This AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
December 31, 2004 is made and entered into by and among THE BANCORP BANK, a
Delaware banking corporation ("Bank"), THE BANCORP, INC., a Delaware corporation
("Parent," and collectively with Bank, "Bancorp"), MEARS MOTOR LIVERY
CORPORATION, a Florida corporation ("Mears"), and JAMES C. HARTMAN ("Hartman"),
and ARROW HOLDINGS, a Wisconsin general partnership ("Holdings" and together
with Hartman, "Shareholders"). Capitalized terms not otherwise defined herein
have the meanings set forth in Section 13.01.
W I T N E S S E T H:
WHEREAS, as of the date hereof each of Shareholders owns forty five
(45) shares of common stock, no par value per share, of Mears, constituting all
issued and outstanding shares of capital stock of Mears (the "Shares");
WHEREAS, the parties desire to have Mears merge into Bank (the
"Merger") on the terms and subject to the conditions set forth in this Agreement
and
WHEREAS, prior to the Merger, Parent will be in control of Bank as
defined by the Code.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
I. THE MERGER
1.01. The Merger. In the event that all of the conditions set forth in
Article V and VI hereof have been satisfied or waived:
(a) The Continuing Corporation. On the Closing Date, Mears
shall merge with and into Bank, the separate existence of Mears shall cease and
Bank (sometimes hereinafter referred to as the "Continuing Corporation") shall
survive.
(b) Rights, Etc. Upon consummation of the Merger, the
Continuing Corporation shall thereupon and thereafter possess all of the rights,
privileges, immunities and franchises, of a public as well as of a private
nature, of Bank and Mears; and all property, real, personal and mixed and all
debts due on whatever account, and all other choses in action, all and every
other interest of or belonging to or due to each of the corporations so merged,
shall be deemed to be vested in the Continuing Corporation without further act
or deed; and the title to any real estate, or any interest therein, vested in
any of such corporations, shall not revert or be in any way impaired by reason
of the Merger as provided by the laws of the State of Delaware.
(c) Articles of Incorporation; Bylaws; Directors; Officers.
The Articles of Incorporation and Bylaws of the Continuing Corporation shall be
those of Bank, as in effect immediately prior to the Closing Date, and the
directors and officers of Bank in office immediately prior to the Closing Date
shall be the directors and officers of the Continuing Corporation, except that
Hartman shall be an officer of Bank pursuant to the Employment Agreement.
1.02. Closing. The Merger shall become effective (the "Effective Date")
upon the filing and acceptance of certificates of merger by the offices of the
Secretary of State of Delaware and the Secretary of State of Florida (the
"Certificates of Merger"); the parties shall use their best efforts to cause
such filings to occur on January 3, 2005. All documents required by the terms of
this Agreement to be delivered at or prior to consummation of the Merger shall
be exchanged by the parties at the closing of the Merger (the "Closing"), which
shall be held at the offices of Ledgewood Law Firm, P.C., or at such other place
as the parties mutually agree, at 10:00 A.M. local time, on December 31, 2004
(the "Closing Date").
1.03. Other Matters. Notwithstanding any term of this Agreement to the
contrary, Parent may, in its discretion at any time prior to the Closing Date,
designate a direct or indirect wholly-owned subsidiary to substitute for Bank as
a constituent corporation in the Merger by written notice to Shareholders so
long as the exercise of this right does not materially adversely affect the
interests of Shareholders, or cause a material delay in, or otherwise adversely
affect, consummation of the transactions contemplated herein.
1.04. Merger Consideration. Subject to the provisions of this
Agreement, at the Effective Date, automatically as a result of the Merger, and
without any action on the part of any party or shareholder:
(a) Outstanding Bank Common Stock. The shares of Bank common
stock issued and outstanding immediately prior to the Effective Date shall, on
and after the Effective Date, remain issued and outstanding shares of Bank
common stock.
(b) Outstanding Mears Common Stock. On the Effective Date, the
Shares of each Shareholder shall, by virtue of the Merger, automatically become
and be converted into the right to receive (i) One Hundred Twenty Six Thousand
Five Hundred Sixty Three (126,563) shares (subject to possible adjustment as set
forth in Section 1.06) of Parent common stock (the "Common Stock") and (ii) Five
Hundred Thousand Dollars ($500,000) in cash.
(c) Escrow. Each Shareholder shall deliver to American Stock
Transfer & Trust Company, as escrow agent (the "Escrow Agent"), under an escrow
agreement to be entered into on the Closing Date by Shareholders, Bancorp and
the Escrow Agent in the form attached hereto as Exhibit A (the "Escrow
Agreement"), stock powers representing Twenty Two Thousand Eight Hundred Ninety
Five (22,895) shares of Common Stock.
1.05. Exchange Adjustment.
(a) As promptly as practicable after the Effective Date,
Shareholders shall cause to be prepared and delivered to Bancorp a balance sheet
of Mears as of December 31, 2004 (the "Closing Balance Sheet"). Shareholders
shall make available to Bancorp all Books and Records and all work papers and
computer files used in connection with the preparation of the Closing Balance
Sheet. The Closing Balance Sheet delivered pursuant to this Section shall not be
binding on Bancorp if Bancorp timely exercises its right to dispute the same
pursuant to the procedures set forth herein. If Bancorp does not exercise such
right with respect to the Closing Balance Sheet on a timely basis, then Bancorp
shall be deemed to have accepted the same as delivered pursuant to this Section.
(b) If Bancorp disputes any item in the Closing Balance Sheet,
then Bancorp shall, within thirty (30) days after the delivery of the Closing
Balance Sheet, give Shareholders written notice of such dispute (an "Accounting
Dispute Notice") setting forth in reasonable detail each of the items in
dispute. In the event that an Accounting Dispute Notice is given to Shareholders
within such 30-day period, Shareholders and Bancorp shall attempt to resolve in
good faith and by mutual agreement the items in dispute within fifteen (15) days
after the delivery of such Accounting Dispute Notice. Failing agreement on all
items in dispute within such 15-day resolution period, Bancorp and Shareholders
shall submit such items in dispute for resolution to the Independent
Accountants. The Independent Accountants shall be instructed to resolve such
disputed items, based solely on written presentations by Bancorp and
Shareholders and not by independent review, and to deliver a written report to
the parties hereto upon such disputed items (the "IA Report"), all within 15
days after the submission of such disputed items to it. The IA Report shall be
(i) within the range of proposals established for such dispute by Bancorp and
Shareholders and (ii) deemed to be an agreement between Shareholders and Bancorp
with respect to the issues in dispute, and upon delivery of the IA Report to
Bancorp and Shareholders, the Closing Balance Sheet as set forth in the IA
Report shall be deemed to be final, conclusive and binding upon all the parties
hereto. The fees and expenses of the Independent Accountants incurred in
connection with the resolution of a dispute pursuant to this Section shall be
borne equally by Bancorp, on the one hand, and Shareholders, on the other.
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(c) If the Closing Balance Sheet (as deemed to be final and
binding pursuant to this Section) shows current earnings of less than $800,000,
then Bancorp and Shareholders shall give instructions to the Escrow Agent to
release Common Stock from the Escrow Account to Bancorp by an amount equal to
the difference based on a valuation of each share of Common Stock of $16.00 per
share and to release the balance of the Common Stock to Shareholders.
1.07. Tax-Free Reorganization. The parties intend, and shall use their
reasonable best efforts to ensure, that the Merger qualify as a reorganization
under Section 368(a)(2)(D) of the Code, and that the exchange of the Shares for
shares of Common Stock qualify as tax-free. The parties acknowledge that each is
relying on its own counsel in evaluating the tax consequences of the transaction
described in this Agreement.
1.08. Registration of Common Stock.
(a) No later than fifteen (15) Business Days after the Closing
Date, Parent shall prepare and file with the Securities and Exchange Commission
a registration statement (the "Registration Statement") registering the resale
of the shares of Common Stock and use its best efforts to cause the Registration
Statement to become effective, and keep the Registration Statement effective
until the earlier of Shareholders' disposal of all the Common Stock or the date
commencing on which Shareholders may dispose of the Common Stock pursuant to
Rule 144(k) promulgated under the Securities Act. Notwithstanding anything to
the contrary herein, Parent shall have the right (i) to defer the initial filing
or request for acceleration of effectiveness of any registration statement or
(ii) after effectiveness, to suspend effectiveness of any such registration
statement, if, in the good faith judgment of the board of directors of Parent
and upon the advice of counsel to Parent, such delay in filing or requesting
acceleration of effectiveness or such suspension of effectiveness is necessary
in light of the existence of material non-public information (financial or
otherwise) concerning Parent disclosure of which at the time is not, in the
opinion of the board of directors of Parent upon the advice of counsel, (A)
otherwise required and (B) in the best interests of Parent; provided however
that Parent will not delay or suspend effectiveness of such registration for
more than one (1) month, unless it is then engaged in an acquisition that would
make such registration impracticable, in which case it will use its best efforts
to eliminate such impracticability as soon as possible.
(b) Parent shall notify the Shareholders, in writing, promptly
after Parent has received notice of the time that the Registration Statement has
become effective or any supplement to any prospectus forming a part of the
Registration Statement has been filed.
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(c) Parent shall prepare and file with the Commission, and
promptly notify the Shareholders of the filings of, such amendments and
supplements to the Registration Statement and the prospectus contained therein
as may be necessary to keep the Registration Statement effective for the entire
period described in Section 1.08(a) above, and to comply with the provisions of
the Securities Act with respect to the sale or other disposition of all of the
Common Stock covered by the Registration Statement.
(d) If the Common Stock is then listed on any exchange or
NASDAQ, Parent shall prepare and file with such stock exchange or NASDAQ, if
necessary, a listing application with respect to the shares of Common Stock and
use its best efforts to cause such listing application to be approved.
(e) Parent shall furnish to Shareholders such numbers of
copies of the Registration Statement, a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the shares of
Common Stock owned by them.
(f) Parent shall use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by Shareholders, provided that Parent shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or jurisdictions
or to agree to any restrictions as to the conduct of its business in the
ordinary course. Parent will advise Shareholders promptly after it receives
notice of the issuance of any stop order, the suspension of the qualification of
the shares of Common Stock for offering or sale in any jurisdiction, any request
by any state securities regulating authority for amendment of the registration,
or requests by any state securities regulatory authority for additional
information with respect to the registration.
(g) Parent shall notify each Shareholder, at any time when a
prospectus relating to the Registration Statement is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(h) It shall be a condition precedent to the obligations of
Parent to take any action pursuant to this Section that the Shareholders furnish
to Parent such information regarding themselves and the intended method of
disposition of the shares of Common Stock as shall be required to effect the
registration.
(i) Parent shall bear and pay all expenses incurred in
connection with registration, filings or qualifications pursuant hereto,
including all registration, filing and qualification fees, printers' and
accounting fees and fees and disbursements of counsel for Parent, including the
reasonable fees and disbursements of one counsel for Shareholders, but not
including the cost of any fees or disbursements of counsel for Shareholders in
excess of $5,000 in the aggregate.
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(j) (i) To the extent permitted by law, Parent will indemnify,
hold harmless and defend each Shareholder against any Losses to which
each may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such Losses arise out of or are
based upon (collectively, a "Violation"): (A) any untrue statement or
alleged untrue statements of a material fact contained in a
registration statement filed pursuant to this Section, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (B) the omission or alleged omission
to state therein a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or (C) any violation or
alleged violation by Parent of the Securities Act, the Exchange Act,
any state securities law or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any state securities law in
connection with such registration statement; provided, however, that
the Parent shall not be liable for any such Loss to the extent that it
arises out of or is based upon a Violation which occurs in reliance
upon and in conformity with written information furnished expressly for
use in connection with such registration statement by such Shareholder
or to the extent it is based upon a violation by such Shareholder of
the Securities Act, the Exchange Act, or any other law.
(ii) To the extent permitted by law, each Shareholder shall,
severally and not jointly indemnify, hold harmless and defend Parent,
each of its directors, each of its officers who have signed the
registration statement and each Person, if any, who controls Parent
within the meaning of the Securities Act or the Exchange Act against
any Losses to which each may become subject under the Securities Act,
the Exchange Act or other federal or state law, insofar as such Losses
arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such
Shareholder expressly for use in connection with such registration
statement or to the extent it is based upon a violation by any
Shareholder of the Securities Act, the Exchange Act, or any other law.
1.09. Employee Matters. Bank covenants and agrees with Shareholders to
provide to employees of Mears retained by it after the Merger years of service
credit for their time worked with Mears in connection with Bank's Benefit Plans,
to the extent permitted by applicable Law.
II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders hereby jointly and severally represent and warrant to
Bancorp as follows:
2.01. Organization of Shareholders. Holdings is a Wisconsin general
partnership. Each Shareholder has full power and authority to execute and
deliver this Agreement and the Operative Agreements to which it is a party and
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby, including, without limitation, to
own, hold, sell and exchange (pursuant to this Agreement) the Shares. Holdings
is duly qualified, licensed or admitted to do business and is in good standing
in all jurisdictions in which the ownership, use or leasing of its Assets and
Properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary and in which the failure to be so qualified,
licensed or admitted and in good standing could reasonably be expected to have
an adverse effect on the validity or enforceability of this Agreement or any of
the Operative Agreements to which it is a party or on its ability to perform its
obligations hereunder or thereunder.
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2.02. Authority. The execution, delivery and performance by each of
Mears and Holdings of this Agreement and the Operative Agreements to which it is
a party have been duly and validly authorized by all necessary corporate and
stockholder action. This Agreement has been duly and validly executed and
delivered by each of Mears and each Shareholder and constitutes, and upon the
execution and delivery by each Shareholder of the Operative Agreements to which
it is a party, such Operative Agreements will constitute, its legal, valid and
binding obligations, each enforceable in accordance with their terms.
2.03. Organization of Mears. Mears is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Florida,
and has full corporate power and authority to conduct its business as and to the
extent now conducted and to own, use and lease its Assets and Properties.
Section 2.03 of the Disclosure Schedule lists all lines of business in which
Mears is participating or engaged. Mears is duly qualified, licensed or admitted
to do business and is in good standing in those jurisdictions specified in
Section 2.03 of the Disclosure Schedule, which are the only jurisdictions in
which the ownership, use or leasing of its Assets and Properties, or the conduct
or nature of its business, makes such qualification, licensing or admission
necessary. The name of each director and officer of Mears on the date hereof,
and the position with Mears held by each, are listed in Section 2.03 of the
Disclosure Schedule. Shareholders have prior to the execution of this Agreement
delivered to Bancorp true and complete copies of the certificate or articles of
incorporation and by-laws (or other comparable corporate charter documents) of
Mears as in effect on the date hereof.
