EXHIBIT 10.4
STOCK PURCHASE AGREEMENT
BY AND AMONG
UMB FINANCIAL CORP.
AND
THE STOCKHOLDERS OF
SUNSTONE FINANCIAL GROUP, INC.
Dated as of April 3, 2001
TABLE OF CONTENTS
PAGE
ARTICLE I - PURCHASE AND SALE OF SHARES ................................. 1
Section 1.1 - Purchase and Sale of Shares ............................ 1
Section 1.2 - Purchase Price.......................................... 1
Section 1.2(a) - Treatment of Option Holders ...................... 1
Section 1.2(b) - Seller Notes...................................... 2
Section 1.2(c) - Earn-Out Payments ................................ 2
Section 1.2(d) - Resolution of Earn-Out Disputes .................. 4
Section 1.2(e) - Purchase Price ................................... 4
Section 1.2(f) - Earn-Out Payment Adjustment....................... 4
ARTICLE II - CLOSING .................................................... 5
Section 2.1 - Time and Place ......................................... 5
Section 2.2 - Deliveries by the Sellers .............................. 6
Section 2.3 - Pre-Closing Delivery by the Buyer ...................... 7
Section 2.4 - Deliveries by the Buyer................................. 7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLERS.............. 8
Section 3.1 - Organization and Standing; Corporate Power; Authority .. 8
Section 3.2 - Capitalization; Share Ownership ........................ 9
Section 3.3 - Good Title.............................................. 9
Section 3.4 - Equity Investments ..................................... 10
Section 3.5 - Consents; No Violation ................................. 10
Section 3.6 - Financial Statements.................................... 11
Section 3.7 - No Undisclosed Liabilities ............................. 11
Section 3.8 - Absence of Certain Changes.............................. 11
Section 3.9 - Taxes................................................... 13
Section 3.10 - Real Property ......................................... 15
Section 3.11 - Intellectual Property ................................. 17
Section 3.12 - Absence of Litigation ................................. 19
Section 3.13 - Insurance.............................................. 19
Section 3.14 - Employee Benefits...................................... 19
Section 3.15 - Contracts and Commitments ............................. 22
Section 3.16 - Labor Matters ......................................... 23
Section 3.17 - Compliance............................................. 24
Section 3.18 - Environmental Matters ................................. 24
Section 3.19 - Employees ............................................. 26
Section 3.20 - Licenses and Permits; Assets........................... 27
Section 3.21 - Bank Accounts.......................................... 27
Section 3.22 - Sellers' Documentation ................................ 27
Section 3.23 - Disclosure ............................................ 27
Section 3.24 - No Finder's Fee ....................................... 27
Section 3.25 - Legal Representation .................................. 28
Section 3.26 - Certain Representations and Warranties Regarding
Broker-Dealer Status................................ 28
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE BUYER
OF THE BUYER............................................. 29
Section 4.1 - Organization ........................................... 29
Section 4.2 - Authorization........................................... 29
Section 4.3 - Valid and Binding Agreement............................. 29
Section 4.4 - Consents; No Violation ................................. 29
Section 4.5 - Absence of Litigation .................................. 30
Section 4.6 - No Finder's Fee ........................................ 30
ARTICLE V - COVENANTS ................................................... 30
Section 5.1 - Conduct and Preservation of Business ................... 30
Section 5.2 - Reasonable Efforts...................................... 33
Section 5.3 - Public Announcements; Notification of Certain Matters .. 33
Section 5.4 - No Solicitation......................................... 34
Section 5.5 - Insurance............................................... 35
Section 5.6 - Consents of Third Parties .............................. 35
Section 5.7 - Taxes................................................... 35
Section 5.8 - Continuing Involvement with Company .................... 39
Section 5.9 - Control of Company Operations........................... 40
Section 5.10 - Company's 401(k) Plan ................................. 40
Section 5.11 - Cancellation of Note................................... 40
Section 5.12 - Option Payout Loan and Guaranty ....................... 41
ARTICLE VI - POST-CLOSING COVENANTS ..................................... 41
ARTICLE VII - CLOSING CONDITIONS ........................................ 41
Section 7.1 - Conditions to the Obligations of the Buyer.............. 41
Section 7.1(a) - Representations and Warranties ................... 41
Section 7.1(b) - Performance ...................................... 41
Section 7.1(c) - Noncompetition Agreements ........................ 41
Section 7.1(d) - Approvals and Consents ........................... 42
Section 7.1(e) - Opinion of Counsel ............................... 42
Section 7.1(f) - No Material Adverse Effect........................ 42
Section 7.1(g) - No Prohibition.................................... 42
Section 7.1(h) - Certificates and Other Closing Deliveries ........ 42
Section 7.1(i) - Option Payout Agreement .......................... 42
Section 7.1(j) - Seller Guaranties and Obligations ................ 42
Section 7.2 - Conditions to the Obligations of Sellers................ 42
Section 7.2(a) - Representations and Warranties.................... 42
Section 7.2(b) - Performance ...................................... 43
Section 7.2(c) - Approvals and Consents............................ 43
Section 7.2(d) - No Prohibition.................................... 43
Section 7.2(e) - No Material Adverse Effect ....................... 43
Section 7.2(f) - Opinion of Counsel................................ 43
ARTICLE VIII - SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION ........................... 43
Section 8.1 - Survival of Representations and Warranties ............. 43
Section 8.2 - Indemnification by Ms. Allison.......................... 43
Section 8.3 - Indemnification by Buyer................................ 44
Section 8.4 - Reimbursement........................................... 44
Section 8.5 - Indemnification Procedures.............................. 44
Section 8.6 - Limitations of Indemnification.......................... 45
Section 8.7 - Offsets................................................. 45
Section 8.8 - Determination of Amount of Claim........................ 45
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER........................... 46
Section 9.1 - Termination ............................................ 46
Section 9.2 - Effect of Termination .................................. 46
Section 9.3 - Amendment, Extension and Waiver......................... 46
ARTICLE X - MISCELLANEOUS ............................................... 47
Section 10.1 - Expenses .............................................. 47
Section 10.2 - Parties in Interest ................................... 47
Section 10.3 - Entire Agreement; Assignment .......................... 47
Section 10.4 - Headings; Section References .......................... 47
Section 10.5 - Notices ............................................... 47
Section 10.6 - Law Governing ......................................... 48
Section 10.7 - Counterparts........................................... 48
Section 10.8 - Construction; Invalidity .............................. 48
Section 10.9 - Remedies .............................................. 49
Section 10.10 - Definition of Sellers' Knowledge...................... 49
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") dated as of April 3,
2001, is by and among UMB Financial Corp., a Missouri corporation (the "Buyer"),
and the persons listed on Exhibit A attached hereto (individually, a "Seller"
and collectively, the "Sellers").
RECITALS
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A. The Sellers have represented to Buyer that they are the record and
beneficial owners of 50,000 shares (the "Shares") of the issued and outstanding
capital stock of Sunstone Financial Group, Inc., a Wisconsin corporation (the
"Company"), with its principal office at 803 W. Michigan Street, Suite A,
Milwaukee, Wisconsin, and that the Shares constitute all of the issued and
outstanding shares of the capital stock of the Company.
B. The Buyer desires to acquire from the Sellers, and the Sellers
desire to sell to Buyer, all of the Shares.
C. The Buyer and the Sellers have entered into a letter of intent
dated January 24, 2001 (the "Letter of Intent"), regarding the purchase of the
Shares by the Buyer.
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above and
the respective representations, warranties, covenants, agreements and conditions
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
---------------------------
Section 1.1 Purchase and Sale of Shares. At the Closing (as defined in
Section 2.1 hereof), each Seller shall sell, transfer, convey, assign and
deliver good, valid, marketable and indefeasible title in and to the number of
Shares set forth on Exhibit A hereto opposite such Seller's name to the Buyer,
and the Buyer shall purchase the Shares from Sellers, upon the terms and subject
to the conditions set forth in this Agreement.
Section 1.2 Purchase Price. In consideration of the sale and transfer
of the Shares, Buyer agrees as follows:
(a) Treatment of Option Holders. The Company has outstanding to each
of the persons listed on Exhibit B attached hereto (each, an "Option
Holder"), parallel stock unit rights (the "Option Rights"). The parties
agree that immediately prior to the Closing
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Date, the Company shall settle the Option Rights for (i) cash in the
amounts set forth on Exhibit B attached hereto, and in accordance with the
terms of the Sunstone Financial Group, Inc. Parallel Stock Unit Plan and
the terms of the related option agreements with the Option Holders and the
Option Payout Agreements (as defined below), and (ii) promissory notes in
the form attached to those certain agreements between the Company and each
Option Holder (the "Option Payout Agreement," the form and content of such
agreements and attached notes being subject to Buyer's written approval
prior to Closing) to be executed and delivered by the Company and each
Option Holder at Closing. In order to finance the first installment under
the Option Payout Agreements, the Buyer shall, prior to the Closing Date,
make a loan to the Company in the principal amount of $630,000 on terms
determined by the Buyer (but consistent with the terms of this Section),
and the Company shall use the proceeds to make such first installment
payments. This borrowing by the Company shall not be deemed a violation of
any covenant, or the breach of any representation or warranty made by the
Sellers, in the Agreement. No Seller shall have any obligation to repay the
indebtedness associated with this borrowing, except as set forth in Section
5.12.
(b) Seller Notes. Buyer shall deliver to the Sellers at Closing, pro
rata in accordance with their ownership of stock of the Company: (i) cash,
by wire transfer of immediately available funds to accounts designated by
each Seller, in a total amount designated by Sellers in written notice
delivered to Buyer at least one (1) business day prior to Closing, which
total amount shall be equal to the lesser of (A) $3,000,000 or (B) the
amount that generates taxable gain to the Company such that when the gain
is allocated to Miriam Meyer Allison ("Ms. Allison") pro rata in accordance
with her ownership of stock of the Company, the gain allocated to her will
be an amount equal to her allocable share of the taxable loss of the
Company for the period beginning January 1, 2001 and ending immediately
prior to the Closing plus any "suspended" taxable losses for periods ending
prior to January 1, 2001; (ii) a promissory note (the "Initial Seller
Note") in substantially the form of Exhibit C attached hereto and
incorporated herein by reference, in the principal amount set forth
opposite each Seller's name on Exhibit A, less the amount of cash to be
received by such individual pursuant to subsection (i) above.
(c) Earn-Out Payments. Subject to the provisions of Section 1(f)
hereof, pay to the Sellers in five (5) annual installments (commencing one
(1) year from the first Annual Date (as defined below)), cash (the
"Earn-Out Payments") in accordance with the earnout formula set forth in
Exhibit D attached hereto and incorporated herein by reference. The
aggregate amount of all of the Earn-Out Payments to be made to Sellers
(collectively) in each given annual installment shall be determined as
provided for in Exhibit D, and then such aggregate amount shall be
apportioned among the Sellers according to the percentages set forth in
Exhibit D. Subject to the provisions of this Agreement, Buyer shall make
such Earn-Out Payments within 75 days after the end of each of the five
12-month periods by certified check or wire transfer of immediately
available funds (each, an "Earn-out Period") specified in Exhibit D and in
accordance with the formula set forth in Exhibit D. For purposes of this
subsection (c), the term "Annual Date" shall refer to whichever of the
following two days is closer in time to the Closing date: (a) the first day
of the first month of the calendar quarter in which Closing occurs, or (b)
the day following the last day of the third month of the calendar quarter
in
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which Closing occurs. Each Earn-out Period listed on Exhibit D shall
consist of the 12-month period immediately preceding the Annual Date of the
year referenced in the first column on Exhibit D. For purposes of the
formula set forth on Exhibit D, "Gross Revenues" for any given Earn-out
Period consist of the sums accrued by Company and Subsidiary (as defined in
Section 3.1) during such Earn-out Period representing payments due from
customers in consideration of goods and services provided to such customers
by Company and Subsidiary, as calculated in a manner consistent with the
Company's audited financial statements for the period ending December 31,
2000 and attached hereto as Exhibit E and incorporated herein by reference;
provided, however, that such Gross Revenues shall specifically (i) include
revenues in respect of the Company or Subsidiary's (x) providing services
to the Buyer's proprietary Scout Funds as listed on Exhibit F attached
hereto; (y) fund accounting servicing of transferred Buyer portfolios as
listed on Exhibit F attached hereto; and (z) any "Related UMB Revenue" (as
defined below); and shall (i) exclude all reimbursements representing
advances or expense reimbursements (including reimbursement for filing
fees, printing, professional fees, etc.) due or received by Company or
Subsidiary from customers and all other sums described as "Client
Distribution Revenue" in Company's unaudited internal operating statements
(a copy of which relating to the month of January, 2001 being attached
hereto as Exhibit G and incorporated herein by reference), and (ii) be
reduced, by the amount of any receivables that were previously included in
the gross revenues of the Company and/or Subsidiary but were written off or
otherwise determined to be uncollectable during the respective Earn-out
Period ("Write-Offs"), all as determined in a manner consistent with
generally accepted accounting principles ("GAAP"). Sellers agree and
acknowledge that Buyer, as the owner of the Company, will have the right to
accept or reject any business proposed to be conducted by the Company and
to modify any pricing structures of the Company; provided, that such right
of acceptance or rejection and right to modify shall be exercised in good
faith and in a commercially reasonable manner; and provided, further., that
Buyer shall comply with the provisions of Article VI hereof.
For purposes of subsection (z) above, the term "Related UMB Revenue" shall
consist of the following revenues accrued (less any such revenues written
off) by UMB Bank N.A ("UMB") during the relevant time period:
(i) Revenues in consideration of UMB providing custody and/or
cash management services ("UMB Services") to a fund to whom Company or
Subsidiary hereafter provides for the first time (Oberweis Funds being
expressly included); one or more of its core transfer agency services,
fund accounting services, distribution services, administration
services or marketing services (the "Core Services"), if UMB was not
providing UMB Services to such fund prior to the date of this
Agreement;
(ii) Revenues in consideration of UMB providing UMB Services to a
new fund hereafter created by a customer to whom Company or Subsidiary
currently provides one or more Core Services;
(iii) Revenues representing cash deposit fees, IRA custody fees,
or related bank fees in consideration of UMB providing UMB Services to
any fund
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for which Company or Subsidiary is hereafter appointed as transfer
agent, if UMB is not already providing UMB Services to such fund.
If a fund agrees with UMB to utilize account balances and earnings
credits to effect payment of the qualifying revenues, then the amount
of such earning credits granted by UMB and used by the fund to effect
such payments shall be included within the UMB Related Revenue.
(d) Resolution of Earn-Out Disputes. Buyer shall cause the Company to,
within sixty (60) days after the end of each of the five (5) Earn-out
Periods specified in Exhibit D, give the Sellers work papers and other
information reasonably requested by such parties reasonably detailing the
Buyer's determination of the cash that each Seller is entitled to receive
as the Earn-out Payment. If Sellers have any objection to such
determination, they must, within thirty (30) business days after receipt of
the notice, give written notice ("Earn-Out Notice") to Buyer specifying in
reasonable detail the Sellers' objections to Buyer's determination of the
Earn-Out Payment. Failure to provide such Earn-Out Notice within such
30-day period shall constitute Seller's agreement and acceptance of the
determination as provided by Buyer. The parties shall meet in person and
negotiate in good faith during the thirty (30) business-day period (the
"Earn-Out Resolution Period") after the date of Buyer's receipt of any
Earn-Out Notice to resolve the Sellers' objections. If the parties are
unable to resolve all such disputes within the Earn-Out Resolution Period,
then within ten (10) business days after the expiration of the Earn-Out
Resolution Period, all disputes shall be submitted to a mutually-agreed
upon independent accountant (the "Independent Accountant"), who shall be
engaged to provide a final and conclusive resolution of all unresolved
disputes within thirty (30) business days after such engagement. The
Independent Accountant's determination shall be limited to the specific
components of the earn-out formula that are in dispute and shall not result
in a recalculation of the earn-out formula set forth in Exhibit D hereto.
