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EXHIBIT 1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE FIRST AMERICAN FINANCIAL CORPORATION,
PEA SOUP ACQUISITION CORP.,
AND
NATIONAL INFORMATION GROUP
Dated as of November 17, 1998
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 17, 1998 (this
"Agreement"), by and among The First American Financial Corporation, a
California corporation ("FAFCO"), Pea Soup Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of FAFCO ("FAFCOSUB") and National
Information Group, a California corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of FAFCO, FAFCOSUB and the
Company have each determined that it is in the best interests of their
respective companies and the shareholders of their respective companies that the
Company and FAFCOSUB combine into a single company through the statutory merger
of FAFCOSUB with and into the Company (the "Merger") and, in furtherance
thereof, have approved the Merger;
WHEREAS, pursuant to the Merger, among other things, the
outstanding common shares of the Company, no par value (each whole common share
of the Company, a "Company Common Share"), shall be converted into Common
shares, par value $1.00, of FAFCO (each whole Common share of FAFCO, a "FAFCO
Common Share"), at the rate set forth herein;
WHEREAS, the Parties (as defined below) intend to cause the
Merger to be accounted for as a pooling of interests under APB Opinion No. 16,
Staff Accounting Series Releases 130, 135 and 146 and Staff Accounting Bulletins
Topic Two (Business Combinations) (the "Pooling Rules");
WHEREAS, the Parties (as defined below) desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
WHEREAS, in order to effectuate and facilitate the Merger, each
Party has independently determined that its in its best interest to enter into
this Agreement and to consummate the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements herein contained,
the parties hereto agree as follows:
SECTION 1
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DEFINITIONS AND INTERPRETATIONS
1.1 Defined Terms. In this Agreement the following words and
expressions shall have the following meanings (such meaning to be equally
applicable to both the singular and plural forms of the terms defined):
"Access Agreement" shall have the meaning provided in Section
5.2(a);
"Agreement" shall have the meaning provided in the introductory
paragraph hereto;
"Agreement of Merger" shall mean the Agreement of Merger in the
form attached hereto as Exhibit A;
"Antitrust Division" shall mean the Antitrust Division of the
Department of Justice;
"Articles of Incorporation" shall have the meaning provided in
Section 2.7;
"Business Day" shall mean any day, excluding Saturday, Sunday or
any day which shall be a legal holiday in the State of California;
"By-Laws" shall have the meaning provided in Section 2.8;
"California Code" shall mean the California Corporations Code;
"Closing" shall have the meaning provided in Section 2.11;
"Closing Date" shall have the meaning provided in Section 2.11;
"Code" shall have the meaning provided in Section 3.19(a);
"Company" shall have the meaning provided in the introductory
paragraph hereto;
"Company Balance Sheet" shall mean the balance sheet of the
Company included in the Company's Quarterly Report on Form 10-Q for the period
ended September 30, 1998;
"Company Balance Sheet Date" shall mean December 31, 1997;
"Company Common Certificate" shall have the meaning provided in
Section 2.4(a);
"Company Common Share" shall have the meaning provided in the
second WHEREAS clause;
"Company Confidentiality Agreement" shall mean that certain
Confidentiality and Nondisclosure Agreement, dated July 31, 1998, by and between
First American Real Estate Information Services, Inc. and the Company;
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"Company Financial Statements" shall have the meaning provided in
Section 3.5;
"Company SEC Reports" shall have the meaning provided in Section
3.5;
"Company Shareholder Meeting" shall have the meaning provided in
Section 8.1(b);
"Company Stock Rights" shall have the meaning provided in Section
2.6(a);
"Delaware Code" shall mean the Delaware General Corporation Law;
"Director Option Plan" shall mean the National Information Group
1991 Director Option Plan;
"Dissenting Shareholders" shall have the meaning provided in
Section 2.3;
"Effective Time" shall have the meaning provided in Section
2.1(b);
"Employee Benefit Plans" shall have the meaning provided in
Section 3.19(a);
"Entity" shall mean any Person that is not a natural Person;
"ERISA" shall have the meaning provided in Section 3.19(a);
"Excepted Shares" shall mean (i) any Company Common Shares which
are held by any Subsidiary of the Company or which are held, directly or
indirectly, by FAFCO or any direct or indirect subsidiary of FAFCO (including
FAFCOSUB) and (ii) Company Common Shares held by Dissenting Shareholders;
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended;
"Exchange Agent" shall have the meaning provided in Section
2.4(a);
"Exchange Ratio" shall have the meaning provided in Section
2.2(a);
"FAFCO" shall have the meaning provided in the introductory
paragraph hereto;
"FAFCO Common Certificates" shall have the meaning provided in
Section 2.4(a);
"FAFCO Common Shares" shall have the meaning provided in the
second WHEREAS clause;
"FAFCO Confidentiality Agreement" shall mean that certain
Confidentiality and Nondisclosure Agreement, dated November 9, 1998, by and
between FAFCO and the Company;
"FAFCO SEC Reports" shall have the meaning provided in Section
4.7;
"FAFCOSUB" shall have the meaning provided in the introductory
paragraph hereto;
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"FAFCOSUB Common Shares" shall mean the common shares, no par
value, of Pea Soup Acquisition Corp.;
"FTC" shall mean the Federal Trade Commission;
"Governmental Entities" shall mean the appropriate legislative,
executive, judicial, Federal, state and local governmental or regulatory
agencies and authorities in the United States or any other jurisdiction;
"Great Pacific" shall have the meaning provided in Section
3.33(a);
"HSR Act" shall have the meaning provided in Section 3.22;
"Indemnified Parties" shall have the meaning provided in Section
8.4(a);
"Insurance Approvals" shall have the meaning provided in Section
3.22;
"Intellectual Property" shall mean all domestic and foreign
patents, patent applications, registered and unregistered trade marks and
service marks, registered and unregistered copyrights, computer programs,
databases, trade secrets and proprietary information;
"IRS" shall have the meaning provided in Section 3.19(f);
"Licenses" shall have the meaning provided in Section 3.17;
"Material Adverse Effect" shall mean, with respect to any Person,
a material adverse effect on (i) the validity or enforceability of this
Agreement, (ii) the ability of such Person to perform its obligations under this
Agreement, (iii) the business, assets, condition or results of operations of
such Person and its Subsidiaries, taken as a whole; provided, however, that any
adverse change, event or effect that is proximately caused by (a) conditions
affecting the United States economy generally or the economy of the regions in
which such Person and its Subsidiaries, taken as a whole, conducts a material
part of its business, (b) by conditions affecting the industries in which such
Person and its Subsidiaries compete or (c) by the announcement of the Merger or
by virtue of this Agreement, including without limitation, compliance by such
Person with its covenants hereunder, shall not be taken into account in
determining whether there has been a Material Adverse Effect;
"Merger" shall have the meaning provided in the first WHEREAS
clause;
"Merger Consideration" shall mean the FAFCO Common Shares and any
cash in lieu of fractional FAFCO Common Shares receivable by each shareholder of
the Company pursuant to Section 2.2(a) and 2.2(b), respectively;
"Merger Documents" shall mean those documents required to be
filed with the California Secretary of State in accordance with Section 1103 of
the California Code;
"New Stock Rights" shall have the meaning provided in Section
2.6(a);
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"NASD" shall mean the National Association of Securities Dealers,
Inc. (or any successor thereto);
"NYSE" shall mean the New York Stock Exchange;
"Party" or "Parties" shall mean each of FAFCO, FAFCOSUB and the
Company, or all of them, as the case may be;
"Permitted Liens" shall have the meaning provided in Section 3.7;
"Person" shall mean and include any individual, partnership,
joint venture, association, joint stock company, corporation, trust, limited
liability company, unincorporated organization, a group and a government or
other department, agency or political subdivision thereof;
"Pooling Letter" shall have the meaning provided in Section
6.2(g);
"Pooling Rules" shall have the meaning provided in the third
WHEREAS clause;
"Pre-Closing Period" shall have the meaning provided in Section
3.13(b);
"Proxy Statement/Prospectus" shall have the meaning provided in
Section 7.1(a);
"Registration Statement" shall have the meaning provided in
Section 7.1(a);
"Reinsurance Agreement" or "Reinsurance Agreements" shall have
the meaning provided in Section 3.33(b);
"Returns" shall have the meaning provided in Section 3.13(a);
"Rule 145" shall have the meaning provided in Section 8.6;
"Rule 145 Letter" shall have the meaning provided in Section
6.2(g);
"SAP" shall mean, with respect to Great Pacific, the statutory
accounting procedures or practices prescribed or permitted by the Insurance
Commissioner of the State of California, the Department of Insurance of the
State of California and insurance departments of other states and Washington,
D.C. or any applicable insurance commission or other Governmental Entity having
such authority over Great Pacific;
"Schedule Certificate" shall mean a certificate from the Chief
Executive Officer of the Company, delivered on a Business Day to FAFCO and
FAFCOSUB (and a copy properly delivered to White & Case LLP) pursuant to Section
11.6, and dated and signed by the Chief Executive Officer of the Company on such
Business Day, setting forth the Schedules delivered by the Company under this
Agreement and certifying that all Schedules to be delivered by the Company under
this Agreement have been so delivered;
"SEC" shall mean the Securities and Exchange Commission;
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"Securities Act" shall mean the Securities Act of 1933, as
amended;
"Stock Plans" shall have the meaning provided in Section 2.6(a);
"Subsidiary" shall mean, with respect to any Person, (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person and/or one
or more Subsidiaries of such Person and (ii) any Entity (other than a
corporation) in which such Person and/or one more Subsidiaries of such Person
has more than a 50% equity interest at the time or otherwise controls the
management and affairs of such Entity (including the power to veto any material
act or decision);
"Surviving Corporation" shall have the meaning provided in
Section 2.1(a);
"Takeover Proposal" shall mean any tender or exchange offer, or
proposal, other than a proposal by FAFCO or any of its affiliates, for a merger,
share exchange or other business combination involving the Company or any of its
Subsidiaries or any proposal or offer to acquire in any manner a substantial
equity interest in the Company or any of its Subsidiaries or a substantial
portion of the assets of the Company or any of its Subsidiaries;
"Takeover Statute" shall mean any "fair price," "moratorium,"
"control share acquisition," or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States;
"Taxes" shall mean all taxes, assessments, charges, duties, fees,
levies or other governmental charges, including, without limitation, all
Federal, state, local, foreign and other income, franchise, profits, capital
gains, capital stock, transfer, sales, use, occupation, property, excise,
severance, windfall profits, stamp, license, payroll, withholding and other
taxes, assessments, charges, duties, fees, levies or other governmental charges
of any kind whatsoever (whether payable directly or by withholding and whether
or not requiring the filing of a Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other Entity;
"Trading Day" shall mean a day on which the New York Stock
Exchange is open for at least one-half of its normal business hours;
"US GAAP" shall mean United States generally accepted accounting
principles applied on a consistent basis;
"VEBAs" shall have the meaning provided in Section 3.19(a); and
"Year 2000 Issues" shall have the meaning provided in Section
3.15.
1.2 Principles of Construction.
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(a) All references to Sections, subsections, Schedules and
Exhibits are to Sections, subsections, Schedules and Exhibits in or to this
Agreement unless otherwise specified. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The term "including" is not limiting and means "including without
limitation."
(b) All accounting terms not specifically defined herein shall be
construed in accordance with US GAAP.
(c) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including"; the words
"to" and "until" each mean "to but excluding"; and the word "through" means "to
and including."
(d) The Table of Contents hereto and the Section headings herein
are for convenience only and shall not affect the construction hereof.
(e) This Agreement is the result of negotiations among and has
been reviewed by each Party's counsel. Accordingly, this Agreement shall not be
construed against any Party merely because of such Party's involvement in its
preparation.
(f) The Schedules referred to herein are incorporated herein by
reference. The Parties acknowledge and agree that notwithstanding the delivery
date of each such Schedule and the date of the Schedule Certificate, each such
Schedule shall be construed to refer to the subject matter it contains as of the
date of this Agreement.
SECTION 2
THE MERGER AND RELATED MATTERS
2.1 The Merger.
(a) At the Effective Time, and subject to and upon the terms and
conditions of this Agreement, the Agreement of Merger and the applicable
provisions of the California Code, FAFCOSUB shall be merged with and into the
Company and the separate corporate existence of FAFCOSUB shall cease, and the
Company shall continue as the surviving corporation under the laws of the State
of California (the "Surviving Corporation").
(b) The Merger shall become effective when (i) each of the
conditions set forth in Section 6 has been satisfied or waived by the
appropriate Party or Parties, (ii) the Agreement of Merger, executed in
accordance with the applicable provisions of the Delaware Code, is filed with
and approved by the Secretary of State of Delaware and (iii) the Agreement of
Merger, executed in accordance with the relevant provisions of the California
Code, is filed with and approved by the California Secretary of State (the time
of such latter filing, the "Effective Time").
(c) From and after the Effective Time, the Merger shall have the
effects provided for in Section 1107 of the California Code.
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2.2 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of FAFCO, FAFCOSUB, the Company or any
of their respective shareholders:
(a) Each Company Common Share then issued and outstanding, other
than Excepted Shares, shall be converted into the right to receive sixty-seven
hundredths (0.67) of a FAFCO Common Share (the "Exchange Ratio"). All such
Company Common Shares, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired and each holder of a Company Common
Certificate representing any such Company Common Shares shall cease to have any
rights with respect thereto, other than its right to receive FAFCO Common Shares
and cash in lieu of fractional FAFCO Common Shares;
(b) No fraction of a FAFCO Common Share will be issued, but in
lieu thereof each holder of Company Common Shares who would otherwise be
entitled to receive a fraction of a FAFCO Common Share shall receive from FAFCO
an amount of cash (rounded to the nearest whole cent) equal to the product of
(i) such fraction and (ii) the average closing price of a FAFCO Common Share, as
reported on the New York Stock Exchange, for the ten Trading Days ending on the
Trading Day that is two Trading Days prior to the Effective Time;
(c) Excepted Shares shall be canceled and retired without any
conversion thereof and shall not receive any cash payment with respect to a
fractional share;
(d) The Exchange Ratio shall be adjusted to reflect fully the
effect of any stock split, reverse split, stock dividend, reorganization,
recapitalization or other like change with respect to FAFCO Common Shares or
Company Common Shares occurring after the date hereof and prior to the Effective
Time; and
(e) Each FAFCOSUB Common Share shall be converted into one common
share, no par value, of the Surviving Corporation.