2.04. Capital Stock. The authorized capital stock of Mears consists
solely of six hundred (600) shares of common stock, of which only the Shares are
issued and outstanding as of the date hereof. The Shares are duly authorized,
validly issued, outstanding, fully paid and nonassessable. Shareholders own the
Shares, beneficially and of record, free and clear of all Liens. Except for this
Agreement, there are no outstanding Options with respect to Mears.
2.05. Subsidiaries. Mears does not have, nor has it ever had, any
Subsidiaries except for Orlando Auto Sales, Inc., a Florida corporation
("Orlando Auto Sales").
2.06. No Conflicts. The execution and delivery by each of Mears and
each Shareholder of this Agreement do not, and the execution and delivery by
each Shareholder of the Operative Agreements to which it is a party, the
performance by Mears and each Shareholder of its obligations under this
Agreement and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents) of
either Holdings or Mears.
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.07 of the
Disclosure Schedule, conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to either Shareholder, Mears or
any of their respective Assets and Properties; or
(c) except as disclosed in Section 2.06 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require either Shareholder or Mears to obtain any consent, approval or
action of, make any filing with or give any notice to any Person as a result or
under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (vi) result
in the creation or imposition of any Lien upon any Assets and Properties of
either Shareholder or Mears under, any Contract or License to which any
Shareholder or Mears is a party or by which any of their respective Assets and
Properties is bound.
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2.07. Governmental Approvals and Filings. Except as disclosed in
Section 2.07 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
either Shareholders or Mears is required in connection with the execution,
delivery and performance of this Agreement or any of the Operative Agreements to
which it is a party or the consummation of the transactions contemplated hereby
or thereby.
2.08. Books and Records. The minute books and other similar records of
Mears and Orlando Auto Sales as made available to Bancorp prior to the execution
of this Agreement contain a true and complete record, in all material respects,
of all action taken at all meetings and by all written consents in lieu of
meetings of the stockholders, the boards of directors and committees of the
boards of directors of Mears. The stock transfer ledgers and other similar
records of Mears as made available to Bancorp prior to the execution of this
Agreement accurately reflect all record transfers prior to the execution of this
Agreement in the capital stock of Mears. Mears does not have any of its Books
and Records recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of Mears.
2.09. Financial Statements. Attached hereto as Schedule 2.09 are true
and complete copies of the following financial statements:
(a) the audited balance sheet of Mears as of March 31, 2004,
together with a true and correct copy of the report on such audited information
by Doyle, Hull & Gregory Certified Public Accountants, Inc., Mears's independent
accountants, and all letters from such accountants with respect to the results
of such audits; and
(b) the unaudited balance sheet of Mears as of October 31,
2004.
All such financial statements fairly present the financial condition of
Mears as of the respective dates thereof and for the respective periods covered
thereby.
2.10. Absence of Changes. Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto on the Closing
Date, since the Audited Financial Statement Date there has not been any material
adverse change, or any event or development which, individually or together with
other such events, could reasonably be expected to result in a material adverse
change, in the Business or Condition of Mears. Without limiting the foregoing,
except as disclosed in Section 2.10 of the Disclosure Schedule, there has not
occurred between the Audited Financial Statement Date and the date hereof:
(a) any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of Mears or any direct or
indirect redemption, purchase or other acquisition by Mears of any such capital
stock of or any Option with respect to Mears;
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(b) any authorization, issuance, sale or other disposition by
Mears of any shares of capital stock of or Option with respect to Mears, or any
modification or amendment of any right of any holder of any outstanding shares
of capital stock of or Option with respect to Mears;
(c) (x) any increase in the salary, wages or other
compensation of any officer, employee or consultant of Mears whose annual salary
is, or after giving effect to such change would be, $100,000 or more; (y) any
establishment or modification of (A) targets, goals, pools or similar provisions
in respect of any fiscal year under any Benefit Plan, employment Contract or
other employee compensation arrangement or (B) salary ranges, increase
guidelines or similar provisions in respect of any Benefit Plan, employment
Contract or other employee compensation arrangement; or (z) any adoption,
entering into, amendment, modification or termination (partial or complete) of
any Benefit Plan except to the extent required by applicable Law and, in the
event compliance with legal requirements presented options, only to the extent
the option which Mears reasonably believed to be the least costly was chosen;
(d) (A) incurrences by Mears of Indebtedness, or (B) except as
may have occurred in the ordinary course of business in connection with any
Company Lease, any voluntary purchase, cancellation, prepayment or complete or
partial discharge in advance of a scheduled payment date with respect to, or
waiver of any right of Mears under, any Indebtedness of or owing to Mears;
(e) with respect to any property leased under a Company Lease,
any physical damage, destruction or other casualty loss (whether or not covered
by insurance) affecting any of the plant, real or personal property or equipment
of Mears in an aggregate amount exceeding $50,000;
(f) any material change in (w) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or Tax practice or
policy of Mears, (x) any method of calculating any bad debt, contingency or
other reserve of Mears for accounting, financial reporting or Tax purposes, (y)
the fiscal year of Mears or (z) any credit policy or standard of Mears,
including, without limitation, criteria relating to placement of a lessee or a
debtor on any credit watch or other similar list maintained by Mears;
(g) with respect to any property leased under a Company Lease,
any write off or write down of or any determination to write off or down any of
the Assets and Properties of Mears in an aggregate amount exceeding $10,000 per
month;
(h) except as may have occurred in the ordinary course of
business with respect to any property leased under a Company Lease, any
acquisition or disposition of, or incurrence of a Lien (other than a Permitted
Lien) on, any Assets and Properties of Mears;
(i) any amendment of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents) of
Mears;
(j) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to (A) any Contract which is required (or had it been in effect on the
date hereof would have been required) to be disclosed in the Disclosure Schedule
pursuant to Section 2.19(a) or (B) any material License held by Mears;
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(k) except as may have occurred in the ordinary course of
business with respect to any property leased under a Company Lease, capital
expenditures or commitments for additions to property, plant or equipment of
Mears constituting capital assets in an aggregate amount exceeding $10,000;
(l) any commencement or termination by Mears of any line of
business;
(m) any transaction by Mears with either Shareholder, any
officer, director, Affiliate or Associate of either Shareholder or any Associate
of any such officer, director or Affiliate (other than Mears) (A) outside the
ordinary course of business consistent with past practice or (B) other than on
an arm's-length basis, other than pursuant to any Contract in effect on the
Audited Financial Statement Date and disclosed to Bancorp pursuant to Section
2.22(a);
(n) any entering into of an agreement to do or engage in any
of the foregoing after the date hereof; or
(o) any other transaction involving or development affecting
Mears outside the ordinary course of business consistent with past practice.
2.11. No Undisclosed Liabilities. Except as reflected or reserved
against in the balance sheet included in the Audited Financial Statement or in
the notes thereto or as disclosed in Section 2.11 of the Disclosure Schedule or
as set forth in Section 2.12(d) below, there are no Liabilities against,
relating to or affecting Mears, Orlando Auto Sales or any of its Assets and
Properties, other than Liabilities incurred in the ordinary course of business
consistent with past practice which in the aggregate are not material to the
Business or Condition of Mears.
2.12. Taxes. Except as set forth in Section 2.12 of the Disclosure
Schedule :
(a) Mears has filed all Tax Returns required to be filed by
applicable law, maintained all documents and records relating to Taxes as are
required to be made or provided or maintained by it and has complied in all
respects with all legislation relating to Taxes applicable to it.
(b) All Tax Returns referred to in paragraph (a) above were in
all respects (and, as to Tax Returns not filed as of the date hereof, will be)
true, complete and correct and filed on a timely basis. There is no claim
outstanding made by an authority of a jurisdiction where Mears is doing
business.
(c) Mears has, within the time and in the manner prescribed by
law, paid (and until the Closing Date will pay within the time and in the manner
prescribed by law) all Taxes that are due and payable.
(d) Mears has not established on the Books and Records
reserves adequate to pay all Taxes not yet due and payable.
(e) There are no Tax Liens upon the assets of Mears except
Liens for Taxes not yet due.
(f) Mears has not requested any extension of time within which
to file any Tax Return, which Tax Return has not since been filed.
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(g) Mears has not executed any outstanding waivers or
comparable consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns.
(h) The statute of limitations for the assessment of all Taxes
in those jurisdictions in which Mears maintains an office has expired for all
applicable Tax Returns or those Tax Returns have been submitted to the
appropriate taxing authorities for all periods through the dates reflected in
Section 2.12 of the Disclosure Schedule and no deficiency for any Taxes has been
proposed, asserted or assessed against Mears that has not been resolved and paid
in full.
(i) No audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax Returns of
Mears and no Tax Authority has notified Mears that it intends to investigate its
Tax affairs.
(j) No power of attorney currently in force has been granted
by Mears concerning any Tax matter.
(k) Mears has not received a Tax ruling or entered into a
Closing Agreement with any Tax Authority that would have a continuing adverse
effect after the Closing Date.
(l) Shareholders have prior to the execution of this Agreement
delivered to Bancorp true and complete copies of (i) all Tax Returns, and any
amendments thereto, filed by Mears since 1998, (ii) all audit reports received
from any Tax Authority relating to any Tax Return filed by Mears and (iii) any
Closing Agreements entered into by Mears with any Tax Authority.
(m) No event, transaction, act or omission has occurred which
could result in Mears becoming liable to pay or to bear any Tax as a transferee,
successor or otherwise which is primarily or directly chargeable or attributable
to any other Person. Mears has no actual or contingent liability (whether by
reason of any indemnity, warranty or otherwise) to any other Person in respect
of any actual, contingent or deferred liability of such person for Taxes.
(n) Mears has complied (and until the Closing Date will
comply) in all respects with the provisions of the Code relating to the payment
and withholding of Taxes, including, without limitation, the withholding and
reporting requirements under Code Sections 1441 through 1464, 3401 through 3606,
and 6041 and 6049, as well as similar provisions under any other laws, and has,
within the time and in the manner prescribed by law, withheld and paid over to
the proper governmental authorities all amounts required in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(o) Mears has not been a member of an Affiliated Group filing
a consolidated, combined or unitary Tax Return for income Tax purposes.
(p) Mears has no any liability for Taxes of any Person other
than Mears (i) under Reg.ss.1.1502-6 (or any similar provision of state, local
or foreign law) (ii) as a transferee or successor or (iii) by contract or
otherwise.
(q) No property of Mears is property that it or any party to
this transaction is or will be required to treat as being owned by another
person pursuant to the provisions of Code ss. 168(f)(8) (as in effect prior to
its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Code ss. 168.
10
(r) Mears is not required to include in income any adjustment
pursuant to Code ss. 481(a) by reason of a voluntary change in accounting method
initiated by Mears, and to the best of the knowledge of Shareholders (after
having made due inquiry of Mears), the IRS has not proposed any such adjustment
or change in accounting method.
(s) No election under Code ss. 338 (or any predecessor
provisions) has been made by Mears with respect to any of its Assets and
Properties.
(t) Mears has not been a United States real property holding
company (as defined in Code ss. 897(c)(2)) during the applicable period
specified in Code ss. 897(c)(1)(ii).
(u) Mears is not subject to any contract, obligation or
commitment under which it will or may any time hereafter be or become liable to
make any payment (or provide any other amount in money or money's worth) of a
revenue nature which (in either such case) is not deductible, depreciable or
amortizable in full in computing the income of Mears for the purpose of any
Taxes on income or profits to which Mears may be subject, other than any payment
relating to the acquisition of assets which is treated as having an indefinite
useful life for purposes of the relevant Tax or payments of the principal of any
Indebtedness which is not deductible.
(v) Mears has not disposed of any asset or supplied any
service or business facility of any kind (including a loan of money or the
letting, hiring or licensing of any property whether tangible or intangible) in
circumstances where the consideration to be received for such disposal or supply
will be less than the consideration deemed received for Tax purposes.
2.13. Legal Proceedings. Except as disclosed in Section 2.13 of the
Disclosure Schedule:
(a) there are no Actions or Proceedings pending or, to the
knowledge of Shareholders, threatened against, relating to or affecting either
Shareholder or Mears or any of their respective Assets and Properties which (i)
could reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement or any of the Operative
Agreements or otherwise result in a material diminution of the benefits
contemplated by this Agreement or any of the Operative Agreements to Bancorp, or
(ii) if determined adversely to either Shareholder or Mears, could reasonably be
expected to result in (y) any injunction or other equitable relief against Mears
that would interfere in any material respect with its business or operations or
(z) Losses by Mears;
(b) there are no facts or circumstances known to Shareholders
that could reasonably be expected to give rise to any Action or Proceeding that
would be required to be disclosed pursuant to clause (a) above; and
(c) there are no Orders outstanding against Mears.
Prior to the execution of this Agreement, Shareholders have delivered
to Bancorp all responses of counsel for Mears to auditors' requests for
information delivered in connection with the Audited Financial Statement
(together with any updates provided by such counsel) regarding Actions or
Proceedings pending or threatened against, relating to or affecting Mears.
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2.14. Compliance With Laws and Orders. Except as disclosed in Section
2.14 of the Disclosure Schedule, Mears is not, nor has it, at any time within
the last five (5) years been, nor has it received any notice that it is or has
at any time within the last five (5) years been, in violation of or in default
under, in any material respect, any Law or Order applicable to Mears or any of
its Assets and Properties, including, without limitation, applicable U.S.
federal and state truth-in-leasing Laws, the U.S. Consumer Leasing Act, 15
U.S.C. 1667, and Article 2-A of the Uniform Commercial Code as adopted in all
applicable states.
2.15. Benefit Plans; ERISA.
(a) Section 2.15(a) of the Disclosure Schedule (i) contains a
true and complete list and description of each of the Benefit Plans, (ii)
identifies each of the Benefit Plans that is a Qualified Plan, (iii) identifies
each Benefit Plan which at any time during the five-year period preceding the
date of this Agreement was at any time a Defined Benefit Plan and (iv) lists,
describes and identifies each other Plan maintained, established, sponsored or
contributed to by an ERISA Affiliate, or any predecessor thereof, which, during
the five-year period preceding the date of this Agreement, was at any time a
Defined Benefit Plan. Mears has not scheduled or agreed upon future increases of
benefit levels (or creations of new benefits) with respect to any Benefit Plan,
and no such increases or creation of benefits have been proposed, made the
subject of representations to employees or requested or demanded by employees
under circumstances which make it reasonable to expect that such increases will
be granted. Except as disclosed in Section 2.15(a) of the Disclosure Schedule,
no loan is outstanding between Mears and any employee.