The determination of the Independent Accountant shall be final, binding and
conclusive on the parties hereto, and the fees and expenses of the
Independent Accountant shall be borne by Sellers unless the audit discloses
that the proposed Earn-Out Payment for such Earn-Out Resolution Period is
incorrect by more than ten percent (10%), in which case, Buyer shall pay
the reasonable fees and expenses charged by the Independent Accountant.
(e) Purchase Price. The payments made in accordance with Section
1.2(b) - (d) shall collectively constitute the purchase price (the
"Purchase Price").
(f) Earn-Out Payment Adjustment. Notwithstanding the provisions of
this Agreement, the Earn-Out Payment to be made during the first Earn-Out
Period (and any subsequent Earn Out Period, if necessary to implement the
adjustment described below) shall be reduced by an amount equal to the
"Adjusted Operating Loss" (as defined below), if any, of the Company during
the first such Earn-Out Period. The Adjusted Operating Loss will be
calculated by (i) taking the Company's pre-tax profit or loss (after
excluding any Client Distribution Revenue) reflected on the Company's
financial statement for the first Earn-Out Period (prepared in accordance
with GAAP and consistently with past practices); (ii) adding any Related
UMB Revenue for such period;
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(iii) subtracting any Write-Offs occurring during such period; and (iv)
adding the difference between (A) the actual interest due UMB on loans made
to the Company or Subsidiary to pay off the promissory notes owed to Park
Bank and other indebtedness mutually agreed to from time to time by Buyer
and Ms. Allison (collectively, "Repaid Debt"), and (B) the "Carrying Cost"
of such Repaid Debt during such period. For purposes of this subsection,
the "Carrying Cost" of the Repaid Debt shall be calculated by multiplying
the amount of the Repaid Debt repaid by, or on behalf of, the Company on or
after Closing, by the prime rate announced from time to time by UMB Bank,
N.A., minus 200 basis points, for those periods of time commencing when
each portion of the Repaid Debt is repaid and ending on April 1, 2002. (No
adjustment to the Earn-Out Payments will be made if there is no Adjusted
Operating Loss applicable to the first Earn-Out Period.)
For purposes of calculating the Adjusted Operating Loss, no general charges
or allocations to the Company shall be assessed by Buyer or its affiliates
for administrative services, overhead, management fees or other similar
expenses that Buyer generally allocates to its subsidiaries; provided
however, that Buyer or its affiliates may charge the Company (and such
charges shall be treated as an expense of the Company for purposes of
calculating its Adjusted Operating Loss) for (a) services actually provided
by Buyer or its affiliates, but only to the extent (and in comparable
amounts) that such charges are assessed against independent third-party
customers for comparable goods or services under similar circumstances, and
(b) the annual cost of any equipment, software or services purchased by
Buyer or its subsidiaries for the primary use and benefit of the Company,
but purchased and held on Buyer's or such subsidiaries' books for capital
or other business purposes. Notwithstanding the foregoing, the parties
agree and acknowledge that the Adjusted Operating Loss shall not exceed
Five Hundred Thousand Dollars ($500,000.00).
(g) Earn-Out Payments in Event of Death. In the event of Ms. Allison's
death during the Earn-Out Period, Buyer shall cause any Earn-Out Payments
due to Ms. Allison to be paid to the Miriam M. and Daniel S. Allison
Revocable Trust dated June 4, 1991, as amended.
ARTICLE II
CLOSING
Section 2.1 Time and Place. Upon the terms and subject to the
conditions contained herein, the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Shook, Hardy &
Bacon L.L.P., 1010 Grand Blvd., 5th Floor, Kansas City, Missouri, beginning at
noon Central Standard Time, on (a) April 17, 2001 or (b) at such other place,
time or later date as may be agreed upon by the parties. The actual date of the
Closing is sometimes referred to herein as the "Closing Date."
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Section 2.2 Deliveries by the Sellers. At the Closing, the Sellers
shall deliver or cause to be delivered to the Buyer the following:
(a) Certificates issued by the Company evidencing ownership of the
Shares by each of the Sellers, duly endorsed (or accompanied by a duly
executed stock power) by the appropriate Seller for transfer to the Buyer;
(b) Copies of the articles of incorporation of the Company and the
articles of organization of Subsidiary (as defined in Section 3.1 below),
certified as of a recent date by the Department of Financial Institutions
of the State of Wisconsin;
(c) Certificates from the Department of Financial Institutions or
other equivalent authority affirmatively certifying (i) the active status
of each of the Company and Subsidiary in the state of incorporation and any
jurisdiction in which the Company or Subsidiary is qualified to do business
as a foreign corporation and (ii) the payment of taxes by each of the
Company and Subsidiary in each such jurisdiction, each such certificate to
be dated as of the most recent practicable date;
(d) A certificate of the secretary or assistant secretary of the
Company stating that (i) the Shares constitute all of the issued and
outstanding capital stock of the Company, (ii) the Company owns all of the
issued and outstanding membership interests of Subsidiary, and (iii) the
articles of incorporation of Company and the articles of organization of
Subsidiary have not been amended or modified since the date of the
certification referred to in Section 2.2(b) hereof. A true and correct copy
of the by-laws of the Company and the operating agreement of Subsidiary, as
in effect on the date hereof and at all times thereafter to and including
the Closing Date, also shall be attached to such certificate;
(e) The opinion of Sellers' counsel referred to in Section 7.1(e)
hereof;
(f) The Required Consents (as identified on Schedule 3.5 hereof);
(g) The results of a recent search of the Uniform Commercial Code,
judgment and tax lien filings which may have been filed with respect to
personal property of the Company and Subsidiary in each jurisdiction where
such filings may have been made or property is located, and the results of
such search shall be satisfactory to the Buyer;
(h) A Non-competition Agreement referred to in Section 7.1(c) hereof,
(substantially in the form attached hereto as Schedule 7.1) duly and
validly executed by Ms. Allison and delivered to Buyer;
(i) Certificates of the Sellers certifying that all representations
and warranties of the Sellers contained herein are accurate, that all
covenants to be performed by the Sellers have been performed, that all
conditions precedent to closing have been performed, and that all other
documents, instruments, payments and writings required to be delivered by
the Sellers to the Buyer at the Closing pursuant to this Agreement or
otherwise required or reasonably requested in connection herewith have been
delivered;
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(j) Estoppel certificates in form satisfactory to Buyer, executed by
all landlords and sub-landlords, as the case may be, and Subordination,
Non-Disturbance and Attornment Agreements, duly executed and in a form
satisfactory to Buyer, as to the Properties.
(k) All other documents, instruments, payments and writings required
to be delivered by the Sellers to the Buyer at the Closing pursuant to this
Agreement or otherwise required or reasonably required in connection
herewith; and
(1) A release (in form reasonably satisfactory to Buyer) of any
guaranty or other instrument or obligation to which Company or Subsidiary
are a party or otherwise bound, guaranteeing or otherwise relating to any
indebtedness or obligations of Ms. Allison or any other Seller.
Section 2.3 Pre-Closing Delivery by the Buyer. Prior to Closing, the
Buyer shall deliver or cause to be delivered the $630,000 loan to the Company
identified in Section 1.2(a) hereof.
Section 2.4 Deliveries by the Buyer. At the Closing, the Buyer shall
deliver or cause to be delivered to the Sellers the following:
(a) The cash and promissory note identified in Section 1.2(b) hereof;
(b) A certificate of the secretary or assistant secretary of the Buyer
stating that all requisite corporate actions necessary for consummation of
the transaction contemplated by this Agreement have been taken by Buyer;
(c) Copies of articles of incorporation of Buyer, certified as of a
recent date by the Secretary of State of Missouri, and a true and correct
copy of the by-laws of the Buyer, as in effect on the date hereof and at
all times thereafter to and including the Closing Date, certified as such
by the secretary or assistant secretary of the Buyer;
(d) A certificate of the Buyer certifying that all representations and
warranties of the Buyer contained herein are accurate, that all covenants
to be performed by the Buyer have been performed, that all conditions
precedent to Closing have been performed, and that all other documents,
instruments, payments and writings required to be delivered by the Buyer to
the Sellers at the Closing pursuant to this Agreement or otherwise required
or reasonably requested in connection herewith have been delivered;
(e) A written acknowledgement of receipt of the certificates purchased
by the Buyer hereunder;
(f) The opinion of Buyer's counsel referred to in Section 7.2(f)
hereof;
(g) An unconditional agreement of Buyer to effect the release of Ms.
Allison from the guaranties set forth on Schedule 5.8(c) upon conclusion of
the Closing; and
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(h) All other documents, instruments, payments and writings required
to be delivered by the Buyer to the Sellers at the Closing pursuant to this
Agreement or otherwise required or reasonably required in connection
herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
OF THE SELLERS
--------------
To induce the Buyer to enter into this Agreement, each of the Sellers
hereby individually represents and warrants to the Buyer as follows:
Section 3.1 Organization and Standing; Corporate Power; Authority.
(a) The Company is a corporation duly organized, validly existing and
in active status under the laws of the State of Wisconsin. Sunstone
Distribution Services LLC ("Subsidiary") is a limited liability company
duly organized, validly existing and in active status under the laws of the
State of Wisconsin. Each of the Company and Subsidiary has all requisite
corporate power and authority to own, lease and operate its respective
properties and assets, and to carry on its respective business as presently
conducted. Each of the Company and Subsidiary possesses all governmental
licenses, franchises, rights and privileges required for the conduct of its
respective business. Each of the Company and Subsidiary is qualified to do
business as a foreign corporation in any state or foreign jurisdiction
where such qualification is required.
(b) Each of the Sellers has all requisite power and authority to
execute and deliver this Agreement, to sell and convey the Shares to be
sold by such Seller hereunder and to carry out and perform his or her
obligations under the terms of this Agreement. All proceedings, if any,
required to be taken by the Sellers to authorize the execution, delivery
and performance of this Agreement and the agreements relating hereto have
been properly taken, or will be taken prior to the Closing. This Agreement
has been duly executed and delivered by each Seller (directly, under a
power of attorney, or otherwise) and constitutes the legal, valid and
binding obligation of each Seller.
(c) The Sellers have furnished to the Buyer true, complete and correct
copies of (i) the articles of incorporation, and all amendments thereto, as
certified by the Department of Financial Institutions of the State of
Wisconsin, and the by-laws, each as presently in effect, for the Company,
and (ii) the articles of organization, and all amendments thereto, as
certified by the Department of Financial Institutions of the State of
Wisconsin, and the operating agreement, each as presently in effect, for
Subsidiary. Neither the Company nor Subsidiary is in violation of any of
the provisions of their organizational documents. All minutes of the
Company and Subsidiary are contained in their respective minute books,
copies of which have been provided to the Buyer for examination, and the
minute books of each of the Company and Subsidiary contain a complete and
accurate record of the substance of all corporate actions taken at all
meetings of the board of directors or the members, as applicable, of all
committees thereof and of the Sellers and the members, as applicable.
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Section 3.2 Capitalization; Share Ownership.
(a) The authorized capital stock of the Company consists solely of
56,000 Shares, of which 50,000 Shares are validly issued and outstanding,
duly authorized, fully paid and non-assessable, except as otherwise
provided in Section 180.0622(2)(b) of the Wisconsin Statutes and the cases
decided thereunder, and no Shares are held in the Company's treasury. All
of the Shares are held by the Sellers as set forth on Schedule 3.2 hereto.
Except as listed on Schedule 3.2 hereto, there are no outstanding (i)
securities convertible into or exchangeable for capital stock of the
Company, (ii) options, warrants, calls or other rights to purchase or
subscribe for capital stock of the Company or rights to acquire any such
rights or (iii) contracts, commitments, agreements, understandings,
arrangements or restrictions to which the Company or any Seller is a party
or by which it or he or she is bound relating to any shares of capital
stock or other securities of the Company (including the Shares), other than
this Agreement. Immediately prior to the Closing, the Sellers will lawfully
own their Shares, of record and beneficially, free and clear of all
liabilities, obligations, claims, liens, pledges, contractual rights,
security interests, options, charges, encumbrances and restrictions of any
kind whatsoever (except this Agreement) and shall transfer good, valid,
marketable and indefeasible title in and to such Shares to the Buyer. The
stock transfer records of the Company, copies of which have been provided
to the Buyer for examination, fully and accurately reflect all issuances,
cancellations, transfers, splits and other transactions involving or
affecting the capital stock of the Company. The Option Rights are the only
phantom or similar rights to acquire options or equity in the Company
and/or Subsidiary. The cash payment made at Closing pursuant to Section
1.2(a) hereof and the performance of the terms of the Option Payout
Agreements satisfy all obligations of the Company and/or Subsidiary with
respect to the plan referred to in Section 1.2(a), the Option Rights and
any other phantom or similar rights.
(b) The issued and outstanding membership interests of Subsidiary
consist solely of 100 units, which are validly issued and outstanding, duly
authorized, fully paid and non-assessable, and no units are held in
Subsidiary's treasury. All of such units are owned by the Company. Except
as listed on Schedule 3.2 hereto, there are no outstanding (i) securities
convertible into or exchangeable for units of or interests in Subsidiary,
(ii) options, warrants, calls or other rights to purchase or subscribe for
units of Subsidiary or rights to acquire any such rights, or (iii)
contracts, commitments, agreements, understandings, arrangements or
restrictions to which Subsidiary or the Company is a party or by which it
is bound relating to the units or interests in or other securities of
Subsidiary. Immediately prior to the Closing, the Company will lawfully own
all Subsidiary Units (and all other interests in Subsidiary), of record and
beneficially, free and clear of all liabilities, obligations, claims,
liens, pledges, contractual rights, security interests, options, charges,
encumbrances and restrictions of any kind whatsoever.
Section 3.3 Good Title. Each Seller has, and on the Closing Date will
have, good, valid, marketable and indefeasible title to the Shares proposed to
be sold by such Seller hereunder on the Closing Date and full right, power and
authority to enter into this Agreement and to sell, assign, transfer and deliver
such Shares hereunder, free and clear of all voting trust
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arrangements, liens, encumbrances, equities, security interests, restrictions
and claims whatsoever; and upon delivery of and payment at the Closing of the
amount to be paid with respect to such Shares at the Closing, Buyer will acquire
good, valid, marketable and indefeasible title thereto, free and clear of all
liens, encumbrances, equities, claims, restrictions, security interests, voting
trusts or other defects of title whatsoever.
Section 3.4 Equity Investments. Schedule 3.4 sets forth a complete and
correct list of each corporation, partnership or other business organization in
which the Company owns, directly or indirectly, any capital stock or other
equity interest or right to acquire any equity interest. The Company has good
and marketable title to all of the securities listed on Schedule 3.4 as owned by
it free and clear of all liens, charges, encumbrances and rights of others, and
there are no irrevocable proxies with respect to the securities listed on
Schedule 3.4. Except as set forth on Schedule 3.4, there are outstanding no
subscriptions, options, convertible securities, warrants, calls or rights of any
kind issued or granted by, or binding upon, the Company to purchase or otherwise
acquire any security of, or equity interest in, any entity listed on Schedule
3.4. Except as set forth on Schedule 3.4, the Company does not own any note,
bond, debenture or other evidence of indebtedness, and is not otherwise a
creditor, of any entity listed on Schedule 3.4. The Company has no subsidiaries,
except as set forth on Schedule 3.4.
Section 3.5 Consents; No Violation.