2.3 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, but only to the extent required by California law, Company
Common Shares issued and outstanding immediately prior to the Effective Time and
held by holders of Company Common Shares that (a) represent in the aggregate 5%
or more of the issued and outstanding Company Common Shares, (b) were not voted
in favor of the Merger and (c) whose holders comply with the provisions of
Chapter 13 of the California Code concerning the right of holders of Company
Common Shares to dissent from the Merger and require appraisal of their Company
Common Shares ("Dissenting Shareholders"), shall not be converted into or
represent the right to receive the Merger Consideration but shall become the
right to receive such consideration as may be determined to be due such
Dissenting Shareholder pursuant to the law of the State of California. From and
after the Effective Time, Dissenting Shareholders shall not have and shall not
be entitled to exercise any of the voting rights or other rights of a
shareholder of the Surviving Corporation. If any Dissenting Shareholder shall
fail to assert or perfect, or shall waive, rescind, withdraw or otherwise lose,
such holder's right to dissent and obtain payment under Chapter 13 of the
California Code, then such Company Common Shares shall automatically be
converted into and represent only the right to receive (upon surrender of a
Company Common Certificate previously representing such Company Common Shares)
FAFCO Common Shares in accordance with Section 2.2(a) (and cash in lieu of any
fractional share in accordance with Section 2.2(b)).
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The Company shall give FAFCO and FAFCOSUB (i) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
related instruments received by the Company and (ii) the opportunity to direct
all negotiations and proceedings with respect to demands for appraisal. The
Company will not voluntarily make any payment with respect to any demands for
appraisal and will not, except with the prior written consent of FAFCO, settle
or offer to settle any demand for appraisal.
2.4 Surrender of Certificates.
(a) Exchange of Company Common Certificates. At or prior to the
Effective Time, or as soon as practicable thereafter, FAFCO, through such
reasonable procedures as FAFCO and the Company mutually agree, shall deposit
with the First American Trust Company (the "Exchange Agent") in trust for the
holders of certificates which immediately prior to the Effective Time
represented Company Common Shares (each such certificate a "Company Common
Certificate"), and each such holder will be entitled to receive, upon surrender
of one or more Company Common Certificates to the Exchange Agent in the manner
set forth in subsection (b) below, (i) certificates representing the FAFCO
Common Shares (the "FAFCO Common Certificates") into which the Company Common
Shares represented by such Company Common Certificates were converted in the
Merger and (ii) cash in an amount sufficient to permit payment of cash in lieu
of fractions of shares pursuant to Section 2.2(b). The Exchange Agent shall
invest any such cash deposited with it as directed by FAFCO, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
FAFCO.
(b) Exchange Procedures. Promptly after the Effective Time, the
Exchange Agent shall mail to each record holder of a Company Common Certificate:
(i) a letter of transmittal in customary form (which shall specify that delivery
shall be effected, and risk of loss and title to the Company Common Certificates
shall pass, only upon receipt of the Company Common Certificates by the Exchange
Agent and shall otherwise be in such form and have such other provisions as
FAFCO shall reasonably specify) and (ii) instructions for use in effecting the
surrender of the Company Common Certificates in exchange for FAFCO Common
Certificates (and cash in lieu of fractional shares). Upon surrender to the
Exchange Agent of a Company Common Certificate, together with such letter of
transmittal properly completed and duly executed, together with any other
required documents, the holder of such Company Common Certificate shall be
entitled to receive in exchange therefor the Merger Consideration payable in
respect of the Company Common Shares formerly represented by such Company Common
Certificate and such Company Common Certificate shall forthwith be canceled.
Until so surrendered, each Company Common Certificate shall be deemed, for all
corporate purposes, to evidence only the right to receive upon such surrender
the Merger Consideration deliverable in respect thereof to which such Person is
entitled pursuant to this Section 2.
No dividends or other distributions with respect to FAFCO Common
Shares with a record date after the Effective Time will be paid to the holder of
any unsurrendered Company Common Certificate with respect to the FAFCO Common
Shares represented thereby until the holder of record of such Company Common
Certificate surrenders such Company Common Certificate. Subject to applicable
law, following the surrender of any such Company Common Certificate, there shall
be paid to the record holder of the FAFCO Common Certificates issued in exchange
thereof, without interest, at the time of such surrender, the amount of any such
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dividends or other distributions with a record date after the Effective Time
theretofore payable (but for the provisions of this paragraph) with respect to
the shares represented by such FAFCO Common Certificates.
(c) Registration Name on Certificates. If the Merger
Consideration (or any portion thereof) is to be delivered to a Person other than
the Person in whose name the Company Common Certificate surrendered in exchange
therefor is registered, it shall be a condition to the payment of the Merger
Consideration that the Company Common Certificates so surrendered shall be
properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of FAFCO that such
taxes have been paid or are not required to be paid.
(d) Unavailable Certificates. In the event any Company Common
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed certificate the Merger Consideration deliverable in respect
thereof as determined in accordance with this Section 2, provided that the
Surviving Corporation may require the Person to whom the Merger Consideration is
paid, as a condition precedent to the payment thereof, to give the Surviving
Corporation a bond in such sum as is customary or otherwise indemnify the
Surviving Corporation in a manner satisfactory to it against any claim that may
be made against the Surviving Corporation with respect to the Company Common
Certificate claimed to have been lost, stolen or destroyed.
(e) Merger Not Consummated. In the event the Merger is not
consummated for any reason, FAFCO and the Company shall promptly direct the
Exchange Agent to return promptly to (i) each Person who deposited a Company
Common Certificate and any other agreements or instruments tendered to the
Exchange Agent by such Person, such Company Common Certificate and other
agreements or instruments and (ii) FAFCO, the Merger Consideration.
(f) Escheat Laws. Notwithstanding any provisions of this Section
2 to the contrary, neither FAFCO nor the Surviving Corporation shall be liable
to any holder of the Company Common Certificates formerly representing Company
Common Shares for any property properly delivered or amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
2.5 No Further Rights of Transfers. At and after the Effective
Time, each holder of a Company Common Certificate shall cease to have any rights
as a shareholder of the Company, except for, in the case of a holder of a
Company Common Certificate (other than Excepted Shares), the right to surrender
his or her Company Common Certificate in exchange for the Merger Consideration
or, in the case of a Dissenting Shareholder, to perfect his or her right to
receive payment for his or her shares pursuant to California law if such holder
has validly perfected and not withdrawn his or her right to receive payment for
his or her shares, and no transfer of Company Common Shares shall be made on the
stock transfer books of the Surviving Corporation. Company Common Certificates
presented to the Surviving Corporation after the Effective Time shall be
canceled and exchanged as provided in this Section 2. At the close of
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business on the day of the Effective Time the stock ledger of the Company with
respect to the Company Common Shares shall be closed.
2.6 Stock Option and Other Plans.
(a) Prior to the Effective Time, the Board of Directors of the
Company (or, if appropriate, any committee thereof) and the Board of Directors
of FAFCO (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to provide that effective at
the Effective Time
(i) all the outstanding stock options, stock appreciation rights,
limited stock appreciation rights, performance units and stock purchase
rights (the "Company Stock Rights") heretofore granted under any stock
option, performance unit or similar plan, agreement and arrangement of
the Company and its Subsidiaries, except for the Director Option Plan
(the "Stock Plans"), shall be assumed by FAFCO and converted
automatically into options to purchase FAFCO Common Shares
(collectively, "New Stock Rights") in an amount and, if applicable, at
an exercise price determined as provided below:
(A) The number of FAFCO Common Shares to be subject to
each New Stock Right shall be equal to the product of (x) the
number of Company Common Shares remaining subject (as of
immediately prior to the Effective Time) to the original Company
Stock Right and (y) the Exchange Ratio, provided that any
fractional FAFCO Common Shares resulting from such multiplication
shall be rounded down to the nearest share; and
(B) The exercise price per FAFCO Common Share under each
New Stock Right shall be equal to the exercise price per Company
Common Share under the original Company Stock Right divided by
the Exchange Ratio, provided that such exercise price shall be
rounded down to the nearest cent; and
(ii) each restricted Stock Purchase Agreement and Joint Escrow
Instructions to which the Company is a party pursuant to the Company's
1986 Stock Option Plan shall be assumed by FAFCO, and the Company Common
Shares subject to each such Agreement and Instructions shall be
converted automatically into FAFCO Common Shares, pursuant to Section
2.2 hereof.
After the Effective Time, each New Stock Right shall be exercisable and shall
vest upon the same terms and conditions as were applicable to the related
Company Stock Right immediately prior to the Effective Time (except that with
regard to such New Stock Right, any references to the Company shall be deemed,
as appropriate, to include FAFCO).
(b) The Board of Directors of the Company shall take all actions
necessary to assure that all Persons holding outstanding options heretofore
granted under the Director Option Plan shall have been notified in accordance
with such plan at least ten (10) days prior to the Closing.
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(c) The Company shall take all actions so that following the
Effective Time no holder of a Company Stock Right or a stock option under the
Director Option Plan or any participant in any Stock Plans or the Director
Option Plan shall have any right thereunder to acquire capital stock of the
Company or the Surviving Corporation. The Company will take all actions so that,
as of the Effective Time, neither the Company nor the Surviving Corporation or
any of their respective Subsidiaries is or will be bound by any Company Stock
Rights, stock options under the Director Option Plan, other options, warrants,
rights or agreements which would entitle any person, other than FAFCOSUB or its
affiliates, to own any capital stock of the Company, the Surviving Corporation
or any of their respective subsidiaries or to receive any payment in respect
thereof, except as otherwise provided herein.
(d) FAFCO agrees that it shall take all action necessary, on or
prior to the Effective Time, to authorize and reserve a number of FAFCO Common
Shares sufficient for issuance upon exercise of options as contemplated by this
Section 2.6.
(e) Unless at the Effective Time the New Stock Rights are
registered pursuant to an effective FAFCO registration statement, as soon as
practicable following the Effective Time, FAFCO shall prepare and file with the
SEC a registration statement on Form S-8 (or another appropriate form)
registering a number of FAFCO Common Shares equal to the number of shares
subject to the New Stock Rights. Any such registration statement shall be kept
effective (and the current status of the initial offering prospectus or
prospectuses required thereby shall be maintained) for at least as long as any
New Stock Right remains outstanding.
2.7 Articles of Incorporation of the Surviving Corporation. The
articles of incorporation of the Company, as in effect immediately prior to the
Effective Time and attached hereto as Exhibit B, shall be the articles of
incorporation of the Surviving Corporation and thereafter shall continue to be
its articles of incorporation (the "Articles of Incorporation") until amended as
provided therein and under the California Code.
2.8 By-Laws of the Surviving Corporation. The by-laws of the
Company, as in effect immediately prior to the Effective Time and attached
hereto as Exhibit C, shall be the by-laws of the Surviving Corporation and
thereafter shall continue to be its by-laws (the "ByLaws") until amended as
provided therein and under the Articles of Incorporation and the California
Code.
2.9 Directors and Officers of the Surviving Corporation. At the
Effective Time, the directors of FAFCOSUB immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, each of such directors
to hold office, subject to the applicable provisions of the Articles of
Incorporation and By-Laws, until their respective successors shall be duly
elected or appointed and qualified. At the Effective Time, the officers of the
Company immediately prior to the Effective Time shall, subject to the applicable
provisions of the Articles of Incorporation and By-Laws, be the officers of the
Surviving Corporation until their respective successors shall be duly elected or
appointed and qualified.
2.10 Accounting Consequences. The Parties intend that the Merger
shall qualify for accounting treatment as a pooling of interests under APB
Opinion No. 16, Staff Accounting Series Releases 130, 135 and 146 and Staff
Accounting Bulletins Topic Two
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(Business Combinations) and agree to take such actions as may reasonably be
necessary or desirable to carry out the intentions of this Section 2.10.
2.11 Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of White & Case LLP, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, twelve (12) days after the
last of the conditions set forth in Section 6 hereof is fulfilled or waived
(subject to applicable law) or at such other time and place and on such other
date as FAFCO and the Company shall mutually agree (the "Closing Date").
SECTION 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents, warrants and agrees to FAFCO and FAFCOSUB
as follows:
3.1 Existence and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California. The Company has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified or licensed to conduct its business,
and is in good standing in each jurisdiction listed on Schedule 3.1, which are
the only jurisdictions in which the character or location of the property owned,
leased or operated by the Company or the nature of the business conducted by the
Company makes such qualification necessary.
3.2 Binding Effect. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency or similar laws and
equitable principles relating to or affecting the rights of creditors generally
from time to time in effect.
3.3 Capitalization. The authorized capital stock of the Company
is (i) 15,000,000 common shares, no par value, of which 4,115,627 shares were
issued and outstanding as of November 4, 1998 and (ii) 5,000,000 shares of
Preferred Stock, no par value, of which none are issued and outstanding as of
the date of this Agreement. All such outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth on Schedule 3.3, there is not and as of the Effective Time there will
not be, outstanding options, warrants, rights, calls, commitments, conversion
rights, rights of exchange, plans or other agreements of any character providing
for the purchase, issuance or sale of any Company Common Shares, any other
securities of the Company, or any equity interest in the Company or its
business.
3.4 Subsidiaries and Investments.
15
(a) Set forth on Schedule 3.4 hereto is a list of each direct or
indirect Subsidiary of the Company and the percentage ownership of the Company
in each such Subsidiary. Each Subsidiary of the Company is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization (as set forth in Schedule 3.4) and has all requisite power to own,
lease and operate its properties and to carry on its business as now being
conducted.
(b) Set forth on Schedule 3.4 is a list of jurisdictions in which
each Subsidiary of the Company is qualified as a foreign company. Such
jurisdictions are the only jurisdictions in which the character or location of
the properties owned, leased or operated by each Subsidiary of the Company, or
the nature of the business conducted by each Subsidiary of the Company, makes
such qualification necessary, except where the failure to obtain such
qualification would not have an Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
3.5 SEC Reports and Financial Statements. Each form, report,
schedule, registration statement and definitive proxy statement filed by the
Company with the SEC on or after January 1, 1996 (as such documents have been
amended prior to the date hereof, the "Company SEC Reports"), as of their
respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations thereunder and, since the first date on which Company Common Shares
were listed for trading on the NASDAQ National Market System, the rules of the
NASD. The Company has made available to FAFCO accurate and complete copies of
all SEC Reports filed by the Company since January 1, 1996. None of the Company
SEC Reports, as of their respective dates, contained any untrue statement of
material fact or omitted statement of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of the Company and its Subsidiaries included in such
Company SEC Reports (the "Company Financial Statements") comply as to form in
all material respects with applicable accounting requirements and with published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with US GAAP (except as may be indicated in the notes thereto, or in
the case of unaudited interim financial statements, as permitted by Form 10-Q of
the SEC) and fairly present in all material respects, subject, in the case of
the unaudited interim financial statements, to normal, year-end adjustments, the
consolidated financial position of the Company and its Subsidiaries as of the
dates thereof.