(b) Except as set forth in Section 2.15(b) of the Disclosure
Schedule, Mears does not maintain and is not obligated to provide benefits under
any life, medical or health plan (other than as an incidental benefit under a
Qualified Plan) which provides benefits to retirees or other terminated
employees other than benefit continuation rights under the Consolidated Omnibus
Budget Reconciliation of 1985, as amended.
(c) Except as set forth in Section 2.15(c) of the Disclosure
Schedule, each Benefit Plan covers only employees who are employed by Mears (or
former employees or beneficiaries with respect to service with Mears), so that
the transactions contemplated by this Agreement will require no spin-off of
assets and liabilities or other division or transfer of rights with respect to
any such Plan.
(d) Neither Mears nor any other corporation or organization
controlled by or under common control with any of the foregoing within the
meaning of Section 4001 of ERISA has at any time contributed to any
"multiemployer plan" as that term is defined in Section 4001 of ERISA.
(e) Each of the Benefit Plans is, and its administration is
and has been since inception, in all respects in compliance with, and Mears has
not received any claim or notice that any such Benefit Plan is not in compliance
with, all applicable Laws and Orders and prohibited transactions exemptions,
including the requirements of ERISA, the Code, the Age Discrimination in
Employment Act, the Equal Pay Act and Title VII of the Civil Rights Act of 1964.
Each Qualified Plan is qualified under Section 401(a) of the Code, and, if
applicable, complies with the requirements of Section 401(k) of the Code. Each
Benefit Plan which is intended to provide for the deferral of income, the
reduction of salary or other compensation or to afford other Tax benefits
complies with the requirements of the applicable provisions of the Code or other
Laws required in order to provide such Tax benefits.
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(f) None of Shareholders or Mears is in default in performing
any of its contractual obligations under any of the Benefit Plans or any related
trust agreement or insurance contract. All contributions and other payments
required to be made by Shareholders or Mears to any Benefit Plan with respect to
any period ending at the Closing Date have been made or reserves adequate for
such contributions or other payments have been or will be set aside therefor and
have been or will be reflected in Financial Statements. There are no material
outstanding liabilities of any Benefit Plan other than liabilities for benefits
to be paid to participants in such Benefit Plan and their beneficiaries in
accordance with the terms of such Benefit Plan.
(g) No event has occurred, and there exists no condition or
set of circumstances in connection with any Benefit Plan, under which Mears,
directly or indirectly (through any indemnification agreement or otherwise),
could reasonably be expected to be subject to any risk of material liability
under Section 409 of ERISA, Section 502(i) of ERISA, Title IV of ERISA or
Section 4975 of the Code.
(h) No transaction contemplated by this Agreement will result
in liability to the PBGC under Section 302(c)(2), 4062, 4063, 4064 or 4069 of
ERISA or otherwise, with respect to Mears, Bancorp or any corporation or
organization controlling, controlled by or under common control with any of the
foregoing within the meaning of Section 4001 of ERISA, and no event or condition
exists or has existed which could result in any such liability with respect to
Bancorp, Mears or any such corporation or organization. No "reportable event"
within the meaning of Section 4043 of ERISA or the regulations thereunder has
occurred with respect to any Defined Benefit Plans. No termination
re-establishment or spin-off re-establishment transaction has occurred with
respect to any Subject Defined Benefit Plan. No Subject Defined Benefit Plan has
incurred any accumulated funding deficiency whether or not waived. No filing has
been made and no proceeding has been commenced for the complete or partial
termination of, or withdrawal from, any Benefit Plan which is a Pension Benefit
Plan. Without limiting any other provision of this Section 2.15, to the
knowledge of Shareholders, no event has occurred and no condition exists, with
respect to any employee benefit plan, program or arrangement, or other plan,
program or arrangement covering independent contractors, that has subjected or
could subject Mears, or any Benefit Plan or any successor thereto, to any tax,
fine, penalty or other liability (other than a liability arising in the normal
course to make contributions or payments, as applicable, when ordinarily due
under a Benefit Plan with respect to employees of Mears). No event has occurred
and no condition exists, with respect to any such plan, program or arrangement
that could subject Bancorp or any of its Affiliates, or any Benefit Plan
maintained by Bancorp or any of its Affiliates, to any tax, fine, penalty or
other liability, that would not have been incurred by Bancorp or any of its
Affiliates, or any such plan, program or arrangement, but for the transactions
contemplated hereby.
(i) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement except as disclosed on Section
2.15(i) of the Disclosure Schedule. No "excess parachute payment" under Section
280G of the Code will arise, directly or indirectly, by virtue of the
transactions contemplated hereby.
(j) To the knowledge of Shareholders, there are no pending or
threatened claims by or on behalf of any Benefit Plan, by any person covered
thereby, or otherwise, which allege violations of Law which could reasonably be
expected to result in liability on the part of Bancorp, Mears or any fiduciary
of any such Benefit Plan, nor is there any basis for such a claim.
13
(k) No employer securities, employer real property or other
employer property is included in the assets of any Benefit Plan.
(l) The fair market value of the assets of each Subject
Defined Benefit Plan, as determined as of the last day of the plan year of such
plan which coincides with or first precedes the date of this Agreement, was not
less than the present value of the projected benefit obligations under such plan
at such date as established on the basis of the actuarial assumptions applicable
under such Defined Benefit Plan at said date and, to the knowledge of
Shareholders, there have been no material changes in such values since said
date.
(m) Complete and correct copies of the following documents to
the extent they exist have been furnished to Bancorp prior to the execution of
this Agreement:
(i) the Benefit Plans and any predecessor plans referred to
therein, any related trust agreements, and service provider agreements,
insurance contracts or agreements with investment managers, including
without limitation, all amendments thereto;
(ii) current summary Plan descriptions of each Benefit Plan
subject to ERISA, and any similar descriptions of all other Benefit
Plans;
(iii) the most recent Form 5500 and Schedules thereto for each
Benefit Plan subject to ERISA reporting requirements;
(iv) the most recent determination of the IRS with respect to
the qualified status of each Qualified Plan;
(v) the most recent accountings with respect to any Benefit
Plan funded through a trust;
(vi) the most recent actuarial report of the qualified actuary
of any Subject Defined Benefit Plan or any other plan with respect to
which actuarial valuations are conducted; and
(vii) all qualified domestic relations orders or other orders
governing payments from any Benefit Plan.
2.16. Real Property. Mears does not own any real property. Mears does
not lease any real property, except for that which will be subject to the Lease.
To the knowledge of Shareholders, there are no condemnation or appropriation
proceedings pending or threatened against any of such real property or the
improvements thereon.
2.17. Tangible Personal Property. Mears is in possession of and has
good title to, or has valid leasehold interests in or valid rights under
Contract to use, all tangible personal property used in the conduct of its
business, including all tangible personal property reflected on the balance
sheet included in the Unaudited Financial Statements and tangible personal
property acquired since the Unaudited Financial Statement Date other than
property disposed of since such date in the ordinary course of business
consistent with past practice. All such tangible personal property owned by
Mears is free and clear of all Liens, other than Permitted Liens and Liens
disclosed in Section 2.17 of the Disclosure Schedule, and its use complies in
all material respects with all applicable Laws.
14
2.18. Intellectual Property Rights. Except as set forth in Section 2.18
of the Disclosure Schedule, Mears has such ownership and use (free and clear of
all Liens) of, or rights by license, lease or other agreement to use (free and
clear of all Liens), of all Intellectual Property used in its business as is
necessary to permit Mears to conduct its business and operations as currently
conducted, except where the failure to have any such right would not have a
material adverse effect on the Business or Condition of Mears. Except as
disclosed in Section 2.18 of the Disclosure Schedule, (i) there are no
restrictions on the direct or indirect transfer of any license, or any interest
therein, held by Mears in respect of such Intellectual Property and (ii) Mears
is not, nor has it received any notice that it is, in default (or with the
giving of notice or lapse of time or both, would be in default) under any
license to use such Intellectual Property. Neither Shareholders nor Mears has
received notice that Mears is infringing any Intellectual Property of any other
Person, no claim is pending or, to the knowledge of Shareholders, has been made
to such effect that has not been resolved and, to the knowledge of Shareholders,
Mears is not infringing any Intellectual Property Rights of any other Person.
2.19. Contracts.
(a) Section 2.19(a) of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts or other arrangements (true and complete
copies or, if none, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and all waivers of
any terms thereof, have been delivered to Bancorp prior to the execution of this
Agreement), to which Mears is a party or by which any of its Assets and
Properties is bound:
(i) (A) all Contracts (excluding Benefit Plans) providing for
a commitment of employment or consultation services for a specified or
unspecified term, the name, position and rate of compensation of each
Person party to such a Contract and the expiration date of each such
Contract; and (B) any written or unwritten representations,
commitments, promises, communications or courses of conduct (excluding
Benefit Plans) involving an obligation of Mears to make payments in any
year, other than with respect to salary or incentive compensation
payments in the ordinary course of business, to any employee;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of Mears or any officer,
director or employee of Mears to engage in any business activity or
compete with any Person or prohibiting or limiting the ability of any
Person to compete with Mears;
(iii) all partnership, joint venture, registration rights,
shareholders' or other similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness of Mears or to
preferred stock issued by Mears (other than Indebtedness owing to
Mears);
(v) all Contracts (A) with distributors, vendors, dealers,
manufacturer's representatives, sales agencies or franchisees,
including, without limitation, any vendor program agreements, and (B)
with clients, customers or other Persons that, in the case of this
clause (B), provide for (y) rebates or any fee sharing or other similar
arrangement or (z) maintenance or other servicing responsibilities;
15
(vi) all Contracts relating to (A) the future disposition or
acquisition of any Assets and Properties or (B) any Business
Combination;
(vii) all Contracts between or among Mears, on the one hand,
and either Shareholder, any officer, director, Affiliate or Associate
of either Shareholder or any Associate of any such officer, director or
Affiliate (other than Mears), on the other hand;
(viii) all collective bargaining or similar labor Contracts;
(ix) all Contracts that (A) limit or contain restrictions on
the ability of Mears to declare or pay dividends on, to make any other
distribution in respect of or to issue or purchase, redeem or otherwise
acquire its capital stock, to incur Indebtedness, to incur or suffer to
exist any Lien, to purchase or sell any Assets and Properties, to
change the lines of business in which it participates or engages or to
engage in any Business Combination or (B) require Mears to maintain
specified financial ratios or levels of net worth or other indicia of
financial condition;
(x) all take or pay or requirements Contracts or any other
Contracts or agreements requiring Mears to pay regardless of whether
products or services are received; and
(xi) all other Contracts that (A) involve the payment or
potential payment, pursuant to the terms of any such Contract, by or to
Mears and (B) cannot be terminated within thirty (30) calendar days
after giving notice of termination without resulting in any material
cost or penalty to Mears.
(b) Each Contract required to be disclosed in Section 2.19(a)
of the Disclosure Schedule is in full force and effect and constitutes a legal,
valid and binding agreement, enforceable in accordance with its terms, of each
party thereto; and except as disclosed in Section 2.19(b) of the Disclosure
Schedule neither Mears, nor, to the knowledge of Shareholders, any other party
to such Contract is, or has received notice that it is, in violation or breach
of or default under any such Contract (or with notice or lapse of time or both,
would be in violation or breach of or default under any such Contract).
(c) Except as disclosed in Section 2.19(c) of the Disclosure
Schedule:
(i) each Company Lease is evidenced by a written agreement,
there are no material understandings, agreements, undertakings or
arrangements between Mears and the lessees or transferees under any
Company Lease which are not set forth in such Company Lease or in a
written agreement (including correspondence, memoranda and notations on
the computer system of Mears) included in the file of Mears relating to
such Company Lease and such written agreements constitute all documents
reasonably necessary to enforce such Company Lease;
(ii) no payments required to be made under any Company Lease
have been paid, at the request or suggestion of Mears, more than 60
days in advance of the due dates thereof and the payments due under the
Company Leases have not been assigned, pledged or otherwise
hypothecated by Mears;
16
(iii) Mears has not acted, or failed to act, in a manner which
would materially alter or reduce any of its rights or benefits under
any manufacturers' or vendors' warranties or guarantees relating to
property covered by any Company Lease;
(iv) the Books and Records with respect to each Company Lease
are complete and accurate;
(v) Mears has properly prepared and filed financing statements
covering all property subject to each Company Lease necessary to duly
perfect a first lien security interest therein, except in the case of
individual Company Leases for which Mears's policy is not to file
financing statements in accordance with Mears's policy (a complete and
correct copy of which has been provided to Bancorp by Shareholders);
(vi) each Company Lease (and any related guarantees) is and
will continue to be after Closing, a valid, binding and enforceable,
non-cancelable obligation of the lessee thereunder (and guarantors
thereof) in accordance with its terms, each of which lessees and
guarantors shall be a bona fide party thereto, having legal capacity to
contract;
(vii) to the knowledge of Shareholders, no lessee under a
Company Lease is threatened with or subject to a proceeding involving
bankruptcy or insolvency;
(viii) the property that is the subject of each Company Lease
has been or will be delivered to the lessee thereunder, and accepted by
such lessee, except where delivery has been waived prior to payment of
the vendor pursuant to a supplement to a Company Lease;
(ix) Mears shall have absolute, complete and indefeasible
title to the property subject to each Company Lease (or a duly
perfected first-lien security interest in the property subject to such
Company Lease except with respect to the property subject to those
Company Leases for which Mears's policy is not to file financing
statements), the Company Lease and all sums due thereunder, free and
clear of any and all Liens or claims of any Person; the supplier or
vendor of said property has received or will receive payment in full
for said property; and
(x) in the six (6) months immediately prior to Closing, all
Company Leases and loans have had payments made only by the party who
is the named contractual customer thereunder except from time to time
said payments may be made by a guarantor or a vendor with the express
permission of Mears.
(d) Except as disclosed in Section 2.19(d) of the Disclosure
Schedule, Mears is not a party to or bound by any Contract that has been or
could reasonably be expected to be, individually or in the aggregate with any
other such Contracts, materially adverse to the Business or Condition of Mears.
2.20. Licenses. Section 2.20 of the Disclosure Schedule contains a true
and complete list of all Licenses used in and material to the business or
operations of Mears, setting forth the owner, the function and the expiration
and renewal date of each. Prior to the execution of this Agreement, Shareholders
have delivered to Bancorp true and complete copies of all such Licenses. Except
as disclosed in Section 2.20 of the Disclosure Schedule:
17
(a) Mears owns or validly holds all Licenses that are material
to its business or operations;
(b) each License listed in Section 2.20 of the Disclosure
Schedule is valid, binding and in full force and effect and, except as disclosed
in Section 2.07 of the Disclosure Schedule, the transactions contemplated by
this Agreement will not result in its termination or otherwise affect its
effectiveness; and
(c) Mears is not, nor has it received any notice that it is,
in default (or with the giving of notice or lapse of time or both, would be in
default) under any such License.