(a) Except as set forth on Schedule 3.5, neither the execution nor
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor the compliance with any of the provisions hereof,
(i) violates or conflicts with, breaches, terminates or constitutes a
default under the Articles of Incorporation, By-Laws or Operating Agreement
of the Company or Subsidiary, (ii) violates or conflicts with any statute
or law or any rule, regulation, order, writ, award, judgment or decree of
any court or governmental authority of any jurisdiction, or any regulation
or restriction of any regulatory or self-regulatory body or agency,
affecting the Company, Subsidiary or any Seller, (iii) as of the Closing
Date, violates or conflicts with, results in the breach or termination of,
or constitutes a default under, or permits any other party to terminate,
any contract, commitment, mortgage, deed of trust, agreement,
understanding, arrangement, lease, trust, license or restriction of any
kind to which the Company or Subsidiary is a party, or by which its assets
are bound, (iv) as of the Closing Date, will cause, or give any persons
valid grounds to cause (with or without notice, the passage of time or
both), the maturity of any debt, liability or obligation of the Company or
Subsidiary to be accelerated, or will increase any such liability or
obligation or will result in the imposition of any lien, encumbrance,
charge or claim upon any of the assets of the Company or Subsidiary, or (v)
requires any filing with, the notification of, or the obtaining of any
permit, authorization, consent or approval of, any third party, court or
governmental or regulatory authority, foreign or domestic (collectively,
the "Required Consents").
(b) The execution, delivery and performance of and compliance with
this Agreement by Seller and the sale and transfer of the Shares to be sold
by each Seller pursuant to the terms hereof, will not result in (i) any
violation or breach of any term of such charter documents of the Company or
Subsidiary, if any, (ii) any violation or breach
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by such Seller of any term of any indenture, mortgage, deed of trust or
other agreement, instrument, court order, judgment, decree, statute, rule
or regulation to which such Seller is a party or by which such Seller is
bound, (iii) any conflict with or default under any such term or (iv) the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of such Seller.
Section 3.6 Financial Statements. The Sellers have previously
delivered to the Buyer copies of (i) the most recent audited balance sheets,
including those as of December 31, 1998 and December 31, 1999 and December 31,
2000, and the related audited statements of earnings, stockholders' equity and
cash flows of the Company and Subsidiary for the years then ended, all of which
have been audited by Virchow, Krause & Company LLP, independent public
accountants for the Company and Subsidiary ("Audited Financial Statements"), and
(ii) the most recent unaudited balance sheet and related unaudited statements of
income of the Company and Subsidiary (the "Unaudited Financial Statements")
(collectively with the Audited Financial Statements, the "Financial
Statements"). The Financial Statements (and the notes thereto): (i) present
fairly in all respects the financial position and results of operations and
changes in financial position and cash flows for each of the Company and
Subsidiary as of the dates and for the periods covered thereby, and (ii) were
prepared in accordance with GAAP consistently applied except, in the case of the
Unaudited Financial Statements, for the absence of normal year-end adjustments
and footnotes, and (iii) reflect all necessary accruals and reserves (except
those relating to income taxes).
Section 3.7 No Undisclosed Liabilities. Except as disclosed on
Schedule 3.7, neither the Company nor Subsidiary has any debts, liabilities or
financial obligations (whether absolute, accrued, contingent or otherwise) which
are not disclosed in the Financial Statements and the notes thereto as required
by GAAP. Neither the Company nor Subsidiary has other liabilities or obligations
of any nature which are not required by GAAP to be set forth in its respective
balance sheet, whether absolute, accrued, contingent or otherwise, whether due
or to become due, which are not reflected in such balance sheet, and neither
Company nor Subsidiary knows of any basis for assertion against the Company or
Subsidiary of any such liability or obligation.
Section 3.8 Absence of Certain Changes. Except as set forth on
Schedule 3.8, there has not been since December 31, 2000:
(a) an occurrence of any event, fact, conditional change or effect
that is or could reasonably be expected to be materially adverse to the
business, operations, results of operations, condition (financial or
otherwise), assets, earnings or liabilities of the Company and/or
Subsidiary (including, without limitation, the receipt by Company,
Subsidiary or any Seller of any information regarding any actual or
potential termination of, or significant change in, the business or
revenues provided by any customer or client of the Company or Subsidiary);
(b) any loan made by the Company and/or Subsidiary to any officer,
director, employee, member or stockholder, or any new agreement or
agreement to enter into any or any change in any, bonus or other
compensation arrangement or agreement with any officer, director, member,
employee, stockholder, consultant or other such person;
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(c) any declaration, payment or set aside for payment of any dividend
or other distribution of assets of the Company or Subsidiary to the
stockholders, members, or any of their affiliates, or any direct or
indirect retirement, redemption, repurchase or other acquisition by the
Company or Subsidiary of any shares or units of its capital stock or units
of interest;
(d) any change in the indebtedness of the Company or Subsidiary, or
any change in the contingent obligations of the Company and/or Subsidiary
by way of guaranty, endorsement, indemnity, warranty or otherwise, other
than in the ordinary course of business, consistent with past practices;
(e) any obligation or liability (absolute, accrued, contingent or
otherwise) other than in the ordinary course of business, consistent with
past practices, incurred in an aggregate amount of $5,000 or more with
respect to any event or transaction or any series of related events or
transactions by the Company and/or Subsidiary;
(f) any waiver, cancellation or compromise by the Company and/or
Subsidiary of a right or of a debt owed to it, or any delay or deferral of
payment of accounts payable or other obligations of the Company and/or
Subsidiary or any acceleration of collection of receivables or other
obligations due the Company and/or Subsidiary;
(g) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation other than in the ordinary course of business,
consistent with past practices, by the Company and/or Subsidiary;
(h) any issuance, redemption or sale by the Company and/or Subsidiary
of their securities or interests;
(i) any sale, assignment, license or transfer of any patents,
trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights, codes, computer software
programs, processes or other intangible assets by the Company and/or
Subsidiary;
(j) any mortgage, pledge, lien, charge or other encumbrance, or grant
to third parties of any rights to, any of tangible assets of the Company
and/or Subsidiary;
(k) any change in any method of accounting, including but not limited
to accounting principles or methods of application of said principles, or
any business practice by the Company and/or Subsidiary;
(l) any damage, destruction or loss, whether or not covered by
insurance, affecting any of the material properties or business of the
Company and/or Subsidiary;
(m) any change in the relationship or course of dealing between the
Company, Subsidiary and any of their respective customers or material
suppliers or vendors;
(n) other than in the ordinary course of business and consistent with
past practices, any sale, lease, license, encumbrance or other disposition
of, or any agreement
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to sell, lease, license, encumber or otherwise dispose of, any assets of
the Company and/or Subsidiary by any party;
(o) any transaction by the Company and/or Subsidiary not in the
ordinary course of business;
(p) any settlement by the Company and/or Subsidiary of non-insured
litigation for amounts in excess of $5,000;
(q) any adoption, termination, amendment or increase in benefits paid
or payable under any severance, termination, profit sharing, deferred
compensation, or other employee benefit plan, program or arrangement, or
any agreement or arrangement with any officer, director, employee, member,
stockholder, consultant or other such person;
(r) any agreement or commitment by the Company and/or Subsidiary to do
any of the things described in this Section 3.8;
(s) any changes in the compensation or commitments to employees,
members or shareholders of the Company or Subsidiary; or
(t) any change to or breach of any of the contracts listed on Schedule
3.15 hereto.
Section 3.9 Taxes.
(a) Each of the Company and the Subsidiary has filed all Tax Returns
that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by either the Company or the
Subsidiary (whether or not shown on any Tax Return) have been paid. Neither
the Company nor the Subsidiary currently is the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever
been made by an authority in a jurisdiction where either the Company or the
Subsidiary does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no liens or encumbrances on any of
the assets of either the Company or the Subsidiary that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) Each of the Company and the Subsidiary has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party, including amounts required to be
withheld and paid in connection with the payments to the Option Holders
described in Section 1.2(a) above.
(c) There is no dispute or claim concerning any Tax liability of
either the Company or the Subsidiary either (A) claimed or raised by any
authority in writing or (B) as to which any of the Sellers or the directors
and officers (and employees responsible for Tax matters) of either the
Company or the Subsidiary has knowledge based upon personal contact with
any agent of such authority. Schedule 3.9 lists those Tax Returns filed
after December 31, 1996, that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Sellers have delivered
to the Buyer correct and
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complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Company or
the Subsidiary relating to taxable periods ending after December 31, 1990.
(d) Neither the Company nor the Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(e) Neither the Company nor the Subsidiary has made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not
be deductible under Code Sec. 162 (as unreasonable compensation), Code Sec.
162(m) or Code Sec. 280G, except that no representation or warranty is made
with respect to any payment to be made to any Option Holder. Neither the
Company nor the Subsidiary is party to any Tax allocation or sharing
agreement. Neither the Company nor the Subsidiary (A) has been a member of
an affiliated group filing a consolidated federal income Tax Return or (B)
has any liability for the Taxes of any person or entity (other than the
Company or the Subsidiary), as a transferee or successor, by contract, or
otherwise.
(f) The unpaid Taxes of the Company and the Subsidiary did not, as of
the date of the Balance Sheet exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
Balance Sheet (defined herein as the December 31, 2000, balance sheet for
the Audited Financial Statements) (rather than in any notes thereto); the
parties acknowledge, however, that there has been no reserve established in
the Balance Sheet for income taxes.
(g) Since the date of the Balance Sheet, neither the Company nor the
Subsidiary has incurred any liabilities for Taxes except in the ordinary
course of business.
(h) The Company has been a validly electing S corporation within the
meaning of Code Sec. 1361 and 1362 at all times during its existence, and
the Company will be an S corporation up to and including the Closing Date.
(i) The Company has no subsidiary that is a "qualified subchapter S
subsidiary" within the meaning of Code Sec. 1361(b)(3)(B).
(j) The Company will not be liable for any Tax under Code Sec. 1374 in
connection with the deemed sale of the Company's assets caused by the
Section 338(h)(10) election. Neither the Company nor the Subsidiary has, in
the last 10 years, (A) acquired assets (other than certain assets acquired
by Subsidiary from the Company upon its formation) from another corporation
in a transaction in which the Company's or Subsidiary's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the
Tax basis of the acquired assets (or any other property) in the hands of
the transferor or (B) acquired the stock of any corporation which is a
qualified subchapter S subsidiary.
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(k) At all times during its existence, the Subsidiary has been treated
as an entity that is "disregarded as an entity separate from its owner" in
accordance with Treas. Reg. Section 301.7701-3(b)(1)(ii), and this
treatment will continue up to and including the Closing Date.
For purposes of this Agreement, the following definitions shall apply:
"Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or additional thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim or refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Section 3.10 Real Property. Neither the Company nor Subsidiary owns
any real property in fee simple. Schedule 3.10(a) sets forth a list of all real
property leased by the Company and/or Subsidiary (collectively, the
"Properties"). The Company or Subsidiary, as the case may be, holds a good and
valid leasehold title and estate in the Properties, in each case free and clear
of all mortgages, deeds of trust, pledges, liens, security interests, claims,
mechanic's or materialmen's liens, charges, easements, restrictive covenants,
rights-of-way and other encumbrances, other than for Permitted Encumbrances. As
used herein, "Permitted Encumbrances" means liens for Taxes not yet due or which
are being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established in accordance with GAAP, municipal and
zoning ordinances and easements of record, utility easements for utilities
serving the property of record, and any similar encumbrances, none of which
interfere with the use of such Properties as currently utilized.
The Company hereby represents that:
(a) Neither the Company nor Subsidiary has received written notice (i)
that any of the Properties (or the buildings, structures or improvements
thereon), or the operations of Company or Subsidiary violate the zoning or
planning laws, ordinances, rules or regulations of the city, county or
state in which they are located, or any building regulations or codes of
such city, county or state, or land use laws or regulations applicable to
the Properties, or (ii) of any claims of others to rights over, under,
across or through any of the Properties by virtue of use or prescription;
(b) All permits, approvals, authorizations or licenses required or
necessary for the use of any of the Properties to the extent required of
the Company have been obtained and are in full force and effect;
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(c) Except as set forth on Schedule 3.10(d), neither the Company nor
Subsidiary has sublet, nor is subletting, all or any part of any of the
Properties, nor has assigned all or any part of its interests in any of the
leases.
(d) Schedule 3.10(d) sets forth a list of all service and maintenance
contracts affecting the Properties and all utility and management contracts
affecting the Properties to which the Company or Subsidiary is a party and
which in any individual contract obligate the Company or Subsidiary to pay
more than $5,000 in any year. All such contracts are currently in full
force and effect, and, as to the Company or Subsidiary, and to Sellers'
knowledge, as to third parties, there is no default, or action or omission
which with the giving of notice or passage of time or both would constitute
a default thereunder. Copies of all such contracts have been delivered to
Buyer. In addition, the Sellers have previously delivered to the Buyer
copies of the most recently issued bills for real estate tax assessments
against any or all of the Properties;
(e) All the Properties are free and clear of any agreements to
sublease (or to grant an assignment of lease), options to sublease (or to
grant an assignment of lease) or rights of first refusal relating thereto.
All real property with respect to which the Company or Subsidiary has an
agreement to purchase, lease or sublease, option to purchase, lease, or
sublease or right of first refusal relating thereto is set forth on
Schedule 3.10(e);
(f) To Sellers' knowledge, all the Properties are currently zoned in
the zoning category which permits operation of said Properties as now used,
operated and maintained;
(g) To Sellers' knowledge, the Properties currently have access to all
gas, water, electricity, storm sewer, sanitary sewer, telephone and all
other utilities necessary or beneficial to the current operation of the
Properties, and all of such utilities are adequate and sufficient for the
current operation of the Properties;
(h) Except as set forth on Schedule 3.10(h), and except for repair and
maintenance in the ordinary course of business, no construction,
improvements, or expansion is currently on-going at any of the Properties,
and Company and/or Subsidiary have accepted possession of the Properties;
(i) The Company or Subsidiary, as the case may be, holds a valid
leasehold estate pursuant to each lease by which the Properties are leased,
as shown on Schedule 3.10(h), and enjoys peaceful and undisturbed
possession thereunder. The Sellers have previously delivered to the Buyer
complete and accurate copies of all such scheduled leases. All such leases
are valid, binding, and enforceable, as to the Company or Subsidiary and to
Sellers' knowledge, as to third parties, in accordance with their terms,
and are in full force and effect, the Company and/or Subsidiary has
complied with all obligations thereunder, and there are no existing
defaults by the Company and/or Subsidiary, and to Sellers' knowledge, there
are no existing defaults by any other party thereunder. No event has
occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default by
the Company and/or Subsidiary, and no event has occurred to Sellers'
knowledge, which (whether with or
-16-
without notice, lapse of time or the happening or occurrence of any other
event) would constitute a default by any other party thereunder. All such
leases shall continue in full force and effect (without default) after the
Closing and consummation of the transactions contemplated by this Agreement
without the consent, approval or act of any other party, except as set
forth in Schedule 3.5;
(j) To the Seller's knowledge, there are no proposed, pending or
threatened proceedings or governmental or quasi-governmental actions to
condemn or take by the power of eminent domain (or to purchase in lieu
thereof), or otherwise to take or restrict the right to use or occupy, any
of the Properties; and
(k) Neither the Sellers, the Company nor Subsidiary has received
written notice that it is in violation of any applicable antipollution,
health or other law, ordinance or regulation in respect of the Properties
or their operation, which violation remains uncured, and to Sellers'
knowledge, no such violation exists.
Section 3.11 Intellectual Property.
(a) Schedule 3.11 contains an accurate and complete description of all
domestic and foreign URL registrations, patents, patent applications,
patent licenses, shop rights, trademarks, trademark registrations and
applications therefor, service marks, service mark registrations and
applications therefor, logos, trade names, assumed names, copyright
registrations and applications therefor, and registered domain names, which
are used by the Company or Subsidiary, or which are presently owned or held
by the Company or Subsidiary or under which the Company or Subsidiary owns
or holds any license, or in which the Company or Subsidiary owns or holds
any direct or indirect interest, other than those rights granted to Buyer
hereunder (collectively, the "Intellectual Property Rights"). Schedule 3.11
further sets forth: (i) the nature of such Intellectual Property Rights;
(ii) the owner of such Intellectual Property Rights; (iii) the jurisdiction
by or in which such Intellectual Property Rights has been issued or
registered or in which an application for such issuance or registration has
been filed, including the respective registration or application numbers;
and (iv) licenses, sublicenses and other agreements as to which the Company
is a party and pursuant to which the Company, or any other person or entity
is authorized to use such Intellectual Property Rights, process, design,
invention, know-how, trade secret or other proprietary information
(collectively, the "Company/Subsidiary Intellectual Property").