3.6 Books and Records. The minute books of the Company and each
of its Subsidiaries contain accurate records of all meetings of, and corporate
action taken by (including action taken by written consent) the shareholders and
Board of Directors of the Company and its respective Subsidiaries. Except as set
forth on Schedule 3.6, neither the Company nor any of its Subsidiaries will, as
a result of the consummation of the Merger, cease to have access to those
records, systems, controls, data or information that are necessary to continue
the business and operations of the Company and its Subsidiaries as such business
and operations exist on the date hereof.
3.7 Title to Properties; Encumbrances. Except (1) as set forth on
Schedule 3.7 (and except for property leased by the Company, which, for the
avoidance of doubt, is represented and warranted to in Section 3.9) and (2) for
properties and assets reflected in the
16
Company Balance Sheet or acquired since the Company Balance Sheet Date which
have been sold or otherwise disposed of in the ordinary course of business, the
Company and its Subsidiaries have good, valid and marketable title to (a) all of
its properties and assets (real and personal, tangible and intangible),
including, without limitation, all of the properties and assets reflected in the
Company Balance Sheet, except as indicated in the notes thereto and (b) all of
the properties and assets purchased by the Company or its Subsidiaries since the
Company Balance Sheet Date; in each case subject to no encumbrance, lien, charge
or other restriction of any kind or character, except for (i) liens reflected in
the Company Balance Sheet, (ii) liens consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations on the
use of real property or irregularities in title thereto which do not materially
detract from the value of, or impair the use of, such property by the Company or
such Subsidiary in the operation of its business, (iii) liens for current taxes,
assessments or governmental charges or levies or condominium fees on property
not yet due and delinquent and (iv) liens described on Schedule 3.7 (liens of
the type described in clauses (i), (ii) and (iii) above are hereinafter
sometimes referred to as "Permitted Liens").
3.8 Real Property. Schedule 3.8 contains an accurate and complete
list of all real property owned in whole or in part by the Company or any of its
Subsidiaries and includes the name of the record title holder thereof and a list
of all indebtedness secured by a lien, mortgage or deed of trust thereon. Except
as set forth on Schedule 3.8, each of the Company and its Subsidiaries has good
and marketable title in fee simple to all the real property owned by it, free
and clear of all encumbrances, liens, charges or other restrictions of any kind
or character, except for Permitted Liens. Other than with respect to the three
condominium units owned by the Company (which are all identified on Schedule
3.8), all of the buildings, structures and appurtenances situated on the real
property owned in whole or in part by the Company or any of its Subsidiaries are
in good operating condition and in a state of good maintenance and repair, are
adequate and suitable for the purposes for which they are presently being used
and, with respect to each, the Company or one of its Subsidiaries has adequate
rights of ingress and egress. None of such buildings, structures or
appurtenances (or any equipment therein), nor the operation or maintenance
thereof, violates any restrictive covenant or any provision of any federal,
state or local law, ordinance, rule or regulation, or encroaches on any property
owned by others. No condemnation proceeding is pending or, to the best
knowledge, information and belief of the Company, threatened, which would
preclude or impair the use of any such property by the Company or such
Subsidiary for the purposes for which it is currently used.
3.9 Leases. Schedule 3.9 contains an accurate and complete list
of each real and personal property lease for which total annual rent payments
equal or exceed $100,000 to which the Company or any of its Subsidiaries is a
party (as lessee or lessor). Each lease set forth on Schedule 3.9 (or required
to be set forth on Schedule 3.9) is in full force and effect; all rents and
additional rents due by the Company or one of its Subsidiaries to date on each
such lease have been paid (other than any pass through expenses not yet invoiced
to the Company); in each case, the lessee has been in peaceable possession since
the commencement of the original term of such lease and is not in material
default thereunder and no waiver, indulgence or postponement of the lessee's
obligations thereunder has been granted by the lessor; and there exists no event
of default or event, occurrence, condition or act which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a default under such lease, except where such default would not
have a Material Adverse Effect on the Company and its
17
Subsidiaries, taken as a whole. The tangible personal property leased by either
the Company or any of its Subsidiaries is, to the best knowledge, information
and belief of the Company, in a state of good maintenance and repair, reasonable
wear and tear excepted, except where the state of such property would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
3.10 Material Contracts. Except as set forth on Schedule 3.10 and
in the Company SEC Reports, neither the Company nor any of its Subsidiaries is
bound by (a) any agreement, contract or commitment relating to the employment of
any Person (as hereinafter defined) by either the Company or any of its
Subsidiaries or any bonus, deferred compensation, pension, profit sharing, stock
option, employee stock purchase, retirement or other employee benefit plan, (b)
any agreement, indenture or other instrument which contains restrictions with
respect to payment of dividends or any other distribution in respect of its
capital stock, (c) any agreement, contract or commitment relating to capital
expenditures in excess of $100,000 per individual item or $250,000 in the
aggregate, (d) any loan or advance to, or investment in, any Person or any
agreement, contract or commitment relating to the making of any such loan,
advance or investment, (e) any guarantee or other contingent liability in
respect of any indebtedness or obligation of any Person other than the Company
or one of its Subsidiaries (other than the endorsement of negotiable instruments
for collection in the ordinary course of business), (f) any management service,
consulting or any other similar type contract, (g) any agreement, contract or
commitment limiting the ability of the Company to engage in any line of business
or to compete with any Person or (h) any agreement, contract or commitment not
entered into in the ordinary course of business which involves $100,000 or more
and is not cancelable without penalty within 30 days. Each contract or agreement
set forth on Schedule 3.10 (or required to be set forth on Schedule 3.10) is in
full force and effect. Neither the Company nor any of its Subsidiaries has
violated any of the terms or conditions of any contract or agreement set forth
on Schedule 3.10 (or required to be set forth on Schedule 3.10) in any material
respect, and, to the best knowledge, information and belief of the Company, all
of the covenants to be performed by any other party thereto have been fully
performed.
3.11 Restrictive Documents. Except as set forth on Schedule 3.11,
neither the Company nor any of its Subsidiaries is subject to, or a party to,
any charter, by-law, mortgage, lien, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment or
decree, or any other restriction of any kind or character, which, by its own
operation, and not by the breach or violation, as the case may be, thereof, (a)
would restrict the ability of the Company or any of its Subsidiaries to acquire
any property or conduct business in any area or (b) has or might reasonably be
expected to have a Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole, except where such Material Adverse Effect may arise with
respect to (i) the obligations of Great Pacific to make payments under its
agreements of insurance or (ii) the obligations of the Company or its
Subsidiaries to indemnify, warrant or guarantee (or similar) the Company's or
such Subsidiary's ordinary course obligations under any lease, license,
agreement, contract or instrument between the Company or a Subsidiary of the
Company and a customer of the Company or such Subsidiary of the Company.
3.12 Litigation. Except as set forth on Schedule 3.12 or as
disclosed in the Company SEC Reports, there is no action, suit, proceeding at
law or in equity, arbitration or administrative or other proceeding by or before
(or to the best knowledge, information and belief
18
of the Company any investigation by) any governmental or other instrumentality
or agency, pending, or, to the best knowledge, information and belief of the
Company, threatened, against or impacting the Company, any of its Subsidiaries
or any of their respective properties or rights which could materially and
adversely affect the right or ability of the Company or any of its Subsidiaries
to carry on its business as now conducted, or which could have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole. The
Company is not subject to any judgment, order or decree entered in any lawsuit
or proceeding which may have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
3.13 Taxes.
(a) Tax Returns. Except as set forth on Schedule 3.13(a), the
Company and each of its Subsidiaries have filed or caused to be filed with the
appropriate taxing authorities all returns, statements, forms and reports for
Taxes (the "Returns") that are required to be filed by, or with respect to, the
Company or such Subsidiary on or prior to the Closing Date. The Returns have
accurately reflected in all material respects and will accurately reflect in all
material respects all liability for Taxes of the Company and such Subsidiaries
for the periods covered thereby.
(b) Payment of Taxes. Except as set forth on Schedule 3.13(b),
all material Taxes and Tax liabilities of the Company and each of its
Subsidiaries for all taxable years or periods that end on or before the Closing
Date and, with respect to any taxable year or period beginning before and ending
after the Closing Date, the portion of such taxable year or period ending on and
including the Closing Date (the "Pre-Closing Period") have been paid or
adequately accrued and disclosed and fully provided for on the books and records
of the Company and each of its Subsidiaries in accordance with US GAAP.
(c) Other Tax Matters.
(i) Except as set forth on Schedule 3.13(c)(i), in the
last seven years neither the Company nor any of its Subsidiaries has been the
subject of an audit or other examination of Taxes by the tax authorities of any
nation, state or locality nor has the Company or any of its Subsidiaries
received any written notices from any taxing authority relating to any issue
which could affect the Tax liability of the Company or any of its Subsidiaries.
(ii) Except as set forth on Schedule 3.13(c)(ii),
neither the Company nor any of its Subsidiaries (A) has, as of the Closing Date,
entered into an agreement or waiver or been requested to enter into an agreement
or waiver extending any statute of limitations relating to the payment or
collection of Taxes of the Company and (B) is, as of the Closing Date, currently
contesting the Tax liability of the Company or any of its Subsidiaries before
any court, tribunal or agency.
(iii) Neither the Company nor any of its Subsidiaries
has been included in any "consolidated," "unitary" or "combined" Return, other
than the consolidated, unified or combined Returns of the Company's Subsidiaries
filed with other Subsidiaries of the Company and/or the Company, provided for
under the laws of the United States, any foreign jurisdiction or any state or
locality with respect to Taxes for any taxable period for which the statute of
limitations has not expired.
19
(iv) Except as set forth on Schedule 3.13(c)(iv), all
Taxes which either the Company or any of its Subsidiaries is (or was) required
by law to withhold or collect have been duly withheld or collected, and have
been timely paid over to the proper authorities to the extent due and payable.
(v) Neither the Company nor any of its Subsidiaries is a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(vi) Except as set forth on Schedule 3.13(c)(vi), there
are no tax sharing, allocation, indemnification or similar agreements in effect
as between (A) the Company or any predecessor, Subsidiary or other affiliate
thereof and (B) any other party under which FAFCO, the Company or any of the
Company's Subsidiaries could be liable for any Taxes or other claims of any
party.
(vii) Neither the Company nor any of its Subsidiaries
has applied for, been granted, or agreed to any accounting method change for
which it will be required to take into account any adjustment under Section 481
of the Code or any similar provision of the Code or the corresponding tax laws
of any nation, state or locality.
(viii) No election under Section 341(f) of the Code has
been made or shall be made prior to the Closing Date to treat the Company or any
of its Subsidiaries as a consenting corporation, as defined in Section 341 of
the Code.
(ix) Except as set forth on Schedule 3.13(c)(ix), to the
best knowledge, information and belief of the Company no claim has ever been
made by any taxing authority in a jurisdiction where the Company does not file
Returns that the Company or any of its assets are or may be subject to taxation
by that jurisdiction.
(x) The liability of the Company and its Subsidiaries
for interest, penalties or fines as a result of the untimely filing of all
Returns and as the result of the untimely payment of Taxes does not exceed
$200,000 in the aggregate.
3.14 Insurance. Set forth on Schedule 3.14 is a complete list of
insurance policies in which either the Company or any of its Subsidiaries is
named an insured or an additional insured. Such policies are in full force and
effect. The Company and its Subsidiaries are insured with reputable insurers
against such risks and in such amounts as the management of the Company
reasonably has determined to be prudent in accordance with customary industry
practices in the respective industries in which the Company and each Subsidiary
of the Company is engaged.
3.15 Intellectual Properties. The operation of the business of
the Company and its Subsidiaries requires no rights under Intellectual Property
other than (a) rights under Intellectual Property which is owned by the Company
or any of its Subsidiaries and (b) rights validly licensed by the Company or any
of its Subsidiaries. Schedule 3.15 is a true, complete and accurate list of all
Intellectual Property licensed by the Company which, with respect to each item
of Intellectual Property, is (x) required for the operation of the business of
the Company and its Subsidiaries and (y) cannot be licensed and installed within
5 Business Days for a single payment of less than $25,000 or annual licensing
(or rental) payments less than $10,000. Unless
20
otherwise described on Schedule 3.15, either the Company or its Subsidiaries has
taken actions reasonably necessary and appropriate to preserve and protect its
respective ownership interest in all Intellectual Property owned by the Company,
whether or not set forth (or required to be set forth) on Schedule 3.15, except
where the failure to do so would not have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole. All registrations, filings and
issuances with respect to items of Intellectual Property owned by the Company,
whether or not set forth (or required to be set forth) on Schedule 3.15, remain
in full force and effect. Except as set forth on Schedule 3.15 under the caption
"Claims," no claim adverse to the interests of the Company or a Subsidiary of
the Company in the Intellectual Property owned or licensed by the Company,
whether or nor set forth (or required to be set forth) on Schedule 3.15, has
been made in litigation or otherwise. Except as set forth on Schedule 3.15 under
the caption "Claims," to the best knowledge, information and belief of the
Company, no such claim has been threatened or asserted, no basis exists for any
such claim and no Person has infringed or otherwise violated either the
Company's or a Subsidiary of the Company's right in any Intellectual Property
owned or licensed by the Company, whether or not set forth (or required to be
set forth) on Schedule 3.15. Except as set forth on Schedule 3.15 under the
caption "Claims," no litigation is pending wherein either the Company or a
Subsidiary of the Company is accused of infringing or otherwise violating the
Intellectual Property right of another Person, or of breaching a contract
conveying a right under Intellectual Property. Except as set forth on Schedule
3.15 under the caption "Claims," to the best knowledge, information and belief
of the Company, no such claim has been asserted or threatened against any either
the Company or any Subsidiary of the Company, nor are there any facts that would
give rise to such a claim. Except as set forth on Schedule 3.15, all computer
and telecommunications software and hardware, including source and object code,
necessary to carry on the Company's business substantially as currently
conducted, that contains or calls on a calendar function that is indexed to a
computer processing unit clock, provides specific dates or calculates spans of
dates, is able, or can, without material expense, be made to be able, to record
store, process and provide true and accurate dates and calculations for dates
and spans of dated including and following January 1, 2000 ("Year 2000 Issues").
Except as set forth on Schedule 3.15, no officer of the Company is aware of any
inability of the Company's significant suppliers, customers and those other
Persons with which it conducts business to identify and resolve their own Year
2000 Issues, except where the inability of such suppliers, customers and other
Persons to identify and resolve their own Year 2000 Issues would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
3.16 Compliance with Laws. Except as set forth on Schedule 3.16,
the Company and each of its Subsidiaries are in compliance in all material
respects with all applicable laws, regulations, orders, judgments and decrees,
except where the failure to comply is not likely to have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole.
