-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J6uGoo1JWkkCvMd76UD2RRx6VAOU9mTBy6/gT7BwE1dIJrYyjughsQkmNkPUCUig zfJGI+diSLMT/7Z6w1Uhcw== 0000950147-01-500875.txt : 20010515 0000950147-01-500875.hdr.sgml : 20010515 ACCESSION NUMBER: 0000950147-01-500875 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20010514 GROUP MEMBERS: IVM INTERSURER BV GROUP MEMBERS: JOHN M. DAVIES GROUP MEMBERS: MERRYMEETING INC GROUP MEMBERS: PATRICK ENTHOVEN SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FRONTIER ADJUSTERS OF AMERICA INC CENTRAL INDEX KEY: 0000735349 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 860477573 STATE OF INCORPORATION: AZ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-54917 FILM NUMBER: 1634198 BUSINESS ADDRESS: STREET 1: 45 E MONTEREY WAY STREET 2: STE 202 CITY: PHOENIX STATE: AZ ZIP: 85011 BUSINESS PHONE: 6022641061 MAIL ADDRESS: STREET 1: P O BOX 7610 CITY: PHOENIX STATE: AZ ZIP: 85011 FORMER COMPANY: FORMER CONFORMED NAME: FRONTIER FINANCIAL CORP /AZ DATE OF NAME CHANGE: 19861114 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MERRYMEETING INC CENTRAL INDEX KEY: 0001140203 STANDARD INDUSTRIAL CLASSIFICATION: SPECIALTY CLEANING, POLISHING AND SANITATION PREPARATIONS [2842] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 7100 EAST LINCOLN DRIVE, STE. D-230 CITY: PHOENIX STATE: AZ ZIP: 85253 BUSINESS PHONE: 6024920336 MAIL ADDRESS: STREET 1: 7100 EAST LINCOLN DRIVE, STE. D-230 CITY: PHOENIX STATE: AZ ZIP: 85253 SC 13D 1 e6835.txt SCHEDULE 13D FOR MERRYMEETING, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No.__)* Frontier Adjusters of America, Inc. ----------------------------------- (Name of Issuer) Shares of Common Stock ------------------------------ (Title of Class of Securities) 359050-10-1 -------------- (CUSIP Number) Stephen A. Markus, Esq. Ulmer & Berne LLP 1300 East 9th Street, Suite 900 Cleveland, Ohio 44114-1583 (216) 621-8400 -------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) May 2, 2001 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. NOTE: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - --------------------- ------------------ CUSIP NO. 359050-10-1 Page 2 of 11 Pages - --------------------- ------------------ 1 NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Merrymeeting, Inc. -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] -------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------- 4 SOURCE OF FUNDS* BK, WC -------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] -------------------------------------------------------------------------- 6 CITZENSHIP OR PLACE OF ORGANIZATION Delaware -------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF --------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY 5,258,513 OWNED BY --------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON --------------------------------------------------------- WITH 10 SHARED DISPOSITIVE POWER 5,258,513 --------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,258,513 -------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 58.7% -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO -------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. SCHEDULE 13D - --------------------- ------------------ CUSIP NO. 359050-10-1 Page 3 of 11 Pages - --------------------- ------------------ 1 NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON IVM Intersurer BV -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] -------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO -------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] -------------------------------------------------------------------------- 6 CITZENSHIP OR PLACE OF ORGANIZATION The Netherlands -------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF --------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,629,257 OWNED BY --------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON --------------------------------------------------------- WITH 10 SHARED DISPOSITIVE POWER 2,629,257 --------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,629,257 -------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* (1) -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 29.3% -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO -------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. - ---------- 1. IVM Intersurer BV, a Netherlands holding company ("IVM"), is a 50% shareholder of Merrymeeting, Inc., a Delaware corporation ("MMI"), which owns 5,258,513 shares of Frontier Adjusters of America, Inc., an Arizona corporation ("Frontier"). This amount includes only 2,629,257 shares, or 50%, of the Frontier shares held by MMI. IVM disclaims any beneficial interest in the other 2,629,256 shares of Frontier held by MMI, which are not included in Item No. 11 above. This report shall not be deemed an admission that IVM is the beneficial owner of such securities for purposes of Section 16 or for any other purpose. SCHEDULE 13D - --------------------- ------------------ CUSIP NO. 359050-10-1 Page 4 of 11 Pages - --------------------- ------------------ 1 NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Patrick Enthoven -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] -------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO -------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] -------------------------------------------------------------------------- 6 CITZENSHIP OR PLACE OF ORGANIZATION South Africa -------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF --------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,629,257 OWNED BY --------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON --------------------------------------------------------- WITH 10 SHARED DISPOSITIVE POWER 2,629,257 --------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,629,257 -------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* (1) -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 29.3% -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN -------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. - ---------- 1. Patrick Enthoven is the Chief Executive of Insurance Operations (but is not a shareholder) of IVM, which is a 50% shareholder of MMI, which owns 5,258,513 shares of Frontier. This amount includes only 2,629,257 shares, or 50%, of the Frontier shares held by MMI. Mr. Enthoven disclaims any beneficial interest in the other 2,629,256 shares of Frontier held by MMI, which are not included in Item No. 11 above. This report shall not be deemed an admission that Mr. Enthoven is the beneficial owner of such securities for purposes of Section 16 or for any other purpose. SCHEDULE 13D - --------------------- ------------------ CUSIP NO. 359050-10-1 Page 5 of 11 Pages - --------------------- ------------------ 1 NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON John M. Davies -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] -------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO -------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] -------------------------------------------------------------------------- 6 CITZENSHIP OR PLACE OF ORGANIZATION United States -------------------------------------------------------------------------- 7 SOLE VOTING POWER 500 NUMBER OF --------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,629,257 OWNED BY --------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 500 PERSON --------------------------------------------------------- WITH 10 SHARED DISPOSITIVE POWER 2,629,257 --------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,629,257 -------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* (1) -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 29.4% -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN -------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. - ---------- 1. John M. Davies is a 50% shareholder of MMI, which owns 5,258,513 shares of Frontier. This amount includes only 2,629,257 shares, or 50%, of the Frontier shares held by MMI. Mr. Davies disclaims any beneficial interest in the other 2,629,256 shares of Frontier held by MMI, which are not included in Item No. 11 above. This report shall not be deemed an admission that Mr. Davies is the beneficial owner of such securities for purposes of Section 16 or for any other purpose. SCHEDULE 13D - --------------------- ------------------ CUSIP NO. 359050-10-1 Page 6 of 11 Pages - --------------------- ------------------ ITEM 1. SECURITY AND ISSUER This Statement on Schedule 13D (the "Statement") relates to the common stock, $0.01 par value (the "Common Stock") of Frontier, which has its principal executive offices located at 45 East Monterey Way, Phoenix, Arizona 85012. The purpose of this filing is to reflect the sale by United Financial Adjusting Company ("UFAC") of its majority interest in Frontier to MMI and to report the proposal of a merger transaction to take Frontier private. ITEM 2. IDENTITY AND BACKGROUND This Statement is being filed collectively by MMI; IVM, by virtue of its ownership of 50% of the outstanding share capital of MMI; Patrick Enthoven, by virtue of the delegation to him by IVM of voting and dispositive powers in connection with the Common Stock beneficially owned by IVM; and John M. Davies, by virtue of his ownership of 50% of the outstanding share capital of MMI, pursuant to their agreement to the collective filing of this Statement. Each of the aforementioned entities and individuals are referred to herein individually as a "Reporting Person" and collectively as "Reporting Persons." 1. MMI c/o Ulmer & Berne LLP 1300 East 9th Street, Suite 900 Cleveland, Ohio 44114-1583. MMI is a newly formed Delaware corporation the purpose of which is to hold the shares of Common Stock purchased by MMI from UFAC. MMI's outstanding share capital is owned 50% by IVM and 50% by John M. Davies. Its officers and directors are Patrick Enthoven, John M. Davies and Jeffrey R. Harcourt. MMI has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). MMI has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction that has resulted in MMI being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. 2. IVM Strawinskylaan 1725 1007 XX Amsterdam The Netherlands IVM is a Netherlands holding company that specializes in investing in insurance-related businesses. The outstanding share capital of IVM is owned by the _____________ Trust (the "Taro Trust"), a Liechtenstein trust. IVM has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). IVM has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction that has resulted in IVM being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. 3. (a) Patrick Enthoven (b) c/o Ulmer & Berne LLP, 1300 East 9th Street, Suite 900, Cleveland, Ohio 44114-1583. (c) Patrick Enthoven has served as Chief Executive of Insurance Operations of IVM Intersurer BV since July 1993 and as a Director of MMI since April 2001. (d) Patrick Enthoven has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) Patrick Enthoven has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction that has resulted in Mr. Enthoven being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Patrick Enthoven is a citizen of South Africa. SCHEDULE 13D - --------------------- ------------------ CUSIP NO. 359050-10-1 Page 7 of 11 Pages - --------------------- ------------------ 4. (a) John M. Davies (b) c/o Ulmer & Berne LLP, 1300 East 9th Street, Suite 900, Cleveland, Ohio 44114-1583. (c) John M. Davies has been associated with Frontier as a director since April 1999, as Chairman of the Board since January 2000 and as Chief Executive Officer and President since November 2000. Since June 1999, Mr. Davies has also served as President of Netrex LLC located at 270 South Service Road, Suite 45, Melville, New York 11747-2339. Since April 2001, Mr. Davies has also served as Chairman of the Board, President and CEO of MMI and MM Merger Corporation, a Delaware corporation and a wholly-owned subsidiary of MMI ("MM Merger"), and a director of MM Merger, located at c/o Ulmer & Berne LLP, 1300 East 9th Street, Suite 900, Cleveland, Ohio 44114-1583. (d) John M. Davies has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) John M. Davies has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction that has resulted in Mr. Davies being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) John M. Davies is a citizen of the United States. 5. (a) Jeffrey R. Harcourt (b) c/o Frontier Adjusters of America, Inc., 45 East Monterey Way, Phoenix, Arizona 85012 (c) Jeffrey R. Harcourt has served as Chief Financial Officer of Frontier since August 1999, as a director of Frontier since April 1999, as Treasurer of Frontier since January 2000 and as Secretary of Frontier since April 2001. Since April 2001, Mr. Harcourt has also served as Chief Financial Officer, Secretary and Treasurer of MMI and MM Merger, and a director of MM Merger. (d) Jeffrey R. Harcourt has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) Jeffrey R. Harcourt has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction that has resulted in Mr. Harcourt being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Jeffrey R. Harcourt is a citizen of the United States. 6. Taro Trust (full name and place of formation will be filed by amendment) P.O. Box 827 Staedtle 36 FL-9490 Vaduz Liechtenstein Taro Trust is managed by Guyerzeller Bank in Zurich, Switzerland. Its purpose is to hold investments and other property. Taro Trust has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). Taro Trust has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction that has resulted in Taro Trust being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. SCHEDULE 13D - --------------------- ------------------ CUSIP NO. 359050-10-1 Page 8 of 11 Pages - --------------------- ------------------ 7. (a) Herman Hein Scholton (b) Velasqezstraat 11, 1077 NG Amsterdam, The Netherlands. (c) Herman Hein Scholton serves as a Managing Director of IVM and as a director of Scholco Beheer en Management B.V., located at Strawinskylaan 1725, 1077 XX Amsterdam, The Netherlands. (d) Herman Hein Scholton has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) Herman Hein Scholton has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction that has resulted in Herman Hein Scholton being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Herman Hein Scholton is a citizen of The Netherlands. 8. (a) Sjoerd Willem Beelen (b) Strawinskylaan 1725, 1077 XX Amsterdam, The Netherlands. (c) Sjoerd Willem Beelen serves as a Managing Director of IVM and as an attorney and account manager with Citco Nederland B.V., located at Strawinskylaan 1725, 1077 XX Amsterdam, The Netherlands. (d) Sjoerd Willem Beelen has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) Sjoerd Willem Beelen has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction that has resulted in Sjoerd Willem Beelen being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Sjoerd Willem Beelen is a citizen of The Netherlands. 9. (a) Monique Charlotte Rosenkotter-Donken (b) Strawinskylaan 1725, 1077 XX Amsterdam, The Netherlands. (c) Monique Charlotte Rosenkotter-Donken serves as a Managing Director of IVM and as an attorney with Citco Nederland B.V., located at Strawinskylaan 1725, 1077 XX Amsterdam, The Netherlands. (d) Monique Charlotte Rosenkotter-Donken has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) Monique Charlotte Rosenkotter-Donken has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction that has resulted in Monique Charlotte Rosenkotter-Donken being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Monique Charlotte Rosenkotter-Donken is a citizen of The Netherlands. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION On May 2, 2001, MMI purchased 5,258,513 shares of common stock of Frontier (the "Shares") from UFAC for an aggregate consideration of $8,330,000. MMI financed the purchase of the shares with working capital and with the proceeds of a credit facility from Fifth Third Bank ("Bank") and Fifth Third Bank (Northeastern Ohio) ("Bank - NE") (collectively, "Banks"). Pursuant to the terms SCHEDULE 13D - --------------------- ------------------ CUSIP NO. 359050-10-1 Page 9 of 11 Pages - --------------------- ------------------ and conditions of a certain Credit Agreement dated April 30, 2001 ("Credit Agreement") by and among MMI and the Banks, Banks have made term loans to MMI in the aggregate principal amount of $8,000,000 (each a "Loan," collectively, the "Loans") to fund the acquisition of the Shares. The Loans include the following: (1) $4,000,000 term loan by Bank - NE to MMI secured by a pledge of the stock acquired from UFAC and a blanket lien on all of the assets of MMI; (2) $1,000,000 term loan by Bank - NE to MMI secured by a blanket lien on all of the assets of MMI; and (3) $3,000,000 term loan by Bank to MMI not secured by a blanket lien on all of the assets of MMI. The Loans are also secured by a collateral assignment of a certain life insurance policy on the life of John M. Davies. The Loans are guaranteed by (i) John M. Davies and his spouse, Allyn; and (ii) MM Merger. The guaranty by MM Merger is secured by a lien on all of its assets. Following the completion of the merger, it is anticipated that the Loans will be redocumented, with the Banks taking a lien on all of Frontier's assets. Principal payments on Loans (1) and (2) are due and payable in equal monthly installments in immediately available funds at the principal office of Bank - NE on the last day of each month in arrears, beginning on February 28, 2002 with a final payment of principal due on April 30, 2006. Interest will accrue on the principal amount of Loan (1) at the Bank Prime Rate plus 125 basis points and on Loan (2) at the Bank Prime Rate plus 175 basis points; provided that if the merger with Frontier is not completed by September 30, 2001, the rate on Loan (2) increases to 21% and if the merger is completed by then, the rate on Loan (2) drops to the Bank Prime Rate plus 125 basis points. Interest payments will be made in immediately available funds at the principal office of Bank - NE on the last day of each month in arrears, beginning with May 2001 and continuing during the term of the Loan. The entire principal amount of Loans (1) and (2), plus all accrued and unpaid interest and any other charges, advances, or fees required to be paid, will be due and payable on April 30, 2006. Interest will accrue on Loan (3) at the rate of 21% per annum. Interest payments will be made in immediately available funds at the principal office of the Bank on the last day of each month in arrears, beginning on the last day of May 2001 and continuing during the term hereof. The entire principal amount of Loan (3), plus all accrued and unpaid interest and any other charges, advances or fees required to be paid, will be due and payable on October 30, 2003. Also, IVM has loaned MMI the principal sum of $1 million, with interest at a rate per annum equal to the Bank Prime Rate less 100 basis points, which rate will be adjusted on October 31, 2001 and on April 30th and October 31st of each calendar year thereafter (with such rate to be in effect for the entire six month period until the next adjustment date). The entire principal amount and all accrued and unpaid interest will be due and payable on the earlier of: (i) upon demand by IVM; provided, however, that IVM will not make such demand if such action or the payment of amounts due under the note would constitute a default under any agreement or note evidencing the Loans described above; or (ii) April 30, 2008. All amounts due under the note are expressly subordinated to all obligations and indebtedness due and owing by MMI to the Banks and any affiliates of such banks and any successor senior lender. ITEM 4. PURPOSE OF TRANSACTION Pursuant to a share purchase agreement dated April 27, 2001, MMI purchased the Shares for investment purposes on May 2, 2001. In addition, MMI has proposed to take Frontier private through a cash-out merger with MM Merger. Frontier's Board of Directors has unanimously approved this proposal and Frontier, MMI and MM Merger have entered into a Plan and Agreement of Merger (the "Merger Agreement"). Under the Merger Agreement, each outstanding share of common stock of Frontier (other than the shares held by MMI) would be exchanged for the right to receive $1.58 in cash. This merger is subject to approval by the shareholders of Frontier. Frontier expects to present the proposed merger for approval at a special meeting of Frontier's shareholders to be called for this purpose. No date has been set for this meeting. In due course, Frontier will file with the SEC the proxy materials and any other related documents pertinent to the proposed merger. SCHEDULE 13D - --------------------- ------------------- CUSIP NO. 359050-10-1 Page 10 of 11 Pages - --------------------- ------------------- ITEM 5. INTEREST IN SECURITIES OF THE ISSUER Merrymeeting, Inc.: (a) Aggregate number of shares beneficially owned: 5,258,513 Percentage of shares: 58.7% (b) Number of shares subject to sole voting power: 0 Number of shares subject to shared voting power: 5,258,513 Number of shares subject to sole dispositive power: 0 Number of shares subject to shared dispositive power: 5,258,513 IVM Intersurer BV: (a) Aggregate number of shares beneficially owned: 2,629,257 Percentage of shares: 29.3% (b) Number of shares subject to sole voting power: 0 Number of shares subject to shared voting power: 2,629,257 Number of shares subject to sole dispositive power: 0 Number of shares subject to shared dispositive power: 2,629,257 Patrick Enthoven: (a) Aggregate number of shares beneficially owned: 2,629,257 Percentage of shares: 29.3% (b) Number of shares subject to sole voting power: 0 Number of shares subject to shared voting power: 2,629,257 Number of shares subject to sole dispositive power: 0 Number of shares subject to shared dispositive power: 2,629,257 John M. Davies: (a) Aggregate number of shares beneficially owned: 2,629,757 Percentage of shares: 29.4% (b) Number of shares subject to sole voting power: 500 Number of shares subject to shared voting power: 2,629,257 Number of shares subject to sole dispositive power: 500 Number of shares subject to shared dispositive power: 2,629,257 (c) Except as described in this Item 5 and in Item 4 and Item 6 hereof, none of the Reporting Persons has effected any transactions in the Shares during the past sixty (60) days. (d) N/A (e) N/A SCHEDULE 13D - --------------------- ------------------- CUSIP NO. 359050-10-1 Page 11 of 11 Pages - --------------------- ------------------- None of Jeffrey R. Harcourt, The Taro Trust, Herman Hein Scholton, Sjoerd Willem Beelen and Monique Charlotte Rosenkotter-Donken have sole or shared voting or dispositive power over any shares of Frontier. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The Reporting Persons are not aware of any contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 and between such persons and any person with respect to any securities of Frontier, including but not limited to transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, put or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, except to the extent that the Shares have been used as collateral against one Loan. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1 - Credit Agreement Exhibit 2 - Share Purchase Agreement dated April 27, 2001, by and among UFAC, as Seller, MMI, as Buyer, and Frontier. Exhibit 3 - Plan and Agreement of Merger dated April 27, 2001, by and among Frontier, MMI and MM Merger. Exhibit 4 - Joint Filing Agreement dated as of May 14, 2001, by and among the Reporting Persons. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. MERRYMEETING, INC., a Delaware corporation By: /s/ John M. Davies -------------------------------------------- Name: John M. Davies Title: President IVM INTERSURER BV, a Netherlands corporation By: /s/ Patrick Enthoven -------------------------------------------- Name: Patrick Enthoven Title: Chief Advisor of Insurance Operations /s/ Patrick Enthoven ----------------------------------------------- Patrick Enthoven /s/ John M. Davies ----------------------------------------------- Date: May 14, 2001 John M. Davies ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL CRIMINAL VIOLATIONS (See 18 U.S.C. 1001) EX-1 2 ex1.txt CREDIT AGREEMENT Exhibit 1 CREDIT AGREEMENT This Credit Agreement (the "Agreement") is entered into as of the 30th day of April, 2001, by and between MERRYMEETING, INC., a Delaware corporation ("Borrower"); FIFTH THIRD BANK (NORTHEASTERN OHIO), an Ohio banking corporation located at 1404 East Ninth Street, Cleveland, Ohio 44114 ("Senior Bank"), and FIFTH THIRD BANK, an Ohio banking corporation, located at 38 Fountain Square Plaza, Cincinnati, Ohio 45263 ("Junior Bank") (Senior Bank and Junior Bank being referred to herein collectively as the "Bank".) SECTION 1. DEFINITIONS. Certain capitalized terms have the meanings set forth on Exhibit 1 hereto. All financial terms used in this Agreement but not defined on Exhibit 1 have the meanings given to them by generally accepted accounting principles as in effect on the date hereof. All other undefined terms have the meanings given to them in the Ohio Uniform Commercial Code. SECTION 2. LOANS. 2.1 TERM LOAN. (a) Senior Bank agrees, subject to the terms and conditions hereinafter set forth, to make two term loans to Borrower (the "Senior Term Loans") on the date of this Agreement in the amount of $4,000,000 ("Senior Note I") and in the amount of $1,000,000 ("Senior Note II") (collectively, the "Senior Term Notes"). Borrower's obligation to pay the Senior Term Loans will be evidenced by promissory notes in substantially the form of Exhibit 2.1(a) attached hereto. The Senior Term Notes will be dated as of the date of this Agreement. Senior Note I will be secured by collateral as set forth in the Security Agreement and Pledge Agreement both entered on even date. The Senior Term Notes shall have priority of payment over the Junior Term Note (as defined below) and the Shareholder Loan (as defined below). (Collectively, the Senior Term Notes and the Junior Term Note are the "Term Notes".) (b) Junior Bank agrees, subject to the terms and conditions hereinafter set forth, to make a term loan (the "Junior Term Loan") to Borrower on the date of this Agreement in the amount of $3,000,000.00. (Collectively, the Senior Term Loans and the Junior Term Loan are the "Term Loans".) Borrower's obligation to pay the Junior Term Loan will be evidenced by its promissory note (the "Junior Term Note") in substantially the form of Exhibit 2.1(b) attached hereto. The Junior Term Note will be dated the date of this Agreement. The Junior Term Note shall be subordinate in payment to the Senior Term Notes. (c) Principal payments on the Senior Term Notes shall be due and payable in equal monthly installments in immediately available funds at the principal office of the Senior Bank in the last day of each month in arrears, beginning on February 28, 2002 with a final payment of principal due on April 30, 2006. Interest will accrue on the principal amount of Senior Note I at the Prime Rate plus 125 basis points and on Senior Note II at the Prime Rate plus 175 basis points, unless increased or decreased pursuant to the terms thereof. Interest payments will be made in immediately available funds at the principal office of the Senior Bank in the last day of each month in arrears, beginning the first calendar month subsequent to the calendar month in which this Agreement is executed and continuing during the term hereof. The entire principal amount of the Senior Term Notes, plus all accrued and unpaid interest and any other charges, advances, or fees required to be paid hereunder, will be due and payable on April 30, 2006. (d) Interest will accrue on the principal amount of the Junior Term Note at the rate of 21% per annum. Interest payments will be made in immediately available funds at the principal office of the Junior Bank on the last day of each month in arrears, beginning on the last day of the calendar month subsequent to the calendar month in which this Agreement is executed and continuing during the term hereof. The entire principal amount of the Junior Term Note, plus all accrued and unpaid interest and any other charges, advances or fees required to be paid hereunder, will be due and payable on October 30, 2003. (e) The proceeds of the Term Loans will be used for the acquisition of the stock of Frontier Adjusters of America, Inc. ("Frontier") to be purchased pursuant to that certain Stock Purchase Agreement dated April 30th, 2001 by and among Borrower and United Financial Adjusting Company, Inc. (such stock, the "Frontier Stock") (such agreement, the "Stock Purchase Agreement"). (f) The indebtedness evidenced by the Junior Term Note is expressly subordinated and is junior, to the extent and in the manner set forth therein, in right of payment to the prior payment in full of all the "Senior Indebtedness." As used herein, "Senior Indebtedness" means all obligations of Borrower to Fifth Third Bancorp and any Bank Affiliate, (and their successors and assigns and any successor senior lender to Senior Bank), including but not limited to obligations in favor of Fifth Third Bank (Northeastern Ohio) represented by those certain Senior Term Notes executed on even date. 2.2 TIME OF PAYMENT. All payments of principal and interest made by Borrower shall be made no later than 2:00 P.M. on the Business Day such payments are due. All amounts paid after such time will be credited on the following date. 2.3 PREPAYMENT. Borrower may prepay any portion of the Senior Term Loans in whole or in part at any time without premium or penalty. Borrower may prepay the Junior Term loan only upon the terms and conditions set forth herein, and set forth in the Junior Term Note. 2 2.4 FEES. (a) With regard to Senior Note I, Borrower will pay to Senior Bank, a one-time, non-refundable closing fee equal to $50,000.00, as well as a note processing fee of $1,000.00. With regard to Senior Note II, Borrower will pay to Senior Bank, a one-time, non-refundable closing fee equal to $10,000.00. The fees described herein shall be due and payable upon funding of the Term Loans. (b) Borrower will pay to Junior Bank, a one-time, non-refundable closing fee equal to $60,000.00, as well as a note processing fee of $1,000.00 both of which shall be due and payable upon funding of the Term Loans. The fees to be paid pursuant to subsections (a) and (b) hereof collectively are the "Closing Fees". (c) On the date hereof, Borrower will pay to each of Senior Bank and Junior Bank a fee intended to reimburse them for their reasonable costs and expenses incurred in negotiating, reviewing and preparing this Agreement, the Term Notes, the Security Agreement, the Pledge Agreement, the Unlimited Personal Guaranty, and the other Loan Documents and all other documents required to consummate the transactions contemplated hereby. 2.5 COLLATERAL AND SECURITY. This Agreement as it relates to Senior Term Note I and Senior Note I are secured by certain collateral as described in that certain Security Agreement entered on even date (the "Security Agreement") and that certain Pledge Agreement entered on even date (the "Pledge Agreement"). SECTION 3. REPRESENTATIONS AND WARRANTIES. Borrower hereby warrants and represents to Bank the following: 3.1 ORGANIZATION AND QUALIFICATION. Borrower is a duly organized, validly existing corporation in good standing under the laws of the State of Delaware, its state of incorporation, has the power and authority (corporate and otherwise) to carry on its business and to enter into and perform this Agreement, the Security Agreement, the Pledge Agreement, the Term Notes, and the other Loan Documents, is qualified and licensed to do business in each jurisdiction in which such qualification or licensing is required and in which the failure to be so qualified would have a material adverse effect on the Borrower, taken as a whole. All information provided to Bank with respect to Borrower and its operations is true and correct in all material respects. 3.2 DUE AUTHORIZATION. The execution, delivery and performance by Borrower of this Agreement, the Security Agreement, the Pledge Agreement, the Term Notes and the other Loan Documents have been duly authorized by all necessary corporate action, and will not contravene any law or any governmental rule or order binding on Borrower, or the articles of incorporation, code of regulations or bylaws of Borrower, nor violate any agreement or instrument by which Borrower is bound nor result in the creation of a Lien on any assets of Borrower (other than the Liens in favor of Bank. Borrower has duly executed and delivered this Agreement, the Term Note and the other Loan Documents and they are valid and binding obligations of Borrower enforceable according to their respective terms 3 except as limited by equitable principles and by bankruptcy, insolvency or similar laws affecting the rights of creditors generally. Except for filings required with the Securities and Exchange Commission and applicable state securities and franchise agencies in connection with the acquisition of the Frontier Stock, no notice to or consent by any governmental body is needed in connection with this transaction. 3.3 LITIGATION. There are no suits or proceedings pending or to the knowledge of Borrower threatened against or affecting Borrower, and no proceedings before any governmental body are pending or threatened against Borrower. 3.4 MARGIN STOCK. Except for the acquisition of the Frontier Stock, no part of the Term Loans will be used to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any margin stock. If requested by Senior Bank, Borrower will furnish to Senior Bank statements in conformity with the requirements of Federal Reserve Form U-1. 