(b) Except as set forth on Schedule 3.11, neither the Company nor
Subsidiary infringes or unlawfully or wrongly uses any patent, trademark,
trade name, service mark, copyright, trade secret, confidential or
proprietary right or any similar rights owned or claimed by another.
(c) Except as set forth in Schedule 3.11, neither the Company nor
Subsidiary knows of any use that has been or is now being made by another
of the Company/Subsidiary Intellectual Property or that would infringe such
rights, or would prevent the unrestricted use thereof by Buyer.
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(d) Except as set forth on Schedule 3.11, (i) the Company or the
Subsidiary, as the case may be, is the sole and exclusive owner of or
possesses valid licenses and rights to use all Company/Subsidiary
Intellectual Property necessary to conduct the businesses of the Company
and the Subsidiary as are currently being conducted, and (ii) such
ownership or right to use under licenses will not be adversely affected as
a result of the execution of this Agreement and consummation of the
transactions provided for herein.
(e) Except as set forth on Schedule 3.11, neither the Company nor
Subsidiary has sold, licensed or otherwise disposed of or transferred or
granted any interest in the Company/Subsidiary Intellectual Property. The
Company and/or Subsidiary has taken all reasonable measures, which may or
may not have included the institution of litigation, to maintain and
protect the Company/Subsidiary Intellectual Property and, to Sellers'
knowledge, all such rights remain valid and enforceable.
(f) Except as set forth on Schedule 3.11(g), to Sellers' knowledge, no
claims have been asserted by any person to the use or validity of any of
the Company/Subsidiary Intellectual Property or challenging or questioning
the validity or effectiveness of any license or agreement related thereto,
and to Sellers' knowledge, there is no valid basis for any such claim. None
of the Company/Subsidiary Intellectual Property is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting
the use thereof by the Company and/or Subsidiary or restricting the
licensing thereof by the Company/Subsidiary to any other person or entity.
Except as set forth on Schedule 3.11, neither the Company and/or Subsidiary
has entered into any agreement to indemnify any other person or entity
against any charge of infringement of any Company/Subsidiary Intellectual
Property.
(g) Except as set forth in Schedule 3.11, (i) neither the Company nor
the Subsidiary has any systems and applications computer programs which
were developed by, or on behalf of, the Company or the Subsidiary (the
"Software Programs."); (ii) the systems and applications computer programs
of the Company and Subsidiary and the technical documentation and
inventories of the Software Programs were developed by personnel, including
employees, agents, consultants and contractors, on behalf of the Company
and such parties (A) entered into "work-for-hire" arrangements or
agreements with the Company, in accordance with applicable federal and
state law, that has accorded the Company full, effective exclusive, and
original ownership of all tangible and intangible property thereby arising;
or (B) executed appropriate instruments of assignment in favor of the
Company as assignee that conveyed to the Company full, effective and
exclusive ownership of all tangible and intangible property thereby
arising; (iii) the technical documentation for the Software Programs
includes the source code, system documentation, statements of principles of
operation, and schematics for all Software Programs, as well as any
pertinent commentary or explanation that may be necessary to render such
materials understandable and usable by a trained computer programmer; (iv)
the technical documentation also includes any program (including
compilers), "workbenches," tools and higher level (or "proprietary")
language used for the development, maintenance and implementation of the
Software Programs; (v) the Company has validly and effectively obtained the
right and license to use, copy, modify, and distribute the third-party
programming and materials contained in the Software
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Programs and technical documentation; (vi) the Software Programs and
technical documentation contain no other programming or materials in which
any third party may claim superior, joint, or common ownership, including
any right or license; (vii) the Software Programs and technical
documentation do not contain derivative works of any programming or
materials not owned in their entirety by Company and Subsidiary; (viii)
neither Company nor Subsidiary have granted, transferred, or assigned any
right or interest in the Software Programs or the technical documentation
to any person or entity; and (ix) there are no contracts, agreements,
licenses, and other commitments and arrangements in effect with respect to
the marketing, distribution, licensing or promotion of the Software
Programs or the technical documentation by any independent salesperson,
distributor, sublicensor or other remarketer or sales organization.
Section 3.12 Absence of Litigation. Except as disclosed in Schedule
3.12, as of the date hereof, there is no action, suit, claim, investigation or
proceeding pending or to the Sellers' knowledge, threatened, nor is there any
valid basis for any claim, against the Company, Subsidiary or any of their
properties before any court or arbitrator or any administrative, regulatory or
governmental body, or any agency or official. Except as disclosed on Schedule
3.12, as of the date hereof, neither the Company, Subsidiary nor any of their
property is subject to any order, writ, judgment, injunction, decree,
determination or award.
Section 3.13 Insurance.
(a) Schedule 3.13(a) sets forth a complete and correct list of all
insurance policies (including a brief summary of the nature and terms
thereof and any amounts paid or payable to the Company or Subsidiary
thereunder, their respective expiration dates, deductibles and stop-loss
thresholds) providing coverage in favor of the Company, Subsidiary or any
of their respective officers, directors, employees or properties. Each such
policy is valid, in full force and effect and will remain in full force and
effect at least through the respective dates set forth in Schedule 3.13(a)
without the payment of additional premiums other than additional premiums
in the ordinary course of business prior to the Closing. No notice of
termination, cancellation or reservation of rights has been received with
respect to any such policy, there is no default with respect to any
provision contained in any such policy, and except as set forth on Schedule
3.13(a), there has not been any failure to give any notice or present any
claim under any such policy in a timely fashion or in the manner or detail
required by any such policy.
(b) The Company and Subsidiary have insurance in an amount and of a
type normal in the ordinary course for similar-sized businesses similar to
the Company and Subsidiary. Other than as set forth on Schedule 3.13(b),
neither the Company nor Subsidiary has received notice of any proposed
increase in premiums or deductible amounts, decrease in coverage or
termination of any policy.
Section 3.14 Employee Benefits.
(a) Schedule 3.14(a) contains a true and complete list of each bonus,
deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical,
dental, life, disability or other
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insurance, supplemental unemployment benefits, profit-sharing, pension,
savings or retirement plan, program, agreement or arrangement, cafeteria
plans within the meaning of section 125 of the Code, retiree medical plans
and any trust fund, plan, program or arrangement funding any plan
(including any voluntary employee beneficiary association within the
meaning of section 501(c)(9) of the Code), and each other employee benefit
plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by the Company or any
subsidiary for the benefit of any employee or terminated employee of the
Company or any subsidiary (all of such plans, programs, agreements and
arrangements included in this Section 3.14(a) being referred to hereinafter
collectively as the "Plans" and individually as a "Plan"). Schedule 3.14(a)
identifies each of the Plans that is an "employee benefit plan," as that
term is defined in section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") (the "ERISA Plans").
(b) With respect to each Plan, the Sellers have heretofore delivered
to Buyer true and complete copies of each of the following documents (to
the extent applicable):
(i) a copy thereof;
(ii) a copy of the three most recent Form 5500 annual reports and
accompanying accountants' reports;
(iii) a copy of the most recent Summary Plan Description,
summaries of all modifications, administrative forms and other
documents that constitute a part of or are incident to the
administration of the Plans;
(iv) copies of any insurance contracts and administrative service
contracts;
(v) if the Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement and
the latest financial statements thereof,
(vi) the most recent determination letter received from the
Internal Revenue Service with respect to each Plan intended to qualify
under section 401 (a) of the Internal Revenue Code of 1986, as amended
(the "Code") and any pending determination letter request; and
(vii) Schedule 3.14(a) also shall contain a written description
of all communications regarding any Plan to employees or former
employees with respect to this transaction.
(c) Neither the Company, any subsidiary nor any Affiliate of the
Company, as determined under Code Section 414(b), (c) or (m) or ERISA
Section 4001(b) (an "ERISA Affiliate") or predecessor to any of the
foregoing maintains or has ever maintained a plan which is or was subject
to (i) the minimum funding requirements of ERISA or the Code or (ii) Title
IV of ERISA.
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(d) Neither the Company, any subsidiary, nor any ERISA Affiliate, nor
any ERISA Plan, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction in connection with which
the Company, any subsidiary or any ERISA Affiliate, any ERISA Plan, any
such trust, or any trustee or administrator thereof, or any party dealing
with any ERISA Plan or any such trust could be in violation of sections
404, 405, or 406 of ERISA or could be subject to either a civil penalty
assessed pursuant to section 409, 502(i) or 502(1) of ERISA or a Tax
imposed pursuant to Chapter 43 of the Code.
(e) No ERISA Plan is a "multi-employer plan," as defined in section
3(37) of ERISA, nor is any ERISA Plan a plan described in section 4063(a)
of ERISA. Neither the Company, any subsidiary, nor any ERISA Affiliate or
predecessor to any of the foregoing has ever maintained, contributed to or
been required to contribute to a "multi-employer plan" as defined in
section 3(37) of ERISA.
(f) Each Plan has been operated and administered in accordance with
its terms and applicable law, including but not limited to ERISA and the
Code.
(g) Each ERISA Plan intended to be qualified within the meaning of
section 401(a) of the Code and each related trust intended to be qualified
within the meaning of section 501(a) of the Code has been established and
operated so as to be qualified and tax-exempt under such sections. Nothing
has occurred or, in connection with the transactions contemplated by this
Agreement, will occur, which would adversely affect the qualified status of
such plans and trusts. In the event the Company, any subsidiary or any
affiliated entity sponsors or maintains a voluntary employee beneficiary
association within the meaning of section 501(c)(9) of the Code, all
necessary governmental approvals for obtaining tax exempt status have been
obtained, and such determination letter is dated on or after January 1,
1985.
(h) No amounts payable under any Plan as a result of or in connection
with the consummation of the transactions contemplated by this Agreement
will fail to be deductible for federal income tax purposes by application
of section 162(m), section 280G or section 404 of the Code.
(i) Except as set forth on Schedule 3.14(i), no Plan provides
benefits, including without limitation death or medical benefits (whether
or not insured), with respect to current or former employees (and their
dependents) of the Company, any subsidiary, or any ERISA Affiliate beyond
their retirement or other termination of service other than continued
medical coverage required by Section 4980B of the Code.
(j) Except as provided in Schedule 3.14(j), the consummation of the
transactions contemplated by this Agreement will not (i) entitle any
current or former employee or officer of the Company, any subsidiary, or
any ERISA Affiliate to severance pay, unemployment compensation or any
other payment, except as expressly provided in this Agreement or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
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(k) There are no pending or threatened claims by or on behalf of any
Plan, by any employee or beneficiary covered under any such Plan, or
otherwise involving any such Plan (other than routine claims for benefits).
(1) The Company and Subsidiary has reserved the right to amend or
terminate any Plan.
(m) Neither the Company nor Subsidiary has announced any plan or
legally binding commitment to create any additional Plans which are
intended to cover employees or former employees of the Company or
Subsidiary or to amend or modify any existing Plan which covers or has
covered employees or former employees of the Company or Subsidiary.
(n) No event has occurred in connection with which the Company, any
subsidiary, or any ERISA Affiliate or any Plan, directly or indirectly,
could be subject to any liability (i) under any statute, regulation or
governmental order relating to any Plans or (ii) pursuant to any obligation
of the Company, any subsidiary, or any ERISA Affiliate to indemnify any
person against liability incurred under any such statute, regulation or
order as they relate to the Plans.
(o) All contributions with respect to each Plan for all periods ending
on or prior to the Closing Date (including periods from the first day of
the current plan year to the Closing Date) will be made by the Company, any
subsidiary or any ERISA Affiliate, as the case may be, or accrued on the
Company's financial statements and books and records prior to the Closing
Date.
Section 3.15 Contracts and Commitments. (a) Schedule 3.15 contains a
true and complete list of (i) all Company and Subsidiary agreements and other
commitments for the provision of goods or services, or for the purchase or
license or lease of any materials, supplies, software, equipment, furniture,
services or other agreements involving an amount greater than $5,000 over the
term of such contract; (ii) all employment and consulting agreements; (iii)
agreements and other commitments with clients or customers of Company and/or
Subsidiary; (iv) all license agreements with third parties (other than
off-the-shelf shrink wrap license agreements that are not material to the
business of Company or Subsidiary); (v) all leases, whether for real property or
personal property; (vi) all loan agreements, mortgages or indentures; (vii) all
agreements, arrangements or commitments with any director, officer, employee,
stockholder or beneficial owner of any of the capital stock or any of their
affiliates; and (viii) all other arrangements, commitments and understandings
(written or oral) to which the Company is a party or by which it or its
properties are bound that are not terminable upon 30 days' or less notice
without the payment of a penalty or termination fee or any other sum in excess
of $500, or that require (or that the Company or Subsidiary have reason to
believe it will require) payment by any party to the agreement, commitment or
understanding of, or the performance by any party to the agreement, commitment
or understanding of services having a value of, more than $5,000 individually
over the term of such contract. True and complete copies of the agreements,
commitments and understandings, or in the case of unwritten agreements,
commitments and understandings, summaries thereof, of Company and Subsidiary
referred to in Schedule 3.15 (collectively, the "Commitments") have been
delivered to Buyer. Schedule 3.15 contains a true
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and correct list of all contracts of the Company and Subsidiary that require
written consent of an outside party or parties before assignment, or that will
be terminated in the event of assignment (as defined in the Investment Company
Act of 1940, as amended).
(b) Except as set forth in Schedule 3.15, (i) all of the Commitments,
as to the Company or Subsidiary and to Sellers' knowledge, as to third parties,
are valid, binding and enforceable and in full force and effect in accordance
with their respective terms and there is no existing default, as to the Company
or Subsidiary and to Sellers' knowledge, as to third parties, that would permit
the other party to a Commitment to terminate the Commitment, not to perform its
obligations under the Commitment or accelerate the payment of money, and no
condition exists that, with notice or lapse of time or both, would constitute a
default on any Commitment, by the Company, Subsidiary, or to the Sellers'
knowledge, any other party under any Commitment; (ii) all of Company's and to
Sellers' knowledge, third parties' covenants and obligations under all
Commitments accrued to date have been performed; (iii) no party has made or
asserted or has any defense, setoff or counterclaim under any Commitment; (iv)
neither the Company nor Subsidiary has received notice that any party under any
Commitment has exercised any option granted to it to cancel or terminate its
Commitment, to shorten the term of its Commitment or to renew or extend the term
(other than automatic renewals) of the Commitment and neither the Company nor
Subsidiary has received any notice of termination of any Commitment; (v) except
as disclosed on Schedule 3.8, neither the Company nor Subsidiary has received
any notice (written or otherwise) of cancellation or termination of, or any
expression or indication of an intention or desire to cancel or terminate, any
of the Commitments; and (vi) no Commitment is the subject of, or to Sellers'
knowledge, has been threatened to be made the subject of, any arbitration, suit
or other legal proceeding. Except as noted on Schedule 3.15, nothing in any
contract listed on such schedule prohibits the consummation of the Agreement,
and the consummation of the transactions provided for in this Agreement will not
cause a termination of or default under any such contract.