3.17 Governmental Licenses. Each of the Company and its
Subsidiaries has all governmental licenses, permits, franchises, approvals,
permits and other authorizations of, and have made all registrations and or
filings with, all Governmental Entities (the "Licenses") necessary to own, lease
and operate its properties and to enable it to carry on their respective
business as presently conducted, except where the failure to have such would not
have a Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole. All Licenses held by the
21
Company and each of its Subsidiaries, are in full force and effect, except where
the failure of such Licenses to be in full force and effect would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
Neither the Company nor any of its Subsidiaries has received written notice that
any such License is the subject of a proceeding for suspension or revocation or
similar proceedings and, to the best knowledge, information and belief of the
Company, no such License is the subject of a proceeding for suspension or
revocation or similar proceedings. Except as set forth on Schedule 3.17, no
jurisdiction has demanded or requested that the Company or any of its
Subsidiaries qualify or become licensed as a foreign corporation. Schedule 3.17
sets forth a true and complete list of each and every License required for the
Company or any of its Subsidiaries to transact insurance or operate an insurance
agency or brokerage and all material Licenses of the Company or any of its
Subsidiaries, together with a description of the nature thereof. The Company has
heretofore made available to FAFCO true and complete copies of all of such
Licenses listed on Schedule 3.17 as are currently in effect. Neither the Company
nor any of its Subsidiaries is improperly transacting any insurance or
reinsurance business or improperly operating an insurance agency or brokerage in
any jurisdiction in which it is not authorized or permitted to transact such
business.
3.18 Labor Matters. Except as set forth on Schedule 3.18, (a) the
Company and each of its Subsidiaries is in compliance with all federal, state or
other applicable laws, domestic or foreign, respecting employment and employment
practices, terms and conditions of employment and wages and hours, except where
the failure to comply is not likely to have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole, and, to the best knowledge,
information and belief of the Company, has not and is not engaged in any unfair
labor practice; (b) neither the Company nor any of its Subsidiaries has received
written notice of any unfair labor practice complaint before the National Labor
Relations Board and, to the best knowledge, information and belief of the
Company, no unfair labor practice complaint is threatened or pending against the
Company before the National Labor Relations Board; (c) there is no labor strike,
dispute slowdown or stoppage actually pending or, to the best knowledge,
information and belief of the Company, threatened against or involving the
Company or any of its Subsidiaries; (d) to the best knowledge, information and
belief of the Company, no union representation question exists respecting the
employees of the Company or any of its Subsidiaries; (e) to the best knowledge,
information and belief, no grievance which might have a Material Adverse Effect
upon the Company and its Subsidiaries, taken as a whole, exists, no arbitration
proceeding arising out of or under any collective bargaining agreement is
pending and no claim therefor has been asserted; (f) no collective bargaining
agreement is currently being negotiated by the Company or any of its
Subsidiaries; and (g) to the best knowledge, information and belief of the
Company, the Company's labor relations over the last three years are good.
3.19 Employee Benefit Plans.
(a) List of Plans. Set forth in Schedule 3.19(a) is an accurate
and complete list of all (i) "employee benefit plans," within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations thereunder ("ERISA"); (ii) bonus, stock option,
stock purchase, restricted stock, incentive, fringe benefit, "voluntary
employees' beneficiary associations" ("VEBAs"), under Section 501(c)(9) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code"), profit-sharing, pension or retirement,
deferred compensation, medical,
22
life, disability, accident, salary continuation, severance, accrued leave,
vacation, sick pay, sick leave, supplemental retirement and unemployment benefit
plans, programs, arrangements, commitments and/or practices (whether or not
insured); and (iii) employment, consulting, termination, and severance contracts
or agreements; in each case for active, retired or former employees or
directors, whether or not any such plans, programs, arrangements, commitments,
contracts, agreements and/or practices (referred to in (i), (ii) or (iii) above)
are in writing or are otherwise exempt from the provisions of ERISA; that have
been established, maintained or contributed to (or with respect to which an
obligation to contribute has been undertaken) or with respect to which any
potential liability is borne by the Company or any of its Subsidiaries
(including, for this purpose and for the purpose of all of the representations
in this Section 3.19, any predecessors to the Company or any of its Subsidiaries
and all employers (whether or not incorporated) that would be treated together
with the Company or any of its Subsidiaries as a single employer (1) within the
meaning of Section 414 of the Code, or (2) as a result of the Company or any
Subsidiary being or having been a general partner of any such employer), since
November 1, 1992 ("Employee Benefit Plans").
(b) Status of Plans. Each Employee Benefit Plan (including any
related trust) complies in form with the requirements of all applicable laws,
including, without limitation, ERISA and the Code, and has at all times been
maintained and operated in substantial compliance with its terms and the
requirements of all applicable laws, including, without limitation, ERISA and
the Code, except to the extent such noncompliance would not result in material
liability. No complete or partial termination of any Employee Benefit Plan has
occurred since November 1, 1992, or is expected to occur. Neither the Company
nor any of its Subsidiaries has any commitment, intention or understanding to
create, modify or terminate any Employee Benefit Plan. No condition or
circumstance exists that would prevent the amendment or termination of any
Employee Benefit Plan. No event has occurred and no condition or circumstance
has existed that could result in a material increase in the benefits under or
the expense of maintaining any Employee Benefit Plan from the level of benefits
or expense incurred for the most recent fiscal year ended thereof.
(c) No Pension Plans. No Employee Benefit Plan is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) subject to
Section 412 of the Code or Section 302 or Title IV of ERISA. Neither the Company
nor any of its Subsidiaries has ever maintained or contributed to, or had any
obligation to contribute to (or borne any liability with respect to) any
"multiple employer plan" (within the meaning of the Code or ERISA) or any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA).
(d) Liabilities. Neither the Company nor any of its Subsidiaries
maintains any Employee Benefit Plan which is a "group health plan" (as such term
is defined in Section 607(1) of ERISA or Section 5000(b)(1) of the Code) that
has not been administered and operated in all respects in compliance with the
applicable requirements of Part 6 of Subtitle B of Title I of ERISA and Section
4980B of the Code, except to the extent such noncompliance would not result in
material liability, and neither the Company nor any of its Subsidiaries is
subject to any material liability, including, without limitation, additional
contributions, fines, taxes, penalties or loss of tax deduction as a result of
such administration and operation. No Employee Benefit Plan which is such a
group health plan is a "multiple employer welfare arrangement," within the
meaning of Section 3(40) of ERISA. Each Employee Benefit Plan that is intended
to meet the
23
requirements of Section 125 of the Code meets such requirements, and each
program of benefits for which employee contributions are provided pursuant to
elections under any Employee Benefit Plan meets the requirements of the Code
applicable thereto, except to the extent such noncompliance would not result in
material liability. Neither the Company nor any of its Subsidiaries maintains
any Employee Benefit Plan which is an "employee welfare benefit plan" (as such
term is defined in Section 3(1) of ERISA) that has provided any "disqualified
benefit" (as such term is defined in Section 4976(b) of the Code) with respect
to which an excise tax could be imposed.
Except as required by Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code, neither the Company nor any of its Subsidiaries
maintains any Employee Benefit Plan (whether qualified or non-qualified under
Section 401(a) of the Code) providing for postemployment or retiree health, life
insurance and/or other welfare benefits and having unfunded liabilities, and
neither the Company nor any of its Subsidiaries have any obligation to provide
any such benefits to any retired or former employees or active employees
following such employees' retirement or termination of service. Neither the
Company nor any of its Subsidiaries has any unfunded liabilities pursuant to any
Employee Benefit Plan that is not intended to be qualified under Section 401(a)
of the Code. No Employee Benefit Plan holds as an asset any interest in any
annuity contract, guaranteed investment contract or any other investment or
insurance contract, policy or instrument issued by an insurance company that, to
the best knowledge, information and belief of the Company, is or may be the
subject of bankruptcy, conservatorship, insolvency, liquidation, rehabilitation
or similar proceedings.
Neither the Company nor any of its Subsidiaries has incurred any
material liability for any tax or excise tax arising under Chapter 43 of the
Code, and no event has occurred and no condition or circumstance has existed
that could give rise to any such material liability.
There are no actions, suits, claims or disputes pending, or, to
the best knowledge and belief of the Company, threatened, anticipated or
expected to be asserted against or with respect to any Employee Benefit Plan or
the assets of any such plan (other than routine claims for benefits and appeals
of denied routine claims). No civil or criminal action brought pursuant to the
provisions of Title I, Subtitle B, Part 5 of ERISA is pending or, to the best
knowledge, information and belief of the Company, threatened, anticipated, or
expected to be asserted against the Company or any of its Subsidiaries or any
fiduciary of any Employee Benefit Plan, in any case with respect to any Employee
Benefit Plan. No Employee Benefit Plan or, to the best knowledge, information
and belief of the Company, any fiduciary thereof has been the direct or indirect
subject of an audit, investigation or examination by any governmental or
quasi-governmental agency.
(e) Contributions. Full payment has been timely made of all
amounts which the Company or any of its Subsidiaries is required, under
applicable law or under any Employee Benefit Plan or any agreement relating to
any Employee Benefit Plan to which the Company or any of its Subsidiaries is a
party, to have paid as contributions or premiums thereto as of the last day of
the most recent fiscal year of such Employee Benefit Plan ended prior to the
date hereof. All such contributions and/or premiums have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any governmental entity, and to the best knowledge and belief of the Company no
event has occurred and no condition or circumstance
24
has existed that could give rise to any such challenge or disallowance. The
Company has made adequate provision for reserves to meet contributions and
premiums and any other liabilities that have not been paid or satisfied because
they are not yet due under the terms of any Employee Benefit Plan, applicable
law or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided.
(f) Tax Qualification. Each Employee Benefit Plan intended to be
qualified under Sections 401(a), 401(k) and 501(a) of the Code has been
determined to be so qualified by the Internal Revenue Service (the "IRS") and,
except to the extent such noncompliance would not result in material liability,
nothing has occurred since the date of the last such determination which
resulted or is likely to result in the revocation of such determination, other
than changes in applicable law made by subsequent legislation, regulations and
rulings. With respect to any such changes in applicable law, any such plan has
been or may be retroactively amended to comply with such changes in order to
avoid disqualification of the plan. Each VEBA has been determined by the IRS to
be exempt from Federal income tax under Section 501(c)(9) of the Code. Since the
date of each most recent determination with respect to any VEBA, no event has
occurred and no condition or circumstance has existed that resulted or is likely
to result in the revocation of any such determination or that could adversely
affect the exempt status of any such trust or VEBA, except to the extent such
noncompliance would not result in material liability.
(g) Transactions. Neither the Company nor any of its Subsidiaries
nor any of their respective directors, officers, employees or, to the best
knowledge and belief of the Stockholder and the Company, other persons who
participate in the operation of any Employee Benefit Plan or related trust or
funding vehicle, has engaged in any transaction with respect to any Employee
Benefit Plan or breached any applicable fiduciary responsibilities or
obligations under Title I of ERISA that would subject any of them to a tax,
penalty or liability for prohibited transactions or breach of any obligations
under ERISA or the Code or would result in any claim being made under, by or on
behalf of any such Employee Benefit Plan by any party with standing to make such
claim.
(h)Triggering Events. Except as set forth on Schedule 3.19(h),
the execution of this Agreement and the consummation of the transactions
contemplated hereby, do not constitute a triggering event under any Employee
Benefit Plan, policy, arrangement, statement, commitment or agreement, whether
or not legally enforceable, which (either alone or upon the occurrence of any
additional or subsequent event) will or may result in any payment (whether of
severance pay or otherwise), "parachute payment" (as such term is defined in
Section 280G of the Code), acceleration, vesting or increase in benefits to any
employee or former employee or director of the Company or any of its
Subsidiaries. Except as set forth on Schedule 3.19(h), no Employee Benefit Plan
provides for the payment of severance, termination, change in control or
similar type payments or benefits.
(i) Documents. The Company has delivered or caused to be
delivered to FAFCO and its counsel true and complete copies of all material
documents in connection with each Employee Benefit Plan, including, without
limitation (where applicable): (i) all Employee Benefit Plans as in effect on
the date hereof, together with all amendments thereto, including, in the case of
any Employee Benefit Plan not set forth in writing, a written description
thereof; (ii)
25
all current summary plan descriptions, summaries of material modifications, and
material communications; (iii) all current trust agreements, declarations of
trust and other documents establishing other funding arrangements (and all
amendments thereto and the latest financial statements thereof); (iv) the most
recent IRS determination letter obtained with respect to each Employee Benefit
Plan intended to be qualified under Section 401(a) of the Code or exempt under
Section 501(a) or 501(c)(9) of the Code; (v) the annual report on IRS Form
5500-series or 990 for each of the last three years for each Employee Benefit
Plan required to file such form; (vi) the most recently prepared financial
statements for each Employee Benefit Plan for which such statements are
required; and (vii) all contracts and agreements relating to each Employee
Benefit Plan, including, without limitation, service provider agreements,
insurance contracts, annuity contracts, investment management agreements,
subscription agreements, participation agreements, and recordkeeping agreements
and collective bargaining agreements.
3.20 Interests in Clients, Suppliers, Etc. Except as set forth on
Schedule 3.20, to the Company's best knowledge, information and belief no
officer, director, employee or affiliate of the Company or any of its
Subsidiaries either (a) is or (b) possesses, directly or indirectly, any
financial interest in or (c) is a director, officer or employee of, any Person
which is, a client of, supplier to, customer of, lessor to, lessee of or
competitor or potential competitor of the Company or any of its Subsidiaries.
Except as set forth on Schedule 3.20, neither the Company nor any of its
Subsidiaries is a party to any transaction agreement, arrangement or
understanding with any affiliate, officer, director or employee of the Company
or any of its Subsidiaries. Ownership of securities of a company whose
securities are registered under the Exchange Act of 1% or less of any class of
such securities shall not be deemed to be a financial interest for purposes of
this Section 3.20.
Except as set forth on Schedule 3.20, neither the Company nor any
of its Subsidiaries is indebted to any director, officer, employee or agent of
the Company or any of its Subsidiaries (except for amounts due as normal
salaries and bonuses and in reimbursement of ordinary expenses), and no such
person is indebted to the Company or any of its Subsidiaries, except for
reimbursements of expenses of less than $5,000 in the aggregate, and, other than
as set forth in the SEC Reports, there have been no other transactions of the
type required to be disclosed pursuant to Items 402 and 404 of Regulation S-K
under the Securities Act and the Exchange Act.
