EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
FIRST INVESTORS FINANCIAL
SERVICES GROUP, INC.
AND
FORTIS, INC.
DATED SEPTEMBER 9, 1998
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of September
9, 1998, by and between FIRST INVESTORS FINANCIAL SERVICES GROUP, INC., a Texas
corporation ("BUYER"), and FORTIS, INC., a Nevada corporation ("SELLER").
RECITALS
WHEREAS, Seller owns 100% of the issued and outstanding capital stock of
Auto Lenders Acceptance Corporation, a Delaware corporation (the "Company"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase,
all of the capital stock of the Company, in accordance with the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used herein, in the Exhibits hereto, and in
the Seller Disclosure Memorandum and the Buyer Disclosure Memorandum, the
following terms have the following respective meanings:
"ADJUSTED NET BOOK VALUE" means the aggregate book value of all assets
less the aggregate book value of all liabilities as of the specified date, as
reflected on a balance sheet as of such date prepared on an accrual basis in
accordance with GAAP and as provided in Article 2 hereof.
"AFFILIATE" of a Person means any Person directly, or indirectly through
one or more intermediaries, controlling, controlled by or under common control
with such Person. For purposes of this Agreement, "control" shall be
conclusively presumed if a Person holds the power, by equity ownership or
otherwise, to elect at least 50% of the directors of the other Person or
otherwise direct the policies and business activities of the other Person.
"AGREEMENT" means this Stock Purchase Agreement and all Exhibits hereto,
as the same may be supplemented, modified or amended from time to time.
"ALAC LOANS" means all currently outstanding motor vehicle installment
loans of the Company or any Company Subsidiary including, without limitation,
such loans sold or pledged in connection with a Securitization Transaction.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, or any day
upon which commercial banks in the city of New York are authorized or required
by law to be closed.
"BUYER DISCLOSURE MEMORANDUM" means the written information entitled
"Buyer Disclosure Memorandum" delivered to Seller on the date of this Agreement
and referencing specific Sections of this Agreement. Any matter disclosed by
Buyer with respect to one Section shall be deemed disclosed with respect to all
other Sections, provided that the relevance to the Section from which any such
matter is omitted is apparent from the disclosure with respect to the Section
for which such matter is included.
"BUYER MATERIAL ADVERSE EFFECT" means an event, change or occurrence
which, individually or together with any other event, change or occurrence, has
a material adverse impact on the ability of Buyer to perform its obligations
under this Agreement or to consummate the transactions contemplated by this
Agreement.
"CLOSING" means the consummation of the transactions described in this
Agreement.
"CLOSING DATE" means the date upon which Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMPANY FINANCIAL STATEMENTS" means (i) the audited balance sheets of the
Company as of December 31, 1995 and 1996, and the related statements of
operations, shareholder's equity and cash flows for the fiscal periods then
ended, including all related notes and schedules, if any; (ii) the audited
consolidated balance sheet of the Company and the Company Subsidiaries as of
December 31, 1997, and the related statements of operations, shareholder's
equity and cash flows for the fiscal year then ended, including all related
notes and schedules, if any; and (iii) the June 30 Balance Sheet.
"COMPANY MATERIAL ADVERSE EFFECT" means an event, change or occurrence
that, individually or together with any other event, change or occurrence, has a
material adverse impact on (i) the financial condition, results of operations,
properties or business of the Company and the Company Subsidiaries taken as a
whole, or (ii) the ability of Seller to perform its obligations under this
Agreement or to consummate the transactions contemplated by this Agreement;
provided, however, that continuing Company operations at a loss consistent with
operations prior to June 30, 1998 shall not be
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considered, alone or in combination, in determining whether a Company Material
Adverse Effect has occurred.
"COMPANY SUBSIDIARIES" means ALAC Receivables Corp., a Delaware
corporation, and ALAC, LLC, a Delaware limited liability company.
"CONSENT" means any consent, approval, authorization, clearance,
exemption, waiver or similar affirmation by any Person pursuant to any Contract,
Law, Order or Permit.
"CONTRACT" means any agreement, arrangement, authorization, commitment,
contract, indenture, instrument, lease, obligation, restriction, understanding
or undertaking of any kind or character, whether written or oral, or other
document to which any Person is a party or that is binding on any Person or its
capital stock, assets or business; provided that the ALAC Loans are not included
in this definition.
"ERISA" means the Employee Retirement Income Security Act of 1974, as in
effect from time to time.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"GOVERNMENTAL AUTHORITY" means any federal, state, county, local, foreign
or other governmental or public agency, instrumentality, commission, authority,
board or body.
"▇▇▇▇-▇▇▇▇▇ ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and all regulations promulgated thereunder.
"JUNE 30 BALANCE SHEET" means the unaudited consolidated balance sheet of
the Company and the Company Subsidiaries as of June 30, 1998, a copy of which is
attached hereto as EXHIBIT 1.
"KNOWLEDGE" (i) with respect to Seller means those facts known by any
of the executive officers of Seller or by any of the following persons: ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, J.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇; and (ii) with respect to Buyer, means
those facts known by any of the executive officers of Buyer.
"LAW" means any code, law (including common law), ordinance, regulation,
reporting or licensing requirement, rule, or statute applicable to a Person or
its assets, liabilities or business, including those promulgated, interpreted or
enforced by any Governmental Authority.
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"LEASE AGREEMENT" means that certain Lease Agreement, dated December
6, 1996, as amended, between The Weather Channel, Inc. and Seller.
"NET DEFERRED TAX ASSET" means the net tax amount of federal income Taxes
accrued by the Company for the temporary differences between the items of income
and expense on the Company's GAAP financial statements as opposed to such items
on the Company's tax financial statements.
"ORDER" means any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or writ of any
federal, state, local or foreign or other court, arbitrator, mediator, tribunal,
administrative agency or Governmental Authority.
"PERMIT" means any federal, state, local or foreign governmental approval,
authorization, certificate, easement, filing, franchise, license, notice, permit
or right to which any Person is a party or that is binding upon or inures to the
benefit of any Person or its assets or business.
"PERMITTED LIEN" means those liens, charges, assessments, security
interests or encumbrances (i) reflected in the June 30 Balance Sheet; (ii) for
Taxes imposed by any taxing authority that are not yet due and payable or that
are being contested in good faith by appropriate proceedings; (iii) purchase
money security interests and similar security interests for goods purchased by
the Company; (iv) mechanics', suppliers', installment sales and similar liens
for services rendered or materials furnished, the charges for which are not yet
due and payable or which are being contested in good faith by appropriate
proceedings; (v) in the case of real property and equipment, defects or
imperfections in title or liens that do not materially interfere with the use of
such properties as presently used by the Company or the conduct of the business
as presently conducted by the Company; and (vi) arising by operation of Law and
in the ordinary course of business (none of which would materially impair or
interfere with the use or operation of such property or asset).
"PERSON" means an individual, corporation, limited liability company,
partnership, association, trust or unincorporated organization, or a government
or any agency or political subdivision thereof.
"PRUDENTIAL LOAN AGREEMENT" means the Interim Loan Warehouse and Security
Agreement dated May 12, 1997, as amended by Credit Increase Confirmation and
Note Amendments dated December 31, 1997, by and between the Company and
Prudential Securities Credit Corporation.
"REPRESENTATIVE" means any investment banker, financial advisor, attorney,
accountant, consultant or other representative engaged by a Person.
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"SECURITIZATION TRANSACTION" means each outstanding transaction under
which ALAC Loans have been sold or pledged in a securitization and sold as a
private placement under the Securities Act of 1933, including without limitation
(i) the ALAC Automobile Receivables Trust 1998-1, and (ii) the ALAC Automobile
Receivables Trust 1997-1.
"SELLER LOAN AGREEMENT" means the Capital Commitment Agreement dated May
22, 1996, as amended by letter dated February 21, 1997, and the related
Promissory Note dated June 16, 1997, as amended August 29, 1997 and January 5,
1998, by and between the Company and Seller.
"SELLER DISCLOSURE MEMORANDUM" means the written information entitled
"Seller Disclosure Memorandum" delivered to Buyer on the date of this Agreement
and referencing specific Sections of this Agreement. Any matter disclosed by
Seller with respect to one Section shall be deemed disclosed with respect to all
other Sections, provided that the relevance to the Section from which any such
matter is omitted is apparent from the disclosure with respect to the Section
for which such matter is included.
"TAX" means any federal, state, county, local or foreign taxes, charges,
fees, levies, imposts, duties or other assessments, including income, gross
receipts, excise, employment, sales, use, transfer, license, payroll, franchise,
severance, stamp, occupation, customs duties, withholding, Social Security,
unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties and additions
imposed thereon or with respect thereto.
"TAX ALLOCATION AGREEMENT" means the Tax Allocation Agreement dated
December 31, 1997 by and among Seller and its subsidiaries listed therein
(including the Company).
"TAX RETURN" means any report, return, information return or other
information required to be supplied to a taxing authority in connection with
Taxes, including any return of an affiliated or combined or unitary group that
includes a party.
1.2 INDEX TO CERTAIN DEFINED TERMS. The terms set forth below shall have
the meanings ascribed thereto in the referenced sections:
TERM SECTION
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AAA 9.1
Affected Party 5.9 (f)
Benefit Plans 3.15(a)
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Buyer Indemnitees 7.1 (a)
Buyer's 401(k ) Plan 5.7 (b)
Buyer's Plans 5.7 (b)
Buyer's Returns 5.9 (c)
Buyer Tax Attribute 5.9 (g)
Buyer's Taxes 5.9 (c)
Closing Balance Sheet 2.3 (b)(i)
Closing Date Payment 2.3 (a)
Common Stock 3.4 (a)
Company Contracts 3.12
Company's Plans 3.15(a)
Cost 7.1 (a)
Damage 7.1 (a)
E&Y 2.3 (b)(i)
Employee Plan 3.15(a)
Environmental Laws 3.11(b)
ERISA Affiliate 3.15(h)
Fortis Plan 5.7 (b)
Group 3.9 (a)
Group Returns 5.9 (b)
Hazardous Materials 3.11(b)
Indemnification Claim 7.3
Indemnitee 7.3
Indemnitor 7.3
Intellectual Property 3.14(a)
Intercompany Contracts 3.12
Landlord 5.12(c)
Net Loan Payoff 5.12(a)
Pre-Closing Consolidated Returns 5.9 (b)
Pre-Closing Period 5.9 (g)
Purchase Price 2.2
Purchased Shares 2.1
Release 3.11(b)
Release of Guarantee 5.12(c)
Retention Bonuses 5.7 (d)
Section 338 Election 5.10
Seller Indemnitees 7.2 (a)
Seller's Accrued Taxes 5.9 (i)
Seller's Plans 3.15(a)
Seller's Taxes 5.9 (b)
Terminated Company's Plans 5.7 (a)
Term 5.12(c)
Warn Act 3.16
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1.3 MISCELLANEOUS. Any singular term in this Agreement shall be deemed to
include the plural, and any plural term the singular. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation."
ARTICLE 2
STOCK PURCHASE AND CLOSING
2.1 PURCHASE AND SALE OF PURCHASED SHARES. Upon and subject to the terms
and conditions of this Agreement, Seller shall sell to Buyer, and Buyer shall
purchase, 100 shares of the Company's common stock, par value $.01 per share,
which represents 100% of the issued and outstanding shares of capital stock of
the Company (the "PURCHASED SHARES").
2.2 CONSIDERATION. The aggregate consideration (the "PURCHASE Price") to
be paid by Buyer to Seller for the Purchased Shares shall equal the Adjusted Net
Book Value of the Company as of the Closing Date, less $8,508,519.
2.3 PAYMENT OF PURCHASE PRICE. Buyer shall pay the Purchase Price as
follows:
(a) CLOSING DATE PAYMENT. At the Closing, Buyer shall pay to Seller an
amount (the "CLOSING DATE PAYMENT") equal to the Purchase Price determined as if
the Closing Date were August 31, 1998, using the Company's unaudited balance
sheet as of August 31, 1998. The Company shall prepare its balance sheet as of
August 31, 1998, on the same basis as if such balance sheet were the Closing
Balance Sheet and shall deliver its balance sheet as of August 31, 1998 to Buyer
no later than two Business Days before the Closing Date .
(b) POST-CLOSING ADJUSTMENT.
(i) As soon as practicable, but in no event later than 15 days after
Closing, Buyer will cause the Company to prepare and deliver to Seller the
Company's regularly prepared interim financial statements, including all
supporting schedules and documents consistent with past practices, as of
the Closing Date. As soon as practicable, but in no event later than 30
days after receipt of such financial statements from Buyer, Seller shall
prepare and deliver to Buyer a balance sheet and related notes of the
Company as of the close of business on the Closing Date (the "CLOSING
BALANCE SHEET") prepared in accordance with GAAP and reflecting accounting
principles and practices consistent with those used in the preparation of
the June 30 Balance Sheet, plus the adjustments set forth in Section
2.3(c) below. Buyer shall provide Seller with all information, records and
access to personnel and Representatives as Seller may reasonably request
in connection with Seller's preparation of the Closing Balance
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Sheet. Such Closing Balance Sheet shall be accompanied by the report of
Ernst & Young, LLP ("E&Y"), independent auditors for Seller and the
Company, which report shall state that in the opinion of E&Y the Closing
Balance Sheet fairly presents the financial position, assets and
liabilities of the Company as of the Closing Date and has been prepared in
accordance GAAP, except as otherwise provided in Section 2.3(c) hereof.
