Exhibit 99.1
EXECUTION COPY
PURCHASE AGREEMENT
BY AND AMONG
SLM HOLDING CORPORATION,
HIJ CORPORATION,
USA GROUP, INC.,
USA GROUP LOAN SERVICES, INC.,
AND
USA GROUP GUARANTEE SERVICES, INC.
DATED AS OF JUNE 14, 2000
TABLE OF CONTENTS
PAGE
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SECTION 1 TRANSACTION TERMS.......................................................................................2
1.1 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES.......................................2
1.2 RETAINED ASSETS........................................................................4
1.3 ASSUMED LIABILITIES....................................................................4
1.4 PURCHASE PRICE.........................................................................5
1.5 ADJUSTMENTS............................................................................6
1.6 ALLOCATION OF CONSIDERATION............................................................9
SECTION 2 CLOSING ...............................................................................................10
2.1 LOCATION AND DATE.....................................................................10
2.2 CLOSING DELIVERIES....................................................................10
SECTION 3 REPRESENTATIONS AND WARRANTIES OF SELLERS..............................................................13
3.1 DUE ORGANIZATION......................................................................14
3.2 AUTHORIZATION; VALIDITY...............................................................14
3.3 NO CONFLICTS..........................................................................14
3.4 TITLE AND OWNERSHIP...................................................................15
3.5 SUBSIDIARIES..........................................................................16
3.6 FINANCIAL STATEMENTS..................................................................16
3.7 PERMITS...............................................................................18
3.8 ENVIRONMENTAL MATTERS.................................................................18
3.9 REAL PROPERTY.........................................................................19
3.10 LEASES................................................................................20
3.11 MATERIAL CONTRACTS AND COMMITMENTS....................................................20
3.12 INSURANCE.............................................................................22
3.13 LABOR AND EMPLOYMENT MATTERS..........................................................22
3.14 EMPLOYEE BENEFIT PLANS................................................................23
3.15 CONFORMITY WITH LAW...................................................................26
3.16 LITIGATION............................................................................26
3.17 INTELLECTUAL PROPERTY.................................................................27
3.18 BOOKS AND RECORDS.....................................................................27
3.19 TAXES.................................................................................27
3.20 ABSENCE OF CHANGES....................................................................31
3.21 DISCLOSURE............................................................................33
3.22 COMPLIANCE WITH THIRD-PARTY SERVICER REGULATIONS......................................33
3.23 LIABILITY FOR LOAN SERVICING..........................................................33
3.24 STUDENT LOAN PORTFOLIO................................................................33
3.25 FAIRNESS OPINION......................................................................36
3.26 ACQUISITION FOR INVESTMENT............................................................36
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SECTION 4 REPRESENTATIONS AND WARRANTIES OF BUYERS...............................................................36
4.1 DUE ORGANIZATION......................................................................37
4.2 AUTHORIZATION; VALIDITY...............................................................37
4.3 COMPLIANCE............................................................................37
4.4 NO CONFLICTS..........................................................................37
4.5 CAPITALIZATION........................................................................38
4.6 SEC REPORTS AND FINANCIAL STATEMENTS..................................................39
4.7 FINANCIAL CAPABILITY..................................................................40
4.8 ABSENCE OF CERTAIN CHANGES............................................................40
4.9 ABSENCE OF UNDISCLOSED LIABILITIES....................................................41
4.10 EMPLOYEE BENEFIT PLANS; ERISA.........................................................41
4.11 MATERIAL BUYER CONTRACTS; REGISTRATION RIGHTS AGREEMENTS..............................42
4.12 LITIGATION............................................................................42
4.13 DISCLOSURE............................................................................43
SECTION 5 COVENANTS..............................................................................................43
5.1 SELLERS'COVENANTS.....................................................................43
5.2 BUYERS'COVENANTS......................................................................49
5.3 JOINT COVENANTS.......................................................................50
5.4 CERTAIN TAX MATTERS...................................................................57
SECTION 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS AND SELLERS..............................................60
6.1 NO LITIGATION.........................................................................60
6.2 GOVERNMENT CONSENTS AND APPROVALS.....................................................60
6.3 EMPLOYMENT AGREEMENTS.................................................................60
6.4 DEPARTMENT OF EDUCATION...............................................................61
SECTION 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS..........................................................61
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS............................61
7.2 NO MATERIAL ADVERSE CHANGE............................................................61
7.3 DELIVERY OF CLOSING ITEMS.............................................................61
7.4 U.S. DEPARTMENT OF TREASURY...........................................................62
SECTION 8 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS.........................................................62
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS............................62
8.2 NO MATERIAL ADVERSE CHANGE............................................................62
8.3 DELIVERY OF CLOSING ITEMS.............................................................62
SECTION 9 INDEMNIFICATION........................................................................................63
9.1 GENERAL INDEMNIFICATION BY SELLERS....................................................63
9.2 GENERAL INDEMNIFICATION BY BUYERS.....................................................64
9.3 LIMITATION............................................................................65
9.4 INDEMNIFICATION PROCEDURES............................................................65
9.5 REMEDIES..............................................................................67
SECTION 10 MISCELLANEOUS.........................................................................................67
10.1 TERMINATION...........................................................................67
10.2 EFFECT OF TERMINATION.................................................................68
10.3 SUCCESSORS AND ASSIGNS................................................................68
10.4 ENTIRE AGREEMENT......................................................................69
10.5 COUNTERPARTS..........................................................................69
10.6 BROKERS AND AGENTS....................................................................69
10.7 EXPENSES AND FEES.....................................................................69
10.8 SPECIFIC PERFORMANCE; REMEDIES........................................................70
10.9 NOTICES...............................................................................70
10.10 DISPUTE RESOLUTION....................................................................71
10.11 GOVERNING LAW.........................................................................71
10.12 SELECTION OF A FORUM..................................................................71
10.13 SEVERABILITY..........................................................................72
10.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS.............................................72
10.15 MUTUAL DRAFTING.......................................................................72
10.16 FURTHER REPRESENTATIONS...............................................................72
10.17 AMENDMENT; WAIVER.....................................................................72
10.18 SCHEDULES.............................................................................72
10.19 DEFINITION OF AFFILIATE...............................................................73
EXHIBITS
Exhibit 2.2(a)(iii) Transitional Services Agreement
Exhibit 2.2(a)(iv) Registration Rights Agreement
Exhibit 2.2(a)(v) Grant Recommendation Agreement
Exhibit 2.2(a)(vi) Name and Trademark License Agreement
Exhibit 2.2(a)(vii) Amendment to Guarantee Services Agreement
Exhibits 2.2(a)(xii) Non Compete Agreement
Exhibit 2.2(a)(xiv) Sellers' Opinions of Counsel
Exhibit 2.2(b)(ix) Buyers' Opinions of Counsel
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "AGREEMENT") is made and entered into this
14th day of June, 2000, by and among SLM Holding Corporation, a Delaware
corporation ("SLM"), HIJ Corporation, a Delaware corporation ("ACQUISITION
CORP." and together with SLM, the "BUYERS"), USA Group, Inc., a Delaware
non-stock corporation ("GROUP"), USA Group Loan Services, Inc., a Delaware
non-stock non-profit corporation of which Group is the sole member ("LOAN
SERVICES"), and USA Group Guarantee Services, Inc., a Delaware non-stock
non-profit corporation of which Group is the sole member ("GUARANTEE SERVICES"
and, together with Group and Loan Services, the "SELLERS").
RECITALS
WHEREAS, Sellers are engaged in purchasing, holding and servicing
educational loans, providing administrative and support services to student loan
guarantee agencies, lenders and educational institutions and providing other
education related services (other than Group Work, the Guarantee Business and
services and activities performed by SMS Hawaii, the "BUSINESS");
WHEREAS, Group is a nonprofit corporation, the charitable mission of
which is to ▇▇▇▇▇▇ education and encourage the continuation of studies at
universities, colleges and schools (the "GROUP WORK"); Group's Affiliate, United
Student Aid Funds, Inc., a Delaware non-stock non-profit corporation ("FUNDS"),
is engaged in acting as a guarantor of student loans pursuant to the Higher
Education Act of 1965, as amended (the "GUARANTEE BUSINESS"), and Guarantee
Services is the sole member of Secondary Market Services Corp.-Hawaii, a
Hawaiian non-stock non-profit corporation ("SMS HAWAII");
WHEREAS, Group is the sole member of Loan Services and Guarantee
Services and owns one hundred percent (100%) of the issued and outstanding
shares of the capital stock of USA Group Enterprises, Inc., a wholly-owned
subsidiary of Group and an Indiana corporation, ("ENTERPRISES") and other assets
used to conduct the Business;
WHEREAS, Enterprises owns one hundred percent (100%) of the issued and
outstanding shares of capital stock of Education One Group, Inc., an Indiana
corporation, Education Debt Services, Inc., an Indiana corporation, USA Group
▇▇▇▇-▇▇▇▇▇▇, Inc., an Indiana corporation, Downtown Services, Inc., an Indiana
corporation, USA Group Secondary Market Services, Inc., a Delaware corporation
("USA GROUP SMS"), and Secondary Market Company, Inc., a wholly-owned subsidiary
of USA Group SMS and a Delaware corporation ("SECONDARY MARKET", and together
with Enterprises and the foregoing subsidiaries, the "TRANSFERRED
SUBSIDIARIES"); and
WHEREAS, Sellers desire to sell to Buyers, and Buyers desire to
purchase from Sellers, all of the properties and assets of Sellers other than
the Retained Assets (as defined herein), used in connection with the Business
upon and subject to the terms, covenants, conditions, warranties and
representations set forth in this Agreement.
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WHEREAS, Sellers have determined that their participation in the
transactions described herein will further their charitable purposes by
enhancing the resources that will be available to them for the purpose of
fostering education and access to education.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, agree as follows:
SECTION 1
TRANSACTION TERMS
1.1 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. Upon and subject to
the terms and conditions of this Agreement, at the Closing (as defined in
Section 2.1, Sellers shall convey, sell, assign, transfer and deliver to Buyers,
and Buyers shall purchase and acquire from Sellers all of the assets,
properties, rights, privileges, claims, contracts and interests of every kind
and description, real or personal, tangible or intangible, absolute or
contingent, wherever situated, whether or not carried or reflected on the books
and records of Sellers, which are owned by or used or held for use by Sellers in
the conduct of the Business, free and clear of any and all Liens other than
Permitted Liens, except for the Retained Assets (as defined in Section 1.2)
(such assets, properties, rights, privileges, claims, contracts and interests
being hereinafter collectively called the "ACQUIRED Assets"). "LIEN" means any
mortgage, security interest, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or otherwise), charge, preference,
priority or other security agreement, option, warrant, attachment, right of
first refusal, preemptive, conversion, put, call or other claim or right,
restriction on transfer, or preferential arrangement of any kind or nature
whatsoever (including any restriction on the transfer of any assets, any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing and the
filing of any financing statement under any applicable Law (as defined in
Section 3.1)). Without limiting the generality of the foregoing, the Acquired
Assets shall include the following:
(a) TANGIBLE PERSONAL PROPERTY. All of the equipment, office
furniture, furnishings, office equipment, computer hardware and software,
leasehold and other improvements and all other tangible personal property owned
by or used or held for use by Sellers in connection with the Business;
(b) ACCOUNT BALANCES. Except to the extent set forth in Section , all
balances in all banking or investment accounts as of the Closing Date;
(c) BOOKS, RECORDS AND WRITTEN MATERIALS. All of the business records
of the Sellers used in connection with the Business, including all financial
books and records, studies, analyses, strategies, plans, forms, specifications,
technical data, and any similar information which has been reduced to writing;
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(d) CATALOGS AND ADVERTISING MATERIALS. All of the promotional and
advertising materials, including all catalogs, brochures, videos, plans,
manuals, handbooks, and equipment owned by or used or held for use by Sellers in
connection with the Business;
(e) INTELLECTUAL PROPERTY. Any and all intellectual property owned by
Sellers, together with all claims for damages against Persons by reason of past
infringement and the right to ▇▇▇ for and collect such damages, confidential or
proprietary business information and trade secrets and all other intellectual
and intangible property rights owned by Sellers or to, or in, which Sellers have
any right or interest whatsoever, and which are used or held for use by Sellers
in connection with the Business (where there are multiple copies of such
material in possession or control of Sellers, all copies of such material) (as
used herein, "PERSON" means a corporation (either stock or non-stock, for or
non-profit), limited liability company, association, partnership, organization,
trust, joint venture or other legal entity, any individual, group of individuals
or a United States, state, local or other governmental entity or municipality or
subdivision thereof or any authority, department, commission, board, bureau,
agency, court or instrumentality ("GOVERNMENTAL AUTHORITY"));
(f) CONTRACTS. All rights and benefits of Sellers in, to and under the
contracts, leases, instruments, agreements and loans, written or oral
(collectively, the "CONTRACTS") to which Sellers are a party and which relate to
the Business or by which the Business is conducted or by which any of the
Acquired Assets are bound (collectively, the "ASSUMED Contracts").
(g) LICENSES. Any license, franchise, concession, certificate, or
registration from or with a Governmental Authority, and held by or used or held
for use in connection with the Business (collectively, the "LICENSES");
(h) PERMITS. Any permit, consent, authorization or approval from or
with a Governmental Authority, and held by or used or held for use in connection
with the Business (collectively, "PERMITS");
(i) ENTERPRISES SHARES. Good, valid and record title to, and
beneficial ownership of, all of the shares of capital stock of Enterprises (the
"ENTERPRISES SHARES") free and clear of all Liens other than Permitted Liens;
(j) NAME. The names set forth in SCHEDULE 1.1(j); and
(k) OTHER ASSETS. All of the other assets, properties, rights,
privileges, claims, contracts and interests of every kind and description of
Sellers used or held for use in connection with the Business, whether, real or
personal, tangible or intangible, absolute or contingent, wherever situated, and
whether or not carried or reflected on the books and records of Sellers.
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1.2 RETAINED ASSETS. Notwithstanding any other provision of this
Agreement, Sellers shall retain, and the Acquired Assets shall not include, the
following (collectively, the "RETAINED ASSETS"):
(a) cash (or other assets in a form agreed to by the parties) in an
amount (subject to adjustment as set forth in Section 1.5), equal to the Net
Asset Value (as defined below) minus $320 million (the "RETAINED CASH");
(b) Sellers' corporate books and records, including stock certificates
of Sellers, treasury stock, stock transfer records, corporate seals and minute
books, and all books and records pertaining to Taxes of Sellers;
(c) the membership interest in Funds;
(d) the membership interest in SMS Hawaii; and
(e) the assets identified on SCHEDULE 1.2.
"NET ASSET VALUE" means the book value of total assets less total
liabilities as determined by generally accepted accounting principles ("GAAP"),
as set forth on the Pro Forma Balance Sheets as of the Net Asset Value Date,
prior to subtracting the Retained Cash from total assets. If the Closing occurs
on or before November 15, 2000, then the "NET ASSET VALUE DATE" shall be June
30, 2000. If the Closing occurs after November 15, 2000, then the "NET ASSET
VALUE DATE" shall be September 30, 2000, unless the failure to close prior to
that date is solely as a result of the breach as of November 15, 2000 of the
representations and warranties set forth in Section 3 of this Agreement which,
individually or in the aggregate, would be reasonably likely to have a Material
Adverse Effect or the breach as of November 15, 2000 of the covenants of Sellers
in this Agreement (which the Buyers shall have the burden to prove), in which
event the Net Asset Value Date shall be June 30, 2000.
1.3 ASSUMED LIABILITIES. On the terms and subject to the conditions set
forth in the Assignment and Assumption Agreement in a form reasonably acceptable
to Buyers and Sellers (the "ASSUMPTION AGREEMENT"), at the Closing, Buyers shall
assume all liabilities and obligations of Sellers whether or not relating to the
Acquired Assets, whether fixed, contingent or otherwise, ▇▇▇▇▇▇ or inchoate,
known or unknown (collectively referred to hereinafter as the "ASSUMED
LIABILITIES"); except that the Assumed Liabilities shall exclude, and Sellers
shall retain all, and Buyers shall have no responsibility for any of Sellers'
liabilities and obligations, whether or not relating to the Acquired Assets,
whether fixed, contingent or otherwise, ▇▇▇▇▇▇ or inchoate, known or unknown
(collectively referred to hereinafter as the "EXCLUDED LIABILITIES") set forth
below:
(i) any liabilities or obligations relating solely to (A) the
conduct of the Guarantee Business; (B) the conduct of the business of SMS
Hawaii; or (C) the conduct of Group Work;
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(ii) any liabilities arising out of or related to expenses
incurred in connection with the development, negotiation and execution of the
transactions contemplated by this Agreement, except to the extent that (x) (A)
such liabilities are reflected on the Pro Forma Balance Sheet for the Net Asset
Value Date and (B) the Purchase Price is less than it would have been if such
liabilities were not included on the Pro Forma Balance Sheet for the Net Asset
Value Date or (y) such liabilities have been discharged as of the Net Asset
Value Date;
(iii) any liabilities for Taxes of the Sellers, including any
such Taxes relating to the Acquired Assets; and
(iv) any liabilities under the Key Executive Incentive Plan, the
Long Term Incentive Plan and the Excel Plan of Group (collectively, the "CASH
PLANS").
1.4 PURCHASE PRICE
(a) In reliance on the representations, warranties and covenants set
forth herein and in consideration of Sellers' sale, assignment, transfer and
delivery of the Acquired Assets to Buyers, Buyers shall assume the Assumed
Liabilities and pay to Sellers aggregate cash and stock consideration in an
amount equal to the lesser of (X) four hundred and fifty million dollars
($450,000,000) plus the Net Asset Value and (Y) seven hundred seventy million
dollars ($770,000,000) (the "PURCHASE PRICE"). The Purchase Price shall be
subject to adjustment as described in Section 1.5 and shall be payable as
follows:
(i) At Closing, Buyer shall pay to Sellers by wire transfer of
immediately available funds an amount in cash equal, in the aggregate, to four
hundred million dollars ($400,000,000) (the "CASH PURCHASE PRICE").
(ii) At Closing, Buyer shall deliver to the Sellers a number of
shares ("SLM SHARES") of common stock, par value $.01 per share, of SLM ("SLM
COMMON STOCK") having, in the aggregate, an Aggregate Value (as defined below)
of the Purchase Price minus the Cash Purchase Price. For purposes of this
Agreement, "AGGREGATE VALUE" shall mean the Average SLM Stock Price times the
number of shares issued as consideration and "AVERAGE SLM STOCK PRICE" shall
mean (X) the sum of the average price per share (which, for each day, shall
equal the average of the high and low sales prices per share for such day) of
SLM Common Stock on the New York Stock Exchange as reported in The Wall Street
Journal (Eastern Edition) for each of the twenty consecutive Trading Days ending
on the Trading Day that is the Trading Day prior to the day of Closing, or, in
the case of adjustment payments pursuant to Section 1.5, such other payment date
(the "PRICING PERIOD"), divided by (Y) twenty. "TRADING DAY" shall mean a day on
which SLM Common Stock is traded on the New York Stock Exchange.
(b) If, solely as a result of circumstances beyond the control of
Sellers, the Closing has not occurred by July 31, 2000 and occurs on or before
November 15, 2000, then the Purchase Price shall be increased by interest at a
per annum rate of 8%, compounded monthly, from August 1, 2000 through the date
of Closing. If the Closing occurs after November 15, 2000, then no interest
shall accrue except pursuant to the next sentence. If, solely as a result of
circumstances beyond the control of Sellers, the Closing occurs after November
15, 2000, then
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the Purchase Price shall be increased by interest at a per annum rate of 8%,
compounded monthly, from November 1, 2000 through the date of Closing.
(c) The Cash Purchase Price and the SLM Shares shall be allocated
among and paid to the Sellers and allocated among and paid by the Buyers as
provided in SCHEDULE 1.6.
1.5 ADJUSTMENTS. USA Group shall no later than 90 days following the Net
Asset Value Date (or 105 days following the Net Asset Value Date in the event
the Net Asset Value Date is September 30, 2000) cause an audit to be completed
of (1) the combined balance sheet of Group and its subsidiaries excluding Funds
and SMS Hawaii as of the Net Asset Value Date (the "AUDITED BALANCE SHEET") and
(2) the Net Asset Value as of the Net Asset Value Date, in each case by Ernst &
Young LLP ("SELLERS' AUDITOR").
(a) ADJUSTED NET ASSET VALUE. If the results of such audit indicate
that the book value of total assets less total liabilities as determined by
generally accepted accounting principles as of the Net Asset Value Date pursuant
to such audit excluding Retained Assets and Excluded Liabilities but prior to
subtracting the Retained Cash from total assets (the "ADJUSTED NET ASSET VALUE")
was different than the Net Asset Value, the following adjustments shall be made:
(i) If the Net Asset Value is less than $320 million and the
Adjusted Net Asset Value is greater than the Net Asset Value, but less than $320
million, then the Purchase Price shall be increased by the amount of such
difference.
(ii) If the Net Asset Value is less than $320 million and the
Adjusted Net Asset Value is greater than the Net Asset Value and greater than
$320 million, then the Purchase Price shall be increased to $770 million and the
Retained Cash shall be increased by the remainder, if any, of the difference
between Net Asset Value and Adjusted Net Asset Value not applied in such
increase of the Purchase Price.
(iii) If the Net Asset Value is greater than $320 million and the
Adjusted Net Asset Value is greater than the Net Asset Value, the Retained Cash
shall be increased by the amount of such difference.
(iv) If the Net Asset Value is greater than $320 million and the
Adjusted Net Asset Value is less than the Net Asset Value, but greater than $320
million, the Retained Cash shall be decreased by the amount of such difference.
(v) If the Net Asset Value is greater than $320 million and the
Adjusted Net Asset Value is less than the Net Asset Value and less than $320
million, the Retained Cash shall be decreased to $0 and the Purchase Price shall
be decreased by the remainder, if any, of the difference between Net Asset Value
and Adjusted Net Asset Value not applied in such decrease of the Retained Cash.
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(vi) If the Net Asset Value is less than $320 million and the
Adjusted Net Asset Value is less than the Net Asset Value, the Purchase Price
shall be decreased by the amount of such difference.
(b) POST-CLOSING PURCHASE PRICE ADJUSTMENTS. In the event the Closing
has occurred, adjustments in Purchase Price will be effected through the
transfer of the Aggregate Value of SLM Shares equal to the adjustment either:
(i) to Sellers by Buyers (in the case of upward adjustments) or (ii) to Buyers
from Sellers (in the case of downward adjustments). Any post-Closing adjustments
to the Purchase Price will occur no later than 120 days following the Net Asset
Value Date (or if later ten Trading Days after the final resolution of any
dispute over the adjustment).
(c) POST-CLOSING RETAINED CASH ADJUSTMENTS. In the event the Closing
has occurred: (i) if the amount of Retained Cash has been increased pursuant to
Section 1.5(a), Buyers will transfer an amount in cash equal to the amount of
such increase to Sellers and (ii) if the amount of Retained Cash has been
decreased pursuant to Section 1.5(a), Sellers will transfer an amount in cash
equal to the amount of such decrease to Buyers. Any post-Closing adjustments to
Retained Cash will occur no later than 120 days following the Net Asset Value
Date (or if later ten Trading Days after the final resolution of any dispute
over the adjustment).
(d) AUDIT PROCEDURES. Buyers shall give Sellers and Sellers' Auditors
reasonable access, during normal business hours, to the properties, books,
records, contracts and commitments of Buyer, in order to enable Sellers'
Auditors to complete the audit described herein. Sellers' Auditor will deliver
to Buyers (i) the Audited Balance Sheet as of the Net Asset Value Date, (ii) a
statement which calculates Adjusted Net Asset Value, and (iii) an auditor's
certificate certifying the Audited Balance Sheet and Adjusted Net Asset Value as
of the Net Asset Value Date and setting forth the Adjusted Net Asset Value,
together with supporting calculations in reasonable detail and audit papers (the
"ADJUSTMENT Certificate"). The audit shall comply with and be performed in
accordance with generally accepted auditing standards and the Audited Balance
Sheet shall be prepared in accordance with GAAP and in a manner that is
consistent with the principles used to prepare the Audited Financial Statements
and presentation set forth in the March 31, 2000 Pro Forma Balance Sheet;
PROVIDED, HOWEVER, that the statement of Adjusted Net Asset Value in (ii) above
shall (A) exclude all Retained Assets other than Retained Cash and Excluded
Liabilities and (B) reflect and itemize, with an accompanying explanation,
Retained Assets, Excluded Liabilities and Retained Cash and proposed revisions,
if any, to the Net Asset Value. For purposes of planning and performing the
audit, Sellers' Auditor shall utilize customary planning materiality as it
relates to the fairness in presentation of the Audited Balance Sheet. Individual
errors discovered in the course of the audit which are not deemed to be material
but which exceed $500,000 shall be posted to a summary of audit differences
schedule. No such items included on the summary of audit differences shall be
reflected as an adjustment of Net Asset Value in arriving at Adjusted Net Asset
Value unless the net effect of all such differences exceeds $1 million, in which
case all such differences shall be reflected as an adjustment to Net Asset Value
in arriving at Adjusted Net Asset Value. Buyers and its independent public
accountants ("BUYERS' AUDITOR") will have 30 days from the date on which the
Audited Balance Sheet as of the Net Asset Value Date and the Adjustment
Certificate
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are delivered to Buyers to review such documents (the "REVIEW PERIOD"). Buyers
and Buyers' Auditor shall be provided with full access to the work papers of
Sellers' Auditor in connection with such review. If Buyers believe that any item
or amount (including the Adjusted Net Asset Value) shown or reflected in the
audited Pro Forma Balance Sheet as of the Net Asset Value Date or the Adjustment
Certificate is not in compliance with the Audit Requirements, Buyers may, on or
prior to the last day of the Review Period, deliver a notice to Sellers setting
forth, in reasonable detail, each disputed item or amount and the basis for its
disagreement therewith, together with supporting calculations (the "DISPUTE
NOTICE"). The Dispute Notice shall set forth Buyers' position as to the proper
Adjusted Net Asset Value. If no Dispute Notice is received by Sellers on or
prior to the last day of the Review Period, the Audited Balance Sheet as of the
Net Asset Value Date, Adjusted Net Asset Value and the Adjustment Certificate
shall be deemed accepted by Buyers. The rights of Buyers and Sellers to
indemnification under Section 9 (and any limitations on such rights) shall not
be deemed to limit, supersede or otherwise affect the rights of Buyers and
Sellers to any adjustments to Purchase Price, Retained Cash and Net Asset Value
under this Section 1.5.
(e) THE ACCOUNTANT. Within 15 days after Sellers' receipt of a Dispute
Notice, if any, Buyers and Sellers will jointly and promptly contact the
national office of, and shall retain the services of, an independent national
accounting firm, which does not at the time of retention provide and has not in
the prior three years provided auditing services to Buyers or Sellers (or to
their Affiliates). If Buyers and Sellers cannot agree on the independent
accounting firm to be retained, Buyers and Sellers will each submit the name of
one accounting firm that satisfies the qualifications set forth in this Section
1.5(e), and the independent accounting firm shall be selected by lot from those
two firms. The independent accounting firm retained by Buyers and Sellers (the
"ACCOUNTANT") will conduct such review of the Audited Balance Sheet and Adjusted
Net Asset Value as of the Net Asset Value Date, any related work papers of
Buyers' Auditor and Sellers' Auditor, the Adjustment Certificate and the Dispute
Notice, and any supporting documentation as the Accountant in its sole
discretion deems necessary, and the Accountant shall conduct such hearings or
hear such presentations by the parties as the Accountant in its sole discretion
deems necessary.
(f) THE ADJUSTMENT REPORT. The Accountant shall, as promptly as
practicable and in no event later than 60 days following the date of its
retention, deliver to Buyers and to Sellers a report (the "ADJUSTMENT REPORT"),
in which the Accountant shall, after considering all matters set forth in the
Dispute Notice, determine what adjustments, if any, should be made to the
Audited Balance Sheet as of the Net Asset Value Date in order for it to comply
with the Audit Requirements, and shall determine the appropriate Adjusted Net
Asset Value on that basis. The Adjustment Report shall set forth, in reasonable
detail, the Accountant's determination with respect to each of the disputed
items or amounts specified in the Dispute Notice, and the revisions, if any, to
be made to the Audited Balance Sheet as of the Net Asset Value Date, together
with supporting calculations. The Adjustment Report shall be final and binding
upon Buyers and Sellers, and shall be deemed a final arbitration award that is
enforceable pursuant to the terms of the Federal Arbitration Act, 9 U.S. C.
Sections 1 et seq. and the state law counterparts thereto.
8
(g) ADJUSTMENT AND PAYMENT. Adjustments and payments based on the
final Adjusted Net Asset Value shall be made pursuant to this Section 1.5 and
such payments required hereunder will bear interest at a rate of 8%, compounded
monthly, from the date of Closing to the date of payment.
(h) COSTS OF AUDIT. The Sellers, on the one hand, and Buyers, on the
other hand, shall each pay one-half of the total cost of the audit procedures
and of the Accountant set forth in this Section 1.5.
1.6 ALLOCATION OF CONSIDERATION
(a) The consideration for the Acquired Assets shall be apportioned
among and paid to the Sellers and among and paid by the Buyers and allocated as
set forth in SCHEDULE 1.6.
(b) The parties hereto covenant and agree with each other that this
allocation was arrived at by arm's length negotiation and that none of them will
take a position on any income tax return (including IRS Form 8594 (Asset
Allocation Statement) if required), before any governmental agency charged with
the collection of any income tax or in any judicial proceeding that is in any
manner inconsistent with the terms of this Section 1.6 without the written
consent of the other parties to this Agreement, which consent shall not be
unreasonably withheld.
(c) If SCHEDULE 1.6 has not been agreed to by the parties as of the
date hereof, the parties hereto covenant and agree that the parties will
attempt, in good faith, to reach mutual agreement on the allocation of
consideration by July 31, 2000, or such other date as mutually agreed on by the
parties. If the parties do not reach agreement as to SCHEDULE 1.6 by the date
agreed to in the previous sentence, any dispute over such allocation shall be
resolved by an accounting firm chosen pursuant to Section 1.5(e) prior to the
Closing. The fees and expenses of such accounting firm shall be borne equally by
the parties. The parties (and their affiliates) shall: (i) timely file all forms
and Tax Returns (including IRS Form 8594 (Asset Allocation Statement)) required
to be filed in connection with SCHEDULE 1.6, (ii) be bound by such SCHEDULE 1.6
for all Tax purposes, (iii) prepare and file all Tax Returns in a manner
consistent with such SCHEDULE 1.6, and (iv) take no position inconsistent with
SCHEDULE 1.6 in any audit or other proceeding relating to Taxes without the
written consent of the other parties to this Agreement, which consent shall not
be unreasonably withheld.
SECTION 2
CLOSING
2.1 LOCATION AND DATE. The consummation of the transactions contemplated
by this Agreement (the "CLOSING") shall take place at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, or another
location as agreed by Buyers and Sellers, no
9
later than five (5) business days after all conditions to Closing shall have
been satisfied or waived, or at such other time and date as Buyers and Sellers
may mutually agree, which date shall be referred to as the "CLOSING DATE."
2.2 CLOSING DELIVERIES
(a) SELLERS DELIVERIES. Upon and subject to the terms and conditions
contained herein, Sellers shall deliver or cause to be delivered to Buyers the
following at the Closing:
(i) ▇▇▇▇ OF SALE. A duly executed General ▇▇▇▇ of Sale conveying,
selling, transferring and assigning the Acquired Assets to Buyers, free and
clear of any and all Liens other than Permitted Liens, in a form agreed to by
the parties.
(ii) ASSUMPTION AGREEMENT. A duly executed Assumption Agreement.
(iii) TRANSITIONAL SERVICES AGREEMENT. A duly executed transition
services and license agreement substantially in the form attached hereto as
EXHIBIT 2.2(a)(iii) with such changes as agreed to by the parties (the
"TRANSITIONAL SERVICES AGREEMENT"), pursuant to which Buyers will permit Sellers
to use those goods, rights and services (including the use of certain office
space, software and information services) enumerated in the Transitional
Services Agreement, including those that are otherwise Acquired Assets, for the
conduct of the Guarantee Business, Group Work and the business of SMS Hawaii for
a period of 12 months with an option to extend the agreement on the part of
Sellers for an additional 6 month term to permit the Sellers an opportunity to
locate and obtain use of substitute assets necessary for the conduct of such
activities.
(iv) REGISTRATION RIGHTS AGREEMENT. A duly executed Registration
Rights Agreement ("REGISTRATION RIGHTS AGREEMENT") in the form attached hereto
as EXHIBIT 2.2(a)(iii).
(v) GRANT RECOMMENDATION AGREEMENT. A duly executed Grant
Recommendation Agreement ("GRANT RECOMMENDATION AGREEMENT") in the form attached
hereto as EXHIBIT 2.2(a)(v).
(vi) NAME AND TRADEMARK LICENSE AGREEMENT. A duly executed Name
and Trademark Licensing Agreement ("NAME AND TRADEMARK LICENSING AGREEMENT")
authorizing Sellers' use of Buyers' acquired name "USA Group" and trademarks
substantially in the form attached hereto as EXHIBIT 2.2(a)(vi).
(vii) AMENDMENT TO GUARANTEE SERVICES AGREEMENT. A duly executed
Amendment to the Guarantee Services Agreement ("AMENDMENT TO GUARANTEE SERVICES
AGREEMENT") in the form attached hereto as EXHIBIT 2.2(a)(vii).
10
(viii) ENTERPRISES SHARE CERTIFICATES. Certificates representing
all of the issued and outstanding shares of the capital stock of Enterprises,
with accompanying stock powers duly executed in blank.
(ix) OTHER SHARE CERTIFICATES. Any certificates held by Sellers
representing shares of any other entity, with accompanying stock powers duly
executed in blank.
(x) LIEN RELEASES. Such releases and termination statements as
are necessary for the termination and release of any and all Liens other than
Permitted Liens on the Acquired Assets;
(xi) PATENT AND TRADEMARKS. Patent and trademark assignments in
form and substance reasonably satisfactory to Buyers;
(xii) NON-COMPETE AGREEMENT. A duly executed Non-Compete
Agreement in the form attached hereto as EXHIBIT 2.2(a)(xiii).
(xiii) OFFICERS CERTIFICATES. Certificates of the Chief Executive
Officer and Chief Financial Officer of Group in a form reasonably acceptable to
Buyers.
(xiv) OPINION OF SELLERS' COUNSEL. An opinion from Sellers'
General Counsel, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, or from Debevoise & ▇▇▇▇▇▇▇▇, special
counsel to Sellers, dated the Closing Date, in the form attached hereto as
EXHIBIT 2.2(a)(xiv);
(xv) SECRETARY'S CERTIFICATES. Certificates executed by the
respective Secretary of each Seller, certifying (a) copies of the certificate of
incorporation, bylaws and other organizational documents of such Seller as in
effect as of the Closing Date, which Certificate of Incorporation shall also be
certified by an appropriate authority in such Seller's jurisdiction of
incorporation, (b) duly enacted resolutions of the directors or trustees and
stockholders or members of each Seller approving this Agreement and the other
documents and transactions contemplated hereby and authorizing the execution and
delivery thereof, and (c) specimen signatures of the officers of such Seller
authorized to sign this Agreement and the other documents contemplated hereby;
(xvi) GOOD STANDING CERTIFICATES. Good standing certificates of
each Seller, the Transferred Subsidiaries, certifying as of a recent date that
each is in good standing under the laws of the jurisdictions in which they are
organized and, except for certificates with respect to jurisdictions where the
failure to be so authorized would not be reasonably likely to have a Buyers'
Material Adverse Effect (as defined in Section 4.1), authorized to conduct
business, as applicable, or comparable instruments (including without limitation
photocopies of currently valid and unaltered business licenses);
(xvii) FIRPTA AFFIDAVIT. A properly executed certificate from
Sellers in form and substance satisfactory to Buyers duly executed and
acknowledged, certifying all facts necessary to exempt the transactions
contemplated hereby from withholding pursuant to the provisions of (a) the
Foreign Investment in Real Property Tax Act and (b) any applicable provisions of
state or local law;
11
(xviii) CONSENTS AND OTHER DOCUMENTS. Any consents, certificates,
documents, instruments and other items required to be delivered pursuant to
Sections 5, 6 and 7; and
(xix) OTHER DELIVERIES. All such other documents, certificates,
instruments, and authorizations as shall be reasonably requested by Buyers to
vest in Buyers good and valid title and interest in and to the Acquired Assets
free and clear of all Liens other than Permitted Liens in accordance with the
provisions hereof, or otherwise give effect to the transactions contemplated
hereby.
(b) BUYERS DELIVERIES. Upon and subject to the terms and conditions
contained herein, Buyers shall deliver or cause to be delivered to Sellers the
following at the Closing:
(i) INITIAL PAYMENT. The SLM Shares and the Cash Purchase Price;
(ii) ASSUMPTION AGREEMENT. A duly executed Assumption Agreement.
(iii) TRANSITIONAL SERVICES AGREEMENT. A duly executed
Transitional Services Agreement.
(iv) REGISTRATION RIGHTS AGREEMENT. A duly executed Registration
Rights Agreement.
(v) GRANT RECOMMENDATION AGREEMENT. A duly executed Grant
Recommendation Agreement.
(vi) NAME AND TRADEMARK LICENSE AGREEMENT. A duly executed
Licensing Agreement.
(vii) AMENDMENT TO GUARANTEE SERVICES AGREEMENT. A duly executed
Amendment to Guarantee Services Agreement.
(viii) OFFICERS CERTIFICATES. Certificates of the Chief Executive
Officer and Chief Financial Officer of SLM in a form reasonably acceptable to
Sellers.
(ix) OPINION OF BUYERS' COUNSEL. An opinion from Buyers' General
Counsel, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, or from ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to
Buyers, in the form attached hereto as EXHIBITS 2.2(b)(ix);
(x) SECRETARY'S CERTIFICATE. A certificate executed by the
Secretary of each Buyer certifying (a) copies of the Certificate of
Incorporation, bylaws and other organizational documents of Buyer as in effect
as of the Closing Date which Certificate of Incorporation shall also be
certified by an appropriate authority in the Buyer's jurisdiction of
incorporation, (b) duly enacted resolutions of the directors of the Buyer
approving this Agreement and the other documents and transactions contemplated
hereby and authorizing the
12
execution and delivery thereof, and (c) specimen signatures of the officers of
Buyer authorized to sign this Agreement and the other documents contemplated
hereby; and
(xi) OTHER DELIVERIES. All such other documents, certificates and
instruments as shall be reasonably requested by Sellers in order to give effect
to the transactions contemplated hereby.
SECTION 3
REPRESENTATIONS AND WARRANTIES
OF SELLERS
To induce Buyers to enter into this Agreement and consummate the
transactions contemplated hereby, Sellers jointly and severally represent and
warrant to Buyers as follows. For purposes of this agreement, "KNOWLEDGE" means
with respect to either of Buyers or Sellers, information actually known by the
Chief Executive Officer, President, Chief Financial Officer, Chief Operating
Officer and General Counsel of Group, in the case of Sellers, or of SLM, in the
case of Buyers, plus the persons identified in SCHEDULE 3.0.
3.1 DUE ORGANIZATION
(a) Each of Sellers and the Transferred Subsidiaries is duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation. Each of the Sellers and the Transferred
Subsidiaries is in good standing and is duly authorized and qualified to do
business under all applicable laws, orders, judgments, rules, codes,
regulations, requirements, decrees or ordinances of any Governmental Authority
(collectively, "LAWS") to own, lease and operate its respective properties and
to carry on its respective business in the places and manner now conducted and
presently planned to be conducted, except where the failure to be so authorized
or qualified does not and would not be reasonably likely to have a material
adverse effect (i) on the rights of Buyers hereunder, on the Acquired Assets or
Assumed Liabilities or on the operations, liabilities, or condition (financial
or otherwise) of the Business or (ii) on the ability of Sellers to consummate
the transactions contemplated hereby or to perform their respective obligations
after the Closing (a "MATERIAL ADVERSE EFFECT").
(b) Each of the Sellers and each of the Transferred Subsidiaries has
made available to Buyers true, complete and correct copies of its Articles of
Incorporation and Bylaws, or comparable documents (collectively, the "CHARTER
DOCUMENTS"). None of Sellers or the Transferred Subsidiaries is in violation of,
in conflict with or in default under its Charter Documents, and there exists no
condition or event which, after notice or lapse of time or both, would result in
any such violation, conflict or default.
3.2 AUTHORIZATION; VALIDITY. Each of the Sellers has all requisite
corporate power and authority to enter into, make and perform this Agreement and
the transactions and other agreements and instruments contemplated by this
Agreement. This Agreement and all other
13
agreements and instruments to be executed and delivered by any of the Sellers or
in connection herewith, when executed and delivered by such Person(s) shall have
been duly and validly authorized, executed and delivered by the Sellers. This
Agreement and the transactions and other agreements and instruments contemplated
hereby constitute, or shall constitute, the valid and binding obligations of
each of Sellers (assuming they are valid and binding obligations of the other
parties thereto) enforceable in accordance with their respective terms, except
as may be limited by any bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement and all other agreements and instruments contemplated hereby and the
consummation of the transactions contemplated hereby and thereby will not:
(a) conflict with, result in a breach or violation of, or require any
consent, approval or authorization under, any of the Charter Documents;
(b) except as set forth in SCHEDULE 3.3(b) and except as would not be
reasonably likely to, individually or in the aggregate, have a Material Adverse
Effect, conflict with, result in a default under or impairment of, give any
Person (other than a Governmental Authority) a right of termination,
cancellation, acceleration, suspension or revocation under, result in the loss
of a material benefit to any of Sellers and the Transferred Subsidiaries under,
or require any consent, waiver, approval, order or authorization under, any
Material Contract (the consents set forth on SCHEDULE 3.3(b) are hereinafter
referred to as the "THIRD PARTY CONSENTS");
(c) other than such as would not be reasonably likely to, individually
or in the aggregate, have a Material Adverse Effect, result in the creation or
imposition of any Lien other than Permitted Liens on the Business or on any of
the Acquired Assets or on the assets of any Transferred Subsidiary;
(d) except as set forth in SCHEDULE 3.3(d) and except as would not be
reasonably likely to, individually or in the aggregate, have a Material Adverse
Effect, conflict with, result in a default under or impairment of, give any
Governmental Authority a right of termination, cancellation, acceleration,
suspension or revocation under, result in the loss of a material benefit to any
of Sellers and the Transferred Subsidiaries under, or require any consent,
waiver, approval, order or authorization under, any License or Permit (the
consents set forth on SCHEDULE 3.3(d) are hereinafter referred to as the
"GOVERNMENT CONSENTS");
(e) except as would not be reasonably likely to, individually or in
the aggregate, have a Material Adverse Effect, violate any Law to which any of
Sellers or the Transferred Subsidiaries or any of their respective properties,
rights or assets are subject or by which any of Sellers or the Transferred
Subsidiaries or any of their respective properties, rights or assets are bound;
or
14
(f) except as would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect, constitute an event which,
after notice or lapse of time or both, would result in any conflict, breach,
violation, default, requirement to perform, loss, creation or imposition of any
Lien, termination or impairment or similar event described in Section 3.3(a)
through (e).
3.4 TITLE AND OWNERSHIP. Except as set forth on SCHEDULE 3.4, Sellers
possess good and valid title to and ownership of the Acquired Assets and have
the full power and authority to convey the Acquired Assets, free and clear of
any Liens other than Permitted Liens. The Acquired Assets and the Retained
Assets are the only rights, assets and properties owned by Sellers. The Acquired
Assets constitute all of the assets, rights and properties necessary for the
conduct of the Business after the Closing Date substantially in the same manner
as conducted prior to the Closing Date. As used herein "PERMITTED LIENS" means
(i) Liens disclosed in SCHEDULE 3.4, (ii) Liens reserved against in the Company
Financial Statements and the March 31, 2000 Pro Forma Financial Statements, to
the extent so reserved, (iii) Liens for Taxes not yet due and payable, (iv)
Liens that, individually and in the aggregate, do not and would not materially
detract from the value of any of the Acquired Assets or the Business or
materially interfere with the use thereof as currently used, or (v) Liens
created by operation of Law without any action on the part of the obligor
thereunder.
3.5 SUBSIDIARIES. For the purposes of this Agreement, the term
"SUBSIDIARIES" shall be construed to include, with respect to any Person,
entities of which such Person is the sole member.
(a) Except as set forth on SCHEDULE 3.5, none of Sellers or the
Transferred Subsidiaries has any subsidiaries or presently owns, of record or
beneficially, or controls, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity or membership interest in any
Person, whether active or dormant, nor is any of Sellers or the Transferred
Subsidiaries, directly or indirectly, a participant in any joint venture,
partnership, limited liability company, trust, association or other noncorporate
entity.
(b) SCHEDULE 3.5 sets forth for the Transferred Subsidiaries and all
other subsidiaries (other than Funds and SMS Hawaii), their authorized capital
and the number of shares of capital stock or other equity interests that are
issued and outstanding. Except as set forth in SCHEDULE 3.5, Group or the
subsidiary identified in SCHEDULE 3.5 is the record and beneficial owner of all
of the outstanding shares of capital stock or other equity interests of the
subsidiaries, free and clear of any Liens other than Permitted Liens,
subscriptions, options, warrants, call rights, commitments or any other
agreements, and there are no proxies with respect to any such shares, and no
equity securities of any of subsidiaries are or may become required to be issued
by reason of any options, warrants, rights to subscribe to, calls, commitments,
agreements or arrangements of any character whatsoever relating to, or
securities or rights convertible into or exchangeable or exercisable for, shares
of any capital stock of any of the subsidiaries.
15
3.6 FINANCIAL STATEMENTS.
(a) SCHEDULE 3.6(a) includes (i) the audited combined financial
statements for the years ended September 30, 1998 and 1999 (the "AUDITED
FINANCIAL STATEMENTS") and (ii) the unaudited combined financial statements as
of and for the period ended March 31, 2000 (the "UNAUDITED INTERIM FINANCIAL
STATEMENTS" and, with the Audited Financial Statements, the "COMPANY FINANCIAL
STATEMENTS"). The Company Financial Statements have been prepared in accordance
with GAAP consistently applied, subject, in the case of the Unaudited Interim
Financial Statements (x) to normal year-end audit adjustments, which
individually or in the aggregate will not be material, (y) to the omission of
footnote information and (z) the omission of a statement of cash flows. Each
balance sheet included in the Company Financial Statements presents fairly the
combined financial condition as of the dates indicated thereon, and each of the
statements of revenues and expenses included in the Company Financial Statements
presents fairly the results of operations for the periods indicated thereon.
Since the dates of the Audited Financial Statements, through the date hereof,
there have been no changes in the accounting policies of Group (including any
change in depreciation or amortization policies or rates) and no revaluation of
any of the Acquired Assets except in each case as required by GAAP.
(b) Group has made available to Buyers true, complete and correct
copies of all management letters relating to any external audit or review of the
financial statements or books of Group, and all other letters or documentation
relating to the internal controls and/or other accounting practices of Group.
(c) SCHEDULE 3.6(c) includes combined statements of financial position
of Group and its subsidiaries as of March 31, 2000 as adjusted to reflect
exclusion of the Retained Assets and the Excluded Liabilities determined as of
March 31, 2000 (the "MARCH 31, 2000 PRO FORMA BALANCE SHEETS") and the related
statement of revenues and expenses as if the Retained Assets and the Excluded
Liabilities determined as of March 31, 2000 had been excluded as of October
1,1999 (the "MARCH 31, 2000 PRO FORMA RESULTS OF OPERATIONS" and, with the March
31, 2000 Pro Forma Balance Sheets, the "MARCH 31, 2000 PRO FORMA FINANCIAL
STATEMENTS"). As promptly as practicable after June 30, 2000 (and, if the
Closing has not yet occurred, after September 30, 2000, and in any event no
later than 10 Trading Days prior to the Closing), the Sellers shall deliver to
the Buyers combined statements of financial position of Group and its
subsidiaries as of June 30, 2000 or September 30, 2000, as applicable, as
adjusted to reflect exclusion of the Retained Assets and the Excluded
Liabilities (the "PRO FORMA BALANCE SHEETS AS OF THE NET ASSET VALUE DATE") and
the related statement of revenues and expenses as if the Retained Assets and the
Excluded Liabilities had been excluded as of October 1, 1999 (the "PRO FORMA
RESULTS OF OPERATIONS AS OF THE NET ASSET VALUE DATE" and, with the Pro Forma
Balance Sheets as of the Net Asset Value Date, the "PRO FORMA FINANCIAL
STATEMENTS AS OF THE NET ASSET VALUE DATE"). The Pro Forma Financial
Statements as of the Net Asset Value Date will be prepared in accordance with
GAAP (subject to the exclusion of the Retained Assets and Excluded Liabilities
and the omission of footnote information and a statement of cash flows) and in a
manner that is consistent with the principles used to prepare the Audited
Financial Statements and presentation set forth in the March 31, 2000 Pro Forma
Balance Sheet. The March 31, 2000 Pro Forma Financial Statements present (and
the Pro Forma Financial
16
Statements as of the Net Asset Value Date will present) fairly in accordance
with GAAP (subject to the exclusion of the Retained Assets and Excluded
Liabilities and the omission of footnote information and a statement of cash
flows) and in a manner that is consistent with the principles used to prepare
the Audited Financial Statements and presentation set forth in the March 31,
2000 Pro Forma Balance Sheet the combined financial condition and results of
operations of Group and its subsidiaries excluding the Retained Assets and
the Excluded Liabilities (for the March 31, 2000 Pro Forma Financial
Statements, as of such date) for such periods, but including accounts between
Funds or SMS Hawaii, on the one hand, and Group and its other subsidiaries,
on the other hand.
(d) Except as set forth in SCHEDULE 3.6(d), Sellers and the
Transferred Subsidiaries are not subject to any Liabilities except for (i) those
Liabilities reflected or reserved against on the Audited Financial Statements
(including the notes thereto) and not previously paid or discharged, (ii)
Liabilities not required under GAAP to be included in the Audited Financial
Statements, (iii) Liabilities of Group or its subsidiaries (other than Funds and
SMS Hawaii) to Funds or SMS Hawaii of the type reflected in the March 31, 2000
Pro Forma Financial Statements and (iv) those Liabilities incurred since the
date of the Audited Financial Statements in the ordinary course of business and
consistent with past practice, which Liabilities would not, individually or in
the aggregate be of the type prohibited by Section 5.1(c). "LIABILITIES" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmature or otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured.
3.7 PERMITS. Each of Sellers and the Transferred Subsidiaries owns or
holds all Permits and Licenses the absence or loss of any of which, individually
or in the aggregate, would be reasonably likely to have a Material Adverse
Effect (the "MATERIAL PERMITS"). Each of the Material Permits are set forth on
SCHEDULE 3.7. The Material Permits and Licenses are in full force and effect,
and none of Sellers or the Transferred Subsidiaries has any notice that any
Governmental Authority intends to modify, cancel, terminate or not renew any
Material Permit or License or Knowledge of any basis for the withdrawal,
cancellation, revocation or termination of any of such Material Permits or
Licenses. The Business has been and is being conducted in compliance with the
requirements, standards, criteria and conditions set forth in the Material
Permits and other applicable Laws and is not in violation of any of the
foregoing except where such non-compliance or violation, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect.
3.8 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 3.8 or as would
not be reasonably likely to have a Material Adverse Effect:
(a) COMPLIANCE. The operations of the Sellers and the Transferred
Subsidiaries comply with all applicable federal, state, local, and foreign laws,
codes, regulations, binding requirements, binding directives, orders and common
law, and all administrative or judicial interpretations thereof that may be
enforced by any Governmental Authority, other Person or court, relating to
pollution, the protection of human health, the protection of the
17
environment, or the emission, discharge, disposal, transportation, release or
threatened release of hazardous or toxic materials in or into the environment,
including the Occupational Safety and Health Act.
(b) PERMITS. Each of Sellers and the Transferred Subsidiaries holds
all environmental Permits (the "ENVIRONMENTAL PERMITS") necessary for the
conduct of the business of such Seller or Transferred Subsidiary as such
activities and business are currently being conducted. All Environmental Permits
are in full force and effect. Each of Sellers and the Transferred Subsidiaries
is in compliance in all material respects with all terms and conditions of the
Environmental Permits. To the Knowledge of each of the Sellers, there are no
circumstances that may prevent or interfere with such compliance in the future.
SCHEDULE 3.8(b) includes a listing and description of all Environmental Permits
currently held by any of Sellers and the Transferred Subsidiaries.
(c) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Knowledge of any Seller or the Transferred Subsidiary, threatened concerning any
Environmental Permit. There are no past or present actions, activities,
circumstances, conditions, events, or incidents that could involve any of
Sellers or the Transferred Subsidiaries (or any Person whose Liability any
Seller or any Transferred Subsidiary has retained or assumed, either by contract
or operation of law) in any environmental litigation, or impose upon any Seller
or the Transferred Subsidiary (or any Person whose Liability Seller or any
Transferred Subsidiary has retained or assumed, either by contract or operation
of law) any material environmental Liability including, without limitation,
common law tort liability.
3.9 REAL PROPERTY
(a) SCHEDULE 3.9(a) contains a complete and accurate description of
all interests in real property, including without limitation fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses and all
buildings and other improvements thereon, together with any additions thereto or
replacements thereof, owned, leased or licensed by any of Sellers or the
Transferred Subsidiaries (the "REAL PROPERTY").
(b) Except as set forth in SCHEDULE 3.9(b) and except as would not be
reasonably likely to have a Material Adverse Effect:
(i) Sellers and the Transferred Subsidiaries own good, valid and
insurable title to all of the Real Property owned by any of Sellers or the
Transferred Subsidiaries, in fee simple and in each case free and clear of all
Liens other than Permitted Liens, title defects, leases, licenses, covenants,
conditions, restrictions, easements or other title matters;
(ii) The Real Property and its continued use, occupancy and
operation as used, occupied and operated in the conduct of the Business do not
constitute a nonconforming use and are not the subject of a special use permit
under any applicable Law. No condemnation
18
or similar proceeding is pending or, to the Knowledge of Sellers, threatened,
that would preclude or impair the use of any of the Real Property for the
purposes for which it is currently used;
(iii) None of Sellers or the Transferred Subsidiaries have
received any notice claiming any violation of any Law, or requiring or calling
attention to the need for any work, repairs, maintenance, construction,
alterations, or installations on or in connection with such Real Property that
has not been complied with in all material respects;
(iv) There are no Persons other than Sellers and the Transferred
Subsidiaries in possession of any of the Real Property or any portion thereof;
and
(v) All buildings, structures, appurtenances, mechanical, plumbing
electrical and other improvements and building systems situated on the Real
Property are in good operating condition and have no patent or latent structural
defects, including without limitation any defects in the roof, structure or
foundation.
3.10 LEASES. SCHEDULE 3.10 sets forth a list of each material written
lease, sublease or similar agreement (including all amendments, renewals,
extensions, modifications or supplements thereto) relating to any, or included
in the, Acquired Assets or to which a Transferred Subsidiary is a party
(individually, a "LEASE" and collectively, the "LEASES"). Each Lease that is
identified on SCHEDULE 3.10 is in full force and effect and enforceable against
each Seller or Transferred Subsidiary that is a party thereto, in accordance
with its terms, and there does not exist any material violation, breach or
default, nor any event which with the giving of notice or passage of time, or
both, would constitute a violation, breach or default, by any party thereto
except as would not be reasonably likely to have a Material Adverse Effect. None
of Sellers or the Transferred Subsidiaries has received notice of default under
any Leases, and to the Knowledge of Sellers there are no material maintenance or
capital improvement obligations thereon in an amount over $250,000. No Lease is
subject or subordinate to any Lien, except where subordination individually or
in the aggregate would not be reasonably likely to have a Material Adverse
Effect. Prior to the date hereof, Sellers and the Transferred Subsidiaries have
made available to Buyers copies of the Leases and all material correspondence
related thereto.
3.11 MATERIAL CONTRACTS AND COMMITMENTS
(a) Except for (A) student loan contracts with individual borrowers
and (B) student loan purchase contracts in which no further loan purchases or
sales by any of the Sellers or Transferred Subsidiaries is expected or required,
SCHEDULE 3.11(a) contains an accurate list (as of the date hereof) of:
(i) all (A) Assumed Contracts and (B) Contracts to which any of
the Transferred Subsidiaries is a party, in each case that involve the provision
of services or the payment of goods and/or services in an amount exceeding $1
million and that are not terminable upon 90 days' notice or less by, and without
penalty to or the acceleration of obligations of, the relevant Seller or
Transferred Subsidiary, or that are otherwise material to any Transferred
Subsidiary or the conduct of the Business;
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(ii) all (A) Assumed Contracts and (B) Contracts to which any of
the Transferred Subsidiaries is a party, that in each case is between (x) a
Seller or a Transferred Subsidiary and (y) any current or former officer,
director, stockholder, manager, member, employee or Affiliate thereof or of any
Seller or Transferred Subsidiary in any such case involving payments or
outstanding obligations of $60,000 or more individually in any one year;
(iii) each loan or credit agreement, security agreement,
guaranty, indenture, mortgage, pledge, conditional sale or title retention
agreement, equipment obligation, lease purchase agreement or other instrument
evidencing indebtedness of any Seller or Transferred Subsidiary, or to which any
Seller or Transferred Subsidiary is a party or by which any Seller or
Transferred Subsidiary or any of the Acquired Assets are bound, in each case
involving the payment or receipt of more than $1 million and that is not
terminable upon 90 days' notice or less by, and without penalty to or the
acceleration of obligations of, the relevant Seller or Transferred Subsidiary;
(iv) all Contracts which involve the licensing to or from any
Seller or Transferred Subsidiary of any intellectual or intangible property
material to the conduct of the Business other than such Contracts as would not
be reasonably likely to have a Material Adverse Effect;
(v) all Contracts relating to any Seller or Transferred
Subsidiary, or to which any Seller or Transferred Subsidiary is a party or by
which any of the Acquired Assets are bound, which contain any non-solicitation,
non-competition or similar obligations or which otherwise prohibit any Seller or
Transferred Subsidiary from freely providing services or supplying products to
any customer or potential customer other than such Contracts as would not be
reasonably likely to have a Material Adverse Effect;
(vi) any Contract for the cleanup, abatement or other actions in
connection with any hazardous material, the remediation of any existing
environmental liabilities, violation of any environmental Laws or relating to
the performance of any environmental audit or study; and
(vii) any joint venture, partnership or similar contract or
agreement.
Subsections (i) through (vii) of this Section 3.11(a) and the Leases are
collectively referred to as the "MATERIAL CONTRACTS." Sellers have made
available to Buyers true, complete and correct copies of each of the Material
Contracts.
(b) Each Material Contract is in full force and effect and is a legal,
valid, binding and enforceable obligation of or against each Seller or
Transferred Subsidiary that is a party thereto. None of Sellers or the
Transferred Subsidiaries nor any other party to any Material Contract is
currently in breach of or in default under, or has improperly terminated any
Material Contract, and there exists no condition or event which, after notice or
lapse of time or both, would constitute any such breach, default or termination,
except for breaches, defaults or terminations that would not be reasonably
likely to have a Material Adverse Effect.
20
(c) Except as specifically contemplated by this Agreement, as set
forth in SCHEDULE 3.11(c), or as would not be reasonably likely to have a
Material Adverse Effect (i) since March 31, 2000, through the date hereof, no
customer or supplier that is a party to a Material Contract has to the Knowledge
of Sellers or the Transferred Subsidiaries indicated in writing that it intends
to stop or decrease the rate of business done with Sellers or the Transferred
Subsidiaries, or that it desires to renegotiate its contract with Sellers or the
Transferred Subsidiaries, (ii) as of the date hereof, Sellers and the
Transferred Subsidiaries have performed all the obligations required to be
performed in connection with the contracts or commitments required to be
disclosed on SCHEDULE 3.11(a), (iii) as of the date hereof, none of Sellers or
the Transferred Subsidiaries has a present expectation or intention of not fully
performing any obligation pursuant to any contract set forth on SCHEDULE
3.11(a), and (iv) as of the date hereof, Sellers have no Knowledge of any breach
or anticipated breach by any other party to any contract set forth on SCHEDULE
3.11(a).
3.12 INSURANCE. SCHEDULE 3.12 sets forth an accurate list of all material
insurance policies carried by the Sellers and the Transferred Subsidiaries.
Sellers have made available to Buyers a true, complete and correct schedule of
all such insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and each of Sellers and
the Transferred Subsidiaries are otherwise in material compliance with the terms
of such policies. Such policies of insurance provide adequate insurance in the
reasonable judgment of Sellers for the Acquired Assets and comply with all
applicable Laws. To Sellers' Knowledge, as of the date hereof, there have been
no threatened terminations of, or material premium increases with respect to,
any of such policies.
3.13 LABOR AND EMPLOYMENT MATTERS. With respect to employees of and service
providers to Sellers and the Transferred Subsidiaries:
(a) Sellers and the Transferred Subsidiaries are complying and have
complied in all respects except for failures to comply that would not be
reasonably likely to have a Material Adverse Effect with all applicable domestic
and foreign laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and no claims or investigations are pending or,
to Sellers' Knowledge, threatened with respect to such laws, either by private
individuals or by governmental agencies;
(b) no Seller or Transferred Subsidiary is or has been engaged in any
unfair labor practice, and there is not as of the date hereof, nor within the
past three years has there been, any unfair labor practice complaint against any
Seller or Transferred Subsidiary pending or, to Sellers' Knowledge, threatened,
before the National Labor Relations Board or any other comparable foreign or
domestic authority or any workers' council;
(c) no labor union represents or within the past three years has
represented Sellers' or the Transferred Subsidiaries' employees and no
collective bargaining agreement is or within the past three years has been
binding against any Seller or Transferred Subsidiary. No
21
Seller or Transferred Subsidiary is currently negotiating to adopt a collective
bargaining agreement. Except as set forth in SCHEDULE 3.13(c), no grievance or
arbitration proceeding arising out of or under collective bargaining agreements
or employment relationships is pending, and no claims therefore exist or have,
to Sellers' Knowledge, been threatened;
(d) no labor strike, lock-out, slowdown, or work stoppage is or within
the past three years has been pending or threatened against or directly
affecting any Seller or Transferred Subsidiary; and
(e) all persons who are or were performing services for any Seller or
Transferred Subsidiary and are or were classified as independent contractors do
or did satisfy and have satisfied the requirements of law to be so classified,
and the appropriate Seller or Transferred Subsidiary has fully and accurately
reported their compensation on IRS Forms 1099 when required to do so, except in
each case as would not be reasonably likely to have a Material Adverse Effect.
3.14 EMPLOYEE BENEFIT PLANS
(a) For the purposes of this Agreement:
(i) "BENEFIT ARRANGEMENT" means any benefit arrangement,
obligation, or practice, whether or not legally enforceable, to provide benefits
(other than merely as salary or under a Benefit Plan), as compensation for
services rendered, to present or former directors, employees, agents, or
independent contractors, including, but not limited to, employment or consulting
agreements, severance agreements or pay policies, stay or retention bonuses or
compensation, executive or incentive compensation programs or arrangements, sick
leave, vacation pay, plant closing benefits, salary continuation for disability,
workers' compensation, retirement, deferred compensation, bonus, stock option or
purchase, tuition reimbursement or scholarship programs, employee discount
programs, meals, travel, or vehicle allowances, any plans subject to Section 125
of the Code, and any plans providing benefits or payments in the event of a
change of control, change in ownership or effective control, or sale of a
substantial portion (including all or substantially all) of the assets of any
business or portion thereof, in each case with respect to any present or former
employees, directors, or agents.
(ii) "BENEFIT PLAN" means an employee benefit plan as defined in
Section 3(3) of ERISA, together with plans or arrangements that would be so
defined if they were not (i) otherwise exempt from ERISA by that or another
section, (ii) maintained under non-U.S. law, or (iii) individually negotiated or
applicable only to one person.
(iii) "COMPANY BENEFIT ARRANGEMENT" means any Benefit Arrangement
Sellers or the Transferred Subsidiaries sponsor or maintain or with respect to
which Sellers or the Transferred Subsidiaries have or may have any current or
future liability (whether actual, contingent, with respect to any of its assets
or otherwise), in each case with respect to any present or former directors,
employees, or service providers to Sellers or the Transferred Subsidiaries.
22
(iv) "COMPANY PLAN" means any Benefit Plan that Sellers or the
Transferred Subsidiaries maintain or have maintained or to which Sellers or the
Transferred Subsidiaries are obligated to make payments or have or may have any
liability, in each case with respect to any present or former employees of
Sellers or the Transferred Subsidiaries.
(v) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(vi) "ERISA AFFILIATE" means any person or entity that, together
with the entity referenced, would be or was at any time treated as a single
employer under Code Section 414 or ERISA Section 4001 and any general
partnership of which such entity is or has been a general partner.
(vii) "PENSION PLAN" means any plan subject to Code Section 412
or ERISA Section 302 or Title IV (including any Multiemployer Plan) or any
comparable benefit plan not covered by ERISA.
(viii) "QUALIFIED PLAN" means any Company Plan intended to meet
the requirements of Section 401(a) of the Code, including any already terminated
plan.
(b) SCHEDULE 3.14(b) contains a complete and accurate list of all
material Company Plans and Company Benefit Arrangements, and specifically
identifies all Company Plans that are Qualified Plans.
(c) With respect, as applicable, to Company Plans and Company Benefit
Arrangements:
(i) Sellers have made available to Buyers true, correct, and
complete copies of the following documents with respect to all Company Plans and
Company Benefit Arrangements: (A) all plan or arrangement documents, including
but not limited to trust agreements, insurance policies, service agreements, and
formal and informal amendments to each; (B) the most recent Forms 5500 or
5500C/R and any attached financial statements and related actuarial reports, and
those for the prior two years; (C) the last IRS determination letter, the last
IRS determination letter that covered the qualification of the entire plan (if
different), and the materials submitted to obtain those letters; (D) summary
plan descriptions and summaries of material modifications, and any prospectuses
that describe the Company Benefit Arrangements or Company Plans; (E) written
descriptions of all non-written agreements relating to any such plan or
arrangement; (F) all notices that the IRS, Department of Labor, or any other
governmental agency or entity issued to Sellers or the Transferred Subsidiaries
within the two years preceding the date of this Agreement; (G) employee manuals
or handbooks containing personnel or employee relations policies, and (H) the
most recent quarterly listing of workers' compensation claims and a schedule of
workers' compensation claims of Sellers and the Transferred Subsidiaries for the
last two fiscal years;
(ii) Except with respect to certain previously disclosed and
minor operational defects for which relief is available under the Employee Plans
Compliance
23
Resolution System, the Qualified Plans qualify under Section 401(a) and 403(b)
of the Code, and nothing has occurred with respect to the operation of the
Qualified Plans that could cause the imposition of any liability, lien, penalty,
or tax under ERISA or the Code; each Company Plan and each Company Benefit
Arrangement has been maintained in all material respects in accordance with its
constituent documents and with all applicable provisions of domestic and foreign
laws, including federal and state securities laws and any reporting and
disclosure requirements; with respect to each Company Plan, no transactions
prohibited by Code Section 4975 or ERISA Section 406 and no breaches of
fiduciary duty described in ERISA Section 404 have occurred; and no Company Plan
contains any security issued by Sellers, the Transferred Subsidiaries or any
ERISA Affiliate.
(iii) Except as set forth in SCHEDULE 3.14(c)(iii), with respect
to each Pension Plan, (A) neither Sellers nor the Transferred Subsidiaries nor
any ERISA Affiliate has terminated or withdrawn or sought a funding waiver, and
no facts exist that could reasonably be expected to cause such actions; (B) no
accumulated funding deficiency (under Code Section 412) exists or, within the
past five years, has existed; (C) no reportable event (as defined in ERISA
Section 4043) has occurred; (D) all costs have been provided for on the basis of
consistent methods in accordance with sound actuarial assumptions and practices;
(E) the assets, as of its last valuation date, exceeded its "BENEFIT
LIABILITIES" (as defined in ERISA Section 4001(a)(16)); and (F) since the last
valuation date, there have been no amendments or changes to increase the amounts
of benefits and, to Sellers' Knowledge nothing has occurred that would reduce
the excess of assets over benefit liabilities in such plans;
(iv) there are no pending claims (other than routine benefit
claims) or lawsuits that have been asserted or instituted by, against, or
relating to, any Company Plans or Company Benefit Arrangements, nor, to the
Knowledge of Sellers, is there any basis for any such claim or lawsuit. No
Company Plans or Company Benefit Arrangements are or have been under audit or
examination (nor has notice been received of a potential audit or examination)
by any domestic or foreign governmental agency or entity (including the IRS and
Department of Labor); and, except as set forth in SCHEDULE 3.14(c)(iv), no
matters are pending under the IRS's Employee Plans Compliance Resolutions System
or any successor or predecessor program;
(v) Except as set forth in SCHEDULE 3.14(c)(v), no Company Plan
or Company Benefit Arrangement contains any provision or is subject to any law
that would accelerate or vest any benefit or require severance, termination or
other payments or trigger any liabilities as a result of the transactions this
Agreement contemplates; Sellers and the Transferred Subsidiaries have not
declared or paid any bonus or incentive compensation related to the transactions
this Agreement contemplates except to the extent any such bonus or incentive
compensation is an Excluded Liability.
(vi) Sellers and the Transferred Subsidiaries have paid all
amounts they are required to pay as contributions to the Company Plans as of
March 31, 2000; all benefits accrued under any unfunded Company Plan or Company
Benefit Arrangement will have been paid, accrued, or otherwise adequately
reserved in accordance with GAAP as of March 31, 2000; all monies withheld from
employee paychecks for Company Plans have been transferred to the relevant plan
within the time applicable regulations specify; and
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(vii) all group health plans of Sellers and the Transferred
Subsidiaries and their ERISA Affiliates materially comply with the requirements
of Part 6 of Title I of ERISA ("COBRA"), Code Section 5000, and the Health
Insurance Portability and Accountability Act; neither Sellers nor any
Transferred Affiliate has any liability under or with respect to COBRA for its
own actions or omissions or those of any predecessor; neither the Sellers nor
the Transferred Subsidiaries maintain any voluntary employee beneficiary
association; no employee or former employee (or beneficiary of either) of
Sellers or the Transferred Subsidiaries is entitled to receive any death or
medical benefits (whether or not insured) beyond retirement or other termination
of employment, other than as applicable law requires.
3.15 CONFORMITY WITH LAW. Each of Sellers and the Transferred
Subsidiaries is and has been in compliance with, and has conducted its
respective business and owned, used, operated and maintained its respective
properties, rights and assets in full compliance with, all applicable Laws of
any Governmental Authority except where the failure to do so would not be
reasonably likely to have a Material Adverse Effect. None of Sellers or the
Transferred Subsidiaries (a) is now in violation of any applicable Laws of any
Governmental Authority, or (b) has notice of any alleged or threatened claims,
violation of, liability or potential responsibility under any Law, except for
such violations as would not reasonably be likely to have a Material Adverse
Effect.
3.16 LITIGATION. Except as set forth on SCHEDULE 3.16, there are no
claims, actions, suits, proceedings, arbitrations, governmental investigations
or inquiries pending or, to the Knowledge of Sellers, threatened, against or
affecting any of Sellers or the Transferred Subsidiaries, any of their
respective assets, rights or properties that would be reasonably likely to have
a Material Adverse Effect, or seek to prevent or delay the transactions
contemplated under this Agreement and no notice of any such claim, action, suit,
proceeding, governmental investigation or inquiry, whether pending or
threatened, has been received by any of Sellers or the Transferred Subsidiaries.
There are no judgments, orders, injunctions, decrees, stipulations or awards
(whether rendered by a court, administrative agency, Governmental Authority, by
arbitration or otherwise) against any of Sellers or the Transferred Subsidiaries
or any of their respective businesses, or against any of the Acquired Assets
that would be reasonably likely to have a Material Adverse Effect.
3.17 INTELLECTUAL PROPERTY. The Sellers and the Transferred
Subsidiaries own the material intellectual property listed in SCHEDULE 3.17.
Except as set forth in SCHEDULE 3.17 or except as would not be reasonably likely
to have a Material Adverse Effect, one of the Sellers or Transferred
Subsidiaries owns or possesses valid licenses to all other intellectual property
used primarily in or necessary to the conduct of the Business as now operated
and all such intellectual property owned by any Seller is included in the
Acquired Assets. Except as set forth in SCHEDULE 3.17, to Sellers' Knowledge,
the conduct of the Business does not infringe on the intellectual property of
any other party, nor, to the Knowledge of Sellers, has there been any written
allegation thereof. To Sellers' Knowledge, there is not currently and has not
been any infringement by others of any of the intellectual property that would
be reasonably likely to have a Material Adverse Effect.
25
3.18 BOOKS AND RECORDS. Each of Sellers and the Transferred
Subsidiaries has made and kept (and given Buyers access to) business records
which, in reasonable detail, accurately and fairly reflect the activities of
each of the Sellers and the Transferred Subsidiaries (the "BOOKS AND RECORDS").
None of Sellers or the Transferred Subsidiaries has engaged in any transaction,
maintained any bank account or used any corporate funds except for transactions,
bank accounts and funds which have been and are reflected in its normally
maintained Books and Records.
3.19 TAXES
(a) All income Tax Returns and all other material Tax
Returns required to be filed on or before the date hereof by or on behalf of
Sellers and the Transferred Subsidiaries have been duly filed, and all such Tax
Returns are true, correct, and complete in all respects.
(b) All Taxes required to be paid by the Transferred
Subsidiaries have been paid, whether or not shown on any Tax Return. All Taxes
owed with respect to the Acquired Assets shown as due on any Tax Return have
been paid.
(c) The amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) reflected on the balance sheets
included in the Company Financial Statements accurately reflects, in accordance
with the accounting standards set forth in Section 3.6(a), the amount of the
Transferred Subsidiaries' liability for unpaid Taxes, as of the date thereof.
The amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals are reflected on the books and records of the
Transferred Subsidiaries as of Net Asset Value Date accurately reflects, in
accordance with GAAP, the amount of the Transferred Subsidiaries' liability for
unpaid Taxes for all periods or portions thereof ending on or before the Net
Asset Value Date .
(d) Except as set forth in SCHEDULE 3.19(d), no Tax
Proceedings are presently pending or threatened, in writing or, if not in
writing, to the Knowledge of Sellers, with regard to any Tax Return or Taxes of
the Sellers or the Transferred Subsidiaries; no notice has been received from
any governmental authority of the expected commencement of such a Tax
Proceeding; and there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns filed or required
to be filed by or with respect to the Sellers or the Transferred Subsidiaries;
and, except as shown on SCHEDULE 3.19(d), no extension of time within which to
file any Tax Return of the Transferred Subsidiaries has been requested for any
Tax Return which has not yet been filed.
(e) No later than 10 days after the date of this
Agreement the Sellers will have made available to Buyers for physical inspection
(i) true and complete copies of all Tax Returns of the Transferred Subsidiaries
and any income Tax Returns or other material Tax Returns of the Sellers
reasonably requested by Buyers, previously filed for Taxable periods ending
after September 30, 1995 (including any available list of tax elections relating
to items reflected on such Tax Returns); (ii) a complete listing of the
Transferred Subsidiaries' tax basis in their material assets (the accuracy of
which shall not be a basis for any claim by Buyers under this
26
Agreement); and (iii) a copy of any written ruling, closing agreement or similar
written binding agreement with a Taxing Authority relating to Taxes received or
entered into (x) by the Transferred Subsidiaries or (y) with respect to the
Acquired Assets.
(f) None of the assets of any of the Transferred
Subsidiaries is "tax exempt use property" within the meaning of Section 168(h)
of the Internal Revenue Code of 1986, as amended (the "CODE"). None of the
Transferred Subsidiaries is a party to any "long term contract" within the
meaning of Section 460 of the Code.
(g) None of the Transferred Subsidiaries is required to
include any adjustment increasing taxable income for any Taxable Period or
portion thereof that ends after the Closing Date under Section 481(a) of the
Code (or any similar provision of state, local or foreign law) as a result of a
method of accounting in use for a Taxable Period ending on or before the Closing
Date, and no application is presently pending with any governmental authority
requesting permission for any change in accounting methods relating to or
affecting the Transferred Subsidiaries. Each Transferred Subsidiary presently
uses the accrual method of accounting for income tax purposes.
(h) Except as set forth on SCHEDULE 3.19(h), the
Transferred Subsidiaries have not entered into any contracts, agreements, plans
or arrangements covering any employee or former employee of any Transferred
Subsidiary that, individually or collectively could give rise to the payment of
any amount (or portion thereof) that would not be deductible pursuant to
Sections 280G, 404 or 162 of the Code. Except as set forth on SCHEDULE 3.19(h),
none of the obligations assumed by Buyers under this Agreement with respect to
any employee of any Seller, individually or collectively, could give rise to the
payment of any amount (or portion thereof) that would not be deductible pursuant
to Sections 280G, 404 (except if such nondeductability is attributable to a
qualification defect in Buyers' plan) or 162 of the Code. The parties do not
intend the second sentence of this Section 3.19(h) to cover agreements that
first become effective on or after the Closing Date, including those described
in Section 6.3.
(i) None of the Transferred Subsidiaries is or has been a
member of an affiliated, consolidated, combined, unitary or similar group in any
year for which the statute of limitations for assessment or collection of tax
has not expired, other than a group of which Enterprises is the common parent,
and no corporation, other than the Transferred Subsidiaries, is a member of the
consolidated group as defined in the U.S. Treasury consolidated return
regulations, of which Enterprises is the common parent.
(j) No Transferred Subsidiary (i) is a party to any Tax
allocation, Tax indemnity, tax sharing agreement, other than a tax sharing
agreement to which the Transferred Subsidiaries are the only parties and a copy
of which has been provided to Buyers, or any similar arrangement pursuant to
which it has agreed to be liable for Taxes of any other Person or (ii) has any
liability for Taxes of any other Person as a transferee or successor.
27
(k) Except as set forth on SCHEDULE 3.19(k), none of the
Transferred Subsidiaries is a party to any joint venture, partnership or other
arrangement that is treated as a partnership for federal income tax purposes.
(l) No claim has ever been made by any governmental
authority in a jurisdiction where the Transferred Subsidiaries do not file Tax
Returns that they have or may be subject to taxation by that jurisdiction, and
none of the Transferred Subsidiaries has received any notice, or request for
information from any such authority, except for a claim or notice that has been
finally resolved and for which any Taxes have been paid.
(m) There are, and immediately following the Closing
there will be, no Liens other than Permitted Liens, on or with respect to (i)
the assets of the Transferred Subsidiaries or (ii) the Acquired Assets or the
Business relating or attributable to Taxes.
(n) No deficiencies for any Taxes have been asserted or
assessed, in writing or, if not in writing, to the Knowledge of Sellers, against
any of Sellers or the Transferred Subsidiaries which, if unpaid, might result in
a Lien, other than a Permitted Lien, on any of the Acquired Assets, the
Business, or the assets of the Transferred Subsidiaries.
(o) The Transferred Subsidiaries, and the Sellers to the
extent of any income and employment tax information or withholding requirements
with respect to employees or independent contractors, have withheld and paid
over to the proper Taxing Authority all Taxes required to have been withheld or
otherwise collected or paid over, and complied with all information and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, creditor,
independent contractor or third party.
(p) None of the Acquired Assets or the assets of the
Transferred Subsidiaries directly or indirectly secures any debt, the interest
on which is tax exempt under Section 103(a) of the Code.
(q) Each of (i) the sale of the Acquired Assets to Buyers
pursuant to the terms and conditions of this Agreement, including the assumption
pursuant to Section 1.1(f) of this Agreement of the Guarantee Services Agreement
for Funds, the Default Aversion Agreement for Funds and the Administrative
Services Agreement, all dated October 1, 1999, (ii) the terms, as described in
SCHEDULE 6.3, of the employment agreement with the individual identified in
SCHEDULE 6.3 and, (iii) to the extent required, any options set forth in
SCHEDULE 5.3(k)(xii), the amounts and recipients of which are designated by
Sellers pursuant to Section 5.3(k)(xii), granted to any officers or employees of
Sellers who are expected to continue with the Business who are "disqualified
persons" (as defined in Section 4958(f)(1) of the Code and the regulations
thereunder) with respect to Sellers, have been (or, with respect to such
options, prior to the Closing will be) approved by the governing body of Group
and the appropriate Sellers, or a committee of the governing body of Group and
the appropriate Sellers, composed entirely of individuals who do not have a
conflict of interest (within the meaning of Proposed Treas. Reg. Section
28
53.4958-6(d)(1)(iii)) with respect thereto. In determining whether to provide
such approval, such governing body or committee has relied (or will rely) on
"appropriate data as to comparability" (within the meaning of Proposed Treas.
Reg. Section 53.4958-6(d)(2)) and in the case of any option described in clause
(iii) above will take into account the total compensation arrangement of the
recipient. The minutes of the governing body or committee will adequately
document the basis for such approval (within the meaning of Proposed Treas. Reg.
Section 53.4958-6(d)(3)).
(r) For purposes of this Agreement:
(i) "PRE-VALUE DATE PERIOD" means any Taxable Period or
portion thereof ending on or before the Net Asset Value Date.
(ii) "TAX" (including with correlative meaning the terms
"TAXES" and "TAXABLE") means (a) all foreign, federal, state, local and other
income, gross receipts, sales, use, ad valorem, value-added, intangible,
unitary, withholding, transfer, franchise, license, payroll, employment,
estimated, excise, environmental, stamp, occupation, premium, property,
prohibited transactions, windfall or excess profits, customs, duties or other
taxies, levies, fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or additional amounts with
respect thereto, (b) any liability for payment of amounts described in clause
(a) as a result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (c) any liability for payment of amounts described in
clause (a) or (b) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to indemnify any
other person for Taxes.
(iii) "TAXABLE PERIOD" means any taxable year or other
period that is treated as a taxable year with respect to which any Tax may be
imposed under any applicable statute, rule or regulation.
(iv) "TAX PROCEEDING" means any action, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) relating to Taxes or Tax Returns initiated or
continued by a Taxing Authority.
(v) "TAX RETURN" means any return (including any
information return), report, statement, schedule, notice, form, estimate or
declaration of estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any Tax.
(vi) "TAXING AUTHORITY" means any governmental agency,
board, bureau, body, department or authority of any United States federal, state
or local jurisdiction or any foreign jurisdiction, having jurisdiction with
respect to any Tax.
29
3.20 ABSENCE OF CHANGES. Since March 31, 2000, each of Sellers and
the Transferred Subsidiaries has conducted its respective business in the
ordinary course consistent with past practice and except as set forth on
SCHEDULE 3.20, there has not been:
(a) any change that by itself or together with other
changes, would be reasonably likely to have a Material Adverse Effect, excluding
for purposes of this Section 3.20 any changes to the extent they arise from (i)
prevailing market conditions that affect Sellers and other businesses
substantially similar to the Sellers or the Transferred Subsidiaries in a
similar manner or (ii) the disclosure of the transactions contemplated by this
Agreement;
(b) any damage, destruction or loss (whether or not
covered by insurance) that, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect;
(c) any change in the authorized capital of any of
Sellers or the Transferred Subsidiaries or in their respective outstanding
securities or any change in their respective ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments with respect to
the securities of any of Sellers or the Transferred Subsidiaries;
(d) any declaration or payment of any dividend or
distribution in respect of the capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock, of any of
the Transferred Subsidiaries;
(e) any increase in the compensation, bonus, sales
commissions or fee arrangements payable or to become payable by any of Sellers
or the Transferred Subsidiaries to any of their respective officers, directors,
stockholders, employees, consultants or agents, except for ordinary and
customary bonuses and salary increases for employees in accordance with past
practice and for compensation for persons who will be retained by Sellers or
Funds after the transactions contemplated by this Agreement;
(f) any work interruptions, labor grievances or claims
filed, or any similar event or condition of any character that would be
reasonably likely to have a Material Adverse Effect;
(g) any sale or transfer, or any agreement to sell or
transfer, any of the Acquired Assets to any Person, in each case outside the
ordinary course of business;
(h) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any material property, rights or assets of
any Person, in each case outside the ordinary course of business;
(i) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to any of Sellers or the Transferred
Subsidiaries in an amount exceeding
30
$500,000, including without limitation any indebtedness or obligation of any
current or former officer, director, manager, member, stockholder or employee of
any of the Sellers or the Transferred Subsidiaries;
(j) as of the date hereof, any breach, amendment that has
a material effect on the rights or obligations of Sellers or the Transferred
Subsidiaries, or termination or non-renewal of any Material Contract or Material
Permit;
(k) any capital expenditure or entry into any commitment
or contract by any of Sellers or the Transferred Subsidiaries, either
individually or in the aggregate, involving an obligation of more than
$1,000,000;
(l) any incurrence, creation, or placement of any Lien
other than Permitted Liens on any of the Acquired Assets, or the allowance or
permission of the same;
(m) any material loan by any of Sellers or the
Transferred Subsidiaries to, incurring by any of Sellers or the Transferred
Subsidiaries of any material indebtedness, guaranteeing by any of Sellers or the
Transferred Subsidiaries of any material indebtedness, issuance or sale of a
material amount of debt securities of any of Sellers or the Transferred
Subsidiaries or guaranteeing of a material amount of debt securities of others;
(n) negotiation or agreement by any of Sellers or the
Transferred Subsidiaries or any officer, director, or agent thereof to do any of
the things described in the preceding clauses (a) through (p) (other than
negotiations with Buyers and their representatives regarding the transactions
contemplated by this Agreement);
(o) any action which, if taken after the date of this
Agreement without Buyers' consent, would constitute a breach under Section
5.1(b).
3.21 DISCLOSURE. The representations and warranties contained in
this Section 3 (including, without limitation, the representations and
warranties contained in the Disclosure Schedule) do not contain a misstatement
of a material fact and do not omit to state any material fact necessary to make
the information provided not misleading.
3.22 COMPLIANCE WITH THIRD-PARTY SERVICER REGULATIONS. Sellers
and the Transferred Subsidiaries are, as of the Closing Date, in material
compliance with all applicable substantive requirements set forth in 34
C.F.R. Sections 668 and 682 regarding qualification and performance as a
third-party servicer (as such term is defined in such Sections) for all
entities for which Sellers or the Transferred Subsidiaries act as third-party
servicers, without regard to the dates of effectiveness and/or implementation
of such Sections.
3.23 LIABILITY FOR LOAN SERVICING. SCHEDULE 3.23 sets forth (i) a
summary of loans serviced by Sellers and insurance or guarantee claim denials by
the guarantor or the Department of Education or the Secretary of Health and
Human Services for fiscal years 1997 through 1999
31
and (ii) any other claims (other than borrower complaints) with respect to
guarantee servicing or to the servicing, origination or disbursement of loans
which have resulted, or may result, in liability to Sellers and the Transferred
Subsidiaries that have not been remedied or cured and which would create a
Material Adverse Effect as of May 31, 2000 (and Sellers shall update such
schedule as of a date three days prior to Closing to reflect changes since May
31, 2000).
3.24 STUDENT LOAN PORTFOLIO
(a) For the purposes of this Agreement:
(i) "ACT" means Part B of Title IV of the Higher
Education Act of 1965, as amended (20 U.S.C.Section1071 et seq.).
(ii) "ELIGIBLE INSURER" means with respect to
loans made under the Act, the Secretary or any agency or non-profit institution
or organization with whom the Secretary has an agreement under Section 428(b) of
the Act.
(iii) "FFELP" means the Federal Family Education
Loan Program created by the Act, as amended.
(iv) "FFELP LOAN PORTFOLIO" means any and all
loans held by any of the Sellers and the Transferred Subsidiaries that are
student loans insured under FFELP.
(v) "NOTE" means, in the case of student loans
insured under FFELP, the promissory note of a borrower and any amendment thereto
evidencing a borrower's obligation in the form consistent with the Act or in the
form consistent with a multiparty agreement and, in the case of other student
loans originated or held by any of the Sellers or the Transferred Subsidiaries,
the promissory note in the forms provided to Buyers on the date hereof.
(vi) "PRIVATE LOAN PORTFOLIO" means any and all
private education loans originated or held by any of Sellers and the Transferred
Subsidiaries other than student loans insured under FFELP.
(vii) "REGULATIONS" means any rule, regulation,
instruction or procedure issued by the Secretary under the Act or by an Eligible
Insurer.
(viii) "STUDENT LOAN PORTFOLIO" means the
combination of the FFELP Loan Portfolio and the Private Loan Portfolio.
(b) Bank One, NA serves as eligible lender trustee
("ELIGIBLE LENDER TRUSTEE") on behalf of SMS and in that capacity holds legal
title to, and is the sole owner of, the FFELP Loan Portfolio free and clear of
all Liens other than as set forth in SCHEDULE 3.24(b). SMS has good title to,
and are the sole owners of, the Private Loan Portfolio, free and clear of all
Liens other than as set forth in SCHEDULE 3.24(b).
32
(c) Except as would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect with respect
to the Student Loan Portfolio, there exists a student loan file pertaining to
each loan in the Student Loan Portfolio containing substantially all documents
customarily contained in a student loan file. The files referred to in the
previous sentence are currently in the possession or control of the servicer or
the Eligible Lender Trustee.
(d) Except as would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect with respect
to the Student Loan Portfolio, each of the loans in the Student Loan Portfolio
is in full force and effect and is a legal, valid and binding obligation of each
respective borrower thereunder in accordance with its terms, except for such
loans noted on the Sellers' and the Transferred Subsidiaries' or any servicer's
books and records as being subject to bankruptcy proceedings.
(e) Except as would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect with respect
to the Student Loan Portfolio, each loan in the FFELP Loan Portfolio has been
duly originated and serviced with due diligence in accordance with the Act and
Regulations.
(f) Except as would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect with respect
to the Student Loan Portfolio, each loan in the Private Loan Portfolio has been
duly originated and serviced in accordance with the credit and collection
policies as in effect from time to time as set forth in SCHEDULE 3.24(f).
(g) Sellers and the Transferred Subsidiaries have
exercised due diligence and reasonable care (or have caused their servicing
agent to exercise due diligence and reasonable care) in originating, purchasing,
administering, servicing and collecting the loans in the Student Loan Portfolio
during the time the loans have been beneficially owned by Sellers and the
Transferred Subsidiaries. If a loan was not made or serviced by or on behalf of
Sellers or the Transferred Subsidiaries, Sellers and the Transferred
Subsidiaries have evidence that due diligence and reasonable care were exercised
in making and servicing the loans prior to the time the loan was acquired by
Sellers.
(h) If any Seller or Transferred Subsidiary is not the
original payee of any Note, such Note has been duly and effectively transferred
to the applicable Seller or Transferred Subsidiary or the Eligible Lender
Trustee in accordance with all applicable requirements (including, with respect
to FFELP loans, the requirements of the Act and Regulations) and such Note does
not require the obligor to consent to transfer, sale or assignment of the rights
and duties of the holder thereof and does not contain any provision that
restricts the ability of the holder thereof or Buyers to exercise their rights
thereunder.
(i) As of the date hereof, no loan in the Student Loan
Portfolio has been modified, extended or renegotiated in any way not provided
for in the Note and the credit and collection policies referred to in Section
3.24(f). Except as provided for under the borrower benefit programs described in
SCHEDULE 3.24(i), the interest rate payable by the borrower on each
33
FFELP Loan is the maximum applicable rate for such loan under the Act and the
interest rate for each loan in the Private Loan Portfolio is the rate described
in the applicable standard form loan documents.
(j) Except as would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect with respect
to the Student Loan Portfolio, all origination fees authorized to be collected
from a borrower of a FFELP Loan pursuant to Section 438 of the Act have been
properly reported to the Secretary, except for origination fees that would be
reported in connection with ED Form 799 for periods after the first quarter in
2000. All ▇▇▇▇▇▇▇▇ to the Secretary of interest subsidies and special allowance
payments on ED Form 799 with respect to Loans in the FFELP Loan Portfolio have
been made in full compliance with the requirements of the Act and Regulations.
(k) Sellers and the Transferred Subsidiaries have made
all refunds of any origination fee and insurance premiums on FFELP loans within
the time in which they were required to be made pursuant to the Act or
Regulations.
(l) Each loan in the FFELP Loan Portfolio has been duly
insured by an Eligible Insurer, and such insurance is in full force and effect
and is freely transferable to Buyers as an incident to the purchase of such
loans (provided that the Buyers are an "eligible lender" under the Act at the
time of the transfer, and provided further that the Buyers have in effect at the
time of transfer a guaranty agreement with the Eligible Insurer, which guaranty
agreement shall henceforth govern the terms and conditions of the Eligible
Insurer's guarantee of such loan) and all premiums due and payable to the
Eligible Insurer have been paid in full as of the date hereof.
3.25 FAIRNESS OPINION. Group has received an opinion of ▇▇▇▇▇▇▇,
▇▇▇▇▇ & Co dated as of the date of this Agreement to the effect that as of such
date, the Cash Purchase Price and the SLM Shares to be received in the aggregate
by the Sellers pursuant to this agreement are fair from a financial point of
view to Group.
3.26 ACQUISITION FOR INVESTMENT. Sellers are acquiring the SLM
Shares for their own account for the purpose of investment and not with a view
to or for sale in connection with a distribution thereof and Sellers have no
present intention or plan to effect any distribution of the SLM Shares (other
than transfers among Sellers) and understand that the certificates for the SLM
Shares will contain a legend restricting their transfer unless an exemption from
registration is available.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF BUYERS
To induce Sellers to enter into this Agreement and consummate the
transactions contemplated hereby, Buyers jointly and severally represent and
warrant to Sellers as follows:
34
4.1 DUE ORGANIZATION
(a) Each of the Buyers is a corporation duly organized,
validly existing and in good standing under the laws of their respective states
of incorporation. Each of the Buyers is in good standing and is duly authorized
and qualified to do business, under all applicable Laws, and to own, lease and
operate its respective properties and to carry on its respective businesses in
the places and in the manner now conducted and presently planned to be
conducted, except where the failure to be so authorized or qualified would not
be reasonably likely to have a material adverse effect on (i) the rights of
Sellers hereunder, on the assets, liabilities or on the operations or condition
(financial or otherwise) of the business of Buyers, or (ii) on the ability of
Buyers to consummate the transactions contemplated hereby or to perform their
respective obligations after Closing (a "BUYERS MATERIAL ADVERSE EFFECT").
(b) Each of the Buyers has made available to Sellers
true, complete and correct copies of its Charter Documents ("BUYERS' CHARTER
DOCUMENTS"). None of the Buyers is in violation of, in conflict with or in
default under its Charter Documents, and there exists no condition or event
which, after notice or lapse of time or both, would result in any such
violation, conflict or default.
4.2 AUTHORIZATION; VALIDITY. Each of the Buyers has all requisite
corporate power and authority to enter into, make and perform this Agreement and
the transactions and other agreements and instruments contemplated by this
Agreement. This Agreement and all other agreements and instruments to be
executed and delivered by any of the Buyers in connection herewith, when
executed and delivered by Buyers, shall have been duly and validly authorized,
executed and delivered by Buyers. This Agreement and the transactions and other
agreements and instruments contemplated hereby constitute, or shall constitute,
the valid and binding obligations of Buyers (assuming that they are valid and
binding obligations of the other parties thereto), enforceable in accordance
with their respective terms, except as may be limited by any bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws affecting the enforcement of creditors' rights generally or by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.3 COMPLIANCE. Buyer is not in conflict with, or in default or
violation of, (a) any Law applicable to Buyers or by which any property or asset
of Buyers is bound or affected, or (b) any Contract to which Buyers are parties
or by which Buyers or any property or asset of Buyers is bound or affected,
except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Buyers Material Adverse Effect.
4.4 NO CONFLICTS. Except as set forth on SCHEDULE 4.4, the
execution, delivery and performance of this Agreement and all other agreements
and instruments contemplated hereby and the consummation of the transactions
contemplated hereby will not:
(a) conflict with, result in a breach or violation of, or
require any consent, approval or authorization under, any of Buyers' Charter
Documents;
35
(b) except as would not, individually or in the
aggregate, be reasonably likely to have a Buyers Material Adverse Effect,
conflict with, result in a default under, give any Person a right of
termination, cancellation, acceleration, suspension or revocation under, result
in the loss of a material benefit to any of Buyers under, or require any
consent, approval or authorization under, any document, agreement or other
instrument to which any Buyer is a party or by which any buyer or any of its
respective properties, rights or assets are bound;
(c) except as would not, individually or in the
aggregate, be reasonably likely to have a Buyers Material Adverse Effect, result
in termination or any impairment of, or require any authorization under, any
Permit issued by any Governmental Authority to any Buyer;
(d) except as would not, individually or in the
aggregate, be reasonably likely to have a Buyers Material Adverse Effect,
violate any Law to which any Buyer or any of its respective properties, rights
or assets are subject or by which any Buyer or any of its respective properties,
rights or assets are bound;
(e) except as would not, individually or in the
aggregate, be reasonably likely to have a Buyers Material Adverse Effect,
constitute an event which, after notice or lapse of time or both, would result
in any conflict, breach, violation, default, requirement to perform, loss,
creation or imposition of any Lien, termination or impairment or similar event
described in Section 4.4(a) through 4.4(d); or
(f) except as would not, individually or in the
aggregate, be reasonably likely to have a Buyers Material Adverse Effect,
require any consent, waiver, approval, order or authorization of or from, or
registration, notification, declaration or filing with any Governmental
Authority by Buyers.
4.5 CAPITALIZATION. The authorized capital stock of SLM consists
of 250,000,000 shares of SLM Common Stock, par value $.20 per share, and
20,000,000 shares of preferred stock of SLM, par value $.20 per share (of which
shares of preferred stock, 3,450,000 are designated as 6.97% cumulative
redeemable preferred stock, Series A). As of May 31, 2000, (i) (A) 156,078,711
shares of SLM Common Stock were issued and outstanding, all of which were
validly issued, fully paid and nonassessable, and (B) 3,300,000 shares of Series
A preferred stock of SLM were issued and outstanding; and (ii)(A) 25,636,637
shares of SLM Common Stock were reserved for issuance under SLM employee or
director benefit programs or SLM's dividend reinvestment plan (collectively, the
"SLM STOCK PLANS") and options to purchase 14,223,962 shares of SLM Common Stock
were issued and outstanding under the SLM Stock Plans, and (B) 30,163,109 shares
of SLM Common Stock were classified as treasury shares, all of which were
validly issued, fully paid and nonassessable. Except as set forth above and
except for 8,500,000 additional shares of SLM Common Stock which were allocated
to and reserved for SLM's Employee Stock Option Plan on June 13, 2000, since May
31, 2000, no shares of SLM Common Stock or other voting securities of SLM were
issued, reserved for issuance or outstanding. All shares of SLM Common Stock
subject to issuance as aforesaid and all shares of SLM Common Stock upon
issuance on the terms and conditions specified in the instruments pursuant to
which
36
they are issuable including shares to be issued pursuant to this Agreement, will
be duly authorized, validly issued, fully paid and nonassessable. Other than as
set forth in SCHEDULE 4.5 or as set forth above or pursuant to this Agreement,
there are no outstanding contractual obligations of SLM to repurchase, redeem or
otherwise acquire any shares of SLM Common Stock or any other shares of capital
stock of SLM, or make any material investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary of SLM or any other Person, other
than a wholly-owned Subsidiary of SLM or a Person wholly-owned by one or more
wholly-owned Subsidiaries of SLM. Other than as set forth on SCHEDULE 4.5, Buyer
has no formal or informal plan to issue, individually or in the aggregate, more
than 50,000 shares of SLM Common Stock.
4.6 SEC REPORTS AND FINANCIAL STATEMENTS
(a) Each form, report, schedule, registration statement
and definitive proxy statement filed by SLM with the SEC prior to the date
hereof (as such documents have been amended prior to the date hereof, the "SLM
SEC REPORTS"), as of their respective dates, complied in all material respects
with the applicable requirements of the Securities Act and the Exchange Act and
the rules and regulations thereunder. None of the SLM SEC Reports, as of their
respective dates, contained or contains any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except for such statements, if any, as have been modified
or superseded by subsequent filings prior to the date hereof.
(b) The consolidated financial statements included in the
SLM SEC Reports have been prepared in accordance with GAAP, consistently applied
during the periods involved (except as otherwise noted therein and except that
the unaudited financial statements are subject to year end adjustment and do not
contain all footnote disclosures required by GAAP) and fairly present in all
material respects the consolidated financial position and the consolidated
results of operations and cash flows of SLM and its consolidated subsidiaries as
at the dates thereof or for the periods presented therein.
4.7 FINANCIAL CAPABILITY. SLM will have on the Closing Date, funds
and authorized and unissued shares of SLM Common Stock sufficient to consummate
the transactions contemplated by this Agreement.
4.8 ABSENCE OF CERTAIN CHANGES. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇ and its
consolidated subsidiaries have conducted their business in the ordinary course
consistent with past practice and except as set forth on SCHEDULE 4.8 there has
not been:
(a) any change that by itself or together with other
changes, would be reasonably likely to have a Buyers Material Adverse Effect,
excluding for purposes of this Section 4.8 any changes arising exclusively from
(i) prevailing market conditions that affect Buyers and other businesses
substantially similar to the Buyers in a similar manner or (ii) the disclosure
of the transactions contemplated hereby;
37
(b) any damage, destruction or loss (whether or not
covered by insurance) that would, individually or in the aggregate, be
reasonably likely to have a Buyers Material Adverse Effect;
(c) through the date hereof any change in the authorized
capital of SLM, Inc. or in its outstanding securities or any change in its
respective ownership interests or any grant of any options, warrants, calls,
conversion rights or commitments with respect to the securities of SLM;
(d) any work interruptions, labor grievances or claims
filed, or any similar event or condition of any character that would, if
determined adversely to Buyers, be reasonably likely to have a Buyers Material
Adverse Effect;
(e) through the date hereof any purchase or acquisition
of, or agreement, plan or arrangement to purchase or acquire, any material
property, rights or assets of any Person, in each case outside the ordinary
course of business;
(f) through the date hereof any cancellation, or
agreement to cancel, any material indebtedness or other material obligation
owing to any Buyer in an amount exceeding $500,000, including without limitation
any indebtedness or obligation of any current or former officer, director,
manager, member, stockholder or employee of any Buyer or any Affiliate thereof;
(g) any breach, amendment or termination or non-renewal
of any Buyer Material Contract or Material Permit that would, individually or in
the aggregate, be reasonably likely to have a Buyers Material Adverse Effect;
(h) other than as required under GAAP, any material
change in accounting or tax accounting methods or practices (including any
change in depreciation or amortization or capitalization rates or policies) by
Buyers;
(i) negotiation or agreement by any Buyer or any officer,
director, or agent thereof to do any of the things described in the preceding
clauses (a) through (h) (other than negotiations with Sellers and their
representatives regarding the transactions contemplated by this Agreement).
4.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
SCHEDULE 4.9, Buyers and their subsidiaries are not subject to any Liabilities
except for (i) those Liabilities reflected or reserved against on the latest
financial statements included in the SLM SEC Reports and not previously paid or
discharged, (ii) Liabilities not required under GAAP to be included in the
latest financial statements included in the SLM SEC Reports, and (iii) those
Liabilities incurred since the date of the latest financial statements included
in the SLM SEC Reports in the ordinary course of business and consistent with
past practice which liabilities would not, individually or in the aggregate, be
reasonably likely to have a Buyers Material Adverse Effect.
38
4.10 EMPLOYEE BENEFIT PLANS; ERISA
(a) With respect to the employee benefit plans, as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), sponsored or otherwise maintained by Buyers or any of
their ERISA Affiliates, in which Buyers or any of their ERISA Affiliates
participate as a participating employer; or to which Buyers or any of their
ERISA Affiliates contribute and including any such plans that within the
preceding five years have been terminated, merged into another plan of a Buyer
or any of its ERISA Affiliates, frozen or discontinued (collectively, "BUYER
PLANS"): (i) all such Buyer Plans have been, in all material respects,
maintained in compliance with the requirements prescribed by all applicable
statutes, orders and governmental rules or regulations, including, without
limitation, ERISA, the Code, and Treasury and Labor Regulations promulgated
thereunder, (ii) to the Buyers' Knowledge, all Buyer Plans intended to
constitute tax-qualified plans under Section 401(a) of the Code do so qualify;
(iii) to the Buyers' Knowledge, there are no actions, suits, proceedings or
claims pending (other than routine claims for benefits) or threatened, against a
Buyer, any Buyer Plan, any fiduciary of any Buyer Plan or the assets of any
Buyer Plan as to which Buyer would have liability.
(b) Buyers have made, or will make, available to Sellers
true, accurate and complete copies of the following: (i) pension, retirement,
profit-sharing, savings, stock purchase, stock bonus, stock ownership, stock
option and stock appreciation right plans and all amendments thereto and all
summary plan descriptions thereof (including any modifications thereto); (ii)
all general deferred compensation plans (whether funded or unfunded), bonus,
severance and collective bargaining agreements, arrangements or understandings,
(iii) all incentive compensation plans and programs; and (iv) all group
insurance and health insurance contracts, policies or plans.
4.11 MATERIAL BUYER CONTRACTS; REGISTRATION RIGHTS AGREEMENTS
(a) Except for contracts that have already been filed as
exhibits to the SLM SEC Reports, SCHEDULE 4.11(a) sets forth a complete and
accurate list of Contracts that would be required to be filed as an exhibit to
Buyers' Annual Report on Form 10-K, if such Annual Report were required to be
filed on the date hereof, a copy of each of which Contract has been made
available to the Sellers (the "MATERIAL BUYER CONTRACTS").
(b) Each of the Material Buyer Contracts is in full force
and effect, and neither Buyers nor any of their subsidiaries, nor, to Buyers'
Knowledge, any other Person, is in breach of, or default under, any such
Material Buyer Contract, and no event has occurred that with notice or passage
of time or both would constitute such a breach or default thereunder by Buyers
or any of their subsidiaries, or, to Buyers' Knowledge, any other Person, except
for such failures to be in full force and effect and such conflicts, violations,
breaches or defaults as in the aggregate would not be reasonably likely to have
a Material Adverse Effect.
39
(c) SCHEDULE 4.11(c) sets forth a complete and accurate
list of each Contract Buyers have entered into with any Person, pursuant to
which Contract such Person has the right to request or to cause Buyers to effect
registrations under the Securities Act of Equity Securities held by such Person
(each, a "REGISTRATION RIGHTS AGREEMENT") and the number of demand registration
rights outstanding thereunder on the date hereof. On or prior to the date hereof
Buyers have provided the Sellers a complete and accurate copy of each such
Registration Rights Agreement. There are no agreements between any Person and
Buyers with respect to share ownership, standstill, equity or voting matters
(except for equity compensation issued under Buyers' compensation plans and
forward equity contracts) other than as set forth in SCHEDULE 4.11(c).
4.12 LITIGATION. Except as set forth on SCHEDULE 4.12, there are no
claims, actions, suits, proceedings, arbitrations, governmental investigations
or inquiries pending or, to the Knowledge of each of Buyers, threatened against
or affecting Buyers, any of their respective assets, rights or properties, or
seeking to prevent or delay the transactions contemplated under this Agreement
or that would be reasonably likely to have a Material Adverse Effect and no
notice of any claim, action, suit, proceeding, governmental investigation or
inquiry, whether pending or threatened, has been received by Buyers.
4.13 DISCLOSURE. The representations and warranties contained in
this Section 4 (including without limitation, the representations and warranties
contained in the Disclosure Schedule) do not contain a misstatement of a
material fact and do not omit to state any material fact necessary to make the
information provided not misleading.
SECTION 5
COVENANTS
5.1 SELLERS' COVENANTS. Sellers hereby covenant and agree to
effect and perform the following covenants, agreements and obligations before or
after Closing in order to consummate the transactions contemplated hereby:
(a) COOPERATION IN LITIGATION. In the event that any
claim is asserted against Buyers or any of its subsidiaries or Affiliates in
connection with the transactions contemplated by this Agreement or in connection
with the Business, each of Sellers agrees to cooperate reasonably with Buyers in
the defense of such claim.
(b) CONDUCT OF BUSINESS PENDING CLOSING. Between the date
hereof and the Closing Date (except as otherwise approved in writing by Buyers,
such approval not to be unreasonably withheld), each of Sellers will, and will
cause each of the Transferred Subsidiaries to:
(i) conduct the Business in the ordinary course,
consistent with past practice;
40
(ii) maintain the Acquired Assets, including
those held under leases, in good working order and condition, ordinary wear and
tear excepted;
(iii) perform all of their respective obligations
under all Material Contracts except to the extent such failures to comply,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect;
(iv) keep in full force and effect their
respective present insurance policies or other comparable insurance coverage;
(v) use commercially reasonable efforts to
maintain and preserve their respective business organizations intact, retain
their respective present officers and key employees and maintain their
respective relationships with suppliers, vendors, customers, creditors and
others having business relations with them;
(vi) maintain compliance in all material respects
with all applicable Laws and all Material Permits; and
(vii) maintain present debt and lease instruments
and not enter into new or amended debt or lease instruments.
(c) PROHIBITED ACTIVITIES. Between the date hereof and
the Closing Date (except as otherwise approved in
writing by Buyers, such approval not to be
unreasonably withheld), Sellers will not, and will
cause the Transferred Subsidiaries not to:
(i) change any of the Charter Documents, or
authorize or propose the same;
(ii) except (A) as approved by SLM (which
approval shall not be unreasonably withheld) or (B) for short-term borrowings
incurred in the ordinary course of business consistent with past practice,
issue, deliver or sell or authorize or propose the issuance, delivery or sale of
any securities of any of Sellers or the Transferred Subsidiaries or any options,
warrants, calls, conversion rights or commitments relating to such securities,
or authorize or propose any change in the equity capitalization of any of
Sellers or the Transferred Subsidiaries, or issue or authorize the issuance of
any debt securities or incur or guarantee any indebtedness in excess of
$1,000,000 in the aggregate other than pursuant to existing facilities;
(iii) declare or pay any dividend, or make any
distribution (whether in cash, stock or property) in respect of their respective
stock whether now or hereafter outstanding, or split, combine or reclassify any
of their respective capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
their respective capital stock, or purchase, redeem or otherwise acquire or
retire for value any shares of their respective stock;
(iv) other than in the ordinary course of
business, enter into any contract or commitment, incur or agree to incur any
Liability, make any capital expenditures, or
41
guarantee any indebtedness, in each case involving an obligation in excess of
$1,000,000 or the equivalent value in the applicable currency;
(v) increase the number of total employees that
will be hired by the Buyers pursuant to Section 5.3(k) or hire any new employee
whose total annual compensation (excluding benefits costs) will exceed $125,000
per year individually or $1,250,000 in the aggregate, with the exception of
those employees of Funds currently doing default collections work who will
transfer to Education Debt Services and ultimately be employees of Buyers
pursuant to Section 5.3(k)(i).
(vi) increase the compensation payable or to
become payable to any officer, director, stockholder, employee, agent,
representative or independent contractor of any of Sellers, except in the
ordinary course of business consistent with past practice, or make any bonus,
management fee payment, loans or advances to any such Person, or, except to the
extent necessary to accomplish the requirements of Section 5.3(k), adopt or
amend any Company Plan or Company Benefit Arrangement, or grant any severance or
termination pay, to the extent all such increases and grants exceed $500,000 in
the aggregate;
(vii) create, assume, or permit the placement of
any Lien other than Permitted Liens on any of the Acquired Assets or on any
assets of the Transferred Subsidiaries, whether now owned or hereafter acquired;
(viii) sell, assign, lease, pledge or otherwise
transfer or dispose of any Acquired Assets or assets of any Transferred
Subsidiary except in the ordinary course of business consistent with past
practice;
(ix) except for purchases of student loan
portfolios in the ordinary course of business consistent with past practice,
acquire or negotiate for the acquisition of any business or the start-up of any
new business, or otherwise acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the Sellers on a consolidated
basis;
(x) except as permitted under Section 5.1(d),
merge or consolidate or agree to merge or consolidate with or into any other
Person;
(xi) amend, modify or terminate any Material
Contract or Material Permit, except where such actions, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect;
(xii) enter into any Contract that is (i) with any
Affiliate of any of the Sellers which would be reasonably likely to involve
payments or obligations of $60,000 in any one year or (ii) otherwise prohibited
hereunder;
(xiii) other than in the ordinary course of
business, cancel or agree to cancel any indebtedness or other obligation in
excess of $1,000,000 owing to any Seller or Transferred Subsidiary, including
without limitation any indebtedness or obligation of any current or former
officer, director, manager, member, stockholder or employee of any of the
42
Sellers or the Transferred Subsidiaries or any Affiliate thereof or of any of
Sellers or the Transferred Subsidiaries;
(xiv) commence a lawsuit, unless the statute of
limitations with respect to the matter of such lawsuit would expire within 10
days of the date of commencement, (A) that may have a material adverse effect on
Buyers' business or (B) against the Department of Education;
(xv) except as required under GAAP, revalue any
of the Acquired Assets, including without limitation, writing down or writing
off the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(xvi) make any new elections with respect to
Taxes, or any changes in current elections with respect to Taxes, affecting the
Transferred Subsidiaries, the Acquired Assets, or the Business; and
(xvii) take, or agree (in writing or otherwise) to
take, any of the actions described in this Section 5.1(c), or any action which
would make any of the representations and warranties of any of Sellers and the
Transferred Subsidiaries contained in this Agreement untrue or result in any of
the conditions set forth in Sections 6 or 7 not being satisfied.
(d) NEGOTIATIONS WITH OTHERS.
(i) Except as provided in Sections 5.1(d)(ii)
and 5.1(d)(iii), from and after the date of this Agreement and prior to the
Closing Date:
(A) None of the Sellers shall, and each
of the Sellers shall cause its officers, directors,
trustees, employees and authorized agents and
representatives (including, without limitation, any
investment banker, attorney, or accountant retained
by it) not to (X) initiate, solicit or encourage,
directly or indirectly, any inquiries from potential
third party acquirers (together with any agents,
investment bankers, attorneys or accountants for such
persons, "THIRD PARTY ACQUIRERS") or the making or
implementation of any proposal or offer with respect
to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any
significant portion of the assets or any equity
securities of, the Sellers or any Transferred
Subsidiary (any such inquiry, proposal or offer, an
"ACQUISITION PROPOSAL"), (Y) have discussions
concerning, engage in any negotiations concerning, or
provide any information which is proprietary in
nature and non-public or confidential to potential
Third Party Acquirers relating to, an Acquisition
Proposal, or (Z) otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal;
and
43
(B) Sellers shall notify Buyers
immediately if any Acquisition Proposal is received
by, any information is requested from, or any such
negotiations or discussions are sought to be
initiated or continued, with either of them, as the
case may be, and the Sellers shall promptly provide
Buyers with copies of any written materials the
Sellers receive from any potential Third Party
Acquirer that relates to an Acquisition Proposal.
(ii) Notwithstanding anything to the contrary
contained in SECTION 5.1(d)(i), from the date of issuance of a press release
which indicates that this Agreement has been entered through 4:00 p.m.
Indianapolis time on the date that is 30 calendar days after the date of
issuance of such press release (the "WINDOW PERIOD"), if the Board of Directors
of Group determines in good faith, based on the advice of outside counsel, that
failure to do so would be reasonably likely to result in a breach of its
fiduciary duties under applicable law, Group and its officers, directors,
trustees, employees and authorized agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by
Group) may, in response to an unsolicited, bona fide, written Acquisition
Proposal, furnish information to or enter into discussions or negotiations with,
the person or entity that delivers such written Acquisition Proposal, provided
that:
(A) Prior to or concurrently with
furnishing information to, or entering into
discussions or negotiations with, such a person or
entity concerning an Acquisition Proposal, the
Sellers provide written notice to Buyers to the
effect that they are furnishing information to, or
entering into discussions or negotiations with, such
person or entity; and
(B) The Sellers keep Buyers informed
generally of the status of any such discussions or
negotiations.
(iii) The Sellers may enter into an agreement for
an Acquisition Proposal received during the Window Period provided that:
(A) None of the Sellers has breached in
any material respect its obligations under this
Section 5.1(d);
(B) The Sellers enter into the
agreement for the Acquisition Proposal within fifteen
(15) days after expiration of the Window Period;
(C) The Acquisition Proposal provides
for the acquisition of substantially all of the
Acquired Assets and assumption of the Assumed
Liabilities and the Board of Directors of Group
determines in good faith, based on the advice of an
independent financial advisor, that the Third party
Acquirer has the financial wherewithal or is
reasonably capable of raising any financing required
to consummate such Acquisition Proposal;
(D) The Acquisition Proposal contains
terms and conditions that, in the good faith
determination of the Board of Directors of Group,
are, taken as a whole, not materially less favorable
than the terms and
44
conditions of this Agreement and the Acquisition
Proposal provides total consideration that is greater
than the sum of (A) the Purchase Price and (B) the
amounts payable to Purchaser pursuant to Section
10.2;
(E) The Sellers have delivered to
Buyers a copy of the Acquisition Proposal, including
details of the price, terms and conditions of such
offer, and the Buyers have failed to deliver written
notice to the Sellers within three Trading Days of
receipt of such copy of the Acquisition Proposal that
the Buyers elect to enter into an agreement with the
Sellers that contains terms and conditions that, in
the good faith determination of the Board of
Directors of Group, are, taken as a whole, at least
equivalent to the terms and conditions of the
Acquisition Proposal;
(F) The Sellers contemporaneously
terminate this Agreement pursuant to Section 10.1(e);
and
(G) The Sellers shall pay to Buyers the
amounts contemplated by Section 10.2.
(e) ACCESS. Sellers shall: (i) during the period from the
date hereof and until the Closing Date give Buyers and their representatives
(including their internal or external attorneys and accountants) reasonable
access during normal business hours, to the properties, books, records,
contracts and commitments of Sellers, including without limitation the audit
papers of Ernst & Young LLP with respect to Sellers and the Transferred
Subsidiaries, and furnish to Buyers such information and documents relating to
the properties and business of Sellers and the Transferred Subsidiaries as
Buyers may reasonably request; and (ii) on or before the Closing, deliver to
Buyers original or best available copies of all Assumed Contracts and powers of
attorney to which Sellers are parties and all documents and correspondence under
Sellers' control relating to past or pending litigation relating to the Business
or to which any Transferred Subsidiary is a party. The Buyers acknowledge that
any information or documents obtained pursuant to this Section 5.1(e) shall be
subject to the confidentiality provisions of Section 5.3(c).
(f) EMPLOYEE NOTIFICATION. Sellers have provided any and
all applicable notice to employees in connection with plant closings, "close
shop" rules, and similar federal, state and local regulations.
(g) REPRESENTATION ON GROUP'S BOARD OF DIRECTORS.
Immediately after the Closing, Group shall cause four (4) persons designated by
SLM (who shall be former but, as of Closing, not current members of the board of
directors of SLM) to become members of the board of directors of Group, and
shall cause such persons (or such other persons as SLM may in the future
designate as replacements) to hold such positions until two years following the
Closing. Such designees will not have voting rights during such two year period
with respect to any matters relating to Funds or Group's ownership of SLM Shares
and, after such two year period, will be subject to Group's generally applicable
conflict of interest rules.
45
(h) GROUP NAME CHANGE. Group shall maintain the phrase
"USA" in its name until the earlier of: (A) five years after the Closing; (B)
the termination of the Guarantee Servicing Agreement; (C) any change in the name
of SLM such that USA Group is no longer used in SLM's name; and (D) an event
involving SLM such that the continued use of the phrase "USA" in its name would
materially impair the ability of Group to fulfill its mission.
(i) PAYMENTS UNDER CASH PLANS. With respect to all
employees of Sellers to be hired by SLM as set forth in Section 5.3(k)(i), Group
shall pay, at or prior to the later of September 30, 2000 and Closing, all
liabilities owing under the Cash Plans accruing at or prior to Closing, or, if
Group requests Buyers to make such payments, reimburse Buyers for all such
payments made by Buyers at the request of Group promptly after such payments are
made.
5.2 BUYERS' COVENANTS. Buyers hereby covenant and agree to effect
and perform the following covenants, agreements and obligations before or after
Closing in order to consummate the transactions contemplated hereby:
(a) REPRESENTATION ON SLM'S BOARD OF DIRECTORS. SLM shall
cause three (3) persons designated by Group (who may be former, but, except for
▇▇▇ ▇▇▇▇▇▇▇▇▇▇, not as of Closing current, members of Group's board) to become
members of the board of directors of SLM effective as of the Closing. Until the
later of (i) two (2) years from Closing and (ii) the date that Group owns less
than fifty percent (50%) of the SLM Shares, SLM will nominate and use its best
efforts to cause the election of three (3) persons designated by Group to SLM's
board of directors.
(b) EMPLOYEE MATTERS.
(i) Buyers shall assume the employment
agreements of the executive vice presidents identified in SCHEDULE 5.2(b)(i)
with appropriate adjustments to reflect the bonus and benefit plans of Buyers
and terms of at least three years.
(ii) To the extent such persons do not become
employed by SLM or by Group, Loan Services or Guarantee Services, SLM shall
reimburse USA Group for severance payments made in connection with the
transactions contemplated by this Agreement under their existing employment
agreements.
(c) SLM NAME CHANGE. SLM shall rename SLM to include, or
do business under the name, "USA". The "USA" name shall also be utilized as the
name of a major operating company of SLM for at least one year following the
Closing.
(d) MAINTAIN SERVICING CENTER. Barring any extraordinary
business or regulatory developments, for a period of five (5) years following
the Closing Date, SLM will retain its principal educational loan and guarantee
servicing operations in the Indianapolis, Indiana metropolitan area and the
Indianapolis, Indiana metropolitan area will be the largest employee base for
SLM during such period.
46
5.3 JOINT COVENANTS. Buyers and Sellers hereby jointly covenant
and agree to effect and perform the following covenants, agreements and
obligations before or after Closing in order to consummate the transactions
contemplated hereby:
(a) NOTIFICATION OF CERTAIN MATTERS. Each party hereto
shall give prompt notice to the other parties hereto of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
reasonably likely to cause any representation or warranty contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing, or
which would be reasonably likely to result in a Material Adverse Effect, and
(ii) any material failure of such party to comply in all material respects with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such party hereunder. The delivery of any notice pursuant to this Section 5.3
shall not, without the express written consent of each of the other parties
hereto (which consent may be withheld in their respective sole discretion) be
deemed to (w) modify the representations, warranties, covenants or agreements
hereunder of the party delivering such notice, (x) modify any of the conditions
set forth in Sections 6, 7 or 8, (y) cure or prevent any such inaccuracy or
failure, or (z) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
(b) PUBLIC ANNOUNCEMENTS. Prior to Closing, neither
Buyers nor Sellers will issue or cause the publication of any press release or
otherwise make any public statement with respect to the transactions
contemplated hereby and the relationship between the parties without the prior
consent of the parties hereto; PROVIDED, that any party hereto may make a public
announcement to the extent required by Law, by the Securities and Exchange
Commission or by any national securities exchange or quotation system.
(c) CONFIDENTIALITY.
(i) Each of the Parties hereto recognizes that
by reason of the transactions contemplated hereby, its ownership or use of the
Acquired Assets and information provided by each party to the others in
connection with the transactions contemplated hereby, it has acquired and will
acquire Confidential Knowledge, the use or disclosure of which could cause
Buyers, any of Sellers or the Transferred Subsidiaries or their respective
Affiliates or subsidiaries substantial loss and damages that could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, each of the Parties hereto covenants and agrees that it will not at
any time, except in performance of its obligations to hereunder, directly or
indirectly, use, disclose or publish, or permit other Persons within its control
not so authorized to use, disclose or publish, any Confidential Knowledge that
it may learn or has learned by reason of its ownership or use of the Acquired
Assets or use any such information in a manner detrimental to the interests of
any party, unless (x) such information becomes known to the public generally
through no fault of any disclosing party, (y) disclosure is required by Law or
the order of any Governmental Authority under color of law, or (z) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party; provided,
that prior to disclosing any information pursuant to clause (x), (y) or (z)
above, such disclosing party shall give prior written notice thereof to the
nondisclosing party
47
and provide such party with the opportunity to contest such
disclosure and shall cooperate with efforts to prevent such disclosure.
(ii) The term "CONFIDENTIAL KNOWLEDGE" includes,
without limitation, knowledge and information that none of Sellers nor Buyers
has disclosed to the public or to the trade with respect to present or future
business, operations, services, products, research, inventions, discoveries,
plans, processes, models, technical information, facilities, methods, trade
secrets, copyrights, software, source code, systems, patents, procedures,
manuals, specifications, any other intellectual property, confidential reports,
price lists, pricing formulas, customer lists, financial information (including
the revenues, costs, or profits associated with any products or services of any
of Sellers, the Transferred Subsidiaries or Buyers), financial statements,
business plans, lease structure, projections, prospects, opportunities or
strategies, acquisitions or mergers, advertising or promotions, personnel
matters, legal matters, any other confidential and proprietary information of or
relating to any of the Sellers, the Transferred Subsidiaries or the Business,
and any other information not generally known outside Sellers that may be of
value to any of Sellers or Buyers but excludes any information already properly
in the public domain. "CONFIDENTIAL KNOWLEDGE" also includes confidential and
proprietary information and trade secrets that third parties entrust to any of
the Sellers or to Buyers in confidence.
(d) MATERIALITY. Sellers and Buyers hereby agree that the
covenants set forth in this Section 5 are a material and substantial part of the
transactions contemplated by this Agreement, supported by adequate
consideration.
(e) SEVERABILITY; REFORMATION. The covenants in this
Section 5 are severable and separate, and the unenforceability of any specific
covenant shall not affect the provisions of any other covenant. Moreover, in the
event any court of competent jurisdiction shall determine that the scope, time
or territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall thereby be reformed.
(f) INDEPENDENT COVENANTS. All of the covenants in this
Section 5 shall be construed as an agreement independent of any other provision
in this Agreement, and the existence of any claim or cause of action of Sellers
against Buyers, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Buyers of such covenants.
(g) COOPERATION IN OBTAINING REQUIRED CONSENTS AND
APPROVALS. Each party hereto shall cooperate in obtaining all consents and
approvals required by Section 6.2.
(h) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ FILING. Sellers and Buyers shall
promptly file with the Federal Antitrust Division of the Department of Justice
any notification and report required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), and, in the event that any
additional filings are required, such additional filings, and shall cooperate
with each other with respect to the foregoing. The parties shall give each other
prior notice and
48
consult with each other prior to any meeting with the United States Federal
Trade Commission or Department of Justice with respect to their respective
filings under the HSR Act or any review by either of the foregoing agencies.
Each of the parties shall take all reasonable actions necessary to cause the
expiration of the waiting periods under the HSR Act as promptly as possible and
shall promptly file any supplemental information which may be requested in
connection therewith.
(i) FURTHER ASSURANCES. Following the Closing, each of
Buyers and Sellers shall, and shall cause each of their Affiliates to, from time
to time, execute and deliver such additional instruments, documents, conveyances
or assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by the other party, to confirm and assure the rights and
obligations provided for in this Agreement and in the Collateral Agreements and
render effective the consummation of the transactions contemplated hereby and
thereby. "COLLATERAL AGREEMENTS" means the Assumption Agreement, the ▇▇▇▇ of
Sale, the Transitional Services Agreement, the Registration Rights Agreement,
the Grant Recommendation Agreement, the Name and Trademark License Agreement,
the Non-Compete Agreement, and the Amendment to Guarantee Services Agreement.
(j) COMMERCIALLY REASONABLE EFFORTS. Subject to the terms
and conditions provided in this Agreement, each of the parties hereto agrees to
use its commercially reasonable efforts to take promptly, or cause to be taken
promptly, all actions, and to do promptly or cause to be done promptly, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement. Each of the parties hereto will
furnish to the other parties such necessary information and reasonable
assistance as such other parties may reasonably request in connection with the
foregoing.
(k) EMPLOYEE MATTERS.
(i) SLM will hire all employees of Sellers
(including individuals who are not "actively at work" but are classified and
treated as employees of Sellers in accordance with Sellers' established
employment policies), other than those set forth on SCHEDULE 5.3(k)(i), as of
the Closing Date and shall, immediately after the Closing Date, retain all
employees of Transferred Subsidiaries (including individuals who are not
"actively at work" but are classified and treated as employees of Transferred
Subsidiaries in accordance with Sellers' and Transferred Subsidiaries'
established employment policies) (such employees referred to collectively as the
"TRANSFERRED EMPLOYEES");
(ii) SLM will provide each Transferred Employee
with an annual salary not less than the level of annual salary in effect for the
individual as of the date of this Agreement;
(iii) SLM will amend, if necessary, the ▇▇▇▇▇▇ ▇▇▇
40l(k) Savings Plan to (I) allow all Transferred Employees (regardless of age or
service) to begin participation under that 40l(k) plan for purposes of making
"40l(k)" deferrals effective as soon as practicable but not more than 30 days
following the Closing Date, (II) require all employer matching contribution
49
account balances of a Transferred Employee to be fully vested at all times
(including contributions allocated to those accounts by Buyers while an employee
of Buyers), (III) give credit for service with Sellers or Transferred
Subsidiaries for all Transferred Employees, to the extent that service was
credited under Sellers' 40l(k) plan as of the Closing Date, for purposes of
eligibility to receive "matching" or any other employer contributions (it being
understood that a Transferred Employee who has 12 or more months of service with
Sellers or the Transferred Subsidiaries as of the Closing Date will be eligible
to receive these employer contributions immediately and that a Transferred
Employee who has less than 12 months of service will become eligible upon
completing 12 months of service as provided in the Buyers 401(k) plan), (IV)
accept a transfer of the assets and liabilities of Sellers' 40l(k) plan
attributable to the Transferred Employees' accounts as soon as practicable
following the Closing Date, (V) for 18 months following the Closing Date, permit
Transferred Employees to retain the investment options available to them under
Sellers' 40l(k) plan, as in effect on the day preceding the Closing Date, at a
cost to the Transferred Employees that does not exceed the cost charged to
participants for any "standard" investment option under the Buyers' 40l(k) plan
and (VI) as soon as practicable following the Closing Date to administer all
plan loans of those Transferred Employees outstanding as of the Closing Date in
accordance with the loan policies and procedures of Sellers' 40l(k) plan;
(iv) SLM will amend the ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ Account
Retirement Plan to (I) allow Transferred Employees, who are participants in the
cash balance plan sponsored by Sellers on the Closing Date, to begin
participation in Buyers' cash balance plan effective as of the day following the
Closing Date, (II) give credit for service with Sellers or Transferred
Subsidiaries for all Transferred Employees, to the extent that service was
credited under Sellers' cash balance plan as of the Closing Date, for all
purposes under the plan, including determinations of participation (for
Transferred Employees who were not participants in Sellers' cash balance plan on
the Closing Date), vesting and pay credits accrued after the Closing Date, but
not for purposes of accrual of benefits or determining the applicability of any
grandfathering provisions of the ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ Account Retirement Plan related
to service prior to October 1, 1999, (III) provide that each Transferred
Employee's account balance as of the day following the Closing Date shall be the
same as such Transferred Employee's account balance under the Sellers' cash
balance plan as of the Closing Date and (IV) provide through the plan year
ending December 31, 2005 that Transferred Employees shall accrue benefits under
the ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ Account Retirement Plan on the same formula as applicable
under Sellers' cash balance plan as of the date of this Agreement (including
those transition period benefits provided for under Sellers' cash balance plan).
As soon as practicable following each plan year ending on or before December 31,
2005, Buyers will provide an accounting of the incremental funding contributions
it made under Sellers' formula as opposed to the contributions it would have
made under its formula (and reduced for any deduction it received for the
incremental contribution) (such adjusted result being the "DIFFERENTIAL").
Sellers will promptly reimburse Buyers for the Differential. Sellers will
reimburse Buyers for the actuarial expenses incurred in preparation of the
actuarial calculations of the Differential. Sellers and Buyers agree to
negotiate in good faith to resolve any disputes regarding the calculation of the
Differential. As soon as practicable after the Closing Date, Sellers shall cause
to be transferred to the ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ Account Retirement Plan the liabilities
relating to the Transferred Employees and assets having a fair market value
equal to the aggregate present value of the accrued benefit obligation
attributable to the
50
Transferred Employees under the Sellers' pension plan, calculated as of the
Closing Date, using the assumptions set forth in PBGC Reg. Section 2619 with
respect to a trusteed plan terminating on the Closing Date, ("PENSION TRANSFER
VALUE") unless the Sellers' cash balance plan has insufficient assets to fund
all liabilities on a plan termination basis, in which event the Pension Transfer
Value shall mean the minimum amount required to be transferred to such plan in
accordance with Section 414(l) of the Code and the regulations thereunder. The
Pension Transfer Value shall be adjusted to reflect interest from the Closing
Date to the date assets are transferred at the select period interest rate used
in computing the Pension Transfer Value, and shall be adjusted to reflect
benefit payments attributable to the Transferred Employees made during such
period. All costs attributable to the Pension Transfer Value to the ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ Account Retirement Plan shall be borne by Sellers, except the cost of
verification of the calculation of the transfer value and Form 5310-A that must
be filed by the recipient of the transfer;
(v) SLM will assume sponsorship of Sellers'
group health plans effective as of the day preceding the Closing Date and (I)
continue to maintain those plans through December 31, 2000 for all Transferred
Employees after the Closing Date, (II) continue thereafter under the same or
other plans to provide coverage under Buyers' group health plans for all
Transferred Employees, including Transferred Employees who, as of Closing Date,
are "part-time" employees to the extent coverage would have been provided to
those individuals under the terms of Sellers' group health plans as in effect on
the day preceding the Closing Date, and (III) amend any group health plan to the
extent necessary to accomplish the foregoing;
(vi) SLM will as a result of and to the extent
consistent with (v) above, assume and accept all responsibility to provide
individuals eligible to receive COBRA continuation coverage under Sellers' group
health plans (who became eligible for that coverage either before, as a result
of, or after the Closing Date) with COBRA continuation coverage under those
plans, with the understanding that, after December 31, 2000, COBRA continuation
coverage may alternatively be provided under one or more of Buyers' group health
plans to the extent permitted by law;
(vii) SLM will amend the "Section 125" plan it
maintains to (I) allow all Transferred Employees to begin participation under
that Section l25 plan effective as of the day following the Closing Date, and
(II) accept a transfer of the assets and liabilities of Sellers' Section 125
plan attributable to the Transferred Employees so that all claims incurred
(either before or after the Closing Date) but not paid as of the Closing Date
will be paid from Buyers' Section 125 plan;
(viii) SLM will provide severance benefits to
Transferred Employees who become employees of Buyers and whose employment is
involuntarily terminated (or who incur a termination due to a request by Buyers
to have the individual relocate more than 50 miles from his then current
residence) within two years of the Closing Date with benefits at least
equivalent to those set forth in SCHEDULE 5.3(k)(viii) and will grandfather for
eligibility for severance under Buyers' severance plan those Transferred
Employees who are classified by Sellers as regular part-time and temporary
part-time at the Closing Date, with the benefits calculated in the same manner
for such part-time employees as by Sellers at the Closing Date;
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(ix) SLM will provide each Transferred Employee
with the opportunity to acquire group term life insurance, accidental death and
dismemberment insurance, long term disability benefits and short term disability
benefits (for a period of six months for short term disability benefits) with
maximum coverages that are comparable to the maximum coverages available under
Sellers' group term life insurance, short term and long term disability plans in
effect on the day preceding the Closing Date;
(x) SLM will amend its vacation policy to (I)
recognize service with Sellers and Transferred Subsidiaries as service with
Buyers to determine annual vacation accruals, (II) protect all vacation days
accrued and unpaid under Sellers' vacation policy in effect on the day preceding
the Closing Date, and (III) provide that all Transferred Employees, who were
within 180 days of reaching the next higher level of vacation accrual under the
Sellers' vacation policy, will be treated as having satisfied the requirements
for that higher level of vacation accrual as of the Closing Date;
(xi) SLM will amend its sick leave policy (I) to
protect all sick leave days accrued by and unpaid to Transferred Employees under
Sellers' sick leave policy as of the Closing Date (II) to provide for an accrual
of 12 sick days per year and (III) to allow, for a period of at least 60 days
after the Closing Date, Transferred Employees who are eligible to cash-out
unused sick days under Sellers' sick leave policy as of the Closing Date to
cash-out those sick days with Buyers and will grandfather for eligibility for
sick leave accrual under Buyers' sick leave accruals policies those Transferred
Employees who are classified by Sellers as regular part-time at the Closing
Date, with the benefits calculated in the same manner as by Sellers at the
Closing Date;
(xii) SLM will grant, effective as of the date
of this Agreement, (A) to each person expected to be a Transferred Employee
and, without duplication, to each person who is a Transferred Employee
options under the applicable ▇▇▇▇▇▇ ▇▇▇ stock option plan to acquire at least
1,000 shares of SLM Common Stock and (B) the number of options set forth in
SCHEDULE 5.3(k)(xii) having the terms set forth, in the amounts designated by
Sellers on SCHEDULE 5.3(k)(xii) as of the date of the Agreement, and with
respect to all such options at an exercise price equal to the closing price
of shares of SLM Common Stock on the date of grant, with the understanding
(I) that these options will be canceled if the Closing does not occur by
January 31, 2001 and (II) that these options would become fully vested and
would remain exercisable for 90 days following an involuntary termination of
employment by Buyers or a termination resulting due to a request by Buyers to
have the individual relocate more than 50 miles from his then current
residence; in addition, ▇▇▇▇▇▇ ▇▇▇ would expect to maintain a grant schedule
under which Transferred Employees (if they remain employed) would receive
additional grants of options for 300 shares in the 2001 to 2003 calendar
years and to make a contribution for the same years for each eligible
Transferred Employee under the ▇▇▇▇▇▇ ▇▇▇ Shared Success Plan equal to at
least 4 percent of the Transferred Employee's eligible compensation from
▇▇▇▇▇▇ Mae, provided that this expectation is subject to Buyers' sole
discretion in light of business, regulatory, tax, and other factors; SLM will
grant, effective as of the Closing Date, the performance shares set forth in
SCHEDULE 5.3(k)(xii) having the terms set forth and in the amounts designated
by Sellers on that schedule as of the date of this Agreement so long as the
listed individuals become Transferred Employees and providing further that
these shares would become fully vested following an
52
involuntary termination of employment by Buyers or a termination resulting due
to a request by Buyers to have the individual relocate more than 50 miles from
his then current residence;
(xiii) SLM will provide all Transferred Employees
who are officers of Sellers or Transferred Subsidiaries (determined as of the
day preceding the Closing Date) with the opportunity to participate under the
Buyers management incentive and discretionary compensation based upon the
availability of such plans to similarly situated officers of Sellers (as
determined with reference to the Transferred Employees' duties for the Buyers);
(xiv) SLM will continue Sellers' tuition
reimbursement plan for all eligible Transferred Employees, as determined under
that plan as in effect on the day preceding the Closing Date, until December 31,
2000, and will expand its tuition reimbursement plan to include reimbursement
for all undergraduate course work by January 1, 2001;
(xv) SLM will continue the on-site day care
center located on the Sellers' business premises at substantially the same level
of services in effect prior to Closing Date for a period of no less than 5 years
from the Closing Date, unless and until the serving operations are closed
pursuant to Section 5.2(d); and
(xvi) SLM will provide other employee benefits in
accordance with its standard plans and policies, recognizing service with
Sellers and Transferred Subsidiaries as service with Buyers and treating all of
the Transferred Employees at least as well as similarly situated employees of
Buyers.
(xvii) Nothing in this Agreement shall (a) restrict
or otherwise inhibit Buyers' right to terminate the employment of any
Transferred Employee on or after the Closing Date (subject to any written
employment agreements to the contrary) or (b) be construed or interpreted to
restrict Buyers' right or authority to amend or terminate any of its employee
benefit plans, policies, or programs effective on or after the Closing Date,
provided that no such amendment or termination shall be effected in a manner
that treats the Transferred Employees adversely from the Buyers' other
employees. Nothing expressed or implied in this Agreement shall give any
Transferred Employee or dependent of such employee any third party beneficiary
rights or other rights to ▇▇▇ under or with respect to this Section 5.3(k).
53
5.4 CERTAIN TAX MATTERS
(a) GENERAL.
(i) Sellers shall timely pay, and shall
indemnify and hold harmless Buyers from and against (x) all Taxes that relate to
the Acquired Assets or Business for any taxable period ending on or prior to the
Closing Date, and (y) all Taxes of the Transferred Subsidiaries for any taxable
period ending prior to, ending on or including the Net Asset Value Date in
excess of the amounts reflected on the Pro Forma Balance Sheet as of the Net
Asset Value Date (as finally adjusted by audit or otherwise pursuant to Section
1.5) as a current liability accrual for Taxes (excluding any reserves for
deferred Taxes).
(ii) Sellers and Buyers shall each be responsible
for one-half of (x) any transfer, documentary, sales, use, excise or other
Taxes, other than any Tax based on net income or gross receipts, assessed upon
or with respect to the transfer of the Acquired Assets or the Business to the
Buyers or any other transaction contemplated under this Agreement and (y) any
recording or filing fees with respect thereto.
(iii) Buyers shall prepare or cause to be prepared
and file or cause to be filed all Tax Returns that are required to be filed with
respect to each Transferred Subsidiary, (A) for Taxable Periods ending on or
before the Closing Date that are due after the Closing Date and (B) for Taxable
Periods beginning on or before and ending after the Closing Date ("STRADDLE
PERIODS"). All such Tax Returns shall be prepared and filed in a manner
(including, without limitation, all elections and methods of accounting) that is
consistent with past practice, except (x) as otherwise required by a change in
applicable law or (y) as consented to by Group, which consent shall not be
unreasonably withheld. Such Tax Returns shall be provided to Group for review
and reasonable comment as soon as possible prior to the final due date for the
filing thereof and Buyers will endeavor to provide drafts of material Tax
Returns to Group at least 60 days prior to such date.
(iv) Upon the latest of (A) five (5) business
days following the receipt of a request therefor, (B) five (5) business days
prior to the due date of any payment to the relevant Taxing Authority and (C)
five (5) business days following the resolution of any dispute described in
Section 5.4(a)(v), Sellers shall pay to Buyers all Taxes shown as due on any Tax
Returns of the Transferred Subsidiaries that relate to a Pre-Value Date Period
unless amounts with respect to such Taxes were paid to the relevant Taxing
Authority as estimated Taxes prior to the Net Asset Value Date or such Taxes
have been reflected on the Pro Forma Balance Sheet as of the Net Asset Value
Date (as finally adjusted by audit or otherwise pursuant to Section 1.5) as a
current liability accrual for Taxes (excluding any reserves for deferred Taxes).
If, as a result of a dispute described in Section 5.4(a)(v) or Sellers' failure
to make timely payment under the terms of this Section, any payment to be made
by Sellers under this Section is made after the actual due date for the payment
to the relevant Taxing Authority, the Sellers shall pay to Buyers in addition to
all Taxes required to be paid interest on such amount from the due date of
payment to the relevant Taxing Authority to the date of payment by Sellers at
the actual rate then applicable to such underpayments of Tax pursuant to Section
6621 of the Code or any similar provision of foreign, state or local or other
law, as applicable.
54
(v) If Group objects to any item reported on or
withholds its consent with respect to any Tax Return described in Section
5.4(a)(iii), Buyers and Group shall proceed in good faith to resolve the matters
in dispute. If Buyers and Group are unable to resolve the matters in dispute
within 15 days, such matters shall be submitted to an independent accounting
firm selected as described in Section 1.5(e). Once chosen, such accounting firm
shall be referred all disputes under this Section until such time as such
accounting firm becomes disqualified by reason of a conflict of interest. Such
accounting firm shall, if requested by Buyers, determine whether Group's
objection or withholding of consent is reasonable and, if it determines such
objection or withholding of consent was reasonable or Buyers did not request
such determination, decide the matters in dispute. The fees and expenses of such
accounting firm shall be borne by Group and Buyers in inverse proportion as they
may prevail on matters resolved by such accounting firm, which proportionate
allocations shall be determined by the accounting firm at the same time its
opinion on the merits of the matters submitted is rendered.
(vi) With respect to any Taxes that relate to the
Acquired Assets or Business, if either Buyer or Sellers pay such Taxes which
under the provisions of this Agreement were required to be paid or for which
indemnification is provided by the other party hereunder, such other party shall
pay the party which paid the Tax within five (5) business days following the
receipt of notice of a request for payment. Any dispute with respect to a
payment to be made under this Section shall be resolved in accordance with the
procedures of Section 5.4(a)(v). The amount of any payment for Taxes made
pursuant to the resolution of a dispute under this Section shall be increased
for interest in accordance with the terms of Section 5.4(a)(iv) from the date
the party paid such Tax or, if later, the date on which such payment was due
under this Section to the date the other party makes payment under this Section.
(b) APPORTIONMENT. For purposes of apportioning any Taxes
to the portion of a Straddle Period that ends on the Closing Date, the
determination shall be made based on a closing of the books as of the close of
business on the Closing Date; provided, however, that real property, personal
property and intangible property Taxes shall be apportioned ratably on a daily
basis between the portions of the Straddle Period in question. For purposes of
apportioning any Taxes between the portion of any Taxable Period ending on the
Net Asset Value Date and the portion of such Taxable Period beginning on the day
after the Net Asset Value Date, the determination shall be made as if a closing
of the books occurred as of the close of business on the Net Asset Value Date;
provided, however, that real property, personal property and intangible property
Taxes shall be apportioned ratably on a daily basis between the portions of such
Taxable Year in question.
(c) ALLOCATION SCHEDULE. The allocation of the purchase
price among the Acquired Assets, the Business, and Enterprises Shares shall be
determined in accordance with Section 1.6.
(d) TAX COOPERATION. Sellers and Buyers shall, and shall
cause their respective affiliates to, (x) provide each other with such
assistance as may reasonably be required in connection with the preparation of
any Tax Returns, the conduct of any audit or other examination by any taxing
authority or judicial or administrative proceedings relating to any
55
liability for Taxes, (y) retain and provide each other with all records or other
information, including payroll records, that may be relevant to the preparation
of any Tax Returns, the conduct of any audit or examination or other Tax
proceeding and (z) provide the each other with any final determination of any
such audit, examination or other proceeding that affects any amount required to
be shown on any Tax Return for any Taxable period. Sellers and Buyers shall
retain all relevant documents, including prior years' Tax Returns, supporting
work schedules and other records or information that may be relevant to such Tax
Returns and shall not destroy or otherwise dispose of any such records until
such time as the statute of limitations (including extension) with respect to
such Tax Return expires. Any party requesting assistance after Closing pursuant
to this Section 5.4(d) shall reimburse the other party for any reasonable
out-of-pocket expenses incurred in providing such assistance.
(e) TAX CONTESTS
(i) If any party receives written notice from
any Taxing Authority of a Tax Proceeding with respect to any Tax for which the
other party is obligated to provide indemnification under this Agreement, such
party shall within sixty (60) days thereof give written notice to the other
party (or within such shorter time as may be necessary to give the Indemnifying
Party a reasonable opportunity to respond to such notice); provided, however,
that the failure to give such notice shall not affect the indemnification
provided hereunder except to the extent that the failure to give such notice
materially prejudices the Indemnifying Party.
(ii) Buyers shall have the right, at their own
expense, to control the conduct of and, except as limited by the following two
sentences, make all decisions with respect to any Tax Proceeding relating to
Taxes of the Transferred Subsidiaries for any Taxable Period. With respect to
any Tax Proceeding referred to in Section 5.4(e)(i), Group shall have the right
to participate fully at its own expense with counsel of its own choosing in all
aspects of the prosecution or defense of such Tax Proceeding. With respect to
any Tax Proceeding referred to in Section 5.4(e)(i), Buyers shall not (A) take
any action or position in any such Tax Proceeding if that action or position
could reasonably be expected to increase the Tax liability of Sellers or any of
their Affiliates for any Taxable Period or (B) settle or compromise any such Tax
Proceeding without the prior written consent of Group, which shall not be
unreasonably withheld. If Group refuses to provide its consent to settle or
compromise any issue with respect to such Tax Proceeding, Group shall bear the
expenses of all aspects of the prosecution or defense of such issue following
such refusal, shall assume control of the prosecution or defense of such issue
and shall indemnify Buyers for any increase in Buyers' or the Transferred
Subsidiaries' liability for Taxes, if any, that the Buyers and the Transferred
Subsidiaries incur with respect to such issue in excess of the liability had
such Tax Proceeding been terminated or settled on the terms proposed prior to
Group's refusal to consent to such settlement or compromise.
56
SECTION 6
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYERS AND SELLERS
The obligation of Buyers and Sellers to effect the transactions
contemplated by this Agreement is subject to the satisfaction or waiver by each,
at or before the Closing Date, of the following conditions:
6.1 NO LITIGATION.
(a) No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction (each party agreeing to use its commercially reasonable efforts to
have any such order reversed or injunction lifted) or other legal or regulatory
restraint or provision prohibiting Buyers' proposed acquisition of the Acquired
Assets, or limiting or restricting Buyers' conduct or operation of the
businesses of Sellers (or its own business) or ownership or use of the Acquired
Assets, in each case following the Closing, shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
Governmental Authority, seeking any of the foregoing be pending or, to the
Knowledge of Buyers or Sellers, be threatened.
(b) No legislation shall have been passed by both house
of the U.S. Congress which is reasonably likely to have a Material Adverse
Effect.
6.2 GOVERNMENT CONSENTS AND APPROVALS. All Government Consents set
forth on SCHEDULE 6.2 shall have been obtained and made. All applicable waiting
periods under the HSR Act shall have expired or been terminated.
6.3 EMPLOYMENT AGREEMENTS. Buyers and the individual identified in
SCHEDULE 6.3 shall have executed and delivered an employment agreement having
the terms set forth in SCHEDULE 6.3. Buyers shall have offered ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ the opportunity to become employed by SLM
and to enter into employment contracts for at least a three-year term containing
salary and severance payments equivalent , and with other terms substantially
comparable, to those in their agreements with Group as in affect on the date
hereof. To the extent such persons do not become employed by SLM or by Group,
Loan Services or Guarantee Services, SLM shall reimburse USA Group for severance
payments made in connection with the transactions contemplated by this Agreement
under their existing employment agreements.
57
6.4 DEPARTMENT OF EDUCATION. Sellers shall have notified the
Department of Education ( the "DEPARTMENT") of the transactions contemplated by
this Agreement as promptly as practicable after the execution of this Agreement
and neither Sellers nor Buyers shall have received any objections to the
transactions from the Department or any such objections shall have been
resolved.
SECTION 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS
The obligation of Buyers to effect the transactions contemplated by
this Agreement is subject to the satisfaction or waiver, at or before the
Closing Date, of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All of the representations and warranties of Sellers contained in this Agreement
shall be true, correct and complete in all respects (ignoring for these purposes
any qualifications as to materiality or Material Adverse Effect) on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date except (a) that the accuracy of
representations and warranties that by their terms speak as of the date of this
Agreement or some other date will be determined as of such date and (b) for such
failures to be true and correct as would not, individually or in the aggregate,
be reasonably likely to result in a Material Adverse Effect; all of the terms,
covenants, agreements and conditions of this Agreement to be complied with,
performed or satisfied by any of Sellers on or before the Closing Date shall
have been duly complied with, performed or satisfied in all material respects.
7.2 NO MATERIAL ADVERSE CHANGE. There have been, individually or
in the aggregate, no Material Adverse Effects (excluding for these purposes,
clause (ii) of the definition thereof) since March 31, 2000.
7.3 DELIVERY OF CLOSING ITEMS. Buyers shall have received the
deliveries contemplated by Section 2.2(a).
7.4 U.S. DEPARTMENT OF TREASURY. Buyer shall have notified the
U.S. Department of Treasury Office of ▇▇▇▇▇▇ ▇▇▇ Oversight of the transactions
contemplated by this Agreement and have received no objection to the
transactions from such office or such objection shall have been resolved.
SECTION 8
CONDITIONS PRECEDENT TO
OBLIGATIONS OF SELLERS
The obligation of Sellers to effect the transactions contemplated
hereby are subject to the satisfaction or waiver, at or before the Closing Date,
of the following conditions:
58
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All of the representations and warranties of Buyers contained in this Agreement
shall be true, correct and complete in all respects (ignoring for these purposes
any qualifications as to materiality or Buyers Material Adverse Effect) on and
as of the Closing Date with the same effect as though such representations and
warranties had been made as of such date except (a) that the accuracy of
representations and warranties that by their terms speak as of the date of this
Agreement or some other date will be determined as of such date and (b) for such
failures to be true and correct as would not, individually or in the aggregate,
be reasonably likely to result in a Buyers Material Adverse Effect; all of the
terms, covenants, agreements and conditions of this Agreement to be complied
with, performed or satisfied by Buyers on or before the Closing Date shall have
been duly complied with, performed or satisfied in all material respects.
8.2 NO MATERIAL ADVERSE CHANGE. There have been, individually or
in the aggregate, no Buyers Material Adverse Effects since March 31, 2000.
8.3 DELIVERY OF CLOSING ITEMS. Sellers shall have received the
deliveries contemplated by Section 2.2(b).
SECTION 9
INDEMNIFICATION
9.1 GENERAL INDEMNIFICATION BY SELLERS. Each of Sellers jointly
and severally, covenants and agrees to indemnify, defend, protect and hold
harmless Buyers and their officers, directors, employees, agents,
representatives, stockholders, assigns, successors and Affiliates (individually,
a "BUYERS INDEMNIFIED PARTY" and collectively, "BUYERS INDEMNIFIED PARTIES")
from, against and in respect of:
(a) all Liabilities, causes of action, lawsuits,
administrative proceedings (including informal proceedings), assessments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses,
including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description, (collectively, "DAMAGES") suffered,
sustained, incurred or paid by Buyers Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any breach or inaccuracy of any
representation or warranty of any of Sellers as of the date of Closing (except
that the accuracy of representations and warranties that speak as of the date of
this Agreement or some other date will be determined as of such date) set forth
in Sections 3.1 (Due Organization), 3.2 (Authorization; Validity), 3.3(a), (d)
and (e) (No Conflicts), 3.4 (Title and Ownership), 3.6(a), (b) and (c)
(Financial Statements), 3.19 (Taxes), and 3.24 (Student Loan Portfolio) of this
Agreement;
59
(ii) any breach or inaccuracy which is to the
Knowledge of Sellers or to the actual knowledge of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (or their successors) after reasonable inquiry (which inquiry
shall be completed as of the Closing) of the following representation: Each of
Sellers and the Transferred Subsidiaries is and has been in compliance with, and
has conducted its respective business and owned, used, operated and maintained
its respective properties, rights and assets in full compliance (with respect to
loan servicing) with the Higher Education Act, the False Claims Act and the
Consumer Credit Protection Act, except where the failure to do so would not be
reasonably likely to have a Material Adverse Effect.
(iii) any breach or nonfulfillment of any covenant
or agreement on the part of any of Sellers, in this Agreement; or
(iv) the Retained Assets or the Excluded
Liabilities; and
(b) any and all Damages incident to any of the foregoing
or to the enforcement of this Section 9.1.
9.2 GENERAL INDEMNIFICATION BY BUYERS. Buyers covenants and agrees
to indemnify, defend, protect and hold harmless Sellers and their officers,
directors, employees, stockholders, assigns, successors and Affiliates
(individually, a "SELLER INDEMNIFIED PARTY" and collectively, "SELLER
INDEMNIFIED PARTIES") from and against:
(a) all Damages suffered, sustained, incurred or paid by
the Sellers Indemnified Parties in connection with, resulting from or arising
out of, directly or indirectly:
(i) any inaccuracy or breach of any
representation or warranty of Buyers as of the date of this Agreement or as of
the date of Closing (except that the accuracy of representations and warranties
that speak as of the date of this Agreement or some other date will be
determined as of such date) set forth in Sections 4.1 (Due Organization) 4.2
(Authorization; Validity), 4.4(a), (c) and (d) (No Conflicts), and 4.6 (SEC
Reports and Financial Statements) of this Agreement; or
(ii) any breach or nonfulfillment of any covenant
or agreement on the part of Buyers in this Agreement; or
(iii) the Assumed Liabilities or the Acquired
Assets; and
(b) any and all Damages incident to any of the foregoing
or to the enforcement of this Section 9.2.
9.3 LIMITATION. Notwithstanding the above:
(a) There shall be no liability for indemnification under
Section 9.1 unless the aggregate amount of Damages exceeds $7,500,000 (the
"SELLERS INDEMNIFICATION THRESHOLD"), at which time Sellers will be obligated to
indemnify the Buyer Indemnified Parties with respect to
60
all such Damages in excess of the Sellers Indemnification Threshold; PROVIDED,
HOWEVER, that Sellers Indemnification Threshold shall not apply to Damages
described in Section 9.1(a)(iii) or 9.1(a)(iv) or to Damages described in
Section 9.1(a)(i) that relate to Section 3.19 (Taxes), Section 5.4 (Certain Tax
Matters), or claims for indemnification thereunder. In no event shall Sellers'
aggregate liability in respect of indemnification claims pursuant to Sections
9.1(a) exceed $200 million; PROVIDED, HOWEVER, that no claims for
indemnification relating to Section 3.19 (Taxes) or the Schedules thereto or
Section 5.4 (Certain Tax Matters) or claims for indemnification thereunder shall
be included in determining such $200 million limitation. To the extent that
Buyers had Knowledge (which Sellers shall have the burden of proving in the
event of any dispute) that Buyers or any party acting on their behalf were aware
that Sellers' representations and warranties set forth in Section 3 of this
Agreement were not true and correct in all material respects as of the date of
closing, indemnification under this Section 9 for such representations and
warranties for which Buyers had Knowledge shall not be available solely with
respect to the specific claim under such representations or warranties which
Buyers were aware were not true and correct.
(b) There shall be no liability for indemnification under
Section 9.2 unless the aggregate amount of Damages exceeds $7,500,000 (the
"BUYERS INDEMNIFICATION THRESHOLD"), at which time Buyers will be obligated to
indemnify the Seller Indemnified Parties with respect to all such Damages in
excess of the Buyers Indemnification Threshold; PROVIDED, HOWEVER, that the
Buyers Indemnification Threshold shall not apply to Damages described in Section
9.2(a)(ii)or 9.2(a)(iii). In no event shall Buyers' aggregate liability in
respect of indemnification claims pursuant to Section 9.2(a) exceed $200
million. To the extent that Sellers had Knowledge (which Buyers shall have the
burden of proving in the event of any dispute) that Sellers or any party acting
on their behalf were aware that Buyers' representations and warranties set forth
in Section 4 of this Agreement were not true and correct in all material
respects as of the date of closing, indemnification under this Section 9 for
such representations and warranties for which Sellers had Knowledge shall not be
available solely with respect to the specific claim under such representations
or warranties which Sellers were aware were not true and correct.
(c) The representations, warranties and covenants
referenced in Sections 9.1(a)(i) , (ii) and (iii) shall survive the Closing and
expire on March 1, 2002. The representations and warranties and covenants
referenced in Sections 9.2(a)(i) and (ii) shall survive the Closing and expire
on March 1, 2002. Notwithstanding the foregoing, the representations and
warranties, covenants and agreements of the Sellers referred to in Sections
9.1(a)(i), (ii) and (iii) that relate to Section 3.19 (Taxes) or under Section
5.4 (Certain Tax Matters) shall survive after the Effective Time and shall
remain in full force and effect until the date that is two (2) months after the
expiration of the last applicable federal or state statute of limitations
(including extensions thereof).
9.4 INDEMNIFICATION PROCEDURES. Except as set forth in Section
5.4(e), all Claims for indemnification under this Section 9 shall be asserted
and resolved as follows:
(a) In the event that any Person entitled to
indemnification hereunder (the "INDEMNIFIED PARTY") has a Claim against any
party obligated to provide indemnification
61
pursuant to Section 9.1 or 9.2 hereof (the "INDEMNIFYING PARTY") which does not
involve a Claim being sought to be collected by a third party, the Indemnified
Party shall with reasonable promptness send a Claim Notice with respect to such
Claim to each Indemnifying Party. If the Indemnifying Party does not notify the
Indemnified Party within thirty (30) days from receipt of the Claim Notice (the
"NOTICE PERIOD") that the Indemnifying Party disputes such Claim, the amount of
such Claim shall be conclusively deemed a liability of the Indemnifying Party
hereunder. In case an objection is made in writing in accordance with this
Section 9.4(a), the Indemnified Party shall have thirty (30) days to respond in
a written statement to the objection. If after such thirty (30) day period there
remains a dispute as to any Claims, the parties shall attempt in good faith for
thirty (30) days to agree upon the rights of the respective parties with respect
to each of such Claims. If the parties should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties.
(b) In the event that any Claim for which the
Indemnifying Party would be liable to an Indemnified Party hereunder is asserted
against an Indemnified Party by a third party, the Indemnified Party shall with
reasonable promptness notify the Indemnifying Party of such Claim, specifying
the nature of such claim and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the final amount
of such Claim) (the "CLAIM NOTICE"). The Indemnifying Party shall, within the
Notice Period, notify the Indemnified Party (i) whether or not such Indemnifying
Party disputes the liability to the Indemnified Party hereunder with respect to
such Claim and (ii) if such Indemnifying Party does not dispute such liability,
whether or not the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend against such Claim, provided that such
Indemnifying Party is hereby authorized (but not obligated) prior to and during
the Notice Period to file any motion, answer or other pleading and to take any
other action which the Indemnifying Party shall deem necessary or appropriate to
protect the Indemnifying Party's interests. In the event that the Indemnifying
Party notifies the Indemnified Party within the Notice Period that the
Indemnifying Party does not dispute the Indemnifying Party's obligation to
indemnify hereunder and desires to defend the Indemnified Party against such
Claim and except as hereinafter provided, such Indemnifying Party shall have the
right to defend by appropriate proceedings, which proceedings shall be promptly
settled or prosecuted by such party to a final conclusion, PROVIDED that, unless
the Indemnified Party otherwise agrees in writing, the Indemnifying Party may
not settle any matter (in whole or in part) unless such settlement includes a
complete and unconditional release of the Indemnified Party. If the Indemnified
Party desires to participate in, but not control, any such defense or settlement
the Indemnified Party may do so at its sole cost and expense. If the
Indemnifying Party elects not to defend the Indemnified Party against such
Claim, whether by failure of such party to give the Indemnified Party timely
notice as provided above or otherwise, then the Indemnified Party, without
waiving any rights against such party, may settle or defend against any such
Claim in the Indemnified Party's sole discretion and the Indemnified Party shall
be entitled to recover from the Indemnifying Party the amount of any settlement
or judgment and, on an ongoing basis, all Damages of the Indemnified Party with
respect thereto, including interest from the date such Damages were incurred.
All reasonable costs and expenses incurred by the Indemnified Party in so
defending a Claim shall constitute Damages.
62
(c) If at any time, in the reasonable opinion of the
Indemnified Party, any Claim described in Section 9.4(b) seeks material
prospective relief which could have a materially adverse effect on the assets,
liabilities, financial condition, results of operations or business prospects of
any Indemnified Party or any Affiliate thereof, the Indemnified Party shall have
the right to control or assume (as the case may be) the defense of any such
Claim and the amount of any judgment or settlement and the reasonable costs and
expenses of defense shall be included as part of the indemnification obligations
of the Indemnifying Party hereunder. If the Indemnified Party should elect to
exercise such right, the Indemnifying Party shall have the right to participate
in, but not control, the defense of such claim or demand at the sole cost and
expense of the Indemnifying Party.
(d) Nothing herein shall be deemed to prevent the
Indemnified Party from making a claim, and an Indemnified Party may make a claim
hereunder, for potential or contingent claims or demands provided the Claim
Notice sets forth the specific basis for any such potential or contingent claim
or demand to the extent then feasible and the Indemnified Party has reasonable
grounds to believe that such a claim or demand may be made.
(e) The Indemnified Party's failure to give reasonably
prompt notice as required by this Section 9.4 of any actual, threatened or
possible Claim which may give rise to a right of indemnification hereunder shall
not relieve the Indemnifying Party of any liability which the Indemnifying Party
may have to the Indemnified Party except to the extent the failure to give such
notice materially and adversely prejudiced the Indemnifying Party.
(f) The parties will make appropriate adjustments for any
Tax benefits, Tax detriments or insurance proceeds in determining the amount of
any indemnification obligation under Sections 5.4, 9.1 or 9.2.
9.5 REMEDIES. The remedies set forth in this Section 9 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
SECTION 10
MISCELLANEOUS
10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date solely:
(a) by mutual consent of Buyers and Sellers;
(b) by Sellers, on the one hand, or by Buyers, on the
other hand, if the Closing shall not have occurred on or before January 31,
2001, provided that the right to terminate this Agreement under this Section
10.1(b) shall not be available to either party whose material
63
misrepresentation, inaccuracy, breach of warranty, default or failure to fulfill
any covenant or obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date;
(c) by Sellers, on the one hand, or by Buyers, on the
other hand, if there is or has been an inaccuracy, breach, failure to fulfill or
default on the part of the other party of any of the representations and
warranties contained herein (ignoring for those purposes any qualifications as
to materiality or Material Adverse Effect) except for such inaccuracies,
breaches, failures or defaults as would not, individually or in the aggregate,
be reasonably likely to result in a Material Adverse Effect, or in the due and
timely performance and satisfaction in all material respects of any of the
covenants, agreements or conditions contained herein, and the curing of such
default shall not have been made within thirty (30) days from receipt of the
notice of such default or could not reasonably be expected to occur before the
Closing Date;
(d) by Sellers or by Buyers if:
(i) any Governmental Authority of competent
jurisdiction shall have issued any judgment, injunction, order or decree
prohibiting, enjoining or otherwise restraining the transactions contemplated
hereby and such judgment, injunction, order or decree shall have become final
and nonappealable; PROVIDED, HOWEVER, that the party seeking to terminate this
Agreement pursuant to this Section 10.1(d)(i) shall have used commercially
reasonable efforts to remove such judgment, injunction, order or decree; or
(ii) any statute, rule, regulation or executive
order promulgated or enacted by any Governmental Authority after the date of
this Agreement which prohibits the consummation of the transactions contemplated
hereby shall be in effect; or
(e) by Sellers pursuant to SECTION 5.1(D).
10.2 EFFECT OF TERMINATION. In the event of any termination of this
Agreement pursuant to Section 10.1 hereof, this Agreement forthwith shall become
void and of no further force or effect, and no party hereto (or any of its
Affiliates, directors, trustees, executors, officers, agents or representatives)
shall have any liability or obligation hereunder, except (a) in any case in
accordance with the expense provisions of Section 10.7, the brokers and finders
provision of Sections 10.6, the provisions of this Section 10.2, the provisions
of Section 5.3 to the extent they relate to Confidential Information of Buyers,
and the governing law and forum selection provisions of Section 10.10 and 10.11,
respectively, each of which shall survive any such termination, (b) in any case
to the extent such termination results from the breach of any covenant or a
knowing misrepresentation or inaccuracy of any representations, warranties or
covenants contained in this Agreement and (c) if the Agreement is terminated
pursuant to Section 10.1(e), then Sellers will immediately pay to Buyers a
termination fee equal to $18,000,000 in cash which shall be payable immediately
upon termination of this Agreement. The agreement contained in this Section 10.2
is an integral part of the transaction and constitutes liquidated damages in the
event of the occurrence of the circumstances specified in Section 10.1(e) above
and is not a penalty.
64
10.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned without the prior written consent of the
other parties hereto (except by operation of law) and shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, heirs and legal representatives; provided, however, that Buyers may
assign any or all of its rights, obligations or liabilities hereunder to any of
its wholly-owned Affiliates, and provided further that Buyers may assign any or
all of its rights and obligations under this Agreement to any party that merges
with or acquires all or substantially all of the assets of Buyers.
10.4 ENTIRE AGREEMENT. This Agreement (which includes the Schedules
hereto) and the agreements set forth in the exhibits attached hereto sets forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby. It shall not be amended or modified except by a written
instrument duly executed by each of the parties hereto. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. Each
of the Schedules to this Agreement is incorporated herein by this reference and
expressly made a part hereof.
10.5 COUNTERPARTS. This Agreement may be executed in multiple
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument.
10.6 BROKERS AND AGENTS. Group represents and warrants to Buyers
that it has employed ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. ("▇▇▇▇▇▇▇ SACHS") in connection with
the transactions contemplated by this Agreement and agrees to indemnify Buyers
against all Damages relating to or arising out of claims for fees or commission
by ▇▇▇▇▇▇▇ ▇▇▇▇▇. Other than ▇▇▇▇▇▇▇ Sachs and Bear ▇▇▇▇▇▇▇ & Co., Inc. with
respect to Sellers and ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc. with respect to Buyers, Buyers
and Sellers each represents and warrants to the other that it has not employed
any broker, finder or agent in connection with the transactions contemplated by
this Agreement and agrees to indemnify the other against all Damages relating to
or arising out of claims for fees or commission of any broker, finder or agent
employed or alleged to have been employed by such indemnifying party.
10.7 EXPENSES AND FEES. Except as provided in Section , 10.2 or as
otherwise provided in this Agreement, Buyers will pay and be solely responsible
for all of the fees, expenses and disbursements of Buyers and their agents,
representatives, accountants and counsel incurred in connection with this
Agreement and the transactions contemplated hereby, including without limitation
negotiation, legal, travel, due diligence expenses. Except as otherwise
provided, Sellers will pay and be solely responsible for all of the fees,
expenses and disbursements of Sellers, and their agents, representatives,
financial advisers, accountants and counsel incurred in connection with this
Agreement and the transactions contemplated hereby, including without limitation
negotiation, legal, travel, due diligence expenses.
10.8 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges
that the other parties will be irreparably harmed and that there will be no
adequate remedy at law for any violation by any of them of any of the covenants
or agreements contained in this Agreement. It
65
is accordingly agreed that, in addition to any other remedies which may be
available upon the breach of any such covenants or agreements, each party hereto
shall have the right to obtain injunctive relief to restrain a breach or
threatened breach of, or otherwise to obtain specific performance of, the other
parties, covenants and agreements contained in this Agreement.
10.9 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to Buyers to:
SLM Holding Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (phone)
(▇▇▇) ▇▇▇-▇▇▇▇ (telefax)
and a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (phone)
(▇▇▇) ▇▇▇-▇▇▇▇ (telefax)
If to Sellers to:
USA Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (phone
(▇▇▇) ▇▇▇-▇▇▇▇ (telefax)
with a required copy to:
Debevoise & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (phone)
(▇▇▇) ▇▇▇-▇▇▇▇ (telefax)
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
66
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
10.10 DISPUTE RESOLUTION. The Sellers on the one hand and the Buyers
on the other hand shall appoint a representative to coordinate with the other
party the implementation of this Agreement. If any dispute arises with respect
to either party's performance hereunder, the representatives shall meet to
attempt to resolve such dispute, either in person or by telephone, within two
(2) Business Days after the written request of either representative. If the
representatives are unable to resolve such dispute, the chief financial officers
of SLM and Group shall meet, either in person or by telephone, within ten (10)
Business Days after either representative provides written notice that the
representatives have been unable to resolve such dispute.
10.11 GOVERNING LAW. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the Laws of the State of
Delaware without giving effect to the choice of law provisions thereof.
10.12 SELECTION OF A FORUM. EACH PARTY HERETO AGREES THAT IT SHALL
BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED
TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS
AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN A
FEDERAL OR STATE COURT LOCATED IN THE STATE OF DELAWARE (THE "CHOSEN COURT") AND
(A) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN COURT, (B)
WAIVES ANY OBJECTION TO LAYING OF VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE
CHOSEN COURT, (C) WAIVES ANY OBJECTION THAT THE CHOSEN COURT ARE AN INCONVENIENT
FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY HERETO, AND (D) AGREES THAT
SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE
EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH THIS AGREEMENT.
10.13 SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
be severable.
10.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. Other than Sections
5.2(b) and 5.3(k), no provision of this Agreement is intended, nor will be
interpreted, to provide or to create any third party beneficiary rights or any
other rights of any kind in any client, customer, Affiliate, stockholder,
officer, director, employee, partner of any party hereto or any other Person,
other than the parties hereto.
67
10.15 MUTUAL DRAFTING. This Agreement is the mutual product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not be
construed for or against any party hereto.
10.16 FURTHER REPRESENTATIONS. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
10.17 AMENDMENT; WAIVER. This Agreement may be amended by the
parties hereto at any time prior to the Closing by execution of an instrument in
writing signed on behalf of each of the parties hereto. Any extension or waiver
by any party of any provision hereto shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
10.18 SCHEDULES. The disclosure of any item in any of the Schedules
attached hereto shall not be deemed a disclosure with respect to any Schedules
in which such item is not disclosed, unless such item is expressly incorporated
by reference, and except to the extent the matters disclosed in one Schedule
would clearly appear on their face to address matters disclosed in another
Schedule.
10.19 DEFINITION OF AFFILIATE. For purposes of this Agreement, the
term "AFFILIATE" means, with respect to any Person, (i) any Person that,
directly or indirectly through one or more entities, controls or is controlled
by, or is under common control with, such Person, or (ii) any director, officer,
partner, member, manager or trustee of such Person or (iii) any Person who is an
officer, director, partner, member, manager or trustee of any Person described
in clauses (i) or (ii) of this sentence. As used herein, "controls," "control"
and "controlled" means the possession, direct or indirect, of the power to
direct the management and policies of a Person, whether through the ownership of
50% or more of the voting interests of such Person or otherwise.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement as of the day and year first above written.
SLM HOLDING CORPORATION
By: ________________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
HIJ CORPORATION
By: ________________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
USA GROUP, INC.
By: ________________________________________________
Name: ________________________________________________
Title: ________________________________________________
By: ________________________________________________
Name: ________________________________________________
Title: ________________________________________________
USA GROUP LOAN SERVICES, INC.
By: ________________________________________________
Name: ________________________________________________
Title: ________________________________________________
USA GROUP GUARANTEE SERVICES, INC.
By: ________________________________________________
Name: ________________________________________________
Title: ________________________________________________
69
EXHIBITS
Exhibit 2.2(a)(iii) Transitional Services Agreement
Exhibit 2.2(a)(iv) Registration Rights Agreement
Exhibit 2.2(a)(v) Grant Recommendation Agreement
Exhibit 2.2(a)(vi) Name and Trademark License Agreement
Exhibit 2.2(a)(vii) Amendment to Guarantee Services Agreement
Exhibits 2.2(a)(xii) Non Compete Agreement
Exhibit 2.2(a)(xiv) Sellers' Opinions of Counsel
Exhibit 2.2(b)(ix) Buyers' Opinions of Counsel
SCHEDULES
SCHEDULE NAMES
Schedule 1.1(j) Name
Schedule 1.2 Retained Assets
Schedule 1.6 Allocation of Consideration
Schedule 3.0 Additional Persons with Knowledge
Schedule 3.3(b) Conflicts
Schedule 3.3(d) Government Consents
Schedule 3.4 Title and Ownership
Schedule 3.5 Subsidiaries
Schedule 3.6(a) Financial Information (including for Group, Guarantee Services, Loan
Services, Enterprises and SMS)
Schedule 3.6(c) Combined Statements of Financial Position of Group and its
Subsidiaries
Schedule 3.6(d) Liabilities
Schedule 3.7 Material Permits
Schedule 3.8 Environmental Matters
Schedule 3.8(b) Environmental Permits
Schedule 3.9(a) Real Property
Schedule 3.9(b) Exceptions Regarding Real Property
Schedule 3.10 Leases
Schedule 3.11(a) Material Contracts
Schedule 3.11(c) Exceptions to Material Contracts
Schedule 3.12 Insurance
Schedule 3.13(c) Labor and Employment Matters
Schedule 3.14(b) Employee Benefit Plans
Schedule 3.14(c)(iii) Pension Plans
Schedule 3.14(c)(iv) Matters Pending under the IRS's Employee Plans Compliance
Resolutions System
Schedule 3.14(c)(v) Acceleration of Company Plan or Company Benefit Arrangement
Schedule 3.16 Litigation
Schedule 3.17 Intellectual Property
Schedule 3.19(d) Tax Extensions
Schedule 3.19(h) Employee Payments
Schedule 3.19(k) Tax Partnerships
Schedule 3.20 Absence of Changes
Schedule 3.23 Liability for Loan Servicing
Schedule 3.24(b) Loan Liens
Schedule 3.24(f) Credit and Collection Policies
Schedule 3.24(i) Borrower Benefit Programs
Schedule 4.4 No Conflicts
Schedule 4.5 Capitalization
Schedule 4.8 Absence of Certain Charges
Schedule 4.9 Absence of Undisclosed Liabilities
Schedule 4.11(a) Material Buyer Contracts
Schedule 4.11(c) Buyer Registration Rights Agreements
Schedule 4.12 Litigation
Schedule 5.2(b)(i) Names of Executive Vice Presidents
Schedule 5.3(k)(i) Non-Transferred Employees
Schedule 5.3(k)(viii) Equivalent Benefits
Schedule 5.3(k)(xii) Options
Schedule 6.2 Government Consents and Approvals
Schedule 6.3 Individual Subject to Employment Agreement
LOCATION OF
DEFINED TERMS
"Accountant"........................................................................................1.5(a)
"Acquisition Corp."...............................................................................Preamble
"Acquisition Proposal"........................................................................5.1(d)(i)(A)
"Act"...........................................................................................3.24(a)(i)
"Adjusted Net Asset Value"..........................................................................1.5(a)
"Adjustment Certificate"..................................................................................
"Adjustment Report".................................................................................1.5(f)
"Affiliate"..........................................................................................10.19
"Aggregate Value"...............................................................................1.4(a)(ii)
"Agreement".......................................................................................Preamble
"Assumed Contracts".................................................................................1.1(f)
"Assumed Liabilities"..................................................................................1.3
"Assumption Agreement".................................................................................1.3
"Audited Balance Sheet".............................................................................1.5(f)
"Audited Financial Statements"......................................................................3.6(a)
"Average SLM Stock Price".......................................................................1.4(a)(ii)
"Benefit Arrangement"...........................................................................3.14(a)(i)
"Benefit Plan".................................................................................3.14(a)(ii)
"Books and Records"...................................................................................3.18
"Business"........................................................................................Recitals
"Buyers"..........................................................................................Preamble
"Buyers' Auditors"..................................................................................1.5(d)
"Buyers' Charter Documents".........................................................................4.1(b)
"Buyers Indemnification Threshold"..................................................................9.3(b)
"Buyers Indemnified Party".............................................................................9.1
"Buyers Material Adverse Effect"....................................................................4.1(a)
"Cash Plans"...........................................................................................1.3
"Cash Purchase Price"............................................................................1.4(a)(i)
"Charter Documents".................................................................................3.1(b)
"Chosen Court"........................................................................................10.6
"Claim Notice"......................................................................................9.4(b)
"Closing"..............................................................................................2.1
"Closing Date".........................................................................................2.1
"COBRA".......................................................................................3.14(c)(vii)
"Code".............................................................................................3.19(f)
"Company Benefit Arrangement".................................................................3.14(a)(iii)
"Company Financial Statements"......................................................................3.6(a)
"Company Plan".................................................................................3.14(a)(iv)
"Confidential Knowledge"........................................................................5.3(c)(ii)
"Contracts".........................................................................................1.1(f)
"Damages"...........................................................................................9.1(a)
"Department"...........................................................................................6.4
"Dispute Notice"....................................................................................1.5(d)
"Eligible Insurer".............................................................................3.24(a)(ii)
"Eligible Lender Trustee"..........................................................................3.24(b)
"Employment Agreement".................................................................................6.3
"Enterprises".....................................................................................Recitals
"Enterprises Shares"................................................................................1.1(i)
"Environmental Permits".............................................................................3.8(b)
"ERISA".........................................................................................3.14(a)(v)
"ERISA Affiliate"..............................................................................3.14(a)(vi)
"Excluded Liabilities".................................................................................1.3
"FFELP".......................................................................................3.24(a)(iii)
"FFELP Loan Portfolio".........................................................................3.24(a)(iv)
"Funds"...........................................................................................Recitals
"GAAP".................................................................................................1.2
"Group"...........................................................................................Preamble
"Group Work"......................................................................................Recitals
"▇▇▇▇▇▇▇ ▇▇▇▇▇".......................................................................................10.6
"Governmental Authority"............................................................................1.1(e)
"Government Consents"...............................................................................3.3(d)
"Guarantee Business"..............................................................................Recitals
"Guarantee Services"..............................................................................Preamble
"HSR Act"...........................................................................................5.3(h)
"Indemnified Party".................................................................................9.4(a)
"Indemnifying Party"................................................................................9.4(a)
"IRS".................................................................................................3.12
"June 30, 2000 Pro Forma Balance Sheets"............................................................3.6(c)
"June 30, 2000 Pro Forma Finance Statements"........................................................3.6(c)
"June 30, 2000 Pro Forma Results of Operations".....................................................3.6(c)
"Knowledge"......................................................................................Section 3
"Laws"..............................................................................................3.1(a)
"Lease"...............................................................................................3.10
"Liabilities".......................................................................................3.6(d)
"Licenses"..........................................................................................1.1(g)
"Lien".................................................................................................1.1
"Loan Services"...................................................................................Preamble
"March 31, 2000 Pro Forma Balance Sheets"...........................................................3.6(c)
"March 31, 2000 Pro Forma Financial Statements".....................................................3.6(c)
"March 31, 2000 Pro Forma Results of Operations"....................................................3.6(c)
"Material Adverse Effect"...........................................................................3.1(a)
"Material Contracts"..................................................................................3.11
"Material Permits".....................................................................................3.7
"Net Asset Value"......................................................................................1.2
"Note"..........................................................................................3.24(a)(v)
"Notice Period".....................................................................................9.4(a)
"Pension Plan"................................................................................3.14(a)(vii)
"Permitted Liens"......................................................................................3.4
"Permits"...........................................................................................1.1(h)
"Person"............................................................................................1.1(e)
"Pre-Closing Period"............................................................................3.19(r)(i)
"Pricing Period"................................................................................1.4(a)(ii)
"Private Loan Portfolio".......................................................................3.24(a)(vi)
"Purchase Price"....................................................................................1.4(a)
"Qualified Plan".............................................................................3.14(a)(viii)
"Real Property".....................................................................................3.9(a)
"Regulations".................................................................................3.24(a)(vii)
"Required Consents".................................................................................5.3(g)
"Retained Assets"......................................................................................1.2
"Seller Indemnified Party".............................................................................9.2
"Sellers Indemnification Threshold".................................................................9.3(a)
"Sellers".........................................................................................Preamble
"Straddle Periods".............................................................................5.4(a)(iii)
"SLM".............................................................................................Preamble
"SLM Common Stock"..............................................................................1.4(a)(ii)
"SLM SEC Reports"...................................................................................4.6(a)
"SLM Shares"....................................................................................1.4(a)(ii)
"SLM Stock Plans"......................................................................................4.5
"SMS Hawaii"........................................................................................1.2(d)
"Student Loan Portfolio".....................................................................3.24(a)(viii)
"Tax Proceeding"...............................................................................3.19(r)(iv)
"Tax Return"....................................................................................3.19(r)(v)
"Tax"..........................................................................................3.19(r)(ii)
"Taxable Period"..............................................................................3.19(r)(iii)
"Taxing Authority".............................................................................3.19(r)(vi)
"Third Party Consents"..............................................................................3.3(b)
"Trading Day"...................................................................................1.4(a)(ii)
"Transferred Subsidiaries"........................................................................Recitals
"Transitional Services Agreement" .............................................................2.2(a)(iii)
"Third Party Acquirers".......................................................................5.1(d)(i)(A)
"Unaudited Interim Financial Statements"............................................................3.6(a)
"USA Group Funds"...................................................................................1.2(c)
"USA Group SMS"...................................................................................Recitals
"Window Period".................................................................................5.1(d)(ii)