3.21 No Changes Since Balance Sheet Date. Except as set forth in
the Company SEC Reports, on Schedule 3.21 or as permitted or contemplated by
this Agreement, since the Company Balance Sheet Date neither the Company nor any
of its Subsidiaries has (a) incurred any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise), except in the ordinary
course of business, (b) permitted any of its assets to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or charge of
any kind (other than Permitted Liens), (c) sold, transferred or otherwise
disposed of any assets except in the ordinary course of business, (d) made any
capital expenditure or commitment therefor, except in the ordinary course of
business, (e) made any distribution to its shareholders or declared or paid any
dividend or made any distribution on any shares of its capital stock (f)
redeemed, purchased or otherwise acquired any shares of its capital stock, (g)
granted or issued any option, warrant or other right to purchase or acquire any
shares of its capital stock, (h) made any bonus or profit sharing distribution
or payment of any kind, except in the ordinary course of
26
business, (i) increased its indebtedness for borrowed money, except current
borrowings from banks in the ordinary course of business, or made any loan to
any Person, (j) written off as uncollectible any notes or accounts receivable,
except write-offs in the ordinary course of business charged to applicable
reserves or by reduction of revenues, none of which individually or in the
aggregate is material to the Company and its Subsidiaries, taken as a whole, (k)
granted any increase in the rate of wages, salaries, bonuses or other
remuneration of any executive employee or other employees, except in the
ordinary course of business, (l) canceled or waived any claims or rights except
in the ordinary course of business, (m) made any change in any method of
accounting or auditing practice, (n) otherwise conducted its business or entered
into any material transaction, except in the ordinary course of business or (o)
agreed, whether or not in writing, to do any of the foregoing.
3.22 Consents and Approvals; No Violations. Assuming (i) the
filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended (the "HSR Act") are made and the waiting period thereunder has been
terminated or expired, (ii) the shareholders of the Company approve the Merger
and (iii) the Merger Documents are accepted for filing with the California
Secretary of State, the execution and delivery of this Agreement by the Company
and the consummation of the transactions contemplated hereby will not (a)
violate any provision of the articles of incorporation or by-laws of the Company
or any of its Subsidiaries, (b) violate any statute, ordinance, rule,
regulation, order or decree of any court or any governmental or regulatory body,
agency or authority applicable to the Company or any of its Subsidiaries, (c)
require any filing with, or permit, consent or approval of, or the giving of any
notice to, any governmental or regulatory body, agency or authority, other than
(A) the filing or appropriate documents with (including those on Form A), and
the approval of, the respective commissioners of insurance (or equivalent
regulatory bodies) of the State of California and such other states as may be
required as a result of the Merger to continue the business of the Company and
its Subsidiaries as it is conducted and where it is conducted as of the date
hereof (the "Insurance Approvals"), which Insurance Approvals are listed on
Schedule 3.22, and (B) the filing of the Registration Statement with the SEC and
the Prospectus/Proxy Statement with the NYSE and the NASD, (d) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or any of its Subsidiaries under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or other instrument or
obligation to which either the Company or any of its Subsidiaries is a party, or
by which either the Company or any of its Subsidiaries or any of their
respective properties or assets may be bound, excluding from the foregoing
clauses (b), (c) and (d) filings, notices, permits, consents and approvals the
absence of which, and violations, breaches, defaults, conflicts and liens which,
in the aggregate, would not have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole.
3.23 Certain Agreements Affected by the Merger. Except as set
forth on Schedule 3.23, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby, including, without
limitation, the Merger, will (a) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of the Company or any of its
Subsidiaries, (b) materially increase any benefits otherwise payable by the
Company or any
27
of its Subsidiaries or (c) result in the acceleration of the type of payment or
vesting of any such benefits.
3.24 Pooling of Interests. Neither the Company nor any of its
Subsidiaries or, to the best knowledge, information and belief of the Company,
any of their respective directors, officers or shareholders has taken any
action, nor to the best knowledge, information and belief of the Company does
any fact or circumstance exist, which would interfere with FAFCO's ability to
account for the Merger as a pooling of interests under the Pooling Rules.
3.25 Disclosure. None of this Agreement, any Schedule, Exhibit or
certificate attached hereto or delivered by the Company pursuant to this
Agreement contains any untrue statement by the Company of a material fact, or
omits any statement of a material fact necessary in order to make the statements
by the Company contained herein or therein, in light of the circumstances in
which they were made, not misleading. There is no fact known to the Company
which is reasonably likely to have a Material Adverse Effect on the Company or
its Subsidiaries, taken as a whole and which has not been disclosed in a
Schedule, Exhibit or certificate attached or provided hereto.
3.26 Broker's or Finder's Fees. Except as set forth on Schedule
3.26, no agent, broker, person or firm acting on behalf of the Company or any of
its Subsidiaries is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto or from any Person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated by this Agreement. The
Company agrees to pay any commission or broker's or finder's fees listed (or
required to be listed) on Schedule 3.26.
3.27 Copies of Documents. All documents made available by the
Company for FAFCO or its advisers' inspection to date, are true, complete
(except as contemplated by the last sentence of Section 5.2(a)) and correct.
3.28 Registration Statement; Proxy Statement/Prospectus. The
information supplied by the Company and its Subsidiaries for inclusion in the
Registration Statement pursuant to which the FAFCO Common Shares to be issued in
the Merger will be registered with the SEC shall not at the time the
Registration Statement (including any amendments or supplements thereto) is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by the Company or any
of its Subsidiaries for inclusion in the Proxy Statement/Prospectus shall not,
on the date the Proxy Statement/Prospectus is first mailed to the shareholders
of the Company, at the time of the Company Shareholders Meeting and at the
Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Shareholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event or information should be discovered by the
Company which should be set forth in an amendment to the
28
Registration Statement or a supplement to the Proxy Statement/Prospectus, the
Company shall promptly inform FAFCO.
3.29 Opinion of Financial Advisor. The Company has been advised
in writing by its financial advisor, ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc., that in such
advisor's opinion, as of the date hereof, the Exchange Ratio is fair to the
shareholders of the Company from a financial point of view.
3.30 Vote Required. The affirmative vote of the holders of a
majority of the common shares of the Company outstanding on the record date set
for the Company Shareholders Meeting is the only vote of the holders of any of
the Company's capital stock necessary to approve this Agreement and the
transaction contemplated hereby, including, without limitation, the Merger.
3.31 Board Approval. The Board of Directors of the Company (at a
meeting duly called and held) has unanimously (a) approved this Agreement and
the Merger, (b) determined that the Merger is in the best interests of the
shareholders of the Company and is on terms that are fair to such shareholders
and (c) recommended that the shareholders of the Company approve this Agreement
and the Merger.
3.32 Customers and Suppliers. Except as indicated in the Company
SEC Reports, as of the date hereof, no customer which individually accounted for
more than 5% of the Company's and its Subsidiaries', taken as a whole, gross
revenues during the 12 month period preceding the date hereof has indicated to
either the Company or any of its Subsidiaries that it will stop, or materially
decrease the rate of, buying services or products of the Company and its
Subsidiaries, or has at any time on or after December 31, 1997 decreased
materially its usage of the services or products of the Company or any of its
Subsidiaries. As of the date hereof, no material supplier of the Company or any
of its Subsidiaries has indicated to the Company or any of its Subsidiaries that
it will stop, or materially decrease the rate of, supplying materials, products
or services to the Company.
3.33 Insurance Matters.
(a) Except for Great Pacific Insurance Company, a wholly-owned
Subsidiary of the Company ("Great Pacific"), neither the Company nor any of its
other Subsidiaries underwrites insurance as an insurer for any Person. Except as
otherwise would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect on Great Pacific, all policies, binders, slips,
certificates, annuity contracts and participation agreements and other
agreements of insurance, whether individual or group, and reinsurance in effect
as of the date hereof (including all applications, supplements, endorsements,
riders and ancillary agreements in connection therewith) that are issued or
entered into, as the case may be, by Great Pacific and any and all of its
marketing materials, are, to the extent required under applicable law, on forms
approved by applicable insurance regulatory authorities or which have been filed
and not objected to by such authorities within the period provided for
objection, and such forms comply in all material respects with the insurance
statutes, regulations and rules applicable thereto and, as to premium rates
established by Great Pacific which are required to be filed with or approved by
insurance regulatory authorities, the rates have been so filed or approved, the
premiums
29
charged conform thereto in all material respects, and such premiums comply in
all material respects with the insurance statutes, regulations and rules
applicable thereto.
(b) Schedule 3.33(b) sets forth a true and complete list of all
reinsurance treaties and contracts (including retrocessions) for reinsurance
ceded by Great Pacific. The treaties and contracts set forth on Schedule 3.33(b)
(or required to be set forth on Schedule 3.33(b)) (each a "Reinsurance
Agreement" and, collectively, the "Reinsurance Agreements") are in full force
and effect except for such treaties or agreements the failure to be in full
force and effect as individually or in the aggregate are not reasonably likely
to have a Material Adverse Effect on Great Pacific.
(c) Neither Great Pacific nor the Company or any other
Subsidiaries of the Company transact reinsurance or own and/or operate any
premium finance company.
(d) All underwriting and/or management and/or service agreements
entered into by Great Pacific as now in force are set forth in Schedule 3.33(d),
and to the extent required under applicable law, are in a form acceptable to
applicable regulatory authorities or have been filed and not objected to by such
authorities within the period provided for objection, except where the failure
to obtain such approval or make such filing would not, individually or in the
aggregate, have a Material Adverse Effect on Great Pacific or in the future be
reasonably expected to have a Material Adverse Effect on Great Pacific or FAFCO
and its Subsidiaries.
(e) Each underwriting management and/or administration agreement
to which Great Pacific is a party is valid and binding against Great Pacific and
is in full force and effect in accordance with its terms. Great Pacific is and
has been in substantial compliance with such agreements. Great Pacific is not in
default in any material respect with respect to any such contract or other
agreement and no such contract or other agreement contains any provision which
would be altered or otherwise become applicable by reason of such transactions.
(f) Great Pacific owns an investment portfolio acquired in the
ordinary course of business, and a true and complete list of the securities and
other investments in each such investment portfolio, as of September 30, 1998,
with information included thereon as to the amortized cost of each such
investment and the market value thereof as of such date, is listed on Schedule
3.33(f). None of the investments included in such investment portfolios is in
default in the payment of principal or interest or dividends or materially
impaired. All investments included in such portfolios substantially comply with
all insurance laws and regulations of each of the states to which Great Pacific
is subject relating thereto.
(g) The Company has no reason to believe that any rating
presently held by Great Pacific is likely to be modified, qualified, lowered or
placed under surveillance for a possible downgrade for any reason, except in
connection with the change of control contemplated by this Agreement.
3.34 Liabilities and Reserves.
(a) The reserves carried on Great Pacific's statutory accounting
statements for the year ended December 31, 1997 for losses (including, without
limitation, incurred but not reported, losses, allocated and unallocated loss
adjustment expenses and unearned premiums)
30
and similar purposes are in compliance in all material respects with the
requirements for reserves established by the Department of Insurance of the
State of California, were determined in all material respects in accordance with
generally accepted actuarial standards and principles consistently applied and
are fairly stated in all material respects in accordance with sound actuarial
principles and SAP. Such reserves were adequate in the aggregate to cover the
total amount of all reasonably anticipated liabilities of Great Pacific under
all outstanding insurance, reinsurance and other applicable agreements as of the
respective dates of such statutory accounting statements of Great Pacific. All
required statements of actuarial opinion of loss and loss adjustment expense
reserves have been filed by Great Pacific in accordance with applicable
insurance regulatory requirements in each jurisdiction in which Great Pacific is
admitted and no objections to those filings have been received. The admitted
assets of Great Pacific as determined under applicable laws are in an amount at
least equal to the minimum amounts required by applicable laws.
(b) Except for regular periodic assessments in the ordinary
course of business or assessments based on developments which are publicly known
within the insurance industry, to the best knowledge, information and belief of
the Company, no claim or assessment is pending or threatened against any
Subsidiary which is peculiar or unique to such Subsidiary by any state insurance
guaranty associations in connection with such association's fund relating to
insolvent insurers which if determined adversely, would, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect on the Company
and its Subsidiaries, taken as a whole.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF FAFCO AND FAFCOSUB
Each of FAFCO and FAFCOSUB represents, warrants and agrees to the
Company as follows:
4.1 Existence and Good Standing; Power and Authority. Each of
FAFCO and FAFCOSUB is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and the State of Delaware,
respectively. Each of FAFCO and FAFCOSUB has the corporate power and authority
to enter into, execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized and approved by all required
corporate action of FAFCO and FAFCOSUB and constitutes the legal, valid and
binding obligation of FAFCO and FAFCOSUB and is enforceable against FAFCO and
FAFCOSUB in accordance with its terms except as such enforceability may be
limited by bankruptcy, insolvency or similar laws and equitable principles
relating to or affecting the rights of creditors generally from time to time in
effect.
4.2 Consents and Approvals; No Violations. Assuming (i) the
filings required under the HSR Act are made and the waiting period thereunder
has been terminated or expired, (ii) the Registration Statement has been filed
and declared effective, (iii) the shareholders of the Company approve the
Merger, (iv) the Merger Documents are accepted for filing with the California
Secretary of State and the Secretary of State of Delaware and (v) the Proxy
Statement/Prospectus is delivered to the Shareholders at least twenty (20)
Business Days prior to the Company Shareholders Meeting, the execution and
delivery of this Agreement by FAFCO
31
and FAFCOSUB and the consummation of the transactions contemplated hereby will
not (a) violate any provision of the articles of incorporation or by-laws (or
equivalent) of either FAFCO or FAFCOSUB, (b) violate any statute, ordinance,
rule, regulation, order or decree of any court or any governmental or regulatory
body, agency or authority applicable to either FAFCO or FAFCOSUB, (c) require
any filing with, or permit, consent or approval of, or the giving of any notice
to, any governmental or regulatory body, agency or authority, authority, other
than (A) the Insurance Approvals and (B) the filing of the Prospectus/Proxy
Statement with the NYSE and the NASD, (d) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of either FAFCO or
FAFCOSUB under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, franchise, permit, agreement, lease, franchise
agreement or other instrument or obligation to which either FAFCO or FAFCOSUB is
a party, or by which they or any of their properties or assets may be bound,
excluding from the foregoing clauses (c) and (d) filings, notices, permits,
consents and approvals the absence of which, and violations, breaches, defaults,
conflicts and liens which, in the aggregate, would not have a Material Adverse
Effect on FAFCO and FAFCOSUB, taken as a whole.
4.3 Restrictive Documents. Neither FAFCO nor FAFCOSUB is subject
to any charter, by-law, mortgage, lien, lease, agreement, instrument, order,
law, rule, regulation, judgment or decree, or any other restriction of any kind
or character, which has or might reasonably be expected to have a Material
Adverse Effect on FAFCO and FAFCOSUB, taken as a whole.