(c) With respect to Commitments involving trust accounts or other
accounts over which Company or Subsidiary has any access or control which
contain funds belonging to any Fund or other third party, the accounts in which
such funds are maintained have been held and administered in accordance with the
provisions and requirements of such Commitments and the duties and rights of the
Company or Subsidiary thereunder and with respect thereto. All deposits,
withdrawals and transfers by or at the direction of Company or Subsidiary have
been made consistent with their obligations under, and the provision of, the
Commitments and other agreements and obligations relating to such accounts and
funds to which Company or Subsidiary are a party or are bound. The balance of
such accounts held or controlled by the Company on the Closing Date will be
equal in all material respects to the amount required to be held at such time
under and pursuant to such Commitments and otherwise with respect to the
Business. The Company has, and as of the Closing Date shall have, reserved for
fiduciary tax liabilities in accordance with such Commitments, if required.
Section 3.16 Labor Matters. Except as set forth in Schedule 3.16,
neither the Company nor Subsidiary is a party to any collective bargaining or
other labor union contract or labor union agreement applicable to persons
employed by the Company or Subsidiary, no collective bargaining agreement is
being negotiated by the Company or Subsidiary, and to the Sellers' knowledge, no
activities or proceedings of any labor union are being held to organize
-23-
any of its respective employees. There is no labor dispute, strike or work
stoppage against the Company or Subsidiary pending or to the Sellers' knowledge,
threatened which may interfere with the respective business activities of the
Company or Subsidiary. Each or the Company and Subsidiary is in compliance with
all federal, state and local laws, including without limitation the rules and
regulations of the Department of Labor and the Office of Federal Contract
Compliance Programs, respecting employment and employment practices, terms and
conditions of employment and wages and hours and not engaged in any unfair labor
practice. There is no unfair labor practice complaint against the Company or
Subsidiary pending or to the Sellers' knowledge, threatened before the National
Labor Relations Board. Except as set forth on Schedule 3.16, no charges with
respect to or relating to the Company or Subsidiary are pending, or to the
Sellers' knowledge threatened, before the Equal Employment Opportunity
Commission or any state, local or foreign agency responsible for the enforcement
of labor or employment laws or for the conduct of an investigation of or
relating to the Company and no such investigation is in process.
Section 3.17 Compliance. Except as set forth on Schedule 3.17, the
Company and Subsidiary have complied and are complying with applicable
provisions of (i) all laws, rules, statutes, orders, ordinances or regulations
and (ii) any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise, or other instrument or obligations, in each case, to
which the Company or Subsidiary is a party or by which the Company, Subsidiary
or their property are bound or affected.
Section 3.18 Environmental Matters.
(a) Except as set forth in Schedule 3.18, each of the Company and
Subsidiary is in compliance with all applicable Environmental Laws (which
compliance includes, but is not limited to, the possession by the Company
and Subsidiary of all permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms
and conditions thereof).
(b) Except as set forth on Schedule 3.18, neither the Company nor
Subsidiary has received any communication (written or oral), whether from a
governmental authority, private party, citizens group, employee or
otherwise, that alleges that the Company and/or Subsidiary is not in such
compliance, and there are no past or present actions, activities,
circumstances, conditions, events or incidents that would prevent or
interfere with such compliance in the future.
(c) Except as set forth in Schedule 3.18, there is no Environmental
Claim pending or to the Sellers' knowledge, threatened against the Company
or Subsidiary or against any person or entity whose liability for any
Environmental Claim the Company or Subsidiary has retained or assumed
either contractually or by operation of law.
(d) Except as set forth in Schedule 3.18, there are no past or present
actions, activities, circumstances, conditions, events or incidents
(including, without limitation, the release, emission, discharge, presence
or disposal of any Hazardous Material) which could form the basis of any
Environmental Claim against the Company or Subsidiary or
-24-
against any person or entity whose liability for any Environmental Claim
the Company or Subsidiary has retained or assumed either contractually or
by operation of law.
(e) Except as set forth in Schedule 3.18, neither the Company nor
Subsidiary has Released, placed, stored, buried or dumped Hazardous
Materials on, beneath or adjacent to any property owned, operated or leased
or formerly owned, operated or leased by the Company or Subsidiary in
violation of Environmental Laws, and neither the Company nor Subsidiary has
received notice that it is a potentially responsible party for the Cleanup
of any property, whether or not owned or operated by the Company and/or
Subsidiary.
(f) The Sellers have delivered to Buyer true, complete and correct
copies and results of any reports, studies, analyses, tests or monitoring
possessed or initiated by the Company and/or Subsidiary pertaining to
Hazardous Materials in, on, beneath or adjacent to the property owned or
leased by the Company and/or Subsidiary or regarding compliance by the
Company and/or Subsidiary with applicable Environmental Laws.
(g) Except as set forth in Schedule 3.18, no transfers of permits or
other governmental authorizations under Environmental Laws, and no
additional permits or other governmental authorizations under Environmental
Laws, will be required to permit the Company, Subsidiary or their
successors, as the case may be, to be in full compliance with all
applicable Environmental Laws for the period immediately following the
transactions contemplated hereby, as conducted by the Company and
Subsidiary immediately prior to the date hereof. To the extent that such
transfers or additional permits and other governmental authorizations are
required, each of the Company and Subsidiary agrees to use reasonable best
efforts to effect such transfers and obtain such permits and other
governmental authorizations at the time such transfers, permits and other
governmental authorizations are required by law.
(h) The following terms as used in this Section 3.18 shall have the
following meanings:
"Cleanup" means all actions required by governmental entities or
Environmental Laws to: (1) cleanup, remove, treat or remediate Hazardous
Materials in the indoor or outdoor environment; (2) prevent the Release of
Hazardous Materials so that they do not migrate, endanger or threaten to
endanger public health or welfare of the indoor or outdoor environment; (3)
perform remedial studies and investigations and post-remedial monitoring
and care; or (4) respond to any government requests for information or
documents in any way relating to cleanup, removal, treatment or remediation
or potential cleanup, removal, treatment or remediation of Hazardous
Materials in the indoor or outdoor environment.
"Environmental Claim" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, Cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or Release
into the indoor or outdoor environment, of any Hazardous Materials at any
location, whether or
-25-
not owned or operated by the Company or (b) circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all federal, state, local and foreign laws,
statutes, rules, orders, common law, regulations and ordinances now or
hereinafter in effect relating to pollution or protection of human health
or the environment, including without limitation, laws relating to Releases
or threatened Releases of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
Release, disposal, transport or handling of Hazardous Materials and all
laws, regulations and ordinances with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Materials.
"Hazardous Materials" means (1) any substance, material, chemical, or
waste that is now or hereafter becomes defined as or included in the
definition of 'Hazardous Substance,' 'Oil,' or 'Pollutant or Contaminant'
in the National Oil and Hazardous Substances Pollution Contingency Plan, 40
C.F.R. (S) 300.5; (2) asbestos and asbestoscontaining materials,
polychlorinated biphenyls ("PCBs"), and lead-based paints; and (3) any
other substance, material, chemical, or waste regulated under any
Environmental Law.
"Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater and surface or
subsurface strata) or into or out of any property, including the movement
of Hazardous Materials through or in the air, soil, surface water,
groundwater or property.
Section 3.19 Employees.
(a) Except as set forth on Schedule 3.19(a): (i) neither the Company
nor Subsidiary has been informed since June 30, 2000, of any current plans
of any personnel of the Company or Subsidiary to terminate their employment
with the Company, and (ii) no employees of the Company or Subsidiary (other
than those party to the Parallel Stock Unit Plan and only to the extent
provided in the Parallel Stock Unit Plan and terminated pursuant to the
terms of the Option Payment Agreements) have any greater rights upon
termination as a result of the execution and performance of this Agreement
and the transactions contemplated herein. Sellers agree to use their
reasonable efforts to ensure that this Agreement and the transactions
contemplated herein will not cause the termination of any employees of the
Company or Subsidiary.
(b) Schedule 3.19(b) sets forth the names of all directors, officers
and employees of each of Company and Subsidiary. The total salary, bonuses,
fringe benefits and perquisites each received during the year ended
December 31, 2000, and any changes to the foregoing which occurred (or are
scheduled to hereafter occur) after December 31, 2000, and through March 7,
2001, are as set forth on Schedule 3.19(b). No changes will be made by the
Company or Subsidiary in the amount or kind of any compensation being
-26-
paid or provided to any individual listed in Schedule 3.19(b) without
Buyer's prior written consent. Except as disclosed in Schedule 3.19(b),
there are no other forms of compensation paid to any directors, officers or
employees of the Company or Subsidiary. Except as disclosed on Schedule
3.19(b), the amounts accrued on the Financial Statements for vacation pay,
sick pay and all commissions and other fees payable to agents, salesmen and
representatives of the Company and Subsidiary will be adequate to cover the
liabilities of the Company and Subsidiary for such items.
Section 3.20 Licenses and Permits; Assets. Each of the Company and
Subsidiary has obtained all licenses, product and establishment registrations,
franchises, permits, easements, certificates, consents, rights and privileges
necessary or appropriate to the conduct of the respective businesses of the
Company and Subsidiary (collectively, the "Licenses," all of which are set forth
on Schedule 3.20(a)). The Licenses are valid and in full force at the Closing as
to the Company and/or Subsidiary, and to Sellers' knowledge, as to third
parties, and Sellers know of no reason why the Licenses will not remain valid
and in full force from and after the Closing. Except as set forth on Schedule
3.20(c), as of the Closing Date, Company and Subsidiary shall have good and
marketable title to all of their intangible or other personal property (other
than licensed or leased property, as to which they shall have a valid licensee
or leasehold interest) reflected on their books or otherwise necessary or
appropriate to operate and conduct their business in the manner heretofore
operated or conducted. Except as set forth on Schedule 3.20(b), no Seller or any
member of any Seller's family owns or will own on the Closing Date, any property
rights, tangible or intangible, which are used in the business of the Company or
Subsidiary.
Section 3.21 Bank Accounts. Schedule 3.21 sets forth the names and
locations of all banks in which the Company and/or Subsidiary has an account or
safe deposit box, the account numbers of all such corporate accounts, and the
names of all persons authorized to draw thereon or have access thereto.
Section 3.22 Sellers' Documentation. All documents supplied by the
Sellers to the Buyer with respect to the business of the Company and Subsidiary,
including customer agreements, payment cards, ledgers and similar records, and
other information related to the businesses of the Company and the Subsidiary
are true, accurate and complete. The financial books and records of the Company
and Subsidiary accurately reflect the transactions to which they are or were a
party or by which their properties are or were bound, and such books and records
are and have been properly kept and maintained.
Section 3.23 Disclosure. No representation or warranty by Sellers in
this Agreement or in any exhibits, schedules or other documents delivered by or
on behalf of Sellers contains, or will contain as of the Closing Date, any
untrue statement of a material fact or omits, or will omit as of the Closing
Date, a material fact to make the statements contained herein and therein not
misleading.
Section 3.24 No Finder's Fee. Sellers represent that the Company has
retained the services of Barrington Partners (and no other person or entity) as
agent or broker in connection with this transaction, and Sellers agree to
personally pay all fees, commissions, expenses and other sums that may now or
hereafter be due to Barrington Partners. Sellers
-27-
represent and warrant that neither Company nor Subsidiary has retained any
finder or broker in connection with the transactions contemplated by this
Agreement, or shall have any liability for any payment to any finder or broker,
and Ms. Allison hereby agrees to indemnify and to hold the Buyer harmless of and
from any liability for any commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) (other than the
professional fees paid by the Company to Barrington Partners in the amount of
approximately $40,000 through January 31, 2001).
Section 3.25 Legal Representation. Each Seller acknowledges that the
Buyer is represented by separate legal counsel, and Sellers have been advised
that they may wish to consult independent legal counsel with regard to the
transactions contemplated by this Agreement. Sellers agree that all fees and
expenses of their legal counsel, accountants and other professionals or
consultants in connection with the transaction provided for herein, shall be
borne by them personally, and not by the Company or Subsidiary.
Section 3.26 Certain Representations and Warranties Regarding
Broker-Dealer Status.
(a) Subsidiary is duly registered as a broker-dealer under Section
15(b) of the Securities Exchange Act of 1934, as amended (together with all
the rules and regulations thereunder, the "Exchange Act") and all
applicable State broker-dealer laws and is a member in good standing with
the National Association of Securities Dealers, Inc. (the "NASD"). Prior to
engaging in any activities requiring it to be registered as a securities
broker/dealer under the Exchange Act, Subsidiary was, and at all times
since has been, a duly registered broker-dealer under the Exchange Act and
the Rules and regulations promulgated thereunder and duly registered or
licensed in good standing under the laws of each jurisdiction in which such
qualification is necessary, as set forth on Schedule 3.26 attached hereto.
All of Subsidiary's registrations set forth on Schedule 3.26 are in full
force and effect, and Subsidiary has paid all annual registration fees owed
in a timely manner. Company and Subsidiary are fully in compliance with all
applicable federal and state securities laws and all applicable rules and
requirements of regulatory agencies and bodies (including self-regulatory
bodies), as well as all applicable policies, obligations, descriptions and
restrictions, including but not limited to those under the Exchange Act.
(b) There are no legal or governmental investigations of Company or
Subsidiary pending, or to Sellers', Company's or Subsidiary's knowledge,
threatened, which would question the right of Subsidiary to act as
broker-dealer. There are no special restrictions, judgments or SEC orders
with regard to Subsidiary currently in effect that have a material adverse
effect on the business or operations of Subsidiary. No orders of exemption
have been issued to Subsidiary by any federal or state regulatory agency.
(c) Neither the Company or Subsidiary are required to be registered
under the Investment Company Act of 1940, as amended, or the Investment
Advisers Act of 1940, as amended.
(d) Although Company and Subsidiary are not required to comply with
Section 17(j) of the Investment Company Act of 1940, as amended, and Rule
17j-1 thereunder,
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Company and Subsidiary have adopted formal codes of ethics and written
policies regarding insider trading. Except for the annual and initial
holding report and certification requirements (which the Company and
Subsidiary are not required to comply with), such codes and policies comply
in all material respects with Section 17(j) of the Investment Company Act
of 1940, as amended, and Rule 17j-1 thereunder. Other than as disclosed on
Schedule 3.26(d), there have been no violations of the aforesaid codes and
policies.
(e) Except as set forth on Schedule 3.26(f), neither the Company,
Subsidiary or any Person "associated" (as defined under the Investment
Advisers Act of 1940, as amended) with the Company or Subsidiary, has in
the last ten (10) years been convicted of any crime or is or has been
subject to any disqualification that would be the basis for denial,
suspension or revocation of a broker-dealer under Section 15 of the
Exchange Act, and there is no proceeding or investigation that is
reasonably likely to become the basis for any such disqualification,
denial, suspension or revocation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer hereby represents and warrants to each of the Sellers as
follows:
Section 4.1 Organization. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Missouri
and has the corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby, and to own, lease and operate
its assets and properties and to carry on its business as it is now being
conducted. The Buyer is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary.
Section 4.2 Authorization. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby, have
been duly authorized by all requisite corporate action of the Buyer and such
authorization was duly and validly given and has not been modified, revoked or
rescinded in any respect and is in full force and effect. No other corporate
proceedings on the part of the Buyer are necessary to authorize this Agreement
or the transactions contemplated hereby. Buyer is not in violation of any
provisions of its organizational documents.
Section 4.3 Valid and Binding Agreement. This Agreement constitutes a
valid and binding agreement of the Buyer enforceable against the Purchaser in
accordance with its terms.
Section 4.4 Consents; No Violation. Except as set forth on Schedule
4.4, neither the execution nor the delivery of this Agreement, the consummation
of the transactions contemplated hereby, nor the compliance with any of the
provisions hereof, by the Buyer, including without limitation its payment of the
Earn-Out Payments in accordance with this Agreement: (i) violates any statute or
law or any rule, regulation, order, award, judgment or decree of any court or
governmental authority, affecting the Buyer, (ii) violates or conflicts with,
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or constitutes a default under any contract, commitment, agreement,
understanding, arrangement, trust or restriction of any kind to which the Buyer
is a party, by which it is bound or which otherwise in any way affects it, (iii)
will cause, or give any persons valid grounds to cause (with or without notice,
the passage of time or both), the maturity of any debt, liability or obligation
of the Buyer to be accelerated, or will increase any such liability or
obligation, (iv) requires any filing with, the notification of, or the obtaining
of any permit, authorization, consent or approval of any third party or
governmental or regulatory authority, foreign or domestic other than the Federal
Reserve Bank of Kansas City or (v) violates or conflicts with or constitutes a
default under the certificate of incorporation or by-laws, as amended, of the
Buyer.
Section 4.5 Absence of Litigation. As of the date hereof, there is no
action, suit, claim, investigation or proceeding pending or threatened against,
Buyer or any of its property before any court or arbitrator or any
administrative, regulatory or governmental body, or any agency or official which
challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement. As of the date hereof, neither Buyer nor any of
its property is subject to any order, writ, judgment, injunction, decree,
determination or award which would prevent or delay the consummation of the
transactions contemplated hereby.
Section 4.6 No Finder's Fee. Buyer represents and warrants that it has
not retained any finder or broker in connection with the transactions
contemplated by this Agreement, and shall have no liability for any payment to
any finder or broker.
ARTICLE V
COVENANTS
---------
Section 5.1 Conduct and Preservation of Business.
(a) The Sellers agree with the Buyer that, except as contemplated by
this Agreement, from the date hereof until the Closing Date, unless
otherwise consented to by the Buyer in advance in writing, the Sellers will
cause the Company and Subsidiary to conduct their businesses diligently, in
the ordinary course and consistent with past practice. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in
this Agreement or with the prior written consent of Buyer, from the date
hereof to the Closing Date, neither the Company nor Subsidiary will:
(i) incur any obligations or liabilities for borrowed monies
(whether absolute, accrued, contingent or otherwise and whether due or
to become due) other than in the ordinary course of business and in
accordance with past Company practices, except to the extent approved
by the Buyer, or make any loans, advances or capital contributions to,
or investments in, any other person;
(ii) permit any change in any accounting principles, or methods
of application of said principles, or practices used by it, including
but not limited to changes with respect to collection of accounts
receivable or payments of accounts payable;
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(iii) pay, discharge or satisfy any claim, lien, encumbrance or
liability (whether absolute, accrued, contingent or otherwise and
whether due or to become due) except in the ordinary course of
business consistent with past practices;
(iv) permit or allow any of its properties or assets (whether
real, personal or mixed, tangible or intangible) to be mortgaged,
pledged or subjected to any lien or encumbrance, or pledge or
otherwise encumber shares of capital stock of the Company or interests
in Subsidiary (other than to the extent of security interests already
existing on or before the Closing Date, which shall be terminated
following the Closing Date);
(v) except as disclosed on Schedule 3.8(n), acquire, sell, lease,
distribute or dispose of any assets outside the ordinary course of
business, including but not limited to any write-down of the value of
any inventory, or write-off as uncollectable any notes or accounts
receivable or any portion thereof or cancel or release any debts or
claims, or waive any rights of substantial value or sell, transfer or
convey any of its properties or assets (whether real, personal or
mixed, tangible or intangible); or incur any obligation(s) or
liability(s) (absolute, contingent or otherwise) in an aggregate
amount of more than Five Thousand Dollars ($5,000) with respect to any
single event or transaction or series of related events or
transactions;
(vi) enter into, adopt, amend or terminate any bonus, profit
sharing, 401(k) plan, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit,
parallel stock unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation, employment, severance or
other employee benefit agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any director, officer,
employee, member or stockholder, or increase in any manner the
compensation or benefits of any director, officer, employee, member or
stockholder or pay any benefits not required by any plan or
arrangement as in effect as of the date hereof;
(vii) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization
or division thereof; (ii) authorize any capital expenditures or
commitments in excess of $20,000 individually; (iii) settle any
litigation for amounts in excess of $20,000; or (iv) enter into or
amend any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(viii) declare, pay or make, or set aside for payment or making,
any dividend or other distribution (whether in cash, stock, or
property or any combination thereof) in respect of its capital stock
or other securities, or split, combine or reclassify any shares of its
capital stock, or directly or indirectly redeem, purchase or otherwise
acquire any of its capital stock or other securities;
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(ix) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other interest in
the Company or Subsidiary;
(x) pay, distribute, loan or advance any amount to or in respect
of, or sell, transfer or lease any properties or assets (whether real,
personal or mixed, tangible or intangible) to, or enter into any
agreement, arrangement or transaction with, any stockholder, member,
any of the officers or directors of the Company or Subsidiary, any
affiliate or associate of any stockholder, or member of the Company or
Subsidiary or any of their respective officers or directors, or any
business or entity in which any stockholder, member or any affiliate
or associate of any such persons has a direct or indirect interest,
other than customary advances for reasonable business expenses made in
the ordinary course of business;
(xi) make any Tax election or settle or compromise any Tax
liability, or terminate its Subchapter S status;
(xii) amend, terminate or voluntarily suffer the termination of
any material contract, lease, agreement or license, or fail to perform
all of its obligations or suffer or permit any default to exist under,
any such contract, lease, agreement or license;
(xiii) amend the Articles of Incorporation or By-Laws of the
Company or the Articles of Organization or Operating Agreement of the
Subsidiary;
(xiv) enter into any material contract or obligation or terminate
or breach any such existing material contract or obligation without
the express written consent of the Buyer;
(xv) cause or permit Company or Subsidiary to accelerate or defer
the collection of their receivables or payment of their obligations
such that the timing and pattern of such collection and payment is
substantially different than that which has existed during the
two-year period immediately preceding the date of this Agreement;
(xvi) cancel, waive or compromise any right or debt or obligation
owed or due to it by any client, customer, employee, officer or other
person or entity, other than in the ordinary course of business and in
an amount of $5,000 or less; or
(xvii) agree, whether in writing or otherwise, to take any action
prohibited in this Section 5.1.
Subject to applicable law and the agreements set forth in Section 5.1(a),
between the date hereof and the Closing Date, the Sellers will, during normal
business hours and upon reasonable prior notice: give Buyer and its counsel,
financial advisors, auditors and other authorized
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representatives reasonable access to all employees, landlords, suppliers,
customers (provided that Ms. Allison or her designee is present during
discussions with customers), vendors, plants, offices, warehouses and other
facilities and to all books and records of the Company and Subsidiary; will
permit Buyer and its counsel, financial advisors, auditors and other authorized
representatives to make such inspections as Buyer may reasonably require; and
will cause the officers of the Company and Subsidiary to furnish Buyer or its
representatives with such financial and operating data and other information
with respect to the business and properties of the Company and Subsidiary as
Buyer may from time to time reasonably request. No investigation pursuant to
this Section 5.1(b) shall affect any representations or warranties of the
parties herein or the conditions to the obligations of the parties hereunder.
Sellers shall, during normal business hours and upon reasonable prior notice:
cause the Company and Subsidiary to permit Buyer to meet with their employees,
between the date hereof and the Closing Date, to discuss retention and other
relevant issues pertaining to operations following Closing. Sellers will
promptly notify Buyer if it learns or has reason to believe that any customer or
client of Company or Subsidiary has terminated or is contemplating a termination
of any contract or agreement with Company or Subsidiary or any other material
change in its business relationship (including a significant change in fees or
revenues paid by the client or customer to Company or Subsidiary) with Company
or Subsidiary. Sellers will also immediately inform Buyer if they learn or have
reason to believe any investigation or proceeding (legal or regulatory) is
instituted or is being contemplated or threatened against Company or Subsidiary.
Buyer will keep confidential and not divulge (except to its employees, counsel,
accountants and other advisors who need to know such information in connection
with this Agreement and who agree to keep confidential and not divulge, or as
may be required by law or order of a court or regulatory agency or body) any
confidential information obtained by it regarding the business and finances of
the Company and Subsidiary; provided, however, that this prohibition will not
include any information (i) known generally to the public, or (ii) accessible to
third parties on an unrestricted basis. Sellers will cause Company and
Subsidiary to not enter into any new contracts or agreements with any client or
customer (or materially amend any existing such contracts or agreements) without
Buyer's prior consent, not to be unreasonably withheld. Buyer shall promptly
return all such confidential information to the Sellers if this Agreement is
terminated.
Section 5.2 Reasonable Efforts. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its, his or her
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, Buyer and the Sellers shall cooperate with one another (i) in
determining whether action by or in respect of, or filing with, any governmental
body, agency, official or authority (either domestic or foreign) is required,
proper or advisable or any actions, consents, waivers or approvals are required
to be obtained from parties to any contracts, in connection with the
transactions contemplated by this Agreement and (ii) in timely seeking to obtain
any such actions, consents and waivers and to make any such filings. In case at
any time after the Closing any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party hereto shall take all such necessary action.
Section 5.3 Public Announcements; Notification of Certain Matters.
Buyer and the Sellers will consult with each other, and obtain the other's
consent, before issuing any
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press release or other publicly-disseminated statement with respect to the
transactions contemplated by this Agreement, except as may be required by
applicable law, by applicable rules of any securities exchange, as may be
reasonably necessary to obtain the third-party consents required of the Sellers
hereunder, or to the Company's and Subsidiary's clients or prospective clients.
The Sellers shall give prompt notice to Buyer, and Buyer shall give prompt
notice to the Sellers, upon becoming aware of (i) the occurrence, or
non-occurrence, of any event the occurrence or non-occurrence of which would
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate, (ii) any fact which was in existence on the date of this Agreement
and, if known on such date, would have been required to be set forth as
described on the Schedules hereto, and (iii) any failure of the Sellers or
Buyer, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, that the
delivery of any notice pursuant to this Section 5.3 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 5.4 No Solicitation.
(a) The Sellers are not engaged in and will not engage in, or allow
the Company or Subsidiary to engage in, any discussions or negotiations
with any third parties with respect to any Acquisition Proposal (as defined
below). Neither the Company nor the Sellers shall, directly or indirectly,
through any officer, director, employee, representative or agent (as
applicable), (i) solicit, initiate or encourage any inquiries or proposals
that constitute, or would lead to, a proposal or offer for a sale of common
stock, a merger, consolidation, business combination, sale of substantial
assets, sale of a substantial percentage of shares of capital stock
(including, without limitation, by way of a tender offer) or similar
transactions involving the Company or Subsidiary, other than the
transactions contemplated by this Agreement (any of the foregoing inquiries
or proposals being referred to in this Agreement as an "Acquisition
Proposal"), (ii) engage in negotiations or discussions concerning, or
provide any non-public information to any person or entity relating to, any
Acquisition Proposal or (iii) agree to, approve or recommend any
Acquisition Proposal.
(b) The Sellers shall notify Buyer promptly after receipt by the
Company or the Sellers of any Acquisition Proposal or any request for
non-public information in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company or Subsidiary by
any person or entity that informs the Company, Subsidiary or the Sellers
that it is considering making, or has made, an Acquisition Proposal. Such
notice shall indicate the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact.
The Sellers' obligations under this Section 5.4 shall terminate upon the
earlier of the termination of this Agreement pursuant to Section 9.1 hereof
or the Closing.
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Section 5.5 Insurance. The Sellers shall cause the Company and
Subsidiary to maintain the insurance coverage specified in Section 3.13 hereto
in full force and effect through the Closing.
Section 5.6 Consents of Third Parties. The Sellers shall obtain, prior
to Closing, consents of all third parties to change of control of the Company
and Subsidiary with respect to all leases, licenses, product and establishment
registrations, contracts and commitments that require such consents.
Section 5.7 Taxes.
(a) The Company and each of the Sellers will, if Buyer so requests,
join with Buyer in making a timely election under IRS Code Sec. 338(h)(10)
(and any corresponding election under state, local, and foreign tax law)
with respect to the purchase and sale of the stock of the Company hereunder
(a "Section 338(h)(10) Election"). If Buyer so requests, the Sellers agree
to cooperate fully in order to make the Section 338(h)(l0) Election valid,
including but not limited to, the filing of Form 8023 and any accompanying
statements or schedules that may be required. Sellers will include any
income, gain, loss, deduction, or other tax item resulting from the Section
338(h)(l0) Election on their Tax Returns to the extent required by
applicable law. Sellers shall also pay any Tax imposed on the Company or
its subsidiaries attributable to the making of the Section 338(h)(10)
Election, including, but not limited to, (i) any Tax imposed under Code
Sec. 1374, (ii) any tax imposed under Treas. Reg. (S)1.338(h)(10)-IT(d)(2),
or (iii) any state, local or foreign tax imposed on the Company's gain, and
Sellers shall indemnify Buyer and the Company against (i) any adverse
consequences arising out of any failure to pay any such Taxes, and (ii)
against any income Tax of the Sellers, the Company or the Subsidiary
incurred during the period up to and including the Closing Date. As
described in Section 5.7(h), Buyer shall reimburse Sellers for certain
Taxes imposed on Sellers as a result of the Section 338(h)(10) Election.
(b) The Buyer shall prepare any and all documents, statements and
other forms that are required to be submitted to any taxing authority in
connection with the Section 338(h)(10) Election (the "Section 338 Forms")
and deliver the same to the Sellers no later than 15 days prior to the date
the Section 338 Forms are required to be filed. Each of the Buyer, the
Sellers and the Company shall cause the Section 338 Forms to be duly
executed by an authorized person and shall return the same to the Buyer no
later than 5 days prior to the date such Section 338 Forms are required to
be filed, and the Buyer shall duly and timely file the same in accordance
with the applicable tax laws.
(c) The Buyer and the Sellers shall use their best efforts, as soon as
practicable after the Closing Date, to enter into an agreement, as may be
amended from time to time (the "Allocation Agreement"), to allocate the
Purchase Price and the liabilities of the Company and the Subsidiary to the
assets of the Company for tax purposes. The Buyer shall initially prepare a
statement setting forth a proposed computation and allocation and shall
submit the same to the Sellers along with copies of all workpapers,
reports, opinions and other documents used to prepare the computation no
later than thirty (30) days after the Closing Date. If, within thirty (30)
days of the Sellers' receipt of the computation and
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the workpapers, the Sellers shall not have objected to such computation,
the computation shall be the allocation. If the Sellers object in writing
to the computation within thirty (30) days, the Buyer and the Sellers shall
negotiate in good faith to resolve the computation. If the Buyer and the
Sellers shall not have agreed to the computation and adopted an allocation
within thirty (30) days after the Sellers' objection, any disputed aspects
of the allocation shall be resolved by an accounting firm mutually
acceptable to the Buyer and the Sellers (the "338 Auditors") as soon as
practicable but in no event later than thirty (30) days prior to the
earlier of (i) the last date on which the Section 338 Forms may be filed or
(ii) the last date on which either the Buyer or the Seller (whichever is
earlier) must file a Tax Return relating to the transactions contemplated
hereby. The decision of the 338 Auditors shall be final, and the costs,
expenses and fees of the 338 Auditors shall be born equally by the Buyer
and the Sellers. The Buyer and the Sellers shall not take a position before
any taxing authority or otherwise (including in any Tax Return)
inconsistent with the allocations provided hereunder.
(d) The Company and Sellers will not revoke the Company's election to
be taxed as an S corporation within the meaning of Code Sec. 1361 and 1362.
The Company and Sellers will not take or allow any action that would result
in the termination of the Company's status as a validly electing S
corporation within the meaning of Code Sec. 1361 and 1362.