2.21. Insurance. Section 2.21 of the Disclosure Schedule contains a
true and complete list (including the names and addresses of the insurers, the
expiration dates thereof, the annual premiums and payment terms thereof and a
brief description of the interests insured thereby) of all liability, property,
workers' compensation, directors' and officers' liability and other insurance
policies currently in effect that insure the business, operations or employees
of Mears or affect or relate to the ownership, use or operation of any of the
Assets and Properties of Mears and that (i) have been issued to Mears or (ii)
have been issued to any Person for the benefit of Mears (other than in
accordance with the terms of any Company Lease). The insurance coverage provided
by the policies described in clause (i) above will not terminate or lapse by
reason of the transactions contemplated by this Agreement. Each policy listed in
Section 2.21 of the Disclosure Schedule is valid and binding and in full force
and effect, no premiums due thereunder have not been paid and neither Mears nor
the Person to whom such policy has been issued has received any notice of
cancellation or termination in respect of any such policy or is in default
thereunder. The insurance policies listed in Section 2.21 of the Disclosure
Schedule, in light of the business, operations and Assets and Properties of
Mears, are in amounts and have coverages that are reasonable and customary for
Persons engaged in such businesses and operations and having such Assets and
Properties. Mears has not received notice that any insurer under any policy
referred to in this Section 2.21 (x) is denying liability with respect to a
claim thereunder or defending under a reservation of rights clause or (y) has
filed for protection under applicable bankruptcy or insolvency laws or is
otherwise in the process of liquidating or has been liquidated. Section 2.21 of
the Disclosure Schedule sets forth a complete and accurate list of all claims in
excess of $10,000 made by Mears under the policies and binders described in
clause (i) above since the Audited Financial Statement Date. Mears does not have
or maintain any self-insurance arrangement.
2.22. Affiliate Transactions. Except as disclosed in Section 2.22(a) of
the Disclosure Schedule, as of the date of this Agreement, (i) there are no
intercompany Liabilities between Mears, on the one hand, and either Shareholder,
any officer, director, Affiliate or Associate of either Shareholder or any
Associate of any such officer, director or Affiliate (other than Mears), on the
other, (ii) neither Shareholder nor any such officer, director, Affiliate or
Associate provides or causes to be provided any assets, services or facilities
to Mears, (iii) Mears does not provide or cause to be provided any assets,
services or facilities to either Shareholder or any such officer, director,
Affiliate or Associate and (iv) Mears does not beneficially own, directly or
indirectly, any Investment Assets of Shareholders or any such officer, director,
Affiliate or Associate. Except as disclosed in Section 2.22(b) of the Disclosure
Schedule, each of the Liabilities and transactions listed in Section 2.22(a) of
the Disclosure Schedule was incurred or engaged in, as the case may be, on an
arm's-length basis. Except as disclosed in Section 2.22(c) of the Disclosure
Schedule, since the Audited Financial Statement Date, all settlements of
intercompany Liabilities between Mears, on the one hand, and either Shareholder
or any such officer, director, Affiliate or Associate, on the other, have been
made, and all allocations of intercompany expenses have been applied, in the
ordinary course of business consistent with past practice.
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2.23. Employees; Labor Relations. (a) Section 2.23 of the Disclosure
Schedule contains a list of the name of each officer and full-time employee of
Mears, together with each such person's position or function, annual base salary
or wages and any incentive or bonus arrangement with respect to such person in
effect on such date. Neither Shareholder has received any information that would
lead it to believe that a material number of such persons will or may cease to
be employees, or will refuse offers of employment from Bancorp, because of the
consummation of the transactions contemplated by this Agreement. Except as
disclosed in Section 2.23 of the Disclosure Schedule, (i) no employee of Mears
is presently a member of a collective bargaining unit and, to the knowledge of
Shareholders, there are no threatened or contemplated attempts to organize for
collective bargaining purposes any of the employees of Mears, and (ii) no unfair
labor practice complaint or sex or age discrimination claim has been brought
during the last five years against Mears before the National Labor Relations
Board or any other Governmental or Regulatory Authority. Since December 31,
1999, there has been no work stoppage, strike or other concerted action by
employees of Mears. During that period, Mears has complied in all material
respects with all applicable Laws relating to the employment of labor, including
without limitation those relating to wages, hours and collective bargaining.
2.24. Environmental Matters. Except as set forth in Section 2.24 of the
Disclosure Schedule, Mears has obtained all Licenses which are required in
respect of its business, operations or Assets and Properties under applicable
Environmental Laws and is in compliance in all material respects with the terms
and conditions of all such Licenses and with any applicable Environmental Law.
Except as set forth in Section 2.24 of the Disclosure Schedule:
(a) No Order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or, to the
knowledge of Shareholders, threatened by any Governmental or Regulatory
Authority with respect to any alleged failure by Mears to have any License
required in connection with the conduct of the business or operations of Mears
or with respect to any treatment, storage, recycling, transportation, disposal
or "release" as defined in 42 U.S.C. ss. 9601(22) ("Release"), of any Hazardous
Material, and Shareholders (after having made due inquiry of Mears) are not
aware of any facts or circumstances which could reasonably be expected to form
the basis for any such Order, complaint, penalty or investigation.
(b) Neither Mears nor, to the knowledge of Shareholders, any
prior owner or lessee of any property now or previously owned or leased by Mears
has handled any Hazardous Material contrary to applicable Environmental Law on
any property now or previously owned or leased by Mears; and, without limiting
the foregoing, (i) no polychlorinated biphenyl is or has been present, (ii) no
asbestos is or has been present, (iii) there are no underground storage tanks,
active or abandoned, and (iv) no Hazardous Material has been Released in a
quantity reportable under, or in violation of, any Environmental Law, at, on or
under any property now or previously owned or leased by Mears, during any period
that Mears owned or leased such property or, to the knowledge of Shareholders,
prior thereto.
(c) Mears has not transported or arranged for the
transportation of any Hazardous Material to any location which is the subject of
any Action or Proceeding that could lead to claims against Bancorp, Mears for
clean-up costs, remedial work, damages to natural resources or personal injury
claims, including, but not limited to, claims under CERCLA.
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(d) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of Mears and no property now
or previously owned or leased by Mears is listed or proposed for listing on the
National Priorities List promulgated pursuant to CERCLA or on any similar state
list of sites requiring investigation or clean-up.
(e) There are no Liens arising under or pursuant to any
Environmental Law or Order on any real property owned or leased by Mears, and no
action of any Governmental or Regulatory Authority has been taken or, to the
knowledge of Shareholders, is in process which could subject any of such
properties to such Liens, and Mears would not be required to place any notice or
restriction relating to the presence of Hazardous Material at any property owned
by it in any deed to such property.
(f) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or which are in the
possession of, Mears in relation to any property or facility now or previously
owned or leased by Mears which have not been delivered to Bancorp prior to the
execution of this Agreement.
2.25. Bank and Brokerage Accounts; Investment Assets. Section 2.25 of
the Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which Mears has an account or safe deposit box or maintains a
banking, custodial, trading or other similar relationship; (b) a true and
complete list and description of each such account, box and relationship,
indicating in each case the account number and the names of the respective
officers, employees, agents or other similar representatives of Mears having
signatory power with respect thereto; and (c) a list of each Investment Asset,
the name of the record and beneficial owner thereof, the location of the
certificates, if any, therefor, the maturity date, if any, and any stock or bond
powers or other authority for transfer granted with respect thereto.
2.26. No Powers of Attorney. Except as set forth in Section 2.26 of the
Disclosure Schedule, Mears does not have any powers of attorney or comparable
delegations of authority outstanding.
2.27. Receivables. Except as set forth in Section 2.27 of the
Disclosure Schedule, all Company Leases and all receivables thereunder (i) arose
from bona fide leasing or lending transactions in the ordinary course of
business, (ii) are legal, valid and binding obligations of the respective
debtors enforceable in accordance with their terms, (iii) are not subject to any
valid set-off or counterclaim, and (iv) are not the subject of any Actions or
Proceedings brought by or on behalf of Mears. The reserves relating to the
Company Lease receivables set forth on the balance sheet included in the
Unaudited Financial Statements and in the accounting records of Mears as of the
Closing Date are or will be calculated in accordance with Mears' existing
policies consistently applied and are adequate based on Mears' historical
experience.
2.28. Inventory. All inventory (excluding, for the purposes of this
Section, property subject to the Company Leases) of Mears reflected on the
balance sheet included in the Audited Financial Statement consisted, and all
such inventory acquired since the Audited Financial Statement Date consists, of
a quality and quantity usable in the ordinary course of business consistent with
past practice, subject to normal and customary allowances for damage and
outdated items. Except as disclosed in the notes to the Audited Financial
Statement, all items included in the inventory of Mears are the property of
Mears, free and clear of any Lien other than Permitted Liens, have not been
pledged as collateral, are not held by Mears on consignment from others and
conform in all material respects to all standards applicable to such inventory
or its use or sale imposed by Governmental or Regulatory Authorities.
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2.29. Investment. Each Shareholder (i) is an "accredited investor"
within the meaning of Rule 501 promulgated under the Securities Act; (ii) has
had an opportunity to discuss Parent's business, management and financial
affairs with Parent's management; and (iii) is acquiring the Common Stock for
its own account (and not for the account of others) for investment and not with
a view to the distribution thereof. Each Shareholder will not sell or otherwise
dispose of such shares (whether pursuant to a liquidating dividend or otherwise)
without registration under the Securities Act, or an exemption therefrom, and
each Shareholder acknowledges that certificate or certificates representing such
shares will contain a legend to the foregoing effect.
2.30. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Shareholders directly
with Bancorp without the intervention of any Person on behalf of Shareholders in
such manner as to give rise to any valid claim by any Person against Bancorp or
Mears or for a finder's fee, brokerage commission or similar payment.
2.31. Disclosure. To Shareholders' knowledge, all material facts
relating to the Business or Condition and Assets and Properties of Mears have
been disclosed to Bancorp in or in connection with this Agreement. No
representation or warranty contained in this Agreement, and no statement
contained in the Disclosure Schedule or in any certificate, list or other
writing furnished to Bancorp pursuant to any provision of this Agreement
(including without limitation the Financial Statements), contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
III. REPRESENTATIONS AND WARRANTIES OF Bancorp
Bancorp, jointly and severally, hereby represents and warrants to
Shareholders as follows:
3.01. Organization. Each of Bank and Parent is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
its incorporation. Each of Bank and Parent has full corporate power and
authority to execute and deliver this Agreement and the Operative Agreements to
which it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. Each of Bank and
Parent is duly qualified, licensed or admitted to do business and is in good
standing in all jurisdictions in which the ownership, use or leasing of its
Assets and Properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary and in which the failure to be
so qualified, licensed or admitted and in good standing could reasonably be
expected to have an adverse effect on the validity or enforceability of this
Agreement or any of the Operative Agreements to which it is a party or on its
ability to perform its obligations hereunder or thereunder.
3.02. Authority. The execution, delivery and performance by each of
Bank and Parent of this Agreement and the Operative Agreements to which it is a
party have been duly and validly authorized by all necessary corporate action.
This Agreement has been duly and validly executed and delivered by each of Bank
and Parent and constitutes, and upon the execution and delivery by each of Bank
and Parent of the Operative Agreements to which it is a party, such Operative
Agreements will constitute, its legal, valid and binding obligations enforceable
against each of Bank and Parent in accordance with their terms.
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3.03. Capital Stock. The authorized capital stock of Parent consists of
20,000,000 shares of Common Stock and 5,000,000 shares of preferred stock. As of
December 23, 2004, there were outstanding (i) 11,888,061 shares of Common Stock,
(ii) 1,116,533 shares of preferred stock convertible on a one-to-one basis into
shares of Common Stock, (iii) warrants exercisable for 571,021 shares of Common
Stock, and (iv) options exercisable for 1,101,150 shares of Common Stock.
3.04. Financial Statements. The financial statements, including the
notes thereto, included in the Proxy Statement present fairly the consolidated
financial position of the entities to which such financial statements relate
(the "Covered Entities") as of the dates indicated and the consolidated results
of operations and changes in financial position and cash flows of the Covered
Entities for the periods specified and such financial statements have been
prepared in conformity with generally accepted accounting principles as applied
in the United States and on a consistent basis during the periods involved and
in accordance with Regulation S-X promulgated by the Securities and Exchange
Commission.
3.05. Absence of Changes. Subsequent to the respective dates as of
which information is given in the Proxy Statement, and except as may be
otherwise stated in the Proxy Statement, there has not been (A) any material
adverse change, or any event or development which, individually or together with
other such events, could reasonably be expected to result in a material adverse
change, in the Business or Condition of Parent.
3.06. Common Stock. Upon Shareholders receipt thereof in accordance
with this Agreement, the Common Stock shall be duly authorized, validly issued,
outstanding, fully paid and nonassessable.
3.07. No Conflicts. The execution and delivery by each of Bank and
Parent of this Agreement do not, and the execution and delivery by each of them
of the Operative Agreements to which it is a party, the performance by each of
them of its obligations under this Agreement and such Operative Agreements and
the consummation of the transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of its articles of incorporation or by-laws;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Schedule 3.07 hereto,
conflict with or result in a violation or breach of any term or provision of any
Law or Order applicable to it or any of its Assets and Properties; or
(c) (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under or (iii) require it to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of
any Contract or License to which each of it is a party or by which any of its
Assets and Properties is bound.
3.08. Governmental Approvals and Filings. Except as disclosed in
Schedule 3.08 hereto, no consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority on the part of Bank and Parent is
required in connection with the execution, delivery and performance of this
Agreement or the Operative Agreements to which it is a party or the consummation
of the transactions contemplated hereby or thereby.
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3.09. Legal Proceedings. There are no Actions or Proceedings pending
or, to the knowledge of Bank and Parent, threatened against, relating to or
affecting either of Bank and Parent or any of its Assets and Properties which
could reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement or any of the Operative
Agreements.
3.10. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Bancorp directly with
Shareholders without the intervention of any person on behalf of Bancorp in such
manner as to give rise to any valid claim by any person against Shareholders or
Mears for a finder's fee, brokerage commission or similar payment.
3.11. Disclosure. To Bancorp's knowledge, all material facts relating
to the Business or Condition of Bancorp have been disclosed to Shareholders in
or in connection with this Agreement. No representation or warranty contained in
this Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to Shareholders pursuant to any
provision of this Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein, in the light of the circumstances under which they were made, not
misleading.