3.5 BUSINESS. Except for the Stock Purchase Agreement, Borrower is not a party to or subject to any agreement or restriction which, in the opinion of Borrower's management, if terminated, would have a material adverse effect on Borrower's business, properties or prospects. 3.6 LICENSES, ETC. Borrower has obtained any and all material licenses, permits, franchises, governmental authorizations, patents, trademarks, copyrights or other rights necessary for the ownership of its properties and the advantageous conduct of its business as conducted by Borrower on the date hereof. Borrower possesses adequate licenses, patents, patent applications, copyrights, trademarks, trademark applications, and trade names to continue to conduct its business as heretofore conducted by it, without any conflict with the rights of any other person or entity. All of the foregoing are in full force and effect and none of the foregoing are in known conflict with the rights of others. 3.7 LAWS AND TAXES. Borrower is in compliance with all laws, regulations, rulings, orders, injunctions, decrees, conditions or other requirements applicable to or imposed upon Borrower by any law or by any governmental authority, court or agency, which if violated would have a material adverse effect on Borrower's business, properties or prospects. Borrower has filed all required tax returns and reports that are now required to be filed by it in connection with any federal, state and local tax, duty or charge levied, assessed or imposed upon Borrower or its assets, including unemployment, social security, and real estate taxes. Borrower has paid all taxes which are now due and payable. No taxing authority has asserted or assessed any additional tax liabilities against Borrower which are outstanding on the date of this Agreement, and Borrower has not filed for any extension of time for the payment of any tax or the filing of any tax return or report. 3.8 FINANCIAL CONDITION. Taken as a whole, the historical financial information relating to Borrower (excluding projections, forecasts and other forward-looking information) (the "Financial Information") which has been or may hereafter be delivered by Borrower or on its behalf to Bank is true and correct 4 in all material respects. All Financial Information in the form of annual, quarterly or monthly financial statements has been prepared in accordance with generally accepted accounting principles consistently applied (except as noted in the notes to such financial statements). Borrower has no material obligations or liabilities of any kind required to be set forth in audited financial statements (or notes thereof) not disclosed in the Financial Information (considered as a whole). There has been no material adverse change in the financial condition of Borrower nor has borrower suffered any damage, destruction or loss which has adversely affected its business or assets since the submission of the most recent Financial Information to Bank. Notwithstanding the foregoing, Bank acknowledges that Borrower was recently formed and has no operating history and thus Financial Information of Borrower is limited to the period from its initial organization and formation. 3.9 TITLE. Borrower has good and marketable title to the assets reflected on the most recent balance sheet submitted to Bank, free and clear from all liens and encumbrances of any kind, except for (collectively, the "Permitted Liens"): (a) current taxes and assessments not yet due and payable; (b) liens and encumbrances, if any, reflected or noted on such balance sheet or notes thereto; (c) assets disposed of in the ordinary course of business; (d) Liens granted by Borrower under purchase money financing arrangements for the purchase of real property and/or equipment reasonably required to conduct its business in the ordinary course; (e) as set forth in Schedule 3.9 attached hereto; (f) Liens imposed by law which secure amounts not at the time due and payable; and (g) Liens in favor of Bank and any Bank Affiliate. 3.10 DEFAULTS. Borrower is in compliance with all agreements applicable to it and there does not now exist any default or violation by Borrower of or under any of the terms, conditions or obligations of (a) its Articles of Incorporation or Regulations/Bylaws, or (b) any indenture, mortgage, deed of trust, franchise, permit, contract, agreement or other instrument to which Borrower is a party or by which it is bound, and, under which a default would have a material adverse effect on Borrower's business, properties or prospects; and the consummation of the transactions contemplated by this Agreement will not result in such default or violation. 3.11 ENVIRONMENTAL LAWS. (a) Borrower has obtained all permits, licenses and other authorizations or approvals which are required under Environmental Laws and Borrower is in compliance in all material respects with all terms and conditions of the required permits, licenses, authorizations and approvals, and is also in compliance in all material respects with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws. (b) Borrower is not aware of, and has not received notice of, any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance or continued compliance, in any material respect, with Environmental Laws, or may give rise to any material common law or legal liability, or otherwise form the basis of any material claim, action, demand, suit, proceeding, hearing, study or investigation, 5 based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, chemical, or industrial, toxic or hazardous substance or waste. (c) There is no civil, criminal or administrative action suit, demand, claim, hearing, notice or demand letter, notice of violation, investigation or proceeding pending or threatened against Borrower, relating in any way to Environmental Laws. 3.12 SUBSIDIARIES AND PARTNERSHIPS. Except as set forth on Schedule 3.12, Borrower has no subsidiaries and is not a party to any partnership agreement or joint venture agreement. 3.13 ERISA. Borrower and all individuals or entities along with Borrower would be treated as a single employer under ERISA or the Internal Revenue Code of 1986, as amended (an "ERISA Affiliate"), are in compliance in all material respects with all of their obligations to contribute to any "employee benefit plan" as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, and any regulations promulgated thereunder from time to time ("ERISA"). Borrower and each of its ERISA Affiliates are in compliance in all material respects with ERISA, and there exists no event described in Section 4043(b) thereof ("Reportable Event"). SECTION 4. AFFIRMATIVE COVENANTS. 4.1 BOOKS AND RECORDS. Borrower will maintain proper books of account and records and enter therein complete and accurate entries and records of all of its transactions in accordance with generally accepted accounting principles and give representatives of Bank access thereto at all reasonable times, including permission to examine, copy and make abstracts from any such books and records and such other information which might be helpful to Bank in evaluating the status of the Loans as it may reasonably request from time to time. 4.2 FINANCIAL STATEMENTS. Borrower will maintain a standard and modern system for accounting and will furnish to Senior Bank and Junior Bank: (a) Within forty (40) days after the end of each month, a copy of Borrower's consolidated financial statements for that month and for the year to date (with a comparison to the budget of Borrower and to the prior year results for the same period) in a form reasonably acceptable to Bank, prepared and certified as complete and correct in all material respects, subject to changes resulting from year-end adjustments, by the principal financial officer of Borrower; (b) Within one hundred twenty (120) days after the end of each fiscal year, a copy of Borrower's consolidated financial statements for that year audited by a firm of independent certified public accountants acceptable to Bank (which acceptance will not be unreasonably withheld), and accompanied by a standard audit opinion of such accountants without qualification; 6 (c) All of the statements referred to in (a), and (b) above shall be in conformance with generally accepted accounting principles; (d) Within forty (40) days of the close of each month, a report reflecting the volume of billed claims processed by each licensee and/or franchisee of Borrower and any operating subsidiary thereof, in form acceptable to Bank.; (e) Within forty (40) days of the close of each fiscal quarter, a certificate signed by the principal financial officer of Borrower (i) stating he is familiar with all documents relating to Bank and that no Event of Default specified in this Agreement or in any other Obligation, nor any event which upon notice or lapse of time, or both would constitute such an Event of Default, has occurred, or if any such condition or event existed or exists, specifying it and describing what action Borrower has taken or proposes to take with respect thereto, and (ii) setting forth, in summary form, figures showing the financial status of Borrower in respect of the financial restrictions contained in this Agreement; (f) Prior to the end of each fiscal year, a projected balance sheet, projected income statement and projected statement of cash flow for the subsequent fiscal year in form acceptable to Bank; (g) Within forty (40) days of the close of each fiscal quarter, a year-to-date report of all gross billings by each office of Borrower, along with accompanying margin information, in form acceptable to Bank; (h) Within three (3) days after any officer of Borrower obtains knowledge of any condition or event which constitutes or, after notice or lapse of time or both, constitutes an Event of Default under this Agreement or any other Obligation, a certificate of such person specifying the nature and period of the existence thereof, and what action Borrower has taken or is taking or proposes to take in respect thereof; (i) Upon request, copies of all federal, state and local income tax returns and such other information as Bank may reasonably request; (j) Intentionally Omitted. (k) Within forty (40) days of the close of each fiscal quarter, Borrower shall deliver to Senior Bank and Junior Bank a Compliance Certificate in the form attached hereto as Exhibit 4.2(k) confirming, in addition to the other information set forth therein, the Borrower's compliance with the financial covenants set forth herein and that no Event of Default has occurred. If at any time Borrower has any additional subsidiaries which have financial statements that could be consolidated with those of Borrower under generally accepted accounting principles, the financial statements required by subsections (a) and (b) above will be the financial statements of Borrower and all such subsidiaries prepared on a consolidated and consolidating basis. 7 4.3 CONDITION AND REPAIR. Borrower will maintain its assets taken as a whole in good repair and working order (making allowances for obsolescence in the ordinary course and normal wear and tear) and will make all appropriate repairs and replacements thereof. 4.4 INSURANCE. Borrower will insure its properties and business against loss or damage of the kinds and in the amounts customarily insured against by corporations with established reputations engaged in the same or similar business as Borrower, and shall further maintain a "key-man" policy of insurance upon the life of its president John M. Davies with a minimum death benefit of $8,000,000 ("Key Man Policy"), with the beneficiary of said policy being the Borrower, and the requisite proceeds being assigned to Senior Bank and Junior Bank in amounts relative to the outstanding balance due of the Term Notes. All such policies will (a) be issued by financially sound and reputable insurers, (b) name Senior Bank and Junior Bank as additional insureds and, where applicable, as loss payees under a lender loss payable endorsement satisfactory to Bank, and (c) will provide for thirty (30) days written notice to Senior Bank and Junior Bank before such policy is altered or canceled. Compliance with this subsection shall be evidenced by a collateral assignment delivered to Senior Bank and Junior Bank by Borrower within ninety (90) days from the execution of this Agreement. If such collateral assignment is not delivered within such 90-day period, the interest rate on the Senior Term Notes shall increase 25 basis points until such collateral assignment is provided. 4.5 TAXES. Borrower will pay when due all taxes, assessments and other governmental charges imposed upon it or its assets, franchises, business, income or profits before any penalty or interest accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which by law might be a lien or charge upon any of its assets, provided that (unless any material item or property would be lost, forfeited or materially damaged as a result thereof) no such charge or claim need be paid if it is being diligently contested in good faith, if Senior Bank and Junior Bank are notified in advance of such contest and if Borrower establishes an adequate reserve or other appropriate provision required by generally accepted accounting principles and deposits with Senior Bank and Junior Bank cash or bond in an amount acceptable to Senior Bank and Junior Bank. 4.6 EXISTENCE; BUSINESS. Subject to Schedule 4.6, Borrower will (a) maintain its existence, (b) engage primarily in business of the same general character as that now conducted, and (c) refrain from entering into any lines of business substantially different from the business or activities in which Borrower is presently engaged. 4.7 COMPLIANCE WITH LAWS. Borrower will comply in all material respects with all federal, state and local laws, regulations and orders applicable to Borrower or its assets including but not limited to all Environmental Laws, in all respects material to Borrower's business, assets or prospects and will immediately notify Senior Bank and Junior Bank of any violation of any rule, regulation, statute, ordinance, order or law relating to the public health or the environment and of any complaint or notifications received by Borrower regarding to any environmental or safety and health rule, regulation, statute, ordinance or law. 8 4.8 NOTICE OF DEFAULT. Borrower will, within three (3) days of its knowledge thereof, give written notice to Senior Bank and Junior Bank of: (a) the occurrence of any event or the existence of any condition which would be, after notice or lapse of applicable grace periods, an Event of Default under this Agreement or any other Obligation, and (b) the occurrence of any event or the existence of any condition which would prohibit Borrower from continuing to make the representations set forth in this Agreement. 4.9 COSTS. Borrower will pay to Bank its fees, reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees, other professionals' fees, appraisal fees, environmental assessment fees (including Phase I assessments), expert fees, court costs, litigation and other expense (collectively, "Costs") reasonably incurred or paid by Bank in connection with the negotiating, documenting, administering and enforcing, the Term Loan and the Loan Documents and the defense, preservation and protection of Bank's rights and remedies thereunder, whether incurred in bankruptcy, insolvency, foreclosure or other litigation or proceedings or otherwise. The Costs will be due and payable upon demand by Bank. If Borrower fails to pay the Costs when due within ten (10) business days after demand, Bank is entitled to disburse such sums as an advance under the Term Loan. Thereafter, the Costs will bear interest from the date incurred or disbursed at the highest rate set forth in the Term Notes. This provision will survive the termination of this Agreement and/or the repayment of any amounts due or the performance of any Obligation. 4.10 DEPOSITORY/BANKING SERVICES. So long as this Agreement is in effect, Bank or any Bank Affiliate will be the principal depository in which all of Borrower's funds are deposited, and the principal bank of account of Borrower; provided, however, Borrower may maintain cash accounts with other depository bank so long as Bank has a perfected lien on such accounts through a deposit account control agreement of similar agreement in form acceptable to Bank and such account is not a principal depository account. 4.11 OTHER AMOUNTS DEEMED LOANS. If Borrower fails to pay any tax, assessment, governmental charge or levy or to maintain insurance within the time permitted or required by this Agreement, or to discharge any Lien prohibited hereby, or to comply with any other Obligation, Bank may, but shall not be obligated to, pay, satisfy, discharge or bond the same for the account of Borrower, and to the extent permitted by law and at the option of Bank, all monies so paid by Bank on behalf of Borrower will be deemed Loans and Obligations. 4.12 NON-INTEREST BEARING ACCOUNT. For a period of one year from the date hereof, Borrower shall maintain a non-interest bearing deposit account with a minimum balance of $250,000.00 at Senior Bank. SECTION 5. NEGATIVE COVENANTS. 5.1 INDEBTEDNESS. Except as set forth on attached Schedule 5.1, Borrower will not incur, create, assume or permit to exist any additional Indebtedness for borrowed money (other than the Obligations) or Indebtedness on account of deposits, advances or progress payments under contracts, notes, bonds, debentures or similar obligations or other indebtedness evidenced by notes, 9 bonds, debentures, capitalized leases or similar obligations, in excess of the aggregate sum of $250,000 during such time as any of the Obligations are outstanding, all of which shall be subordinate to the Obligations. 5.2 PREPAYMENTS. Borrower will not voluntarily prepay any Indebtedness owing by Borrower prior to the stated maturity date thereof other than (i) the Obligations and (ii) Indebtedness to trade creditors where the prepayment will result in a discount on the amount due. 5.3 LEASES. Except for the Operating Leases, and as otherwise set forth in Section 5.4 hereof, Borrower will not enter into any lease of real or personal property as lessee without the prior written consent of Senior Bank. 5.4 CAPITAL EXPENDITURES. Borrower will not make any plant or fixed capital expenditure, or any commitment therefor, or obtain equipment subject to a purchase money security interest, trust deed or lease, exceeding the aggregate sum of $1,000,000 during such time as any of the Obligations are outstanding. 5.5 PLEDGE OR ENCUMBRANCE OF ASSETS. Other than the Permitted Liens, Borrower will not create, incur, assume or permit to exist, arise or attach any Lien in any present or future asset, except for Liens to Bank, Liens existing on the date of this Agreement which have been disclosed to and approved by Bank and Liens imposed by law which secure amounts not at the time due and payable. 5.6 GUARANTEES AND LOANS. Borrower will not enter into any direct or indirect guarantees other than by endorsement of checks for deposit or other than in the ordinary course of business nor make any advance or loan other than in the ordinary course of business as presently conducted, including, without limitation, loans and advances to employees of Borrower. 5.7 CAPITAL STOCK; DIVIDENDS. Borrower will not issue any additional shares of its capital stock, nor grant any warrants, options or other rights to purchase such stock. Borrower will not (a) declare or pay any dividend or distributions on its capital stock; (b) make any payments of any kind to its shareholders (including, without limitation, debt repayments, payments for goods or services or otherwise, but excluding ordinary salary payments to shareholders employed by Borrower) or (c) redeem any shares of its capital stock in any fiscal year. NOTE: The following financial covenants 5.8-5.14 shall be based on Borrower's consolidated financial statements, including Frontier Adjusters of America, Inc. and any other majority owned subsidiaries, before giving effect to minority shareholder interests. It is hereby agreed that the bank fees and transaction costs associated with Borrower's acquisition of Frontier Adjusters of America, Inc. will be excluded from the computations of the financial covenants 5.8-5.14 as described below: 5.8 MAXIMUM SENIOR INDEBTEDNESS TO EBITDA RATIO. Borrower shall not permit the ratio of its Senior Indebtedness to EBITDA to exceed 2.25:1.00 at any time for a period of twenty-four months following the execution of this Agreement, and 2.00:1.00 at any time thereafter, as measured on a rolling four quarter basis. 10 5.9 MAXIMUM INDEBTEDNESS TO EBITDA. Borrower shall not permit the ratio of its Indebtedness to EBITDA to exceed 2.85:1.00 at any time, as measured on a rolling four quarter basis. 5.10 MINIMUM EBIT TO INTEREST EXPENSE. Borrower shall maintain a minimum ratio of EBIT to Interest Expense of 2.0:1.00 at all times, as measured on a rolling four quarter basis. 5.11 DEBT SERVICE COVERAGE RATIO. Borrower shall maintain a minimum Debt Service Coverage Ratio of 1.15:1.00 at all times, as measured at the end of each fiscal quarter for the preceding four fiscal quarters. This covenant shall not apply to the fiscal quarter in which the Term Loan is repaid, and the succeeding three fiscal quarters thereafter. 5.12 MERGER; DISPOSITION OF ASSETS. Except as set forth on Schedule 5.12, Borrower will not (a) change its capital structure, (b) merge or consolidate with any corporation, (c) amend or change its Articles of Incorporation or Code of Regulations\Bylaws or (d) sell, transfer, lease or otherwise dispose of all or any part of its assets, whether now owned or hereafter acquired, or dispose of its stock in any Subsidiary, whether now owned or hereafter acquired, excepting asset or stock of Subsidiaries of Borrower leased, transferred, or sold in the normal course of Borrower's business the value of which do not exceed in the aggregate an amount equal to five percent (5%) of the total assets of the Borrower at any time that any of the Obligations remain outstanding. 5.13 MINIMUM TANGIBLE NET WORTH. As measured at the close of the fiscal quarter ended December 31, 2001, Borrower's Minimum Tangible Net Worth shall be not less than ($4,000,000) (with "( )" denoting negative amounts). At the close of each subsequent fiscal quarter, Borrower shall not permit its Minimum Tangible Net Worth to be less than the sum of (i) its Tangible Net Worth as measured at the close of the immediately preceding fiscal quarter PLUS (ii) an amount equal to fifty percent (50%) of its net income for the preceding fiscal quarter. 5.14 INVESTMENTS. Except as set forth on Schedule 5.14, Borrower will not purchase or hold beneficially any stock, securities or evidences of indebtedness of, or make any investment or acquire any interest in, any other firm, partnership, corporation or entity other than short term investments of excess working capital in one or more of the following: (a) investments (of one year or less) in direct or guaranteed obligations of the United States, or any agencies thereof; and (b) investments (of one year or less) in certificates of deposit of banks or trust companies organized under the laws of the United States or any jurisdiction thereof, provided that such banks or trust companies are insured by the Federal Deposit Insurance Corporation and have capital in excess of $25,000,000. 5.15 PAYMENT ON SUBORDINATED DEBT. Borrower shall make no payment, principal, interest, or otherwise, upon the Subordinated Debt while the Term Loans are outstanding. Borrower's Subordinated Debt shall not at any time exceed in the aggregate $1,000,000 during the existence of the Obligations without the prior written consent of Bank. 11 5.16 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule 5.16, Borrower will not (a) directly or indirectly issue any guarantee for the benefit of any of its Affiliates other than the Obligations, (b) directly or indirectly make any loans or advances to or investments in any of its Affiliates, (c) enter into any transaction with any of its Affiliates, other than transactions entered into on an arm's length basis in the normal course of Borrower's business, (d) divert (or permit anyone to divert) any of its business opportunities to any Affiliate or any other corporate or business entity in which Borrower or its shareholders holds a direct or indirect interest, or (e) make any other payment to any Affiliate. SECTION 6. EVENTS OF DEFAULT AND REMEDIES. 6.1 EVENTS OF DEFAULT. Any of the following events will be an Event of Default ("Event of Default"): (a) Any representation or warranty made by Borrower herein or in any of the Loan Documents is incorrect when made or reaffirmed; or (b) Borrower fails to make payment of any principal or interest on any Obligation within five (5) Business Days after such payment is due and payable, by acceleration or otherwise; or (c) A default occurs under any non-monetary Obligation and such default is not cured within five (5) Business Days after notice from either Senior Bank or Junior Bank; or (d) A court enters a decree or order for relief with respect to Borrower, or any guarantor of the Obligations in an involuntary case under any applicable bankruptcy, insolvency or other similar law then in effect, or appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of Borrower or Guarantor or for any substantial part of its property, or orders the wind-up or liquidation of its affairs; or a petition initiating an involuntary case under any such bankruptcy, insolvency or similar law is filed and is pending for sixty (60) days without dismissal; or (e) Borrower or Guarantor commences a voluntary case under any applicable bankruptcy, insolvency or other similar law in effect, or makes any general assignment for the benefit of creditors, or fails generally to pay its debts as such debts become due, or takes corporate action in furtherance of any of the foregoing; or (f) Borrower defaults under the terms of any Indebtedness (other than loans owing by Borrower to its shareholders which are subordinated to payment of the Obligations hereunder) or lease involving total payment obligations of Borrower in excess of $300,000 and such default gives any creditor or lessor the right to accelerate the maturity of any such Indebtedness or lease payments which right is not contested by Borrower or is determined by any court of competent jurisdiction to be valid; or 12 (g) Final judgment of the payment of money in excess of $150,000 is rendered against Borrower and remains undischarged for thirty (30) days during which execution is not effectively stayed; or (h) An Event of Default or default after giving effect to any applicable grace or cure periods occurs under any Loan Document, or any guarantor of any of the Obligations denies his obligation to guaranty any Obligations then existing or attempts to limit or terminate his obligation to guaranty any future Obligations, including future Term Loans; or (i) The dissolution of Borrower or the death of Guarantor; or (j) The commencement of any foreclosure proceedings, proceedings in aid of execution, attachment actions, levies against, or the filing by any taxing authority of a lien against any of the Collateral or any property securing the repayment of any of the Obligations, which has not been dismissed within 60 days of commencement; or (k) The loss, theft or substantial damage to the Collateral or any property securing the repayment of the Obligations if the result of such occurrence will be, in Senior Bank's commercially reasonable judgment, the failure or inability of Borrower to continue substantially normal operation of its business within thirty (30) days of the date of such occurrence; or (l) Bank ceases to be Borrower's (i) principal depository Bank in which all of Borrower's funds are deposited (except as otherwise permitted hereunder), and (ii) principal bank of account; or (m) A Reportable Event (as defined in ERISA) occurs with respect to any employee benefit plan maintained by Borrower for its employees other than a Reportable Event caused solely by a decrease in employment; or a trustee is appointed by a United States District Court to administer any employee benefit plan; or the Pension Benefit Guaranty Corporation institutes proceedings to terminate any of Borrower's employee benefit plans; or (n) [Intentionally omitted.] (o) Any event occurs which might, in Senior Bank's commercially reasonable opinion, have a material adverse effect on the Collateral or on Borrower's financial condition, operations, assets or prospects, or on any other property securing the repayment of the Obligations; or 13 (p) A change occurs in the ownership of Borrower's common stock so that more than 20% of the outstanding common stock of Borrower is no longer owned by those parties owning such stock on the date of this Agreement or entities controlled by those parties; or (q) The default by any party under any subordination agreement subordinating the payment of any indebtedness of Borrower to that owed to Bank or the priority of any liens held by such party in Collateral securing such indebtedness to the liens of Bank therein, or Borrower makes any payment on such subordinated debt that is not permitted by the terms of the subordination or by this Agreement; or (r) (i) Any of the Loan Documents or the authority of any party thereto to carry out the intent of the Loan Documents are deemed invalid or ineffective by a court of competent jurisdiction; (ii) any party executing any of the Loan Documents asserts that any of such Loan Documents is not a legal, valid and binding obligation of the party thereto enforceable in accordance with its terms; (iii) the security interest or Lien purporting to be created by any of the Loan Documents will for any reason cease to be a valid, perfected lien subject to no other liens other than Liens permitted by the terms of this Agreement; or (iv) any Loan Document is amended, hypothecated, subordinated, terminated or discharged, or if any person is released from any of its covenants or obligations under any of the Loan Documents, except as permitted by Bank in writing; or (s) [Intentionally omitted.] (t) Bank in the exercise of its commercially reasonable judgment deems itself insecure or there has been a material adverse change in the financial status of Borrower; or (u) The filing of any lien or charge against the Collateral or any part thereof in excess of $10,000 which is not removed to the satisfaction of Senior Bank within a period of 30 days thereafter; or (v) The abandonment by Borrower of all or any part of the Collateral; or (w) The failure of Borrower to own 80% or more of the outstanding shares of Frontier by February 28, 2002; (x) Borrower's failure to enter into an Amended and Restated Credit Agreement and associated Loan Documents upon Borrower's becoming an 80% or greater shareholder of Frontier in which Borrower has caused Frontier to execute in favor of Bank or assume one or more Unlimited Guarantys of the Obligations, and has caused Frontier to grant to Bank a first and best security interest in and lien upon all assets of Frontier to secure the Obligations. 14 (y) Borrower's failure to deliver to Senior Bank all share certificates representing the Frontier stock, executed in blank, within twenty-four hours of Borrower's receipt of same. 6.2 REMEDIES. If any Event of Default occurs, Bank may (i) cease advancing money hereunder, (ii) declare all Obligations to be immediately due and payable, whereupon such Obligations will immediately become due and payable, (iii) exercise any and all rights and remedies provided by applicable law and the Loan Documents, (iv) proceed to realize upon the Collateral or any property securing the Obligations, including, without limitation, causing all or any part of the Collateral to be transferred or registered in its name or in the name of any other person, firm or corporation, with or without designation of the capacity of such nominee, all without presentment, demand, protest, or notice of any kind, each of which are hereby expressly waived by Borrower. Borrower shall be liable for any deficiency remaining after disposition of any Collateral, and waives all valuation and appraisement laws. 6.3 SETOFF. If any Event of Default will occur, Bank is authorized, without notice to Borrower, to offset and apply to all or any part of the Obligations all moneys, credits and other property of any nature whatsoever of Borrower now or at any time hereafter in the possession of, in transit to or from, under the control or custody of, or on deposit with (whether held by Borrower individually or jointly with another party), Bank, including but not limited to certificates of deposit. 6.4 DEFAULT RATE. After the occurrence of an Event of Default, all amounts of principal outstanding as of the date of the occurrence of such Event of Default will accrue interest at the Default Rate, in Bank's sole discretion, without notice to Borrower. This provision does not constitute a waiver of any Events of Default or an agreement by Bank to permit any late payments whatsoever. 6.5 LATE PAYMENT PENALTY. If any payment of principal is not paid when due (whether at maturity, by acceleration or otherwise after the expiration of any applicable notice, grace and cure periods), Borrower agrees to pay to Bank a late payment fee equal to five percent (5%) of the payment amount then due. 6.6 NO REMEDY EXCLUSIVE. No remedy set forth herein is exclusive of any other available remedy or remedies, but each is cumulative and in addition to every other remedy available under this Agreement, the Loan Documents or as may be now or hereafter existing at law, in equity or by statute. Borrower waives any requirement of marshaling of assets which may be secured by any of the Loan Documents. 