4.4 Broker's or Finder's Fees. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Inc., financial advisor to FAFCO, no agent, broker, person or firm acting on
behalf of FAFCO or FAFCOSUB is, or will be, entitled to any commission or
broker's or finder's fees from any of the Parties hereto, or from any Person
controlling, controlled by or under common control with any of the Parties
hereto, in connection with any of the transactions contemplated by this
Agreement. FAFCO agrees to pay the fees, costs and expenses of ▇▇▇▇▇▇▇ ▇▇▇▇▇
Barney, Inc. or any successor thereto.
4.5 FAFCO Common Shares. The FAFCO Common Shares to be delivered
in connection with the Merger (a) have been authorized, (b) when delivered, will
be validly issued, fully paid, nonassessable and registered pursuant to an
effective registration statement under the Securities Act, (c) will be issued in
compliance with all federal and state securities laws and (d) will be listed for
trading with the NYSE.
4.6 Capitalization. The authorized capital stock of FAFCO is
108,000,000 common shares, par value $1.00, of which 60,025,471 were issued and
outstanding as of November 10, 1998 and 1,000 shares of Series A Junior
Participating Preferred Shares, par value $1.00, none of which are issued and
outstanding. All such outstanding shares have been duly authorized and validly
issued, and are fully paid and nonassessable. Except for options granted under
FAFCO's 1996 Employee Stock Option Plan and the 1997 Directors Stock Plan, and
except as set forth on Schedule 4.6, there are no outstanding options, warrants,
convertible securities or other securities or rights issued or granted by FAFCO
which entitle the holder
32
thereof to purchase or acquire FAFCO Common Shares and none of the foregoing
will arise as a result of the execution or performance of this Agreement or the
transactions contemplated herein. Except as set forth on Schedule 4.6, no Person
has any demand or piggyback registration rights in respect of their FAFCO Common
Shares.
4.7 SEC Reports and Financial Statements. Each form, report,
schedule, registration statement, definitive proxy statement filed by FAFCO with
the SEC on or after January 1, 1996 (as such documents have been amended prior
to the date hereof, the "FAFCO SEC Reports"), as of their respective dates,
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations thereunder
and, since the first date on which FAFCO Common Shares were listed for trading
on the New York Stock Exchange, the rules of the NYSE. FAFCO has made available
to the Company accurate and complete copies of all FAFCO SEC Reports filed by
the Company since January 1, 1997. None of the FAFCO SEC Reports, as of their
respective dates, contained or contains any untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of FAFCO and its
Subsidiaries included in such FAFCO SEC Reports comply as to form in all
material respects with applicable accounting requirements and with published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with US GAAP (except as may be indicated in the notes thereto, or in
the case of unaudited interim financial statements, as permitted by Form 10-Q of
the SEC) and fairly present in all material respects, subject, in the case of
the unaudited interim financial statements, to normal, year-end adjustments, the
consolidated financial position of FAFCO and its Subsidiaries as of the dates
thereof and neither FAFCO nor any of its Subsidiaries has incurred any
liabilities and obligations (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) of any
nature except liabilities, obligations and contingencies (a) which are reflected
in the consolidated balance sheet of FAFCO and its Subsidiaries at December 31,
1997, (b) which (i) were incurred in the ordinary course of business after
December 31, 1997 or (ii) are disclosed in the FAFCO SEC Reports filed after
December 31, 1997, (c) which are not required to be recorded as a liability
under US GAAP or disclosed in notes to financial statements or (d) which
individually or in the aggregate are not expected to have a Material Adverse
Effect on FAFCO. Since December 31, 1997, there has been no change in any of the
significant accounting (including tax accounting) policies, practices or
procedures of FAFCO or any of its Subsidiaries except changes resulting from
changes in accounting pronouncements of the Financial Accounting Standards
Boards or changes in applicable laws or rules or regulations thereunder.
4.8 Litigation. Except as disclosed in the FAFCO SEC Reports,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the best knowledge,
information and belief of FAFCO any investigation by) any governmental or other
instrumentality or agency, pending, or, to the best knowledge, information and
belief of FAFCO, threatened, against or impacting FAFCO and its Subsidiaries,
taken as a whole, or any of its or their properties or rights which could have a
Material Adverse Effect. Neither FAFCO nor its Subsidiaries is subject to any
judgment, order or decree entered in any lawsuit or proceeding which may have a
Material Adverse Effect on FAFCO and its Subsidiaries, taken as a whole.
33
4.9 Compliance with Laws. Except as set forth on Schedule 4.9,
FAFCO and its Subsidiaries are in compliance in all material respects with all
applicable laws, regulations, orders, judgments and decrees, except where the
failure to comply would not likely have a Material Adverse Effect on FAFCO and
its Subsidiaries, taken as a whole.
4.10 Disclosure. None of this Agreement, any Schedule, Exhibit or
certificate attached hereto or delivered by FAFCO or FAFCOSUB pursuant to this
Agreement contains any untrue statement by FAFCO or FAFCOSUB of a material fact,
or omits any statement of a material fact necessary in order to make the
statements of FAFCO or FAFCOSUB contained herein or therein, in light of the
circumstances in which they were made, not misleading. There is no fact known to
FAFCO which is reasonably likely to have a Material Adverse Effect on FAFCO.
4.11 Tax Matters. Prior to the Merger, FAFCO will be in control
of FAFCOSUB within the meaning of Section 368(c)(1) of the Code. FAFCO has no
plan or intention to reacquire any of the FAFCO Common Shares issued in
connection with the Merger. FAFCO has no plan or intention to liquidate the
Surviving Corporation, to merge the Surviving Corporation with or into another
corporation, to sell or otherwise dispose of the capital stock of the Surviving
Corporation, except for transfers of shares of the Surviving Corporation to
corporations controlled by FAFCO or to cause the Surviving Corporation to sell
or otherwise dispose of any of its assets, except for dispositions made in the
ordinary course of business or transfers of assets to a corporation controlled
by the Surviving Corporation. The Surviving Corporation will continue the
historic business of the Company or use a significant portion of the Company's
historic business assets in a business.
4.12 Pooling of Interests. Neither FAFCO nor any of its
Subsidiaries or, to the best knowledge, information and belief of the Company,
any of their respective directors, officers or shareholders has taken any
action, nor to the best knowledge, information and belief of the Company does
any fact or circumstance exist, which would interfere with FAFCO's ability to
account for the Merger as a pooling of interests under the Pooling Rules.
4.13 Board Approval. The Board of Directors of FAFCO (at a
meeting duly called and held) has approved this Agreement and the Merger.
4.14 Registration Statement; Proxy Statement/Prospectus. The
information included by FAFCO in the Registration Statement pursuant to which
the FAFCO Common Shares to be issued in the Merger will be registered with the
SEC shall not at the time the Registration Statement (including any amendments
or supplements thereto) is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The information
included by FAFCO or any of its Subsidiaries for inclusion in the Proxy
Statement/Prospectus shall not, on the date the Proxy Statement/Prospectus is
first mailed to the shareholders of the Company, at the time of the Company
Shareholder Meeting and at the Effective Time, contain any statement which, at
such time, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they are made, not false or
misleading.
34
SECTION 5
TRANSACTIONS PRIOR TO THE EFFECTIVE TIME
5.1 Conduct of the Business of the Company Prior to Closing.
During the period from the date of this Agreement to the Effective Time, the
Company shall and shall cause its Subsidiaries to: (x) conduct their respective
operations only according to the ordinary and usual course of business; use
reasonable efforts to preserve intact their business organizations, keep
available the services of their officers and employees (without having any
obligation to provide retention packages) and maintain existing relationships
with licensors, suppliers, distributors, customers, landlords, employees, agents
and others having business relationships with them; (y) discuss with FAFCO
concerning operational matters of a material nature (including, without
limitation, the cancellation or waiver of any claim or right in excess of
$50,000) and (z) report periodically to FAFCO concerning the business,
operations and finances of the Company and its Subsidiaries. Notwithstanding the
immediately preceding sentence, prior to the Effective Time, except as may be
first approved in writing by FAFCO or as is otherwise permitted or required by
this Agreement, the Company shall and the Company shall cause each of its
Subsidiaries to: (a) refrain from amending or modifying their respective
articles of incorporation, certificates of incorporation and by-laws from their
respective forms on the date of this Agreement, (b) refrain from (i) paying
bonuses in excess of $400,000 in the aggregate after the date hereof, (ii)
increasing any salaries, except in the ordinary course of business or (iii)
paying or increasing any other compensation, in each case, to any officer or
employee or entering into any employment, severance, or similar agreement (in
each case, except in the ordinary course of business) with any officer or
employee; provided, however, that the Company shall be entitled to make, or
agree to make, cash payments in an aggregate amount not to exceed $250,000 (in
addition to the bonuses permitted under Section 5.1(b)(i)) to officers and
employees in order to retain the services of such officers and/or employees, (c)
except for payments required to maintain any of the following at their current
levels, refrain from adopting or increasing any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any of their respective, directors, officers or employees, (d)
except to the extent permitted by any other clause of this Section 5.1, refrain
from entering into any contract or commitment except contracts and commitments
in the ordinary course of business, (e) refrain from increasing their
indebtedness for borrowed money, except borrowings in the ordinary course of
business, under existing lines of credit, provided that such borrowings shall
not exceed the maximum commitment under each such existing line of credit, (f)
except as set forth in Schedule 5.1(f), refrain from canceling or waiving any
claim or right of substantial value which individually or in the aggregate is
material, (g) refrain from declaring or paying any dividends in respect of their
respective capital stock, other than quarterly cash dividends paid by the
Company to its shareholders in an amount not to exceed the lesser of (i) $0.11
per share per quarter and (ii) 50% of the consolidated net earnings of the
Company for such quarter, or redeeming, purchasing or otherwise acquiring any of
their respective securities, (h) refrain from making any material change in
accounting methods or practices, except as required by law, US GAAP or SAP, (i)
refrain from issuing or selling any shares of capital stock or any other
securities, as the case may be, or issuing any securities convertible into, or
options, warrants or rights to purchase or subscribe to, or entering into any
arrangement or contract with respect to the issue and sale of, any shares of
their respective capital stock or any other securities, or making
35
any other changes in their respective capital structures, except such issuances
or sales of securities which either the Company or any of its Subsidiaries is
already obligated to make as of the date of this Agreement and which are
disclosed to FAFCO, (j) refrain from selling, leasing or otherwise disposing of
any asset or property other than in the ordinary course of business, (k) refrain
from making any capital expenditure or commitment therefor, except in the
ordinary course of business, (l) except as set forth on Schedule 5.1(f), refrain
from writing off as uncollectible any notes or accounts receivable, except
write-offs in the ordinary course of business charged to applicable reserves,
none of which individually or in the aggregate is material, (m) take any action
which would interfere with FAFCO's ability to account for the Merger as a
pooling of interests and (n) refrain from agreeing in writing to do any of the
foregoing.
5.2 Review of the Company; Confidentiality.
(a) FAFCO may, prior to the Closing Date, directly or through its
representatives, review the properties, books and records of the Company and
its Subsidiaries and their financial and legal condition to the extent FAFCO
deems necessary or advisable to familiarize itself with such properties and
other matters; such review shall not, however, affect the representations and
warranties made by the Company in this Agreement or the remedies of FAFCO for
breaches of those representations and warranties. The Company shall, and shall
cause the Subsidiaries of the Company to, permit FAFCO and its representatives
to have, after the date of execution of this Agreement, full access to the
premises, to the officers, employees and to all the books and records of the
Company and its Subsidiaries and to cause the officers of the Company and its
Subsidiaries to furnish FAFCO with such financial and operating data and other
information with respect to the business and properties of the Company as FAFCO
shall from time to time reasonably request. The Company represents and warrants
that all documents made or to be made available by the Company pursuant to this
Section 5.2(a) are true, complete (except as contemplated by the last sentence
of this Section 5.2(a)) and correct.
Notwithstanding anything to the contrary contained in this
Agreement, including, without limitation, Sections 5.1 and 5.2, neither the
Company nor its Subsidiaries shall be required to provide FAFCO or its
representatives with access to (i) the source code to proprietary software of
the Company until such time as any waiting period under the HSR Act shall have
expired or been terminated and (ii) the customer lists and/or customer contracts
of the Company until such time as FAFCO and the Company shall have entered into
an Access to Proprietary Information and Confidentiality Agreement (the "Access
Agreement"), in such form as FAFCO and the Company shall agree, except that
FAFCO shall not have access to the pricing and other terms contained in the
Company's contracts with customers of its flood certification business and tax
reporting business until the Effective Time.
(b) In the event of termination of this Agreement, FAFCO shall
keep confidential any material information obtained from the Company and its
Subsidiaries concerning the Company's and its Subsidiaries' properties,
operations and business (unless readily ascertainable from public or published
information or trade sources) until the same ceases to be material (or becomes
so ascertainable) and, at the request of the Company, shall return to the
Company and its Subsidiaries or destroy all copies of any schedules, statements,
documents, source codes, object codes, programs and flowcharts or other written
information obtained in
36
connection therewith, including, but not limited to, any materials prepared by
FAFCO or its representatives (except for work product encompassed by the
attorney-client privilege) containing any such confidential information, except
to the extent that such materials contain information confidential to FAFCO, in
which case such materials shall not be returned, but destroyed. The Company
shall deliver or cause to be delivered to FAFCO such additional instruments,
documents, certificates and opinions as FAFCO may reasonably request for the
purpose of (i) verifying the information set forth in this Agreement and on any
Schedule or Exhibit attached hereto and (ii) consummating or evidencing the
transactions contemplated by this Agreement. In the event of termination of this
Agreement, the Company Confidentiality Agreement shall remain in full force and
effect, unless such Company Confidentiality Agreement is terminated by the
Access Agreement, in which case the Access Agreement shall remain in full force
and effect.
(c) In the event of termination of this Agreement, the Company
shall keep confidential any material information obtained from FAFCO and its
Subsidiaries concerning the FAFCO's and its Subsidiaries' properties, operations
and business (unless readily ascertainable from public or published information
or trade sources) until the same ceases to be material (or becomes so
ascertainable) and, at the request of FAFCO, shall return to FAFCO and its
Subsidiaries or destroy all copies of any schedules, statements, documents or
other written information obtained in connection therewith, including any
materials prepared by the Company or its representatives (except for work
product encompassed by the attorney-client privilege) containing any such
confidential information, except to the extent that such materials contain
information confidential to the Company, in which case such materials shall not
be returned, but destroyed. In the event of termination of this Agreement, the
FAFCO Confidentiality Agreement shall remain in full force and effect, unless
such FAFCO Confidentiality Agreement is terminated by the Access Agreement, in
which case the Access Agreement shall remain in full force and effect.