IV. ACTIONS PRIOR TO CLOSING
4.01. Regulatory and Other Approvals.
(a) Shareholders, at their sole expense, will and will cause
Mears to (i) take all commercially reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all commercially reasonable
efforts, as promptly as practicable to obtain all consents, approvals or actions
of, to make all filings with and to give all notices to Governmental or
Regulatory Authorities or any other Person required of Shareholders or Mears to
consummate the transactions contemplated hereby and by the Operative Agreements,
including without limitation those described in Sections 2.06 and 2.07 of the
Disclosure Schedule, (ii) provide such other information and communications to
such Governmental or Regulatory Authorities or other Persons as Bancorp or such
Governmental or Regulatory Authorities or other Persons may reasonably request
and (iii) cooperate with Bancorp as promptly as practicable in obtaining all
consents, approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other Persons required of
Bancorp to consummate the transactions contemplated hereby and by the Operative
Agreements. Shareholders will provide prompt notification to Bancorp when any
such consent, approval, action, filing or notice referred to in clause (i) above
is obtained, taken, made or given, as applicable, and will advise Bancorp of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
(b) Bancorp, at its sole expense, will (i) take all
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other Person required of Bancorp to consummate the transactions contemplated
hereby and by the Operative Agreements, including without limitation those
described in Schedule 3.04 hereto, (ii) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as Shareholders or such Governmental or Regulatory Authorities or other Persons
may reasonably request and (iii) cooperate with Shareholders and Mears as
promptly as practicable in obtaining all consents, approvals or actions of,
making all filings with and giving all notices to Governmental or Regulatory
Authorities or other Persons required of Shareholders or Mears to consummate the
transactions contemplated hereby and by the Operative Agreements. Bancorp will
provide prompt notification to Shareholders when any such consent, approval,
action, filing or notice referred to in clause (i) above is obtained, taken,
made or given, as applicable, and will advise Shareholders of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement or any of the
Operative Agreements.
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4.02. Investigation by Bancorp. Shareholders will, and will cause Mears
to, (a) provide Bancorp and its officers, directors, employees, agents, counsel,
accountants, financial advisors, consultants and other representatives (together
"Representatives") with full access, upon reasonable prior notice and during
normal business hours, to all officers, employees, agents and accountants of
Mears and its Assets and Properties and Books and Records, (b) furnish Bancorp
and such Representatives with all such information and data (including without
limitation copies of Contracts, Benefit Plans and other Books and Records)
concerning the business and operations of Mears as Bancorp or any of such
Representatives reasonably may request in connection with such investigation and
(c) as promptly as practicable, deliver to Bancorp true and complete copies of
such financial statements, reports and analyses as may be prepared or received
by Shareholders or, Mears relating to the business or operations of Mears or as
Bancorp may otherwise reasonably request.
4.03. No Solicitations. Shareholders will not take, nor will it permit
Mears or any Affiliate of Shareholders (or authorize or permit any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf of Shareholders, Mears or any such Affiliate) to take,
directly or indirectly, any action to initiate, assist, solicit, receive,
negotiate, encourage or accept any offer or inquiry from any Person (a) to
engage in any Business Combination with Mears, (b) to reach any agreement or
understanding (whether or not such agreement or understanding is absolute,
revocable, contingent or conditional) for, or otherwise attempt to consummate,
any Business Combination with Mears or (c) to furnish or cause to be furnished
any information with respect to Mears to any Person (other than as contemplated
by Section 4.03) who Shareholders, Mears or such Affiliate (or any such Person
acting for or on their behalf) knows or has reason to believe is in the process
of considering any Business Combination with Mears. If Shareholders, Mears or
any such Affiliate (or any such Person acting for or on their behalf) receives
from any Person (other than Bancorp or any other Person referred to in Section
4.03) any offer, inquiry or informational request referred to above,
Shareholders will promptly advise such Person, by written notice, of the terms
of this Section 4.03 and will promptly, orally and in writing, advise Bancorp of
such offer, inquiry or request and deliver a copy of such notice to Bancorp.
4.04. Conduct of Business. Shareholders will cause Mears to conduct
business only in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, Shareholders will:
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(a) cause Mears to use commercially reasonable efforts to (i)
preserve intact the present business organization and reputation of Mears, (ii)
keep available (subject to dismissals and retirements in the ordinary course of
business consistent with past practice) the services of the present officers,
employees and consultants of Mears, (iii) maintain the Assets and Properties of
Mears in good working order and condition, ordinary wear and tear excepted, (iv)
maintain the good will of customers, vendors, suppliers, lenders and other
Persons with whom Mears has significant business relationships and (v) continue
all current sales, marketing and promotional activities relating to the business
and operations of Mears;
(b) except to the extent required by applicable Law, (i) cause
the Books and Records to be maintained in the usual, regular and ordinary manner
and (ii) not permit any material change in (A) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or Tax practice or
policy of Mears, (B) any method of calculating any bad debt, contingency or
other reserve of Mears for accounting, financial reporting or Tax purposes, (C)
the fiscal year of Mears or (D) the credit policies or standards of Mears;
(c) (i) use, and will cause Mears to use, commercially
reasonable efforts to maintain in full force and effect until the Closing
substantially the same levels of coverage as the insurance afforded under the
Contracts listed in Section 2.21 of the Disclosure Schedule, (ii) to the extent
requested by Bancorp prior to the Closing Date, use all commercially reasonable
efforts to cause such insurance coverage held by any Person (other than Mears)
for the benefit of Mears to continue to be provided at the expense of Mears for
at least sixty (60) calendar days after the Closing on substantially the same
terms and conditions as provided on the date of this Agreement and (iii) cause
any and all benefits under such Contracts paid or payable (whether before or
after the date of this Agreement) with respect to the business, operations,
employees or Assets and Properties of Mears to be paid to Mears; and
(d) cause Mears to comply, in all material respects, with all
Laws and Orders applicable to their respective business and operations, and
promptly following receipt thereof to give Bancorp copies of any notice received
from any Governmental or Regulatory Authority or other Person alleging any
violation of any such Law or Order.
4.05. Employee Matters. Except as may be required by Law, Shareholders
will refrain, and will cause Mears to refrain, from directly or indirectly:
(a) making any representation or promise, oral or written, to
any officer, employee or consultant of Mears concerning any Benefit Plan, except
for statements as to the rights or accrued benefits of any officer, employee or
consultant under the terms of any Benefit Plan;
(b) making any increase in the salary, wages or other
compensation of any officer, employee or consultant of Mears from those in
effect on December 20, 2004 and disclosed to Bancorp;
(c) adopting, entering into, amending, modifying or
terminating (partially or completely) any Benefit Plan except to the extent
required by applicable Law or this Agreement;
(d) establishing or modifying any (i) targets, goals, pools or
similar provisions in respect of any fiscal year under any Benefit Plan,
employment Contract or other employee compensation arrangement or (ii) salary
ranges, increase guidelines or similar provisions in respect of any Benefit
Plan, employment Contract or other employee compensation arrangement; or
25
(e) entering into, amending, modifying or terminating
(partially or completely), any Contract that is, or had it been in existence on
the date of this Agreement would have been required to be, disclosed in Section
2.19(a)(i) of the Disclosure Schedule.
Shareholders will cause Mears and Affiliates to administer each Benefit
Plan, or cause the same to be so administered, in all material respects in
accordance with the applicable provisions of the Code, ERISA and all other
applicable Laws. Shareholders will promptly notify Bancorp in writing of each
receipt by Shareholders, Mears or any Affiliate (and furnish Bancorp with
copies) of any notice of investigation or administrative proceeding by the IRS,
Department of Labor, PBGC or other Person involving any Benefit Plan.
4.06. Certain Restrictions. Shareholders will cause Mears to refrain
from:
(a) amending its certificate or articles of incorporation or
by-laws (or other comparable corporate charter documents) or taking any action
with respect to any such amendment or any reorganization, liquidation or
dissolution of any such corporation;
(b) authorizing, issuing, selling or otherwise disposing of
any shares of capital stock of or any Option with respect to Mears, or modifying
or amending any right of any holder of outstanding shares of capital stock of or
Option with respect to Mears, except that Mears shall be permitted, prior to the
Closing, to transfer all of the issued and outstanding stock of Orlando Auto
Sales to Debra Hartman for no consideration and without representation or
warranty of any kind; by signing this Agreement, Debra Hartman releases and
forever discharges Mears, Bancorp, their affiliates, subsidiaries, parents,
officers, directors, employees and agents, successors and assigns from any and
all claims and causes of action she may ever have in connection with Orlando
Auto Sales;
(c) declaring, setting aside or paying any dividend or other
distribution in respect of the capital stock of Mears, or directly or indirectly
redeeming, purchasing or otherwise acquiring any capital stock of or any Option
with respect to Mears;
(d) acquiring or disposing of, or incurring any Lien (other
than a Permitted Lien) on, any Assets and Properties (excluding Company Leases),
other than in the ordinary course of business consistent with past practice;
(e) (i) entering into, amending, modifying, terminating
(partially or completely), granting any waiver under or giving any consent with
respect to (A) any Contract that would, if in existence on the date of this
Agreement, be required to be disclosed in the Disclosure Schedule pursuant to
Section 2.19(a), or (B) any material License or (ii) granting any irrevocable
powers of attorney;
(f) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach of, or
default under, any term or provision of any License held or used by Mears or any
Contract to which Mears is a party or by which any of its Assets and Properties
is bound;
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(g) (i) incurring Indebtedness (except in the ordinary course
of business) or (ii) except with respect to any Company Lease in the ordinary
course of business, voluntarily purchasing, canceling, prepaying or otherwise
providing for a complete or partial discharge in advance of a scheduled payment
date with respect to, or waiving any right of Mears under, any Indebtedness of
or owing to Mears;
(h) engaging with any Person in any Business Combination;
(i) except with respect to any Company Lease in the ordinary
course of business, making capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets in an aggregate amount
exceeding $10,000;
(j) making any change in the lines of business in which it
participates or is engaged;
(k) except with respect to any Company Lease in the ordinary
course of business, writing off or writing down any of their Assets and
Properties outside the ordinary course of business consistent with past
practice;
(l) disposing of any Company Lease; or
(m) entering into any agreement to do or engage in any of the
foregoing.
4.07. Affiliate Transactions. Except as set forth in Section 4.07 of
the Disclosure Schedule, immediately prior to the Closing, all Indebtedness and
other amounts owing under Contracts between Shareholders, any officer, director,
Affiliate or Associate of Shareholders or any Associate of any such officer,
director or Affiliate (other than Mears), on the one hand, and Mears, on the
other, will be paid in full. Prior to the Closing, Mears will not enter into any
Contract or amend or modify any existing Contract, and will not engage in any
transaction outside the ordinary course of business consistent with past
practice or not on an arm's-length basis (other than pursuant to Contracts
disclosed pursuant to Section 2.19(a)(vi)), with Shareholders or any such
officer, director, Affiliate or Associate.
4.08. Books and Records. On the Closing Date, Shareholders will deliver
or make available to Bancorp at the offices of Mears all of the Books and
Records, and if at any time after the Closing Shareholders discover in their
possession or under their control any other Books and Records, they will
forthwith deliver such Books and Records to Bancorp.
4.09. Notice and Cure. Each party (the "Defaulting Party") will notify
the other (the "Non-Defaulting Party") promptly in writing of, and
contemporaneously will provide the Non-Defaulting Party with true and complete
copies of any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance occurring after the date of this Agreement that
causes or will cause any covenant or agreement of such Defaulting Party under
this Agreement to be breached or that renders or will render untrue any
representation or warranty of such Defaulting Party contained in this Agreement
as if the same were made on or as of the date of such event, transaction or
circumstance. Each party also will notify the other promptly in writing of, and
will use all commercially reasonable efforts to cure, before the Closing, any
violation or breach of any representation, warranty, covenant or agreement made
by such party in this Agreement, whether occurring or arising before, on or
after the date of this Agreement. No notice given pursuant to this Section shall
have any effect on the representations, warranties, covenants or agreements
contained in this Agreement for purposes of determining satisfaction of any
condition contained herein or shall in any way limit the others right to seek
indemnity under Article XI.
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4.10. Fulfillment of Conditions.
(a) Shareholders will execute and deliver at the Closing each
Operative Agreement that Shareholders are required hereby to execute and deliver
as a condition to the Closing, will take all commercially reasonable steps
necessary or desirable and proceed diligently and in good faith to satisfy each
other condition to the obligations of Bancorp contained in this Agreement and
will not, and will not permit Mears to, take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
(b) Bancorp will execute and deliver at the Closing each
Operative Agreement that Bancorp are hereby required to execute and deliver as a
condition to the Closing, will take all commercially reasonable steps necessary
or desirable and proceed diligently and in good faith to satisfy each other
condition to the obligations of Shareholders contained in this Agreement and
will not take or fail to take any action that could reasonably be expected to
result in the nonfulfillment of any such condition.
V. CONDITIONS TO OBLIGATIONS OF BANCORP
The obligations of Bancorp hereunder are subject to the fulfillment, at
or before the Closing, of each of the following conditions (all or any of which
may be waived in whole or in part by Bancorp in its sole discretion):
5.01. Representations and Warranties. Each of the representations and
warranties made by Shareholders in this Agreement (other than those made as of a
specified date earlier than the Closing Date) shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date, and any representation or
warranty made as of a specified date earlier than the Closing Date shall have
been true and correct in all material respects on and as of such earlier date.
5.02. Performance. Shareholders shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Shareholders or Mears at
or before the Closing.
5.03. Orders and Laws. There shall not be in effect on the Closing Date
any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Bancorp, and there shall not be pending or threatened on the Closing Date any
Action or Proceeding or any other action in, before or by any Governmental or
Regulatory Authority which could reasonably be expected to result in the
issuance of any such Order or the enactment, promulgation or deemed
applicability to Bancorp, Mears, or the transactions contemplated by this
Agreement or any of the Operative Agreements of any such Law.
5.04. Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Bancorp and Shareholders to perform their obligations under
this Agreement and the Operative Agreements and to consummate the transactions
contemplated hereby and thereby, (a) shall have been duly obtained, made or
given, (b) shall be in form and substance reasonably satisfactory to Bancorp,
(c) shall not be subject to the satisfaction of any condition that has not been
satisfied or waived and (d) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
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5.05. Third Party Consents. All consents (or in lieu thereof waivers)
to the performance by Bancorp and Shareholders of their obligations under this
Agreement and the Operative Agreements or to the consummation of the
transactions contemplated hereby and thereby as are required under any Contract
to which Bancorp, Shareholders or Mears is a party or by which any of their
respective Assets and Properties are bound and where the failure to obtain any
such consent (or in lieu thereof waiver) could reasonably be expected,
individually or in the aggregate with other such failures, to materially
adversely affect Bancorp or the Business or Condition of Mears, (a) shall have
been obtained, (b) shall be in form and substance reasonably satisfactory to
Bancorp, (c) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (d) shall be in full force and effect.