Notwithstanding the foregoing, the Closing Balance Sheet (i) shall be
prepared using a materiality standard appropriate under GAAP for the
Company and the Company Subsidiaries on a consolidated basis, without
regard for any other Affiliate of the Company, and (ii) will be adjusted
as provided in Section 2.3(c) hereof.
(ii) Following delivery of the Closing Balance Sheet by Seller,
Buyer shall have 15 days in which to review the Closing Balance Sheet.
During such 15-day period, Seller shall cause E&Y to provide to Buyer and
its independent auditors, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, full access to E&Y's work
papers in connection with the audit of the Closing Balance Sheet. Such
Closing Balance Sheet shall be deemed conclusive and binding on the
parties, unless Buyer notifies Seller in writing within such 15-day period
of its disagreement therewith (which notice shall state with reasonable
specificity the reasons for any disagreement and the amounts in dispute).
If there is a disagreement, and such disagreement cannot be resolved by
Buyer and Seller within 10 days following Seller's receipt of Buyer's
notice of disagreement, the dispute shall be submitted to the independent
auditing firm of PricewaterhouseCoopers LLP. The determination by
PricewaterhouseCoopers LLP, which shall be made within 30 days of the date
upon which the dispute is submitted to such firm, shall be binding and
conclusive on the parties. Buyer and Seller shall each pay one-half of the
cost of the fees and expenses of such independent auditing firm.
(iii) Within 5 days after all disputes have been resolved with
respect to the Closing Balance Sheet, the parties shall make any necessary
payment to ensure that Buyer has paid the full Purchase Price and no more.
Therefore, if the Purchase Price is (x) less than the Closing Date
Payment, Seller shall refund to Buyer the difference, or (y) greater than
the Closing Date Payment, Buyer shall pay to Seller the difference. Any
such refund or payment shall bear interest at the rate of six percent per
annum, simple interest, from the Closing Date through and including the
date of payment.
(c) The Closing Balance Sheet shall include the following principles and
practices, regardless of whether they are in conformity with GAAP or the
Company's prior principles and practices:
(i) The Closing Balance Sheet shall be consistent with all
provisions of Section 5.7 (relating to employee benefit matters), and
Section 5.9 (relating to tax matters).
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(ii) The Closing Balance Sheet shall include a loan loss reserve
equal to the amount of the loan loss reserve as of June 30, 1998, plus 12%
of the principal amount of all loans purchased or originated by the
Company between June 30, 1998 and the Closing Date, minus the net charge
offs through the Closing Date.
(iii) The assets entitled "Interest - Strip Receivable," "Servicing
Asset" and "Investment in Trust Certificates" shall be valued on the
Closing Balance Sheet using the same assumptions used in determining the
values on the June 30 Balance Sheet, which assumptions are attached hereto
as EXHIBIT 2.3.
(iv) The asset entitled "Tax Benefit Receivable from Parent" shall
(i) be reduced to eliminate any Net Deferred Tax Asset, and (ii) shall be
included on the Closing Balance Sheet in the amount actually paid by
Seller to the Company at Closing, pursuant to Section 5.12(a). As set
forth in Section 5.12(a), the amount so paid will be estimated by Seller,
and there shall be no further adjustment in this amount, with no further
liability from Seller to the Company with respect to such asset.
(v) The asset entitled "Equipment, Furniture & Leasehold
Improvements amount, net of depreciation" shall be valued on the Closing
Balance Sheet at no more than $2,448,795.
(vi) Any accrued liability on the Closing Balance Sheet for bonuses
or other payments to officers or employees shall be adjusted to the amount
of the actual payments.
(d) Each monetary amount stated in this Agreement is stated in United
States Dollars, and each payment or refund made pursuant to this Article 2 or
pursuant to Section 5.12(a) shall be in United States Dollars paid by means of a
wire transfer of immediately available funds to an account designated by the
recipient.
2.4 CLOSING.
(a) The Closing will take place effective at close of business on the
later of September 30, 1998 or the second Business Day after all conditions set
forth in Section 6.1 are satisfied. The Closing will be held at 10:00 A.M. at
the offices of ▇▇▇▇▇▇ & Bird LLP located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, or such other time and place as may be mutually agreed upon by the
parties. All transactions that take place at the Closing shall be deemed to
occur simultaneously.
(b) At the Closing:
(i) Buyer shall deliver to Seller (1) prior to 1:00 p.m. Atlanta,
Georgia time, immediately available funds by wire transfer to an account
specified by
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Seller in an amount equal to the Closing Date Payment plus the Net Loan
Payoff; and (2) the certificates and other documents set forth in Section
6.3; and
(ii) Seller shall deliver to Buyer (1) the certificate or
certificates representing the Shares, either duly endorsed for transfer to
the Buyer or accompanied by appropriate stock powers; (2) the certificates
and other documents set forth in Section 6.2; (3) the Seller Loan
Agreement marked to show that all amounts thereunder have been paid in
full; and (4) a certificate in accordance with Treasury Regulation Section
1.1445-2(b)(2) certifying that Seller is not a "foreign person." If, on or
prior to the Closing, Buyer shall not have received such certificate
identified in (4) above, Buyer may withhold from the Closing Date Payment
such sums as are required to be withheld therefrom under Section 1445 of
the Code.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the corresponding sections or subsections of the
Seller Disclosure Memorandum, Seller hereby represents and warrants to Buyer as
follows:
3.1 ORGANIZATION AND GOOD STANDING OF SELLER; POWER AND AUTHORITY. Seller
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada. Seller has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Seller, and the performance by Seller of its obligations hereunder, have been
duly and validly authorized by all necessary corporate action on the part of
Seller. No other corporate or shareholder proceedings on the part of Seller are
necessary to approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
3.2 ORGANIZATION AND GOOD STANDING OF THE COMPANY; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company has all requisite
corporate power and authority to own or lease its assets as now owned or leased
and to conduct its business as presently conducted. The Company is qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the ownership of its assets or the conduct of its business
requires such qualification, except where the failure to be so qualified or in
good standing is not reasonably likely to have a Company Material Adverse
Effect. The copies of the Company's certificate of incorporation and bylaws that
have been delivered to Buyer are correct and complete and are in full force and
effect.
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3.3 ORGANIZATION AND GOOD STANDING OF THE COMPANY SUBSIDIARIES; POWER AND
AUTHORITY. ALAC Receivables Corp. is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. ALAC, LLC
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each Company Subsidiary has
all requisite corporate power and authority to own or lease its assets as now
owned or leased and to conduct its business as presently conducted. Each Company
Subsidiary is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership of its assets or the
conduct of its business requires such qualification, except where the failure to
be so qualified or in good standing is not reasonably likely to have a Company
Material Adverse Effect. The copies of ALAC Receivables Corp.'s certificate of
incorporation and bylaws, and the copy of ALAC, LLC's limited liability company
agreement, that have been delivered to Buyer are correct and complete and are in
full force and effect.
3.4 CAPITALIZATION AND OWNERSHIP.
(a) The Company's authorized capital stock consists solely of (i) 10,000
shares of common stock, par value $.01 per share ("COMMON STOCK"), 100 of which
are currently issued and outstanding and none of which are held in its treasury,
and (ii) 10,000 shares of preferred stock, par value $.01 per share, of which
none are currently issued and outstanding and none are held in its treasury. All
of the outstanding shares of the Common Stock have been duly authorized, validly
issued and are fully paid and nonassessable and subject to no preemptive rights.
There are no outstanding options, warrants, rights, agreements, calls,
commitments or demands of any character relating to the capital stock of the
Company and no securities convertible into or exchangeable for any of such
capital stock. Seller (i) is the sole record and beneficial owner of the
Purchased Shares, free and clear of any lien, security interest, restriction,
encumbrance or claim, and (ii) owns all of the issued and outstanding capital
stock of the Company.
(b) The authorized capital stock of ALAC Receivables Corp. consists solely
of 1,000 shares of common stock, par value $1.00 per share, all of which are
currently issued and outstanding and none of which are held in its treasury. All
of the outstanding shares of the common stock of ALAC Receivables Corp. have
been duly authorized, validly issued and are fully paid and nonassessable. There
are no outstanding options, warrants, rights, agreements, calls, commitments or
demands of any character relating to the capital stock of ALAC Receivables Corp.
and no securities convertible into or exchangeable for any of such capital
stock. The Company (i) is the sole record and beneficial owner of such shares,
free and clear of any lien, security interest, restriction, encumbrance or
claim, and (ii) owns all of the issued and outstanding capital stock of ALAC
Receivables Corp.
(c) ALAC Receivables Corp. is the sole member of ALAC, LLC, and ALAC
Receivables Corp. owns, beneficially and of record, 100% of the membership
interests of ALAC, LLC, free and clear of any lien, security interest,
restriction, encumbrance or
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claim. There are no outstanding options, warrants, rights, agreements, calls,
commitments or demands of any character relating to the membership interests of
ALAC, LLC and no securities convertible into or exchangeable for any of such
membership interests.
3.5 NO OTHER SUBSIDIARIES. The Company does not, directly or indirectly,
own any stock of, or any other interest in, any Person other than the Company
Subsidiaries, except that the Company may own interests held for investment
purposes not exceeding 10% of any such single Person. ALAC Receivables Corp.
does not, directly or indirectly, own any stock of, or any other interest in,
any Person other than ALAC, LLC. ALAC, LLC does not, directly or indirectly, own
any stock of, or any other interest in, any Person. Neither the Company nor any
Company Subsidiary is a party to any joint venture or partnership.
3.6 NO VIOLATION OF APPLICABLE LAWS OR AGREEMENTS. Subject to receipt of
the Consents listed in Section 3.6 of the Seller Disclosure Memorandum, and
subject to the Consent required under the ▇▇▇▇-▇▇▇▇▇ Act, the execution and
delivery of this Agreement by Seller does not, and the consummation of the
transactions contemplated by this Agreement and the compliance with the terms,
conditions and provisions of this Agreement by Seller will not, (a) violate or
conflict with any provision of Seller's, the Company's or any Company
Subsidiary's articles or certificate of incorporation or bylaws; (b) violate,
conflict with or result in the breach or termination of, or otherwise give any
contracting party (which has not consented to such execution, delivery and
consummation) the right to change any material term of, or to terminate or
accelerate the maturity of, or constitute a default under (or an event which,
with notice or lapse of time or both, would constitute a default under) the
terms of, any indenture, mortgage, loan or credit agreement or any other
material agreement or instrument to which any of Seller, the Company or any
Company Subsidiary is a party or by which any of them or any of their assets may
be bound or affected, or any applicable Law; or (c) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the assets of the Company or any Company Subsidiary or give to others any
interests or rights therein.
3.7 FINANCIAL STATEMENTS. Seller has delivered to Buyer complete and
correct copies of the Company Financial Statements. The Company Financial
Statements (a) have been prepared in accordance with GAAP, except as may be
indicated in the footnotes thereto, and except that the June 30 Balance Sheet is
unaudited and does not contain footnote disclosures; (b) are correct and
complete and in accordance with the books and records of the Company; (c) fairly
presented in all material respects the financial position of the Company, or the
consolidated financial position of the Company and the Company Subsidiaries, as
applicable, as of the dates thereof and the results, or the consolidated
results, as applicable, of their operations and cash flows for the periods then
ended (subject, in the case of the June 30 Balance Sheet, to normal year-end
adjustments); and (d) with respect to the audited financial statements, do not
omit to state the existence of any obligations or liabilities, whether absolute,
accrued, contingent or
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otherwise (including, without limitation, guarantees or repurchase obligations)
that are required to be disclosed, reflected or reserved for under GAAP.
3.8 ABSENCE OF CERTAIN CHANGES. Since June 30, 1998 (i) there has been no
occurrence having, or which would reasonably be expected to result in, a Company
Material Adverse Effect, other than the transactions contemplated by this
Agreement, (ii) neither the Company nor any Company Subsidiary has taken any
action that would be prohibited under Section 5.1 after the date of this
Agreement, and (iii) no extraordinary credit losses, in the aggregate, have been
incurred with respect to the ALAC Loans. Since June 30, 1998, the business of
the Company and the Company Subsidiaries has been conducted only in the ordinary
and usual course consistent with past practice, except with respect to the
transactions contemplated by this Agreement.
3.9 TAX MATTERS.
(a) The Company, ALAC Receivables Corp., Seller and certain other
Affiliates of Seller constitute an affiliated group of corporations within
the meaning of Section 1504 of the Code (the "Group"). The Company has
joined in the filing of a consolidated federal income Tax Return with the
Group for taxable years beginning with 1995, and ALAC Receivables Corp.
will join in the filing of a consolidated federal income Tax Return with
the Group for taxable years beginning with 1997. ALAC, LLC has been taxed
as a partnership, with ALAC Receivables Corp. as its sole member, since
its formation in September 1997.