5.3 Exclusive Dealing. The Company shall not, and shall not
permit any of its Subsidiaries to, and the Company and its Subsidiaries shall
not authorize or permit any officer, director or employee of, or any financial
advisor, attorney, accountant or other advisor or representative retained by,
the Company or any of its Subsidiaries to, solicit, initiate, encourage
(including by way of furnishing information), endorse or enter into any
agreement with respect to, or take any other action to facilitate, any inquiries
or the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Takeover Proposal. The Company shall immediately advise FAFCO
orally and in writing of any Takeover Proposal or any inquiries or discussions
with respect thereto and shall promptly, but in any event within two (2)
Business Days of receipt, furnish to FAFCO a copy of any such written proposal
or a written summary of any such oral proposal. Neither the Board of Directors
of the Company nor any committee thereof shall (a) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to FAFCO the approval or
recommendation by the Board of Directors of the Company of the Merger or this
Agreement or (b) approve or recommend, or propose to approve or recommend, any
Takeover Proposal or any other acquisition of outstanding Company Common Shares
other than pursuant to the Merger or this Agreement. Notwithstanding the
foregoing, nothing contained in this Agreement shall prevent the Board of
Directors of the Company from (i) furnishing information to or entering into
discussions or negotiations with any unsolicited Person or taking any action
described in clauses (a) and (b) of the preceding sentence if and only to the
37
extent that the Board of Directors of the Company shall have determined in good
faith, that such action is required in the exercise of its fiduciary duties,
based upon the written advice of its outside counsel or (ii) complying with Rule
14d-9 and Rule 14e-2 promulgated under the Exchange Act.
5.4 Best Efforts. Until such time as this Agreement is terminated
pursuant to Section 9.1, each of the Company, FAFCO and FAFCOSUB shall, and the
Company shall cause each of its Subsidiaries to, cooperate and use their
respective best efforts to take, or cause to be taken, all appropriate action,
and to make, or cause to be made, all filings necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
their respective best efforts to obtain, prior to the Effective Time, all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company,
FAFCO and FAFCOSUB as are necessary for consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Merger;
provided, however, that in order to obtain any such consent, approval or
authorization no (a) loan agreement or con tract for borrowed money shall be
repaid except as currently required by its terms, in whole or in part, (b)
contract shall be amended to increase the amount payable thereunder or otherwise
to be more burdensome to the Company, FAFCO or FAFCOSUB or (c) Party shall, and
no Party shall be required to, commit to any divestiture transaction, agree to
sell or hold separate or agree to license to such Party's competitors, before or
after the Effective Time, any of FAFCO's, the Company's or their respective
Subsidiaries' businesses, product lines, properties or assets, or agree to any
changes or restrictions in the operation of such businesses, product lines,
properties or assets.
SECTION 6
CONDITIONS PRECEDENT TO MERGER
6.1 Conditions Precedent to Obligations of FAFCO, FAFCOSUB and
the Company. The respective obligations of FAFCO and FAFCOSUB, on the one hand,
and the Company, on the other hand, to effect the Merger are subject to the
satisfaction or waiver (subject to applicable law) at or prior to the Closing
Date of each of the following conditions:
(a) Approval of Company's Shareholders. This Agreement and the
Merger shall have been approved and adopted by the requisite vote of the
shareholders of the Company in accordance with applicable law and the Company's
articles of incorporation and by-laws;
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the Merger shall have expired or been terminated;
(c) Statutes; Governmental Approvals. No statute, rule,
regulation, executive order, decree or order of any kind shall have been
enacted, entered, promulgated or enforced by any court or governmental authority
which prohibits the consummation of the Merger; all governmental and other
consents and approvals, if any, disclosed on any Schedule attached hereto or
necessary to permit the consummation of the transactions contemplated by this
Agreement shall have been received, including, without limitation, the Insurance
Approvals;
38
(d) No Litigation. No temporary or preliminary or permanent
injunction or other order issued by a court or other government body or by any
public authority to restrain or prohibit or restraining or prohibiting the
consummation of the Merger shall be in effect;
(e) Securities Matters. The SEC shall have declared effective the
Registration Statement. No stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued by the SEC and
no proceeding for that purpose, and no similar proceeding in respect of the
Proxy Statement/Prospectus, shall have been initiated or threatened by the SEC;
and all requests for additional information on the part of the SEC shall have
been complied with to the reasonable satisfaction of the parties hereto;
(f) Listing. The FAFCO Common Shares to be delivered shall have
been listed with the New York Stock Exchange, subject only to official notice of
issuance; and
6.2 Conditions Precedent to Obligations of FAFCO and FAFCOSUB.
The obligations of FAFCO and FAFCOSUB to effect the Merger are also subject to
the satisfaction or waiver, at or prior to the Closing Date, of each of the
following conditions:
(a) Truth of Representations and Warranties. The representations
and warranties of the Company contained herein shall be true and accurate in all
material respects, in each case at and as of the date of this Agreement and as
of the Closing Date (except to the extent a representation or warranty speaks
specifically as of an earlier date), and the Company shall have delivered to
FAFCO a certificate from the Chief Executive Officer of the Company, dated the
Closing Date to such effect;
(b) Performance of Agreements. All of the agreements of the
Company to be performed prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed in all material respects as of the
Closing Date, and the Company shall have delivered to FAFCO a certificate from
the Chief Executive Officer of the Company, dated the Closing Date, to such
effect;
(c) Opinion of Counsel. On the Closing Date, FAFCO shall have
received a favorable opinion, dated the Closing Date, of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
LLP, counsel to the Company, in customary form reasonably acceptable to FAFCO;
(d) Good Standing and Other Certificates. As of the Closing Date,
the Company shall have delivered to FAFCO (a) copies of the Company's articles
of incorporation including all amendments thereto, certified by the Secretary of
State of California, (b) a certificate from the Secretary of State or other
appropriate official of the Company's jurisdiction of incorporation to the
effect that the Company is in good standing in such jurisdiction and listing all
charter documents of the Company on file, (c) a certificate from the Secretary
of State or other appropriate official in each State in which the Company is
qualified to do business to the effect that the Company is in good standing in
such State, (d) a certificate as to the tax status of the Company from the
appropriate official in its jurisdiction of incorporation and each state in
which the Company is qualified to do business and (e) a copy of the by-laws of
the Company, certified by the Secretary of the Company as being true and correct
and in effect on the Closing Date;
39
(e) No Material Adverse Change. As of the Closing Date, there
shall have been no Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole, and there shall not have occurred any change or development
that would reasonably be expected to have a Material Adverse Effect on the
Company;
(f) Proceedings. As of the Closing Date, the Company shall have
delivered to FAFCO certified copies of resolutions duly adopted by the Company's
Board of Directors and shareholders, approving the Merger and authorizing the
transactions contemplated hereby, and such other or additional instruments,
consents, waivers, approvals, endorsements and documents as FAFCO reasonably
deems necessary to enable the Merger to be consummated as provided in this
Agreement. All other proceedings in connection with the Merger and the other
transactions contemplated hereby, and all instruments, consents, waiver,
approvals, endorsements and documents referred to hereunder or otherwise
incident to such transactions, shall have been obtained and be reasonably
satisfactory in form and substance to FAFCO and its counsel;
(g) Affiliates. As of the date immediately preceding the date
that the Registration Statement is filed, FAFCO shall have received from each
person that is deemed an "affiliate" of the Company under Rule 145 on the date
immediately preceding the date of the filing of the Registration Statement
written agreements substantially in the form attached hereto as Exhibit D (each
such agreement, a "Rule 145 Letter") and Exhibit E (each such agreement, a
"Pooling Letter"), and, in the event that any other Person becomes an affiliate
of the Company thereafter, a Rule 145 Letter and a Pooling Letter from such
Person, and each such Rule 145 Letter and Pooling Letter shall remain in full
force and effect;
(h) Letters from Accountants. As of the Closing Date and as of
the date the Registration Statement is declared effective by the SEC, FAFCO
shall have received a letter or letters from PriceWaterhouseCoopers LLP, as
independent auditors of FAFCO and the Company, in a form acceptable to FAFCO, to
the effect that the Merger qualifies for pooling of interests accounting
treatment if consummated in accordance with this Agreement;
(i) Comfort Letters of Accountants. As of the date the
Registration Statement is filed, FAFCO shall have received a letter or letters
from PriceWaterhouseCoopers LLP, as independent auditors of FAFCO and the
Company, acceptable to FAFCO, and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement; and
(j) Employment Agreements. Employment agreements, which were
executed contemporaneously herewith by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇, in each
case together with FAFCO and the Company, shall be in full force and effect.
6.3 Conditions Precedent to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver, at or prior to the Closing Date, of each of the
following conditions:
(a) Opinion of Counsel. The Company shall have received (i) a
favorable opinion, dated the Closing Date, of White & Case LLP, counsel to FAFCO
and FAFCOSUB, in customary form reasonably acceptable to the Company and (ii) a
written opinion from ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, counsel to the Company, to the
effect that the Merger will be treated for
40
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code;
(b) Good Standing Certificate. As of the Closing Date FAFCO and
FAFCOSUB shall have delivered to the Company (i) copies of the articles of
incorporation and certificate of incorporation of FAFCO and FAFCOSUB,
respectively, including all amendments thereto, certified by the Secretary of
State of the State of California and the Secretary of State of Delaware,
respectively and (ii) a certificate from the Secretary of State of the State of
California and the Secretary of State of Delaware to the effect that FAFCO and
FAFCOSUB, respectively, is in good standing in such State, and listing all
charter documents of FAFCO and FAFCOSUB on file;
(c) Truth of Representations and Warranties. The representations
and warranties of FAFCO and FAFCOSUB contained herein shall be true and accurate
in all material respects, in each case at and as of the date of this Agreement
and as of the Closing Date (except to the extent a representation or warranty
speaks specifically as of an earlier date), and FAFCO and FAFCOSUB shall have
delivered to the Company a certificate from the President of FAFCO and FAFCOSUB,
respectively, dated the Closing Date, to such effect;
(d) Performance of Agreements. All of the agreements of FAFCO and
FAFCOSUB to be performed prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed in all material respects, and FAFCO and
FAFCOSUB shall have delivered to the Company a certificate, dated the Closing
Date, to such effect;
(e) Proceedings. As of the Closing Date, FAFCO and FAFCOSUB shall
have delivered to the Company certified copies of resolutions duly adopted by
their respective Boards of Directors and, with respect to FAFCOSUB, its sole
shareholder, approving the Merger and authorizing the transactions contemplated
hereby, and such other or additional instruments, consents, waivers, approvals,
endorsements and documents as the Company reasonably deems necessary to enable
the Merger to be consummated as provided in this Agreement. All other
proceedings in connection with the Merger and the other transactions
contemplated hereby, and all instruments, consents, waiver, approvals,
endorsements and documents referred to hereunder or otherwise incident to such
transactions, shall have been obtained and be reasonably satisfactory in form
and substance to the Company and its counsel;
(f) No Material Adverse Change. As of the Closing Date there
shall have been no Material Adverse Effect on FAFCO and there shall not have
occurred any change or development that would reasonably be expected to have a
Material Adverse Effect on FAFCO; and
(g) Fairness Opinion. The Company shall have received an opinion
from ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc., its financial advisor, dated as of the date of
the mailing of the Proxy Statement/Prospectus, confirming the opinion referred
to in Section 3.29.
41
SECTION 7
COVENANTS RELATING TO SECURITIES MATTERS
7.1 Proxy Statement/Prospectus; Registration Statement.
(a) As soon as practicable following the date of this Agreement,
FAFCO and the Company shall jointly prepare and FAFCO shall file with the SEC, a
registration statement on Form S-4 under the Securities Act (the "Registration
Statement"), which will include a proxy statement/prospectus (the "Proxy
Statement/Prospectus") describing, among other things, the transactions
contemplated by this Agreement. FAFCO and the Company shall also take any action
(other than, with respect to FAFCO and the Company, qualifying to do business in
any jurisdiction in which they are not now so qualified and, with respect to
FAFCO, accounting for the Merger as a "purchase") required to be taken under
state blue sky or securities laws in connection with the issuance of FAFCO
Common Shares necessary to fulfill the transaction contemplated by this
Agreement. FAFCO and the Company shall each furnish the other all information
concerning FAFCO and the Company and all such other information required for use
in the Proxy Statement/Prospectus and each of FAFCO and the Company shall take
such other action as the other may reasonably request in connection with the
preparation of the Proxy Statement/Prospectus. FAFCO shall use commercially
reasonable efforts to have or to cause the Registration Statement to become
effective as promptly as practicable (except that FAFCO shall have no obligation
to agree to account for the Merger as a "purchase" in order to cause the
Registration Statement to become effective) and shall take all action required
under applicable federal or state securities laws in connection with the
issuance of FAFCO Common Shares in the Merger (other than qualifying to do
business in any jurisdiction in which FAFCO is not now so qualified).
(b) If at any time prior to the Effective Date any event with
respect to FAFCO or the Company or their respective Subsidiaries shall occur
which is required at that time to be described in the Proxy
Statement/Prospectus, the Party with respect to whom the event occurs shall
promptly notify the other Parties, and to the extent required by law, FAFCO will
promptly file an amendment or supplement with the SEC and disseminate such
amendment to the Company shareholders.
7.2 Listing. FAFCO shall prepare and submit to the NYSE a listing
application covering the FAFCO Common Shares to be issued in the Merger, and
shall use its best efforts to cause such shares to be approved for listing and
trading on the NYSE prior to the Effective Time, subject to official notice of
issuance. Such listing application shall be submitted to the NYSE promptly
following the filing of the Registration Statement with the SEC.
SECTION 8
OTHER COVENANTS
8.1 Shareholder Approval. In order to consummate the Merger, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law:
42
(a) promptly furnish a copy of the Proxy Statement/Prospectus to
each of its shareholders after the Registration Statement has become effective
with the SEC;
(b) promptly and duly call, give notice of, convene and hold a
special meeting of its shareholders (the "Company Shareholder Meeting") for the
purpose of voting upon this Agreement and the Merger and the Company agrees that
this Agreement and the Merger shall be submitted at such Company Shareholder
Meeting; provided, however, that the Company Shareholder Meeting shall not be
held on a day earlier than the day that is twenty (20) Business Days after the
Proxy Statement/Prospectus has been delivered to the shareholders of the
Company; and
(c) use its reasonable best efforts to obtain the necessary
approval of the Merger by its shareholders.
8.2 HSR Act. FAFCO and the Company shall each, in cooperation
with the other, make the required filings in connection with the transactions
contemplated by this Agreement under the HSR Act with the FTC and the Antitrust
Division, and shall request early termination of the waiting period with respect
to such filings. As promptly as practicable from time to time after the date of
this Agreement, each Party shall make all such further filings and submissions,
and take such further action as may be required in connection therewith (except
that no Party hereby commits to any divestiture transaction, agrees to sell or
hold separate or agrees to license to such Party's competitors any of their or
their respective Subsidiaries' businesses, product lines, properties or assets,
or agrees to any changes or restrictions in the operation of such businesses,
product lines, properties or assets), and shall furnish the other all
information in its possession necessary therefor. FAFCO and the Company shall
each notify the other immediately upon receiving any request for additional
information with respect to such filings from either the Antitrust Division or
the FTC, and the Party receiving the request shall use its reasonable best
efforts to comply with such request as soon as possible. Neither such Party
shall withdraw any such filing or submission without the written consent of the
other.
