYLVANIA OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE COMMONWEALTH OF PENNSYLVANIA.
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing
and signed by the Buyer and the Seller. No waiver by a Party
of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder
or affect in any way any rights arising by virtue of any prior
or subsequent such occurrence.
j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
k. Expenses. Each of the Parties, the Company and its
Subsidiaries will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
The Seller agrees that none of the Company or its Subsidiaries
has borne or will bear any of the Seller's costs and expenses
(including any of his legal fees and expenses) in connection
with this Agreement or any of the transactions contemplated
hereby.
l. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the
Parties and no presumption or burden of proof shall arise
favoring or disfavoring a Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations
32
<PAGE>
promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation.
The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance.
If a Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating
to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
m. Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement
are incorporated herein by reference and made a part hereof.
n. Specific Performance. Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in
the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the
other Party shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over
the Parties and the matter (subject to the provisions set
forth in Section 10(p) below), in addition to any other remedy
to which he or it may be entitled, at law or in equity.
o. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in
Allentown, Pennsylvania in any action or proceeding arising
out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to
bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives
any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety,
or other security that might be required of the other Party
with respect thereto. A Party may make service on the other
Party by sending or delivering a copy of the process to the
Party to be served at the address and in the manner provided
for the giving of notices in Section 10(h) above. Nothing in
this Section 10(p), however, shall affect the right of a Party
to serve legal process in any other manner permitted by law or
at equity. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be
enforced by suit on the judgment or in any other manner
provided by law or at equity.
* * * * *
33
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
PENN TREATY AMERICAN CORPORATION
Attest:
/s/ Michael F. Grill By: /s/ Cameron B. Waite
- -------------------- --------------------
Title: Treasurer
Title: Chief Financial Officer
-----------------------
Witness:
/s/ Steven M. Meldrum /s/ Gregory D. Thaens
- --------------------- ---------------------
Name: Steven M. Meldrum Gregory D. Thaens
34