(b) The Group has (i) timely filed all Tax Returns required to be
filed by it, with the federal income Tax Return of the Group for the
taxable year 1997 being scheduled for filing on or before September 15,
1998; (ii) paid all Taxes shown to have become due pursuant to such filed
Tax Returns; and (iii) paid all other Taxes for which a notice of
assessment or demand for payment has been received or which are otherwise
due and payable. All Tax Returns of the Group (i) have been prepared in
accordance with all Laws, and (ii) accurately reflect the taxable income
(or other measure of tax) of the corporation or corporations filing the
same. All Taxes of the Company and ALAC Receivables Corp. for periods
after December 31, 1996 have been paid or are adequately reserved against
in the Company Financial Statements, except to the extent such Taxes are
Seller's obligation as provided in Section 5.9 hereof. The Company and the
Company Subsidiaries have timely filed all information returns or reports,
including Forms 1099, that are required to be filed and have accurately
reported all information required to be included on such returns or
reports. True copies of federal income Tax Returns of the Company included
in the consolidated Tax Returns for the Group for each of the fiscal
periods ended December 31, 1995 and 1996 have been delivered to Buyer.
True copies of the state Tax Returns of the Company and ALAC Receivables
Corp. filed most recently in each state in which such Person has filed Tax
Returns have been delivered to Buyer.
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(c) There is no action, suit, proceeding, investigation, audit or
claim pending or proposed with respect to any liability for Tax that
relates to the Company or any Company Subsidiary, and there are no
proposed assessments of Taxes against the Company or any Company
Subsidiary, no proposed adjustments to any Tax Return pending against the
Group with respect to the operations or assets of the Company or the
Company Subsidiaries, and no proposed adjustments to the manner in which
any Tax of the Group is determined with respect to the operations or
assets of the Company or any Company Subsidiary. No taxing authority in a
jurisdiction where the Company or the Company Subsidiaries do not file Tax
Returns has made a claim or threat that any of such Persons is or may be
subject to taxation by that jurisdiction.
(d) Neither the Company nor any Company Subsidiary has (i) filed any
consent agreement under Section 341(f) of the Code, (ii) executed or been
the subject of a waiver or consent extending any statute of limitation for
any Tax liability that remains outstanding, (iii) joined in or been
required to join in filing a consolidated or combined federal, state or
local Tax Return with any corporation other than a current or former
member of the Group, (iv) been the subject of a ruling of the Internal
Revenue Service or any state or local taxing authority that has continuing
application to the Company or any Company Subsidiary, (v) been the subject
of a closing agreement with any taxing authority that has continuing
effect, (vi) filed an election under Section 338(g) or Section 338(h)(10)
of the Code or caused a deemed election under Section 338(e) thereof, or
(vii) granted a power of attorney with respect to any Tax matters that has
continuing effect. Neither the Company nor any Company Subsidiary has
agreed to make nor is it required to make any adjustment under Section 481
of the Code or any comparable provision of state, local or foreign Law by
reason of a change in accounting method or otherwise and the Internal
Revenue Service (or other taxing authority) has not proposed any such
change in accounting method in connection with an ongoing audit of any
such Person. Neither the Company nor any Company Subsidiary has disposed
of property in a transaction being accounted for under the installment
method pursuant to Section 453 of the Code, or any comparable state, local
or foreign Law.
3.10 PENDING LITIGATION OR PROCEEDINGS. There are no claims, suits,
actions, proceedings, arbitrations or investigations pending or, to the
Knowledge of Seller, threatened (a) against or otherwise relating to or
involving the Company or the Company Subsidiaries or any of their assets, or (b)
relating to the transactions contemplated by this Agreement.
3.11 COMPLIANCE WITH LAWS; PERMITS.
(a) The Company and each Company Subsidiary holds all material Permits
required to conduct its business as presently conducted, and all such Permits
are valid and in full force and effect. The Company and each Company Subsidiary
is in compliance in
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all material respects with all such Permits and with all Laws and Orders;
provided that this provision does not apply to the ALAC Loans which are
addressed in Section (c) below. The sale of the Purchased Shares and the
consummation of the transactions contemplated hereby will not violate the terms,
provisions or conditions of any such Permit or result in the revocation,
cancellation or forfeiture thereof.
(b) The Company and the Company Subsidiaries are in compliance in all
material respects with all Laws relating to air, water, soil, solid waste
management, Hazardous Materials (as defined below), or the protection of health
or the environment (collectively, the "ENVIRONMENTAL LAWS"). There are no
claims, actions, suits or proceedings pending or, to Seller's Knowledge,
threatened against or involving the Company or any Company Subsidiary or
relating to any real property at any time owned, leased or used by the Company
or any Company Subsidiary under any of the Environmental Laws (whether by reason
of any failure to comply with any of the Environmental Laws or otherwise). No
Order of any kind under any of the Environmental Laws has been entered against
the Company or any Company Subsidiary. There has not been a Release (as defined
below) of any Hazardous Material on any real property leased by the Company or
any Company Subsidiary, and neither the Company nor any Company Subsidiary has
received any notification from any Governmental Authority that as to any real
property leased by any of them or any business or activities conducted on any
such property, there exists or has occurred a violation of applicable
Environmental Laws or potential liability for Release of Hazardous Materials.
For purposes of this Section 3.11(b), (i) "HAZARDOUS MATERIALS" means materials
defined as "hazardous waste or substances" under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 ET SEQ. and the
Resource Conservation and Recovery Act, 42 U.S.C. ss. 6903 ET SEQ., and other
solid, semi-solid, liquid or gaseous substances which are toxic, ignitable,
corrosive, carcinogenic or otherwise dangerous to human, plant or animal health
and well being; and (ii) "RELEASE" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or other disposal in any amount into or onto the air, ground or surface water,
land or other parts of the environment, however caused.
(c) To Seller's Knowledge, the Company and each Company Subsidiary, with
respect to all ALAC Loans, whether as holder or servicer thereof (including,
without limitation, with respect to the documentation, underwriting,
origination, purchase, assumption, modification, sale, contribution, pooling or
servicing thereof) is and has been in compliance with all material regulations,
orders, writs, decrees, injunctions and other requirements of any court or
governmental authorities applicable to it, its properties and assets and its
conduct of its business including, without limitation, (i) the rules,
regulations and requirements of any applicable agency, (ii) any applicable
local, state or federal laws or ordinances, and any regulations or orders issued
thereunder, governing or pertaining to unlawful discrimination in lending
(including without limitation, equal credit opportunity, retail installment
sales, and fair credit reporting), truth-in-lending, or consumer credit
(including, without limitation, the Federal Consumer Credit Protection Act, the
Federal Truth-in-Lending Act and Regulation Z thereunder, and the Federal
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Equal Credit Opportunity Act and Regulation B thereunder) and (iii) all
applicable motor vehicle installment sales and usury and interest limitation
laws. Without limitation on the foregoing, the Company and each Company
Subsidiary has been and is in compliance in all material respects with all
servicer and other requirements of the applicable agencies, investors, or other
parties to servicing agreements (including, without limitation, any applicable
net worth requirements) which are applicable to it, and all applicable
underwriting standards of such agencies, investors, or other parties to
servicing agreements. Neither the Company nor any Company Subsidiary is a party
to any cease and desist order, written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any supervisory
letter from, or has adopted any board resolutions at the request of, federal or
state, securities, consumer lending, insurance or other governmental authorities
nor has any of them been advised by any such authority that it is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, directive, written agreement, memorandum of
understanding, supervisory letter, commitment letter, board resolutions or
similar undertaking.
3.12 MATERIAL CONTRACTS. Neither the Company nor any Company Subsidiary is
a party to, is bound by or has any obligations under or receives benefits under,
(i) any employment, severance, bonus, termination, consulting or retirement
Contract, (ii) any Contract relating to the borrowing of money by the Company or
any Company Subsidiary or the guarantee by the Company or any Company Subsidiary
of any such obligation (other than Contracts evidencing trade payables), (iii)
any Contract which prohibits or restricts the Company or any Company Subsidiary
from engaging in any business activities in any geographic area, line of
business or otherwise in competition with any other Person, (iv) any Contract
involving Intellectual Property (other than Contracts entered into in the
ordinary course with customers and "shrink-wrap" software licenses), (v) any
Contract between the Company or any Company Subsidiary, on the one hand, and
Seller or an Affiliate of Seller, on the other hand ("INTERCOMPANY CONTRACTS"),
or (vi) any Contract relating to the purchase or sale of any goods or services
or any other subject matter (other than the ALAC Loans, the dealer agreements,
and Contracts entered into in the ordinary course of business and involving
payments under any individual Contract not in excess of $10,000 per year) (such
contracts as are listed in Section 3.12 of the Seller Disclosure Memorandum
together with all Contracts referred to in Section 3.15(a) of the Seller
Disclosure Memorandum are referred to herein as the "COMPANY Contracts"). With
respect to each Company Contract, (i) the Company Contract is in full force and
effect; (ii) the Company or Company Subsidiary is not in default in any material
respect thereunder; (iii) the Company or Company Subsidiary has not repudiated
or waived any material provision of any such Contract; (iv) no other party to
any such Contract is, to the Knowledge of Seller, in default in any material
respect, or has repudiated or waived any material provision thereunder; and to
Seller's Knowledge, no material dispute or controversy exists with respect to
any Company Contracts.
3.13 ASSETS.
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(a) The Company and each Company Subsidiary has (i) good and marketable
title, or valid and binding leasehold rights in the case of leased property, to
all assets and properties owned or leased by it, whether tangible or intangible,
and (ii) valid and binding leasehold rights to all real property leased by it,
in each case free and clear of any lien, encumbrance, mortgage, pledge, charge
or security interest whatsoever, other than Permitted Liens. Neither the Company
nor any Company Subsidiary owns any real property. The Company and each Company
Subsidiary owns, leases or has the right to use all assets and properties
necessary for the conduct of its business as presently conducted.
(b) The Seller Disclosure Memorandum sets forth a complete and accurate
list of all real property leased by the Company; the Company Subsidiaries do not
lease any real property. With respect to all such leased real property (i) the
Company is in peaceful and undisturbed possession of the premises, (ii) to the
Knowledge of Seller, the Company has good and valid rights of ingress and egress
to and from to the leased property, and (iii) to the Knowledge of Seller, none
of the buildings, structures, improvements or fixtures used by the Company has
any material defects that would impair the day-to-day use of any such buildings,
structures, improvements or fixtures or that would subject the Company to
liability under any Law. Seller represents and warrants to Buyer that (i) all
commissions, fees or other payments owing by the Company or any Company
Subsidiary under arrangements with The Staubach Company -- Southeast, Inc. have
been paid in full, and (ii) on or prior to the Closing Date, such arrangements
shall be terminated and neither the Company nor any Company Subsidiary shall
have any further obligations thereunder.
3.14 INTELLECTUAL PROPERTY.
(a) For purposes of this Agreement, the term "INTELLECTUAL PROPERTY" shall
mean, collectively, patents, copyrights, designs, designs-in-progress,
formulations, know-how, inventions, trademarks, trade names, trade styles,
service marks and computer software. The Company and each Company Subsidiary
owns or has the uncontested right to use all Intellectual Property necessary for
the conduct of such Person's business as presently conducted, including the use
of all processing and billing systems, loss exposure programs, loan acquisition
standards programs, other computer programs, and all other proprietary software,
data bases, systems and other information used by the Company or the Company
Subsidiaries in connection with their businesses; provided that certain payroll,
benefit administration, accounting, legal, tax and executive services are
provided pursuant to the Intercompany Contracts.
.
(b) No claim is pending or, to Seller's Knowledge, threatened, and neither
the Company nor any Company Subsidiary has received any notice, that the conduct
of such Person's business (including its use of any Intellectual Property)
infringes upon, misappropriates or conflicts with any rights in Intellectual
Property claimed by any third party, nor, to Seller's Knowledge, is there any
basis for such a claim. No use by the Company or any Company Subsidiary of any
material Intellectual Property licensed to it violates the terms of any Contract
pursuant to which it is licensed. No claim is pending
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or, to Seller's Knowledge, threatened that alleges that any material
Intellectual Property owned or licensed by or to the Company or any Company
Subsidiary, or that the Company or a Company Subsidiary otherwise has the right
to use, is invalid or unenforceable by the Company or Company Subsidiary, nor is
there, to Seller's Knowledge, any basis for any such claim.
(c) No royalties or fees are payable by the Company or any Company
Subsidiary to anyone for use of the Intellectual Property.
3.15 EMPLOYEE BENEFIT PLANS.
(a) The only employee pension benefit plans (as defined in Section 3(2) of
ERISA), welfare benefit plans (as defined in Section 3(1) of ERISA), bonus,
stock purchase, stock ownership, stock option, deferred compensation, incentive
or other compensation plan or arrangement, and other material employee fringe
benefit plans (each an "EMPLOYEE PLAN") presently maintained by, or contributed
to by the Company or by Seller, or under which the Company or Seller has any
obligations, for the benefit of any current or former employee of the Company
are those listed in Section 3.15(a) of the Seller Disclosure Memorandum (the
"BENEFIT PLANS"), which identifies whether each Benefit Plan is provided by
Seller as part of an employee benefit plan also covering employees of other
Affiliates of Seller ("SELLER'S PLANS"), or is provided separately by the
Company ("COMPANY'S PLANS") and does not cover employees other than employees of
the Company.
(b) The Company Subsidiaries do not have, and have not had in the past,
any employees, and the Company Subsidiaries do not maintain or contribute to,
and have not maintained or contributed to in the past, any Employee Plan.