5.06. Opinion of Counsel. Bancorp shall have received the opinion of
counsel to Shareholders, dated the Closing Date, substantially in the form and
to the effect of Exhibit B hereto, and to such further effect as Bancorp may
reasonably request.
5.07. Good Standing Certificates. Shareholders shall have delivered to
Bancorp (a) copies of the certificates or articles of incorporation (or other
comparable corporate charter documents), including all amendments thereto, of
Mears certified by the Secretary of State of Florida, (b) certificates from the
Secretary of State of Florida to the effect that each of Mears is in good
standing or subsisting in such jurisdiction, listing all charter documents of
Mears on file and attesting to its payment of all franchise or similar taxes,
and (c) a certificate from the Secretary of State or other appropriate official
in each jurisdiction in which Mears is qualified or admitted to do business to
the effect that Mears is duly qualified or admitted and in good standing in such
jurisdiction.
5.08. Termination of Mears's 401(k) Plan. The termination of Mears's
401(k) Plan shall have become effective.
5.09. Escrow Agreement. Shareholders and the Escrow Agent shall have
entered into the Escrow Agreement.
5.10. Lease. James and Debra Hartman and Bancorp shall have entered
into a lease, in the form attached hereto as Exhibit C, of the real property
Mears currently occupies (the "Lease"), and the currently existing lease of such
property shall have been terminated.
5.11. Employment Agreement. Hartman shall have executed and delivered
an employment agreement in the form attached hereto as Exhibit D (the
"Employment Agreement").
5.12. Certificates of Merger. Mears and, if necessary, Shareholders
shall have executed and delivered the Certificates of Merger.
5.13. Proceedings. All proceeding to be taken on the part of
Shareholders in connection with the transactions contemplated by this Agreement
and all documents incident thereto shall be reasonably satisfactory in form and
substance to Bancorp, and Bancorp shall have received copies of all such
documents and other evidences as Bancorp may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
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VI. CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS
The obligations of Shareholders hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Shareholders in its sole
discretion):
6.01. Representations and Warranties. Each of the representations and
warranties made by Bancorp in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date.
6.02. Performance. Bancorp shall have performed and complied with, in
all material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Bancorp at or before the
Closing.
6.03. Orders and Laws. There shall not be in effect on the Closing Date
any Order or Law that became effective after the date of this Agreement
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
6.04. Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Shareholders and Bancorp to perform their obligations under
this Agreement and the Operative Agreements and to consummate the transactions
contemplated hereby and thereby (a) shall have been duly obtained, made or
given, (b) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (c) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
6.05. Third Party Consents. All consents (or in lieu thereof waivers)
to the performance by Shareholders of their obligations hereunder and to the
consummation of the transactions contemplated hereby as are required under the
Contracts listed in Section 6.05 of the Disclosure Schedule (a) shall have been
obtained, (b) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (c) shall be in full force and effect.
6.06. Opinion of Counsel. Shareholders shall have received the opinion
of counsel to Bancorp, dated the Closing Date, substantially in the form and to
the effect of Exhibit E hereto, and to such further effect as Shareholders may
reasonably request.
6.07. Escrow Agreement. Bancorp and the Escrow Agent shall have entered
into the Escrow Agreement.
VII. RESTRICTIVE COVENANTS
7.01. Restrictive Covenants. Each of Shareholders and Robert O.
Schlytter ("Schlytter") will, for a period of three (3) years from the Closing
Date, refrain from, either alone or in conjunction with any other Person, or
directly or indirectly through its present or future Affiliates:
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(a) employing, engaging or seeking to employ or engage any
Person who within the prior twelve (12) months had been an officer or employee
of Mears, unless such officer or employee (A) resigns voluntarily (without any
solicitation from Shareholder or any of its Affiliates) or (B) is terminated by
Mears after the Closing Date;
(b) causing or attempting to cause (A) any client, customer,
vendor or supplier of Mears to terminate or materially reduce its business with
Mears or (B) any officer, employee or consultant of Mears to resign or sever a
relationship with Mears;
(c) disclosing (unless compelled by judicial or administrative
process or otherwise required by law) or using any confidential or secret
information relating to Mears or any of its clients, customers, vendors or
suppliers; or
(d) except as contemplated by the Employment Agreement,
participating or engaging in (other than through the ownership of five percent
(5%) or less of any class of securities registered under the Exchange Act), or
otherwise lending material assistance (financial or otherwise) to any Person
participating or engaged in, any of the lines of business in which Mears is
participating or engaged on the Closing Date in any jurisdiction in which Mears
participates or engages in such line of business on the Closing Date;
provided, however, that Hartman and Schlytter shall be permitted to participate
or engage in any business (including any real estate transaction) which does not
violate subsection (d) hereof.
7.02. Severability. The parties hereto recognize that the Laws and
public policies of the various states of the United States may differ as to the
validity and enforceability of covenants similar to those set forth in this
Article VII. It is the intention of the parties that the provisions of this
Article VII be enforced to the fullest extent permissible under the Laws and
policies of each jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such Laws or policies) of
any provisions of this Article VII shall not render unenforceable, or impair,
the remainder of the provisions of this Article VII. Accordingly, if any
provision of this Article VII shall be determined to be invalid or
unenforceable, such invalidity or unenforceability shall be deemed to apply only
with respect to the operation of such provision in the particular jurisdiction
in which such determination is made and not with respect to any other provision
or jurisdiction.
7.03. Injunctive Relief. The parties hereto acknowledge and agree that
any remedy at Law for any breach of the provisions of this Section would be
inadequate, and each Shareholder hereby consents to the granting by any court of
an injunction or other equitable relief, without the necessity of actual
monetary loss being proved, in order that the breach or threatened breach of
such provisions may be effectively restrained.
VIII. TAX MATTERS AND POST-CLOSING TAXES
8.01. Liability For Taxes.
(a) Shareholders shall be liable for, shall pay and shall
indemnify and hold Bancorp and Mears harmless against all Taxes of Mears
(including but not limited to all sales, use and property Taxes) for any taxable
period ending on or before the Closing Date.
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(b) Bancorp shall be liable for, shall pay and shall indemnify
and hold Shareholders harmless against any and all Taxes of Mears for any
taxable period commencing after the Closing Date.
8.02. Allocation. In the case of Taxes of Mears that are payable with
respect to a taxable period that begins before the Closing Date and ends after
the Closing Date, the amount of Taxes attributable to the pre-Closing portion of
a taxable period shall be determined based on an interim closing of the books of
Mears as of the close of the Closing Date, except that the amount of any such
Taxes that are imposed on a periodic basis shall be determined by reference to
the relative number of days in the pre-Closing and post-Closings portion of such
taxable period and the taxable year of any partnership or other pass through
entity in which Mears is partner or other beneficial interest holder shall be
deemed to terminate on the Closing Date.
8.03. Payment. Except as otherwise provided in this Article VIII, any
amounts owed by an indemnitor to an indemnitee under this Article VIII shall be
paid within ten (10) days of notice from the indemnitee; provided, however,
that, if such amounts are being contested before a taxing authority in good
faith, the indemnitor shall not be required to make payment until it is finally
determined by such taxing authority, unless the indemnitor has authorized the
indemnitee to make payment to such taxing authority.
8.04. Refunds. Any refunds received by Bancorp, Mears, or their
successors of Taxes of Mears relating to taxable periods or portions thereof
ending on or before the Closing Date shall be for the account of Shareholders,
and Bancorp shall pay over to Shareholders any such refund received by Bancorp,
Mears, or their successors within five (5) Business Days of receipt.
8.05. Contests.
(a) Shareholders will allow Mears and its counsel to
participate at its own expense in any audits of a consolidated, combined or
unitary Tax Return of an Affiliated Group of which Mears was a member to the
extent that such Returns relate to Mears. Shareholders will not settle any such
audit in a manner which would adversely affect Mears after the Closing Date
unless such settlement would be reasonable in the case of a Person that owned
Mears both before and after the Closing Date.
(b) After the Closing, Bancorp shall promptly notify
Shareholders in writing of the commencement of any Tax audit or administrative
or judicial proceeding or of any demand or claim on Bancorp or Mears which, if
determined adversely to the taxpayer or after the lapse of time would be grounds
for indemnification under Section 8.01(a). Such notice shall contain factual
information (to the extent known to Bancorp or Mears) describing the asserted
Tax liability in reasonable detail and shall include copies of any notice or
other document received from any Tax Authority in respect of any such asserted
Tax liability. If Bancorp fails to give Shareholders prompt notice of an
asserted Tax liability as required by this Section 8.05(b), then (i) if
Shareholders are precluded by the failure to give prompt notice from contesting
the asserted Tax liability in both the administrative and judicial forums, then
Shareholders shall not have any obligation to indemnify for any loss arising out
of such asserted Tax liability, and (ii) if Shareholders are not so precluded
from contesting but such failure to give prompt notice results in a detriment to
Shareholders, then any amount which Shareholders are otherwise required to pay
Bancorp pursuant to Section 8.01(a) with respect to such liability shall be
reduced by the amount of such detriment.
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(c) Shareholders may elect to direct, through counsel of their
own choosing and at their own expense, any audit, claim for refund and
administrative or judicial proceeding involving any asserted liability with
respect to which indemnity may be sought under Section 8.01(a) (any such audit,
claim for refund or proceeding relating to an asserted Tax liability are
referred to herein collectively as a "Contest"). If Shareholders elect to direct
the Contest of an asserted Tax liability, they shall, within thirty (30)
calendar days of receipt of the notice of asserted Tax liability (but not less
than five (5) days before the due date of any protest or other claim in respect
thereof), notify Bancorp of their intent to do so and acknowledge in writing, in
form and substance satisfactory to Bancorp, their obligation to indemnify
Bancorp in full therefor. Bancorp shall cooperate and shall cause Mears to
cooperate in each phase of such Contest. If Shareholders choose to direct the
Contest, Bancorp shall promptly empower and shall cause Mears promptly to
empower (by power-of-attorney and such other documentation as may be
appropriate) such representatives of Shareholders as they may designate to
represent Bancorp or Mears in the Contest insofar as the Contest involves an
asserted Tax liability for which Shareholders would be liable under Section
8.01(a).
(d) If Shareholders elect not to direct the Contest and
acknowledge in writing, in form and substance satisfactory to Bancorp, their
obligation to indemnify Bancorp in full therefor, then (i) Shareholders may
participate, at their own expense, in the Contest and (ii) neither Bancorp nor
Mears shall not settle or compromise any asserted liability over the objection
of Shareholders. If Shareholders elect not to direct the Contest and fail to
provide such acknowledgment, then (x) Shareholders shall have no right to
participate in the Contest and (y) Bancorp or Mears may pay, compromise or
contest such asserted liability in their sole discretion.
8.06. Filing of Tax Returns; Change of Tax Year. The parties hereto
covenant and agree that: (a) Shareholders shall prepare and file with the
applicable Governmental Authorities all income Tax Returns relating to Mears
with respect to any period that ends on or before the Closing Date and all other
Tax Returns required to be filed (not taking into account extensions) on or
prior to the Closing Date and (b) Bancorp shall prepare and file with the
applicable Governmental Authorities all other Tax Returns relating to Mears. The
parties hereto acknowledge and agree that for purposes of filing all Tax
Returns, unless otherwise required by law, the taxable year of Mears shall end
as of the Closing Date and that its new taxable year shall commence as of the
day following the Closing Date and shall end on the same day as Bancorp's fiscal
year for filing its federal income tax return. Bancorp shall not amend any Tax
Return relating to Mears with respect to any period that ends on or before the
Closing Date that would have the effect of increasing Shareholders' or Mears'
Tax liability without Shareholders' written consent.
8.07. Cooperation and Exchange of Information. Shareholders and Bancorp
will provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax Return, amended return or
claim for refund, determining a liability for Taxes or a right to a refund of
Taxes or participating in or conducting any audit or other proceeding in respect
of Taxes. Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules
and related work papers and documents relating to rulings or other
determinations by any Tax Authority. Each party shall execute and deliver such
powers-of-attorney and make available such other documents as are necessary to
carry out the intent of this Article VIII. Each party agrees to notify the other
party of any audit adjustments that do not result in Tax liability but can
reasonably be expected to affect Tax Returns of the other party. Each party
shall make its employees available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder. Each party will
retain in accordance with applicable IRS record retention procedures all Tax
Returns, schedules and work papers and all material records or other documents
relating to Tax matters of Mears for its taxable period first ending after the
Closing Date and for all prior taxable periods until the later of (a) the
expiration of the statute of limitations of the taxable periods to which such
Tax Returns and other documents relate, without regard to extensions except to
the extent notified by the other party in writing of such extensions for the
respective Tax periods, or (b) seven (7) years following the due date (without
extension) for such Tax Returns. Any information obtained under this Section
8.07 shall be kept confidential, except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in conducting
an audit or other proceeding.
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8.08. Conveyance Taxes. Shareholders agree to pay all liabilities for
all sales, transfer, stamp, real property transfer or gains and similar Taxes
incurred as a result of the sale of the Shares contemplated hereby. Shareholders
and Bancorp will cooperate in the preparation and filing of any required
transfer Tax Returns.
8.09. Termination of Prior Tax Settlement Agreements. Any tax
settlement or sharing agreements, arrangements, policies or guidelines, formal
or informal, express or implied that may exist between Mears, on one hand, and
the Shareholders and/or its Affiliates (other than Mears), on the other hand (a
"Settlement Agreement"), shall terminate as of the Closing Date, and, any
obligations to make payments under any Settlement Agreement shall be cancelled
as of the Closing Date.
IX. EMPLOYEE AND EMPLOYEE BENEFIT MATTERS
9.01. Employees. "Employees" shall mean all current and former
employees of Mears. "Active Employees" shall mean the Employees who, as of the
Closing Date, are employees of Mears, including employees on short-term
disability who return to work prior to incurring a long-term disability and
employees on leave and who, pursuant to the Family and Medical Leave Act of
1993, must be offered employment by Mears upon their return from leave.
9.02. Continuation of Employment. Effective as of the Closing Date,
Bancorp shall cause Mears to continue the employment of each Active Employee.
Notwithstanding the foregoing, nothing in this Section 9.02 shall limit
Bancorp's or Mears's authority to terminate the employment of any Active
Employee at any time and for any reason, including without cause.