6.7 EFFECT OF TERMINATION. The termination of this Agreement will not affect any rights of either party or any obligation of either party to the other, arising prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into, rights created or obligations incurred prior to such termination have been fully disposed of, concluded or liquidated. 15 6.8 NO ADEQUATE REMEDY AT LAW. Borrower recognizes that in the event Borrower fails to pay, perform, observe or discharge any of its obligations under this Agreement, the Note or the other Loan Documents, no remedy at law will provide adequate relief to Bank and Borrower agrees that Bank shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving that it has incurred actual damages. SECTION 7. CONDITIONS PRECEDENT. 7.1 CONDITIONS TO THE LOAN. Bank will have no obligation to make or advance the Term Loans until Borrower and/or Guarantors have delivered to Bank at or before the closing date, in form and substance satisfactory to Bank: (a) Executed versions of the Loan Documents. (b) A Certificate of Borrower in the form of Exhibit 7.1(b) and all attachments thereto. (c) A Certificate of MM Merger Corporation in the form of Exhibit 7.1(b) and all attachments thereto. (d) A favorable opinion of counsel to Borrower, in form acceptable to Bank. (e) A favorable opinion of counsel to MM Merger Corporation, in form acceptable to Bank. (f) The Loan Documentation Fee and Closing Fee have been paid in full. (g) Certificate of Insurance relating to loss and damage to Borrower's properties and business as described in Section 4.4 hereof, if applicable. (h) John M. Davies and Allyn A. Davies shall have delivered to Senior Bank an Unlimited Payment Guaranty of all of the Obligations in the form attached as Exhibit 7.1(h). (i) MM Merger Corporation shall have delivered to Senior Bank an Unlimited Payment Guaranty of all of the Obligations in the form attached as Exhibit 7.1(i). (j) UCC-1 Financing Statements of Borrower and MM Merger Corporation. (k) Such additional information and materials as Bank may reasonably request. 7.2 CONDITIONS TO TERM LOAN. On the date of the Term Loan, the following statements will be true: 16 (a) All of the representations and warranties contained herein and in the Loan Documents will be correct in all material respects as though made on such date except for those changes permitted under this Agreement; (b) No event will have occurred and be continuing, or would result from such Term Loan, which constitutes an Event of Default, or would constitute an Event of Default but for the requirement that notice be given or lapse of time or both; The acceptance by Borrower of the proceeds of the Term Loan will be deemed to constitute a representation and warranty by Borrower that the conditions in Section 7.2 of this Agreement, other than those that have been waived in writing by Bank, have been satisfied. SECTION 8. MISCELLANEOUS PROVISIONS. 8.1 MISCELLANEOUS. This Agreement, the exhibits and the other Loan Documents are the complete agreement of the parties hereto and supersede all previous understandings relating to the subject matter hereof. This Agreement may be amended only in writing signed by the party against whom enforcement of the amendment is sought. This Agreement may be executed in counterparts. If any part of this Agreement is held invalid, illegal or unenforceable, the remainder of this Agreement will not in any way be affected. This Agreement is and is intended to be a continuing agreement and will remain in full force and effect until the Loans are finally and irrevocably paid in full and the Term Loan is terminated. 8.2 WAIVER BY BORROWER. Borrower waives notice of non-payment, demand, presentment, protest or notice of protest of any Accounts or other Collateral, and all other notices (except those notices specifically provided for in this Agreement). 8.3 BINDING EFFECT. This Agreement will be binding upon and inure to the benefit of the respective legal representatives, successors and assigns of the parties hereto; however, Borrower may not assign or transfer any of its rights or delegate any of its obligations under this Agreement or under any of the Loan Documents, by operation of law or otherwise. Senior Bank and/or Junior Bank (and any subsequent assignee) may transfer and assign any of its rights or delegate any of its duties under this Agreement or may transfer or assign partial interests or participation in the Loans to other persons. Senior Bank and Junior Bank may disclose to all prospective and actual assignees and participants all financial, business and other information about Borrower which Senior Bank or Junior Bank may possess at any time. 8.4 SUBSIDIARIES. If Borrower has any additional wholly-owned Subsidiaries at any time during the term of this Agreement, the term "Borrower" in each representation, warranty and covenant herein will mean "Borrower" and each Subsidiary individually and in the aggregate, and Borrower will cause each Subsidiary to be in compliance therewith. 8.5 SECURITY. The Obligations are secured as provided herein, in this Agreement, the Security Agreement attached hereto as Exhibit 8.5, in the Loan Documents and in each other document or agreement which by its terms secures the repayment or performance of the Obligations 17 8.6 SURVIVAL. All representations, warranties, covenants and agreements made by Borrower herein and in the Loan Documents will survive the execution and delivery of this Agreement, the Loan Documents and the issuance of the Term Note. 8.7 DELAY OR OMISSION. No delay or omission on the part of Senior Bank or Junior Bank in exercising any right, remedy or power arising from any Event of Default will impair any such right, remedy or power or any other right remedy or power or be considered a waiver or any right, remedy or power or any Event of Default nor will the action or omission to act by Senior Bank or Junior Bank upon the occurrence of any Event of Default impair any right, remedy or power arising as a result thereof or affect any subsequent Event of Default of the same or different nature. 8.8 NOTICES. Any notices under or pursuant to this Agreement will be deemed duly sent when delivered in hand or when mailed by registered or certified mail, return receipt requested, addressed as follows: To Borrower: Merrymeeting, Inc. c/o 1300 East 9th Street, Suite 900 Cleveland, Ohio 44114 Attention: John Davies, President Copy to: Ulmer & Berne LLP 1300 East Ninth St., Suite 900 Cleveland, Ohio 44114 Attn: Stephen Markus To Junior Bank: The Fifth Third Bank 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attention: Commercial Loan Department Copy to: John J. Schmidt Statman, Harris, Siegel & Eyrich, LLC 2900 Chemed Center 255 East Fifth Street Cincinnati, Ohio 45202 To Senior Bank: Fifth Third Bank (Northeastern Ohio) 1404 East Ninth Street Cleveland, Ohio 44114 Attn: Commercial Loan Department 18 Copy to: Mansour, Gavin, Gerlack & Manos Co., LPA 55 Public Square, #2150 Cleveland, Ohio 44113-1994 Attn: Anthony J. Coyne Either party may change such address by sending written notice of the change to the other party. 8.9 NO PARTNERSHIP. Nothing contained herein or in any of the Loan Documents is intended to create or will be construed to create any partnership, joint venture or other relationship between Bank and Borrower other than as expressly set forth herein or therein and will not create any joint venture, partnership or other relationship. 8.10 INDEMNIFICATION. If after receipt of any payment of all or part of the Obligations, Bank is for any reason compelled to surrender such payment to any person or entity, because such payment is determined to be void or voidable as a preference, impermissible setoff, or diversion of trust funds, or for any other reason, this Agreement will continue in full force and effect and Borrower will be liable to, and will indemnify, save and hold Bank, its officers, directors, attorneys, and employees harmless of and from the amount of such payment surrendered. The provisions of this Section will be and remain effective notwithstanding any contrary action which may have been taken by Bank in reliance on such payment, and any such contrary action so taken will be without prejudice to Bank's rights under this Agreement and will be deemed to have been conditioned upon such payment becoming final, indefeasible and irrevocable. In addition, Borrower will indemnify, defend, save and hold Bank, its officers, directors, attorneys, and employees harmless of, from and against all claims, demands, liabilities, judgments, losses, damages, costs and expenses, joint or several (including all accounting fees and attorneys' fees reasonably incurred), that Bank or any such indemnified party may incur arising out of this Agreement, any of the Loan Documents or any act taken by Bank hereunder except for the willful misconduct or gross negligence of such indemnified party. The provisions of this Section will survive the termination of this Agreement. 8.11 GOVERNING LAW; JURISDICTION. This Agreement, the Note and the other Loan Documents will be governed by the domestic laws of the State of Ohio. Borrower agrees that the state and federal courts in Cuyahoga or Hamilton County, Ohio, or any other court in which Bank initiates proceedings have exclusive jurisdiction over all matters arising out of this Agreement, and that service of process in any such proceeding will be effective if mailed to Borrower at its address described in the Notices section of this Agreement. BANK AND BORROWER HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 8.12 WARRANT OF ATTORNEY: The undersigned, jointly and severally, authorizes any attorney-at-law to appear in any court of record after maturity of this note, whether by acceleration or otherwise, waive the issuance and service of process and to confess judgment against them in favor of the Bank for the principal sum due hereon together with interest, charges, court costs and attorney's fees, and to waive and release all errors, rights of appeal, exemptions and stays of execution. The undersigned also agrees that the attorney acting for the undersigned as set forth in this paragraph may be compensated by 19 Bank for such services, and the undersigned waive any conflict of interest caused by such representation and compensation arrangement. This warrant of attorney to confess judgment shall be construed under the laws of the State of Ohio. (THIS SPACE INTENTIONALLY LEFT BLANK.) 20 IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement by their duly authorized officers as of the date first above written. - -------------------------------------------------------------------------------- WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - -------------------------------------------------------------------------------- MERRYMEETING, INC. By: /s/ JOHN M. DAVIES ----------------------------------- Print Name: JOHN M. DAVIES --------------------------- Its: PRESIDENT ---------------------------------- FIFTH THIRD BANK By: /s/ THOMAS R. WILLIAMS ----------------------------------- Print Name: THOMAS R. WILLIAMS --------------------------- Its: VICE PRESIDENT ---------------------------------- FIFTH THIRD BANK (NORTHEAST OHIO) By: /s/ DAVID J. WILLIAMS ----------------------------------- Print Name: DAVID J. WILLIAMS --------------------------- Its: VICE PRESIDENT ---------------------------------- 21 EXHIBITS TO CREDIT AGREEMENT BETWEEN MERRYMEETING, INC. AND FIFTH THIRD BANK Exhibit 1 Definitions Exhibit 2.1(a) Senior Term Notes Exhibit 2.1(b) Junior Term Note Exhibit 4.2(k) Financial Certificate of Borrower Exhibit 7.1(b)(1) Certificate of Borrower Exhibit 7.1(b)(2) Certificate of MM Merger Corporation Exhibit 7.1(h) Unlimited Payment Guaranty of John M. Davies and Allyn A. Davies Exhibit 7.1(i) Unlimited Payment Guaranty of MM Merger Corporation Exhibit 8.5(a) Security Agreement of Borrower Exhibit 8.5(b) Security Agreement of MM Merger Corporation 22 EXHIBIT 1 DEFINITIONS 1. "Accounts" has the meaning assigned to that term in the Security Agreement. 2. "Affiliate" means, as to Borrower, (a) any person or entity which, directly or indirectly, is in control of, is controlled by or is under common control with, Borrower, or (b) any person who is a director, officer or employee (i) of Borrower or (ii) of any person described in the preceding clause (a). 3. "Bank Affiliate" means Fifth Third Bancorp and any person or entity which, directly or indirectly, is in control of, is controlled by or is under common control with Bank or Fifth Third Bancorp. 4. "Business Day" means any day which the Bank and the Federal Reserve Bank of Cleveland is open for business. 5. "Collateral" has the meaning assigned to that term in any Security Agreement. 6. "Current Assets" means all assets which may properly be classified as current assets in accordance with generally accepted accounting principles, provided that for the purpose of determining the Current Assets of Borrower (a) notes and accounts receivable will be included only if good and collectible and payable on demand or within twelve (12) months from the date as of which Current Assets are to be determined (and if not directly or indirectly renewable or extendible, at the option of the debtors, by their terms or by the terms of any instrument or agreement relating thereto, beyond such twelve (12) months) and will be taken at their face value less reserves determined to be sufficient in accordance with generally accepted accounting principles, and (b) the cash surrender value of life insurance policies will be excluded. 7. "Current Liabilities" means all Indebtedness maturing on demand or within twelve (12) months from the date as of which Current Liabilities are to be determined (including, without limitation, liabilities, including taxes accrued as estimated, accounts payable, and all current liabilities as may properly be classified as current liabilities in accordance with generally accepted accounting principles), and excluding intercompany liabilities. Page 1 of 5 8. "Current Maturities of Long Term Debt" means that portion of the principal amount of Long Term Debt which must be paid during the twelve fiscal months following the date such determination is to be made. 9. "Debt Service Coverage Ratio" means the ratio of (a) the sum of Borrower's consolidated net income (net of expenses) for a fiscal year before minority interests, before taxes, depreciation, amortization and interest expense (excluding non-cash interest regarding shareholder subordinated debt), less distributions, dividends and capital expenditures and other extraordinary items to (b) the sum of Borrower's interest expense (excluding non-cash interest regarding shareholder subordinated debt), Current Maturities of Long Term Debt, capital expenditures, capital distributions, taxes actually paid, and capital lease obligations for such fiscal year. 10. "Default Rate" means three percent (3%) in excess of the interest rate otherwise in effect under amounts outstanding under the Note. In no event will the interest rate accruing under such Note be increased to be in excess of the maximum interest rate permitted by applicable state or federal usury laws then in effect. 11. "EBIT" means Borrower's consolidated net income (net of expenses) before interest expenses and taxes. 12. "EBITDA" means Borrower's consolidated net income (net of expenses) before interest expense, taxes, depreciation, amortization of goodwill. 13. "Environmental Laws" means all federal, state, local and foreign laws relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial toxic or hazardous substances or wastes into the environment (including without limitation ambient air, surface water, ground water or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes, and any and all regulations, codes, plans, orders, decrees, judgments, injunctions, notices or demand letters issued, entered promulgated or approved thereunder. 14. "ERISA" means the Federal Employee Retirement Income Security Act of 1974. 15. "Event(s) of Default" will have the meaning set forth in Section 6.1 of the Agreement. Page 2 of 5 16. "Guarantors" shall mean, individually or collectively, John M. Davies, Allyn A. Davies, and MM Merger Corporation. 17. "Indebtedness" means (a) all items (except items of capital stock, of capital surplus, of general contingency reserves or of retained earnings, deferred income taxes, and amount attributable to minority interests, if any) which in accordance with generally accepted accounting principles would be included in determining total liabilities on a consolidated basis as shown on the liability side of a balance sheet as at the date as of which Indebtedness is to be determined, (b) all indebtedness secured by any mortgage, pledge, lien or conditional sale or other title retention agreement to which any property or asset owned or held is subject, whether or not the indebtedness secured thereby will have been assumed (excluding non-capitalized leases which may amount to title retention agreements but including capitalized leases), and (c) all indebtedness of others which Borrower or any Subsidiary has directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted or sold with recourse or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire, or in respect of which Borrower or any Subsidiary has agreed to apply or advance funds (whether by way of loan, stock purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable. 18. "Lien" means any security interest, mortgage, pledge, assignment, lien or other encumbrance of any kind, including interests of vendors or lessors under conditional sale contracts and capitalized leases. 19. "Loan Documents" means this Agreement, the Term Notes, the Security Agreement executed by Borrower in favor of Fifth Third Bank, Northern Ohio dated January 24, 2001, the Pledge Agreement, the Standby and Subordination Agreement, the Unlimited Payment Guarantys, and every other document or agreement executed by any party relating to or evidencing, guarantying or securing any of the Obligations; and "Loan Document" means any one of the Loan Documents. 20. "Loans" means the Term Loans. 21. "Long Term Debt" means Indebtedness which, by its terms, is not payable in full within one year from the date incurred, or the repayment of which may, at the option of Borrower, be extended for a period more than one year from the date incurred. 22. "Mortgage[s]" means all mortgages, deeds of trust or trust deeds executed by Borrower encumbering real property of Borrower to secure the repayment of the Obligations. Page 3 of 5 23. "Notes" means the Term Notes. 24. "Obligation(s)" means all loans, advances, indebtedness, liabilities and obligations of Borrower owed to Bank and all Bank Affiliates, and specifically including but not limited to Fifth Third Bank (Northeastern Ohio), of every kind and description whether now existing or hereafter arising including without limitation, those owed by Borrower to others and acquired by Bank or any Bank Affiliate, by purchase, assignment or otherwise, and whether direct or indirect, primary or as guarantor or surety, absolute or contingent, liquidated or unliquidated, matured or unmatured, whether or not secured by additional collateral, and including without limitation all liabilities, obligations and indebtedness arising under this Agreement, the Note and the other Loan Documents, all obligations to perform or forbear from performing acts, all amounts represented by letters of credit now or hereafter issued by Bank for the benefit of or at the request of Borrower, and all expenses and attorneys' fees incurred by Bank and any Bank Affiliate under this Agreement or any other document or instrument related to any of the foregoing. 25. "Operating Leases" means such real property and equipment leases as to which Borrower is a party as lessee that do not in the aggregate exceed $10,000 per month. 26. "Permitted Liens" has the meaning assigned thereto as set forth in Section 3.9 hereof. 27. "Prime Rate" means the rate of interest per annum announced to be its prime rate from time to time by Bank at its principal office in Cincinnati, Ohio whether or not Bank will at times lend to borrowers at lower rates of interest or, if there is no such prime rate, then its base rate or such other rate as may be substituted by Bank for the prime rate. 28. "Security Agreement" means any Security Agreement executed between Borrower and Bank or Bank Affiliate, including but not limited to Fifth Third Bank, Northeastern Ohio, securing the Obligations. 29. "Senior Indebtedness" means the all obligations to Fifth Third Bancorp and any Bank Affiliate other than the Junior Term Note. 30. "Subordinated Debt" means any and all obligations for borrowed money incurred by the Borrower to the shareholders or any person or entity other than Bank at the time that any Obligations remain outstanding. 31. "Subsidiary" means any corporation of which Borrower directly or indirectly owns or controls at the time outstanding stock having under ordinary circumstances (not depending on the happening of a contingency) voting power to elect a majority of the board of directors of said corporation. Page 4 of 5 32. "Tangible Net Worth" shall mean the aggregate sum of shareholders' equity less notes to shareholders (unless the payment of such notes has been subordinated to payment of the Obligations), less advances to shareholders, goodwill, and all intangibles, and plus that debt as described in the Standby and Subordination Agreement dated of even date. 33. "Term Loan" has the meaning assigned to that term in Section 2.1 of this Agreement. 34. "Term Note" has the meaning assigned to that term in Section 2.1 of this Agreement. 35. "Total Funded Debt" means any and all Obligations owed to Bank or any Bank Affiliate. Page 5 of 5 EXHIBIT 2.1(a) TERM NOTES NOTE 1: [LOGO] FIFTH THIRD BANK (NORTHEASTERN OHIO) 1 SECURED TERM NOTE $ 4,000,000 APRIL 30, 2001 - --------------- -------------- CLEVELAND, OHIO (Effective Date) - --------------- On or before the Due Date below, the undersigned corporation, for value received, promises to pay to the order of Fifth Third Bank (Northeastern Ohio), 1404 East Ninth Street, Cleveland, Ohio 44114 (hereinafter referred to as "Bank") the sum of FOUR MILLION AND 00/100 ----- Dollars, plus interest per annum at a rate of PRIME PLUS 125 BASIS POINTS. In the event of a change in said Prime Rate, the rate on this note shall change immediately. Interest shall be computed on a year of 360 days and charged for the actual number of days elapsed. This note is payable as follows: Principal shall be due and payable in installments in the amount of $ 55,555.55 and shall be due on the last day of each month beginning 02/28/2002 with a final payment on April 30, 2006 of the principal amount then owing plus all interest due thereon. Interest shall be due and payable on the last day of each month beginning May 31, 2001. Principal and interest payments shall be made at the Bank's address above unless otherwise designated by Bank in writing. To secure repayment of this note and all modifications, extensions and renewals thereof, the undersigned has granted to Bank a security interest in: (i) certain collateral described pursuant to the terms and conditions of that certain Security Agreement of even date herewith by Borrower in favor of Bank; (ii) certain collateral consisting of 5,258,513 shares of stock of Frontier Adjusters of America, Inc. pursuant to the terms and conditions of that certain Pledge Agreement of even date herewith by Borrower in favor of Bank (collectively, the "Collateral"). The undersigned agrees to immediately deliver such additional dividends, warrants, securities, or other property or rights thereto to Bank immediately upon receipt as additional Collateral and until delivery to hold same in trust for Bank. All documents executed in connection with this Note and all Collateral, including without limitation the following, further secure the Obligations: a blanket lien on all business assets as described in the Security Agreement entered on even date and the securities of the Borrower as pledged under the Pledge Agreement entered on even date. The undersigned certifies that the proceeds of this loan are to be used for business purposes. If this note is a renewal, in whole or in part, of a previous Obligation, the acceptance by Bank of this note shall not effectuate a payment but rather a continuation of the previous Obligation. Bank may charge and the undersigned agrees to pay, on the above Effective Date, a note processing fee in an amount determined by Bank. Events of Default are as described in the Credit Agreement entered on even date. In addition to any other remedy permitted by law, the Bank may at any time after the occurrence of Event of Default and expiration of applicable cure period, if any, without notice, apply the Collateral to this note and Bank may, at its option, proceed to enforce and protect its rights by an action at law or in equity or by any other appropriate proceedings. Notwithstanding any other legal or equitable rights of Bank, Bank, in the Event of Default, is (a) hereby irrevocably appointed and constituted attorney in fact, with full power of substitution, to exercise all rights of ownership with respect to Collateral and (b) is hereby given full power to collect, sell, assign, transfer and deliver all of said Collateral or any part thereof, or any substitutes therefor, or any additions thereto, through any private or public sale without either demand or notice to the undersigned, or any advertisement, the same being hereby expressly waived, at which sale Bank is authorized to purchase said property or any part thereof, free from any right of redemption on the part of the undersigned, which is hereby expressly waived and released. In the case of any sale, the undersigned agrees to be and remains liable to Bank for any and every deficiency after application as aforesaid upon the Obligation evidenced by this Note. The undersigned shall pay all costs of collection incurred by Bank, including its attorney's fees, if this note is referred to an attorney for collection, whether or not payment is obtained before entry of judgment, which costs and fees are Obligations secured by the Collateral. If any payment is not paid when due (whether by acceleration or otherwise) or within 10 days thereafter, undersigned agrees to pay to Bank a late payment fee as provided for in any loan agreement or 5% of the payment amount, whichever is greater with a minimum fee of $20.00. After an Event of Default, the undersigned agrees to pay to Bank a fixed charge of $25.00, or the undersigned agrees that Bank may, without notice, increase the above stated interest rate by three percent (3%), whichever is greater. Under no circumstances shall said interest rate be raised to a rate which shall be in excess of the maximum rate of interest allowable under the state and/or federal usury laws in force at the time of such change. The undersigned may prepay all or part of this note without premium or penalty, which prepaid amounts shall be applied to the amounts due in reverse order of their due dates. Partial prepayments shall not excuse any subsequent payment due. ENTIRE AGREEMENT: The undersigned agrees that there are no conditions or understandings which are not expressed in this note and the documents referred to herein. WAIVER: No failure on the part of the Bank to exercise any of its rights hereunder shall be deemed a waiver of any such rights or of any default. Demand, presentment, protest, notice of dishonor, notice of protest and notice of default are hereby waived. Each of the undersigned, including but not limited to all co-makers and accommodation makers of this note, hereby waives all suretyship defenses including but not limited to all defenses based upon impairment of collateral and all suretyship defenses described in Section 3-605 of the Uniform Commercial Code, as revised in 1990 (the "UCC"). Such waiver is entered to the full extent permitted by Section 3-605(i) of the UCC. This note is being delivered in, is intended to be performed in, will be construed and enforceable in accordance with, and be governed by the laws of the State of Ohio, without regard to conflict of law principles. Borrower agrees that the state and federal courts in Cuyahoga County, Ohio or any other court in which the Bank initiates proceedings, shall have exclusive jurisdiction over all matters arising out of this Note, and that service of process in any such proceeding will be effective if mailed to the undersigned corporation at its address described in the Notices section of the Credit Agreement entered on even date. JURY WAIVER: THE UNDERSIGNED, AND ANY ENDORSER OR GUARANTOR HEREOF, WAIVE THE RIGHT TO A TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY. The declaration of invalidity of any provision of this note shall not affect any part of the remainder of the provisions. This note is supplemented by the terms and conditions of the Credit Agreement dated of even date between the undersigned and Bank. Warrant of attorney: The undersigned, jointly and severally, authorizes any attorney-at-law to appear in any court of record after maturity of this note, whether by acceleration or otherwise, waive the issuance and service of process and to confess judgment against them in favor of the Bank for the principal sum due hereon together with interest, charges, court costs and attorney's fees, and to waive and release all errors, rights of appeal, exemptions and stays of execution. The undersigned also agrees that the attorney acting for the undersigned as set forth in this paragraph may be compensated by Bank for such services, and the undersigned waive any conflict of interest caused by such representation and compensation arrangement. This warrant of attorney to confess judgment shall be construed under the laws of the State of Ohio. - -------------------------------------------------------------------------------- WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - -------------------------------------------------------------------------------- Borrower: MERRYMEETING, INC. DUE DATE: APRIL 30, 2006 /s/ JOHN M. DAVIES ------------------------------------- John M. Davies, President ADDRESS: 7763 Sunstone Drive Brecksville, Ohio 44141 EXHIBIT 2.1(a) TERM NOTES NOTE 2: [LOGO] FIFTH THIRD BANK (NORTHEASTERN OHIO) 1 UNSECURED TERM NOTE $ 1,000,000 APRIL 30, 2001 - -------------- -------------- CLEVELAND OHIO (Effective Date) - -------------- On or before the Due Date below, the undersigned corporation, for value received, promises to pay to the order of Fifth Third Bank (Northeastern Ohio), 1404 East Ninth Street, Cleveland, Ohio 44114 (hereinafter referred to as "Bank") the sum of ONE MILLION AND 00/100 ------------------ Dollars plus interest per annum at a rate of PRIME PLUS 175 BASIS POINTS. In the event of a change in said Prime Rate, the rate on this note shall change immediately. In addition, after the Borrower becomes the 80% owner of Frontier Adjusters of America, Inc., the interest rate will be reduced to Prime Rate plus 125 basis points. However, if the contemplated merger does not occur by September 30, 2001, then the interest rate will be increased to 21% If the merger is consummated after September 30, 2001, Bank will review the creditworthiness of Borrower to determine if the interest rate of 21% should be decreased. Interest shall be computed on a year of 360 days and charged for the actual number of days elapsed. This note is payable as follows: Principal shall be due and payable in installments in the amount of $13,888.89 and shall be due on the last day of each MONTH beginning 02/28/2002 with a final payment on April 30, 2006 of the principal amount then owing plus all interest due thereon. Interest shall be due and payable at maturity on the LAST day of each month beginning May 31, 2001. Principal and interest payments shall be made at the Bank's address above unless otherwise designated by Bank in writing. The undersigned certifies that the proceeds of this loan are to be used for business purposes. If this note is a renewal, in whole or in part, of a previous Obligation, the acceptance by Bank of this note shall not effectuate a payment but rather a continuation of the previous Obligation. Bank may charge and the undersigned agrees to pay, on the above Effective Date, a note processing fee in an amount determined by Bank. Events of Default are as defined in the Credit Agreement entered on even date. Upon the occurrence of an Event of Default herein described Bank may, at its option declare this note and all other Obligations of the undersigned to be fully due and payable in their aggregate amount together with accrued interest plus any applicable prepayment premiums, fees, and charges. If any payment is not paid when due (whether by acceleration or otherwise) or within 10 days thereafter, undersigned agrees to pay to Bank a late payment fee as provided for in any loan agreement or 5% of the payment amount, whichever is greater with a minimum fee of $20.00. After an Event of Default, the undersigned agrees to pay to Bank a fixed charge of $25.00, or the undersigned agrees that Bank may, without notice, increase the above stated interest rate by three percent (3%), whichever is greater. Under no circumstances shall said interest rate be raised to a rate which shall be in excess of the maximum rate of interest allowable under the state and/or federal usury laws in force at the time of such change. The undersigned may prepay all or part of this note without premium or penalty, which prepaid amounts shall be applied to the amounts due in reverse order of their due dates. Partial prepayments shall not excuse any subsequent payment due. ENTIRE AGREEMENT: The undersigned agrees that there are no conditions or understandings which are not expressed in this note and the documents referred to herein. WAIVER: No failure on the part