8.3 Amended Returns. Except as required by law, the Company shall
not file, and shall cause its Subsidiaries to refrain from filing, any Returns
with respect to the Company or such Subsidiary without the prior written consent
of FAFCO.
8.4 Directors and Officers Indemnification.
(a) After the Effective Time, FAFCO will cause the Surviving
Corporation to indemnify and hold harmless the present and former officers,
directors, employees and agents of the Company and its Subsidiaries (the
"Indemnified Parties") in respect of acts or omissions occurring on or prior to
the Effective Time to the extent provided under the Company's and its
Subsidiaries' articles of incorporation and bylaws or any indemnification
agreement with the Company's and its Subsidiaries' officers and directors to
which the Company and/or its Subsidiaries is a party, in each case in effect on
the date hereof; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law.
(b) For six years after the Effective Time, FAFCO will cause the
Surviving Corporation to use its best efforts to procure officers' and
directors' liability insurance in respect
43
of acts or omissions occurring on or prior to the Effective Time covering each
such person currently covered by the Company's and/or its Subsidiaries'
officers' and directors' liability insurance policy on terms substantially
similar to those of such policy in effect on the date hereof, provided that
FAFCO shall not be required to cause the Surviving Corporation to maintain such
insurance with respect to a specific officer or director if the premium for
obtain such insurance exceeds (i) if the premium for obtaining such insurance
exceeds 115% of the amount per annum the Company paid in its last full fiscal
year, which amount has been disclosed to FAFCO unless such officer or director
pays the Surviving Corporation his or her pro rata share of 50% of such excess
premium. If the Surviving Corporation is unable to obtain the insurance required
by this Section, it shall obtain as much comparable insurance as possible for an
annual premium equal to such maximum amount.
8.5 Pooling Accounting. FAFCO and the Company shall each use
their respective best efforts to cause the business combination effected by the
Merger to be accounted for as a pooling of interests. Each of the Company and
FAFCO shall use its best efforts to cause "affiliates" (as defined in Section
6.2(g)) not to take any action that would adversely affect the ability of FAFCO
to account for the business combination to be effected by the Merger as a
pooling of interests.
8.6 Affiliate Agreements. Schedule 8.6, as completed by the
Company prior to the Closing, sets forth those persons who may be deemed
"affiliates" of the Company within the meaning of Rule 145 promulgated under the
Securities Act ("Rule 145"). The Company shall provide FAFCO such information
and documents as FAFCO shall reasonably request for purposes of reviewing such
list. The Company shall use its best efforts to deliver or cause to be delivered
to FAFCO, concurrently with the execution of this Agreement (and in each case
prior to the filing of the Registration Statement) from each of the Affiliates
of the Company, an executed Rule 145 Letter and a Pooling Letter. FAFCO and
FAFCOSUB shall be entitled to place appropriate legends on the certificates
evidencing any FAFCO Common Shares to be received by such affiliates of the
Company pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for FAFCO Common Shares, consistent
with the terms of such Rule 145 Letters.
8.7 Confidentiality Agreements. The Parties agree that both the
Company Confidentiality Agreement and the FAFCO Confidentiality Agreement,
unless and until terminated by the Access Agreement, shall be hereby amended to
provide that any provision therein which in any manner would be inconsistent
with this Agreement or the transactions contemplated hereby shall terminate as
of the date hereof. The Parties further agree that the Company Confidentiality
Agreement (or, if applicable, those provisions of the Access Agreement
obligating FAFCO and its Subsidiaries) shall terminate as of the Effective Time.
8.8 Takeover Statutes. If any Takeover Statute is or may become
applicable to the Merger, each of FAFCO and the Company shall take such actions
as are necessary so that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any Takeover Statute on the Merger and such other transactions.
44
8.9 Insurance Matters. The Company will furnish FAFCO with such
information as FAFCO may reasonably request in connection with any application
or notification FAFCO may make to applicable Governmental Entities in connection
with the transactions contemplated hereby. The Company will cooperate with
FAFCO, to the extent FAFCO may reasonably request, to enable it to make such
applications or notifications as promptly as practicable, including without
limitation, providing access to any and all employees of the Company. The
Company shall, or shall cause each of its Subsidiaries to, perform such other
actions to obtain prompt favorable action from any such agency or body as may be
reasonably requested by FAFCO. Notwithstanding the foregoing, the Company shall
not be required to perform such actions that will require an expenditure of
money that is not in the ordinary course of business.
The Company shall timely deliver to FAFCO copies of all
regulatory reports that may be filed with respect to the Company and its
Subsidiaries and any material correspondence between the Company or any of its
Subsidiaries with any state insurance regulatory authority regarding any of the
Company or its Subsidiaries.
SECTION 9
TERMINATION
9.1 Events of Termination. This Agreement may be terminated at
any time prior to the Effective Time (a) by mutual written agreement of the
Parties, (b) on or after the 180th day from the date hereof (or such later date
as the Parties may have agreed to in writing) by FAFCO, by written notice to the
Company, if the conditions set forth in Section 6.1 and Section 6.2 (with the
exception of Section 6.2(h) which is provided for in subsection (k) below)
hereof shall not have been complied with or performed in any material respect
and neither FAFCO nor FAFCOSUB shall have materially breached any of their
representations, warranties, covenants or agreements contained herein, (c) by
FAFCO, by written notice to the Company, if the Board of Directors of the
Company shall have withdrawn or modified in any manner adverse to FAFCO or
FAFCOSUB its approval or recommendation of the Merger, (d) on or after the 180th
day from the date hereof (or such later date as the Parties may have agreed to
in writing) by the Company, by written notice to FAFCO, if the conditions set
forth in Section 6.1 and Section 6.3 hereof shall not have been complied with or
performed in any material respect and the Company shall not have materially
breached any of its representations, warranties, covenants or agreements
contained herein, (e) by any of the Parties by written notice to the other
Parties if the Effective Time shall not have occurred within one month after the
Closing Date, (f) by FAFCO by written notice to the Company, to be received no
later than the date that is ten days (provided, however, that for purposes of
this Section 5.1(f) November 25, 26, 27, 28 and 29, 1998, December 24, 25, 26,
27, 31, 1998 and January 1, 2 and 3, 1999 shall not constitute a "day") after
the later of (i) the date the Chief Executive Officer of the Company shall have
delivered to FAFCO the Schedule Certificate and (ii) the date the Access
Agreement is executed and delivered by the Company in a form acceptable to
FAFCO, if FAFCO is not satisfied with its due diligence review of the Company
and its Subsidiaries, or if the Schedule Certificate is not delivered within 30
days of the date of this Agreement, (g) by FAFCO, by written notice to the
Company, if the Company fails to call the Company Shareholder Meeting on or
prior to the 35th
45
day after the Registration Statement is declared effective by the SEC, (h) by
the Company, by written notice to FAFCO, if a Takeover Proposal shall have
occurred and the Board of Directors of the Company in connection therewith,
after consultation with its legal counsel, withdraws or modifies its approval
and recommendation of this Agreement and the transactions contemplated hereby
after determining that to cause the Company to proceed with the transactions
contemplated hereby would not be consistent with the Board of Directors'
fiduciary duty to the shareholders of the Company, (i) by either FAFCO or the
Company, by written notice to the other, if prior to the 180th day from the date
hereof, a court of competent jurisdiction or other Governmental Entity shall
have issued a final, non-appealable order, decree or ruling, or taken any other
action, having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, (j) by either FAFCO or the Company, by written notice to
the other, if at the Company Shareholder Meeting (including any adjournment or
postponement thereof), the requisite vote of the shareholders of the Company in
favor of this Agreement and the Merger shall not have been obtained, (k) by
FAFCO, by written notice to the Company, if as of the date the Registration
Statement is declared effective by the SEC and as of the Closing Date,
PriceWaterhouseCoopers LLP, as independent auditors of FAFCO and the Company,
shall not have delivered to FAFCO a letter or letters, in a form acceptable to
FAFCO, to the effect that the Merger qualifies for pooling of interests
accounting treatment if consummated in accordance with this Agreement, (l) by
FAFCO, by written notice to the Company, if, as a condition to receiving the
approval of the Merger by either the FTC or the Antitrust Division or as a
condition to the expiration or termination of any waiting period under the HSR
Act, either FAFCO or the Company shall be required to, or required to agree to,
(i) divest, sell or hold separate or agree to license to such Party's
competitors, before or after the Effective Time, any of FAFCO's, the Company's
or their respective Subsidiaries' businesses, product lines, properties or
assets, (ii) any material changes or material restrictions in the operation of
such businesses, product lines, properties or assets or (iii) any changes or
restrictions in their respective businesses, product lines, properties, assets
or to this Agreement or the transactions contemplated hereby which would prevent
FAFCO from accounting for the Merger as a pooling of interests under the Pooling
Rules or (m) by the Company, by written notice to FAFCO, if ▇.▇. ▇▇▇▇▇▇▇ & Sons,
Inc., the Company's financial advisor, shall not have delivered to the Company
an opinion, dated the date of mailing of the Proxy Statement/Prospectus,
confirming the opinion referred to in Section 3.29.
9.2 Effect of Termination. In the event that this Agreement shall
be terminated pursuant to Section 9.1, all further obligations of the Parties
hereto under this Agreement (other than pursuant to Sections 5.2(b) (Review of
the Company), 11.2 (Expenses) and 11.5 (Publicity) which shall continue in full
force and effect) shall terminate without further liability or obligation of any
Party to any other Party hereunder; provided, however, that no Party shall be
released from liability hereunder if this Agreement is terminated and the
transaction abandoned by reason of (a) the willful failure of such Party to have
performed its obligations hereunder and (b) any knowing misrepresentation made
by such Party regarding any matter set forth herein.
46
SECTION 10
NONSURVIVAL OF REPRESENTATIONS
10.1 Non-Survival of Representations. Except for covenants and
agreements which, by their terms, are to be performed after the Effective Time,
all representations, warranties, covenants and agreements of the Parties in this
Agreement shall not survive the Effective Time, and thereafter no Party hereto
and no Subsidiary, officer, director or employee of any such Party, or any
Subsidiary of such Party, shall have any liability whatsoever with respect to
any such representation, warranty or agreement except for liabilities arising
from intentional fraud, willful (tortious or illegal) misconduct or criminal
acts.
SECTION 11
MISCELLANEOUS
11.1 Knowledge. Except as otherwise set forth herein, where any
representation or warranty contained in this Agreement is expressly qualified
by reference to the best knowledge, information and belief of (a) the Company,
the Company confirms that its chief executive officer, president, principal
accounting officer and general counsel has made due and diligent inquiry as to
the matters that are the subject of such representations and warranties or (b)
FAFCO, FAFCO confirms that its president, chief financial officer and general
counsel has made due and diligent inquiry as to the matters that are the subject
of such representations and warranties.
11.2 Expenses.
(a) Except as provided in 11.2(b), the Parties hereto shall pay
all of their own expenses relating to the transactions contemplated by this
Agreement and the documents described herein, including, without limitation, the
fees and expenses of their respective counsel, auditors and financial advisers.
(b) FAFCO shall pay all expenses associated directly with the
filing of the Registration Statement, the filing required under the HSR Act, the
filing of the listing application described in Section 7.4 and the printing and
mailing of the Prospectus/Proxy Statement, except, for the avoidance of doubt,
in the event the Effective Time does not occur, FAFCO shall not be required to
pay the fees and expenses of the Company's counsel, auditors and financial
advisors associated with the preparation or review of any of the foregoing.
11.3 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of California applicable to agreements executed and to be performed solely
within such State.
11.4 Jurisdiction; Agents for Service of Process. Any judicial
proceeding brought against any of the Parties to this Agreement on any dispute
arising out of this Agreement or any matter related hereto may be brought in the
courts of the State of California, or in the United States District Court for
the Central District of California, and, by execution and delivery of this
Agreement, each of the Parties to this Agreement accepts the exclusive
jurisdiction of
47
such courts, and irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement.
11.5 Publicity. Except as otherwise required by law, neither
FAFCO nor the Company shall issue any press release or make any other public
statement, in each case relating to, connected with or arising out of this
Agreement or the matters contained herein, without obtaining the prior consent
of the other to the contents and the manner of presentation and publication
thereof, which consent shall not be unreasonably or untimely withheld.
11.6 Notices. Any notice or other communication required or
permitted under this Agreement shall be sufficiently given if delivered in
person or sent by facsimile or by registered or certified mail, postage prepaid,
addressed as follows:
if to FAFCO or FAFCOSUB, to:
The First American Financial Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
White & Case LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
if to the Company, to:
National Information Group
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
48
or such other address or number as shall be furnished in writing by any such
Party, and such notice or communication shall, if properly addressed, be deemed
to have been given as of the date so delivered, sent by facsimile or three
business days after deposit into the U.S. mail postage prepaid.
11.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any Party hereto. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and permitted assigns.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
11.9 Entire Agreement. This Agreement and the other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter. The Parties acknowledge
and agree that there are no, and there shall not be any, oral agreements between
or among any of the Parties and that for any agreement to be binding such
agreement must be in a writing executed by each Party.
11.10 Amendments. This Agreement may be amended by the Parties,
by action taken or authorized by their respective Board of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the shareholders of FAFCOSUB and the Company, but, after any such
approval by such shareholders, no amendment shall be made which by law requires
further approval by such shareholders without such further approval. Any such
amendment may not be made orally, but only by an agreement in writing signed by
FAFCO, FAFCOSUB and the Company.
11.11 Extension; Waiver. At any time prior to the Effective Time,
the Parties may, to the extent legally allowed, (i) extend the time for
performance of any of the obligations or other acts of the other parties hereto
contained here, (ii) waive any inaccuracies in the representations and
warranties of the other Parties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions of the other Parties contained herein. Any agreement on the part of a
Party to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such Party.
11.12 Severability. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
11.13 Third Party Beneficiaries. Except as expressly provided
herein, each Party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any Person other than the
Parties hereto and the shareholders of the Company.
49
IN WITNESS WHEREOF, each of FAFCO, FAFCOSUB and the Company has
caused its corporate name to be hereunto subscribed by its officer thereunto
duly authorized, all as of the day and year first above written.
THE FIRST AMERICAN FINANCIAL CORPORATION
By____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
50
PEA SOUP ACQUISITION CORP.
By____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
51
NATIONAL INFORMATION GROUP
By____________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer