1
EXHIBIT 10.55
AGREEMENT AND PLAN OF MERGER
2
TABLE OF CONTENTS
Page
----
ARTICLE I. THE MERGER.............................................................................................4
1.1. Structure of the Merger................................................................................4
1.2. Effect of the Merger...................................................................................5
1.3. Delivery of Cash; Exchange Procedures..................................................................5
1.4 Reserve Amount.........................................................................................5
1.5. Certain Definitions....................................................................................6
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER.........................................................8
2.1. Corporate Organization, etc............................................................................8
2.2. Capital Stock; Options.................................................................................9
2.3. Subsidiaries and Affiliates............................................................................9
2.4. Authorization, etc.....................................................................................9
2.5. No Violation...........................................................................................9
2.6. Governmental Authorities...............................................................................9
2.7. Financial Statements..................................................................................10
2.8. No Undisclosed Liabilities, Claims, etc...............................................................10
2.9. Absence of Certain Changes............................................................................10
2.10. Contracts............................................................................................11
2.11. True and Complete Copies.............................................................................11
2.12. Title and Related Matters............................................................................11
2.13. Litigation...........................................................................................12
2.14. Tax Matters..........................................................................................13
2.15. Government Contracts.................................................................................15
2.16. Compliance with Law..................................................................................15
2.17. Absence of Certain Business Practices................................................................16
2.18. ERISA and Related Employee Benefit Matters...........................................................16
2.19. Intellectual Property................................................................................18
2.20. Warranties...........................................................................................19
2.21. Labor Relations......................................................................................19
2.22. Insurance............................................................................................19
2.23. Environmental........................................................................................19
2.24. Capital Expenditures.................................................................................21
2.25. Suppliers............................................................................................21
2.26. Dealings with Affiliates.............................................................................22
2.27. Bank Accounts........................................................................................22
2.28. Compensation.........................................................................................22
2.29. Insurance Licenses...................................................................................22
3
2.30. Disclosure...........................................................................................22
2.31 Consultants, Brokers and Finders......................................................................22
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF ACQUIROR..........................................................22
3.1. Authorization, etc....................................................................................23
3.2. No Violation..........................................................................................23
3.3. Governmental Authorities..............................................................................23
3.4. Consultants, Brokers and Finders......................................................................23
ARTICLE IV. CERTAIN COVENANTS....................................................................................23
4.1. Further Assurances....................................................................................23
4.2. Employment Agreements.................................................................................23
4.3. Reserved..............................................................................................23
4.4. Opinion of Counsel....................................................................................23
4.5. Release...............................................................................................23
ARTICLE V. CLOSING............................................................................................. 24
5.1. Effective Time........................................................................................24
5.2. Closing...............................................................................................24
5.3. Deliveries at Closing.................................................................................24
ARTICLE VI. TERMINATION AND ABANDONMENT..........................................................................24
6.1. Methods of Termination................................................................................24
6.2. Procedure Upon Termination............................................................................25
ARTICLE VII. INDEMNIFICATION.....................................................................................25
7.1. Indemnification by Shareholder........................................................................25
7.2. Indemnification by Acquiror...........................................................................26
7.3. Transfer of Defense for Damages.......................................................................26
7.4. Survival of Warranties................................................................................27
7.5. Determination of Damages..............................................................................27
7.6. Exclusivity...........................................................................................27
ARTICLE VIII. MISCELLANEOUS PROVISIONS...........................................................................27
8.1. Amendment and Modification............................................................................27
8.2. Waiver of Compliance; Consents........................................................................27
8.3. Expenses..............................................................................................27
8.4. Notices...............................................................................................28
8.5. Binding Effect........................................................................................29
8.6. Governing Law.........................................................................................29
8.7. Counterparts..........................................................................................29
8.8. Neutral Interpretation................................................................................29
2
4
8.9. Headings..............................................................................................29
8.10. Entire Agreement.....................................................................................29
3
5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
effective as of the 30th day of September, 1998, by and among AMVESTORS
FINANCIAL CORPORATION, a Kansas corporation ("Acquiror"), SENIOR BENEFIT
SERVICES OF KANSAS, INC., a Kansas corporation ("Merger Sub"), SENIOR BENEFIT
SERVICES INSURANCE AGENCY, INC., a Texas corporation f/k/a "Senior Benefit
Services Agency, Inc." ("SBS"), NATIONAL SENIOR BENEFIT SERVICES, INC., a Texas
corporation and wholly-owned subsidiary of SBS ("SBS Sub") and Richard McCarter
(the "Shareholder").
R E C I T A L S
WHEREAS, the Boards of Directors of Acquiror, Merger Sub and
SBS deem it advisable and in the best interests of their respective
shareholder(s) that Acquiror acquire SBS, and such Boards of Directors have
approved the merger of SBS with and into Merger Sub upon the terms and subject
to the conditions set forth herein; and
WHEREAS, Shareholder, as the sole shareholder of SBS, SBS, as
the sole shareholder of SBS Sub, and the Acquiror, as the sole stockholder of
Merger Sub, have approved the merger and the transactions contemplated herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and
respective representations, warranties and covenants set forth herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follow:
ARTICLE I.
THE MERGER
1.1. Structure of the Merger. At the effective time of the
Merger (the "Effective Time") as provided in Section 5.1, SBS will merge with
and into Merger Sub (the "Merger") pursuant to the provisions of, and with the
effect provided in, Section 17-6702 of the Kansas General Corporation Code and
Section 5.01 of the Texas Business Corporation Act, whereupon the separate
existence of SBS shall cease, and Merger Sub shall be the surviving corporation
(the "Surviving Corporation"). At the Effective Time, the articles of
incorporation and by-laws of Merger Sub in effect immediately prior to the
Effective Time shall be the articles of incorporation and by-laws of the
Surviving Corporation, the directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, and the
officers of Merger Sub immediately prior to the Effective Time shall be the
officers of the Surviving Corporation. The articles of incorporation of Merger
Sub are attached as Exhibit 1.1.
4
6
1.2. Effect of the Merger.
(a) By virtue of the Merger, automatically and without any
action on the part of the holder thereof, the shares of SBS common stock, par
value $0.10 per share (the "Common Stock") issued and outstanding at the
Effective Time (the "Shares") shall, at the Effective Time, be cancelled and
cease to be issued and outstanding shares of Common Stock and shall be converted
into the right to receive the Merger Consideration.
(b) At the Effective Time, pursuant to and as permitted by
applicable Kansas and Texas corporate law, all of the rights, privileges,
powers, franchises, property and assets of Merger Sub and SBS and all debts and
liabilities due or to become due to Merger Sub and SBS, including every interest
or asset of conceivable value or benefit, shall be deemed fully and finally and
without any right of reversion or impairment vested in the Surviving Corporation
without further act or deed, and without any assignment or transfer having
occurred, and the Surviving Corporation shall have and hold the same in its own
right as fully as the same was possessed and held by Merger Sub or SBS. All
debts, liabilities, and obligations due or to become due of, and all claims or
demands for any cause existing against, Merger Sub or SBS shall be and become
the debts, liabilities, obligations of, and the claims and demands against, the
Surviving Corporation in the same manner as if the Surviving Corporation had
itself incurred or become liable for them; all rights or creditors of Merger Sub
or SBS and all liens upon the property of Merger Sub or SBS shall be preserved
unimpaired, and any action or proceeding pending by or against Merger Sub or SBS
shall not be deemed to have been abated or have been discontinued, but may be
prosecuted to judgment with the right of appeal or review as in other cases as
if the Merger had not taken place and the Surviving Corporation may be
substituted for Merger Sub or SBS, as the case may be.
1.3. Delivery of Cash; Exchange Procedures. Subject to the
terms and conditions of this Agreement and in reliance on the representations,
warranties and covenants of SBS and Shareholder herein contained, and in
consideration of the Merger, Acquiror or Merger Sub agrees to pay to Shareholder
as follows (the "Merger Consideration"):
(a) At the Closing, $2,135,000 plus simple interest accrued
thereon at the rate of 7% per annum from July 1, 1998 through the Closing Date
by wire transfer in immediately available funds to Shareholder's account (the
"Initial Merger Payment");
(b) on or before January 31, 2004, the amount, if any, of
Net Reserve Amount (hereinafter defined), as determined in accordance with
Section 1.4.