of the Bank to exercise any of its rights hereunder shall be deemed a waiver of any such rights or of any default. Demand, presentment, protest, notice of dishonor, notice of protest and notice of default are hereby waived. Each of the undersigned, including but not limited to all co-makers and accommodation makers of this note, hereby waives all suretyship defenses including but not limited to all defenses based upon impairment of collateral and all suretyship defenses described in Section 3-605 of the Uniform Commercial Code, as revised in 1990 (the "UCC"). Such waiver is entered to the full extent permitted by Section 3-605(i) of the UCC. This note is being delivered in, is intended to be performed in, will be construed and enforceable in accordance with, and be governed by the laws of the State of Ohio, without regard to conflict of law principles. Borrower agrees that the state and federal courts in Cuyahoga County, Ohio or any other court in which the Bank initiates proceedings, shall have exclusive jurisdiction over all matters arising out of this Note, and that service of process in any such proceeding will be effective if mailed to the undersigned corporation at its address described in the Notices section of the Credit Agreement entered on even date. JURY WAIVER: THE UNDERSIGNED, AND ANY ENDORSER OR GUARANTOR HEREOF, WAIVE THE RIGHT TO A TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY. The declaration of invalidity of any provision of this note shall not effect any part of the remainder of the provisions. This note is supplemented by the terms and conditions of the Credit Agreement dated of even date between the undersigned and Bank. Warrant of attorney: The undersigned, jointly and severally, authorizes any attorney-at-law to appear in any court of record after maturity of this note, whether by acceleration or otherwise, waive the issuance and service of process and to confess judgment against them in favor of the Bank for the principal sum due hereon together with interest, charges, court costs and attorney's fees, and to waive and release all errors, rights of appeal, exemptions and stays of execution. The undersigned also agrees that the attorney acting for the undersigned as set forth in this paragraph may be compensated by Bank for such services, and the undersigned waive any conflict of interest caused by such representation and compensation arrangement. This warrant of attorney to confess judgment shall be construed under the laws of the State of Ohio. - -------------------------------------------------------------------------------- WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - -------------------------------------------------------------------------------- Borrower: MERRYMEETING, INC. DUE DATE: APRIL 30, 2006 /s/ JOHN M. DAVIES ------------------------------------- John M. Davies, President ADDRESS: 7763 Sunstone Drive Brecksville, Ohio 44141 EXHIBIT 2.1(b) TERM NOTE $3,000,000.00 Cincinnati, Ohio April 30, 2001 MERRYMEETING, INC., a Delaware corporation (the "Borrower"), for value received, hereby promises to pay to the order of FIFTH THIRD BANK, an Ohio banking corporation (the "Bank"), at its offices located at 38 Fountain Square Plaza, Cincinnati, Ohio 45263, in lawful money of the United States of America, the principal sum of Three Million Dollars ($3,000,000.00) together with interest as set forth herein. Interest on the outstanding principal balance of this Note will accrue at a rate per annum equal to 21% per annum. Interest will be calculated on the basis of a year of 360 days and charged for the actual number of days elapsed. Interest will be payable in immediately available funds at the principal office of Bank on the first day of each calendar month. After maturity, whether by acceleration, notice of intention to prepay or otherwise, this Note will bear interest (computed and adjusted in the same manner, and with the same effect, as interest hereon prior to maturity), payable on demand, at a rate per annum equal to the Default Rate, until paid, and whether before or after the entry of judgment hereon. Accrued and unpaid interest will only be due and payable monthly commencing on the last day of May, 2001 and continuing on the last day of each month thereafter during the term hereof. The entire principal amount and all accrued and unpaid interest due and of this Note will be due and payable on October 30, 2003. This Note is the Term Note referred to in the Credit Agreement between Borrower and Bank of even date herewith, as it may be amended from time to time (the "Agreement"), and is entitled to the benefits, and is subject to the terms, of the Agreement. Capitalized terms used but not otherwise defined herein will have the meanings attributed thereto in the Agreement. The principal of this Note is pre-payable in the amounts and under the circumstances, and its maturity is subject to acceleration upon the terms, set forth in this Agreement. Except as otherwise expressly provided in the Agreement, if any payment on this Note becomes due and payable on a day other than one on which Bank is open for business (a "Business Day"), the maturity thereof will be extended to the next Business Day, and interest will be payable at the rate specified during the extension period. In addition to any other limitations set forth herein, no payment of principal, interest or any other amount due with respect to this Note shall be made, and the holder shall not exercise any right of set-off or recoupment with respect to this Note, until all of the Senior Indebtedness (as defined in the Agreement) is paid in full; provided, that Borrower may make and the holder may receive Page 1 of 3 payments of principal and interest on account of this Note in accordance with its terms and may prepay the whole or any part hereof so long as no breach or default or event of default exists or would result therefrom with respect to the Senior Indebtedness. All payments permitted hereunder shall be final in amounts so received shall not thereafter be subject to these subordination provisions. If any payment not permitted hereunder is received by the holder on account of this Note before all of the Senior Indebtedness is paid in full, such payment may not be commingled with any asset of holder, shall be held in trust by holder for the benefit of the holders of the Senior Indebtedness and shall be paid over to such holders or their designated representatives, for application to the payment of the Senior Indebtedness then remaining unpaid, until all of the Senior Indebtedness is paid in full and according to their respective interests. After the occurrence of an Event of Default, all amounts of principal outstanding as of the date of the occurrence of such Event of Default will bear interest at the Default Rate, in Bank's sole discretion, without notice to Borrower. This provision does not constitute a waiver of any Events of Default or an agreement by Bank to permit any late payments whatsoever. If any payment of principal is not paid when due (whether by acceleration or otherwise after the expiration of applicable notice grace and cure periods, if any), Borrower agrees to pay to Bank a late payment fee equal to five percent (5%) of the payment amount then due. Borrower may prepay any portion of this Note in part at any time without premium or penalty. Any prepayments under this Note in advance of any amortized payments will be applied to reduce the outstanding principal amount of this Note in the inverse chronological order of maturity. In no event will the interest rate on this Note exceed the highest rate permissible under any law which a court of competent jurisdiction will, in a final determination, deem applicable hereto. In the event that a court determines that Bank has received interest and other charges under this Note in excess of the highest permissible rate applicable hereto, such excess will be deemed received on account of, and will automatically be applied to reduce the amounts due to Bank from Borrower under this Note, other than interest in the inverse order of maturity, and the provisions hereof will be deemed amended to provide for the highest permissible rate. If there are no such amounts outstanding, Bank will refund to Borrower such excess. All payments received by Bank will be applied first to payment of amounts advanced by Bank on behalf of Borrower, which may be due for insurance, taxes and attorneys' fees or other charges to be paid by Borrower pursuant to the Agreement and the Loan Documents (as defined herein), then to accrued interest due on this Note, then to the principal, which will be repaid in the inverse order of maturity. Borrower and all endorsers, sureties, guarantors and other persons liable on this Note hereby waive presentment for payment, demand, notice of dishonor, protest, notice of protest and all other demands and notices in connection with the delivery, performance and enforcement of this Note, and one or more extensions and renewals of this Note. This Note may not be changed orally, but only by an instrument in writing. Page 2 of 3 This Note is being delivered in, is intended to be performed in, will be construed and enforceable in accordance with, and be governed by the internal laws of, the State of Ohio without regard to principles of conflict of laws. Borrower agrees that the State and federal courts in Hamilton County, Ohio, or any other court in which Bank initiates proceedings, have exclusive jurisdiction over all matters arising out of this Note, and that service of process in any such proceeding will be effective if mailed to Borrower at its address described in the Notices section of the Agreement. BORROWER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE. WARRANT OF ATTORNEY: The undersigned, jointly and severally, authorizes any attorney-at-law to appear in any court of record after maturity of this note, whether by acceleration or otherwise, waive the issuance and service of process and to confess judgment against them in favor of the Bank for the principal sum due hereon together with interest, charges, court costs and attorney's fees, and to waive and release all errors, rights of appeal, exemptions and stays of execution. The undersigned also agrees that the attorney acting for the undersigned as set forth in this paragraph may be compensated by Bank for such services, and the undersigned waive any conflict of interest caused by such representation and compensation arrangement. This warrant of attorney to confess judgment shall be construed under the laws of the State of Ohio. - -------------------------------------------------------------------------------- WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - -------------------------------------------------------------------------------- WITNESSES: MERRYMEETING, INC. BRIAN M. O'NEILL WITNESS /s/ JOHN M. DAVIES ------------------------------------- John M. Davies, President Page 3 of 3 EX-2 3 ex-2.txt SHARE PURCHASE AGREEMENT Exhibit 2 --------------------------------------------------------------- STOCK PURCHASE AGREEMENT BY AND AMONG UNITED FINANCIAL ADJUSTING COMPANY, INC. ("SELLER") MERRYMEETING, INC. ("BUYER") AND FRONTIER ADJUSTERS OF AMERICA, INC. (THE "COMPANY") Dated as of April 27, 2001 --------------------------------------------------------------- This STOCK PURCHASE AGREEMENT, dated as of April 27, 2001, by and among UNITED FINANCIAL ADJUSTING COMPANY, INC., an Ohio corporation ("Seller"), MERRYMEETING INC., a Delaware corporation ("Buyer"), and FRONTIER ADJUSTERS OF AMERICA, INC., an Arizona corporation (the "Company"). W I T N E S S E T H: WHEREAS, Seller owns 5,258,513 shares of common stock, par value $.01 per share of the Company, out of 8,957,660 shares of such common stock of the Company which are issued and outstanding (the "Common Stock"), constituting approximately 58.70% of the issued and outstanding shares of the Common Stock; and WHEREAS, Seller wishes to sell to Buyer and Buyer wishes to purchase from Seller all of such 5,258,513 shares of the Company owned by Seller (the "Purchase Shares"); and WHEREAS, in connection with the purchase and sale of the Purchase Shares, the parties hereto desire to make such other arrangements and agreements, and to enter into certain other ancillary agreements, all as more specifically provided herein. NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS SECTION 1.1 SPECIFIC DEFINITIONS. In addition to the other definitions contained in Section 1.2, the following terms will, when used in this Agreement, have the following respective meanings: "AFFILIATES" shall mean, with respect to any Person, any Persons directly or indirectly through one or more Subsidiaries controlling or controlled by, or under common control with, such other Person at any time during the period for which the determination of affiliation is being made; it being understood that none of Buyer, Seller or any of their respective Affiliates shall be considered Affiliates under this Agreement simply by virtue of this Agreement, the Ancillary Agreements or any other agreements entered into in connection with the transactions contemplated by this Agreement. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "AGREEMENT" shall mean this Stock Purchase Agreement, as the same may be amended or supplemented from time to time in accordance with the terms hereof. 2 "ANCILLARY AGREEMENTS" shall mean all closing and other related documents under the Agreement. "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a day on which banks in New York City are authorized or obligated by Law or executive order to close. "BUYER" shall have the meaning set forth in the Preamble. "BUYER GROUP MEMBER" shall mean each of Buyer and its Affiliates and their directors, officers, employees, agents and their respective successors and assigns, and Company and its Subsidiaries (as constituted after the Closing). "CLAIM NOTICE" shall have the meaning set forth in Section 9.4. "CLOSING" shall mean the closing of the Transaction. "CLOSING DATE" shall mean April 30, 2001 or such other date as shall be agreed by Seller and Buyer. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" shall have the meaning set forth in the Recitals. "COMPANY COMMON STOCK" shall have the meaning set forth in Section 5.3. "COMPANY MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the businesses, properties, assets, liabilities, results of operations or financial condition of Company and its Subsidiaries, taken as a whole. "COMPANY STOCK" shall mean 100% of the outstanding shares of Company Common Stock. "COMPANY SUBSIDIARIES" shall mean the Subsidiaries of Company. "CONTRACTS" shall mean all leases, including, without limitation, real property leases and personal property leases, contracts, agreements, indentures, promissory notes, guarantees, licenses, arrangements, commitments and understandings of any kind, whether written or oral, to which a Person is a party or by which such Person or any of its assets may be bound, and all rights arising under any of them. "DAMAGES" shall mean losses, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, deficiencies, Taxes and reasonable expenses and costs, including reasonable attorneys' and auditors' fees (and any reasonable expert's fees). 3 "GAAP" shall mean generally accepted accounting principles consistently applied. "GOVERNMENTAL AUTHORITY" shall mean any federal, state, municipal or other governmental authority, department, commission, board, agency or instrumentality. "GOVERNMENTAL AUTHORIZATIONS" shall mean, with respect to a business, all licenses, permits, certificates and other authorizations and approvals required under applicable Law to carry on such business as conducted as of the Closing. "GOVERNMENTAL ENTITY" shall mean any local, state, federal, national, provincial, regional or other government, including all of their respective branches, departments, agencies, courts, instrumentalities or other subdivisions. "INDEMNIFIED PARTIES" shall mean the Seller Group Members and the Buyer Group Members. "INDEMNITEE" shall have the meaning set forth in Section 9.4. "INDEMNITOR" shall have the meaning set forth in Section 9.4. "IRS" shall mean the Internal Revenue Service. "LAW" shall mean any law, statute, ordinance, rule, regulation, code, order, judgment, injunction or decree promulgated or issued by any Governmental Entity. "MATERIAL ADVERSE CHANGE" shall mean, with respect to a business, any change, effect, event, occurrence or state of facts that is, or would reasonably be likely to be, materially adverse to such business, or to its respective properties, assets, liabilities, results of operations or financial condition. "ORDINARY COURSE OF BUSINESS" shall mean, with respect to a business, the conduct of such business in accordance with the customs, practices and procedures of such business. "PERSON" shall mean any individual, corporation, partnership, limited liability company, trust, association or other entity or organization. "SELLER" shall have the meaning set forth in the Preamble. "SELLER GROUP MEMBER" shall mean each of Seller and its Affiliates and their directors, officers, employees, agents and their respective successors and assigns. "SUBSIDIARY" shall mean any partnership, corporation, limited liability company, branch or similar entity that is required by GAAP to be consolidated by Seller, Buyer or Company. 4 "TAX RETURN" shall mean any reports, declaration, report, claim for fraud, or information returns or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "TAXES" shall mean all taxes imposed by any Governmental Entity anywhere in the world, including income, gross receipts, windfall profits, value added, severance, property, production, sales, use, license, excise, franchise, employment, withholding or similar taxes, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties. "TRANSACTION" shall mean, collectively, all of the transactions contemplated by this Agreement and the Ancillary Agreements. "TRANSFER" shall mean sell, assign, transfer, pledge, encumber, hypothecate, dispose or convey, directly or indirectly, whether in one transaction or a series of related transactions. SECTION 1.2 INTERPRETATION. (a) the words "hereof," "herein," and "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement; (b) references to "Article" or "Section" are to the respective Articles and Sections of this Agreement, and references to "Exhibit" or "Schedule" are to the respective Exhibits and Schedules annexed hereto; (c) references to a "party" means a party to this Agreement and includes references to such party's successors and assigns; (d) the terms "Dollars" and "$" shall mean United States dollars; (e) terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa; (f) the masculine pronoun includes the feminine and the neuter, and visa versa, as appropriate in the context; (g) wherever the word "include," "includes," or "including" is used in this Agreement, it will be deemed to be followed by the words "without limitation" unless clearly indicated otherwise; and (h) the word "or" shall not be deemed to be exclusive but shall be interpreted as "and/or." 5 ARTICLE 2. CLOSING PURCHASE AND SALE SECTION 2.1 THE CLOSING. The closing (the "Closing") of the transactions set forth in this Article 2.1 shall take place at 10:00 A.M., New York time, on April 30, 2001, or at such other time or such other date as the Buyer and the Seller may agree, at the offices of Seller, 270 South Service Road, Melville, New York. (Hereinafter, such date is referred to as the "Closing Date" and such time on the Closing Date is referred to as the "Closing Time".) SECTION 2.2 SALE AND PURCHASE OF THE PURCHASE SHARES. Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, at the Closing, the Seller agrees to sell, convey, transfer, assign and deliver to the Buyer certificates for the Purchase Shares, duly endorsed in blank or accompanied by stock powers in blank, free and clear of all Liens and the Buyer agrees to purchase from the Seller the Purchase Shares. ARTICLE 3. PURCHASE PRICE SECTION 3.1 THE PURCHASE PRICE. The Buyer shall purchase the Purchase Shares for an aggregate amount of $8,330,000.00 (the "Purchase Price"). SECTION 3.2 DELIVERY OF PURCHASE PRICE. At the Closing, the Purchase Price shall be paid by the Buyer to the Seller by wire transfer of immediately available funds to an account designated in writing by the Seller at least two business days prior to the Closing. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Seller as follows: SECTION 4.1 ORGANIZATION. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority, and all necessary permits and licenses, to own and operate its assets and to carry on its business as presently conducted. SECTION 4.2 CORPORATE AUTHORIZATION. Buyer has full requisite power and authority to execute and deliver this Agreement, and each Ancillary Agreement to which it is a party, and to perform its obligations hereunder and thereunder. The execution, delivery and performance by Buyer of this Agreement and each Ancillary Agreement to which it is a party have been duly and validly authorized on behalf of Buyer, and no additional corporate or shareholder authorization or consent is or will be required in connection with the execution, delivery and performance by Buyer of this Agreement and each Ancillary Agreement to which it is a party. SECTION 4.3 CONSENTS AND APPROVALS. There are no consents, approvals, waivers or authorizations that are required to be obtained by Buyer from, and no notices 6 or filings that are required to be given by Buyer to, or made by Buyer with, any Governmental Entity or other Person, in connection with the execution, delivery and performance by Buyer of this Agreement or any Ancillary Agreement. SECTION 4.4 NONCONTRAVENTION. The execution, delivery and performance by Buyer of this Agreement and each Ancillary Agreement, and the consummation by Buyer of the Transaction, do not and will not (i) violate any provisions of the Articles of Incorporation, By-Laws or other organizational documents of Buyer or (ii) conflict with, or result in the breach of, or constitute a default under, or result in the termination, cancellation or acceleration (whether after the filing of notice or the lapse of time or both) of any right or obligation of Buyer under any Contract or result in the creation of any Encumbrance upon the Purchase Shares or (iii) violate or result in a breach of or constitute a default under any Law or other restriction of any court or governmental authority to which Buyer is subject, including any Governmental Authorization of the Transaction. SECTION 4.5 BINDING EFFECT. This Agreement, and each Ancillary Agreement to which Buyer is a party, when executed and delivered by the other parties thereto, will constitute valid and legally binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms. SECTION 4.6 LITIGATION AND CLAIMS. There is no civil, criminal or administrative action, suit, demand, claim, hearing, proceeding or investigation pending or, to the knowledge of Buyer, threatened, against or relating to Buyer in connection with the Purchase Shares, or with respect to the Transaction. SECTION 4.7 FINDERS' FEES. There is no investment banker, broker, finder or other intermediary that has been retained by or is or has been authorized to act on behalf of Buyer who might be entitled to any fee or commission from Buyer in connection with the Transaction. SECTION 4.8 SECURITIES LAW REPRESENTATIONS. (a) Seller has granted Buyer full and unrestricted access to the business premises, offices, properties, and business, corporate and financial books and records of the Company. Buyer has been permitted to examine the foregoing records, to question officers of the Company, and to make such other investigations as it considered appropriate to determine or verify the business and financial condition of the Company. Seller furnished to Buyer all information regarding the business and affairs of the Company that Seller requested. (b) Because of Buyer's considerable knowledge and experience in financial and business matters, Buyer is able to evaluate the merits, risks, and other factors bearing on the suitability of the Purchase Shares as an investment. (c) The Buyer's financial condition is such that it would not be, and does not contemplate being, required to dispose of any investment in the Purchase 7 Shares, or sell, transfer, pledge, or otherwise dispose of any of the Purchase Shares for an indefinite period. (d) Buyer's acquisition of the Purchase Shares will be solely for its own account, as principal, for investment, and not with a view to, or for resale in connection with, any underwriting or distribution. ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SELLER Except for the following express representations and warranties made in this Article 5, Seller makes no representation or warranty as to the business, assets, operations, liabilities or financial condition of the Company, or as to any other matter. Seller represents and warrants to Buyer as follows: SECTION 5.1 ORGANIZATION. (a) Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio and has all requisite corporate power and authority, and all necessary permits and licenses, to own and operate its assets, and to carry on its business as presently conducted. (b) Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Arizona and has all requisite corporate power and authority to own and operate its assets, and to carry on its business as presently conducted. SECTION 5.2 CORPORATE AUTHORIZATION. Seller has full corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is a party, and to perform its obligations hereunder and thereunder. The execution, delivery and performance by Seller of this Agreement and each Ancillary Agreement to which it is a party have been duly and validly authorized on behalf of Seller, and no additional corporate or shareholder authorization or consent is or will be required in connection with the execution, delivery and performance by Seller of this Agreement and each Ancillary Agreement to which it is a party. SECTION 5.3 CAPITAL STOCK. (a) The entire authorized capital stock of Company consists of (i) 100,000,000 shares of preferred stock, none of which are issued or outstanding and (ii) 100,000,000 shares of common stock, par value $.01 per share (the "Company Common Stock"), 8,957,660 of which are issued and outstanding. Seller holds of record and owns beneficially 5,258,513 of the outstanding shares of Company Common Stock, constituting approximately 58.7% of all of the issued and outstanding Company Common Stock, and has good and valid title to all such shares. The Purchase Shares are now, and at the Closing Date will be, free and clear of all Encumbrances. Except as set forth in Schedule 5.3.1, no shares of Company Common Stock are held in the treasury of Company. All of the shares of outstanding Company Common Stock have been duly authorized and are validly issued, fully paid and nonassessable. 8 (b) Except as set forth in Schedule 5.3.2, there are no outstanding or authorized warrants, options, rights (including stock appreciation, phantom stock, profit participation or similar rights and rights to demand registration or to sell in connection with a registration by Company under the federal securities laws), calls or other commitments of any nature relating to the shares of Company Common Stock or other securities of Company, and there are no outstanding securities of Company that are now or in the future are convertible into or exchangeable for shares of capital stock of Company. Company is not obligated to issue any shares of the Common Stock for any purpose, and, except as contemplated hereby, no person has entered into any contract, whether oral or written, or option or any right or privilege (whether pre-emptive or contractual) capable of becoming a contract or option for the purchase, subscription or issuance of any unissued shares or other securities of Company. Seller is not a party to any voting trusts, proxies or other agreements or understandings with respect to the Company Common Stock or other securities of Company. SECTION 5.4. NONCONTRAVENTION. The execution, delivery and performance by Seller of this Agreement and each Ancillary Agreement, and the consummation by Seller of the Transaction, do not and will not (i) violate any provision of the certificate of incorporation, by-laws or other organizational documents of Seller, (ii) conflict with, or result in the breach of, or constitute a default under, or result in the termination, cancellation or acceleration (whether after the filing of notice or the lapse of time or both) of any right or obligation of Seller under, any Contract or result in the creation of any Encumbrance upon the Purchase Shares or (iii) violate or result in a breach of or constitute a default under any Law or other restriction of any court or governmental authority to which Seller is subject, including any Governmental Authorization of the Transaction. SECTION 5.5. LITIGATION AND CLAIMS. There is no civil, criminal or administrative action, suit, demand, claim, hearing, proceeding or investigation pending or, to the knowledge of Seller, threatened, against or relating to Seller in connection with the Purchase Shares, or with respect to the Transaction. SECTION 5.6 BINDING EFFECT. This Agreement and each Ancillary Agreement to which Seller is a party, when executed and delivered by the other parties thereto, will constitute valid and legally binding obligations of Seller, enforceable against Seller in accordance with their respective terms. SECTION 5.7 FINDERS' FEES. There is no investment banker, broker, finder or other intermediary that has been retained by or is or has been authorized to act on behalf of Seller or Company who might be entitled to any fee or commission from Seller or Company in connection with the Transaction. SECTION 5.8 TAXES. To the best of Seller's knowledge: (a) All taxes owed by or with respect to the Company have been paid or provided for. 9 (b) Neither the IRS nor any other tax entity is now asserting or threatening to assert against the Company any deficiency or claim for additional taxes or any tax adjustment which could result in a Material Adverse Change to the Company. ARTICLE 6. COVENANTS SECTION 6.1 CONDUCT OF BUSINESS. During the period from the date hereof to the Closing Date, except as otherwise specifically contemplated by this Agreement or as Buyer shall otherwise agree in writing, Seller covenants and agrees that it will use all reasonable efforts to cause the Company to (1) continue to conduct its business, maintain its assets and carry on its business practices in the same manner as heretofore, (2) preserve its business organization intact, will not interfere with or take action that undermines Company's efforts to retain the services of its employees and preserve the present business relationships and goodwill of its suppliers and customers and others having business relations with it, (3) pay and perform in all material respects all of its liabilities and obligations as and when due and all contracts and leases to which it is a party in accordance with the terms and provisions thereof and (4) comply in all material respects with all Laws that are applicable to it and its business. In addition, Seller covenants and agrees that Company shall not, and Seller shall not permit Company, or any Company Subsidiary, directly or indirectly, to do any of the following without the express prior written consent of Buyer: (a) make or adopt any changes to or otherwise alter its certificate or articles of incorporation, by-laws or any other governing or constitutive documents; (b) purchase or enter into any Contract to purchase or lease any real property; (c) grant any salary increase or permit any advance to any director, officer or employee, other than in accordance with past practice, or enter into any new, or amend or otherwise alter, any employee benefit plan, or any employment or consulting Contract, or any Contract providing for the payment of severance; (d) enter into any transaction other than in the normal and ordinary course of business; (e) form any Subsidiary or Affiliate, or issue, grant, sell, redeem, subdivide, combine, change or purchase any of Company's capital stock, notes or other securities, whether debt or equity, or make any Contract or commitments to do so; (f) merge or consolidate, or agree to merge or consolidate, with or into any other Person or acquire or agree to acquire or be acquired by any Person; (g) (i) change any of its methods of accounting in effect as at June 30, 2000, or (ii) make or rescind any express or deemed election relating to Taxes, or change any of its methods of reporting income or deductions for income tax purposes from those employed in the preparation of Tax Returns for the taxable year ended June 30, 2000 except as may be required by applicable Law, the IRS or GAAP; or 10 (h) enter into any Contract or other commitment to do any of the foregoing. SECTION 6.2 REASONABLE EFFORTS. Seller and Buyer will cooperate and use their respective commercially reasonable efforts to fulfill the conditions precedent to the other party's obligations hereunder, including securing as promptly as practicable all consents, approvals, waivers and authorizations required in connection with the Transaction. SECTION 6.3 FURTHER ASSURANCES. From time to time after the Closing Date, Seller and Buyer shall promptly execute, acknowledge and deliver any other assurances or documents reasonably requested by the requesting party (and at such requesting party's expense) and necessary for the other party to satisfy its obligations hereunder or to obtain the benefits of the Transaction. SECTION 6.4 INTERCOMPANY LIABILITIES. Seller shall, on or prior to the Closing Date, eliminate all intercompany transactions. SECTION 6.5 NO BREACH OF REPRESENTATIONS AND WARRANTIES. Neither Seller nor Buyer will take any action prior to the Closing Date which would cause or constitute a breach, or would, if it had been taken immediately prior to the date hereof have caused or constituted a breach, of any of such party's representations and warranties set forth in this Agreement. Each of Seller and Buyer will, in the event of and promptly after the occurrence of, or promptly after becoming aware of the occurrence of, or promptly after becoming aware of the occurrence of or the impending or threatened occurrence of, any occurrence or event prior to the Closing Date which would cause or constitute a breach or would if it had occurred immediately prior to the date hereof, have caused or constituted a breach of any of the representations or warranties set forth in this Agreement, give detailed notice thereof to the other party and use its reasonable efforts to prevent or promptly remedy such breach. SECTION 6.6 ACCESS. Buyer and its officers, employees and representatives (including independent public accountants and counsel) will at reasonable times during regular business hours be permitted reasonable access to, and will be permitted to make copies of or abstracts from, all of the books and records, financial and operating data and other information of Company and its Subsidiaries, will have reasonable access to the premises and physical properties of Company and its Subsidiaries as Buyer deems necessary or advisable for purposes of consummating the transactions contemplated hereby, and will be permitted to discuss the affairs, finances and accounts of Company and its Subsidiaries with the directors, officers, employees, counsel, accountants, suppliers and customers of Company and its Subsidiaries. Buyer agrees that, prior to the consummation of the Transaction, it shall not disclose, divulge, furnish or make accessible to anyone, other than those of its employees, representatives, attorneys, accountants or lenders with a need to know, any information concerning Company or its Subsidiaries which is not or does not become commonly known by or available to the general public. 11 ARTICLE 7. TAX MATTERS SECTION 7.1 INDEMNIFICATION. (a) Seller's Indemnification. Notwithstanding any other provision of this Agreement, Seller shall indemnify and hold harmless the Buyer Group Members from, against and in respect of any Taxes imposed with respect to the transfer to the Buyer of the Purchase Shares or any income or gain derived by Seller with respect to such transfer for any taxable period, or portion thereof, ended on or before the Closing Date. (b) Buyer's Indemnification. Buyer shall indemnify and hold harmless the Seller Group Members from, against and in respect of any Taxes imposed with respect to the Company whether before or after the Closing Date. SECTION 7.2 TAX RETURNS. Buyer shall be responsible for causing the Company to timely complete and file all Tax Returns and the prompt payment of all Taxes of the Company, whether attributable to before or after the Closing Date. Buyer shall provide the Seller the opportunity to review any Tax Return to be filed by the Company (prior to the filing thereof) which Tax Return is attributable to a period, in whole or in part, prior to the Closing Date. ARTICLE 8. CONDITIONS TO CLOSING SECTION 8.1 CONDITIONS TO THE OBLIGATIONS OF THE PARTIES. The obligations of the parties to effect the Closing are subject to the satisfaction (or waiver) prior to the Closing of the following conditions: (a) No Injunctions. No Law prohibiting the consummation of the Transaction shall be in effect on the Closing Date. SECTION 8.2 CONDITIONS TO THE OBLIGATION OF BUYER. The obligation of Buyer to effect the Closing is subject to the satisfaction (or waiver) prior to the Closing of the following conditions: (a) Representations and Warranties. The representations and warranties of Seller contained herein shall have been true and correct in all material respects when made and shall be true and correct in all material respects as of the Closing, as if made as of the Closing (except representations and warranties that are made as of a specific date need be true only as of such date). (b) Covenants. The covenants and agreements of Seller to be performed on or prior to the Closing shall have been duly performed in all material respects. (c) Certificates. Buyer shall have received (i) a certificate of an executive officer of Seller, dated the Closing Date, and certifying to the fulfillment on the part of Seller of 12 the conditions specified in paragraphs (a) and (b) above (ii) resignations of Peter I. Cavallaro, Charles E. Becker, James J. Ferzoco, and Anthony J. Puglisi as officers and/or directors of the Company, and (iii) such other evidence with respect to the fulfillment of said conditions as Buyer may reasonably request. (d) No Change in Business. Between the date of this Agreement and the Closing Date, Company and its Subsidiaries shall not have suffered or experienced a Material Adverse Effect, and there shall have been delivered to Buyer a certificate from Seller, signed by an executive officer of Seller, to such effect. (e) Ancillary Agreements. Seller shall have executed and delivered (or shall have caused to be executed and delivered) this Agreement and each of the Ancillary Agreements. SECTION 8.3 CONDITIONS TO THE OBLIGATION OF SELLER. The obligation of Seller to effect the Closing is subject to the satisfaction (or waiver) prior to the Closing of the following conditions: (a) Representations and Warranties. The representations and warranties of Buyer contained herein shall have been true and correct in all material respects when made and shall be true and correct in all material respects as of the Closing, as if made as of the Closing (except that representations and warranties that are made as of a specific date need be true only as of such date). (b) Covenants. The covenants and agreements of Buyer to be performed on or prior to the Closing shall have been duly performed in all material respects. (c) Certificates. Seller shall have received (i) a certificate of an executive officer of Buyer, dated the Closing Date, and certifying to the fulfillment on the part of Buyer of the conditions specified in paragraphs (a) and (b) above and (ii) such other evidence with respect to the fulfillment of said conditions as Seller may reasonably request. (d) Ancillary Agreements. Buyer shall have executed and delivered (or shall have cause to be executed and delivered) this Agreement and each of the Ancillary Agreements. ARTICLE 9. SURVIVAL; INDEMNIFICATION SECTION 9.1 SURVIVAL OF REPRESENTATIONS. All statements, certifications, indemnifications, representations and warranties made herein by the parties to this Agreement, and their respective obligations to be performed pursuant to the terms hereof, shall survive the Closing; provided, however, that, the representations and warranties made by the parties hereunder shall terminate on the date one year after the Closing Date, except to the extent a party gives written notice to the other party of any breach thereof on or before such date (which notice shall identify the Section of this Agreement alleged to have been breached and a reasonable description of the breach and of all material facts relating thereto then known by the party providing such notice), and then only with respect to the matters described in such notice. 13 SECTION 9.2 INDEMNIFICATION BY SELLER. Seller shall indemnify and hold harmless any Buyer Group Member from and against any and all Damages incurred by such Buyer Group Member arising from, or in connection with: (a) any failure by Seller to perform any of its covenants or other obligations herein or in any document executed in connection with this Agreement, including, without limitation, the Ancillary Agreements; (b) any breach of any representation or warranty of Seller contained or referred to herein or in any Schedule, certificate, exhibit or other instrument delivered by or on behalf of Seller pursuant to this Agreement; (c) the allegation in writing by any third party of the existence of any liability, obligation, lease, agreement, contract, other commitment or state of facts which, if such allegation were true, would constitute a breach by Seller of any representation or warranty of Seller contained or referred to herein or in any Schedule, certificate, exhibit or other instrument delivered by or on behalf of Seller pursuant to this Agreement; and (d) the tax matters set forth in Section 7.1(a). SECTION 9.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold harmless any Seller Group Member from and against any and all Damages incurred by such Seller Group Member arising from, or in connection with: (a) any failure by Buyer to perform any of its covenants or other obligations herein or in any other document executed in connection with this Agreement, including, without limitation, the Ancillary Agreements; (b) any breach of any representation or warranty of Buyer contained or referred to herein or in any Schedule, certificate, exhibit or other instrument delivered by or on behalf of Buyer pursuant to this Agreement; (c) the allegation in writing by any third party of the existence of any liability, obligation, lease, agreement, contract, other commitment or state of facts which, if such allegation were true, would constitute a breach by Buyer of any representation or warranty of Buyer contained or referred to herein or in any Schedule, certificate, exhibit or other instrument delivered by or on behalf of Buyer pursuant to this Agreement; and (d) the tax matters set forth in Section 7.1(b). SECTION 9.4 NOTICE OF CLAIMS. Any Buyer Group Member or Seller Group Member seeking indemnification hereunder (an "Indemnitee") shall promptly give to the party or parties obligated to provide indemnification to such Indemnitee (an "Indemnitor") a notice ("Claim Notice") describing in reasonable detail the facts giving rise to any claim for indemnification hereunder and shall include in such Claim Notice (if then known) the amount or the method of computation of the amount of such claim, and a reference to the provision of this Agreement, the Ancillary Agreements, or any other 14 agreement, document or instrument executed hereunder or in connection herewith upon which such claim is based. SECTION 9.5 THIRD PARTY CLAIMS. (a) Subject to paragraph (b) below, in the case of any third party claim, action or suit as to which indemnification is sought by an Indemnitee, the Indemnitor shall have 15 business days after receipt of the notice referred to in Section 9.4 to notify the Indemnitee that it elects to conduct and control such claim, action or suit. If the Indemnitor does not give the foregoing notice, the Indemnitee shall have the right to defend, contest, settle or compromise such action or suit in the exercise of its exclusive but reasonable discretion, and the Indemnitor shall, upon request from any Indemnitee, promptly pay to such Indemnitee in accordance with the other terms of this Article 9 the amount of any Damages. If the Indemnitor gives the foregoing notice, the Indemnitor shall have the right to undertake, conduct and control, through counsel of its own choosing and at the sole expense of the Indemnitor, the conduct and settlement of such action or suit, and the Indemnitee shall cooperate with the Indemnitor in connection therewith; provided, that (x) the Indemnitor shall permit the Indemnitee to participate in such conduct or settlement through counsel chosen by the Indemnitee, but the fees and expenses of such counsel shall be borne by the Indemnitee and (y) the Indemnitor shall agree promptly to reimburse the Indemnitee for the full amount of any Damages resulting from such action or suit, except fees and expenses of counsel for the Indemnitee incurred after the assumption of the conduct and control of such action or suit by the Indemnitor and (z) the Indemnitor may not settle any such action or suit if the Indemnitor would not be fully liable for all Damages resulting from such action or suit. So long as the Indemnitor is contesting any such action or suit in good faith, the Indemnitee shall not pay or settle any such action or suit or make any statement or take any action that would prejudice the right or ability of the Indemnitor to defend or settle such action or suit or that would effect the amount of Damages relating thereto. (b) In the case of any third party claim, action or suit as to which indemnification is sought by an Indemnitee which involves a claim for Damages other than money Damages together with money Damages or involves a claim solely for such other Damages and, in either case, could result in a Material Adverse Change in the business of the Indemnitee, the Indemnitee shall have the right to conduct and control, through counsel of its choosing, such claim, action or suit. The Indemnitee shall permit the Indemnitor to participate in the defense of any such action or suit through counsel chosen by it, provided that the fees and expenses of such counsel shall be borne by the Indemnitor. The Indemnitee may compromise or settle any such claim, action or suit; provided, that, any compromise or settlement with respect to a claim for money Damages effected after the Indemnitor, by notice to the Indemnitee, shall have reasonably disapproved in its reasonable judgment such compromise or settlement shall discharge the Indemnitor from liability with respect to the subject matter thereof, and no amount in respect thereof shall be claimed as Damages. 15 ARTICLE 10. TERMINATION SECTION 10.1 TERMINATION. This Agreement may be terminated at any time prior to the Closing: (a) by mutual agreement of Seller and Buyer; (b) by either Seller or Buyer, by giving written notice of such termination to the other party, if the Closing shall not have occurred on or prior to June 15, 2001; provided that the terminating party is not in material breach of its obligations under this Agreement; and (c) by either Seller or Buyer if there shall be in effect any Law that prohibits the Closing or if the Closing would violate any non-appealable final order, decree or judgment of any court or governmental body having competent jurisdiction. a SECTION 10.2 EFFECT OF TERMINATION. In the event of the termination of this Agreement in accordance with Section 10.1, this Agreement shall thereafter become void and have no effect, and no party hereto shall have any liability to any other party hereto or their respective Affiliates, directors, officers or employees, except that nothing in this Section 10.2 shall relieve any party from liability for any breach of this Agreement that arose prior to such termination, for which liability the provisions of Article 9 shall remain in effect in accordance with the provisions and limitations of such Article. ARTICLE 11. MISCELLANEOUS SECTION 11.1 NOTICES. All notices or other communications under this Agreement shall be in writing and shall be deemed duly given, effective (i) three Business Days later, if sent by registered or certified mail, return receipt requested, postage prepaid, (ii) when sent if sent by telecopier or fax, provided that the telecopy or fax is promptly confirmed by telephone, (iii) when served, if delivered personally to the intended recipient, and (iv) one Business Day later, if sent by overnight delivery via a national courier service, and, in each case, addressed to the intended recipient at the address set forth below. Any party may change the address to which notices or other communications hereunder are to be delivered by giving each other party notice in the manner herein set forth. If to Seller: UNITED FINANCIAL ADJUSTING COMPANY, INC. c/o Netrex Capital Group LLC 270 South Service Road Melville, NY 11747 Telephone: (516) 622-9435 Telecopy: (516) 777-8440 Attn: Peter I. Cavallaro, General Counsel With a copy to: UNITED FINANCIAL ADJUSTING COMPANY, INC. c/o Netrex Capital Group LLC 270 South Service Road Melville, NY 11747 Telephone: (516) 622-9439 Telecopy: (516) 777-8440 Attn: Peter I. Cavallaro, General Counsel 16 If to Buyer: MERRYMEETING, INC. 9 Merrymeeting Lane Lloyd Harbor, NY 11743 Telephone: (631) 692-5901 Attn: John M. Davies With a copy to: ULMER & BERNE LLP Bond Court Building 1300 East Ninth St., Suite 900 Cleveland, OH 44114 Telephone: (216) 621-8400 Fax: (216) 621-7488 Attn: Steven A. Markus SECTION 11.2 AMENDMENT; WAIVER. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Seller and Buyer, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Except as otherwise provided herein, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Law or at equity. SECTION 11.3 NO ASSIGNMENT OR BENEFIT TO THIRD PARTIES. No party to this Agreement may assign any of its rights or delegate any of its obligations under this Agreement, by operation of Law or otherwise, without the prior written consent of the other party hereto. Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the parties hereto and their respective successors or permitted assigns and the Indemnified Parties, any rights or remedies under or by reason of this Agreement. Any attempted assignment in violation of this Section 11.3 shall be null and void. SECTION 11.4 ENTIRE AGREEMENT. This Agreement (including all Schedules and Exhibits), and the Ancillary Agreements contain the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. SECTION 11.5 CONFIDENTIALITY. Neither Seller nor Buyer nor any of their respective Affiliates shall issue a press release or make any public announcement relating to this Agreement or any matters referred to or contemplated herein or in the Ancillary Agreements, in each case without the express written consent of the other party, except as may be required to comply with the requirements of any applicable Law or rules and regulations of any stock exchange upon which the securities of such party are listed or 17 quoted, or of any regulatory authority with jurisdiction over either of the parties hereto, or any of their respective Affiliates, in which case such disclosing party shall consult with and provide a reasonable opportunity to comment to the other party. It is understood that this Section 11.5 shall not prevent compliance by Seller or any Subsidiary of Company with the rules and regulations of any stock exchange upon which the securities of such party are listed or quoted. SECTION 11.6 EXPENSES. Except as otherwise expressly provided in this Agreement, whether or not the transactions contemplated by this Agreement are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such expenses. SECTION 11.7 GOVERNING LAW. This Agreement shall be governed by the laws of the State of New York without regard to principles of conflicts of law. The parties hereto irrevocably agree to the exclusive jurisdiction of the State and Federal courts located in the Counties of Nassau or Suffolk, State of New York with respect to any action arising hereunder. SECTION 11.8 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement. SECTION 11.9 HEADINGS. The heading references herein are for convenience purposes only, do not constitute a part of this Agreement and shall not be deemed to alter or affect the meaning or interpretation of any of the provisions hereof. SECTION 11.10 SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. To the extent permitted by Law, if any provision of this Agreement, or the application thereof to any Person or any circumstances is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. SECTION 11.11 INFERENCES. Inasmuch as this Agreement is the result of negotiations between sophisticated parties of equal bargaining power represented by counsel, no inference in favor of or against either party will be drawn from the fact that any portion of this Agreement has been drafted by or on behalf of such party. 18 IN WITNESS WHEREOF, the parties have executed or caused this Agreement to be executed as of the date first written above. UNITED FINANCIAL ADJUSTING COMPANY, INC. By: /s/ Peter I. Cavallaro -------------------------------- Peter I. Cavallaro Secretary MERRYMEETING, INC. By: /s/ John Davies -------------------------------- John Davies President FRONTIER ADJUSTERS OF AMERICA, INC. By: /s/ Peter I. Cavallaro -------------------------------- Peter I. Cavallaro Secretary 19 Stock Purchase Agreement SCHEDULE 5.3.1 TREASURY STOCK There are currently 61,399 shares of the Common Stock of the Company held in treasury. Stock Purchase Agreement SCHEDULE 5.3.2 OUTSTANDING WARRANTS, OPTIONS, ETC. 1. There are no outstanding warrants. 2. See the attached list. EX-3 4 ex-3.txt PLAN AND AGREEMENT OF MERGER Exhibit 3 PLAN AND AGREEMENT OF MERGER THIS PLAN AND AGREEMENT OF MERGER dated as of April 27, 2001, is made by and among FRONTIER ADJUSTERS OF AMERICA, INC., an Arizona corporation ("FAJ"), MERRYMEETING, INC., a Delaware corporation ("MMI"), and MM MERGER CORPORATION, a Delaware corporation ("ACQUISITION"). RECITALS A. MMI is the holder of approximately 58.7% of the issued and outstanding capital stock of FAJ. B. MMI is also the holder of 100% of the issued and outstanding capital stock of Acquisition. C. The parties hereto desire that Acquisition be merged with and into FAJ upon the terms and conditions of this Agreement. AGREEMENT NOW, THEREFORE, the parties hereto hereby approve and adopt this Agreement as a Plan of Merger and do mutually covenant and agree as follows: ARTICLE 1 DEFINITIONS As used in this Agreement, the following terms have the following respective meanings: "ACQUISITION" means MM Merger Corporation, a Delaware corporation. "ACTION" means any actual or, to a Person's knowledge, threatened action, claim, suit, litigation, arbitration, inquiry, proceeding or investigation by or before any Government Authority. "ADDITIONAL DOCUMENTS" has the meaning set forth in SECTION 11.1. "AFFILIATE" has the meaning ascribed thereto in Rule 12b-2 promulgated under the Exchange Act, as in effect on the date hereof. "AGREEMENT" means this Plan and Agreement of Merger. "AMEX" means the American Stock Exchange, Inc. "BENEFICIAL OWNERSHIP" has the meaning set forth in Rule 13d-3 promulgated under the Exchange Act. "BLUE SKY LAWS" has the meaning set forth in SECTION 4.5(E). 1 "BUSINESS DAY" means any day other than a Saturday, a Sunday or a bank holiday in Cleveland, Ohio or Phoenix, Arizona. "CERCLA" means the federal Comprehensive, Environmental Response, Compensation, and Liability Act, 42 U.S.C.ss. 9601 ET SEQ., as amended. "CERTIFICATE OF MERGER" has the meaning as set forth in SECTION 2.1. "CLOSING" AND "CLOSING DATE" have the meanings set forth in SECTION 8.1. "CODE" means the Internal Revenue Code of 1986, as amended, and any successor thereto, including all of the rules and regulations promulgated thereunder. "COMMITMENT" means any commitment, contractual obligation, agreement, borrowing, capital expenditure or material transaction entered into by a party or any of its Subsidiaries. "CURRENT REPORTS" has the meaning set forth in SECTION 4.6(B). "EFFECTIVE DATE" has the meaning set forth in SECTION 2.7. "EMPLOYEES" means all current, former and retired employees, officers and directors of a Person or any of its Subsidiaries, including current, former and retired employees, officers and directors on disability, layoff or leave status. "ENVIRONMENTAL CLAIM" means any claim, investigation or written notice by any Person alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries or fatalities, or penalties) arising out of, based on or resulting from (A) the presence, generation, transportation, treatment, use, storage, disposal or release of Materials of Environment Concern or the threatened release of Materials of Environmental Concern at any location, or (B) activities or conditions forming the basis of any violation, or alleged violation of, or liability or alleged liability under, any Environmental Law. "ENVIRONMENTAL LAWS" means any federal, state, or local statute, law, ordinance, code, order, injunction, decree or ruling, and any regulation promulgated thereunder, which regulates or controls (i) pollution, contamination, or the condition of groundwater, surface water, soil, sediment or air, or (ii) a spill, leak, emission, discharge, release or disposal into groundwater, surface water, soil, sediment or air, including without limitation CERCLA; the Federal Resource Conservation and Recovery Act, 42 U.S.C.ss.6901 ET SEQ., as amended; the Hazardous Materials Transportation Act, 49 U.S.C.ss.1801 ET SEQ., as amended; the Toxic Substances Control Act, 15 U.S.C.ss.2601 ET SEQ., as amended; the Clean Air Act, 42 U.S.C.ss.7401 ET SEQ., as amended; the Clean Water Act, 33 U.S.C.ss.1251 ET SEQ., as amended; the Safe Drinking Water Act, 42 U.S.C.ss.300f ET SEQ., as amended; the Emergency Planning and Community Right to Know Act, 42 U.S.C.ss.11001 ET SEQ., as amended; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.ss.136 ET SEQ., as amended; the National Environmental Policy Act, 42 U.S.C.ss.4321 ET SEQ., as amended; any similar state or local statutes or ordinances, and the regulations promulgated thereunder. 2 "ERISA" means the Employee Income Security Act of 1974, as amended, and any successor thereto, including all of the rules and regulations promulgated thereunder. "ERISA AFFILIATE" means, with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same "controlled group" as the first entity, trade or business within the meaning of Section 4001(a)(14) of ERISA. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FAJ" means Frontier Adjusters of America, Inc., an Arizona corporation. "FAJ COMMON STOCK" has the meaning set forth in SECTION 2.5(A). "FAJ PERMITS" has the meaning set forth in SECTION 4.19(A). "FAJ PLANS" means, collectively, each of FAJ's or any of the FAJ Subsidiaries' benefit, bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other employee benefit arrangements, understandings or plans (whether under Section 414(b), (c), (m) or (o) of the Code or otherwise) applicable to any Employee or any Person affiliated with FAJ or any of the FAJ Subsidiaries. "FAJ PROPRIETARY RIGHTS" has the meaning set forth in SECTION 4.16. "FAJ AND SUBSIDIARIES' PROPERTIES" has the meaning set forth in SECTION 4.12. "FAJ REPORTS" has the meaning set forth in SECTION 4.6(A). "FAJ SHARES" has the meaning set forth in SECTION 2.5. "FAJ SUBSIDIARIES" means Frontier Adjusters of Arizona, Inc., an Arizona corporation, Frontier Adjusters, Inc., a Colorado corporation, and Frontier Adjusters Co., Ltd., an Alberta, Canada corporation. "FINANCIAL STATEMENTS" has the meaning set forth in SECTION 5.5(A). "FORM 10-K" has the meaning set forth in SECTION 4.6(A). "GAAP" means United States generally accepted accounting principles. "GOVERNMENT AUTHORITY" means any government or state (or any subdivision thereof) of or in the United States or Canada, or any agency, authority, bureau, commission, department or similar body or instrumentality thereof, or any governmental court or tribunal. "INDEMNIFIED PARTY" has the meaning set forth in SECTION 11.3. "INDEMNIFYING PARTY" has the meaning set forth in SECTION 11.3. 3 "INDEMNITY THRESHOLD" has the meaning set forth in SECTION 11.4(A). "IRS" means the Internal Revenue Service or any successor thereto. "LIABILITIES" means, as to any Person, all debts, adverse claims, liabilities, direct, indirect, absolute or contingent of such Person, whether accrued, vested or otherwise. "LIENS" means all liens, mortgages, deeds of a Person, title retention arrangements, security interests, pledges, claims, charges, easements and other encumbrances of any nature whatsoever. "LOSS AND EXPENSE" has the meaning set forth in SECTION 11.2(A). "MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial condition, results of operations or business of a Person or any of its Subsidiaries. "MATERIALS OF ENVIRONMENTAL CONCERN" means all chemicals, pollutants, contaminants, wastes, toxic substances, petroleum or any fraction thereof, petroleum products hazardous substances (as defined in Section 101(14) of CERCLA, 42 U.S.C. ss. 6601(14)), or solid or hazardous wastes as now defined and regulated under any Environmental Laws. "MATERIAL TRANSACTION" means any transaction between a Person and its Affiliates, that would be required to be disclosed in such Person's reports or proxy materials filed under the Exchange Act by Item 404 of Regulation S-K. "MERGER" has the meaning set forth in SECTION 2.1. "MERGER CONSIDERATION" has the meaning set forth in SECTION 2.5(A). "MMI" means Merrymeeting, Inc., a Delaware corporation. "MMI PLANS" means, collectively, each of MMI's or any of the MMI Subsidiaries' benefit, bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other employee benefit arrangements, understandings or plans (whether under Section 414(b), (c), (m) or (o) of the Code or otherwise) applicable to any Employee or any Person affiliated with MMI or any of the MMI Subsidiaries. "MMI SUBSIDIARIES" means Acquisition. "MMI PERMITS" has the meaning set forth in SECTION 5.19(A). "MMI PROPRIETARY RIGHTS" has the meaning set forth in SECTION 5.15. "MMI AND SUBSIDIARIES' PROPERTIES" has the meaning set forth in SECTION 5.11. "OTHER FILINGS" has the meaning set forth in SECTION 3.2. "PAYING AGENT" has the meaning set forth in SECTION 2.5(C)(I). 4 "PAYMENT FUND" has the meaning set forth in SECTION 2.5(C)(I). "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization, other form of business or legal entity or Government Authority. "PERMITTED LIENS" means: (A) statutory liens for obligations which are not overdue, or are being contested in good faith; (B) rights of way disclosed on an ALTA survey of any property; and (C) items listed on SCHEDULES 4.12 and 5.11, as applicable. "PROXY STATEMENT" has the meaning set forth in SECTION 3.2. "SEC" means United States Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SECURITIES LAWS" has the meaning set forth in SECTION 4.6(A). "SUBSIDIARY" means each entity of which a Person, directly or through one or more intermediary entities (i) has the right to elect a majority of the board of directors or other governing body, (ii) owns a majority of the issued and outstanding common stock, or (iii) has the right to receive 50% or more of the economic value of any business or activity in which such entity is engaged; PROVIDED, HOWEVER, that FAJ shall not be deemed a Subsidiary of MMI for any purposes hereof. "TAX" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 54A), customs duties, capital stock, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. The term "Tax" also includes any amount payable pursuant to any tax sharing agreement to which any relevant party is liable and any amount payable pursuant to any similar contract. "TAX RETURN" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. ARTICLE 2 MERGER 2.1 MERGER. On the Effective Date, Acquisition shall be merged with and into FAJ, which shall be the surviving corporation, pursuant to the terms hereof and the Certificate and Articles of Merger (the "CERTIFICATE OF MERGER"), attached as EXHIBIT 1 hereto (the "MERGER"). 2.2 EFFECT OF THE MERGER. On the Effective Date, the separate existence of Acquisition shall cease, and FAJ shall succeed to and possess all the properties, rights, privileges, powers, franchises and immunities, of a public as well as of a private nature, and be subject to all the debts, liabilities, 5 obligations, restrictions, disabilities and duties of Acquisition, all without further act or deed, as provided in the Arizona Business Corporation Act and the Delaware General Corporation Law. 2.3 OFFICERS AND DIRECTORS OF FAJ. On the Effective Date, the name of the surviving corporation shall be unchanged and the directors and executive officers of FAJ shall be as listed on SCHEDULE A. 2.4 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation of FAJ and the Bylaws of FAJ immediately prior to the Effective Date shall remain the Articles of Incorporation and Bylaws of FAJ. 2.5 STATUS AND CONVERSION OF SECURITIES. (a) CONVERSION OF FAJ COMMON STOCK. Upon the merger becoming effective, each share of Common Stock, par value $.01 per share, of FAJ ("FAJ COMMON STOCK") issued and outstanding on the Effective Date, other than shares to be cancelled pursuant to SECTION 2.5(B) (such shares of FAJ Common Stock other than those to be cancelled are collectively called the "FAJ SHARES"), by reason of the Merger and without any action on the part of the holders thereof, shall be converted into the right to receive an amount equal to $1.58 in cash (the "MERGER Consideration"). Provided, however, that the Merger Consideration shall be subject to equitable adjustment in the event of any stock split, stock dividend, reverse stock split, or other change in the number of shares of FAJ Common Stock outstanding prior to the Effective Date. No shares of FAJ Common Stock shall be deemed to be outstanding or to have any rights other than those set forth in this Section after the Effective Date, except that any shares of FAJ Common Stock held in the treasury of FAJ shall be cancelled and all rights in respect thereof shall cease to exist and no cash or securities or other property shall be issued in respect thereof. (b) CANCELLATION OF FAJ COMMON STOCK HELD BY MMI. All shares of FAJ Common Stock previously held by MMI will be cancelled as of the Effective Date. (c) CONVERSION OF CAPITAL STOCK OF ACQUISITION. On the Effective Date, each share of common stock, $.01 par value per share, of Acquisition shall be converted into one share of FAJ Common Stock. (d) PROCEDURE FOR PAYMENT. (i) On the Effective Date and as a condition precedent to the effectiveness of the Merger, (A) MMI will furnish to U. S. Stock Transfer Company, or such other stock transfer company as may be mutually acceptable to the parties (the "PAYING AGENT") a corpus (the "PAYMENT FUND") consisting of cash sufficient in the aggregate for the Paying Agent to make full payment of the Merger Consideration to the holders of all of the outstanding FAJ Shares and (B) MMI will cause the Paying Agent to mail a letter of transmittal (with instructions for its use) in the form attached hereto as EXHIBIT 2 to each record holder of outstanding FAJ Shares for the holder to use in surrendering the certificates which represented its shares of FAJ Shares against payment of the Merger Consideration. No interest will accrue or be paid to the holder of any outstanding FAJ Common Stock. 6 (ii) MMI may cause the Paying Agent to invest the cash included in the Payment Fund in one or more of the permitted investments set forth on EXHIBIT 3 attached hereto; provided, however, that the terms and conditions of the investments shall be such as to permit the Paying Agent to make prompt payment of the Merger Consideration as necessary. MMI may cause the Paying Agent to pay over to MMI or FAJ any net earnings with respect to the investments, and MMI will replace promptly any portion of the Payment Fund that the Paying Agent losses through such investments. (iii) MMI may cause the Paying Agent to pay over to MMI any portion of the Payment Fund (including any earnings thereon) remaining 180 days after the Effective Date, and thereafter all former stockholders shall be entitled to look to MMI (subject to abandoned property, escheat, and other similar laws) as general creditors thereof with respect to the cash payable upon surrender of their certificates. (iv) MMI shall pay all charges and expenses of the Paying Agent. (e) CLOSING OF TRANSFER RECORDS. After the close of business on the Effective Date, transfers of FAJ Common Stock outstanding prior to the Effective Date shall not be made on the stock transfer books of FAJ. (f) NO OTHER CAPITAL STOCK OR OPTIONS TO PURCHASE FAJ COMMON STOCK. On the Effective Date, there shall be no outstanding shares of capital stock of FAJ other than shares of FAJ Common Stock. In addition, on the Effective Date, there shall be no outstanding options, warrants, or rights to purchase shares of FAJ Capital Stock. 2.6 FURTHER DOCUMENTS. From time to time, on and after the Effective Date, as and when requested by FAJ or MMI or their successors or assigns, the appropriate officers and directors of Acquisition as of the Effective Date shall, for and on behalf and in the name of Acquisition or otherwise, execute and deliver all such deeds, bills of sale, assignments and other instruments, and shall take or cause to be taken such further or other actions as FAJ or MMI or their successors or assigns may deem necessary or desirable in order to confirm of record or otherwise to FAJ title to and possession of all of the properties, rights, privileges, powers, franchises and immunities of Acquisition and otherwise to carry out fully the provisions and purposes of this Agreement. 2.7 EFFECTIVE DATE. The Merger shall become effective on such date (the "EFFECTIVE DATE") as of which all applicable legal requirements have been fulfilled to consummate the Merger, including the filing and effectiveness of the Certificate of Merger with the applicable authorities in the states of Arizona and Delaware. The parties shall use their best efforts to consummate the Merger at the earliest practicable date following the Closing. 2.8 APPROVAL OF MERGER. The parties shall take all necessary actions to file the Certificate of Merger with, and obtain the approval for such filing by, the Arizona Corporation Commission, and the Secretary of State of the State of Delaware. 7 ARTICLE 3 SHAREHOLDER APPROVALS; PROXY FILINGS 3.1 SHAREHOLDER APPROVALS. Meetings of the shareholders of FAJ and Acquisition shall be held in accordance with the laws of their respective states of incorporation, on or before the Closing Date, in each case, among other things, to consider and act upon the adoption of this Agreement and the Merger. 3.2 PROXY STATEMENT. As promptly as practicable after the execution of this Agreement, FAJ shall prepare and file with the SEC a preliminary proxy statement by which the shareholders of FAJ will be asked to approve, in accordance with the rules of the AMEX and any applicable laws, the Merger, and such other items as the FAJ Board of Directors deems appropriate. The preliminary proxy statement, as initially filed with the SEC, as it may be amended and refiled with the SEC, and the definitive proxy statement filed with the SEC and mailed to the FAJ shareholders (such definitive proxy statement, the "PROXY STATEMENT"), shall be in form and substance reasonably satisfactory to MMI. FAJ shall respond to any comments of the SEC, shall mail the Proxy Statement to the FAJ shareholders, and shall cause any meeting of the FAJ Board of Directors or the FAJ shareholders required to be held to consider the Merger and the transactions contemplated hereby at the earliest practicable time. As promptly as practicable after the date hereof, FAJ shall prepare and file any other filings required under the Exchange Act, the Securities Act or any other federal, state or local laws relating to this Agreement and the transactions contemplated hereby, including any state takeover laws (the "OTHER FILINGS"). FAJ will notify MMI promptly of the receipt of any comments from the SEC or its staff or any other governmental official and of any request by the SEC or its staff or any other government official for amendments or supplements to the Proxy Statement or any Other Filing or for additional information and will supply MMI with copies of all correspondence between FAJ or any of its representatives, on the one hand, and the SEC or its staff or any other government official, on the other hand, with respect to the Proxy Statement or any Other Filing. FAJ shall cause the Proxy Statement and any Other Filing to comply in all material respects with all applicable requirements of law. MMI shall provide FAJ all information about MMI and the MMI Subsidiaries required to be included or incorporated by reference in the Proxy Statement or any Other Filing and shall otherwise cooperate with FAJ in taking the actions described in this Section. Whenever any event occurs that is required to be set forth in an amendment or supplement to the Proxy Statement or any Other Filing, each party, as applicable, shall promptly inform the other party of such occurrence and cooperate in the preparation and filing with the SEC or its staff or any other government officials, or mailing to the FAJ shareholders, as required, such amendment or supplement. 8 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF FAJ FAJ represents and warrants to MMI and Acquisition as follows: 4.1 ORGANIZATION AND QUALIFICATION, SUBSIDIARIES. (a) Each of FAJ and the FAJ Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation. Each of FAJ and the FAJ Subsidiaries has all requisite corporate power and authority to own, operate, lease and encumber its properties and carry on its business as now conducted. (b) Each of FAJ and the FAJ Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the ownership or lease of its properties or the conduct of its business requires such qualification, except for any such failures to so qualify that would not have a Material Adverse Effect with respect to FAJ or any FAJ Subsidiary. (c) All of the outstanding shares of capital stock of, or other equity interests in, each of the FAJ Subsidiaries are owned, directly or indirectly, by FAJ in compliance with all applicable securities laws, free and clear of all Liens. (d) The issued and outstanding shares of each of FAJ and the FAJ Subsidiaries have been duly authorized and are validly issued, fully paid and nonassessable and free of preemptive rights. On the Effective Date, FAJ will have good and marketable title to the FAJ Subsidiaries' shares, free and clear of all Liens. 4.2 DUE AUTHORIZATION. The execution, delivery and performance of this Agreement and of all of the documents and instruments delivered in connection herewith by FAJ has been duly and validly authorized by all necessary corporate action on the part of FAJ. This Agreement has been duly executed and delivered on behalf of FAJ. This Agreement is, and the other documents and instruments required hereby will be, when executed and delivered by FAJ, the valid and binding obligations of FAJ, enforceable against FAJ in accordance with their respective terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability or right of creditors generally and to general equitable principles which may limit the right to obtain equitable remedies. 4.3 CAPITALIZATION. (a) As of the date hereof, FAJ has 100,000,000 shares of common stock authorized, and 8,957,660 shares of common stock issued and outstanding, and 100,000,000 shares of preferred stock authorized, and no shares of preferred stock issued or outstanding. Neither FAJ nor any of the FAJ Subsidiaries has any outstanding securities or bonds, debentures, notes or other obligations, the holders of which have the right to vote (or that are convertible into or exercisable for securities the holders of which have the right to vote) with respect to the transactions contemplated hereby. All issued and outstanding shares of FAJ and the FAJ Subsidiaries were issued in compliance with all applicable state and federal securities laws. Except as set forth on SCHEDULE 4.3(A), there are no existing options, warrants, calls, subscriptions, 9 convertible securities, or other rights, agreements or commitments that obligate FAJ or any FAJ Subsidiary to issue, transfer or sell any shares of capital stock or other equity interests in FAJ or any FAJ Subsidiary. (b) Neither FAJ nor any of the FAJ Subsidiaries has issued or granted securities convertible into or exchangeable for interests in FAJ or any FAJ Subsidiary, and, except as set forth on SCHEDULE 4.3(A), neither FAJ nor any FAJ Subsidiary is a party to any outstanding commitment of any kind relating to, or any presently effective agreement or understanding with respect to, interests in FAJ or any FAJ Subsidiary, whether issued or unissued. (c) Neither FAJ nor any of the FAJ Subsidiaries owns directly or indirectly any material interest or investment (whether equity or debt) in any corporation, partnership, joint business venture, trust or other legal entity (other than the list set forth on SCHEDULE 4.3(C), which is a list of all of the investments of FAJ and the FAJ Subsidiaries). 4.4 APPROVAL; STOCK. (a) The Board of Directors of FAJ and a committee of "disinterested directors" (as defined in Section 10-2741(D) of the Arizona Business Corporation Act) have approved the Merger, and this Agreement, and the transactions contemplated hereby and have determined to recommend that the shareholders of FAJ vote in favor of and approve this Agreement and the Merger. (b) The Merger and the payment of the Merger Consideration will not give any shareholder of FAJ or any other Person the right to demand payment for that shareholder's shares under the laws of the State of Arizona; any appraisal or similar rights under the laws of the State of Arizona; any dissenters' or similar rights under the laws of the State of Arizona; any preemptive or similar right to purchase additional shares of FAJ's capital stock; or any rights under any shareholders' rights, "poison pill" or similar plan adopted by the FAJ Board of Directors or the FAJ shareholders or contained in FAJ's Articles of Incorporation or other organizational documents. 4.5 NO CONFLICTS; NO DEFAULTS; REQUIRED FILINGS AND CONSENTS. Neither the execution and delivery by FAJ of this Agreement, nor the consummation by FAJ of the transactions contemplated hereby in accordance with the terms hereof, will: (a) conflict with or result in a breach of any provisions of the organizational documents of FAJ; (b) result in a breach or violation of, a default under, or the triggering of any payment or other obligation pursuant to, or accelerate vesting or have any other consequence under, any stock option plan, option plan or similar compensation plan of FAJ or any grant or award made under any of the foregoing; (c) violate or conflict with any statute, regulation, judgment, order, writ, decree or injunction applicable to FAJ; 10 (d) violate or conflict with or result in a breach of any provision of, or constitute a default (or any event that, with notice or lapse of time or both, would constitute a default) under, or result in the termination or in a right of termination or cancellation of, or accelerate the performance required by, or result in the creation of any Lien upon any of the properties of FAJ under, or result in being declared void, voidable or without further binding effect, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed or any franchise, license, permit, lease, contract, agreement or other instrument, commitment or obligation to which FAJ is a party, or by which FAJ or any of its properties is bound or affected; or (e) require any consent, approval or authorization of, or declaration, filing or registration with, any Government Authority or private organization, other than any filings required under the Securities Act, the Exchange Act, any state franchise laws or state securities laws ("BLUE SKY LAWS"). 4.6 SEC MATTERS AND ABSENCE OF UNDISCLOSED LIABILITIES. (a) FAJ has delivered or made available to MMI, FAJ's Annual Report on Form 10-K for the fiscal year ended June 30, 2000 filed by FAJ with the SEC and all exhibits, amendments and supplements thereto, including all documents incorporated by reference therein (collectively, the "FORM 10-K"), and each registration statement, report, proxy statement or information statement and all exhibits thereto prepared by or relating to FAJ for the three years prior to the date of this Agreement, each in the form (including exhibits and any amendments thereto) filed with the SEC (collectively the "FAJ REPORTS"). The FAJ Reports were filed with the SEC in a timely manner and constitute all forms, reports and documents required to be filed by FAJ under the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder (the "SECURITIES LAWS"). As of their respective dates, the FAJ Reports: (i) complied as to form in all material respects with the applicable requirements of the Securities Laws; and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. There has been no violation asserted by any Government Authority with respect to any of the FAJ Reports that has not been resolved and, to FAJ's knowledge, there have been no threatened assertions of violations. (b) Each of the balance sheets (including the related notes and schedules) included in or incorporated by reference into the Form 10-K and each Exchange Act report filed between the date such annual report was filed with the SEC and the Closing Date (the Form 10-K and such reports collectively, the "CURRENT REPORTS") fairly present the consolidated financial position of FAJ and its Subsidiaries as of its date and each of the statements of operations, shareholders' equity (deficit) and cash flows included in or incorporated by reference into the Current Reports (including any related notes and schedules) fairly present the consolidated results of operations, retained earnings or cash flows, as the case may be, of FAJ and its Subsidiaries for the period covered thereby, in each case in accordance with GAAP and in accordance with Regulation S-X promulgated by the SEC, except as may be noted therein and except, in the case of the unaudited statements, for normal recurring year-end adjustments which would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. All such balance sheets and statements are free of errors, omissions and misstatements, except for such errors, omissions 11 and misstatements that would not, individually or in the aggregate, have, or reasonably be expected to have, a Material Adverse Effect. None of the receivables of FAJ and its Subsidiaries are materially overstated, and no payables and other liabilities of FAJ and its Subsidiaries are materially understated, on any such balance sheet or statement. (c) Except as and to the extent set forth in the Current Reports or in any Schedule hereto, to FAJ's knowledge, none of FAJ or any of its Subsidiaries has any material Liabilities, nor do there exist any circumstances that would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. 4.7 LITIGATION; COMPLIANCE WITH LAW. (a) SCHEDULE 4.7 sets forth a list and a brief description of all pending Actions against FAJ and any of the FAJ Subsidiaries of which FAJ has notice, in which the amount of damages prayed for in any complaint or pleading exceeds $150,000 or that is reasonably likely to result in damages of $150,000 or more. (b) Except as set forth on SCHEDULE 4.7, there are no Actions pending or, to the knowledge of FAJ threatened, against FAJ or any of the FAJ Subsidiaries, or any property (including proprietary rights) of FAJ or any of the FAJ Subsidiaries in any court or other forum or before any arbitrator of any kind or before or by any Governmental Authority of which or FAJ has notice, in which the amount of damages prayed for in any complaint or pleading exceeds $150,000 or that is reasonably likely to result in damages of $150,000 or more. (c) To the knowledge of FAJ, neither FAJ nor any of the FAJ Subsidiaries is in violation of any statute, rule, regulation, order, writ, decree or injunction of any Government Authority or any body having jurisdiction over them or any of their respective properties. SCHEDULE 4.7 sets forth all such violations known to FAJ except for violations that would not, individually or in the aggregate, have, or reasonably be expected to have, a Material Adverse Effect. 4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in SCHEDULE 4.8 or in any other Schedule hereto, since December 31, 2000, FAJ and each of the FAJ Subsidiaries has conducted its business only in the ordinary course of business, and there has not been (a) any change, circumstance or event that had or that could reasonably be expected to have a Material Adverse Effect or (b) any change in any accounting principles, practices or methods, except as required by changes in GAAP. 4.9 TAX MATTERS. (a) FAJ and each of the FAJ Subsidiaries has timely filed with the appropriate taxing authority all Tax Returns required to be filed by it or has timely requested extensions and any such request has been granted and has not expired. Each such Tax Return is complete and accurate in all material respects and all information shown thereon is correct in all material respects. All Taxes required to have been paid by FAJ or any of the FAJ Subsidiaries have been paid when due, except for Taxes contested in good faith and for which adequate reserves as required by GAAP have been taken and which are listed on SCHEDULE 4.9. FAJ and each of the FAJ Subsidiaries have properly accrued their liability 12 for all Taxes for periods subsequent to the periods covered by such Tax Returns as required by GAAP. Neither FAJ nor any of the FAJ Subsidiaries has executed or filed with the IRS or any other taxing authority any agreement now in effect extending the period for assessment or collection of any Tax. Except as set forth on SCHEDULE 4.9, neither FAJ nor any of the FAJ Subsidiaries is a party to any pending action or proceeding by any taxing authority for assessment or collection of any Tax, and no claim for assessment or collection of any Tax has been asserted against any of them. Except as set forth on SCHEDULE 4.9, no claim has been made by any authority in a jurisdiction where FAJ or any of the FAJ Subsidiaries does not file Tax Returns that it is or may be subject to taxation or reporting in that jurisdiction. There is no dispute or claim concerning any information, reporting or tax liability of FAJ or any of the FAJ Subsidiaries, (i) claimed or raised by any taxing authority in writing or (ii) as to which FAJ has knowledge. Except as set forth on SCHEDULE 4.9, neither FAJ nor any of the FAJ Subsidiaries has had its tax returns audited by any Government Authority within the last four years. (b) No amount or other entitlement that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated hereby by any Employee of FAJ or any of the FAJ Subsidiaries or of any of their Affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or plan currently in effect would be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(2) of the Code). 4.10 COMPLIANCE WITH AGREEMENTS. (a) Neither FAJ nor any of the FAJ Subsidiaries is in default under or in violation of any provision of its articles of incorporation or organization, or bylaws or operating agreement or any similar organizational document. (b) FAJ and each of the FAJ Subsidiaries has filed all material reports, registrations, documents and statements, together with any amendments and supporting materials required with respect thereto, that it was required to file with any Government Authority and all other material reports, documents, materials and statements required to be filed by it, and has paid all fees or assessments due and payable in connection therewith. There is no unresolved violation asserted by any Government Authority against FAJ or any of the FAJ Subsidiaries of which FAJ or Acquisition has received notice. (c) Neither FAJ nor any of the FAJ Subsidiaries is in default, and, to FAJ's knowledge, no event has occurred that, with the giving of notice or the lapse of time or both, would constitute a default, under any Commitment to which FAJ or any of the FAJ Subsidiaries are bound, whether as a party or otherwise or in respect of any payment obligations thereunder except for defaults that would not, individually or in the aggregate, have, or reasonably be expected to have, a Material Adverse Effect with respect to FAJ or any FAJ Subsidiary. Except as set forth in SCHEDULE 4.10(C), neither FAJ nor any of the FAJ Subsidiaries is a party to any joint venture or partnership agreements. To FAJ's knowledge, there is no condition with respect to FAJ or the FAJ Subsidiaries that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect with respect to FAJ or any FAJ Subsidiary. 13 (d) SCHEDULE 4.10(D) sets forth a complete and accurate list of all material agreements of FAJ and each of the FAJ Subsidiaries in effect on the date hereof. Each agreement or policy listed on SCHEDULE 4.10(D) is in full force and effect, and FAJ and each of the FAJ Subsidiaries and, to FAJ's knowledge, the other parties thereto, are in compliance with such agreements or policies. Solely for purposes of this Section, material agreements shall mean agreements that involve an expense to FAJ or any of the FAJ's Subsidiaries or annual revenue over $500,000. 4.11 FINANCIAL RECORDS; ARTICLES AND BYLAWS, CORPORATE RECORDS. (a) The books of account and other financial records of FAJ and the FAJ Subsidiaries are true and complete in all material respects, and have been maintained in accordance with GAAP. (b) FAJ has delivered or made available to FAJ true and complete copies of the Articles and the Bylaws of FAJ and each of the FAJ Subsidiaries, as amended to date, and the Articles of Organization, organizational documents and joint venture agreements of FAJ and each of the FAJ Subsidiaries, and all amendments thereto. (c) The corporate minute books and other records of proceedings of FAJ and the FAJ Subsidiaries contain accurate records of all meetings and consents of the equity holders, directors and other governing bodies thereof and accurately reflect in all material respects all other corporate action of the directors and shareholders and any committees of the board of directors of FAJ and the FAJ Subsidiaries. 4.12 TITLE TO ASSETS; LIENS. FAJ and each FAJ Subsidiary has good and marketable title (insurable and indefeasible fee simple title in the case of owned real property), to all of the respective property, equipment and other assets owned by it (the "FAJ AND SUBSIDIARIES' PROPERTIES"), and, except as set forth on SCHEDULE 4.12, such assets are free and clear of any and all mortgages, liens, security interests, charges, encumbrances or title defects of any nature whatsoever other than Permitted Liens and liens that would not, individually or in the aggregate, materially impair the use of such FAJ and Subsidiaries' Properties. SCHEDULE 4.12 contains a complete and accurate list of each parcel of real property owned, leased or used by FAJ and any FAJ Subsidiary in the conduct of its business. There are no pending or, to the best knowledge of FAJ, threatened zoning, condemnation or eminent domain proceedings, building, utility or other moratoria, or injunctions or court orders which would materially adversely affect such real property. To the knowledge of FAJ, the current use of the owned real property by FAJ and the FAJ Subsidiaries is permissible and in material compliance with all applicable zoning ordinances and other regulations of any Government Authority. 4.13 ENVIRONMENTAL MATTERS. (a) FAJ and each of the FAJ Subsidiaries' ownership, operation and use of its respective property have been and currently are in compliance in all material respects with all applicable Environmental Laws. (b) No Environmental Claim with respect to the operations or the businesses of FAJ or the FAJ Subsidiaries, or with respect to any real property owned by FAJ or the FAJ Subsidiaries, has been asserted or, to FAJ's knowledge, 14 threatened, and, to FAJ's knowledge, no circumstances exist with respect to FAJ or any of the FAJ Subsidiaries or any such real property that would reasonably be expected to result in any Environmental Claim being asserted, in any such case, against (i) FAJ or any of the FAJ Subsidiaries, or (ii) any Person whose liability for any Environmental Claims FAJ or any of the FAJ Subsidiaries has or may have retained or assumed either contractually or by operation of law. (c) (i) Neither FAJ nor any of the FAJ Subsidiaries has been notified, or has reason to anticipate being notified, of potential responsibility in connection with any site that has been placed on, or proposed to be placed on, the National Priorities List or its state or foreign equivalent pursuant CERCLA, or analogous state or foreign laws, (ii) no Materials of Environmental Concern are present on, in or under any real property owned by FAJ or the FAJ Subsidiaries, (iii) neither FAJ nor any FAJ Subsidiary nor, to the knowledge of FAJ, any tenant of any such real property has released or arranged for the release of any Materials of Environmental Concern at or on any such real property, (iv) no underground storage tanks, surface disposal areas, pits, ponds, lagoons or open trenches are present at any such real property, (v) no transformers, capacitors or other equipment containing fluid with more than 50 parts per million polychlorinated biphenyls are present at, on or under any such real property, except for any such transformers, capacitors or other equipment owned by any utility company, and (vi) to FAJ's knowledge, no employee, agent, contractor, subcontractor or tenant of FAJ or any of the FAJ Subsidiaries is now or has in the past been exposed to friable asbestos or asbestos-containing material at any such real property whether now or previously owned or occupied by FAJ or any of the FAJ Subsidiaries. 4.14 EMPLOYEES AND BENEFIT PLANS. (a) SCHEDULE 4.14(A) sets forth a complete and accurate list of all employment agreements with Employees of FAJ and each of the FAJ Subsidiaries. Except for the Employees who are parties to such employment agreements, all of the Employees of FAJ and the FAJ Subsidiaries are employed in an at-will status (except for restrictions or limitations on the at-will status of such employees imposed by general principles of law or equity). (b) SCHEDULE 4.14(B) sets forth a complete and accurate list of each of the FAJ Plans. Since December 31, 2000, there has been no adoption, modification, amendment or alteration of any FAJ Plan by FAJ or any of the FAJ Subsidiaries. All FAJ Plans, including any such plan that is an "employee benefit plan" as defined in Section 3(3) of ERISA, are in compliance, in all material respects, with all applicable requirements of law, including ERISA and the Code, and neither FAJ nor any of the FAJ Subsidiaries has any liabilities or obligations with respect to any FAJ Plan, whether accrued, contingent or otherwise. 4.15 LABOR MATTERS. Except as disclosed in SCHEDULE 4.14, there are no pending or, to the knowledge of FAJ, threatened Actions or work stoppages relating to any Employee of FAJ or any FAJ Subsidiary. Neither FAJ nor any of the FAJ Subsidiaries is a party to any collective bargaining agreement with respect to Employees, and, to the knowledge of FAJ, there are no activities of any labor union seeking to represent or organize the employees of FAJ or any of the FAJ Subsidiaries. No unfair labor practice or labor arbitration, or race, sex, age, disability or other discrimination complaint is pending, nor is any such complaint, to the knowledge of FAJ, threatened against FAJ or any of the 15 FAJ Subsidiaries before the National Labor Relations Board, Equal Employment Opportunity Commission, Department of Labor or any other Governmental Authority, and no grievance is pending, nor is any grievance, to the knowledge of FAJ, threatened against FAJ or any of the FAJ Subsidiaries. FAJ and each of the FAJ Subsidiaries is in compliance in all material respects with all applicable federal, state and local laws relating to employment, including without limitation, the provisions thereof relating to wages, non-discriminatory hiring and employment practices, collective bargaining, and payment of Social Security and Unemployment Compensation taxes or similar taxes, and neither FAJ nor any of the FAJ Subsidiaries is liable for any arrears of wages or subject to any liabilities or penalties for failure to comply with any of the foregoing laws. 4.16 PROPRIETARY RIGHTS. Attached as SCHEDULE 4.16 is a list of (a) all trademark, service mark or trade name registrations and all pending applications for any such registration; (b) all patent and copyright registrations and all pending applications therefor; (c) all other trademarks, service marks, domain names, or trade names, whether or not registered; and (d) all licenses with respect thereto as well as rights or licenses to use any proprietary rights (including software licenses) of any other entities (the items in clauses (a), (b), (c) and (d) collectively, the "FAJ PROPRIETARY RIGHTS"), that are owned or used by FAJ or any of the FAJ Subsidiaries. To the knowledge of FAJ, the use of any of the Proprietary Rights by FAJ or any of the FAJ Subsidiaries has not infringed, is not infringing upon, and is not otherwise violating the rights of any Person or other entity in or to such FAJ Proprietary Rights or the asserted FAJ Proprietary Rights of others. No notices have been received by FAJ or any of the FAJ Subsidiaries that the use of the FAJ Proprietary Rights by FAJ or any of the FAJ Subsidiaries infringes upon or otherwise materially violates any rights of a person or other entity in or to such FAJ Proprietary Rights or the proprietary rights of others. To the knowledge of FAJ, no person or other entity is infringing on the FAJ Proprietary Rights owned by FAJ or any of the FAJ Subsidiaries. The FAJ Proprietary Rights include all FAJ Proprietary Rights used in, or necessary to, the conduct of the business of FAJ and each of the FAJ Subsidiaries. 4.17 INSURANCE. FAJ and each of the FAJ Subsidiaries maintains insurance policies covering the assets, business, equipment, properties, operations and Employees of it, each of which insurance policies are of a type and in amounts customarily carried by Persons similar in size to FAJ or the FAJ Subsidiaries conducting businesses similar to those of FAJ or the FAJ Subsidiaries. SCHEDULE 4.17 sets forth a list of all insurance coverage or policies currently maintained by FAJ and the FAJ Subsidiaries. All such coverage or policies shall be maintained in full force and effect until the Closing. There is no material claim by FAJ or any of the FAJ Subsidiaries pending under any of their insurance policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies. 4.18 BROKERS OR FINDERS. No agent, broker, investment banker or other firm or Person, including any of the foregoing that is an Affiliate of FAJ, is or will be entitled to any broker's or finder's fee or any other commission or similar fee agreed to or arranged by FAJ in connection with this Agreement or any of the transactions contemplated hereby. 16 4.19 GOVERNMENT APPROVALS; COMPLIANCE WITH LAWS AND ORDERS. (a) FAJ and the FAJ Subsidiaries have obtained from the appropriate Government Authorities that are charged with regulating or supervising any business conducted by FAJ and the FAJ Subsidiaries all permits, variances, exemptions, orders, approvals, certificates of authority and licenses necessary for the conduct of their business and operations as and to the extent currently conducted (the "FAJ PERMITS"), which FAJ Permits are valid and remain in full force and effect. FAJ and each of the FAJ Subsidiaries is in compliance in all material respects with the terms of all such FAJ Permits. (b) Neither FAJ nor any of the FAJ Subsidiaries has received notice of or, to the knowledge of FAJ, is not subject to any Action, order or any complaint, proceeding or investigation of any Government Authority which is charged with regulating or supervising any business conducted by FAJ or any of the FAJ Subsidiaries, that is pending or threatened, that affects or which could affect the effectiveness or validity of any such FAJ Permit or that could impair the renewal thereof or that is likely to result in any such Action, agreement, consent decree or order or in any fine, penalty or other liability in excess of $20,000 or the forfeiture of the certificate of authority of FAJ or any of the FAJ Subsidiaries. As of the date hereof, neither FAJ nor any of the FAJ Subsidiaries is a party or subject to any Action, agreement, consent decree or order, or other understanding or arrangement with, or any directive of, any Government Authority that is charged with regulating or supervising any business conducted by FAJ or any of the FAJ Subsidiaries that imposes any material restrictions on or otherwise affects in any material way the conduct of the business of FAJ. 4.20 KNOWLEDGE DEFINED. As used herein, the phrase "to FAJ's knowledge" (or words of similar import) means the actual knowledge, after reasonable inquiry, of any of the chief executive officers, chief financial officers or directors of each of FAJ and the FAJ Subsidiaries. 4.21 PROXY STATEMENT. The Proxy Statement, at the date mailed to the shareholders of FAJ and at the time of their meeting to consider the same, (i) will comply in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder and (ii) will not 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 the light of the circumstances under which they were made, not misleading (except with respect to information that has been supplied to FAJ from MMI for inclusion in the Proxy Statement). ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF MMI AND ACQUISITION MMI and Acquisition each hereby represents and warrants to FAJ as follows: 5.1 ORGANIZATION AND QUALIFICATION, SUBSIDIARIES. (a) Each of MMI and the MMI Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation. Each of MMI and the MMI Subsidiaries has all requisite corporate power and authority to own, operate, lease and encumber its properties and carry on its business as now conducted. 17 (b) Each of MMI and the MMI Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the ownership or lease of its properties or the conduct of its business requires such qualification, except for any such failures to so qualify that would not have a Material Adverse Effect with respect to MMI or any MMI Subsidiary. (c) All of the outstanding shares of capital stock of, or other equity interests in, each of the MMI Subsidiaries are owned, directly or indirectly, by MMI in compliance with all applicable securities laws, free and clear of all Liens. (d) The issued and outstanding shares of each of MMI and the MMI Subsidiaries have been duly authorized and are validly issued, fully paid and nonassessable and free of preemptive rights. On the Effective Date, MMI will have good and marketable title to the MMI Subsidiaries' shares, free and clear of all Liens. (e) The Merger will not give any Person any dissenters, appraisal or similar rights or any preemptive or similar right to purchase additional shares of capital stock of MMI or any of the MMI Subsidiaries, or any rights under any shareholders' rights, "poison pill" or similar plan. 5.2 DUE AUTHORIZATION. The execution, delivery and performance of this Agreement and of all of the documents and instruments delivered in connection herewith by MMI and Acquisition has been duly and validly authorized by all necessary corporate action on the part of MMI and Acquisition. This Agreement has been duly executed and delivered on behalf of MMI and Acquisition. This Agreement is, and the other documents and instruments required hereby will be, when executed and delivered by MMI and Acquisition, the valid and binding obligation of MMI and Acquisition, enforceable against MMI and Acquisition in accordance with their respective terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability or right of creditors generally and to general equitable principles which may limit the right to obtain equitable remedies. 5.3 NO CONFLICTS; NO DEFAULTS; REQUIRED FILINGS AND CONSENTS. Neither the execution and delivery by MMI or Acquisition of this Agreement, nor the consummation by MMI or Acquisition of the transactions contemplated hereby in accordance with the terms hereof, will: (a) conflict with or result in a breach of any provisions of the organizational documents of Acquisition or MMI; (b) result in a breach or violation of, a default under, or the triggering of any payment or other obligation pursuant to, or accelerate vesting or have any other consequence under, any stock option plan, option plan or similar compensation plan of Acquisition or MMI or any grant or award made under any of the foregoing; (c) violate or conflict with any statute, regulation, judgment, order, writ, decree or injunction applicable to Acquisition or MMI; (d) violate or conflict with or result in a breach of any provision of, or constitute a default (or any event that, with notice or lapse of time or both, would constitute a default) under, or result in the termination or in a 18 right of termination or cancellation of, or accelerate the performance required by, or result in the creation of any Lien upon any of the properties of Acquisition or MMI under, or result in being declared void, voidable or without further binding effect, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed or any franchise, license, permit, lease, contract, agreement or other instrument, commitment or obligation to which Acquisition or MMI is a party, or by which Acquisition or MMI or any of their properties is bound or affected; or (e) require any consent, approval or authorization of, or declaration, filing or registration with, any Government Authority or private organization, other than any filings required under the Securities Act, the Exchange Act, or Blue Sky Laws. 5.4 CAPITAL STOCK. (a) As of the date hereof, there are 3,000 and 10,000,000 shares of common stock authorized and 2,000 and 3,699,147 shares of common stock issued and outstanding of each of MMI and Aquisition, respectively, and no and 1,000,000 shares of preferred stock authorized, and no shares of preferred stock issued and outstanding of MMI and Acquisition. Neither MMI nor any of the MMI Subsidiaries has any outstanding securities or bonds, debentures, notes or other obligations, the holders of which have the right to vote (or that are convertible into or exercisable for securities the holders of which have the right to vote) with respect to the transactions contemplated hereby. All issued and outstanding shares of MMI and the MMI Subsidiaries were issued in compliance with all applicable state and federal securities laws. There are no existing options, warrants, calls, subscriptions, convertible securities, or other rights, agreements or commitments that obligate MMI or any MMI Subsidiary to issue, transfer or sell any shares of capital stock or other equity interests in MMI or any MMI Subsidiary. (b) Neither MMI nor any of the MMI Subsidiaries has issued or granted securities convertible into or exchangeable for interests in MMI or any MMI Subsidiary, and, except as set forth on SCHEDULE 5.4(A), neither MMI nor any MMI Subsidiary is a party to any outstanding commitment of any kind relating to, or any presently effective agreement or understanding with respect to, interests in MMI or any MMI Subsidiary, whether issued or unissued. (c) Neither MMI nor any of the MMI Subsidiaries owns directly or indirectly any material interest or investment (whether equity or debt) in any corporation, partnership, joint business venture, trust or other legal entity (other than the list set forth on SCHEDULE 5.4(C), which is a list of all of the investments of MMI and the MMI Subsidiaries). 5.5 FINANCIAL STATEMENTS AND ABSENCE OF UNDISCLOSED LIABILITIES. (a) MMI has delivered to FAJ financial statements for MMI and Acquisition (the "FINANCIAL STATEMENTS") for the two calendar years prior to the date of this Agreement or for the period of its incorporation if such period is shorter, which are attached as SCHEDULE 5.5. (b) The consolidated balance sheet of MMI (including the related notes and schedules), included in the Financial Statements, have been prepared to reflect the financial position and results of operations of MMI and Acquisition on a carve-out basis and not to reflect MMI and all majority-owned subsidiaries 19 on a consolidated basis. Accordingly, FAJ has been excluded. Such statements fairly present the financial position of each of MMI and Acquisition as of its date, and the consolidated statement of operations, shareholders' equity (deficit) and cash flows included in the Financial Statements (including any related notes and schedules) fairly present the results of operations, retained earnings or cash flows, as the case may be, of MMI and Acquisition for the periods covered thereby, in each case in accordance with GAAP consistently applied during the periods involved, except as may be noted therein or that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect with respect to MMI or any MMI Subsidiary. All such balance sheets and statements are free of errors, omissions and misstatements except for such errors, omissions and misstatements that would not, individually or in the aggregate, have, or reasonably be expected to have, a Material Adverse Effect with respect to MMI or any MMI Subsidiary. None of the receivables of each of MMI and the MMI Subsidiaries are materially overstated, and no payables and other liabilities of MMI and each of the MMI Subsidiaries are materially understated, on any such balance sheet or statement. (c) Except as and to the extent set forth in the Financial Statements or in any Schedule hereto, to MMI's knowledge, none of MMI or Acquisition has any material Liabilities, nor do there exist any circumstances that would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect with respect to MMI or any MMI Subsidiary. (d) Except as and to the extent set forth in SCHEDULE 5.5(D) hereto, there are no intercompany transactions that would be eliminated in consolidation should a consolidated financial statement, consolidating MMI and Acquisition, be prepared for each of the two calendar years prior to the date of this Agreement, the date hereof, or the Closing Date. 5.6 LITIGATION; COMPLIANCE WITH LAW. (a) SCHEDULE 5.6 sets forth a list and a brief description of all pending Actions against MMI and any of the MMI Subsidiaries or the MMI Shares of which MMI or Acquisition have notice, in which the amount of damages prayed for in any complaint or pleading exceeds $150,000 or that is reasonably likely to result in damages of $150,000 or more. (b) Except as set forth on SCHEDULE 5.6, there are no Actions pending or, to the knowledge of MMI or Acquisition threatened, against MMI or any of the MMI Subsidiaries, or any property (including proprietary rights) of MMI or any of the MMI Subsidiaries in any court or other forum or before any arbitrator of any kind or before or by any Governmental Authority of which Acquisition or MMI have notice, in which the amount of damages prayed for in any complaint or pleading exceeds $150,000 or that is reasonably likely to result in damages of $150,000 or more. (c) To the knowledge of MMI or Acquisition, neither MMI nor any of the MMI Subsidiaries is in violation of any statute, rule, regulation, order, writ, decree or injunction of any Government Authority or any body having jurisdiction over them or any of their respective properties. SCHEDULE 5.6 sets forth all such violations known to MMI or Acquisition except for violations that would not, individually or in the aggregate, have, or reasonably be expected to have, a Material Adverse Effect. 20 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in SCHEDULE 5.7 or in any other Schedule hereto, MMI and each of the MMI Subsidiaries has conducted its business only in the ordinary course of business, and there has not been (a) any change, circumstance or event that had or that could reasonably be expected to have a Material Adverse Effect or (b) any change in any accounting principles, practices or methods, except as required by changes in GAAP. 5.8 TAX MATTERS. (a) MMI and each of the MMI Subsidiaries has timely filed with the appropriate taxing authority all Tax Returns required to be filed by it or has timely requested extensions and any such request has been granted and has not expired. Each such Tax Return is complete and accurate in all material respects and all information shown thereon is correct in all material respects. All Taxes required to have been paid by MMI or any of the MMI Subsidiaries have been paid when due, except for Taxes contested in good faith and for which adequate reserves as required by GAAP have been taken and which are listed on SCHEDULE 5.8. MMI and each of the MMI Subsidiaries have properly accrued their liability for all Taxes for periods subsequent to the periods covered by such Tax Returns as required by GAAP. Neither MMI nor any of the MMI Subsidiaries has executed or filed with the IRS or any other taxing authority any agreement now in effect extending the period for assessment or collection of any Tax. Except as set forth on SCHEDULE 5.8, neither MMI nor any of the MMI Subsidiaries is a party to any pending action or proceeding by any taxing authority for assessment or collection of any Tax, and no claim for assessment or collection of any Tax has been asserted against any of them. Except as set forth on SCHEDULE 5.8, no claim has been made by any authority in a jurisdiction where MMI or any of the MMI Subsidiaries does not file Tax Returns that it is or may be subject to taxation or reporting in that jurisdiction. There is no dispute or claim concerning any information, reporting or tax liability of MMI or any of the MMI Subsidiaries, (i) claimed or raised by any taxing authority in writing or (ii) as to which MMI or Acquisition has knowledge. Except as set forth on SCHEDULE 5.8, neither MMI nor any of the MMI Subsidiaries has had its tax returns audited by any Government Authority within the last four years. (b) No amount or other entitlement that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated hereby by any Employee of MMI or any of the MMI Subsidiaries or of any of their Affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or plan currently in effect would be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(2) of the Code). 5.9 COMPLIANCE WITH AGREEMENTS. (a) Neither MMI nor any of the MMI Subsidiaries is in default under or in violation of any provision of its articles of incorporation or organization, or bylaws or operating agreement or any similar organizational document. (b) MMI and each of the MMI Subsidiaries has filed all material reports, registrations, documents and statements, together with any amendments and supporting materials required with respect thereto, that it was required to 21 file with any Government Authority and all other material reports, documents, materials and statements required to be filed by it, and has paid all fees or assessments due and payable in connection therewith. There is no unresolved violation asserted by any Government Authority against MMI or any of the MMI Subsidiaries of which MMI or Acquisitionhas received notice. (c) Neither MMI nor any of the MMI Subsidiaries is in default, and, to MMI or Acquisition's knowledge, no event has occurred that, with the giving of notice or the lapse of time or both, would constitute a default, under any Commitment to which MMI or any of the MMI Subsidiaries are bound, whether as a party or otherwise or in respect of any payment obligations thereunder except for defaults that would not, individually or in the aggregate, have, or reasonably be expected to have, a Material Adverse Effect with respect to MMI or any MMI Subsidiary. Except as set forth in SCHEDULE 5.9(C), neither MMI nor any of the MMI Subsidiaries is a party to any joint venture or partnership agreements. To MMI and Acquisition's knowledge, there is no condition with respect to MMI or the MMI Subsidiaries that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect with respect to MMI or any MMI Subsidiary. (d) SCHEDULE 5.9(D) sets forth a complete and accurate list of all material agreements of MMI and each of the MMI Subsidiaries in effect on the date hereof. Each agreement or policy listed on SCHEDULE 5.9(D) is in full force and effect, and MMI and each of the MMI Subsidiaries and, to MMI or Acquisition's knowledge, the other parties thereto, are in compliance with such agreements or policies. Solely for purposes of this Section, material agreements shall mean agreements that involve an expense to MMI or any of the MMI Subsidiaries or annual revenue over $500,000. 5.10 FINANCIAL RECORDS; ARTICLES AND BYLAWS, CORPORATE RECORDS. (a) The books of account and other financial records of MMI and the MMI Subsidiaries are true and complete in all material respects, and have been maintained in accordance with GAAP. (b) MMI has delivered or made available to FAJ true and complete copies of the Articles and the Bylaws of MMI and each of the MMI Subsidiaries, as amended to date, and the Articles of Organization, organizational documents and joint venture agreements of MMI and each of the MMI Subsidiaries, and all amendments thereto. (c) The corporate minute books and other records of proceedings of MMI and the MMI Subsidiaries contain accurate records of all meetings and consents of the equity holders, directors and other governing bodies thereof and accurately reflect in all material respects all other corporate action of the directors and shareholders and any committees of the board of directors of MMI and the MMI Subsidiaries. 5.11 TITLE TO ASSETS; LIENS. MMI and each MMI Subsidiary has good and marketable title (insurable and indefeasible fee simple title in the case of owned real property), to all of the respective property, equipment and other assets owned by it (the "MMI AND SUBSIDIARIES' PROPERTIES"), and, except as set forth on SCHEDULE 5.11, such assets are free and clear of any and all mortgages, 22 liens, security interests, charges, encumbrances or title defects of any nature whatsoever other than Permitted Liens and liens that would not, individually or in the aggregate, materially impair the use of such MMI and Subsidiaries' Properties. SCHEDULE 5.11 contains a complete and accurate list of each parcel of real property owned, leased or used by MMI and any MMI Subsidiary in the conduct of its business. There are no pending or, to the best knowledge of MMI or Acquisition, threatened zoning, condemnation or eminent domain proceedings, building, utility or other moratoria, or injunctions or court orders that would materially adversely affect such real property. To the knowledge of MMI or Acquisition, the current use of the owned real property by MMI and the MMI Subsidiaries is permissible and in material compliance with all applicable zoning ordinances and other regulations of any Government Authority. 5.12 ENVIRONMENTAL MATTERS. (a) MMI and each of the MMI Subsidiaries' ownership, operation and use of its respective property have been and currently are in compliance in all material respects with all applicable Environmental Laws. (b) No Environmental Claim with respect to the operations or the businesses of the MMI or the MMI Subsidiaries, or with respect to any real property owned by MMI or the MMI Subsidiaries, has been asserted or, to Acquisition's knowledge, threatened, and, to MMI and Acquisition's knowledge, no circumstances exist with respect to MMI or any of the MMI Subsidiaries or any such real property that would reasonably be expected to result in any Environmental Claim being asserted, in any such case, against (i) MMI or any of the MMI Subsidiaries, or (ii) any Person whose liability for any Environmental Claims MMI or any of the MMI Subsidiaries has or may have retained or assumed either contractually or by operation of law. (c) (i) Neither MMI nor any of the MMI Subsidiaries has been notified, or has reason to anticipate being notified, of potential responsibility in connection with any site that has been placed on, or proposed to be placed on, the National Priorities List or its state or foreign equivalent pursuant CERCLA, or analogous state or foreign laws, (ii) no Materials of Environmental Concern are present on, in or under any real property owned by MMI or the MMI Subsidiaries, (iii) neither MMI nor any MMI Subsidiary nor, to the knowledge of MMI or Acquisition, any tenant of any such real property has released or arranged for the release of any Materials of Environmental Concern at or on any such real property, (iv) no underground storage tanks, surface disposal areas, pits, ponds, lagoons or open trenches are present at any such real property, (v) no transformers, capacitors or other equipment containing fluid with more than 50 parts per million polychlorinated biphenyls are present at, on or under any such real property, except for any such transformers, capacitors or other equipment owned by any utility company, and (vi) to MMI or Acquisition's knowledge, no employee, agent, contractor, subcontractor or tenant of MMI or any of the MMI Subsidiaries is now or has in the past been exposed to friable asbestos or asbestos-containing material at any such real property whether now or previously owned or occupied by MMI or any of the MMI Subsidiaries. 23 5.13 EMPLOYEES AND BENEFIT PLANS. (a) SCHEDULE 5.13(A) sets forth a complete and accurate list of all employment agreements with Employees of MMI and each of the MMI Subsidiaries. Except for the Employees who are parties to such employment agreements, all of the Employees of MMI and the MMI Subsidiaries are employed in an at-will status (except for restrictions or limitations on the at-will status of such employees imposed by general principles of law or equity). (b) SCHEDULE 5.13(B) sets forth a complete and accurate list of each of the MMI Plans. There has been no adoption, modification, amendment or alteration of any MMI Plan by MMI or any of the MMI Subsidiaries. All MMI Plans, including any such plan that is an "employee benefit plan" as defined in Section 3(3) of ERISA, are in compliance, in all material respects, with all applicable requirements of law, including ERISA and the Code, and neither MMI nor any of the MMI Subsidiaries has any liabilities or obligations with respect to any MMI Plan, whether accrued, contingent or otherwise. 5.14 LABOR MATTERS. Except as disclosed in SCHEDULE 5.14, there are no pending or, to the knowledge of MMI or Acquisition, threatened Actions or work stoppages relating to any Employee of MMI or any MMI Subsidiary. Neither MMI nor any of the MMI Subsidiaries is a party to any collective bargaining agreement with respect to Employees, and, to the knowledge of MMI or Acquisition, there are no activities of any labor union seeking to represent or organize the employees of MMI or any of the MMI Subsidiaries. No unfair labor practice or labor arbitration, or race, sex, age, disability or other discrimination complaint is pending, nor is any such complaint, to the knowledge of MMI or Acquisition, threatened against MMI or any of the MMI Subsidiaries before the National Labor Relations Board, Equal Employment Opportunity Commission, Department of Labor or any other Governmental Authority, and no grievance is pending, nor is any grievance, to the knowledge of MMI or Acquisition, threatened against MMI or any of the MMI Subsidiaries. MMI and each of the MMI Subsidiaries is in compliance in all material respects with all applicable federal, state and local laws relating to employment, including without limitation, the provisions thereof relating to wages, non-discriminatory hiring and employment practices, collective bargaining, and payment of Social Security and Unemployment Compensation taxes or similar taxes, and neither MMI nor any of the MMI Subsidiaries is liable for any arrears of wages or subject to any liabilities or penalties for failure to comply with any of the foregoing laws. 5.15 PROPRIETARY RIGHTS. Attached as SCHEDULE 5.15 is a list of (a) all trademark, service mark or trade name registrations and all pending applications for any such registration; (b) all patent and copyright registrations and all pending applications therefor; (c) all other trademarks, service marks, domain names, or trade names, whether or not registered; and (d) all licenses with respect thereto as well as rights or licenses to use any proprietary rights (including software licenses) of any other entities (the items in clauses (a), (b), (c) and (d) collectively, the "MMI PROPRIETARY RIGHTS"), that are owned or used by MMI or any of the MMI Subsidiaries. To the knowledge of MMI or Acquisition, the use of any of the proprietary rights by MMI or any of the MMI Subsidiaries has not infringed, is not infringing upon, and is not otherwise violating the rights of any Person or other entity in or to such Proprietary Rights or the asserted Proprietary Rights of others. No notices have been received by MMI or any of the MMI Subsidiaries that the use of the MMI Proprietary Rights by MMI or any of the MMI Subsidiaries infringes upon or otherwise materially violates any rights of a person or other entity in or to such MMI Proprietary Rights or the proprietary rights of others. To the knowledge of MMI or Acquisition, no person or other entity is infringing on the 24 MMI Proprietary Rights owned by MMI or any of the MMI Subsidiaries. The MMI Proprietary Rights include all proprietary rights used in, or necessary to, the conduct of the business of MMI and each of the MMI Subsidiaries. 5.16 INSURANCE. MMI and each of the MMI Subsidiaries maintains insurance policies covering the assets, business, equipment, properties, operations and Employees of it, each of which insurance policies are of a type and in amounts customarily carried by Persons similar in size to MMI or the MMI Subsidiaries conducting businesses similar to those of MMI or the MMI Subsidiaries. SCHEDULE 5.16 sets forth a list of all insurance coverage or policies currently maintained by MMI and the MMI Subsidiaries. All such coverage or policies shall be maintained in full force and effect until the Closing. There is no material claim by MMI or any of the MMI Subsidiaries pending under any of their insurance policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies. 5.17 TAKEOVER STATUTES. No "fair price," "moratorium," "business combination," "control share acquisition" or other anti-takeover statute or similar statute or regulation enacted by the states of Delaware or Ohio applies to the transactions contemplated by this Agreement. All actions have been taken to ensure that no statute or regulation of the states of Delaware or Ohio, including any "business combination act," limits MMI's ability to engage in further transactions with FAJ. 5.18 BROKERS AND FINDERS. No agent, broker, investment banker or other Person, including any of the foregoing that is an Affiliate of MMI or any of the MMI Subsidiaries, is or will be entitled to any broker's or finder's fee or any other commission or similar fee agreed to or arranged by MMI or any of the MMI Subsidiaries in connection with this Agreement or any of the transactions contemplated hereby. 5.19 GOVERNMENT APPROVALS; COMPLIANCE WITH LAWS AND ORDERS. (a) MMI and each of the MMI Subsidiaries has obtained from the appropriate Government Authority that is charged with regulating or supervising any business conducted by MMI or any of the MMI Subsidiaries all material permits, variances, exemptions, orders, approvals, certificates of authority and licenses necessary for the conduct of its business and operations as and to the extent currently conducted (the "MMI PERMITS"), which MMI Permits are valid and remain in full force and effect. MMI and the MMI Subsidiaries are in compliance in all material respects with the terms of all such MMI Permits. (b) Neither MMI nor any of the MMI Subsidiaries has received notice of or, to the knowledge of MMI or Acquisition, is subject to any Action, order or any complaint, proceeding or investigation of any Government Authority that is charged with regulating or supervising any business conducted by MMI or any of the MMI Subsidiaries, that is pending or threatened, that affects or that could affect the effectiveness or validity of any MMI Permit or that could impair the renewal thereof or that is likely to result in any such Action, agreement, consent decree or order or in any fine, penalty or other liability in excess of $20,000 or the forfeiture of a certificate of authority of MMI or any of the MMI Subsidiaries. As of the date hereof, neither MMI nor any of the MMI Subsidiaries is a party or subject to any Action, agreement, consent decree or order, or other understanding or arrangement with, or any directive of, any Government 25 Authority that is charged with regulating or supervising any business conducted by MMI or any of the MMI Subsidiaries that imposes any material restrictions on or otherwise affects in any material way the conduct of the business of MMI or any of the MMI Subsidiaries, as currently conducted. 5.20 KNOWLEDGE DEFINED. As used herein, the phrase "to MMI or Acquisition's knowledge" (or words of similar import) means the actual knowledge, after reasonable inquiry, of any of the chief executive officers, chief financial officers or directors of each of MMI and the MMI Subsidiaries. 5.21 PLACEMENT. (a) MMI acknowledges that the FAJ Shares being acquired are being acquired for Acquisition's own account without a view to public distribution or resale and that Acquisition has no contract, undertaking, agreement, or arrangement to sell or otherwise transfer or dispose of the FAJ Shares or any portion thereof to any other person or entity. (b) MMI agrees that it will not sell or otherwise transfer or dispose of the FAJ Shares, or any portion thereof, unless such FAJ Shares are registered under the Securities Act and any applicable state securities laws or MMI obtains an opinion of reputable securities counsel that such FAJ Shares may be sold in reliance on an exemption from such registration requirements. (c) MMI understands that no federal or state agency including the SEC, the Arizona Corporation Commission or the securities commission or authorities of any other state has approved or disapproved the FAJ Shares, passed upon or endorsed the merits of the Merger or the adequacy of the disclosure given in connection with the offering, or made any finding or determination as to the fairness of the FAJ Shares for investment. 5.22 NO CONFLICTING INFORMATION. MMI acknowledges that it owns a majority of the issued and outstanding capital stock of FAJ. In addition, certain officers of MMI are also officers of FAJ and manage certain day-to-day matters for FAJ. Accordingly, MMI has, and has access to, certain information regarding the business, operations and financial condition of FAJ. 5.23 PROXY STATEMENT. None of the information in this Agreement relating to MMI or Acquisition or otherwise supplied or to be supplied by MMI, including information for inclusion or incorporation by reference in the Proxy Statement, as of the date hereof and as of the date such information was provided to FAJ for inclusion in the Proxy Statement to be mailed to the FAJ's shareholders, contains or will contain any untrue statement of a material fact or omit to state any material fact required to be stated herein or therein or necessary to make the statements herein or therein, in light of the circumstances under which they are made, not misleading. MMI will advise FAJ in writing of any material changes in any such information or if any such information contains any untrue statements of material facts or omits to state any material facts required to be stated herein or therein or necessary to make the statements herein or therein, in light of the circumstances under which they are made, not misleading. 26 ARTICLE 6 COVENANTS RELATING TO THE CLOSING 6.1 TAKING OF NECESSARY ACTION. Each party hereto agrees to use its commercially reasonable best efforts promptly to take or cause to be taken all action and promptly to do or cause to be done all things reasonably necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, subject to the terms and conditions of this Agreement. 6.2 PUBLIC ANNOUNCEMENT; CONFIDENTIALITY. (a) For as long as this Agreement is in effect, no party shall issue or cause the publication of any press release or any other announcement with respect to this Agreement, or the transactions contemplated hereby or thereby without the consent of the others (which consent shall not be unreasonably withheld or delayed), except when, in the reasonable judgment of FAJ, such release or announcement is required by applicable law or pursuant to any listing agreement with, or the rules or regulations of, any securities exchange or any other regulatory requirement. (b) Each party agrees that all information provided to another party or any of its representatives pursuant to this Agreement shall be kept confidential, and shall not disclose such information to any Persons other than the directors, officers, employees, financial advisors, legal advisors, accountants, consultants and affiliates of such party who reasonably need to have access to the confidential information and who are advised of the confidential nature of such information, but the foregoing obligation shall not (i) relate to any information that (A) is or becomes generally available other than as a result of unauthorized disclosure by the receiving party or by Persons to whom the receiving party has made such information available, (B) is or becomes available to the receiving party on a nonconfidential basis from a third party that is not, to the receiving party's knowledge, bound by any other confidentiality agreement with the disclosing party, or (C) is independently developed or already known to the receiving party prior to disclosure by the disclosing party, or (ii) prohibit disclosure of any information if required by law, rule, regulation, court order or other legal or governmental process. 