9.03. Employee Benefits. As soon as practicable (as determined by
Bancorp) after the Closing Date, Bancorp shall make available to similarly
situated (e.g. "full time" for welfare benefit plans and "salaried" for
qualified pension benefit plans) Active Employees the employee benefits
available to employee of Bancorp. All Active Employees shall be given credit for
service with Mears for purposes of eligibility. In addition, Active Employees
shall, effective upon becoming so eligible, receive for purposes of Bancorp's
qualified pension benefit plans (except any Defined Benefit Plan of Bancorp),
vesting service credit for periods of employment with Mears, solely to the
extent such service was credited under the corresponding Plan of Mears.
Notwithstanding the foregoing, (1) the obligation to grant service credit to any
applicable Active Employee under a benefit plan of Bancorp, as contemplated in
this Section 9.03, shall be contingent upon such benefit plan not violating the
applicable nondiscrimination requirements of the Code and the regulations
thereunder as a result of such grant of service credit; and (2) with respect to
any insured benefit plan of Bancorp, the applicable provisions of Section 9.03
shall be contingent upon and subject to acceptance by and cooperation of the
applicable insurer or other third party providing coverage under any benefit
plan of Bancorp. Additionally, nothing herein shall be construed to limit
Bancorp's right (or the right of an Affiliate of Bancorp) to amend any of its
benefit plans at any time. The right to amend shall include, without limitation,
the right to limit the class of Employees eligible to participate in any benefit
plan of Bancorp.
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X. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
10.01. Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any right of Bancorp (whether or not exercised) to
investigate the affairs of Mears or any right of any party (whether or not
exercised) to investigate the accuracy of the representations and warranties of
the other party contained in this Agreement, Shareholders and Bancorp have the
right to rely fully upon the representations, warranties, covenants and
agreements of the other contained in this Agreement. The representations,
warranties, covenants and agreements of Shareholders and Bancorp contained in
this Agreement will survive the Closing (a) indefinitely with respect to the
representations and warranties contained in Sections 2.02, 2.04, 3.02, 3.07 and
3.08, (b) until the expiration of the applicable statute of limitations with
respect to the representations and warranties contained in Section 2.12 and (c)
in the case of all other representations and warranties and any covenant or
agreement to be performed in whole or in part prior to the Closing until the
third anniversary of the Closing Date except that any representation, warranty,
covenant or agreement that would otherwise terminate in accordance with this
clause will continue to survive if a Claim Notice or Indemnity Notice (as
applicable) shall have been timely given under Article XI on or prior to such
termination date, until the related claim for indemnification has been satisfied
or otherwise resolved as provided in Article XI.
XI. INDEMNIFICATION
11.01. Indemnification by the Shareholders.
(a) Shareholders shall jointly and severally indemnify Bancorp
and its officers, directors, employees, agents and Affiliates in respect of any
and all of the following:
(i) any Losses from any Actions or Proceedings relating to or
affecting Mears or any of its Assets and Property or which are
subsequently brought against, relate to or affect Mears or any of its
Assets and Property and which arise as a result of any action or
circumstance existing or occurring prior to the Closing Date;
(ii) any Losses resulting from claims made by (A) any
Governmental or Regulatory Authority with respect to Taxes of the
Affiliated Group of which Mears is a member, or (B) any Person
(including, but not limited to, any Governmental or Regulatory
Authority) relating to any employee benefit or ERISA representation or
warranty in this Agreement (determined as if such representation or
warranty were made by, on behalf of or with respect to, an ERISA
Affiliate); and
(iii) any Losses suffered, incurred or sustained by any of
them or to which any of them becomes subject, resulting from, arising
out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on
the part of Shareholder contained in this Agreement (determined in all
cases as if the terms "material" or "materially" were not included
therein).
35
(b) All claims for indemnification by Bancorp pursuant to this
Section 11.01 shall be asserted in accordance with the provisions of Section
11.03.
(c) The right of Bancorp to assert claims pursuant to this
Section 11.01 shall survive for the period provided in Article X.
(d) Except with respect to a misrepresentation or breach of
warranty by either Shareholder contained in Sections 2.02 and 2.04 and except as
provided in Section 1.06, Shareholders shall not be liable for Losses hereunder
in excess of $500,000 in the aggregate.
11.02. Indemnification by Bancorp.
(a) Bancorp agrees to indemnify each Shareholder in respect
of, and hold each of them harmless from and against, any and all Losses
suffered, incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of Bancorp contained in this Agreement (determined in all
cases as if the terms "material" or "materially" were not included therein).
(b) All claims for indemnification by Shareholders pursuant to
this Section 11.02 shall be asserted in accordance with the provisions of
Section 11.03.
(c) The right of Shareholders to assert claims pursuant to
this Section 11.02 shall survive for the period provided in Article X.
11.03. Method of Asserting Claims. All claims for indemnification by
any Indemnified Party under Section 1.06, 11.01 or 11.02 will be asserted and
resolved as follows:
(a) In the event any claim or demand in respect of which an
Indemnifying Party might seek indemnity under this Article XI is asserted
against or sought to be collected from such Indemnified Party by a Person other
than Shareholders, Mears, Bancorp or any Affiliate of Shareholders or Bancorp (a
"Third Party Claim"), the Indemnified Party shall deliver a Claim Notice with
reasonable promptness to the Indemnifying Party and, if applicable, the Escrow
Agent. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party will not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced by such
failure of the Indemnified Party. The Indemnifying Party will notify the
Indemnified Party as soon as practicable within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified Party under this
Article XI and whether the Indemnifying Party desires, at its sole cost and
expense, to defend the Indemnified Party against such Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim, then the Indemnifying
Party will have the right to defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the Indemnifying Party, such
Third Party Claim by all appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party (but
only with the consent of the Indemnified Party in the case of any settlement
that provides for any relief other than the payment of monetary damages. The
Indemnifying Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the Indemnified Party, at
any time prior to the Indemnifying Party's delivery of the notice referred to in
the first sentence of this subsection, file any motion, answer or other
pleadings or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate to protect its interests; and provided
further, that if requested by the Indemnifying Party, the Indemnified Party
will, at the sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnifying Party in contesting any Third Party Claim that
the Indemnifying Party elects to contest. The Indemnified Party may participate
in, but not control, any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this subsection, and except as
provided in the preceding sentence, the Indemnified Party will bear its own
costs and expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the defense or
settlement of a Third Party Claim at any time if it irrevocably waives its right
to indemnity under this Article XI with respect to such Third Party Claim.
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(c) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to Section 11.03(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party will have the
right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will be
prosecuted by the Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party. The Indemnified
Party will have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that if requested by the
Indemnified Party, the Indemnifying Party will, at the sole cost and expense of
the Indemnifying Party, provide reasonable cooperation to the Indemnified Party
and its counsel in contesting any Third Party Claim which the Indemnified Party
is contesting. Notwithstanding the foregoing provisions of this subsection, if
the Indemnifying Party has notified the Indemnified Party within the Dispute
Period that the Indemnifying Party disputes its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such dispute is
resolved in favor of the Indemnifying Party in the manner provided in subsection
(d) below, the Indemnifying Party will not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this subsection or of
the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party will reimburse the Indemnifying Party in full
for all reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate in, but
not control, any defense or settlement controlled by the Indemnified Party
pursuant to this subsection, and the Indemnifying Party will bear its own costs
and expenses with respect to such participation.
(d) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability to the Indemnified Party with respect to
the Third Party Claim under Article XI or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes its liability
to the Indemnified Party with respect to such Third Party Claim, the Loss in the
amount specified in the Claim Notice will be conclusively deemed a liability of
the Indemnifying Party under this Article XI and the Indemnifying Party shall
pay the amount of such Loss to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability with respect to such claim,
the Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be resolved by litigation in a
court of competent jurisdiction.
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(e) In the event any Indemnified Party should have a claim
under this Article XI against any Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under this Article XI
and the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability
with respect to such claim, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within the Resolution Period, such dispute shall
be resolved by litigation in a court of competent jurisdiction.
XII. TERMINATION
12.01. Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Shareholders and Bancorp;
(b) at any time before the Closing, by Shareholders or
Bancorp, in the event (i) of a material breach hereof by the non-terminating
party if such non-terminating party fails to cure such breach within five (5)
Business Days following notification thereof by the terminating party or, if
such breach cannot be reasonably be cured within such time, if the
non-terminating party fails to proceed diligently to effect a cure of such
breach and such breach is not cured within thirty (30) Business Days following
notification thereof by the terminating party, or (ii) upon notification of the
non-terminating party by the terminating party that the satisfaction of any
condition to the terminating party's obligations under this Agreement becomes
impossible or impracticable with the use of commercially reasonable efforts if
the failure of such condition to be satisfied is not caused by a breach hereof
by the terminating party; and
(c) at any time before the Closing, if in the opinion of
Bancorp facts or circumstances exist which have or are likely to have a material
adverse effect on the condition (financial, legal or business) or future
prospects of Mears.
12.02. Effect of Termination. If this Agreement is validly terminated
pursuant to Section 12.01, this Agreement will forthwith become null and void,
and there will be no liability or obligation on the part of Shareholders or
Bancorp (or any of their respective officers, directors, employees, agents or
other representatives or Affiliates), except as provided in the next succeeding
sentence and except that the provisions with respect to expenses in Section
14.03 and confidentiality in Section 14.05 will continue to apply following any
such termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section 12.01(b) or
(c), Shareholders will remain liable to Bancorp for any breach of this Agreement
by Shareholders existing at the time of such termination, and Bancorp will
remain liable to Shareholders for any breach of this Agreement by Bancorp
existing at the time of such termination, and Shareholders or Bancorp may seek
such remedies, including damages and fees of attorneys, against the other with
respect to any such breach as are provided in this Agreement or as are otherwise
available at Law or in equity.
38
XIII. DEFINITIONS
13.01. Definitions. (a) As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding or
any settlement thereof, arbitration or Governmental or Regulatory Authority
investigation or audit.
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract or
otherwise and, in any event and without limitation of the previous sentence, any
Person owning twenty percent (20%) or more of the voting securities of a second
Person shall be deemed to control that second Person.
"Affiliated Group" means any consolidated, combined or
affiliated group of which Mears has been a Member.
"Agreement" means this Agreement and Plan of Merger and the
Exhibits, the Disclosure Schedule and the Schedules hereto and the certificates
delivered in accordance herewith, and as the same shall be amended from time to
time.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation
or other business organization of which such Person is an officer or partner or
is the beneficial owner, directly or indirectly, of twenty percent (20%) or more
of any class of equity securities, any trust or estate in which such Person has
a beneficial interest or as to which such Person serves as a trustee or in a
similar capacity and any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person.
"Audited Financial Statement Date" means the last day of the
most recent fiscal period of Mears for which Financial Statements are delivered
to Bancorp pursuant to Section 2.09.
39
"Audited Financial Statement" means the audited Financial
Statements of Mears delivered to Bancorp pursuant to Section 2.09.
"Benefit Plan" means any Plan established by Mears, or any
predecessor or Affiliate of any of the foregoing, existing at the Closing Date
or prior thereto, to which Mears contributes or has contributed, or under which
any employee, former employee or director of Mears or any beneficiary thereof is
covered, is eligible for coverage or has benefit rights.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of Mears,
including without limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, databases, computer
files , information and programs (including but not limited to Infolease),
retrieval programs, operating data and plans and environmental studies and
plans.
"Business Combination" means with respect to any Person any
merger, consolidation or combination to which such Person is a party, any sale
or other disposition of capital stock or other equity interests of such Person
or any sale or other disposition of all or substantially all of the Assets and
Properties of such Person.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of Delaware are authorized or obligated
to close.
"Business or Condition of Mears" means the business, condition
(financial or otherwise), results of operations, Assets and Properties and
prospects of Mears taken as a whole.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"Claim Notice" means written notification pursuant to Section
11.03(a) of a Third Party Claim as to which indemnity under Section 11.01 or
11.02 is sought by an Indemnified Party, enclosing a copy of all papers served,
if any, and specifying the nature of such Third Party Claim and the basis for
the Indemnified Party's claim against the Indemnifying Party under Section 11.01
or 11.02, together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such Third Party Claim.
"Closing" means the closing of the transactions contemplated
by Section 1.02.
"Closing Agreement" means a written and legally binding
agreement with a Tax Authority relating to Taxes.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Company Lease" means any equipment or motor vehicle
financing, operating or other similar lease agreement for use, conditional sale,
loan or financing entered into by Mears as a lessor, lender or financier as of
the Closing Date.
"Contract" means any agreement, lease, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral) other than a Company Lease.
40
"Defined Benefit Plan" means each Plan which is a defined
benefit plan as defined in Section 3(35) of ERISA or Section 414(j) of the Code.
"Disclosure Schedule" means the record delivered to Bancorp by
Shareholders herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein by Shareholders pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) calendar
days following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Environmental Law" means any Law relating to human health,
safety or protection of the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants or Hazardous Materials in the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), or otherwise relating to the
treatment, storage, disposal, transport or handling of any Hazardous Material.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any Person who is in the same
controlled group of corporations or who is under common control with Shareholder
or, before the Closing, Mears (within the meaning of Section 414 of the Code or
Section 4001 of ERISA).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Financial Statements" means the financial statements of Mears
delivered to Bancorp pursuant to Section 2.09.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"Hazardous Material" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs); (B) any chemicals, materials, substances or wastes which are now or
hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import, under any Environmental Law; and (C) any other
chemical, material, substance or waste, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental or Regulatory Authority.
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (iv) under capital leases, (v) in respect of any amount of assets
sold and (vi) in the nature of guarantees of the obligations described in
clauses (i) through (v) above of any Person.
41
"Independent Accountants" means a firm of accountants mutually
agreed to by Shareholders and Bancorp, which firm shall not be the accountants
for either Bancorp, Shareholders or Mears.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article XI, including without limitation a Person
asserting a claim pursuant to paragraph (c) of Section 11.03.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article XI, including
without limitation a Person against whom a claim is asserted pursuant to
paragraph (c) of Section 11.03.
"Indemnity Notice" means written notification pursuant to
Section 11.03(e) of a claim for indemnity under Article XI by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, software license and sub-license
agreements, end-user license agreements for software, software maintenance
agreements, technical information, manufacturing, engineering and technical
drawings, know-how and all pending applications for and registrations of
patents, trademarks, service marks and copyrights.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by Mears.
"IRS" means the United States Internal Revenue Service.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
42
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, fees of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment) net of
any recoveries through collection action, litigation or otherwise.
"Operative Agreements" means the Lease, the Employment
Agreement, the Escrow Agreement and any support or other agreements to be
entered into in connection with the transaction.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive any benefits or rights similar to any rights enjoyed by or accruing
to the holder of shares of capital stock of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
"Pension Benefit Plan" means each Benefit Plan which is a
pension plan within the meaning of Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent and (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not materially impair the value of the
property subject to such Lien or the use of such property in the conduct of the
business of Mears.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business organization,
trust, union, association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Qualified Plan" means each Pension Benefit Plan which is
intended to qualify under Section 401 of the Code.
"Resolution Period" means the period ending thirty (30)
calendar days following receipt by an Indemnified Party of a Dispute Notice.
43
"Securities Act" means the Securities Act of 1933, as amended.
"Subject Defined Benefit Plan" means each Defined Benefit Plan
listed and described in Section 2.15(a) of the Disclosure Schedule.
"Subsidiary" means any Person in which any other Person
directly or indirectly through one or more Subsidiaries or otherwise,
beneficially owns more than fifty percent (50%) of either the equity interests
or the voting control.
"Tax Authority" means the IRS and any state, local, foreign or
other governmental agency charged by law with the administration or collection
of any Tax.
"Tax Return" means a report, return, notification or other
information required to be supplied to a Governmental or Regulatory Authority
with respect to Taxes.
"Taxes" means any Federal, state, county, local or foreign
taxes, charges, surcharges, fees, levies, or other assessments, including all
net income, gross income, sales and use, value added, ad valorem, transfer,
gains, profits, excise, franchise, real and personal property, gross receipt,
capital stock, production, business and occupation, disability, employment,
payroll, license, estimated, stamp, duties, imposts, severance or withholding
taxes or charges imposed by any government entity, and includes any interest and
penalties (civil or criminal) on or additions to any such taxes and any expenses
incurred in connection with the determination, settlement or litigation of any
Tax liability.
"Unaudited Financial Statement Date" means the last day of the
most recent fiscal quarter of Mears for which Financial Statements are delivered
to Bancorp pursuant to Section 2.09.
"Unaudited Financial Statements" means the Financial
Statements for the most recent fiscal quarter of Mears delivered to Bancorp
pursuant to Section 2.09.
(a) Unless the context of this Agreement otherwise requires,
(i) words of any gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of Mears. All accounting terms used
herein and not expressly defined herein shall have the meanings given to them
under GAAP.
XIV. MISCELLANEOUS
14.01. Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or mailed (first class postage prepaid) or by confirmed
telefax to the parties at the following addresses:
If to Bancorp, to:
The Bancorp, Inc.
405 Silverside Road
Wilmington, Delaware 19809
Attn: Scott Megargee
Fax: (302) 385-5117
44
with a copy to:
Ledgewood Law Firm, P.C.
1521 Locust Street, 8th Floor
Philadelphia, PA 19102
Attn: Lisa A. Ernst, Esquire
Fax: (215) 735-2513
If to Shareholders, to:
James C. Hartman
3905 El Rey Road
Orlando, FL 32808
Fax: 407-292-9292
with a copy to:
Dean, Mead, Egerton, Bloodworth,
Capouano & Bozarth, P.A.
800 N. Magnolia Avenue, Suite 1500
Orlando, FL 32802
Attn: Stephen R. Looney, Esquire
Fax: (407) 423-1831
Arrow Holdings
c/o Realty Management Consultants
4811 S. 76th Street, Number 211
Greenfield, WI 53220
Attn: Robert Schlytter
Fax: (414) 281-2894
with copy to:
Walsh & Keating, S.C.
1505 Wauwatosa Avenue
Milwaukee, WI 53213
Attn: David C. Keating, Esq.
Fax: (414) 257-9959
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section or by confirmed telefax,
be deemed given upon delivery and (ii) if delivered by mail in the manner
described above to the address as provided in this Section, be deemed given upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice is
to be delivered pursuant to this Section). Any party from time to time may
change its address or other information for the purpose of notices to that party
by giving notice specifying such change to the other party hereto.
45
14.02. Entire Agreement. This Agreement and the Operative Agreements
supersede all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof and contain the sole and entire
agreement between the parties hereto with respect to the subject matter hereof
and thereof.
14.03. Expenses. Except as otherwise expressly provided in this
Agreement (including without limitation as provided in Section 12.02), whether
or not the transactions contemplated hereby are consummated, each party will pay
its own costs and expenses incurred in connection with the negotiation,
execution and closing of this Agreement and the Operative Agreements and the
transactions contemplated hereby and thereby.
14.04. Public Announcements. At all times at or before the Closing,
Shareholders and Bancorp will not issue or make any reports, statements or
releases to the public or generally to the employees, customers, vendors,
suppliers or other Persons to whom Mears sells goods or provide services or with
whom Mears otherwise has significant business relationships with respect to this
Agreement or the transactions contemplated hereby without the consent of the
other, which consent shall not be unreasonably withheld. If either party is
unable to obtain the approval of its public report, statement or release from
the other party and such report, statement or release is, in the opinion of
legal counsel to such party, required by Law in order to discharge such party's
disclosure obligations, then such party may make or issue the legally required
report, statement or release and promptly furnish the other party with a copy
thereof.
14.05. Confidentiality. Each party hereto will hold, and will use its
best efforts to cause its Affiliates, and their respective Representatives to
hold, in strict confidence from any Person (other than any such Affiliate or
Representative), unless (i) compelled to disclose by judicial or administrative
process (including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law or (ii)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (a) previously known by
the party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential; provided that following the Closing the
foregoing restrictions will not apply to Bancorp's use of documents and
information concerning Mears furnished by Shareholders hereunder. In the event
the transactions contemplated hereby are not consummated, upon the request of
the other party, each party hereto will, and will cause its Affiliates and their
respective Representatives to, promptly redeliver or cause to be redelivered all
copies of documents and information furnished by the other party in connection
with this Agreement or the transactions contemplated hereby and destroy or cause
to be destroyed all notes, memoranda, summaries, analyses, compilations and
other writings related thereto or based thereon prepared by the party furnished
such documents and information or its Representatives.
14.06. Further Assurances; Post-Closing Cooperation.
(a) At any time or from time to time after the Closing,
Shareholders shall execute and deliver to Bancorp such other documents and
instruments, provide such materials and information and take such other actions
as Bancorp may reasonably request more effectively to vest title to the Shares
in Bancorp and, to the full extent permitted by Law, to put Bancorp in actual
possession and operating control of Mears and its Assets and Properties and
Books and Records, and otherwise to cause Shareholders to fulfill their
obligations under this Agreement and the Operative Agreements to which they are
a party.
46
(b) Following the Closing, each party will afford the other
party, its counsel and its accountants, during normal business hours, reasonable
access to the books, records and other data relating to the Business or
Condition of Mears in its possession with respect to periods prior to the
Closing and the right to make copies and extracts therefrom, to the extent that
such access may be reasonably required by the requesting party in connection
with (i) the preparation of Tax Returns, (ii) the determination or enforcement
of rights and obligations under this Agreement, (iii) compliance with the
requirements of any Governmental or Regulatory Authority, (iv) the determination
or enforcement of the rights and obligations of any Indemnified Party or (v) in
connection with any actual or threatened Action or Proceeding. Further, each
party agrees for a period extending six (6) years after the Closing Date not to
destroy or otherwise dispose of any such books, records and other data unless
such party shall first offer in writing to surrender such books, records and
other data to the other party and such other party shall not agree in writing to
take possession thereof during the ten (10) day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns, other
documents or reports required to be filed with Governmental or Regulatory
Authorities or its financial statements or to fulfill its obligations hereunder,
it is necessary that a party be furnished with additional information, documents
or records relating to the Business or Condition of Mears not referred to in
paragraph (b) above, and such information, documents or records are in the
possession or control of the other party, such other party shall use its best
efforts to furnish or make available such information, documents or records (or
copies thereof) at the recipient's request, cost and expense. Any information
obtained by Shareholders in accordance with this paragraph shall be held
confidential by Shareholders in accordance with Section 14.05.
(d) Notwithstanding anything to the contrary contained in this
Section, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in accordance
with any provision of this Section shall be subject to applicable rules relating
to discovery.
14.07. Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
14.08. Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
14.09. No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article XI.
47
14.10. No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except for assignments and transfers by operation of Law.
Subject to the foregoing, this Agreement is binding upon, inures to the benefit
of and is enforceable by the parties hereto and their respective successors and
assigns.
14.11. Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
14.12. Consent to Jurisdiction and Service of Process. Shareholders
hereby irrevocably appoint CT Corporation, at its office at 111 Eighth Avenue,
New York, NY 10011, its lawful agent and attorney to accept and acknowledge
service of any and all process against it in any action, suit or proceeding
arising in connection with this Agreement or any of the Operative Agreements and
upon whom such process may be served, with the same effect as if such party were
a resident of the Commonwealth of Pennsylvania and had been lawfully served with
such process in such jurisdiction, and waives all claims of error by reason of
such service, provided that in the case of any service upon such agent and
attorney, the party effecting such service shall also deliver a copy thereof to
the other party at the address and in the manner specified in Section 14.01.
Shareholders and Bancorp will enter into such agreements with such agents as may
be necessary to constitute and continue the appointment of such agents
hereunder. In the event that such agent and attorney resigns or otherwise
becomes incapable of acting as such, such party will appoint a successor agent
and attorney in New York, New York, reasonably satisfactory to the other party,
with like powers. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the United States District Court for the Eastern District of
Pennsylvania or any court of the Commonwealth of Pennsylvania located in the
County of Philadelphia in any such action, suit or proceeding, and agrees that
any such action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection to
venue therein), provided, however, that such consent to jurisdiction is solely
for the purpose referred to in this Section 14.12 and shall not be deemed to be
a general submission to the jurisdiction of said courts or in the Commonwealth
of Pennsylvania other than for such purpose. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by Law or to
commence legal proceedings or otherwise proceed against the other in any other
jurisdiction.
14.13. Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
14.14. Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Delaware.
14.15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
48
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party hereto as of the date first above
written.
THE BANCORP, INC.
By:
------------------------------------------------
Name:
Title:
---------------------------------------------------
JAMES C. HARTMAN
ARROW HOLDINGS
By:
------------------------------------------------
Name:
Title:
MEARS MOTOR LIVERY CORPORATION
By:
------------------------------------------------
Name:
Title:
---------------------------------------------------
ROBERT O. SCHLYTTER
(for the purposes of Section 7.01 only)
-----------------------------------------
DEBRA HARTMAN
(for the purposes of Section 4.06(b) only)
49
TABLE OF CONTENTS
I. THE MERGER............................................................1
The Merger............................................................1
Closing .............................................................1
Other Matters.........................................................2
Merger Consideration..................................................2
Exchange Adjustment...................................................2
Tax-Free Reorganization...............................................3
Registration of Common Stock..........................................3
Employee Matters......................................................5
II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS........................5
Organization of Shareholders..........................................5
Authority.............................................................6
Organization of Mears.................................................6
Capital Stock.........................................................6
Subsidiaries..........................................................6
No Conflicts..........................................................6
Governmental Approvals and Filings....................................7
Books and Records.....................................................7
Financial Statements..................................................7
Absence of Changes....................................................7
No Undisclosed Liabilities............................................9
Taxes .............................................................9
Legal Proceedings....................................................11
Compliance With Laws and Orders......................................12
Benefit Plans; ERISA.................................................12
Real Property........................................................14
Tangible Personal Property...........................................14
Intellectual Property Rights.........................................15
Contracts............................................................15
Licenses 17
Insurance............................................................18
Affiliate Transactions...............................................18
Employees; Labor Relations...........................................19
Environmental Matters................................................19
Bank and Brokerage Accounts; Investment Assets.......................20
No Powers of Attorney................................................20
Receivables..........................................................20
Inventory............................................................20
Investment...........................................................21
Brokers ............................................................21
Disclosure...........................................................21
III. REPRESENTATIONS AND WARRANTIES OF Bancorp............................21
Organization.........................................................21
Authority............................................................21
Capital Stock........................................................22
Financial Statements.................................................22
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Absence of Changes...................................................22
Common Stock.........................................................22
No Conflicts.........................................................22
Governmental Approvals and Filings...................................22
Legal Proceedings....................................................23
Brokers ............................................................23
Disclosure...........................................................23
IV. ACTIONS PRIOR TO CLOSING.............................................23
Regulatory and Other Approvals.......................................23
Investigation by Bancorp.............................................24
No Solicitations.....................................................24
Conduct of Business..................................................24
Employee Matters.....................................................25
Certain Restrictions.................................................26
Affiliate Transactions...............................................27
Books and Records....................................................27
Notice and Cure......................................................27
Fulfillment of Conditions............................................28
V. CONDITIONS TO OBLIGATIONS OF BANCORP.................................28
Representations and Warranties.......................................28
Performance..........................................................28
Orders and Laws......................................................28
Regulatory Consents and Approvals....................................28
Third Party Consents.................................................29
Opinion of Counsel...................................................29
Good Standing Certificates...........................................29
Termination of Mears's 401(k) Plan...................................29
Escrow Agreement.....................................................29
Lease ............................................................29
Employment Agreements................................................29
Certificates of Merger...............................................29
Proceedings..........................................................29
VI. CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS............................30
Representations and Warranties.......................................30
Performance..........................................................30
Orders and Laws......................................................30
Regulatory Consents and Approvals....................................30
Third Party Consents.................................................30
Opinion of Counsel...................................................30
Escrow Agreement.....................................................30
VII. RESTRICTIVE COVENANTS................................................30
Restrictive Covenants................................................30
Severability.........................................................31
Injunctive Relief....................................................31
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VIII. TAX MATTERS AND POST-CLOSING TAXES...................................31
Liability For Taxes..................................................31
Allocation...........................................................32
Payment 32
Refunds 32
Contests 32
Filing of Tax Returns; Change of Tax Year............................33
Cooperation and Exchange of Information..............................33
Conveyance Taxes.....................................................34
Termination of Prior Tax Settlement Agreements.......................34
IX. EMPLOYEE AND EMPLOYEE BENEFIT MATTERS................................34
Employees............................................................34
Continuation of Employment...........................................34
Employee Benefits....................................................34
X. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS....35
Survival of Representations, Warranties, Covenants and Agreements....35
XI. INDEMNIFICATION......................................................35
Indemnification by the Shareholders..................................35
Indemnification by Bancorp...........................................36
Method of Asserting Claims...........................................36
XII. TERMINATION..........................................................38
Termination..........................................................38
Effect of Termination................................................38
XIII. DEFINITIONS..........................................................39
Definitions..........................................................39
XIV. MISCELLANEOUS........................................................44
Notices ............................................................44
Entire Agreement.....................................................46
Expenses 46
Public Announcements.................................................46
Confidentiality......................................................46
Further Assurances; Post-Closing Cooperation.........................46
Waiver ............................................................47
Amendment............................................................47
No Third Party Beneficiary...........................................47
No Assignment; Binding Effect........................................48
Headings 48
Consent to Jurisdiction and Service of Process.......................48
Invalid Provisions...................................................48
Governing Law........................................................48
Counterparts.........................................................48
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