1.4. Reserve Amount. As part of the Merger Consideration, on
February 1, 2004 Acquiror shall be obligated to pay to Shareholder the sum of
$1,220,000 (the "Reserve Amount"), subject to dollar for dollar (i) deduction
for any offsets or deductions against the Reserve Amount which Acquiror may
apply to satisfy any claims for Damages made pursuant to Section 7.1 and (ii)
addition for simple interest accrued thereon at the rate of 7% per annum from
July 1, 1998 through the date of payment. The amount of the Reserve Amount, net
of such
5
7
deductions and additions, at January 31, 2004 is referred to herein as the "Net
Reserve Amount" and shall be paid by Acquiror to Shareholder on February 1, 2004
(or if such day is a holiday or weekend, on the next banking day) by wire
transfer in immediately available funds. The Reserve Amount shall be a
nonexclusive source of funds and nonexclusive remedy for claims for Damages
under Section 7.1 and shall not in any way limit or cap the amount of claims for
such Damages.
1.5. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings set forth below:
"Accounts" means all of SBS's and SBS Sub's (as the case may
be) customer accounts and records pertaining to such accounts, including
accounts and records relating to all lines of insurance, employee benefits and
any related types of business or service written or offered by SBS or SBS Sub,
as the case may be.
"Acquiror" shall have the meaning set forth in the preamble of
this Agreement.
"Affiliates" shall have the meaning set forth in Section 2.3.
"Balance Sheets" shall have the meaning set forth in Section
2.7.
"Closing" shall have the meaning set forth in Section 5.2.
"Closing Balance Sheet" means the balance sheet of SBS (on a
consolidated basis) as of the close of business on the Effective Date prepared
in accordance with GAAP.
"Closing Date" shall have the meaning set forth in Section 5.2.
"Code" shall have the meaning set forth in Section 2.14.
"Contracts" shall have the meaning set forth in Section 2.10.
"Damages" shall have the meaning set forth in Section 7.1.
"Effective Time" shall have the meaning set forth in Section
5.1.
"Encumbrances" shall mean all mortgages, security interests,
liens, pledges, claims, escrows, options, rights of first refusal, indentures,
easements, licenses, security agreements or other agreements, arrangements,
contracts, commitments, understandings, obligations, charges or encumbrances of
any kind or character.
"Environmental Laws and Regulations" shall have the meaning set
forth in Section 2.23.
"ERISA" shall have the meaning set forth in Section 2.18.
"GAAP" means generally accepted accounting principles.
6
8
"Hazardous Materials" shall have the meaning set forth in
Section 2.23.
"Income Statements" shall have the meaning set forth in Section
2.7. "Initial Merger Payment" shall have the meaning set forth in Section 1.3.
"IRS" shall have the meaning set forth in Section 2.14.
"Intellectual Property Rights" shall have the meaning set forth
in Section 2.19.
"Key Employees" means employees of SBS or SBS Sub who have
material relationships with SBS's or SBS Sub's respective customers.
"Knowledge" means the actual knowledge of the subject person
and that knowledge that would be obtained or realized upon the subject person's
reasonable and prudent inquiry into the matter after having been put on notice
(including constructive notice provided for under applicable statutory or
regulatory provisions) of the need to so inquire.
"Last Fiscal Year-End Date" shall have the meaning set forth in
Section 2.7.
"Last Interim Period-End Date" shall have the meaning set forth
in Section 2.7.
"Laws" shall include, without limitation, all foreign, federal,
state and local laws, statutes, rules, regulations, codes, ordinances, plans,
orders, judicial decrees, writs, injunctions, notices, decisions or demand
letters issued, entered or promulgated pursuant to any foreign, federal, state
or local law.
"Lease Restrictions" shall have the meaning set forth in
Section 2.12.
"Licenses" shall have the meaning set forth in Section 2.29.
"Merger" shall have the meaning set forth in Section 1.1.
"Merger Consideration" shall have the meaning set forth in
Section 1.3.
"Merger Sub" shall have the meaning set forth in the preamble
of this Agreement.
"Net Reserve Amount" shall have the meaning set forth in
Section 1.4.
"Notice" shall have the meaning set forth in Section 8.4.
"Operating Earnings" means for any given period and on a
consolidated basis, the gross revenues of SBS less the operating expenses of
SBS, excluding expenses related to any Agent Bonus Plan, any SBS Management
Bonus Plan, SBS Profit Sharing Plan, employment and non-competition agreements
with George Richards and Richard McCarter, respectively, Goodwill amortization
and federal income taxes, and determined in accordance with GAAP.
7
9
"Pension Benefit Plan" shall have the meaning set forth in
Section 2.18.
"Reserve Amount" shall have the meaning set forth in Section
1.4.
"SBS" shall have the meaning set forth in the preamble of this
Agreement.
"SBS Sub" shall mean National Senior Benefit Services, Inc., a
Texas corporation, a wholly-owned direct subsidiary of SBS.
"Shareholder" shall have the meaning set forth in the preamble
of this Agreement.
"Shares" shall have the meaning set forth in Section 1.2.
"Surviving Corporation" shall have the meaning set forth in
Section 1.1.
"Taxes" shall have the meaning set forth in Section 2.14.
"Threshold" shall have the meaning set forth in Section 7.1.
"Welfare Benefit Plan" shall have the meaning set forth in
Section 2.18.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder and SBS acknowledge that Acquiror and Merger Sub
are unwilling to proceed with the Merger and transactions contemplated under
this Agreement without the representations and warranties provided by
Shareholder in this Article II. Shareholder hereby represents and warrants to
Acquiror and Merger Sub as follows:
2.1. Corporate Organization, etc. SBS and SBS Sub are
corporations duly organized, validly existing and in good standing under the
laws of the State of Texas with all requisite corporate power and authority to
carry on their respective business as it is now being conducted and to own,
operate and lease their respective properties and assets. Exhibit 2.1 lists each
of the states where SBS and SBS Sub is qualified as a foreign corporation. To
Shareholder's Knowledge (after reasonable investigation made), the conduct of
its business and its ownership or use of property do not require SBS or SBS Sub
to be qualified or licensed to do business as a foreign corporation in any state
except those listed in Exhibit 2.1. SBS and SBS Sub have all federal, state,
local and foreign licenses, permits or other approvals required for the
operation of their respective businesses as now being conducted, except as would
not have a material adverse effect on SBS's or SBS Sub's business or prospects,
respectively.
8
10
2.2. Capital Stock; Options.
(a) The authorized capital stock of SBS consists of 10,000
shares of Common Stock and the only shares of capital stock of SBS issued and
outstanding are the 10,000 shares of Common Stock held by Shareholder of record
and beneficially. SBS has no treasury stock. All the Shares are validly issued,
fully paid and nonassessable and are owned by Shareholder, free and clear of all
Encumbrances.
(b) The authorized capital stock of SBS Sub consists of
1,000,000 shares of common stock, par value $0.10 per share, and the only shares
of capital stock of SBS Sub issued and outstanding are the 10,000 shares of
common stock held by SBS of record and beneficially (the "Sub Shares").
(c) There are no issued and outstanding options, warrants,
rights, securities, contracts, commitments, understandings or arrangements by
which SBS, SBS Sub or Shareholder is bound with respect to the Shares or the Sub
Shares (with regard to voting, transfer, sale or otherwise) or to issue any
additional shares of its capital stock or equity equivalents.
2.3. Subsidiaries and Affiliates. SBS has a single subsidiary,
SBS Sub. SBS Sub has no subsidiaries. Except as set forth in Exhibit 2.3,
neither SBS nor SBS Sub has any other subsidiaries, Affiliates (as defined
below) or investments in any other entity or business operation. The term
"Affiliates" includes each shareholder, director and officer of a party, and any
corporation, partnership or other entity in which such party or a director or
officer of such party has any financial interest or is a controlling person, as
that term is used in connection with the federal securities laws, if any such
person or entity has, or in the past had, a contractual relationship with or
transacted business with such party.
2.4. Authorization, etc. SBS and Shareholder each have full
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
2.5. No Violation. Except as set forth on Exhibit 2.5, neither
SBS nor SBS Sub is subject to or obligated under any article or certificate of
incorporation or bylaw or, to Shareholder's Knowledge, any Law, agreement,
instrument, license, franchise or permit, which would be breached or violated by
SBS's execution, delivery and performance of this Agreement. SBS, SBS Sub and
Shareholder have complied with all applicable Laws in connection with the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
2.6. Governmental Authorities. Neither Shareholder, SBS nor SBS
Sub is required to submit any notice, report or other filing with, and no
consent, approval or authorization is required, by any governmental or
regulatory authority in connection with their execution, delivery, consummation
or performance of this Agreement or the consummation of the transactions
contemplated hereby, except as otherwise expressly provided herein.