6.3 CONDUCT OF BUSINESS. Except as agreed to by the other parties and set forth on SCHEDULE 6.3, during the period from the date of this Agreement to the Effective Date: (i) each of FAJ and MMI will, and FAJ and MMI will cause each of their respective Subsidiaries to, conduct its business only in the ordinary course consistent with past practice; (ii) neither of MMI nor FAJ will, and FAJ and MMI will cause each of their respective Subsidiaries not to, take any action or enter into any material transaction other than in the ordinary course of business consistent with past practice; and (iii) to the extent consistent with the foregoing, each of FAJ and MMI will, and FAJ and MMI will cause each of their respective Subsidiaries to, use its commercially reasonable best efforts to preserve intact its current business organization and reputation, existing relationships with customers, franchisees, licensees, suppliers, government officials, regulatory authorities and others having business dealings with it or regulatory authority over it and shall comply in all material respects with all laws and orders of each Governmental Authority and regulatory authority having jurisdiction over it. Without limiting the generality of the foregoing and except as otherwise expressly permitted in this Agreement, prior to the Closing, 27 neither FAJ nor MMI will, and FAJ and MMI will not permit any of their respective Subsidiaries to, without the prior written consent of the other: (a) issue, deliver or sell, or authorize or enter into any agreement or commitment to issue, deliver or sell (y) any additional shares of its capital stock of any class, or any securities or rights which are convertible into, exchangeable for, or evidencing the right to subscribe for any shares of its capital stock, or any rights, warrants, options, calls, commitments or any other agreements to purchase or acquire any shares of its capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of its capital stock, or (z) any other of its securities or the securities of any of its Subsidiaries; (ii) split, combine, subdivide, reclassify, redeem, repurchase or otherwise acquire or take similar action with respect to any shares of its capital stock, or (iii) declare, set aside for payment or pay any dividend, or make any other distribution in respect of any shares of its capital stock or other outstanding securities or make any payments to shareholders in their capacity as such, other than in a manner and amount consistent with prior business practices; (b) (i) create, increase the benefits payable or accruing under, or modify in any manner any FAJ Plan or MMI Plan or the compensation, pension, welfare, medical or fringe benefits of any of its directors, officers or Employees, except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits or compensation expense to FAJ, MMI or their Subsidiaries, or (ii) enter into any new, or amend any existing, employment, severance, "golden parachute" or other similar agreement with any such director, officer or Employee, except as may be approved in writing by the other party; (c) make any acquisition, by means of merger, consolidation, purchase of a substantial equity interest in or a substantial portion of the assets of, or otherwise, of any business or corporation, partnership, association or other business organization or division thereof (except as herein contemplated); (d) adopt any amendments to its articles of incorporation, bylaws or similar organizational documents, or alter through merger with any entity, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of it or any of its Subsidiaries, or encumber, dispose of, sell or lease any material amount of the assets of FAJ or MMI or any of their Subsidiaries except as herein authorized; (e) enter into any contract, arrangement or understanding requiring the expenditure of greater than $150,000; (f) in the event that a claim is made for damages during the period prior to the Closing Date that is reasonably likely to have a Material Adverse Effect, fail to promptly notify the other party of the pendency of such claim; or (g) authorize, recommend, propose or announce an intention to do any of the foregoing, or enter into any agreement, contract or commitment to do any of the foregoing. 6.4 NOTIFICATION OF CERTAIN MATTERS. Each of the parties shall notify the other parties in writing of its discovery of any matter that would render any of such party's or the other party's representations and warranties contained 28 herein untrue or incorrect in any material respect, but the failure of any party to so notify another party of the inaccuracy of that other party's representations and warranties does not constitute a breach of this Agreement. 6.5 PROVISION OF CERTAIN DOCUMENTS. Each party shall, upon reasonable request by another party, deliver true and complete copies of any documents related to such party or any of its Subsidiaries that are reasonably requested within five Business Days after the date of such request. ARTICLE 7 CERTAIN ADDITIONAL COVENANTS AND CONDITIONS 7.1 RESALE. MMI acknowledges and agrees that, as a result of the effectiveness of the Merger, and pursuant to a then effective Schedule 13e-3 and a Form 15, FAJ will cease to be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. Accordingly, the FAJ Shares to be acquired pursuant to the transactions hereby contemplated will not upon completion of the Merger, as of the Closing Date or the Effective Date, be registered under the Securities Act or the Blue Sky Laws of any state and they may be sold or otherwise disposed of only in one or more transactions registered under the Securities Act and, where applicable, such Blue Sky Laws or as to which an exemption from the registration requirements of the Securities Act and, where applicable, such Blue Sky Laws is available. 7.2 ACCESS TO INFORMATION. From the date of this Agreement until the Effective Date, each party shall provide the other and its representatives with such financial and other information regarding such party's or any of the Subsidiaries' business, operations, properties and financial statements a party or its representatives shall reasonably request and shall provide the other party or its representatives access to all of the properties, assets, books, records, tax returns, contracts and personnel during the normal business hours of the party providing the information. 7.3 EFFECTIVENESS OF AGREEMENT; CONDITION PRECEDENT. The effectiveness of this Agreement and the obligations of the parties hereunder are subject to the acquisition by MMI of approximately 58.7% of the issued and outstanding capital stock of FAJ within 10 days after the date of this Agreement. ARTICLE 8 CLOSING; CLOSING DELIVERIES 8.1 CLOSING; TERMINATION. The Closing (the "CLOSING") shall take place at 10:00 a.m., local time, at the offices of FAJ, 45 East Monterey Way, Phoenix, Arizona 85012, on the Business Day following the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in SECTIONS 9.1 AND 9.2 (other than those conditions that are to be satisfied concurrently with the Closing), or on such other date or at such other time and place as the parties shall agree on in writing (the "CLOSING DATE"). If the Closing has not occurred on or before the first anniversary of this Agreement and this Agreement has not been previously terminated under ARTICLE 10, this Agreement shall terminate on 29 such anniversary without further action by the parties hereto, and this Agreement shall be null and void and have no further effect. 8.2 FAJ CLOSING DELIVERIES. At the Closing, FAJ shall deliver, or cause to be delivered, to Acquisition and MMI each of the following: (a) resolutions of the Board of Directors of FAJ, certified by the Secretary of FAJ, authorizing the execution and delivery of this Agreement, and the transactions contemplated hereby, including the Merger; (b) the legal opinion of FAJ's counsel required by SECTION 9.1(F); (c) evidence or copies of any consents, approvals, orders, qualifications or waivers required by SECTION 9.1; (d) the Certificate of Merger executed by FAJ; (e) the Articles of Incorporation or similar organizational documents of each of FAJ and the FAJ Subsidiaries, each certified as of a recent date by a duly authorized official of the jurisdiction of its incorporation or organization, and the bylaws or similar organizational documents of each of FAJ and the FAJ Subsidiaries, each certified as of a recent date by the Secretary or similar officer of the entity; (f) certificates of a duly authorized official of the jurisdiction of its organization, dated as of a recent date, as to the good standing of each of FAJ and the FAJ Subsidiaries in the jurisdiction of its organization or incorporation; (g) if not previously delivered, all other certificates and instruments and documents required pursuant this Agreement to be delivered by FAJ to MMI or Acquisition at or prior to the Closing; and (h) such other instruments reasonably requested by MMI or Acquisition as may be necessary or appropriate to confirm or carry out the provisions of this Agreement. 8.3 MMI AND ACQUISITION CLOSING DELIVERIES. At the Closing, MMI or Acquisition shall deliver, or cause to be delivered, to FAJ the following: (a) the certificate, dated the Closing Date and validly executed required by SECTION 9.2(A); (b) the legal opinion of counsel required by SECTION 9.2(G); (c) the Certificate of Incorporation or similar organizational documents of each of MMI and the MMI Subsidiaries, each certified as of a recent date by a duly authorized official of the jurisdiction of its incorporation or organization, and the bylaws or similar organizational documents of each of MMI and the MMI Subsidiaries, each certified as of a recent date by the Secretary or similar officer of the entity; 30 (d) certificates of a duly authorized official of the jurisdiction of its organization, dated as of a recent date, as to the good standing of each of MMI and the MMI Subsidiaries in the jurisdiction of its organization or incorporation; (e) if not previously delivered to FAJ, all other certificates, documents, instruments and writings required pursuant to this Agreement to be delivered by or on behalf of Acquisition or MMI at or before the Closing; (f) the Certificate of Merger executed by MMI and Acquisition; and (g) such other instruments reasonably requested by FAJ as may be necessary or appropriate to confirm or carry out the provisions of this Agreement. ARTICLE 9 CONDITIONS TO CLOSING 9.1 CONDITIONS TO MMI AND ACQUISITION CLOSING. The obligations of MMI and Acquisition hereunder are subject to the satisfaction or waiver by MMI or Acquisition of each of the following conditions precedent: (a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and warranties of FAJ contained herein that are not qualified as to materiality shall have been true and correct in all material respects on and as of the date hereof, and shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date, and the representations and warranties already qualified with respect to materiality shall have been true and correct in all respects at each such date without regard to the materiality qualification contained in this Section. The covenants and agreements of FAJ to be performed on or before the Closing Date in accordance with this Agreement shall have been duly performed in all material respects. FAJ shall have delivered to MMI and Acquisition at the Closing a certificate of an appropriate officer in form and substance satisfactory to MMI and Acquisition, dated the Closing Date to such effect. (b) NO MATERIAL ADVERSE CHANGE. Since December 31, 2000, there shall not have been any change, circumstance or event with respect to any of FAJ or the FAJ Subsidiaries that has had or could reasonably be expected to have a Material Adverse Effect. (c) NO LIMITATION. There is (i) no Action, suit, investigation or proceeding instituted (x) by any Government Authority or any Person that seeks to prevent the consummation of the transactions contemplated hereby or (y) that is reasonably likely to result in material damages to FAJ or any of the FAJ Subsidiaries in connection with the transactions contemplated hereby, which, in either case, continues to be outstanding and (ii) no injunction or restraining order (temporary or permanent) in effect to stay, prevent or delay the consummation of the transactions provided for herein, which continues to be outstanding. (d) SHAREHOLDER APPROVAL. The shareholders of FAJ shall have approved this Agreement and the transactions contemplated hereby, including the Merger, by a vote of a majority of the shares of FAJ Common Stock present, in person or 31 by proxy, at a special meeting of FAJ shareholders, including the Merger. FAJ shall have delivered to MMI and Acquisition at the Closing a certificate of the Secretary of FAJ in form and substance satisfactory to MMI dated the Closing Date to such effect. (e) PROCEEDINGS. All corporate and other proceedings to be taken by FAJ connection with the transactions contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory to MMI and Acquisition, and MMI and Acquisition shall have received all such counterpart originals or other copies of such documents as it has reasonably requested. (f) OPINION OF COUNSEL. MMI and Acquisition shall have received a legal opinion from Gallagher & Kennedy, P.A., counsel to FAJ, dated the Closing Date concerning, FAJ's existence, authority, capitalization, SEC filings (excluding financial and statistical data contained therein), compliance with law, and such other legal matters within the scope of the Report of the State Bar of Arizona, Corporate, Banking and Business Law Section Subcommittee on Rendering Legal Opinions in Business Transactions, dated February 1, 1989, as MMI and Acquisition may request, in form and substance reasonably satisfactory to MMI and Acquisition. 9.2 CONDITIONS TO FAJ CLOSING. The obligations of FAJ hereunder are subject to the satisfaction or waiver by FAJ of each of the following conditions precedent: (a) REPRESENTATIONS AND WARRANTIES, COVENANTS. The representations and warranties of MMI and Acquisition contained herein that are not qualified as to materiality shall have been true and correct in all material respects on and as of the date hereof, and shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date, and the representations and warranties already qualified with respect to materiality shall have been true and correct in all respects at each such date without regard to the materiality qualification contained in this Section. The covenants and agreements of MMI and Acquisition to be performed on or before the Closing Date in accordance with this Agreement shall have been duly performed in all material respects. MMI and Acquisition shall have delivered to FAJ at the Closing a certificate of an appropriate officer in form and substance reasonably satisfactory to FAJ dated the Closing Date to such effect. (b) NO MATERIAL ADVERSE CHANGE. Since the date hereof, there shall not have been any change, circumstance or event with respect to any of MMI or the MMI Subsidiaries that has had or could reasonably be expected to have a Material Adverse Effect. (c) NO LIMITATION. There is (i) no Action, suit, investigation or proceeding instituted (x) by any Government Authority or any Person that seeks to prevent the consummation of the transactions contemplated hereby or (y) that is reasonably likely to result in material damages to MMI, or any of the MMI Subsidiaries in connection with the transactions contemplated hereby, which, in either case, continues to be outstanding and (ii) no injunction or restraining order (temporary or permanent) in effect to stay, prevent or delay the consummation of the transactions provided for herein, which continues to be outstanding. 32 (d) SHAREHOLDER APPROVAL. The shareholders of FAJ shall have approved this Agreement and the transactions contemplated hereby, including the Merger, by the requisite vote. (e) PROCEEDINGS. All corporate and other proceedings to be taken by MMI in connection with the transactions contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory in form and substance to FAJ and FAJ shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. (f) FAIRNESS OPINION. The Board of Directors of FAJ shall have received a fairness opinion from ComStock Valuation Advisors, Inc. satisfactory to the Board of Directors of FAJ and to a committee of the Board comprised entirely of independent third-party directors, in their reasonable discretion. (g) OPINION OF COUNSEL. FAJ shall have received a legal opinion from counsel to Acquisition and MMI, dated the Closing Date, concerning the existence and authority of Acquisition and the existence, authority, capitalization, and compliance with law of each of MMI and the MMI Subsidiaries, and such other legal matters as FAJ may reasonably request, in form and substance reasonably satisfactory to FAJ. ARTICLE 10 WAIVER, MODIFICATION, ABANDONMENT 10.1 WAIVERS. The failure of MMI to comply with any of its obligations, agreements or conditions as set forth herein may be waived expressly in writing by FAJ, by action of its Board of Directors without the requirement for a vote of shareholders. The failure of FAJ to comply with any of its obligations, agreements or conditions as set forth herein may be waived expressly in writing by MMI, by action of its Board of Directors, without the vote of shareholders. 10.2 MODIFICATION. This Agreement may be modified at any time in any respect by the mutual consent of all of the parties, notwithstanding prior approval by the shareholders. Any such modification may be approved for any party by its Board of Directors, without further shareholder approval, except that the Merger Consideration may not be decreased without the consent of the FAJ shareholders and may not be increased without the consent of the MMI shareholders given, in each case, by the same vote as is required under applicable state law for approval of this Agreement. 10.3 ABANDONMENT. The Merger may be abandoned on or before the Effective Date notwithstanding adoption of this Agreement by the shareholders of the parties hereto: (a) By the mutual agreement of the Boards of Directors of FAJ, MMI and Acqusition; 33 (b) By the Board of Directors of FAJ, if any of the conditions provided in SECTION 9.2 shall not have been satisfied, complied with or performed in any material respect, and FAJ shall not have waived such failure of satisfaction, noncompliance or nonperformance; (c) By the Board of Directors of MMI, if any of the conditions provided in SECTION 9.1 shall not have been satisfied, complied with or performed in any material respect, and MMI shall not have waived such failure of satisfaction, noncompliance or nonperformance; or (d) At the option of FAJ and MMI, if there shall have been instituted and be pending or threatened any legal proceeding before any court or governmental agency seeking to restrain or prohibit or to obtain damages in respect of this Agreement or the consummation of the Merger contemplated by this Agreement, or if any order restraining or prohibiting the Merger shall have been issued by any court or governmental agency and shall be in effect. In the event of any termination pursuant to this Section (other than pursuant to subparagraph (a) hereof) written notice setting forth the reasons thereof shall forthwith be given by MMI, if it is the terminating party, to FAJ, or by FAJ, if it is the terminating party, to MMI. ARTICLE 11 SURVIVAL; INDEMNIFICATION 11.1 SURVIVAL. Subject to the limitations set forth in this Article and notwithstanding any investigation conducted at any time by or on behalf of any party, all representations and warranties, and, except as otherwise provided in this Agreement, covenants and agreements of the parties (as applicable) in this Agreement and in any Schedule hereto, or any certificate, document or other instrument delivered in connection herewith ("ADDITIONAL DOCUMENTS"), shall survive the execution, delivery and performance of this Agreement and shall be deemed to have been made again by the parties (as applicable) at and as of the Closing. Such representations and warranties, and the rights of any party to seek indemnification with respect thereto pursuant to SECTION 11.2, shall expire, except with respect to claims asserted prior to and pending at the time of such expiration, on the first anniversary of the Effective Date. All statements contained in any Exhibit, Schedule or Additional Document shall be deemed representations and warranties of the parties (as applicable) set forth in this Agreement within the meaning of this Article. Without duplication of Loss and Expense (as hereinafter defined), FAJ, MMI or Acquisition, as the case may be, shall be deemed to have suffered Loss and Expense arising out of or resulting from the matters referred to herein if the same shall be suffered by any parent, Subsidiary or Affiliate of FAJ, MMI or Acquisition; PROVIDED, HOWEVER, that MMI shall not be deemed to have suffered any Loss and Expense arising out of or resulting from any Loss and Expense suffered by FAJ. 11.2 INDEMNIFICATION. (a) Subject to SECTION 11.4, from and after the Effective Date, FAJ shall indemnify, defend and hold harmless MMI (and its officers, directors or members) and their successors and assigns, for, from and against any and all damages, claims, losses, expenses, costs, obligations and Liabilities, including Liabilities for all reasonable attorneys' fees and expenses (collectively, "LOSS 34 AND EXPENSE"), suffered, directly or indirectly, by MMI by reason of, or arising out of, (i) any breach of any representation or warranty made by FAJ in this Agreement, or (ii) any failure by FAJ to perform or fulfill any of its covenants or agreements set forth herein. (b) Subject to SECTION 11.4, from and after the Effective Date, MMI shall indemnify, defend and hold harmless FAJ (and its officers and directors), its successors and assigns, for, from and against any and all Loss and Expense, suffered, directly or indirectly, by FAJ by reason of, or arising out of, (i) any breach of any representation or warranty made by Acquisition or MMI in this Agreement and, (ii) any failure by Acquisition or MMI to perform or fulfill any of its covenants or agreements set forth herein. 11.3 THIRD-PARTY CLAIMS. If a claim by a third party is made against a party and if such party intends to seek indemnity with respect thereto under this Article, such party (the "INDEMNIFIED PARTY") shall promptly notify the party required to provide such indemnity (the "INDEMNIFYING PARTY") in writing of such claim setting forth such claim in reasonable detail and shall otherwise make available to the indemnifying party all relevant information which is material to the claim and which is in the possession of the Indemnified Party. The Indemnifying Party shall have 30 days after receipt of such notice (or such shorter time period as required so that the interests of the Indemnified Party would not be materially prejudiced as a result of the failure to have received such notice) to undertake, through counsel of its own choosing and at its own expense, the settlement or defense thereof, and the Indemnified Party shall cooperate with it in connection therewith. The Indemnified Party may participate in such settlement or defense through counsel chosen by such Indemnified Party, so long as the fees and expenses of such counsel are borne by that Indemnified Party. The Indemnified Party shall not pay or settle any claim which the Indemnifying Party is diligently contesting, as herein required, without the prior written consent of the Indemnifying Party. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such claim without such consent, but in such event it shall waive any right to indemnity therefor by the Indemnifying Party. However, if the Indemnifying Party does not notify the Indemnified Party within 30 days after the receipt of the Indemnified Party's notice of a claim for indemnity hereunder that it elects to undertake the defense thereof or if the Indemnifying Party fails to undertake or pursue the defense, the Indemnified Party shall have the right to contest or compromise and may settle or pay the claim and no such contesting, compromise, settlement or payment will constitute a waiver of any right to indemnity therefor pursuant to this Agreement. 11.4 LIMITATIONS ON INDEMNIFICATION, SURVIVAL. Rights to indemnification under this Agreement are subject to the following limitations: (a) No party shall be entitled to indemnification hereunder with respect to any Loss and Expense (or if more than one claim for indemnification is asserted, with respect to all such Loss and Expense), until the cumulative aggregate amount of all Loss and Expense incurred by such party with respect to such claim or claims exceeds $250,000 (the "INDEMNITY THRESHOLD"), in which case the Indemnifying Party shall then be liable for the full amount of all such Loss and Expense, without regard to the Indemnity Threshold. 35 (b) The obligation of indemnity provided for in this Agreement with respect to the representations and warranties set forth herein has no expiration or termination date. (c) Except with respect to third-party claims being defended in good faith or claims for indemnification with respect to which there exists a good faith dispute, the Indemnifying Party shall satisfy its obligations hereunder within 30 days of receipt of a notice of claim under this ARTICLE 11. (d) The amount of any Loss and Expense otherwise recoverable under this Article by an Indemnified Party shall be reduced by any amounts recovered by the Indemnified Party under insurance policies (net of any costs incurred in connection with the collection thereof), it being understood that none of the parties shall have any obligation to, but each agrees to use commercially reasonable efforts to, timely pursue all reasonable remedies against applicable insurers, and provided it does not invalidate any coverage, each party hereby waives all rights of subrogation against the other parties under all applicable insurance policies. (e) The indemnification provisions of this Article shall be the sole monetary remedy available to each of the parties. Equitable remedies shall remain available to each of the parties, provided that no unjust enrichment results from the enforcement of such remedies. ARTICLE 12 MISCELLANEOUS 12.1 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other party. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section, provided receipt of copies of such counterparts is confirmed. 12.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE THE LAWS OF THE STATE OF ARIZONA WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. 12.3 JURISDICTION. Each party to this Agreement hereby irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement or any agreements or transactions contemplated hereby may be brought only in a United States District Court sitting in Phoenix, Arizona, or in the United States District that encompasses Phoenix, Arizona, and hereby expressly submits to the personal jurisdiction and venue of any such court of proper jurisdiction for the purposes thereof and expressly waives any claim of improper venue and any claim that such court is an inconvenient forum. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. 36 12.4 ENTIRE AGREEMENT. This Agreement (including the agreements incorporated or referred to herein) and the Schedules and Exhibits hereto contain the entire agreement between the parties with respect to the subject matter hereof and supersede prior agreements, understandings, representations or warranties between the parties. This Agreement is not intended to confer upon any Person not a party hereto (and their successors and assigns) any rights or remedies hereunder. 12.5 NOTICES. All notices and other communications hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented overnight delivery service or, to the extent receipt is confirmed, telefax or other electronic transmission service to the appropriate address or number as set forth below, unless and until either of such parties notifies the other in accordance with this Section of a change of address or change of telecopy number: If to MMI: Merrymeeting, Inc. 7763 Sunstone Drive Brecksville, Ohio 44141 Attn: President Fax No.:_______________ With a copy to: Ulmer & Berne LLP 1300 East 9th Street, Suite 900 Cleveland, Ohio 44114-1583 Attn: Stephen A. Markus, Esq. Fax No.: (216) 621-7488 If to Acquisition: MM Merger Corporation 7763 Sunstone Drive Brecksville, Ohio 44141 Attn: President Fax No.:_______________ With a copy to: Ulmer & Berne LLP 1300 East 9th Street, Suite 900 Cleveland, Ohio 44114-1583 Attn: Stephen A. Markus, Esq. Fax No.: (216) 621-7488 If to FAJ: Frontier Adjusters of America, Inc. 45 East Monterey Way Phoenix, Arizona 85012 Attention: President Fax Number: (602) 279-5813 37 With a copy to: Gallagher & Kennedy, P.A. 2575 East Camelback Road Phoenix, Arizona 85016-9225 Attention: Karen L. Liepmann, Esq. Fax Number: (602) 530-8500 12.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by either of the parties hereto without the prior written consent of the other party. 12.7 AMENDMENTS AND WAIVERS. This Agreement may not be modified or amended except by an instrument in writing signed by the party against whom enforcement of any such modification or amendment is sought. Either party hereto may, only by an instrument in writing, waive compliance by the other party hereto with any term or provision hereof on the part of such other party hereto to be performed or complied with. The waiver by any party hereto of a breach of any term or provision hereof shall not be construed as a waiver of any subsequent breach thereof. 12.8 INTERPRETATION; ABSENCE OF PRESUMPTION. (a) For the purposes hereof, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof," "herein," and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules and Exhibits hereto) and not to any particular provision of this Agreement, and Article, Section, paragraph, Exhibit and Schedule references are to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise specified, (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless otherwise specified, and (iv) the word "or" shall not be exclusive, but shall be interpreted as "and/or." (b) This Agreement will be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. 12.9 SEVERABILITY. If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted by a court of competent jurisdiction rather than voided, if possible, in order to achieve the intent of the parties to this Agreement to the fullest extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the fullest extent permitted. 12.10 FURTHER ASSURANCES. The parties agree that, from time to time, whether before, at or after the Closing Date, each of them will execute and deliver such further instruments and take such other actions as may be necessary to carry out the purposes and intents hereof. 38 12.11 SPECIFIC PERFORMANCE. The parties each acknowledge that, in view of the uniqueness of the Merger, the parties hereto would not have an adequate remedy at law for money damages if this Agreement were not performed in accordance with its terms, and therefore agree that the parties hereto shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which the parties hereto be entitled at law or in equity. IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the parties hereto as of the date first above written. FRONTIER ADJUSTERS OF AMERICA, INC., an Arizona corporation By: /s/ JEFFREY R. HARCOURT -------------------------------------------- Name: Jeffrey R. Harcourt Title: CFO / Treasurer MERRYMEETING, INC., a Delaware corporation By: /s/ JOHN M. DAVIES -------------------------------------------- Name: John M. Davies Title: President MM MERGER CORPORATION, a Delaware corporation By: /s/ JOHN M. DAVIES -------------------------------------------- Name: John M. Davies Title: President 39 Exhibit 1 - Certificate of Merger Exhibit 2 - Letter of Transmittal Exhibit 3 - Permitted Investments SCHEDULES Schedule A Directors and Executive Officers of FAJ Schedule 4.3(a) FAJ Outstanding Options Schedule 4.3(c) FAJ Investments Schedule 4.7 FAJ Actions and Violations Schedule 4.8 FAJ Changes since December 31, 2000 Schedule 4.9 FAJ Tax Issues Schedule 4.10(c) FAJ Joint Venture or Partnership Agreements Schedule 4.10(d) FAJ Material Agreements Schedule 4.12 FAJ Properties and Permitted Liens Schedule 4.14(a) FAJ Employment Agreements Schedule 4.14(b) FAJ Plans Schedule 4.15 FAJ Labor Matters Schedule 4.16 FAJ Proprietary Rights Schedule 4.17 FAJ Insurance Schedule 5.4(a) MMI Outstanding Options Schedule 5.4(c) MMI Investments Schedule 5.5 MMI Financial Statements Schedule 5.5(d) MMI Intercompany Transactions Schedule 5.6 MMI Actions and Violations Schedule 5.7 MMI Changes Schedule 5.8 MMI Tax Issues Schedule 5.9(c) MMI Joint Venture or Partnership Agreements Schedule 5.9(d) MMI Material Agreements Schedule 5.11 MMI Properties and Permitted Liens Schedule 5.13(a) MMI Employment Agreements Schedule 5.13(b) MMI Plans Schedule 5.14 MMI Labor Matters Schedule 5.15 MMI Proprietary Rights Schedule 5.16 MMI Insurance 40 EX-4 5 ex4.txt JOINT FILING AGREEMENT EXHIBIT 4 FRONTIER ADJUSTERS OF AMERICA, INC. - SCHEDULE 13D JOINT FILING AGREEMENT The undersigned hereby agree that this Schedule 13D, dated May 14, 2001, with respect to the shares of common stock, $.01 par value per share, of Frontier Adjusters of America, Inc., is, and any amendments to such Schedule 13D signed by each of the undersigned shall be, filed on behalf of each of us pursuant to and in accordance with the provisions of Rule 13d-1(k) under the Securities Exchange Act of 1934. MERRYMEETING, INC., a Delaware corporation Date: May 14, 2001 By: /s/ John M. Davies -------------------------------------------- Name: John M. Davies Title: President IVM INTERSURER BV, a Netherlands corporation By: /s/ Patrick Enthoven -------------------------------------------- Name: Patrick Enthoven Title: Chief Advisor of Insurance Operations /s/ Patrick Enthoven ----------------------------------------------- Patrick Enthoven /s/ John M. Davies ----------------------------------------------- John M. Davies -----END PRIVACY-ENHANCED MESSAGE-----