(e) Sellers shall prepare or cause to be prepared and file or cause to
be filed (on a timely basis) all income Tax Returns for the Company and the
Subsidiary for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. Sellers shall prepare the Tax Returns in a
manner consistent with the Tax Returns previously filed for the Company and
Subsidiary and in accordance with applicable law, and Sellers shall
indemnify Buyer, the Company and the Subsidiary against any Taxes and
penalties either (i) incurred by any of them related to the filing of such
Tax Returns; or (ii) required to be reported on such Tax Returns. Sellers
shall permit Buyer to review and comment on each such Tax Return described
in the preceding sentence prior to filing. To the extent required by
applicable law, Sellers shall include any income, gain, loss, deduction or
other tax items for such periods on their income Tax Returns in a manner
consistent with the Schedule K-1's furnished to the Sellers for such
periods. Buyer shall prepare or cause to be prepared and file or cause to
be filed all non-income Tax Returns for the Company and Subsidiary for all
periods ending on or prior to the Closing Date which are filed after the
Closing Date. Sellers shall reimburse Buyer for any Taxes of Company or
Subsidiary with respect to such periods within fifteen (15) days after
payment by Buyer, the Company, or the Subsidiary of such Taxes to the
extent such Taxes are not reflected in the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of the Balance
Sheet, as adjusted for the passage of time through the Closing Date (in
accordance with the past custom and practice of the Company and Subsidiary
in filing Tax Returns) to reflect Tax liabilities incurred in the ordinary
course of business after the date of the Balance Sheet.
(f) Buyer, the Company, the Subsidiary and Sellers shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax
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Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. The Company, the Subsidiary and Sellers agree (A) to
retain all books and records with respect to Tax matters pertinent to the
Company and the Subsidiary relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Buyer or Sellers, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Company
and the Subsidiary or Sellers, as the case may be, shall allow the other
party to take possession of such books and records. Buyer and Sellers
further agree, upon request, to use their best efforts to obtain any
certificate or other document from any governmental authority or any other
person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(g) All transfer, documentary, sales, use, stamp, registration or
other such Taxes and fees (including any penalties and interest) incurred
in connection with this Agreement shall be paid one-half by Buyer and
one-half by Sellers when due, and the party required by applicable law will
file all necessary Tax Returns and other documentation with respect to all
such transfer, documentary, sales, use, stamp, registration and other such
Taxes and fees, and, if required by applicable law, the other parties will,
and will cause their affiliates to, join in the execution of any such tax
Returns and other documentation. The expense of such filings shall be paid
one-half by Buyer and one-half by Sellers.
(h) Buyer shall reimburse Sellers for certain Taxes imposed on Sellers
as a result of the Section 338(h)(10) Election as follows:
(i) By no later than the sixtieth (60th) day prior to the due
date (including one four (4)-month automatic extension) of the federal
income Tax Returns of Sellers for each calendar year beginning with
calendar year 2001 and ending with the last calendar year in which a
payment to or from the Sellers is required under this Agreement,
Sellers shall calculate and notify Buyer of an amount equal to the
excess of (A) the total amount of federal and state income taxes
payable by each Seller for all such years (including any increase or
decrease in federal or state taxes payable as a result of any payment
pursuant to this Section 5.7(h)), minus (B) the total amount of
federal and state income taxes which would have been payable by each
Seller for all such years if no Section 338(h)(10) Election had been
made. The amount calculated pursuant to this Section 5.7(h) for each
Seller is referred to herein as the "Section 338(h)(10) Amount" and
shall be allocated to goodwill.
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(ii) Buyer, within fifteen (15) days following the date of each
notice from Sellers of their calculation of Section 338(h)(10) Amounts
pursuant to Section 5.7(h)(i), may object to such calculation by
delivery of written notice to Sellers, setting forth in reasonable
detail the nature of the objections. If Sellers and Buyer within ten
(10) days following receipt by the Sellers of the written notice of
objections are unable to resolve any disagreements regarding the
calculation, all such disagreements at the written request of either
Buyer or Sellers shall be referred for resolution to a
mutually-agreed-upon neutral accounting firm (the "Neutral Accounting
Firm"). In such event, the Neutral Accounting Firm shall as soon as
reasonably practicable following the referral to it of the
disagreements deliver to Sellers and Buyer a written report in which
it shall set forth its determination of the Section 338(h)(10) Amounts
for Sellers, and its determination shall be conclusive and binding on
the parties hereto. Buyer and Sellers shall fully cooperate, and Buyer
shall cause the Company to fully cooperate, with the Neutral
Accounting Firm in connection with such determination hereunder,
including without limitation providing the Neutral Accounting Firm
with full access to his, her or its books and records to the extent
relevant to such resolution. The costs and expenses of retaining the
Neutral Accounting Firm shall be borne equally by the Buyer, on the
one hand, and the Sellers, on the other hand (in proportion to their
Shares). Within fifteen (15) days of each notice from Sellers to Buyer
of the Section 338(h)(10) Amounts (or, if Buyer objects to such
Notice, within fifteen (15) days after the final computation of the
Section 338(h)(l0) Amounts), Buyer and Seller shall be obligated to
make payments between them such that the net payment made from Buyer
to Sellers (in the aggregate) under this Section 5.7(h) is equal to
the lesser of (a) the aggregate total of the Section 338(h)(10)
Amounts or (b) Two Hundred Eighty Thousand Dollars ($280,000) plus
fifty percent (50%) of the amount by which the aggregate total of the
Section 338(h)(10) amounts exceeds Two Hundred Eighty Thousand Dollars
($280,000).
(iii) At such time as a final and binding determination is made
in any audit, review, examination or any other administrative or
judicial proceeding (including any administrative or judicial review
of any claim for refund) involving any Tax Return referred to in this
Section 5.7(h) (a "Tax Contest"), the obligations of the parties under
this Section 5.7(h) shall be adjusted (and payments shall be made
between the parties to reflect such adjustments) in accordance with
such final determination.
(iv) Each of the parties shall provide prompt notice to the other
party of any pending or threatened Tax Contest of which it becomes
aware that could affect the obligations of either party under this
Section 5.7(h). Such notice shall contain factual information (to the
extent known) describing any asserted Tax liability or adjustment in
reasonable detail (and its possible effect upon the obligations under
this Section 5.7(h)) and shall be accompanied by copies of any notice
and other documents received from any Tax authority in respect of any
such matters. If a party that would be entitled to receive a payment
under this Section 5.7(h) (an "Indemnified Party") has knowledge of an
asserted Tax liability
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or adjustment that could affect the amount of such payment and such
party fails to give the party that would be obligated to make such
payment (the "Indemnifying Party") prompt notice of such asserted Tax
liability or adjustment, then (i) if the Indemnifying Party is
precluded from contesting the asserted Tax liability or adjustment in
any forum as a result of the failure to give prompt notice, the
Indemnifying Party shall have no obligation to make an additional
payment to the Indemnified Party with respect to any Taxes arising out
of such asserted Tax liability, and (ii) if the Indemnifying Party is
not precluded from contesting the asserted Tax liability in any forum,
but such failure to give prompt notice results in a monetary detriment
to the Indemnifying Party, then any amount which the Indemnifying Party
is otherwise required to pay the Indemnified Party pursuant to this
Agreement shall be reduced by the amount of such detriment.
(v) In the case of any Tax Contest, Sellers shall control the
defense or prosecution of such Tax Contest; provided, however, Sellers
shall not agree to or concede any Tax liability or adjustment that
could cause Buyer to have an obligation under this Section 5.7(h)
without Buyer's written consent, which consent shall not be
unreasonably withheld. All costs and expenses of any such Tax Contest
shall be borne by the party incurring such costs and expenses.
(i) Notwithstanding any other provision of this Agreement, the
agreements and obligations under this Section 5.7 shall survive
indefinitely.
(j) Unless the Company is entitled to claim a compensation deduction
(for a Tax Period other than the Company's final S Corporation Tax Return)
for the payments made to the Option Holders under Section 1.2 above or
under the Option Payout Agreements between the Company and the Option
Holders, Sellers shall be liable to Buyer and the Company for any payroll
Taxes incurred by Buyer or the Company as a result of any payment made to
the Option Holders under Section 1.2 above or under the Option Payout
Agreements between the Company and the Option Holders (including payroll
Taxes incurred by the Company in its final S Corporation Tax year).
Section 5.8 Continuing Involvement with Company.
(a) After the Closing Date and for five (5) years thereafter, or such
longer period thereafter as Buyer elects,
(i) Buyer shall cause the Company's Board of Directors to be
comprised of the following persons, subject to reasonable
substitutions and changes (other than as to Miriam Meyer Allison and
the CEO of the Company) as necessary in Buyer's reasonable discretion:
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Miriam Meyer Allison
Crosby Kemper III
Sheila Kemper Dietrich
Mark Schmidtlein
Frank Ware
Chief Operating Officer of the Company (to be
announced);
(ii) Buyer shall nominate Ms. Allison for election to Buyer's
Board of Directors.
(iii) Buyer shall cause the Company's operations to remain in
Milwaukee, Wisconsin;
Promptly after Closing, Buyer shall cause its fund accounting functions to
be moved to the Company's Milwaukee, Wisconsin, location, take all steps
possible to cause the UMB Scout Funds to utilize the services of the
Company and Subsidiary as promptly as possible; and use its best efforts to
recruit other clients and customers for the Company and Subsidiary;
(b) The terms of Ms. Allison's post-Closing employment by the Buyer
are set forth on Schedule 5.8(b) attached hereto and incorporated herein by
reference.
(c) At or promptly after Closing, Buyer shall cause Seller Ms. Allison
to be released from her obligations under the guaranties, notes and other
instruments and documents listed on Schedule 5.8(c).
Section 5.9 Control of Company Operations. Nothing contained in this
Agreement shall give to Buyer, directly or indirectly, the right to control or
direct the Company's operations prior to the Closing Date. Prior to the Closing,
the Company shall exercise, consistent with the exercise of its reasonable
business judgment but subject to the terms and conditions of this Agreement,
complete control and supervision of its operations.
Section 5.10 Company's 401(k) Plan. The Sellers shall cause the
Company to take all action necessary to terminate the Company's 401(k) Plan (the
"401(k) Plan") prior to the Closing Date (with such termination to be effective
prior to the Closing Date). Thereafter, the parties shall apply to the Internal
Revenue Service for a favorable determination letter in connection with the
termination and liquidation of the 401(k) Plan. Upon the receipt of a favorable
Internal Revenue Service determination letter, the 401(k) Plan participants who
are employed by the Company may, in accordance with Section 401(a)(31) of the
Code, directly rollover, in cash, any "eligible rollover distribution" (as such
term is defined in Code Section 402(c)(4)) from the 401(k) Plan to Buyer's
401(k) plan.
Section 5.11 Cancellation of Note. Prior to Closing, Ms. Allison shall
forgive indebtedness owed to her by the Company pursuant to that certain Five
Hundred Thousand Dollar ($500,000) Note dated December 28, 2000, between the
Company and Ms. Allison (the "Note") and return the Note to the Company for
cancellation.
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Section 5.12 Option Payout Loan and Guaranty. Prior to Closing, Buyer
will loan to Company $630,000 in accordance with the provisions of Section
1.2(a) hereof, pursuant to a form of note mutually agreed upon by Buyer, Ms.
Allison and the Company; provided,however that if the Closing does occur on
April 17, 2001, the Company shall, upon Buyer's request, pay the balance due to
Buyer in immediately available funds. Ms. Allison will guarantee the Company's
obligations with respect to such note.
ARTICLE VI
POST-CLOSING COVENANTS
----------------------
From the Closing Date to the end of the fifth Earn-Out Period, Buyer
will (a) use reasonable efforts to preserve the existence and corporate
structure of the Company and Subsidiary; (b) not, directly or indirectly, engage
in any business that is competitive with the business being conducted by the
Company or Subsidiary without the prior consent of the Company's Board; and (c)
not engage in any practice intended to minimize Sellers' ability to earn the
Earn-Out Payments. In addition, for two (2) years following the Closing Date,
Buyer agrees that it will not terminate any of the Company's lines of business
existing on the Closing Date or terminate any customer of the Company existing
on the Closing Date without the prior approval of Ms. Allison, which consent
shall not unreasonably be withheld. Without limiting the generality of the
foregoing, as to contracts between Company or Subsidiary and Buyer or UMB,
Company and Subsidiary will accrue Gross Revenues for services provided at a
rate at least equal to their then-current standard fee schedules for
unaffiliated accounts. In addition, Buyer shall make available to the Sellers
copies of Buyer's internal management reports concerning Gross Revenues as Buyer
prepares or receives such reports in the ordinary course of its own business.
ARTICLE VII
CLOSING CONDITIONS
------------------
Section 7.1 Conditions to the Obligations of the Buyer. All
obligations of the Buyer hereunder are subject to the fulfillment, prior to or
at the Closing, unless waived by the Buyer, of each of the following conditions:
(a) Representations and Warranties. All representations and warranties
made by the Sellers in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and at and as of the
Closing Date, as if made at and as of such time, and Buyer shall have
received a certification of the Sellers to that effect dated the Closing
Date;
(b) Performance. The Sellers shall have performed and complied in all
material respects with all covenants, agreements, obligations and
conditions required by this Agreement to be so performed or complied with
by them on or prior to Closing;
(c) Noncompetition Agreements. Ms. Allison shall have entered into a
Noncompetition Agreement with the Buyer effective as of the Closing,
substantially in the form attached hereto as Schedule 7.1(c);
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(d) Approvals and Consents. All governmental and material third party
approvals and consents required to be obtained by the Sellers, the Company
or Subsidiary for consummation of the transactions contemplated by this
Agreement shall have been obtained at or prior to Closing, provided, that
the parties agree that material consents shall include, without limitation,
all distribution agreements, call management and fulfillment agreements, as
well as any other agreements that automatically expire or terminate in the
event of assignment (as defined in the Investment Company Act of 1940, as
amended) (other than standard dealer assistance agreements), and shall not
include contracts that can easily be obtained from other third parties
without significant additional cost.
(e) Opinion of Counsel. Buyer shall have received an opinion of
counsel to the Sellers, dated the Closing Date, addressing the matters set
forth on Schedule 7.1(e) attached hereto and reasonably satisfactory to
Buyer and its counsel;
(f) No Material Adverse Effect. There shall have been no material
adverse effect on the business, customer base, Gross Revenues, operations,
results of operations, condition, assets, prospects and liabilities of the
Company and/or Subsidiary between the date of this Agreement and the
Closing Date;
(g) No Prohibition. No statute, rule, regulation, executive order,
decree, ruling, injunction or other order shall have been enacted, entered,
promulgated or enforced by any court or governmental authority of competent
jurisdiction within the United States which prohibits or makes illegal the
transactions contemplated by this Agreement; and
(h) Certificates and Other Closing Deliveries. The Sellers shall have
executed and delivered to the Buyer the officers' certificates and any
other documents required by Section 2.2 hereof; and
(i) Option Payout Agreement. The Option Holders shall have executed
and delivered to the Buyer the Option Payout Agreements, effective as of
Closing.
(j) Seller Guaranties and Obligations. Neither the Company nor the
Subsidiary shall have any liability for any indebtedness or obligation of
Ms. Allison or any other Seller, whether under a guaranty, as co-signor, or
otherwise.
Section 7.2 Conditions to the Obligations of the Sellers. All
obligations of the Sellers hereunder are subject to the fulfillment, prior to or
at the Closing, unless waived by the Sellers, of each of the following
conditions:
(a) Representations and Warranties. The representations and warranties
made by the Buyer in this Agreement shall be true when made and shall
continuously remain true and shall be reaffirmed and remade at and as of
the Closing Date in all material respects as though such representations
and warranties were made at and as of the Closing Date, and Sellers shall
have received a certification of the Buyer to that effect dated the Closing
Date;
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(b) Performance. The Buyer shall have performed and complied in all
material respects with all covenants, agreements, obligations and
conditions required by this Agreement to be so performed or complied with
by it;
(c) Approvals and Consents. All governmental and third party approvals
and consents required to be obtained by the Buyer for consummation of the
transactions contemplated by this Agreement shall have been obtained at or
prior to Closing; and
(d) No Prohibition. No statute, rule, regulation, executive order,
decree, ruling, injunction or other order has been enacted, entered,
promulgated, or enforced by any court or governmental authority of
competent jurisdiction within the United States which prohibits or makes
illegal the transactions contemplated by this Agreement.