9
11
2.7. Financial Statements. Exhibit 2.7 contains SBS's
consolidated balance sheet at December 31, 1997 and at June 30, 1998 (the
"Balance Sheets") and consolidated Statements of Revenue and Expenses for the
fiscal year ended December 31, 1997 and for the period ended as of June 30, 1998
(the "Income Statements"). The Balance Sheets are complete and accurate and
fairly present the financial position of SBS as of the dates thereof, and the
Income Statements fairly and accurately present the results of operations for
the periods referred to therein. The Balance Sheets and the Income Statements
have been prepared in accordance with GAAP consistently applied. December 31,
1997 is referred to herein as the "Last Fiscal Year-End Date" and June 30, 1998
is referred to herein as the "Last Interim Period-End Date."
2.8. No Undisclosed Liabilities, Claims, etc. To Shareholder's
Knowledge (after reasonable investigation made) and except for (a) liabilities
fully reflected or reserved against in the Balance Sheet; and (b) regular and
usual liabilities and obligations incurred in the ordinary course of business
consistent with past practices after the Last Interim Period-End Date, neither
SBS nor SBS Sub has any liabilities, obligations or claims (absolute, accrued,
fixed or contingent, matured or unmatured, or otherwise), including liabilities,
obligations or claims which may become known or which arise only after the
Closing and which result from actions, omissions or occurrences of SBS or SBS
Sub prior to the Closing.
2.9. Absence of Certain Changes. Except as set forth in Exhibit
2.9, since the Last Interim Period-End Date and with references herein being
deemed to include SBS Sub:
(a) here has not been (i) any adverse change in the business,
financial condition, earnings, operations or prospects of SBS's business; (ii)
any damage, destruction or loss, whether covered by insurance or not, adversely
affecting SBS's properties, business or prospects; (iii) any increase in the
compensation payable or to become payable by SBS to its directors, officers or
Key Employees, or any adoption of or increase in any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for or with any
such party (except for the payment of cash at closing to Shareholder and/or
employees of SBS as is expressly agreed by the parties hereto in writing prior
thereto); (iv) any entry into any commitment or transaction outside the ordinary
course of SBS's business, including, without limitation, any borrowing or
capital expenditure (except for the new telephone system installed in
August/September 1998); (v) any change by SBS in accounting methods, practices
or principles; (vi) any termination or waiver of any rights of value to the
business of SBS; (vii) any transaction or event involving receipt or payment of
more than $5,000 not in the ordinary course of SBS's business; (viii) any
adoption or amendment of any collective bargaining, bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, or other
plan, agreement, trust, fund or arrangement for the benefit of employees; or
(ix) any agreement or understanding made or entered into to do any of the
foregoing; and
(b) SBS has (i) operated its business and promoted and
maintained the Accounts in the ordinary course, diligently and in good faith,
consistent with past management practices; and (ii) maintained all of its
properties in customary repair, order and condition, reasonable wear and tear
excepted.
10
12
2.10. Contracts. Exhibit 2.10 contains a schedule of all
Contracts to which SBS or SBS Sub is a party. The term "Contracts" shall
include, but shall not be limited to, all oral (which shall be summarized in
Exhibit 2.10) and written contracts, agreements, loan agreements, mortgages,
indentures, deeds of trust, guarantees, commitments, joint venture agreements,
purchase and/or sale agreements, collective bargaining, union, consulting and/or
employment contracts, leases of real or personal property, easements,
distribution or dealer agreements, service agreements, license agreements and
advertising agreements (except there shall not be included any license
agreements, brokers agreement with insurance agents or agreements which do not
exceed, in the case of any one agreement, an obligation of $5,000, and in the
case of all such agreements, an aggregate obligation of $15,000). To the
Knowledge of Shareholder, neither SBS nor SBS Sub is in default or alleged to be
in default under any Contract nor is SBS or SBS Sub aware of any default by any
other party to any Contract, and there exists no event, condition or occurrence
which, after notice or lapse of time, or both, would constitute SBS's or SBS
Sub's default under any Contract. To the Knowledge of Shareholder, all the
Contracts are in full force and effect and constitute legal, valid and binding
obligations of the parties thereto in accordance with their terms.
2.11. True and Complete Copies. Copies of all agreements,
contracts and documents delivered and to be delivered hereunder by SBS or SBS
Sub are true and complete copies of such agreements, contracts and documents.
All written summaries of oral agreements are materially correct.
2.12. Title and Related Matters. Except as set forth in Exhibit
2.12, SBS and SBS Sub have good and marketable title to (or in the case of
indicated leases, valid leasehold interest) in all their respective properties
and assets reflected in the Balance Sheet or acquired after the date thereof
(except properties sold or otherwise disposed of since the date thereof in the
ordinary course of business and consistent with past practices) including,
without limitation, the specific assets referred to in paragraphs (a), (b) and
(c) below, free and clear of all Encumbrances, except as reflected on the
Balance Sheet. SBS or SBS Sub, as the case may be, owns or leases, directly or
indirectly, all the assets and properties, and is a party to all licenses and
other agreements, presently used or necessary to carry on the business or
operations of SBS or SBS Sub, respectively, as presently conducted.
(a) Real Property
(i) SBS has good and marketable title in fee simple to
the land, including buildings and improvements thereon, shown on
the Balance Sheet. All such land, buildings and improvements of
SBS are owned free and clear of all Encumbrances of every kind and
character, except as set forth on Exhibit 2.12.
(ii) Neither SBS nor SBS Sub is a tenant under any
lease(s) of real property used by SBS or SBS Sub except as
described on Exhibit 2.10. With respect to the leased real
property described on Exhibit 2.10 and except as set forth on
Exhibit 2.12: (A) all such leases are in full force and effect and
constitute
11
13
valid and binding obligations of the respective parties thereto;
(B) there have not been and there currently are not any defaults
thereunder by any party thereto; (C) 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
thereunder entitling the lessor to terminate the lease; and (D)
the continuation, validity and effectiveness of all such leases
under the current rentals and other current terms thereof will in
no way be affected by the transactions contemplated by this
Agreement or, if any would be affected, Shareholder shall use all
necessary means at its disposal to cause an appropriate consent to
such transactions to be delivered to Acquiror prior to the Closing
Date at no cost or other adverse consequence to SBS, SBS Sub,
Merger Sub or Acquiror ((A) through (D) are hereinafter
collectively referred to as "Lease Restrictions").
(iii) Neither SBS nor SBS Sub currently has, and in the
past has not had, any ownership interest in any real property
except as disclosed on Exhibit 2.12.
(b) Personal Property. SBS (or SBS Sub, if so indicated)
has good and marketable title to all the personal property and assets, tangible
or intangible, shown on the Balance Sheet, except to the extent sold or disposed
of in transactions entered into in the ordinary course of business consistent
with past practices since the Last Fiscal Year-End Date. The personal property
in the aggregate is in good condition and working order, and each individual
item of personal property which would cost in excess of $2,500 to replace is in
good condition and working order. None of such assets are subject to any (i)
contracts of sale or lease, except contracts for the sale of inventory in the
ordinary and regular course of business; or (ii) security interests,
encumbrances, liens or charges of any kind or character, except as set forth in
Exhibit 2.12. Except as set forth in Exhibit 2.12, there are no Lease
Restrictions with respect to the personal property leased by SBS.
(c) No Disposition of Assets. There has not been since the
Last Fiscal Year-End Date any sale, lease or any other disposition or
distribution by SBS or SBS Sub of any of their respective assets or properties
and any other assets now or hereafter owned by it, except transactions in the
ordinary and regular course of business consistent with past practices or as
otherwise consented to by Acquiror.
2.13. Litigation. Except as set forth in Exhibit 2.13, (a) there
is no suit, action, investigation or proceeding pending or, to the Knowledge of
Shareholder, threatened against Shareholder or SBS or SBS Sub or any of SBS's or
SBS Sub's directors, officers or Key Employees (a "Matter"), (b) there are no
Matters pertaining to the Licenses, and (c) without limiting the generality of
the foregoing, there are no Attorney General, department of insurance or other
matters pending or, to the Knowledge of Shareholder, threatened which, if
adversely determined, would adversely affect the business, prospects,
operations, earnings, properties or the condition, financial or otherwise, of
SBS or SBS Sub. There is not any judgment, decree, injunction, ruling or order
of any court, governmental department, commission, agency,
12
14
instrumentality or arbitrator outstanding against SBS or SBS Sub having, or
which, insofar as can be reasonably foreseen, in the future may have, any such
effect.
2.14. Tax Matters. The term "Taxes" means all net income, capital
gains, gross income, gross receipts, sales, use, transfer, ad valorem,
franchise, profits, license, capital, withholding, payroll, employment, excise,
goods and services, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees or assessments, or other
governmental charges of any kind whatsoever, together with any interest, fines
and any penalties, additions to tax or additional amounts incurred or accrued
under applicable Laws or assessed, charged or imposed by any governmental
authority, domestic or foreign, provided that any interest, penalties, additions
to tax or additional amounts that relate to Taxes for any taxable period
(including any portion of any taxable period ending on or before the Closing
Date) shall be deemed to be Taxes for such period, regardless of when such items
are incurred, accrued, assessed or charged. For purposes of this Section 2.14,
SBS shall be deemed to include SBS Sub and any predecessor of SBS or SBS Sub or
any person or entity from which SBS or SBS Sub incurs a liability for Taxes as a
result of transferee liability. Except as stated in Exhibit 2.14:
(a) SBS and SBS Sub have duly and timely filed (and prior
to the Closing Date will duly and timely file) true, correct and complete tax
returns, reports or estimates, all prepared in accordance with applicable laws,
for all years and periods (and portions thereof) and for all jurisdictions
(whether federal, state, local or foreign) in which any such returns, reports or
estimates were due. All Taxes shown as due and payable on such returns, reports
and estimates have been paid, and there is no current liability for any Taxes
due and payable in connection with any such returns. All Taxes not yet due and
payable have been fully accrued on the books of SBS and SBS Sub and the Balance
Sheets and adequate reserves have been established therefor; the charges,
accruals and reserves for Taxes provided for on the financial statements
delivered or to be delivered pursuant to Section 2.7 are adequate; and there are
no unpaid assessments for additional Taxes for any period nor is there any basis
therefor. Copies of all federal, state and foreign tax returns filed by SBS and
SBS Sub for the past five (5) years have been delivered to Acquiror.
(b) Neither SBS or SBS Sub is, or has been, a member of any
consolidated, combined or unitary group for federal, state, local or foreign tax
purposes. Neither SBS nor SBS Sub is a party to any joint venture, partnership
or other arrangement that could be treated as a partnership for federal income
tax purposes.
(c) SBS and SBS Sub have (i) withheld all required amounts
from its employees, agents, contractors and nonresidents and remitted such
amounts to the proper agencies, (ii) paid all employer contributions and
premiums and (iii) filed all federal, state, local and foreign returns and
reports with respect to employee income tax withholding, and social security and
unemployment taxes and premiums, all in compliance with the withholding tax
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), as in
effect for the applicable year or any prior provision thereof and other
applicable Laws.
13
15
(d) The federal income tax returns of SBS and SBS Sub have
been examined by the Internal Revenue Service (the "IRS"), or have been closed
by the applicable statute of limitations, for all periods through December 31,
1994; neither SBS nor SBS Sub has any state income tax liability or reporting
requirements; and no deficiencies or reassessments for any Taxes have been
proposed, asserted or assessed against SBS or SBS Sub by any federal, state,
local or foreign taxing authority. Exhibit 2.14 describes the status of any
federal, state, local or foreign tax audits or other administrative proceedings,
discussions or court proceedings that are presently pending with regard to any
Taxes or tax returns of SBS or SBS Sub (including a description of all issues
raised by the taxing authorities in connection with any such audits or
proceedings), and no additional issues are being asserted against SBS or SBS Sub
in connection with any existing audits or proceedings.
(e) Neither SBS nor SBS Sub have executed or filed any
agreement or other document extending the period for assessment, reassessment or
collection of any Taxes, and no power of attorney granted by SBS or SBS Sub with
respect to any Taxes is currently in force.
(f) Neither SBS nor SBS Sub has entered into any closing or
other agreement with any taxing authority which affects any taxable year of SBS
or SBS Sub ending after the Closing Date. Neither SBS nor SBS Sub is a party to
any tax sharing agreement or similar arrangement for the sharing of tax
liabilities or benefits.
(g) Neither SBS nor SBS Sub has agreed to and is not
required to make any adjustment by reason of a change in accounting methods that
affects any taxable year ending after the Closing Date. The IRS has not proposed
to SBS or SBS Sub any such adjustment or change in accounting methods that
affects any taxable year ending after the Closing Date. Neither SBS nor SBS Sub
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to their respective business or
operations and that affects any taxable year ending after the Closing Date.
(h) Neither SBS nor SBS Sub has consented to the
application of Code Section 341(f).
(i) There is no contract, agreement, plan or arrangement
covering any employee or former employee of SBS or SBS Sub that, individually or
collectively, could give rise to the payment by SBS or SBS Sub of any amount
that would not be deductible by reason of Code Section 280G.
(j) No asset of SBS or SBS Sub is tax exempt use property
under Code Section 168(h). No portion of the cost of any asset of SBS or SBS Sub
has been financed directly or indirectly from the proceeds of any tax exempt
state or local government obligation described in Code Section 103(a).
14
16
(k) No asset of SBS or SBS Sub is property that SBS or SBS
Sub is required to treat as being owned by any other person pursuant to the safe
harbor lease provision of former Code Section 168(f)(8).
(l) Neither SBS nor SBS Sub has or has had a permanent
establishment in any foreign country and does not and has not engaged in a trade
or business in any foreign country. Neither SBS nor SBS Sub is a foreign person
within the meaning of Code Section 1445.
(m) Neither Acquiror, Merger Sub, SBS nor SBS Sub will be
liable for any federal, state, local, foreign or other sales, use, documentary,
recording, stamp, transfer or similar Taxes applicable to, imposed upon or
arising out of prior tax returns or obligations, of SBS or SBS Sub which could
arise because of the Merger and the transactions contemplated by this Agreement.
2.15. Government Contracts. No Contract or other aspect of the
business of SBS and SBS Sub is subject to the Armed Services Procurement
Regulations or other regulations of any governmental agency. Neither SBS nor SBS
Sub has bid on or been awarded any "small business set aside contract," any
other "set aside contract" or other order or contract requiring small business
or other special status at any time during the last three (3) years.
2.16. Compliance with Law.
(a) To the Knowledge of Shareholder (after reasonable
investigation made), neither (i) SBS nor SBS Sub has previously failed or is
currently failing to comply with any applicable Laws relating to the business of
SBS or SBS Sub or the operation of their respective businesses and assets and
(ii) SBS nor SBS Sub has previously failed and is not currently failing to
comply with any applicable Laws relating to the business of SBS or SBS Sub or
the operation of their respective businesses and assets where such failure or
failures would individually or in the aggregate have an adverse effect on the
financial condition, business, operations of SBS taken as a whole. In
particular, but without limiting the generality of the foregoing, each of SBS
and SBS Sub is in compliance with all applicable Laws relating to deceptive
trade practices, unauthorized practice of law, unfair competition, unfair claims
settlement practices, rebating, anti-competitive practices, price fixing, health
and safety, environmental, employment and discrimination matters. There are no
proceedings of record and no proceedings are pending or threatened, nor has SBS
or SBS Sub received any written notice regarding any violation of any Law,
including, without limitation, any requirement of OSHA or any pollution or
environmental control agency (including air and water).
(b) Exhibit 2.16 contains copies of all reports, orders,
consent agreements and findings of inspections by representatives of any
federal, state or local governmental entity or agency of SBS's or SBS Sub's
respective businesses and properties from January 1, 1994 through the date
hereof. The deficiencies, if any, noted on such reports or any deficiencies
noted by such inspections through the Closing Date shall be corrected by the
Closing
15
17
Date. Neither SBS, SBS Sub nor Shareholder knows or has reason to know of any
other safety, health, environmental, anti-competitive or discrimination problems
relating to the financial condition, business, assets, operations, prospects,
earnings or employment practices of SBS or SBS Sub.
2.17. Absence of Certain Business Practices. None of SBS, SBS
Sub, any director, officer, employee or agent of SBS or SBS Sub, Shareholder,
any other person or entity acting on behalf of or associated with SBS, SBS Sub
or Shareholder, nor any other entity directly or indirectly owned or controlled
by SBS, SBS Sub or Shareholder, acting alone or together, has (a) received,
directly or indirectly, any payments, promotional allowances or any other
economic benefit, regardless of its nature or type, from any customer, supplier,
trading company, shipping company, governmental employee or other entity or
individual with whom SBS or SBS Sub has done business directly or indirectly,
other than commissions, fees and rebates for SBS's or SBS Sub's normal business
operations, or (b) directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, trading company, shipping company,
governmental employee or other person or entity who is or may be in a position
to help or hinder the business of SBS or SBS Sub (or assist SBS or SBS Sub in
connection with any actual or proposed transaction) any of which (i) might
subject SBS or SBS Sub to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) if not given in the past, might have
had an adverse effect on the assets, business or operations of SBS or SBS Sub as
reflected in the financial statements set forth in Exhibit 2.7, or (iii) if not
continued in the future, might adversely affect the assets, business operations
or prospects of SBS taken as a whole or which might subject SBS or SBS Sub to
suit or penalty in any private or governmental litigation or proceeding.
2.18. ERISA and Related Employee Benefit Matters. References in
this Section to "SBS" shall be deemed to include SBS Sub.
(a) Welfare Benefit Plans. Exhibit 2.18(a) lists each
"employee welfare benefit plan" (within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974 ("ERISA")) maintained by SBS or
to which SBS contributes or is required to contribute, including any
multiemployer plan ("Welfare Benefit Plan") and sets forth as of the most recent
valuation date (i) the amount of any liability of SBS for payments due with
respect to any Welfare Benefit Plan, (ii) the amount of any payment made and to
be made, stated separately, by SBS with respect to any Welfare Benefit Plan for
the plan year during which the Closing is to occur, and (iii) with respect to
any Welfare Benefit Plan to which Section 505 of the Code applies, a statement
of assets and liabilities for such Welfare Benefit Plan as of the most recent
valuation date. Without limiting the foregoing, Exhibit 2.18(a) discloses any
obligations of SBS to provide retiree health benefits to current or former
employees of SBS.
(b) Pension Benefit Plans. Exhibit 2.18(b) lists each
"employee pension benefit plan" (within the meaning of Section 3(2) of ERISA)
maintained by SBS or to which SBS contributes or is required to contribute,
including any multiemployer plan ("Pension Benefit Plan"). All costs of each
Pension Benefit Plan have been provided for on the basis of consistent methods
and, if applicable, in accordance with sound actuarial assumptions and practices
that are
16
18
acceptable under ERISA. SBS does not maintain or contribute to any Pension
Benefit Plan that is subject to Title I, Part 3 of ERISA (concerning "funding"),
With respect to each Pension Benefit Plan that is not subject to Title I, Part 3
of ERISA, Exhibit 2.18(b) sets forth as of the valuation date (i) the amount of
any liability of SBS for any contributions due with respect to such Pension
Benefit Plan and (ii) the amount of any contribution paid and to be paid, stated
separately, by SBS with respect to such Pension Benefit Plan for the plan year
during which the Closing is to occur.
(c) Compliance with Applicable Law. Each of the Pension
Benefit Plans, Welfare Benefit Plans, any related trust agreements, insurance
contracts, annuity contracts, and other funding arrangements, comply in all
respects with the provisions of ERISA and the Code and all other statutes,
orders, governmental rules and regulations applicable to such Welfare Benefit
Plans and Pension Benefit Plans. SBS has performed all of its obligations
currently required to have been performed under all Welfare Benefit Plans and
Pension Benefit Plans. There are no actions, suits or claims (other than routine
claims for benefits) pending or, to the Knowledge of Shareholder, threatened
against or with respect to any Welfare Benefit Plans, Pension Benefit Plans or
the assets of such plans, and no facts exist that could give rise to any
actions, suits or claims (other than routine claims for benefits) against such
plans or the assets of such plans. Each Pension Benefit Plan is qualified in
form and operation under section 401(a) of the Code, the Internal Revenue
Service has issued a favorable determination letter with respect to each Pension
Benefit Plan, and no event has occurred that will or could give rise to a
disqualification of any Pension Benefit Plan under Code Section 401(a). To the
Knowledge of Shareholder, no event has occurred that will or could subject any
Welfare Benefit Plan or Pension Benefit Plan to tax under Section 511 of the
Code.
(d) Administration of Plans. Each Welfare Benefit Plan and
each Pension Benefit Plan has been administered to date in compliance with the
requirements of ERISA and the Code. No fiduciary of any Welfare Benefit Plan or
Pension Benefit Plan has engaged in (i) any transaction in violation of Section
406(a) or (b) of ERISA, or (ii) any "prohibited transaction" (within the meaning
of Section 4975(c)(1) of the Code) for which no exemption exists under Section
408 of ERISA or Section 4975(d) of the Code. No trust agreement, insurance
contract, annuity contract, or other funding arrangement would impose a penalty,
discount, or other reduction on account of the withdrawal of assets from such
agreement, contract, or arrangement or a change in investment of such assets.
There is no pending or threatened litigation concerning any Welfare Benefit Plan
or Pension Benefit Plan, and there have been no written or oral communications
concerning any such Plan with the Internal Revenue Service, Department of Labor,
or any other federal, state, or local governmental entity.
(e) Other Employee Benefit Plans and Agreements. Exhibit
2.18(e) lists each fringe benefit, cafeteria, profit sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer,
consulting, retirement, welfare, or other incentive plan or agreement, or
employment agreement not terminable on 30 days or less written notice, and any
other employee benefit plan, agreement, arrangement, or commitment not
previously listed on the Exhibits to this Section that is maintained by SBS or
to which SBS contributes or is required to
17
19
contribute. Exhibit 2.18(e) contains a complete list of all employees of SBS and
the number of vacation days currently accrued to each such employee.
(f) Copies of Plans. Exhibit 2.18(a) lists: each Welfare
Benefit Plan; each Pension Benefit Plan, related trust agreements, annuity
contracts, insurance contracts, and other funding arrangements; each plan,
agreement, arrangement, and commitment referred to in subsection (e) of this
Section; favorable determination letters; annual reports (Form 5500 series)
required to be filed with any governmental agency for each Welfare Benefit Plan
and each Pension Benefit Plan for the most recent three plan years, including,
without limitation, all schedules thereto and all financial statements with
attached opinions of independent accountants; current summary plan descriptions;
and actuarial reports as of the last valuation date for each Pension Benefit
Plan that is subject to Title IV of ERISA.
(g) Continuation Coverage Requirements for Health Plans.
Each group health plan of SBS (including any plans of Affiliates of SBS that
must be taken into account under Section 4980B of the Code) has been operated in
compliance with the group health plan continuation coverage requirements of
Section 4980B of the Code and Title I, Part 6 of ERISA.
(h) Valid Obligations. Each Welfare Benefit Plan, Pension
Benefit Plan, related trust agreement, annuity contract or other funding
instrument, and each plan, agreement, arrangement and commitment referred to in
subsection (e) of this Section is legal, valid and binding and in full force and
effect, and there are no defaults thereunder. Except as specified in Exhibit
2.18(h), none of the rights of SBS thereunder will be impaired by the
consummation of the transactions contemplated by this Agreement, and all of the
rights of SBS thereunder will be enforceable by Acquiror at and after the
Closing without the consent or agreement of any other party other than consents
and agreements specifically listed in Exhibit 2.18(h).
2.19. Intellectual Property. SBS and SBS Sub has good and
marketable title to each copyright, trademark, trade name, service mark, trade
dress, patent, franchise, trade secret, product designation, formula, process,
know-how, right of publicity, design and other similar rights used in, or
necessary for, the operation of their respective businesses as currently
conducted. Exhibit 2.19 contains a detailed listing of each copyright registered
with the U. S. Copyright Office, each trademark, trade name, service mark, trade
dress, and patent registered with the U. S. Patent and Trademark Office, and all
pending applications therefor, owned by SBS or SBS Sub (collectively
"Intellectual Property Rights"). Except as otherwise set forth on Exhibit 2.19,
all of said Intellectual Property Rights are free and clear of all royalty
obligations, security interests, liens and encumbrances. SBS or SBS Sub, as the
case may be, has the exclusive right to use all Intellectual Property Rights
used in, or necessary for, the operation of their respective businesses as
currently conducted. SBS, SBS Sub and Shareholder have taken all action
necessary to protect against and defend against, and has no knowledge of, any
conflicting use of any such Intellectual Property Rights. Neither SBS nor SBS
Sub has or intends to utilize any Intellectual Property Rights except those
which are set forth in Exhibit 2.19. Except as set forth in Exhibit 2.19,
neither SBS nor SBS Sub is a party in any capacity to any franchise, license,
18
20
royalty or other agreement respecting or restricting any Intellectual Property
Rights, and the Intellectual Property Rights used by SBS or SBS Sub in the
conduct of their respective businesses do not conflict with the Intellectual
Property Rights of any third party. No service provided by SBS or SBS Sub
violates any license or infringes any Intellectual Property Rights of any third
party, and there are no pending claims or demands by any third party to the
contrary. Exhibit 2.19, which shall be provided to Acquiror at Closing, lists
all computer and telephone passcodes, passwords, log in identities and other
relevant information needed to access and use the equipment of SBS and SBS Sub.