(c) The Company, Seller and any other sponsor of any of the Benefit Plans
have performed all material obligations required to be performed by them under
the Benefit Plans, and each of the Benefit Plans is in compliance in all
material respects with the applicable provisions of ERISA, the Code and all
other applicable Laws.
(d) All contributions to, and payments from, the Benefit Plans which may
have been required to be made in accordance with the Benefit Plans and, when
applicable, Section 302 of ERISA or Section 412 of the Code, have, in all
material respects, been timely made.
(e) There are (i) no pending or, to Seller's Knowledge, threatened audits
or investigations by any Governmental Authority involving the Benefit Plans,
(ii) no pending or, to Seller's Knowledge, threatened termination proceedings
involving any Benefit Plan, which is subject to Title IV of ERISA, and (iii) no
pending or, to Seller's Knowledge, threatened claims (except for routine claims
for benefits payable in the normal operation of the Benefit Plans), suits or
proceedings involving any Benefit Plan or
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asserting any rights or claims to benefits under any Benefit Plan that could
give rise to any material liability.
(f) Neither the Benefit Plans, the Company, Seller nor any employee of the
foregoing, nor, to Seller's Knowledge, any trusts created thereunder or any
trustee, administrator or other fiduciary thereof, has engaged in a "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section 406
of ERISA) which could subject the Company to a material tax or penalty on
prohibited transactions imposed by such Section 4975 or the sanctions imposed
under Title I of ERISA or any material liability under Chapter 43 of Subtitle D
of the Code.
(g) No Benefit Plan subject to Title IV of ERISA has been terminated, and
neither Seller, the Company nor any ERISA Affiliate (as defined below) has
incurred any material liability to the Pension Benefit Guaranty Corporation
other than for the payment of premiums. No Benefit Plan has applied for or
received a waiver of the minimum funding standards imposed by Section 412 of the
Code.
(h) At no time has (i) Seller, (ii) the Company or (iii) any business or
entity that is or was, together with the Company, treated as a "single employer"
under Section 414(b), 414(c) or 414(m) of the Code, required to be aggregated
with the Company under Section 414(o) of the Code or under "common control" with
the Company under Section 4001(a)(14) of ERISA (an "ERISA AFFILIATE"), incurred
any liability which could subject Buyer or the Company to a material liability
under Section 4062, 4063 or 4064 of ERISA.
(i) At no time for which any relevant statute of limitations remains open
has Seller, the Company or any ERISA Affiliate been required to contribute to,
or incurred any withdrawal liability within the meaning of Section 4201 of
ERISA, to any multiemployer pension plan, within the meaning of Section 3(37) of
ERISA, which liability has not been fully paid as of the date hereof.
(j) Seller and the Company have complied in all material respects with the
notice and continuation coverage requirements of Section 4980B of the Code and
the regulations thereunder with respect to each Benefit Plan that is, or was
during any taxable year of Seller or the Company for which the statute of
limitations on the assessment of federal income taxes remains open, by consent
or otherwise, a group health plan within the meaning of Section 5000(b)(1) of
the Code.
(k) Neither Seller nor the Company has incurred or is reasonably likely to
incur any liability that is or could reasonably be expected to become a material
liability of the Company with respect to any plan or arrangement that would be
included within the definition of "Benefit Plan" but for the fact that such plan
was terminated or expired by its terms before the date of this Agreement.
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(l) No payment that is or may be made by the Company, or from any Benefit
Plan, to any employee, former employee, director or agent of the Company under
the terms of any Benefit Plan, either alone or in conjunction with any other
payment, will or could be characterized as an excess parachute payment under
Section 28OG of the Code.
(m) Under the terms of the Company's Plans, consummation of the
transactions contemplated by this Agreement (either alone or together with any
other event specified in such Company's Plans) will not result in any payment,
acceleration, restriction on amendments, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits under any of
the Company's Plans.
3.16 LABOR MATTERS.
(a) Section 3.16(a) of Seller Disclosure Memorandum contains a correct and
complete list of all employees of the Company or any Company Subsidiary, the
amount of their direct annual compensation and, if applicable, any target bonus
amounts and a description of any other compensation or severance arrangements
with any employee. The employment of all Company employees is terminable at will
by the Company or any Company Subsidiary without any penalty or severance
obligation.
(b) Neither the Company nor any Company Subsidiary is a party to any union
agreement or collective bargaining agreement and there are no work rules or
practices agreed to between the Company or any Company Subsidiary with any labor
organization or employee association applicable to any employees of the Company
or any Company Subsidiary
(c) There has been no attempt to organize any of the employees of the
Company or any Company Subsidiary, or to Seller's Knowledge proposed or
threatened to be made.
(d) There is no labor strike, dispute, slowdown, stoppage or lockout
pending or, to Seller's Knowledge, threatened against or affecting the Company
or any Company Subsidiary, any of the assets of the Company or any Company
Subsidiary or the conduct of their respective businesses.
(e) There is no labor strike, dispute, slowdown, stoppage or lockout
pending or, to Seller's Knowledge, threatened against or affecting the Company
and any Company Subsidiary and during the past three years there has not been
any such action.
(f) There is no unfair labor practice, employment discrimination or wage
and hour complaint or charge pending or, to Seller's Knowledge, threatened
before any Governmental Authority.
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(g) Since the enactment of the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), and prior to the Closing, the Company has not
effectuated (i) a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility of the Company Subsidiary; or (ii) a "mass layoff" (as
defined in the WARN Act) affecting any site of employment or facility of the
Company or any Company Subsidiary, nor has the Company been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local law. None of the
Company's or any Company Subsidiary's employees has suffered an "employment
loss" (as defined in the WARN Act) since six (6) months prior to the date
hereof.
(h) To Seller's Knowledge, no employee or officer of the Company or a
Company Subsidiary has discussed future employment with Seller.
3.17 BROKERAGE. Neither Seller, the Company nor any Company Subsidiary has
made any agreement or taken any other action which might cause any Person to
become entitled to a broker's fee or commission as a result of the transactions
contemplated hereby.
3.18 SECURITIZATION TRANSACTIONS. The Company and each Company Subsidiary
has complied in all material respects with all agreements and all conditions to
be performed or satisfied by it with respect to all agreements by which it is
bound in connection with the Securitization Transactions. No private placement
memorandum, or any supplement or amendment thereto, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein, in light of the circumstances under which they were made, not
misleading, and no securities were issued or sold in violation of Section 5 of
the Securities Act of 1933, as amended, in connection with the Securitization
Transactions. No rating agency has downgraded, or given the Company any
indication that it is considering a downgrading of, any securities issued in the
Securitization Transactions.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the corresponding sections or subsections of
the Buyer Disclosure Memorandum, Buyer hereby represents and warrants to Seller
as follows:
4.1 ORGANIZATION AND GOOD STANDING OF BUYER; POWER AND AUTHORITY. Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas. Buyer has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Buyer, and the performance by Buyer of its obligations hereunder, have been
duly and validly authorized by all necessary
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corporate action on the part of Buyer. No other corporate or shareholder
proceedings on the part of Buyer are necessary to approve this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Buyer and constitutes the valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms.
4.2 NO VIOLATION OF APPLICABLE LAWS OR AGREEMENTS. Subject to receipt of
the Consents listed in Section 4.2 of the Buyer Disclosure Memorandum, the
execution and delivery of this Agreement by Buyer does not, and the consummation
of the transactions contemplated by this Agreement and the compliance with the
terms, conditions and provisions of this Agreement by Buyer will not, (a)
violate or conflict with any provision of Buyer's articles or certificate of
incorporation or bylaws; (b) violate, conflict with or result in the breach or
termination of, or otherwise give any contracting party (which has not consented
to such execution, delivery and consummation) the right to change any material
term of, or to terminate or accelerate the maturity of, or constitute a material
default under the terms of, any indenture, mortgage, loan or credit agreement or
any other material agreement or instrument to which Buyer is a party or by which
it or any of its assets may be bound or affected, or any applicable Law; or (c)
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the assets of Buyer or give to others any
interests or rights therein.
4.3 PENDING LITIGATION OR PROCEEDINGS. There are no claims, suits,
actions, proceedings, arbitrations or investigations pending or, to the
Knowledge of Buyer, threatened, against or otherwise relating to or involving
Buyer or any of its assets, the outcome of which would reasonably be expected to
materially adversely affect the ability of Buyer to consummate the transactions
contemplated by this Agreement.
4.4 CONSENTS AND APPROVALS. Except as required under the ▇▇▇▇-▇▇▇▇▇ Act,
the execution, delivery and performance of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby do not require any
consent, approval or authorization of, or registration or filing with, any
Person or Governmental Authority.
4.5 BROKERAGE. Buyer has not made any agreement or taken any other action
that might cause any Person to become entitled to a broker's fee or commission
as a result of the transactions contemplated hereby.
4.6 INVESTMENT INTENT. Buyer is acquiring the Shares for investment for
its own account and not with a view to, or for offer or sale in connection with,
any public distribution thereof.
4.7 FINANCING. Buyer has or will have, as and when required, the funds
necessary to consummate the transactions contemplated hereby in accordance with
the terms hereof.
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ARTICLE 5
CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS
5.1 OPERATIONS PENDING CLOSING. Prior to the Closing Date, except with the
prior consent of Buyer (which consent shall not be unreasonably withheld,
delayed or conditioned), and except as otherwise provided in this Agreement or
as set forth in Section 5.1 of the Seller Disclosure Memorandum:
(a) Seller shall cause the Company and the Company Subsidiaries to
conduct their business in the usual and ordinary course as currently being
conducted, and
(b) without limiting the generality of the foregoing clause (a),
Seller shall cause the Company and each Company Subsidiary not to do, or
make any agreement or commitment to do, any of the following:
(i) amend its certificate of incorporation, bylaws or
limited liability company agreement, as applicable;
(ii) merge, consolidate, liquidate or dissolve;
(iii) issue, adjust, split, combine, reclassify, repurchase or
redeem any capital stock or membership interests, any securities
convertible or exchangeable into capital stock or membership
interests, or any options, warrants or rights with respect to
capital stock or membership interests, or split, subdivide or
reclassify its capital stock or membership interests;
(iv) declare or pay any dividend or make any other
distribution on its capital stock or membership interests;
(v) enter into any employment (other than employment
arrangements that are terminable at will and not evidenced by a
written agreement) or bonus agreement or increase the compensation
or benefits of directors, officers or employees of the Company or
any Company Subsidiary or pay any bonuses, except for normal and
customary increases made consistent with past practices and except
for bonus or other compensation that will be paid prior to Closing
or accrued on the Closing Balance Sheet;
(vi) except in the ordinary course of business and in
connection with the ALAC Loans, (1) create or incur any lien,
encumbrance, mortgage, pledge, charge or security interest
whatsoever on any of its assets, (2) incur or assume any guaranty or
other liability to discharge an
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obligation of another, or (3) incur or assume any obligations for
money borrowed or other indebtedness (other than pursuant to the
Prudential Loan Agreement or the Seller Loan Agreement), or cancel
or discount any material debt owed to it;
(vii) enter into, terminate or amend any material Contract
(other than the amendment or termination of the Prudential Loan
Agreement, the Seller Loan Agreement, and the Intercompany Contracts
and other than the amendment, with Buyer's consent, which shall not
be unreasonably withheld or delayed, to the BNI, Inc. Contract or
the Lease Agreement; provided, however, that the need to obtain
Buyer's consent is not necessary for certain amendments to the BNI,
Inc. Contract, as set forth in Section 5.1(vii) of the Seller
Disclosure Memorandum);
(viii) make expenditures for fixed assets in excess of
$100,000 in the aggregate;
(ix) do or fail to do anything that will cause a material
breach of, or a material default under, any material Contract;
(x) adopt any new employee benefit plan, or terminate or
withdraw from, or make any material change in or to, any existing
employee benefit plans of the Company other than any such change
that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any
such plan, or make any distributions from such employee benefit
plans, except as required by Law, by the terms of such plans, or
consistent with past practice;
(xi) make any change in the Company's accounting procedures,
methods, policies or practices or the manner in which the Company
maintains its records (other than as provided for in this
Agreement);
(xii) transfer or enter into an agreement to transfer any of
the capital stock or membership interests of the Company or any
Company Subsidiary, as applicable, or transfer or enter into an
agreement to transfer any material portion of the assets of the
Company or any Company Subsidiary, other than transactions in the
ordinary course of business
(xiii) acquire or agree to acquire the capital stock or other
equity or any material portion of the assets of any other Person
(other than assets acquired for the Company's investment portfolios
pursuant to the Company's current investment policies and
guidelines), or create any subsidiary.
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(xiv) sell or dispose of any material properties or assets
(other than in the ordinary course of business consistent with past
practice);
(xv) other than in the ordinary course of business, diminish
or reduce in any material respect its underwriting guidelines
applicable to the making or purchase of ALAC Loans; increase in any
material manner the effective ratio between the amount of ALAC Loans
made or purchased after the date of this Agreement and the wholesale
value or other measure of the value of the motor vehicle or other
collateral securing any such ALAC Loans as compared to the loan to
value ratios currently utilized by the Company; or make any material
reduction in interest rates, manner of determining interest, amount
of fees or manner of determining fees or any other aspect of the
pricing of ALAC Loans or of any loan servicing or other service
provided by the Company or the Company Subsidiaries; or
(xvi) enter into any additional transaction in the nature of a
Securitization Transaction.
5.2 FINANCING. Buyer covenants and agrees it has arranged to incur debt
sufficient to finance the transactions contemplated hereby in accordance with
the terms of the commitments attached as EXHIBIT 5.2.
5.3 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each party agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate and
make effective, as soon as reasonably practicable after the date of this
Agreement, the transactions contemplated by this Agreement, including using all
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated hereby and to cause to be satisfied
the conditions referred to in Article 6; provided, that nothing herein shall
preclude either party from exercising its rights under this Agreement. Each
party shall use all reasonable efforts to obtain all Consents listed in Section
3.6 of the Seller Disclosure Memorandum or Section 4.2 of the Buyer Disclosure
Memorandum. Within five Business Days after the date of this Agreement, Buyer
and Seller will make all necessary filings under the ▇▇▇▇-▇▇▇▇▇ Act; each party
shall pay the expenses of preparing its own such filing, and Buyer shall pay all
filing fees. Seller and Buyer shall promptly advise the other of all oral, and
promptly provide each other with copies of all written, communications,
requests, inquiries or other notifications received from any Governmental
Authorities with respect to the transactions contemplated hereby.
5.4 INVESTIGATION AND CONFIDENTIALITY.
(a) Upon reasonable notice, and except as may otherwise be required by
Law, Seller shall cause the Company and the Company Subsidiaries to give Buyer
and its Representatives access to the personnel, properties, books and records
of the Company
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and the Company Subsidiaries, during normal business hours throughout the period
from the date hereof to the earlier of the Closing Date or the termination of
this Agreement. During such period, Seller will permit a designated
Representative of Buyer to be present during normal business hours at the
Company's executive offices for communication purposes; provided that such
Representative shall (i) have no right to require any action that could affect
the operations of the business and (ii) not meet with any Company employee, for
any reason, without first obtaining permission (such permission can be withheld
for any reason) from ▇▇▇▇▇▇ ▇▇▇▇▇▇, who shall have the right to designate a
representative to be present during any such meeting; and provided further that
the Representative's presence at the Company and any consultation the
Representative may have with a Company employee shall not disrupt or otherwise
interfere with the conduct of the Company's business. During such period of
time, Seller shall cause the Company and the Company Subsidiaries to furnish
promptly to Buyer and its Representatives all information concerning the
Company's and the Company Subsidiaries' business and financial condition as may
reasonably be requested, provided that no investigation pursuant to this Section
5.4(a) shall affect or be deemed to modify any representation or warranty made
by Seller; and, provided further, that any disclosure of this Agreement or the
transactions contemplated hereby to, or any discussions with, customers, vendors
or contracting parties of the Company, shall only occur when Representatives of
the Company are present. All information provided to Buyer pursuant to this
Section 5.4(a) shall be governed by the terms of the Confidentiality Agreement.
(b) Each party agrees to give the other party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other party
or which has had or is reasonably likely to have a Company Material Adverse
Effect or a Buyer Material Adverse Effect, as applicable.
5.5 PRESS RELEASES. Prior to the Closing Date, the content and timing of
any press release or other public announcement proposed to be made by either
party or any party's Representatives regarding this Agreement or the
transactions contemplated hereby must be consented to in advance by the other
party, which consent shall not be unreasonably withheld, conditioned or delayed;
provided, that nothing in this Section 5.5 shall be deemed to prohibit any party
from making any disclosure that its counsel deems necessary or advisable in
order to satisfy such party's disclosure obligations imposed by Law.
5.6 MUTUAL RELEASES. At Closing, Seller and the Company will each execute
a release, in form and substance acceptable to Seller and Buyer, pursuant to
which each will release the other and the other's shareholders, Representatives,
Affiliates and insurers, and their respective successors and assigns, of and
from any and all claims, demands, debts, obligations and causes of action now
accrued or which may hereafter accrue, based in whole or in part on any facts,
conduct, activities, transactions, events or occurrences known or unknown, which
have or allegedly have existed or occurred, from
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the beginning of time to the Closing Date (other than obligations arising under
this Agreement); provided, however, that the foregoing release by the Company
shall not operate as a release or bar of any claim asserted by Buyer against
Seller pursuant to Section 7(1)(a) hereof, notwithstanding the fact that such
claim arises from facts or circumstances that would have given rise to a claim
by the Company against Seller but for the foregoing release.
5.7 EMPLOYEE MATTERS.
(a) Immediately prior to Closing, Seller and the Company shall enter into
an agreement or agreements effective as of Closing (i) terminating the Company's
liabilities under the Seller's Plans as identified in Section 3.15 of the Seller
Disclosure Memorandum and any other Employee Plan provided by Seller or any
ERISA Affiliate thereof to employees other than or in addition to employees of
the Company (collectively, the "TERMINATED COMPANY'S PLANS"), and (ii)
transferring to Seller or an Affiliate thereof at Closing the liabilities and
cash in an amount equal to the accrued liabilities as reflected on the books of
the Company on the Closing Date under such Terminated Company's Plans; provided
that such agreements shall include no liability for the Company or any Company
Subsidiary that will occur after Closing, unless such liability is included in
the Closing Balance Sheet. Such liabilities will be estimated reasonably by the
Company at Closing, with any necessary adjustments being included as a part of
obtaining the Closing Balance Sheet, all such cash and transferred liabilities
being excluded from the Closing Balance Sheet. The Closing Balance Sheet shall
not include any assets attributable to any of the Terminated Company's Plans
that are transferred to Seller on or before the Closing Date as provided herein.
(b) Buyer shall cause to be amended any group medical, group dental, group
life, group long-term disability, 401(k) savings, vacation and sick leave
programs maintained by Buyer for the benefit of their employees (the "BUYER'S
PLANS") to provide that (i) as of the Closing Date, each active employee of the
Company and such active employee's eligible dependents (who are currently
covered under Terminated Company's Plans) shall become eligible for each of the
Buyer's Plans once the active employee or eligible dependent satisfies the
normal eligibility requirements for each such Buyer's Plans, provided that for
this purpose, the service of each active employee of the Company with the
Company shall be treated as service with Buyer; and (ii) as of the Closing Date,
all pre-existing condition exclusion clauses contained in each medical or dental
insurance or indemnity plan or program that is a Buyer's Plan shall be waived
with respect to all active employees of the Company and their eligible
dependents. For purposes of this Section 5.7, "active employees" shall mean all
current employees of the Company, including, without limitation, those employees
on any type of temporary or short-term absence, leave or disability who are
expected to return to active employment. To the extent necessary, Buyer shall
also cause any 401(k) savings program maintained by Buyer for the benefit of its
employees ("BUYER'S 401(K) PLAN") to be amended such that any participant in the
Fortis, Inc. Employees' Uniform Profit Sharing Plan (the "FORTIS PLAN") who
becomes an employee of Buyer may transfer his or her account balance under
-27-
the Fortis Plan to the Buyer's 401(k) Plan in a direct rollover under Code
Section 401(a)(31), and may include as part of such direct rollover any
outstanding loan which such participant has in the Fortis Plan as of the Closing
Date. Seller shall provide to Buyer access to all data and records in its
possession necessary to enable Buyer to comply with this Section 5.7(b).
Moreover, nothing contained in this Section 5.7(b) shall obligate the Buyer to
amend the Buyer's 401(k) Plan in such a manner as to alter the nature of the
investments or assets presently authorized by such plan.
(c) For calendar year 1998, Buyer and the Company, for purposes of
deductible limits and out-of-pocket annual maximums under their welfare plans,
shall credit each employee of the Company with the actual applicable deductibles
satisfied and amounts toward out-of-pocket annual maximums, in each case in the
year in which Closing occurs, under the same type of benefit plan in which such
employee is participating as of the Closing Date.
(d) The parties acknowledge that the Company has offered to pay retention
bonuses (the "RETENTION BONUSES") to certain employees of the Company, to be
paid after the Closing Date, as described in Section 5.7 of the Seller
Disclosure Memorandum. The Closing Balance Sheet will include a liability for
the actual payment of the Retention Bonuses, and Buyer agrees to cause the
Company to pay the Retention Bonuses in accordance with the terms as set forth
in the Seller Disclosure Memorandum.
(e) From and after the Closing Date, Seller shall indemnify and hold
harmless Buyer and its Affiliates, including the Company, against any loss,
liability, claim, obligation, damage, deficiency, cost or expense (including
legal and other expenses reasonably incurred in investigating and defending
against the same) arising out of or relating to (i) the establishment, funding,
operation, administration, amendment or termination of or withdrawal or partial
withdrawal from, any Seller's Plan as listed in the Seller Disclosure
Memorandum, or any other Employee Plan provided to employees other than or in
addition to employees of the Company, which is now or previously has been in
existence, established, maintained or contributed to, or required to be
established, maintained or contributed to, by Seller or any ERISA Affiliate,
whether arising out of or relating to any event or state of facts occurring or
existing before, on or after the Closing Date, and including any liabilities
arising under Title IV of ERISA, Section 302 of ERISA and Section 412 or 4971 of
the Code; (ii) any failure prior to the Closing Date by Seller or any ERISA
Affiliate to comply with the continuation coverage requirements contained in
Section 4980B(f) of the Code and/or Section 6012 of ERISA; and (iii) the amount
of any Retention Bonuses due to employees of the Company in excess of any
accrued liability therefor included on the Closing Balance Sheet.
(f) If a plant closing or a mass layoff occurs or is deemed to occur with
respect to the Company in connection with the transactions contemplated by this
Agreement or after the Closing, Buyer shall be solely responsible for providing
all notices required under the Work Adjustment and Retraining Notification Act,
29 U.S.C. ss.2109 ET SEQ. or the regulations promulgated thereunder and for
taking all remedial
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measures, including without limitation, the payment of all amounts, penalties,
liabilities, costs and expenses if such notices are not provided.
5.8 POST-CLOSING ACCESS.
(a) From and after the Closing Date, Buyer shall cause the Company and the
Company Subsidiaries to cooperate with Seller to make available to Seller all
financial, Tax and other information (including the books and records of the
Company and the Company Subsidiaries) reasonably required by Seller in
connection with (i) any audit or other investigation by any taxing authority or
any required reports or submissions to any Governmental Authority with respect
to the Company or any Company Subsidiary related to periods ending on or prior
to the Closing Date or (ii) matters relating to insurance coverage of the
Company or Third Party Claim proceedings and investigations. Buyer shall cause
the Company and the Company Subsidiaries to preserve such information and the
books and records for at least six years after the Closing Date, and thereafter
to dispose thereof only after it shall have given Seller 90 days' prior notice
of such disposition and the opportunity (at Seller's expense) to remove and
retain such information and the books and records.
(b) From and after the Closing Date, Seller shall cooperate with Buyer to
make available to Buyer all financial, Tax and other information (including all
employee and benefit records with respect to Company employees that are retained
by Seller) reasonably required by Buyer in connection with (i) any audit or
other investigation by any taxing authority or any required reports or
submissions to any Governmental Authority with respect to the Company or any
Company Subsidiary related to periods ending on or prior to the Closing Date or
(ii) matters relating to insurance coverage of the Company or Third Party Claim
proceedings and investigations. Seller shall preserve such information for at
least six years after the Closing Date, and thereafter to dispose thereof only
after it shall have given Buyer 90 days' prior notice of such disposition and
the opportunity (at Buyer's expense) to remove and retain such information and
the books and records.
5.9 CERTAIN TAX MATTERS.
(a) Except as otherwise provided in this Section 5.9 and in Section
5.12(a), the Tax Allocation Agreement and any other tax sharing agreement,
arrangement, policy or guideline, formal or informal, express or implied, that
may exist between the Company, the Company Subsidiaries and Seller or their
Affiliates and all obligations thereunder shall terminate as of the Closing
Date, and the Company and the Company Subsidiaries shall have no liability
thereunder for any and all amounts due in respect to periods prior to the
Closing Date.
(b) The Company and ALAC Receivables Corp. shall continue to be included
in the Group's consolidated federal income Tax Return, and the Company and the
Company Subsidiaries shall continue to be included in any required state or
local
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consolidated or combined income Tax Returns that include the Company or
any of the Company Subsidiaries with respect to periods ending on or before the
Closing Date (all such Tax Returns filed or to be filed with respect to taxable
periods of the Company ending on or before the Closing Date are hereinafter
referred to as "PRE-CLOSING CONSOLIDATED RETURNS," even though certain of such
Tax Returns may be filed subsequent to the Closing Date).
Seller shall timely prepare and file (or cause to be prepared and
filed) (which may include Seller's seeking any allowable filing extensions),
consistent with prior practices, (i) all Pre-Closing Consolidated Returns and
(ii) all other Tax Returns not yet filed, and required to be filed on or before
the Closing Date with respect to the Company or any of the Company Subsidiaries
(the "GROUP RETURNS"). Seller shall timely pay (or cause to be paid) all Taxes
shown as due and payable on the Group Returns or, whether or not so shown, are
attributable to operations prior to the Closing Date ("SELLER'S TAXES"). Buyer
and Seller agree that if the Company or any Company Subsidiary is permitted
under any Law relating to state or local income tax to treat the Closing Date as
the last day of a taxable period, Buyer and Seller shall treat (and cause their
respective Affiliates to treat) the Closing Date as the last day of a taxable
period, and any Tax Return for such a period shall be considered as a Group
Return for purposes hereof.
(c) Buyer shall timely prepare and file (or cause to be prepared and
filed) (which may include Buyer's seeking any allowable filing extensions) all
Tax Returns required by Law for the Company and the Company Subsidiaries that
are not required to be prepared and filed by Seller pursuant to Section 5.9(b)
("BUYER'S RETURNS"). Any Buyer's Return filed or to be filed with respect to a
period prior to or including the Closing Date shall be prepared in a manner
consistent with prior practice, except where otherwise required by Law, and
copies of such Buyer's Returns shall be delivered to Seller. Buyer shall timely
pay (or cause to be paid) all Taxes shown as due and payable on the Buyer's
Returns ("BUYER'S TAXES").
(d) After the Closing Date, Seller may submit to Buyer blank Tax Return
workpaper packages reasonably necessary for Seller to prepare any Group Returns.
Buyer shall cause the Company and the Company Subsidiaries to prepare completely
and accurately (provided that all workpapers prepared consistent with the prior
practice of the Company and the Company Subsidiaries shall be deemed to be
prepared accurately for purposes of this Section 5.9(d)) all information that
Seller shall reasonably request in such workpaper packages and shall submit to
Seller such packages within the later of 90 days after Buyer's receipt thereof
or 60 days after the close of the taxable period to which a workpaper package
relates. Each party shall cooperate with the other in connection with any tax
filing, investigation, audit or other proceeding. Buyer and Seller and their
Affiliates shall preserve all information, returns, books, records and documents
relating to any liabilities for Taxes with respect to a taxable period until the
later of the expiration of all applicable statutes of limitation and extensions
thereof, or the conclusion of all litigation with respect to Taxes for such
period.
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(e) After the Closing Date, Seller shall indemnify and hold harmless Buyer
from and against any Tax liability with respect to:
(i) any Seller's Taxes;
(ii) Buyer's Taxes attributable to or apportioned to any period on
or before the Closing Date in accordance with the allocation rules of
Section 5.9(i) for Seller's Accrued Taxes to the extent the liability
therefor exceeds the liability for Seller's Accrued Taxes accrued with
respect thereto as reflected on the Closing Balance Sheet;
(iii) any increase in Tax liability resulting from the Company or
any Company Subsidiary being severally liable for any Taxes of the Group
or any other consolidated group of which the Company or any Company
Subsidiary was a member prior to the Closing Date pursuant to Treasury
Regulations ss. 1.1502-6 or any analogous state, local or foreign tax
provision;
(iv) any federal income Taxes of the Company or any Company
Subsidiary for periods ending on or before the Closing Date that are not
Seller's Taxes; and
(v) subject to Section 7.1(c), any Taxes (other than federal income
taxes) with respect to periods ending on or before the Closing Date for
which returns have been filed or were required to be filed (taking into
account extensions) on or before the Closing Date in excess of the
respective reserves established with respect thereto on the Closing
Balance Sheet.
Seller shall pay such amounts as it is obligated to pay to Buyer under the
preceding sentence within 15 days after receipt of written notice from Buyer
that Buyer has paid any such Tax liability and, to the extent not paid by Seller
within such 15-day period, shall thereafter include interest thereon at the
lesser of 18% per annum or the highest rate allowed by Law.
After the Closing Date, Buyer shall indemnify and hold harmless
Seller and its Affiliates from and against any Tax liability with respect to
Buyer's Taxes that (i) are allocable to or apportioned to a period after the
Closing Date or (ii) are allocable to or apportioned to a period ending on or
before the Closing Date but do not exceed Seller's Accrued Taxes accrued with
respect thereto as reflected on the Closing Balance Sheet. Buyer shall pay such
amounts within 15 days after receipt of written notice from Seller that Seller
has paid any such Tax liability and, to the extent not paid by Buyer within such
15-day period, shall thereafter include interest thereon at the lesser of 18%
per annum or the highest rate allowed by Law..
(f) In the event that Buyer, the Company or any Company Subsidiary
receives written notice of any pending or threatened federal, state, local,
municipal or foreign tax
-31-
examinations, claims settlements, proposed adjustments, assessments or
reassessments or related matters with respect to Taxes that could affect the
Group, or if Seller receives written notice of matters that could affect Buyer,
the Company or any Company Subsidiary, the party receiving such notice shall
notify in writing the potentially affected party within 10 days thereof. The
failure of any party to give the notice required by this paragraph shall not
impair that party's rights under this Agreement except to the extent that the
other parties demonstrate that they have been damaged thereby.
Subject to Section 5.9(g), each of Seller and Buyer (as applicable, the
"CONTROLLING PARTY") shall have the right to control any audit or examination by
any taxing authority, initiate any claim for refund, file any amended return,
contest, resolve and defend against any assessment, notice of deficiency or
other adjustment or proposed adjustment relating to or with respect to those Tax
Returns that each is required to prepare and file pursuant to Sections 5.9(b)
and (c); provided that, in the event that any such adjustment could have an
adverse effect on the Tax liability of the other party (or affect the Buyer by
having an adverse effect on the Tax liability of the Company or any Company
Subsidiary, or affect Seller by having an adverse effect on the Tax liability of
the Group) (the "AFFECTED PARTY"), the Controlling Party (i) shall give the
Affected Party written notice of any such adjustment, (ii) shall permit the
Affected Party to participate in the proceeding to the extent the adjustment may
adversely affect the Tax liability of the Affected Party at its own expense and
(iii) shall not settle or otherwise compromise such proceeding without the prior
written consent of the Affected Party, which consent shall not be unreasonably
withheld or delayed. Except as specified in Section 5.9(g) or the following
sentence, Seller and Purchaser shall each be entitled to retain for its own
account any refunds of Taxes attributable to those Tax Returns that each is
required to prepare and file pursuant to Sections 5.9(b) and (c) and shall pay
to the other the amount of any refund to which the other is entitled, net of any
liability for Taxes resulting from the receipt of such refund, within 15 days
after the receipt of such refund and, to the extent not paid within such 15-day
period, shall thereafter include interest at the rate of six percent per annum,
simple interest. In the case of Buyer, a refund attributable to any Buyer's
Return filed with respect to a period prior to the Closing Date shall be divided
between Buyer and Seller, using the principles outlined in the last sentence of
Section 5.9(i) to determine such amount; provided, however, in no event shall
Seller be entitled to a refund unless the amount of such refund exceeds the
amount, if any, which is accrued with respect thereto as an asset on the Closing
Balance Sheet.
(g) To the extent permitted by Law, neither Buyer, the Company nor any
Company Subsidiary shall carry back any tax attribute ("BUYER TAX ATTRIBUTE") to
a period ending on or before the Closing Date ("PRE-CLOSING PERIOD").
Notwithstanding anything to the contrary contained in this Section 5.9(g), if an
election not to carry back a Buyer's Tax Attribute is not permitted by Law or
would be unreasonably burdensome to Buyer, Buyer may request Seller to waive the
restrictions imposed by this Section 5.9(g), and Seller shall agree to such
request unless Seller's obligations hereunder would be unreasonably burdensome
to Seller. If, in accordance with the preceding sentence, Buyer carries back a
Buyer Tax Attribute to a Pre-Closing Period, Seller shall promptly file (or
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cause to be filed) a claim for refund and shall pay (or cause to be paid) to
Buyer the full amount of any resulting Tax Benefit within 30 days of the date
such Tax Benefit is realized, but only to the extent that Seller would not
otherwise have been entitled to utilize such Tax Attribute. The Tax Benefit
shall be recomputed and any payment made in excess of the redetermined Tax
Benefit shall be refunded if and to the extent that Seller subsequently realizes
tax attributes that could have been utilized but for the carryback of Buyer's
Tax Attributes pursuant to this Section 5.9(g). Such recomputation shall assume
that the tax attributes of Seller were utilized first and that the Buyer Tax
Attributes carried back by Buyer were then utilized in accordance with Law. For
purposes hereof, "Tax Benefit" shall mean
(i) in the case of any Tax Return, the sum of the amount by which
the Tax liability is reduced (or the Tax refund is increased) plus any
interest (in each case, net of Taxes, if any, on such refund or interest)
relating to such Tax liability (or Tax refund), and in the case of a
consolidated federal income Tax Return or unconsolidated, combined,
unitary or similar state, local or other Tax return, the sum of the amount
by which the Tax liability of the affiliated group of corporations is
reduced (or Tax refund is increased) plus any interest (in each case, net
of Taxes, if any, on such refund or interest) from such government or
jurisdiction relating to such Tax liability or Tax refund;
(ii) a Tax Benefit shall be deemed to have been realized (A) at the
time any refund of Taxes is received, (B) at the time any refund of Taxes
is applied against other Taxes due (which, in the case of refunds so
applied in the course of an audit or other proceeding, shall be the date
on which the audit or other proceeding is finalized) or (C) at the time a
liability for Taxes is otherwise reduced (which, in each case, shall be 2
1/2 months after the close of the year in which such liability for Taxes
arose); and
(iii) where a party has other losses, deductions, credits or similar
items available to it, losses, deductions, credits or items for which the
other party would be entitled to a payment under this Agreement shall be
treated as the last items utilized to produce a Tax Benefit.
(h) Buyer and Seller agree that any indemnification payments made pursuant
to this Agreement shall be treated for tax purposes as an adjustment to the
Purchase Price unless otherwise required by Law.
(i) In preparing the Closing Balance Sheet, in lieu of an accrual of
liability for Taxes computed in accordance with GAAP with respect to periods
covered by Buyer's Returns, such Closing Balance Sheet shall reflect (as a
liability for amounts unpaid net of amounts prepaid) the portion of Buyer's
Taxes allocable to Buyer's Returns for the period up to and including the
Closing Date ("SELLER'S ACCRUED TAXES"). Such allocable portion shall, in the
case of Taxes that are based on income or gross receipts, be determined as if
the Closing Date were the last day of any applicable taxable period and, in the
case of
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other Taxes, be apportioned ratably on a daily basis. The Closing Balance Sheet
specifically shall not reflect a liability for Taxes allocable to Group Returns
or for any other federal income Taxes, which Taxes are solely the responsibility
of Seller.
5.10 SECTION 338 ELECTION. Buyer and Seller will each make, on a timely
basis, an election under Section 338(h)(10) of the Code (and any corresponding
elections under state, local or foreign Law) (collectively, the "SECTION 338
ELECTION") with respect to the purchase and sale of the Purchased Shares
hereunder, inclusive of the shares or membership interest of each of the Company
Subsidiaries, as applicable, which would be deemed sold pursuant to the Section
338 Election. As soon as practicable after Closing, Buyer shall determine the
allocation of the Purchase Price to the assets of the Company and provide such
information to Seller. Buyer and Seller shall report the purchase and sale of
the Purchased Shares in a manner consistent with the Section 338 Election and
Buyer's allocation of the Purchase Price (provided Buyer's allocation is
reasonable and complies with the Code), and neither Buyer nor Seller shall take
any position contrary thereto or inconsistent therewith in any Tax Return or any
proceeding with any taxing authority.
5.11 DISCLOSURE MEMORANDA. At any time and from time to time between the
date hereof and the date that is two Business Days prior to the Closing Date,
Seller and Buyer shall have the right and the continuing obligation to
supplement their respective Disclosure Memorandums with respect to any matter
arising after the date hereof that, if existing or occurring at such date, would
have been required to be set forth or described in such Disclosure Memorandum.
If, in Buyer's reasonable determination, any such supplements provided by Seller
reveal any Company Material Adverse Effect or any condition or event that
individually or in the aggregate would be reasonably likely to result in a
Company Material Adverse Effect, Buyer may terminate this Agreement. If, in
Seller's reasonable determination, any such supplements provided by Buyer reveal
any Buyer Material Adverse Effect or any condition or event that individually or
in the aggregate would be reasonably likely to result in a Buyer Material
Adverse Effect, Seller may terminate this Agreement.
5.12 NET LOAN PAYOFF; INTERCOMPANY CONTRACTS; LEASE AGREEMENT.
(a) At Closing, Buyer shall cause the Company to pay to Seller in cash the
difference (the "NET LOAN PAYOFF") between (i) the total amount of the
outstanding principal plus all accrued interest thereon as of the Closing Date
owed by the Company under the Seller Loan Agreement, and (ii) the total amount
owed by Seller to the Company pursuant to the Tax Allocation Agreement without
regard for any future Tax benefits and as estimated by Seller at Closing with
such amount being included on the Closing Balance Sheet as provided in Section
2.3 hereof. Such estimate shall take into account Tax Returns that have been
filed by and the results of operations of the Company through August 31, 1998.
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(b) Prior to Closing, Seller shall cause the Company to pay to Seller and
its Affiliates any and all amounts owed by the Company pursuant to the
Intercompany Contracts. Subject to any provision of this Agreement that
expressly provides to the contrary (including specifically Section 5.12(c)
hereof), effective as of Closing, all Intercompany Contracts shall be terminated
and all obligations of the Company or any Company Subsidiary thereunder shall be
extinguished. Seller agrees to terminate the Prudential Loan Agreement and to
pay any liability associated with such termination, including any breakage fee,
with the result that all obligations of the Company or any Company Subsidiary
thereunder shall be extinguished, all collateral released, and all financing
statements terminated of record.
(c) Prior to Closing, Buyer shall negotiate in good faith with The Weather
Channel, Inc. ("Landlord") to cause either Buyer or Company to be substituted
for the Seller as lessee under the Lease Agreement and the Seller to be released
from its obligations thereunder, and Seller shall participate in and shall
reasonably cooperate in such negotiations. In this connection, Buyer will offer
to (i) extend the term of the Lease for up to five years or such shorter period
as may mutually be agreed with the Landlord, and (ii) guarantee the performance
of the Company thereunder, if applicable; provided that the Buyer shall have no
obligation hereunder to offer any further concessions from the existing terms
and conditions of the Lease Agreement, economic or otherwise. In the event that,
despite such negotiations, Buyer is unable to cause Seller to be released, then
Seller shall remain as tenant under the Lease Agreement and shall sublease the
premises to the Company (on identical terms and conditions as the Lease
Agreement) for a period beginning on the Closing Date and ending on June 30,
2000, provided that the Seller obtains the Landlord's consent to such sublease.
In the event of such consent and sublease, the parties acknowledge that Seller
will exercise its right to terminate the Lease Agreement as of June 30, 2000 and
Seller shall be obligated to make any refund to the Landlord of any unamortized
brokerage fees and Company shall be obligated to comply with the provisions of
the Lease Agreement and to return the property to Landlord in the condition
provided in the Lease Agreement. Seller and Buyer will each pay any brokerage
fees incurred by it in connection with the foregoing negotiations and the
Company shall have no obligation for the payment of any such fees.
5.13 EXPENSES. Whether or not the Closing occurs, except as otherwise
stated herein, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expense.
5.14 MANAGEMENT OF LITIGATION AND DISPUTES. Seller shall be responsible
for all litigation pending at Closing, of the Company and the Company
Subsidiaries, where the Company and/or the Company Subsidiaries are named as a
defendant in such pending litigation, even if it has been disclosed to Buyer,
and the same shall be handled as an indemnified Third Party Claim subject to
indemnification by Seller under Article 7; provided however that such pending
litigation at Closing is not subject to the deductible provision in Section
7.1(c) hereof, and that Seller shall be deemed to have received notice of such
litigation and to have assumed the defense thereof and liability therefor.
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5.15 NON-SOLICITATION. For a period of one year following the Closing
Date, the Seller shall not, without the consent of Buyer, which shall not be
unreasonably withheld, directly or through any Affiliate of Seller, make any
solicitation of employment to any person who, at the time of such solicitation
is an employee of the Company or a Company Subsidiary; provided however that
this Section does not prohibit Seller from responding to, and acting upon,
unsolicited inquiries by employees of the Company or a Company Subsidiary.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of
each party to perform this Agreement and consummate the transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by both parties pursuant to Section 10.3:
(a) REGULATORY APPROVALS. All required Consents of, filings and
registrations with, and notifications to, all Governmental Authorities shall
have been obtained or made and shall be in full force and effect and all waiting
periods required by Law shall have expired.
(b) CONSENTS AND APPROVALS. All Consents listed in Section 3.6 of the
Seller Disclosure Memorandum and Section 4.2 of the Buyer Disclosure Memorandum
shall have been obtained.
(c) LEGAL PROCEEDINGS. No court or Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law or Order (whether temporary, preliminary or permanent) or taken any other
action which prohibits, restricts or makes illegal consummation of the
transactions contemplated by this Agreement.
6.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
perform this Agreement and consummate the transactions contemplated hereby are
subject to the satisfaction of the following conditions, unless waived by Buyer
pursuant to Section 10.3(a):
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section 6.2(a),
the accuracy of the representations and warranties of Seller set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties set forth in
Sections 3.4 and 3.5 shall be true and correct. There shall not exist
inaccuracies in the representations and warranties of Seller set forth in this
Agreement (including the
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representations and warranties set forth in Sections 3.4 and 3.5) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have, a
Company Material Adverse Effect; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of Seller to be performed and complied with pursuant to
this Agreement prior to the Closing Date shall have been duly performed and
complied with in all material respects.
(c) CERTIFICATE. Seller shall have delivered to Buyer a certificate, dated
as of the Closing Date, and signed on behalf of Seller by a duly authorized
officer thereof to the effect that the conditions set forth in Sections 6.2(a)
and 6.2(b) have been satisfied.
(d) CERTIFIED COPY OF RESOLUTIONS. Seller shall have delivered to Buyer a
copy, certified by the duly qualified and acting Secretary or Assistant
Secretary of Seller, of resolutions adopted by the Board of Directors of Seller
approving this Agreement and the consummation of the transactions contemplated
hereby.
(e) RESIGNATIONS. Seller shall have delivered to Buyer the resignations,
effective as of the Closing Date, of (i) all directors of the Company and the
Company Subsidiaries (other than the independent director), and (ii) ▇▇▇▇▇▇
▇▇▇▇▇▇, President of the Company.
(f) OPINION OF COUNSEL. Buyer shall have received on the Closing Date the
opinion of ▇▇▇▇▇▇ & Bird LLP, counsel for Seller, dated the Closing Date,
addressed to Buyer and in form and substance reasonably approved by Buyer's
counsel.
(g) LEASE AGREEMENT. The disposition of the Lease Agreement shall have
been completed as provided in Section 5.12(c) and the Company shall be in lawful
possession and quiet enjoyment of the leased premises either by virtue of the
substitution of the Company or Buyer for the Seller under the Lease Agreement or
the succession of the Company by sublease from the Seller as contemplated by
such Section 5.12(c), and customary documentation whereby the Landlord has
accepted such substitution or succession (in form and substance reasonably
acceptable to the Buyer) shall have been delivered to the Buyer.
6.3 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
perform this Agreement and consummate the transactions contemplated hereby are
subject to the satisfaction of the following conditions, unless waived by Seller
pursuant to Section 10.3(b):
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(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section 6.3(a),
the accuracy of the representations and warranties of Buyer set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). There shall not exist inaccuracies in the
representations and warranties of Buyer set forth in this Agreement such that
the aggregate effect of such inaccuracies has, or is reasonably likely to have,
a Buyer Material Adverse Effect; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of Buyer to be performed and complied with pursuant to
this Agreement prior to the Closing Date shall have been duly performed and
complied with in all material respects.
(d) CERTIFICATE. Buyer shall have delivered to Seller a certificate, dated
as of the Closing Date and signed on its behalf by a duly authorized officer, to
the effect that the conditions set forth in Sections 6.3(a) and 6.3(b) have been
satisfied.
(e) CERTIFIED COPY OF RESOLUTIONS. Buyer shall have delivered to Seller a
copy, certified by the duly qualified and acting Secretary or Assistant
Secretary of Buyer, of resolutions adopted by the Board of Directors of Buyer
approving this Agreement and the consummation of the transactions contemplated
hereby.
(f) OPINION OF COUNSEL. Seller shall have received on the Closing Date the
opinion of ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., counsel for Buyer, dated the Closing
Date, addressed to Seller and in form and substance reasonably approved by
Seller's counsel.
(g) LEASE AGREEMENT. The disposition of the Lease Agreement shall have
been completed as provided in Section 5.12(c) and the Company shall be in lawful
possession and quiet enjoyment of the leased premises either by virtue of the
substitution of the Company or Buyer for the Seller under the Lease Agreement or
the succession of the Company by sublease from the Seller as contemplated by
such Section 5.12(c), and customary documentation whereby the Landlord has
accepted such substitution or succession (in form and substance reasonably
acceptable to the Seller) shall have been delivered to the Seller.
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ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION BY SELLER.
(a) Subject to the limitations of this Article 7, and in addition to the
indemnities provided pursuant to Sections 5.7(e), 5.9(e) and 5.14, but not in
duplication thereof, Seller hereby agrees to indemnify and hold harmless Buyer,
the Company and the Company Subsidiaries, and their respective officers,
employees, directors, agents, successors and assigns (collectively, the "BUYER
INDEMNITEES") from and against any loss, liability, claim, obligation, damage or
deficiency (any "DAMAGE") of or to any Buyer Indemnitee arising out of or
resulting from (i) the breach of any representation or warranty of Seller
contained in this Agreement; (ii) Seller's failure to perform in any material
respect any covenant or agreement set forth in this Agreement; and (iii) any
cost or expense (including reasonable legal and other professional fees and
expenses) (any "COST"), incurred by any Buyer Indemnitee in connection with any
of the foregoing indemnification obligations of Seller or the enforcement by any
Buyer Indemnitee of the provisions of this Section 7.1.
(b) Seller shall have no liability to any Buyer Indemnitee for
indemnification under any provision of this Agreement unless written notice
specifying in reasonable detail the nature and amount of an Indemnification
Claim is given to Seller prior to the second anniversary of the Closing Date;
provided, however, that such time limitation shall not apply to (i) any
Indemnification Claim for a breach of Section 3.4 or 3.5, for which an
Indemnification Claim may be made or brought against Seller at any time; (ii)
any Indemnification Claim for a breach of Section 3.9 or pursuant to Section
5.9(e), for which an Indemnification Claim may be made or brought against Seller
through the thirtieth day after the date upon which the liability giving rise to
such Indemnification Claim may relate is barred by all applicable statutes of
limitation; or (iii) any Indemnification Claim that exists prior to the second
anniversary of the Closing Date and that has been the subject of a written
notice specifying in reasonable detail the nature of the claim delivered by
Buyer to Seller prior to the second anniversary of the Closing Date.
(c) Seller shall be liable to Buyer Indemnitees for indemnification under
this Agreement only to the extent the cumulative total of Damages and Costs for
all Indemnification Claims exceeds $150,000 (such deductible does not apply to
Section 5.14 litigation, Section 5.9(e) tax obligations and Section 5.7(e)
employee matters), and in no event shall Seller be liable for indemnification
under this Agreement for any amount in excess of $10,000,000; provided, however,
no limitation of liability provided in this paragraph (c) shall apply to any
Damage or Cost arising out of or resulting from common law fraud in connection
with the transactions contemplated by this Agreement.
7.2 INDEMNIFICATION BY BUYER.
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(a) Subject to the limitations of this Article 7, and in addition to the
indemnity provided pursuant to Section 5.9(e), but not in duplication thereof,
Buyer hereby agrees to indemnify and hold harmless Seller and its respective
officers, employees, directors, agents, successors and assigns (collectively,
the "SELLER INDEMNITEES") from and against any Damage of or to any Seller
Indemnitee arising out of or resulting from (i) the breach of any representation
or warranty of Buyer contained in this Agreement; (ii) Buyer's failure to
perform in any material respect any covenant or agreement set forth in this
Agreement; (iii) any Damage of Seller by reason of the breach by the Company of
the sublease from Seller to the Company under Section 5.12(c) hereof; and (iv)
any Cost incurred by any Seller Indemnitee in connection with any of the
foregoing indemnification obligations of Buyer or the enforcement by any Seller
Indemnitee of the provisions of this Section 7.2.
(b) Buyer shall have no liability to any Seller Indemnitee for
indemnification under any provision of this Agreement unless written notice
specifying in reasonable detail the nature and amount of an Indemnification
Claim is given to Buyer prior to the second anniversary of the Closing Date;
provided, however, that such time limitation shall not apply to any
Indemnification Claim pursuant to Section 5.9(e) or Section 7.2(a)(iii) hereof,
for which an Indemnification Claim made be made or brought against Buyer through
the thirtieth day after the date upon which the liability giving rise to such
Indemnification Claim may relate is barred by all applicable statutes of
limitation.
7.3 INDEMNIFICATION PROCEDURES. All claims for indemnification (an
"INDEMNIFICATION CLAIM") by any party entitled to indemnification hereunder (an
"INDEMNITEE") from any other party hereunder (an "INDEMNITOR") under this
Article 7 shall be asserted and resolved as follows:
(a) An Indemnification Claim shall be made by an Indemnitee by delivery of
a written notice to the Indemnitor requesting indemnification and specifying the
basis on which indemnification is sought and the amount of Damage and Cost, and,
in the case of a Third Party Claim, containing (by attachment or otherwise) such
other information as such Indemnitee shall have concerning such Third Party
Claim.
(b) If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 7.4 shall be observed by the Indemnitee and the
Indemnitor.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Indemnitor shall have 30 days to object to such Indemnification
Claim by delivery of a written notice of such objection to the Indemnitee
specifying in reasonable detail the basis for such objection. If within 30 days
after the date on which the Indemnitor receives the Indemnification Claim, the
Indemnitor has not delivered to the Indemnitee a notice objecting to all or any
portion of the claimed Damage or Cost and setting forth the amount of such
claimed Damage or Cost objected to and the reasons for such objection, the
Indemnitee shall be entitled to indemnification for such Damage and Cost, and
the Indemnitor shall promptly pay such Damage and Cost. If, within 30 days
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after the date on which the Indemnitor receives an Indemnification Claim, the
Indemnitor delivers to the Indemnitee an objection to all or any portion of the
claimed Damage or Cost, setting forth the amount of such Damage or Loss objected
to and the reasons for such objection, the Indemnitee shall be entitled to
reimbursement for the portion of such Damage or Cost not objected to by the
Indemnitor and the Indemnitor shall promptly pay such amount. The Indemnitee
shall be entitled to indemnification for the portion of such claimed Damage or
Cost to which the Indemnitor objected to upon the earlier of (i) the
Indemnitor's and Indemnitee's written agreement with respect to the
indemnification of such Damage or Cost, or (ii) a final determination or award
of an arbitrator as provided for in Article 9 hereof.
(d) Upon determination of the amount of an Indemnification Claim, whether
by agreement between the Indemnitor and the Indemnitee or by an arbitration
award or by any other final adjudication, the Indemnitor shall pay the amount of
such Indemnification Claim within ten Business Days of the date such amount is
determined.
7.4 THIRD PARTY CLAIMS. The obligations and liabilities of the parties
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) The Indemnitee shall give the Indemnitor written notice of a Third
Party Claim within ten Business Days after receipt by the Indemnitee of notice
thereof, and the Indemnitor may undertake the defense, compromise and settlement
thereof by representatives of its own choosing reasonably acceptable to the
Indemnitee. The failure of the Indemnitee to notify the Indemnitor of such claim
shall not relieve the Indemnitor of any liability that the Indemnitor may have
with respect to such claim except to the extent the Indemnitor is prejudiced by
such failure. The assumption of the defense, compromise and settlement of any
such Third Party Claim by the Indemnitor shall not be an acknowledgment of the
obligation of the Indemnitor to indemnify the Indemnitee with respect to such
claim hereunder. If the Indemnitee desires to participate in, but not control,
any such defense, compromise and settlement, it may do so at its sole cost and
expense. If, however, the Indemnitor fails or refuses to undertake the defense
of such Third Party Claim within fifteen days after written notice of such claim
has been given to the Indemnitor by the Indemnitee, the Indemnitee shall have
the right to undertake the defense, compromise and settlement of such claim with
counsel of its own choosing.
(b) No settlement of a Third Party Claim involving the asserted liability
of the Indemnitor under this Article 7 shall be made without the prior written
consent by or on behalf of the Indemnitor, which consent shall not be
unreasonably withheld or delayed. Consent shall be presumed in the case of
settlements of $10,000 or less where the Indemnitor has not responded within
five Business Days of notice of a proposed settlement. If the Indemnitor assumes
the defense of such a Third Party Claim, no compromise or settlement thereof may
be effected by the Indemnitor without the Indemnitee's consent (which consent
shall not be unreasonably withheld or delayed) unless (i) there is no finding or
admission of any violation of Law and no effect on any
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other claim that may be made against the Indemnitee, (ii) the sole relief
provided is monetary damages that are paid in full by the Indemnitor, and (iii)
the compromise or settlement includes, as an unconditional term thereof, the
giving by the claimant or the plaintiff to the Indemnitee of a release, in form
and substance satisfactory to the Indemnitee, from all liability in respect of
such Third Party Claim.
(c) In connection with the defense, compromise or settlement of any Third
Party Claim, the parties to this Agreement shall execute such powers of attorney
as may reasonably be necessary or appropriate to permit participation of counsel
selected by any party hereto and, as may reasonably be related to any such claim
or action, shall provide access to the counsel, accountants and other
representatives of each party during normal business hours to all properties,
personnel, books, tax records, contracts, commitments and all other business
records of such other party and will furnish to such other party copies of all
such documents as may reasonably be requested (certified, if requested).
7.5 SOLE REMEDY.
(a) Buyer's sole and exclusive remedy for any breach of this Agreement by
Seller shall be the provisions in Sections 5.7(e), 5.9(e), 5.14 and 7.1, and
Buyer hereby waives any and all other remedies which may be available at Law or
equity (in the absence of fraud) for any breach or alleged breach of this
Agreement.
(b) Seller's sole and exclusive remedy for any breach of this Agreement by
Buyer shall be the provisions in Sections 5.9(e) and 7.2, and Seller hereby
waives any and all other remedies which may be available at Law or equity (in
the absence of fraud) for any breach or alleged breach of this Agreement.
7.6 TAX EFFECT AND INSURANCE. The liability of the Indemnitor with respect
to any Indemnification Claim shall be reduced by the Tax benefit actually
realized and any insurance proceeds received by the Indemnitee as a result of
any Damage or Cost upon which such Indemnification Claim is based, and shall
include any Tax detriment actually suffered by the Indemnitee as a result of
such Damage or Cost. The amount of any such Tax benefit or detriment shall be
determined by taking into account the effect, if any and to the extent
determinable, of timing differences resulting from the acceleration or deferral
of items of gain or loss resulting from such Damages and Costs and shall
otherwise be determined so that payment by the Indemnitor of the Indemnification
Claim, as adjusted to give effect to any such Tax benefit or detriment, will
make the Indemnitee as economically whole as is reasonably practical with
respect to the Damages and Costs upon which the Indemnification Claim is based.
Any dispute as to the amount of such Tax benefit or detriment shall be resolved
by arbitration as provided in Article 9 of this Agreement.
7.7 SUBROGATION. Upon payment in full of any Indemnification Claim, or the
payment of any judgment or settlement with respect to a Third Party Claim, the
Indemnitor shall be subrogated to the extent of such payment to the rights of
the
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Indemnitee against any Person with respect to the subject matter of such
Indemnification Claim or Third Party Claim.
ARTICLE 8
TERMINATION
8.1 WHEN AGREEMENT MAY BE TERMINATED. This Agreement may be terminated at
any time prior to Closing:
(a) By mutual consent of Buyer and Seller; or
(b) By either party (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained in this Agreement) in the event of a material breach by the other
party of any representation or warranty contained in this Agreement that cannot
be or has not been cured within 30 days after the giving of written notice to
the breaching party of such breach and which breach is reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect or a
Buyer Material Adverse Effect, as applicable, on the breaching party; or
(c) By either party (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained in this Agreement) in the event of a material breach by the other
party of any covenant or agreement contained in this Agreement that cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching party of such breach; or
(d) By either party (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained in this Agreement) in the event any Consent of any Governmental
Authority required for consummation of the transactions contemplated hereby
shall have been denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for appeal;
or
(e) By either party in the event that the transactions contemplated hereby
shall not have been consummated by October 31, 1998, if the failure to
consummate the transactions contemplated hereby on or before such date is not
caused by any breach of this Agreement by the party electing to terminate
pursuant to this Section 8.1(e).
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall become void and have no
effect, except that (i) the provisions of Section 5.4(a), Article 7, Article 9
and this Section 8.2 shall survive any such termination and abandonment, and
(ii) a termination pursuant to Sections 8.1(b) or 8.1(c) shall not relieve the
breaching party from liability for an uncured willful breach of a
representation, warranty, covenant or agreement giving rise to such termination.
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ARTICLE 9
ARBITRATION
9.1 AGREEMENT TO ARBITRATE. Except as set forth in Section 2.3(b), any
claim, controversy or dispute arising out of or relating to this Agreement, on
which an amicable understanding cannot be reached, to the maximum extent allowed
by applicable law and irrespective of the type of relief sought, shall be
submitted to and resolved by arbitration, and such arbitration shall be the sole
remedy for such matter. Such arbitration shall be heard and conducted in
Atlanta, Georgia and shall be conducted expeditiously in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA"), as
such rules shall be in effect on the date of delivery of demand for arbitration,
with the exception that the arbitrators may not award any punitive or exemplary
damages or any damages other than compensatory, and except as such rules may be
otherwise inconsistent with the express provisions of this Article 9.
9.2 INITIATING ARBITRATION. To initiate arbitration, a party shall notify
the other party in writing of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The receiving party shall acknowledge receipt of
the notice in writing within 5 days, and thereafter the parties shall attempt in
good faith to resolve the dispute within 15 days. If the dispute cannot be
resolved within such 15-day period, any party may file a written demand for
arbitration by filing a written notice with the AAA and with the other party,
complying with the AAA's prescribed procedures for such notices. Within 15 days
of delivery of such demand for arbitration, each party shall appoint one
arbitrator, and the arbitrators so selected shall, within 15 days of their
appointment, appoint an additional arbitrator. In the event that the arbitrators
selected by the parties are unable to agree upon the selection of the additional
arbitrator after reasonable efforts within such 15-day period, a list of 7
qualified and available persons shall be requested from the AAA. The parties
shall take turns striking one person each from the list, with the last remaining
person being the additional selected arbitrator. Once selected, the arbitration
panel shall meet as expeditiously as possible, select a chairman, schedule the
arbitration hearing, and notify the parties in writing of the date, time and
place of the hearing.
9.3 EFFECT. All conclusions of law reached by the arbitrators shall be
made in accordance with the internal laws of the State of Delaware without
regard for its conflict of laws doctrine. Any award rendered by the arbitrators
shall be accompanied by a written opinion setting forth the findings of fact and
conclusions of law relied upon in reaching their decision. The award rendered by
the arbitrators shall be final, binding and non-appealable, and judgment upon
such award may be entered by any court having jurisdiction thereof.
9.4 COSTS. Each party shall pay the fees of its own arbitrator, attorneys,
expenses of witnesses and all other expenses in connection with the presentation
of such party's case. The remaining costs of the arbitration, including fees of
the additional
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arbitrator, costs of records or transcripts and administrative fees, shall be
borne by the parties as designated by the arbitrators.
ARTICLE 10
MISCELLANEOUS
10.1 NATURE AND SURVIVAL OF REPRESENTATIONS. The representations,
warranties, covenants and agreements of Buyer and Seller contained in this
Agreement shall survive the Closing and shall not merge in the performance of
any obligation by any party hereto.
10.2 AMENDMENT. This Agreement may not be amended or modified without the
prior written consent of both parties.
10.3 WAIVERS.
(a) Prior to or on the Closing Date, Buyer shall have the right to waive
any default in the performance of any term of this Agreement by Seller, to waive
or extend the time for the compliance or fulfillment by Seller of any or all of
its obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Buyer under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly authorized officer
of Buyer.
(b) Prior to or on the Closing Date, Seller, shall have the right to waive
any default in the performance of any term of this Agreement by Buyer, to waive
or extend the time for the compliance or fulfillment by Buyer of any or all of
its obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Seller under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of Seller.
(c) The failure of any party at any time or times to require performance
of any provision hereof shall in no manner affect the right of such party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
10.4 GOVERNING LAW. Notwithstanding the place where this Agreement may be
executed by any of the parties, the parties expressly agree that this Agreement
shall in all respects be governed by, and construed in accordance with, the laws
of the State of Delaware, without regard for its conflict of laws doctrine.
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10.5 NOTICES. Any notice or other communication to be given hereunder
shall be in writing and shall be deemed sufficient when (i) mailed by United
States certified mail, return receipt requested, (ii) mailed by overnight
express mail, (iii) sent by facsimile or telecopy machine, followed by
confirmation mailed by first-class mail or overnight express mail, or (iv)
delivered in person, at the address set forth below, or such other address as a
party may provide to the other in accordance with the procedure for notices set
forth in this Section:
If to Buyer:
First Investors Financial Services Group, Inc.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seller:
Fortis, Inc.
One Chase ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ & Bird
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: B. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇., Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
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10.6 INVALID PROVISION. If any provision of this Agreement shall be
determined by arbitrators (acting in accordance with Article 9) to be invalid or
unenforceable, this Agreement shall be deemed amended to delete such provision
and the remainder of this Agreement shall be enforceable by its terms.
10.7 ASSIGNMENT. This Agreement may not be assigned or delegated by any
party without the prior written consent of all other parties, which consent
shall not be unreasonably withheld or delayed.
10.8 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
10.9 FURTHER ASSURANCES. Each party agrees to execute and deliver all such
further instruments and do all such further acts as may be reasonably necessary
or appropriate to effectuate this Agreement.
10.10 HEADINGS. Headings and captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way define,
limit, extend or prescribe the scope of this Agreement or the intent of any
provision.
10.11 PERSON AND GENDER. The masculine gender shall include the feminine
and neuter genders and the singular shall include the plural.
10.12 ENTIRE AGREEMENT. This Agreement, together with the Disclosure
Memoranda and Exhibits referenced herein, and the Confidentiality Agreement,
constitute the entire agreement of the parties with respect to matters set forth
in this Agreement and supersede any prior understanding or agreement, oral or
written, with respect to such matters.
10.13 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party hereto,
whether under any rule of construction or otherwise. No party shall be
considered the draftsman. On the contrary, this Agreement has been reviewed,
negotiated and accepted by all parties with advice of their lawyers and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of all parties hereto.
10.14 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, and all such
counterparts shall constitute one and the same Agreement, binding on all the
parties notwithstanding that all the parties are not signatories to the same
counterpart.
10.15 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole benefit
of the parties hereto and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the parties hereto, any legal or
equitable rights hereunder.
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IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the day and year first above written.
FIRST INVESTORS FINANCIAL
SERVICES GROUP, INC.
Attest: By:\s\ ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇.
\s\ ▇▇▇▇▇▇ ▇. DUCK Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇.
Secretary
Title: PRESIDENT AND CHIEF
FORTIS, INC.
Attest: By:\s\ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇
\s\ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Secretary
Title: EXECUTIVE VICE PRESIDENT
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