(e) No Material Adverse Effect. There shall have been no material
adverse effect on the business, customer base, revenues, operations,
results of operations, condition, assets, prospects and liabilities of the
Buyer between the date of this Agreement and the Closing Date.
(f) Opinion of Counsel. Sellers shall have received an opinion of
counsel to the Buyer, dated the Closing Date, addressing the matters set
forth on Schedule 7.2(f) attached hereto and reasonably satisfactory to
Sellers and their counsel.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
Section 8.1 Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive for a
period of twenty-eight (28) months following the Closing; provided, however,
that the representations, warranties and covenants regarding tax and
environmental liabilities contained in Sections 3.9, 3.18 and 5.7 hereof shall
survive until expiration of all applicable statutes of limitation; and provided,
further, that if a Notice of Claim shall have been made before the expiration of
the applicable statutes of limitation, the representation to which such Notice
applies shall survive in respect of that claim until the final determination or
settlement of that claim.
Section 8.2 Indemnification by Ms. Allison. Ms. Allison individually
agrees to indemnify, defend and hold harmless Buyer and its affiliates,
directors, officers, employees and representatives from and against all
liabilities, losses, claims, costs or damages whatsoever (including reasonable
attorneys' fees), arising out of, from or based on:
(a) the inaccuracy of any representation or warranty contained herein
made by the Sellers; or
(b) the non-performance of the Sellers of any covenant, agreement or
obligation to be performed by any such party under this Agreement.
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Section 8.3 Indemnification by Buyer. Buyer agrees to indemnify,
defend and hold harmless the Sellers from and against all liabilities, losses,
claims, costs or damages whatsoever (including reasonable attorneys' fees)
arising out of, from or based on:
(a) the inaccuracy of any representation or warranty contained herein
made by Buyer; or
(b) the non-performance by Buyer of any covenant, agreement or
obligation to be performed by Buyer hereunder.
Section 8.4 Reimbursement.
(a) After a claim has been approved or deemed approved by Ms. Allison
pursuant to Section 8.5(b) and subject to the right of Ms. Allison to
assume control and defense of any such claim pursuant to Section 8.5(c),
Ms. Allison individually agrees to reimburse Buyer within twenty (20) days
after receipt of Buyer's written request for payment with respect to any
loss, damage, cost or expense suffered by Buyer at any time after the date
hereof in accordance with Section 8.2 above.
(b) After a claim has been approved or deemed approved by Buyer
pursuant to Section 8.5(b) and subject to the right of the Buyer to assume
control and defense of any such claim pursuant to Section 8.5(c), Buyer
agrees to reimburse the Sellers within twenty (20) days after receipt of
Buyer's written request for payment with respect to any loss, damage, cost
or expense suffered by Sellers at any time after the date hereof in
accordance with Section 8.3 above.
Section 8.5 Indemnification Procedures.
(a) When a claim is made by any person not a party to this Agreement
with respect to any matter that relates to the indemnification provisions
of this Article 8, the indemnified party (the "Indemnitee") shall notify
the indemnifying party (the "Indemnitor") in writing within ten (10) days
after the Indemnitee has written notice of the facts constituting the basis
for such claim (the "Notice of Claim"). Whenever any claim is made by one
of the parties to this Agreement with respect to any matter to which the
indemnification provisions of this Article 8 relate, the Indemnitee shall
send a Notice of Claim to the Indemnitor as soon as practicable. The Notice
of Claim shall specify all facts known to Indemnitee relating to such
indemnification claim and the amount or an estimate of the amount of the
liability arising from such claim. The Notice of Claim shall be given in
accordance with Section 10.5 of this Agreement.
(b) Each claim will be deemed approved by the Indemnitor, unless the
Indemnitor gives the Indemnitee written notice of disapproval within twenty
(20) days of receipt of such Notice of Claim. The parties shall undertake,
in good faith, to resolve any dispute with respect to any such claim that
is so disapproved. If such good faith discussions do not lead to a
resolution of the controversy or dispute, then the parties shall meet with
a mutually acceptable mediator to further attempt to resolve such
controversy or dispute.
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(c) If the facts giving rise to any such indemnification shall involve
any actual, threatened or possible claim or demand by any person against
the Indemnitee, the Indemnitor shall be entitled to defend such claim at
its expense and through counsel of its own choosing if it gives written
notice of its intention to assume the defense of such claim to Indemnitee
within twenty (20) days after receipt of the Notice of Claim. If the
Indemnitor shall exercise such option, it shall have control over such
defense and over the payment, settlement or compromise of such claim, and
the Indemnitee agrees to cooperate fully with the Indemnitor and its
attorneys with respect to such claim. If the Indemnitor shall not exercise
such option, the Indemnitee may, but shall not be obligated to, assume the
contest and defense of such claim. Any payment or settlement resulting from
such contest, together with the total expenses thereof, including but not
limited to attorneys' fees, shall be binding upon the Indemnitor and
Indemnitee.
(d) After the Closing, and except with respect to obligations under
Section 5.7 above, the indemnification provided for by this Article 8 shall
constitute the exclusive remedy of either party with respect to (i) the
matters for which indemnification is provided, and (ii) any other matters
arising out of, relating to or in conjunction with this Agreement or the
transactions contemplated hereby.
Section 8.6 Limitations of Indemnification. No Indemnitee shall assert
any claim for indemnification against any Indemnitor until such time as the
aggregate of all claims which the Indemnitee shall have against the Indemnitor
shall equal One Hundred Thousand Dollars ($100,000.00) (the "Basket Amount"),
and then only for the amounts in excess of the Basket Amount. In no event shall
the indemnification obligations hereunder of an Indemnitor exceed Seven Million
Five Hundred Thousand Dollars ($7,500,000.00). The provisions of this Section
8.6 shall not apply to (i) any claim based on a representation, warranty or
covenant made in Section 3.9 above, (ii) any obligation under Section 5.7 above,
or (iii) any obligations of the Buyer to make any payments pursuant to Section
1.2 hereof, subject to the provisions of Section 8.7 hereof.. Notwithstanding
any term contained herein to the contrary, the provisions of Section 8.6 shall
not apply to any claim based on a representation, warranty or covenant made in
Section 4.4 (ii) and (iii).
Section 8.7 Offsets. The Buyer shall have the right to offset against
any and all amounts paid to any and all Sellers pursuant to Section 1.2(c) of
this Agreement to the extent that moneys are owed at any time by Sellers to
Buyer pursuant to the indemnification provisions of this Article VIII. The
Sellers agree that such right of offset shall be in addition to the rights of
Buyer to make claims under this Article VIII.
Section 8.8 Determination of Amount of Claim. In determining the
amount of any claim under this Article VIII, such amount shall be net of
insurance proceeds actually received. In addition, with respect to all claims by
Buyer for indemnification pursuant to Section 8.2 hereof, Buyer shall, in good
faith, first determine whether insurance coverage exists with respect to such
claims, and if such coverage exists, Buyer shall timely and diligently pursue
such coverage and shall apply the proceeds thereof to all such claims prior to
seeking indemnification under Section 8.2 hereof.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. Subject to Section 9.2 hereof, this Agreement
may be terminated and the transactions contemplated hereby abandoned at any time
prior to the Closing:
(a) by mutual written consent of Buyer, on the one hand, and Sellers,
on the other hand;
(b) by Buyer, on one hand or Sellers, on the other hand, if any court
or governmental authority of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and non-appealable;
(c) by Buyer, on one hand or the Sellers, on the other hand, at any
time after June 30, 2001, if the transactions contemplated hereby shall not
have occurred by such date; provided, that the right to terminate this
Agreement under this subparagraph (c) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause or resulted in the failure of the transactions contemplated hereby to
have occurred by such date;
(d) by Buyer, if there shall have been a breach of any material
representation, warranty or covenant or agreement of the Sellers contained
herein which shall not have been cured prior to ten (10) business days
following notice of such breach; or
(e) by Sellers, if there shall have been a breach of any material
representation, warranty, covenant or agreement of Buyer contained herein
which would prevent the consummation of the transactions contemplated
hereby which shall not have been cured prior to ten (10) business days
following notice of such breach.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1 hereof, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any party
hereto, except based upon obligations set forth in Article 9 and except for
duties of non-disclosure and confidentiality undertaken in this Agreement. The
termination of this Agreement shall not relieve any party from liability for any
breach of this Agreement.
Section 9.3 Amendment, Extension and Waiver. At any time prior to the
Closing, the Buyer, on the one hand, and the Sellers, on the other hand, may by
an instrument in writing signed on behalf of each party hereto (a) amend, alter
or modify this Agreement, (b) extend the time for the performance of any of the
obligations or other acts of the parties hereto, (c) waive any inaccuracies in
the representations and warranties contained herein or any document delivered
pursuant hereto and (d) waive compliance with any of the agreements or
conditions contained herein. This Agreement may not be amended except by an
instrument in writing signed on behalf of the Buyer, on the one hand, and
Sellers, on the other hand. The aforementioned requirement of a signed writing
to amend, alter or modify this Agreement may
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not be waived, except in writing, and may not be deemed waived orally or by
implication. Subject to the express terms and conditions of this Agreement, the
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect its right at a later time to enforce
the same.
ARTICLE X
MISCELLANEOUS
-------------
Section 10.1 Expenses. Each Seller shall bear all fees and expenses
incurred by him, her or the Company or Subsidiary in connection with the
preparation of, and consummation of, this Agreement. The Buyer shall bear all of
its fees incurred by it in connection with the preparation of, and consummation
of, this Agreement.
Section 10.2 Parties In Interest. All the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective heirs, successors and assigns of the parties
hereto. Except for any assignees permitted by this Agreement, no third party is
entitled to rely on any of the representations, warranties and agreements of the
parties contained in this Agreement, and the Buyer, the Company, Subsidiary and
the Sellers assume no liability to any third party because of such reliance.
Section 10.3 Entire Agreement; Assignment. This Agreement, including
the Schedules attached hereto, (i) contains the entire understanding of the
parties with respect to its subject matter and supersedes all prior agreements
and understandings between the parties with respect to its subject matter and
(ii) shall not be assigned by operation of law or otherwise (including a change
of control (as that term is defined in Schedule 5.8(c) hereof)); provided, that
the Buyer may assign its rights and obligations in whole or in part to any
subsidiary or affiliate of the Buyer (provided that such transferee agrees to be
bound by this Agreement); and provided, further, that the Buyer unconditionally
agrees to guarantee the obligation of such subsidiary or affiliate to make
Earn-Out Payments hereunder.
Section 10.4 Headings; Section References. The section and paragraph
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. All
section references in this Agreement are to sections of this Agreement, unless
specifically set forth in this Agreement to the contrary. All Schedule
references in this Agreement are to Schedules of this Agreement, unless
specifically set forth in this Agreement to the contrary.
Section 10.5 Notices. All notices, requests, claims, demands and other
communications hereunder (collectively, "Notices") shall be in writing and shall
be deemed to have been duly given if (i) delivered in person against signed and
dated receipt, (ii) sent by recognized commercial overnight delivery service on
the next business day, (iii) sent by registered or certified mail, first class
postage prepaid, return receipt requested or (iv) sent by telecopy or electronic
mail (with receipt orally confirmed on the same date) and simultaneously mailed,
first class, postage prepaid, as follows:
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(a) If to the Sellers:
Miriam M. Allison
207 E. Buffalo St., Suite 650
Milwaukee, WI 53202
with a copy to:
Quarles & Brady LLP
411 E. Wisconsin Avenue
Milwaukee, WI 53202
Attn: Fredrick G. Lautz
(b) If to the Buyer:
UMB Financial Corp.
1010 Grand Blvd.
Kansas City, Missouri 64106
Attn: Dennis Rilinger, General Counsel
with a copy to:
Shook, Hardy & Bacon L.L.P.
1010 Grand Blvd., Fifth Floor
P.O. Box 15607
Kansas City, Missouri 64106
Attn: Victoria R. Westerhaus
Notice shall be deemed effective on the day of delivery if given pursuant to
clause (i) or (iv) above, or on the third following business day following
mailing if given pursuant to clause (iii) above, or on the next business day
following delivery to the recognized commercial delivery service if given
pursuant to clause (ii). Any party may change its address for purposes hereof by
written Notice in accordance herewith, except that Notices regarding change of
address shall only be effective upon receipt. Failure to accept a Notice shall
not invalidate such Notice.
Section 10.6 Law Governing. Regardless of the place of its execution,
this Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Wisconsin without regard to its conflict of laws
rules.
Section 10.7 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed to be
an original but all of which together shall constitute one and the same
instrument.
Section 10.8 Construction; Invalidity. This Agreement shall be
construed according to its fair meaning as if prepared mutually by all parties
hereto, and no party shall be deemed to be the draftsman hereof. Each section
and subsection of this Agreement constitutes a separate and distinct
undertaking, covenant and/or provision thereof. If any provision of this
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Agreement is held invalid, such invalidity shall not affect the other provisions
hereof which can be given effect without the invalid provisions, and, to this
end, the provisions of this Agreement are intended and shall be deemed
severable. Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which renders any provision of this Agreement
prohibited or unenforceable in any way, and any prohibited or unenforceable
provision of this Agreement shall be considered to have been superseded by a
legally permissible and enforceable clause which corresponds most closely to the
intent of the parties as evidenced by the provisions held to be unenforceable.
Section 10.9 Remedies. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 10.10 Definition of Sellers' Knowledge. "Sellers' knowledge"
shall mean, where a representation or warranty is stated to, or based on, the
knowledge of the Sellers, the matter is actually known by Sellers or should have
been known by Sellers in their capacities as stockholders and by Ms. Allison in
her capacity as an executive officer of the Company.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the Sellers and by the duly authorized officers of the Buyer as of the date
first above written.
UMB FINANCIAL CORP.
By:/s/ Rufus Crosby Kemper III
--------------------------------------
Name: Rufus Crosby Kemper III
Title: Chairman & Chief Executive Officer
SELLERS:
/s/ Miriam M. Allison
-----------------------------------------
Miriam M. Allison
/s/ Sarah Hammond
-----------------------------------------
Sarah Hammond
/s/ Rebekah Allison
-----------------------------------------
Rebekah Allison
/s/ Matthew Allison
-----------------------------------------
Matthew Allison
/s/ Peter Hammond
-----------------------------------------
Peter Hammond
TABLE OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A List of Sellers
Exhibit B List of Option Holders
Exhibit C Form of Initial Sellers Note
Exhibit D Earn-out Payments
Exhibit E Company's Audited Financial Statements for the
Period Ending December 31, 2000
Exhibit F Service to Buyer's Scout Funds
Exhibit G Company's Unaudited Internal Operating Statement
for January, 2001
SCHEDULES
Schedule 3.2 Sellers and Shareholdings
Schedule 3.4 Equity Investments
Schedule 3.5 Required Consents
Schedule 3.7 Undisclosed Liabilities
Schedule 3.8 Absence of Certain Changes
Schedule 3.9 Tax Returns
Schedule 3.10 Real Property
Schedule 3.11 Intellectual Property
Schedule 3.12 Litigation
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefits
Schedule 3.15 Contracts and Commitments
Schedule 3.16 Labor Matters
Schedule 3.17 Compliance
Schedule 3.18 Environmental Matters
Schedule 3.19 Employees
Schedule 3.20 Licenses and Permits
Schedule 3.21 Bank Accounts
Schedule 3.26 Broker/Dealer Status
Schedule 4.4 Buyer's Consents
Schedule 5.8(b) Release of Guarantees
Schedule 5.8(c) Ms. Allison's Employment Agreement
Schedule 7.1(c) Form of Noncompetition Agreement
Schedule 7.1(e) Matters to Be Addressed in Seller's Counsel's Opinion
Schedule 7.2(f) Matters to Be Addressed in Buyer's Counsel's Opinion