2.20. Warranties. Except as set forth in Exhibit 2.20, to
Shareholder's Knowledge, there are no claims existing or threatened under or
pursuant to any warranty, whether expressed or implied, on products or services
sold by SBS or SBS Sub.
2.21. Labor Relations. To Shareholder's Knowledge, SBS and SBS
Sub is in compliance with all Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including,
without limitation, the Fair Labor Standards Act, the Family and Medical Leave
Act of 1993, the Americans with Disabilities Act of 1990, the Veterans
Reemployment Rights Act, the Equal Employment Opportunities Act as amended by
the Civil Rights Act of 1991, the Occupational Safety and Health Act, the
Employee Retirement Income Security Act, the Immigration Reform and Control Act
of 1986, the Age Discrimination in Employment Act, Title VII of the Civil Rights
Act of 1964, the Older Workers Benefit Protective Act, and all other Laws, each
as amended to date, relating to employer/employee rights and obligations. SBS
and SBS Sub currently have satisfactory relationships with its employees.
Exhibit 2.21 lists (i) current employees, officers and directors of SBS and SBS
Sub, respectively, and their respective compensation levels and (ii) each former
employee and/or officer of SBS or SBS Sub whose aggregate annualized
compensation (including all bonuses), exceeded $40,000 and whose employment by
SBS or SBS Sub has ceased for any reasons since January 1, 1994. Set forth
opposite the name of each such employee and/or officer listed pursuant to clause
(ii) above are: the positions held; the beginning and ending employment dates;
and the reason for the cessation of employment.
2.22. Insurance. Exhibit 2.22 lists all of SBS's and SBS Sub's
existing insurance policies, the premiums therefor and the coverage of each
policy, including errors and omissions, fidelity and crime coverages. Such
policies and the amount of coverage and the risks insured are, in the aggregate,
sufficient to protect and insure SBS and SBS Sub against perils which good
business practice demands be insured against or which are normally insured
against by other industry members similarly situated.
2.23. Environmental.
19
21
(a) For purposes of this Section:
(i) "Hazardous Materials" means any hazardous,
infectious or toxic substance, chemical, pollutant, contaminant,
emission or waste which is or becomes regulated by any local,
state, federal or foreign authority. Hazardous Materials
include, without limitation, anything which is: (i) defined as a
"pollutant" pursuant to 33 U.S.C.ss.1362(6); (ii) defined as a
"hazardous waste" pursuant to 42 U.S.C.ss.6921; (iii) defined as
a "regulated substance" pursuant to 42 U.S.C. ss. 6991; (iv)
defined as a "hazardous substance" pursuant to 42 U.S.C.ss.
9601(14); (v) defined as a "pollutant or contaminant" pursuant
to 42 U.S.C.ss. 9601(33); (vi) petroleum; (vii) asbestos; and
(viii) polychlorinated biphenyl.
(ii) "Environmental Laws and Regulations" means all
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
any Laws relating to pollution, nuisance, or the environment
including, without limitation, (i) the Federal Clean Air Act, 42
U.S.C.ss.ss.7401 et seq.; (ii) the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C.ss.ss.9601
et seq.; (iii) the Federal Emergency Planning and Community
Right-to-Know Act, 42 U.S.C.ss.ss. 1101 et seq.; (iv) the
Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C.ss.ss. 136 et seq.; (v) the Federal Water Pollution
Control Act, 33 U.S.C.ss.ss. 1251 et seq.; (vi) the Solid Waste
Disposal Act, 42 U.S.C. ss.ss. 6901 et seq.; (vii) the Toxic
Substances Control Act, 15 U.S.C.ss.ss. 2601 et seq.; (viii)
Laws relating in whole or part to emissions, discharges,
releases, or threatened releases of any Hazardous Material; and
(ix) Laws relating in whole or part to the manufacture,
processing, distribution, use, coverage, disposal,
transportation, storage or handling of any Hazardous Material.
(iii) "SBS" shall be deemed to include SBS Sub.
(b) The operations and activities of SBS comply, and have
in the past complied, in all respects, with all Environmental Laws and
Regulations. There are no pending or currently proposed changes to any
Environmental Laws and Regulations which, when implemented or effective, may
affect the operations of SBS.
(c) SBS has obtained and is and has been in full compliance
with all requirements, permits, licenses and other authorizations which are
required with respect to SBS's operations, as well as the transactions
contemplated hereby under all Environmental Laws and Regulations. Exhibit 2.23
lists each such permit, license or other authorization. There are no other such
permits, licenses or other authorizations which are required by any
Environmental Laws and Regulations to be obtained after the Closing.
(d) There is no civil, criminal, administrative or other
action, suit, demand, claim, hearing, notice of violation, proceeding,
investigation, notice or demand pending,
20
22
received or threatened against SBS relating in any way to any Environmental Laws
and Regulations.
(e) SBS has not caused or experienced any past or present
events, conditions, circumstances, plans or other matters which: (i) are not in
compliance with all Environmental Laws and Regulations; (ii) may give rise to
any statutory, common law, or other legal liability, or otherwise form the basis
of any claim, action, demand, suit, proceeding, hearing, notice of violation or
investigation based on or relating to Hazardous Materials including, without
limitation, such matters relating to any property owned, leased or utilized by
SBS at any time; (iii) arise from inventory of or waste from Hazardous
Materials; or (iv) arise from any off-site disposal, release or threatened
release of Hazardous Materials.
(f) No asbestos, polychlorinated biphenyls, lead-based
paints, or radon are on any real property or in any building now or previously
owned, operated, leased or utilized by SBS.
(g) No employee or former employee of SBS has been exposed
to any Hazardous Material owned, produced or utilized by SBS or any former
subsidiary.
(h) Neither SBS nor Shareholder has received any notice or
indication from any governmental agency or private or public entity advising
that SBS is or may be responsible for any investigation or response costs with
respect to a release, threatened release or cleanup of chemicals or materials
produced by or resulting from any business, commercial or industrial activities,
operations or processes, including, without limitation, any Hazardous Materials.
Neither SBS nor Shareholder is aware of any facts which might give rise to such
notices.
(i) No underground tanks, piping or subsurface structures
of any type exist or have existed on any real property now or previously owned,
operated, leased or utilized by SBS.
(j) Exhibit 2.23 contains complete copies of all
environmental investigations, assessments, audits, studies, tests and related
materials in possession of SBS or Shareholder or known to SBS or Shareholder to
exist, which relate to the current or prior operations of SBS or any real
property now or previously owned, operated, leased or utilized by SBS.
2.24. Capital Expenditures. Neither SBS nor SBS Sub has any
outstanding commitments for capital expenditures in excess of $5,000 in
aggregate.
2.25. Suppliers. No suppliers of goods or services to SBS or SBS
Sub that has made sales or provided services representing, individually or in
the aggregate, more than $25,000 in payments or commitments by SBS or SBS Sub
since August 31, 1997 has (i) ceased, or indicated any intention to cease, doing
business with SBS or SBS Sub, or (ii) changed or
21
23
indicated any intention to change any terms or conditions for future supply or
sale of products or services from the terms or conditions that existed with
respect to the supply or sale of such products or services during the twelve
(12) month period ending on the date hereof.
2.26. Dealings with Affiliates. Exhibit 2.26 sets forth a
complete list (including the parties) of all oral or written contracts,
arrangements or other agreements (excluding any contract listed on Exhibit 2.28)
with any Affiliate to which SBS or SBS Sub is, will be or has been a party at
any time from January 1, 1994, to the Closing Date.
2.27. Bank Accounts. Exhibit 2.27 is a list of all bank accounts,
lock boxes, safe deposit boxes and post office boxes, and the combinations,
codes or location of keys thereto, maintained in the name of or controlled by
SBS and/or SBS Sub and the names of the persons having access thereto.
2.28. Compensation. Exhibit 2.28 lists the current job title and
total remuneration (including, without limitation, salary, commissions and
bonuses) for each officer, director, employee or consultant of SBS or SBS Sub
who received total remuneration in excess of $40,000 from SBS or SBS Sub,
respectively, during either of the past two (2) calendar years or who is
expected to receive total remuneration in excess of such amount during the
current calendar year.
2.29. Insurance Licenses. SBS, SBS Sub and each of their
respective shareholders, directors, officers and employees required by law to do
so has obtained and currently maintains in good standing all required licenses
from the Texas Insurance Department and all other similar agencies by which they
are required to be licensed (the "Licenses"). Exhibit 2.29 contains an accurate
list of the Licenses, including the number of each License.
2.30. Disclosure. No representation or warranty made by SBS, SBS
Sub or Shareholder in this Agreement or in any agreement, instrument, document,
certificate, statement or letter furnished to Acquiror, by or on behalf of SBS,
SBS Sub or Shareholder in connection with any of the transactions contemplated
by this Agreement contains any untrue statement of fact or omits to state a fact
necessary in order to make the statements herein or therein not misleading in
light of the circumstances in which they are made
2.31. Consultants, Brokers and Finders. Neither SBS, SBS Sub nor
Shareholder have retained any consultant, broker or finder in connection with
the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to SBS and Shareholder
as follows:
22
24
3.1. Authorization, etc. Acquiror and Merger Sub each have, or,
in the case of Merger Sub, will have, prior to the Effective Time, full
corporate power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
3.2. No Violation. Neither Acquiror nor Merger Sub is subject to
or obligated under any certificate of incorporation, bylaw, Law, or any
agreement or instrument, or any license, franchise or permit, which would be
breached or violated by the execution, delivery or performance of this Agreement
unless appropriate consents or waivers to such actions have been previously
obtained. Acquiror has complied with all Laws in connection with its execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
3.3. Governmental Authorities. Neither Acquiror nor Merger Sub is
required to submit any notice, report or other filing with and no consent,
approval or authorization is required by any governmental or regulatory
authority in connection with Acquiror 's execution or delivery of this Agreement
or the consummation of the transactions contemplated hereby except for (i) the
filing of the Certificate of Merger with the Secretary of State of Kansas, (ii)
the filing of the Articles of Merger with the Secretary of State of Texas (such
Certificate of Merger and Articles of Merger are sometimes jointly referred to
as the "Certificates of Merger"), (iii) the filing of notice with the Texas
Insurance Commission, and (iv) such notices, reports, other filings, consents,
approvals or authorizations which have been made or obtained.
3.4. Consultants, Brokers and Finders. Acquiror has not retained
any consultant, broker or finder in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
CERTAIN COVENANTS
4.1. Further Assurances. SBS, SBS Sub, Shareholder and SBS's and
Shareholder's respective counsel will furnish Acquiror with such other and
further documents, certificates, opinions, consents and information as Acquiror
shall reasonably request to evidence compliance with the terms and conditions of
any credit agreement in existence or to be entered into between Acquiror and a
bank and/or other lending entities or individuals.
4.2. Employment Agreements. At the Closing, each party to the
respective Employment Agreements substantially in the form attached hereto as
Exhibits 4.2(a) and 4.2 (b) shall execute and deliver such Employment
Agreements.
4.3. Reserved.
4.4. Opinion of Counsel. At the Closing, Shareholder and SBS
shall cause Acquiror to have received an opinion of their respective counsel,
dated as of the Closing Date, substantially in the form attached hereto as
Exhibit 4.4.
4.5. Release.. At the Closing, Shareholder shall execute and
deliver the Release substantially in the form attached hereto as Exhibit 4.5.
23
25
ARTICLE V
CLOSING
5.1. Effective Time. The Merger shall become effective upon the
filing and acceptance of the Certificates of Merger in proper form for filing
with the Secretaries of State of Kansas and Texas or as of such later time as
specified in the Certificates of Merger, such time herein called the "Effective
Time."
5.2. Closing. Unless this Agreement shall have been terminated or
the Merger abandoned pursuant to the provisions of Article VI hereof, a closing
(the "Closing") shall be held on September 30, 1998 or on such other date
mutually agreed upon by the parties (the "Closing Date") at the offices of
Acquiror or such place or places as mutually agreed upon by the parties.
5.3. Deliveries at Closing.
(a) At the Closing, Shareholder shall deliver to Acquiror
and Merger Sub all the Common Stock by delivering the Certificates and the other
agreements, certifications and other documents required to be executed and
delivered hereunder at the Closing shall be duly and validly executed and
delivered.
(b) At the Closing, SBS and SBS Sub shall deliver to
Acquiror and Merger Sub, in form reasonably satisfactory to counsel for
Acquiror, such bills of sale, assignments or other conveyances and all third
party consents obtained as may be appropriate or necessary to effect the Merger.
(c) From time to time after the Closing, at Acquiror's
request and without further consideration from Acquiror, SBS and SBS Sub shall
execute and deliver such other instruments of conveyance and transfer and take
such other action as Acquiror reasonably may require to consummate the
transactions contemplated by this Agreement.
(d) Acquiror shall deliver to Shareholder the Initial Merger
Payment.
(e) The respective parties to the Employment Agreements,
Opinion and Release shall deliver signed originals of such documents.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.1. Methods of Termination. This Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Acquiror and SBS; or
(b) by either SBS or Acquiror, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited, or if a judgment,
24
26
injunction, order or decree enjoining Acquiror or SBS from consummating the
Merger is entered and such judgment, injunction, order or decree shall become
final and nonappealable.
6.2. Procedure Upon Termination. In the event of termination and
abandonment pursuant to Section 6.1 hereof, this Agreement shall terminate and
the Merger shall be abandoned without further action by any of the parties
hereto. If this Agreement is terminated as provided herein:
(a) each party will upon request redeliver all documents,
Merger Consideration and other materials of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same; and
(b) each party shall bear its own expenses.
ARTICLE VII
INDEMNIFICATION
7.1. Indemnification by Shareholder. Shareholder agrees to
indemnify Acquiror and Merger Sub against any loss, damage, or expense
(including but not limited to reasonable attorneys' fees) ("Damages"), incurred
or sustained by Acquiror or Merger Sub as a result of (a) any breach of any
term, provision, covenant or agreement contained in this Agreement by SBS, SBS
Sub or Shareholder; (b) any inaccuracy in any of the representations or
warranties made by SBS, SBS Sub or Shareholder in Article II of this Agreement;
(c) any loss, claim or obligation arising from or related to the business or
operation of the Company conducted prior to the Closing (to the extent such
business and/or operation, or the existence, nature or extent of any such loss,
claim or obligation, has been misrepresented by SBS, SBS Sub or Shareholder);
(d) any loss, claim or obligation arising from or related to tax obligations
(and related fines, penalties and interest) of the Company or Shareholder for
periods ending on or prior to the Closing Date; or (e) any inaccuracy or
misrepresentation in any certificate or other document or instrument delivered
by SBS, SBS Sub or Shareholder in accordance with any provision of this
Agreement. The obligations of Shareholder as set forth in this Section shall be
subject to and limited by the following:
(a) No claim for Damages shall be made until the cumulative
amount of such Damages shall equal or exceed $10,000 (the "Threshold") at which
time a claim for Damages in excess thereof can be made on a dollar-for-dollar
basis; provided, however, the maximum aggregate amount of Shareholder's
liability hereunder or otherwise shall not exceed the Merger Consideration. Such
limitations, however, shall not apply to any Damages resulting from fraudulent
actions, intentional misrepresentations or breaches of covenants;
(b) Acquiror shall give written notice to Shareholder
stating specifically the basis for the claim for Damages, the amount thereof and
if relating to a pending claim by a
25
27
third party to which Acquiror is entitled to indemnification, Acquiror shall
tender defense thereof to Shareholder as provided in Section 7.3; and
(c) Acquiror shall first use the Reserve Amount to satisfy
any claims for Damages. Thereafter, Acquiror shall have the option to (A) offset
such claims for Damages against any obligation of Acquiror to Shareholder now or
hereafter existing, or (B) require Shareholder to promptly pay to Acquiror such
amounts in cash.
7.2. Indemnification by Acquiror. Acquiror agrees to indemnify
Shareholder against Damages incurred or sustained by Shareholder as a result of
(a) any breach of any term, provision, covenant or agreement contained in this
Agreement by Acquiror or Merger Sub; (b) any inaccuracy in any of the
representations or warranties made by Acquiror or Merger Sub in Article III of
this Agreement; (c) any loss, claim or obligation arising from or related to the
business or operation of the Company conducted after the Closing Date (but
except for the effect, damage or loss upon such business or operation arising
from or related to any claim for Damages asserted under Section 7.1); or (d) any
inaccuracy or misrepresentation in any certificate or other document or
instrument delivered by Acquiror or Merger Sub in accordance with any provision
of this Agreement. The obligations of Acquiror as set forth in this Section
shall be subject to and limited by the following:
(a) No claim for Damages shall be made until the cumulative
amount of such Damages shall equal or exceed $10,000 (the "Threshold") at which
time a claim for Damages in excess thereof can be made on a dollar for dollar
basis; provided, however, the maximum aggregate amount of Acquiror's liability
hereunder shall not exceed the Merger Consideration. Such limitations, however,
shall not apply to any Damages resulting from fraudulent actions, intentional
misrepresentations, breaches of covenants; and
(b) Shareholder shall give written notice to Acquiror
stating specifically the basis for the claim for Damages, the amount thereof
and, if relating to a pending claim by a third party to which Acquiror is
entitled to indemnification, shall tender defense thereof to Acquiror as
provided in Section 7.3.
7.3. Transfer of Defense for Damages. Promptly upon receipt by
the indemnitee of a notice of a claim by a third party which may give rise to a
claim for Damages, the indemnitee shall give written notice thereof to the
indemnitor. No failure or delay of the indemnitee in the performance of the
foregoing shall relieve, reduce or otherwise affect the indemnitor's obligations
and liability to indemnify the indemnitee pursuant to this Agreement, except to
the extent that such failure or delay shall have adversely affected the
indemnitor's ability to defend against such claim for Damages. If the indemnitor
gives to the indemnitee an agreement in writing, in a form reasonably
satisfactory to the indemnitee's counsel, to defend such claim for Damages, the
indemnitor may, at its sole expense, undertake the defense against such claim
and may contest such claim and the indemnitee shall execute such documents and
take such steps as may be reasonably necessary in the opinion of counsel for the
indemnitor, to enable the indemnitor to conduct the defense of such claim for
Damages. If the indemnitor fails or refuses to defend any
26
28
claim for Damages, the indemnitor may nevertheless, at its own expense,
participate in the defense of such claim by the indemnitee and in any and all
settlement negotiations relating thereto. In any and all events, the indemnitor
shall have such access to the records and files of the indemnitee relating to
any claim for Damages as may be reasonably necessary to effectively defend or
participate in the defense thereof. No party shall settle any claim for Damages
without the consent of the other, which consent shall not be unreasonably
withheld. In order to achieve a reasonable and speedy resolution of third party
claims, the parties hereto agree to reasonably cooperate with each other in such
regard.
7.4. Survival of Warranties. The respective representations and
warranties of SBS, SBS Sub, Shareholder, Acquiror and Merger Sub contained
herein or in any certificates shall not be deemed waived or otherwise affected
by any investigation made by any party hereto or the occurrence of the Merger.
Each and every such representation and warranty shall survive for a period of
four (4) years from the Closing Date, and any claim for Damages not commenced
during such period shall be waived; provided, however, all claims for Damages
based on intentionally wrongful or fraudulent actions or misrepresentations
("Fraud") shall survive for four (4) years after the claiming party has actual
knowledge of such Fraud.
7.5. Determination of Damages. The parties shall make appropriate
adjustments for tax benefits and insurance coverage and take into account the
time and cost of money in determining Damages for purposes of this Article VII.
7.6. Exclusivity. Redress under the indemnity provisions
contained in this Article shall be the exclusive remedy available to the parties
hereto for the matters covered by such provision, except in the cases of
fraudulent actions or intentional misrepresentations.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written agreement of
the parties hereto.
8.2. Waiver of Compliance; Consents. Any failure of SBS, SBS Sub
or Shareholder on the one hand, or Acquiror or Merger Sub on the other hand, to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by Acquiror or by SBS, respectively, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing.
8.3. Expenses. Each party will pay its own legal, accounting and
other expenses incurred by such party or on its behalf in connection with this
Agreement and the transactions contemplated herein.
27
29
8.4. Notices. Any notice, request, consent or communication
(collectively a "Notice") under this Agreement shall be effective only if it is
in writing and (i) personally delivered, (ii) sent by a nationally recognized
overnight delivery service, with delivery confirmed, or (iii) telexed or
telecopied, with receipt confirmed, addressed as follows:
If to SBS, SBS Sub or Shareholder:
Richard McCarter
Senior Benefit Services Insurance Agency, Inc.
6833 Dan Danciger Road
Fort Worth, Texas 76133-4909
Telecopier: (817) 370-0857
Telephone: (817) 370-0585
with a copy to:
Mack Ed Swindle, Esq.
Michener, Larimore, Swindle, Whitaker, Flowers, Sawyer,
Reynolds & Chalk, L.L.P.
3500 City Center Tower II
301 Commerce Street
Fort Worth, TX 76102
Telecopier: (817) 335-6935
Telephone: (817) 335-4417
If to Acquiror or Merger Sub to:
Thomas M. Fogt and Michael H. Miller
AmVestors Financial Corporation
555 S. Kansas Avenue
Topeka, Kansas 66603
Telecopier: (785) 295-4345
Telephone: (785) 232-6945
with a copy to:
Gregory G. Johnson, Esq.
Bryan Cave LLP
1200 Main Street, Suite 3500
Kansas City, Missouri 64105
Telecopier: (816) 374-3300
Telephone: (816) 374-3227
28
30
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) when receipt of a Notice sent by an
overnight delivery service is confirmed by such overnight delivery service, or
(iii) when receipt of the telex or telecopy is confirmed, as the case may be,
unless the sending party has actual knowledge that a Notice was not received by
the intended recipient.
8.5. Binding Effect. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, successors and permitted assigns.
8.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF KANSAS (REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
APPLICABLE TEXAS PRINCIPLES OF CONFLICTS OF LAW OF THE STATE OF KANSAS) AS TO
ALL MATTERS INCLUDING, BUT NOT LIMITED TO, MATTERS OF VALIDITY, CONSTRUCTION,
EFFECT, PERFORMANCE AND REMEDIES.
8.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.8. Neutral Interpretation. This Agreement constitutes the
product of the negotiation of the parties hereto and the enforcement hereof
shall be interpreted in a neutral manner, and not more strongly for or against
any party based upon the source of the draftsmanship hereof.
8.9. Headings. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.10. Entire Agreement. This Agreement, which term as used
throughout includes the Exhibits hereto, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, representations, warranties,
covenants or undertakings other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
29
31
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first hereinabove set forth.
ACQUIROR:
AMVESTORS FINANCIAL CORPORATION
By: /s/ Thomas M. Fogt
-------------------------------------------
Name: Thomas M. Fogt
Title: Executive Vice President
MERGER SUB:
SENIOR BENEFIT SERVICES OF KANSAS, INC.
By: /s/ Michael H. Miller
-------------------------------------------
Name: Michael H. Miller
Title: Executive Vice President
SBS:
SENIOR BENEFIT SERVICES INSURANCE AGENCY, INC.
By: /s/ Richard McCarter
-------------------------------------------
Name: Richard McCarter
Title: Chairman of the Board
30
32
SBS SUB:
NATIONAL SENIOR BENEFIT SERVICES, INC.
By: s/ Richard McCarter
---------------------------------------
Name: Richard McCarter
Title: President
SHAREHOLDER:
/s/ Richard McCarter
-------------------------------------------
Richard McCarter
31
33
SCHEDULE OF EXHIBITS
TO
AGREEMENT AND PLAN OF MERGER
Exhibits Title
-------- -----
Exhibit 1.1 Merger Sub's Articles of Incorporation
Exhibit 1.6 Merger Consideration Allocation
Exhibit 2.1 Foreign Qualifications
Exhibit 2.3 Schedule of Subsidiaries and Affiliates
Exhibit 2.5 Restrictions on Ability to Perform
Exhibit 2.7 Financial Statements
Exhibit 2.9 Certain Changes
Exhibit 2.10 Schedule of Contracts
Exhibit 2.12 Title and Related Matters
Exhibit 2.13 Legal Proceedings and Judgments
Exhibit 2.14 Certain Tax Matters
Exhibit 2.16 Copies of Reports and Inspections
Exhibit 2.18(a) ERISA and Related Employee Benefit Matters
Exhibit 2.18(b) Accrued Vacation Days
Exhibit 2.19 Schedule of Intellectual Property Rights
Exhibit 2.20 Warranties and Claims Under Warranties
Exhibit 2.21 Labor Relations
Exhibit 2.22 Schedule of Insurance
1
34
Exhibit 2.26 Schedule of Contracts with Affiliates
Exhibit 2.27 List of all Bank Accounts, Lock Boxes, Safe
Deposit Boxes and Post Office Boxes
Exhibit 2.28 Compensation Schedule
Exhibit 2.29 Licenses
Exhibit 4.2(a) Employment Agreement with Richard McCarter
Exhibit 4.2(b) Employment Agreement with George Richards
Exhibit 4.4 Opinion
Exhibit 4.5 Release
2