EXHIBIT 2.1
[CONFORMED COPY]
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STOCK PURCHASE AGREEMENT
between
SPS TRANSACTION SERVICES, INC.,
as
SELLER
and
ASSOCIATES FIRST CAPITAL CORPORATION,
as
PURCHASER
April 18, 1998
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TABLE OF CONTENTS
ARTICLE I Purchase and Sale of Shares 1
1.1 Purchase and Sale of Shares 1
1.2 Purchase Price and Additional Transactions 1
1.3 Closing 2
1.4 Seller's Deliveries to Purchaser 2
1.5 Purchaser's Deliveries to Seller 3
ARTICLE II Representations and Warranties of Seller 3
2.1 Authority 3
2.2 No Conflicts; Consents 4
2.3 Organization and Standing; Subsidiaries 4
2.4 Capital Stock of the Subsidiaries 5
2.5 Subsidiaries' Equity Interests 5
2.6 SEC Reports and Financial Statements 5
2.7 Absence of Certain Changes or Events 6
2.8 Litigation 6
2.9 Taxes 6
2.10 Benefit Plans 7
2.11 Employee Relations 8
2.12 Compliance, Licenses and Permits 9
2.13 Takeover Statutes 9
2.14 Vote Required 10
2.15 Brokers, Finders, etc. 10
2.16 Contracts 10
2.17 Insurance 11
2.18 Tangible Personal Property 11
2.19 Real Properties 11
2.20 Office Leases 11
2.21 Guaranties 12
2.22 Computer Systems 12
2.23 Accounts and Receivables 12
2.24 Voting Agreement 13
2.25 No Other Representations or Warranties 13
ARTICLE III Representations and Warranties of Purchaser 13
3.1 Organization and Standing 13
3.2 Authority 13
3.3 No Conflicts; Consents 13
3.4 Information Supplied 14
3.5 Financial Ability to Perform 14
3.6 Absence of Certain Changes or Events 14
3.7 No Other Representations or Warranties 14
ARTICLE IV Covenants of Seller 14
4.1 Access 14
4.2 Ordinary Conduct 15
4.3 Other Transactions 16
4.4 Stockholder Approval; Recommendation 17
4.5 Intercompany Debt 17
4.6 Solicitation 17
4.7 Contribution of Seller 17
4.8 Maintain Corporate Existence 17
ARTICLE V Covenants of Purchaser 18
5.1 Confidentiality 18
5.2 Employees 18
5.3 Benefit Plans for Hired Employees 19
5.4 WARN Act 21
5.5 Regulatory Conditions 22
5.6 Certain Understandings 22
5.7 Proxy Information 22
5.8 Assumption of Liabilities 23
ARTICLE VI Mutual Covenants 23
6.1 Consummation of the Transactions 23
6.2 Publicity 23
6.3 Antitrust Notification 24
6.4 Further Assurances 24
ARTICLE VII Conditions to Closing 24
7.1 Each Party's Obligations 24
7.2 Seller's Obligations 25
7.3 Purchaser's Obligations 26
7.4 Frustration of Closing Conditions 26
ARTICLE VIII Tax Matters 27
8.1 Section 338 27
8.2 Liability for Taxes and Related Matters 27
8.3 Transfer Taxes 30
8.4 Information to be Provided by Purchaser 30
8.5 Assistance and Cooperation 30
8.6 Survival of Obligations 30
ARTICLE IX Termination 31
9.1 Termination Events 31
9.2 Information and Confidentiality 31
9.3 Termination Fees 31
9.4 Abandonment 32
ARTICLE X Indemnification 32
10.1 Nonsurvival of Representations, Warranties and Agreements 32
10.2 Agreement to Indemnify 32
10.3 Conditions of Indemnification 33
10.4 Limitation of Indemnification 34
10.5 Claims Adjusted for Taxes 35
ARTICLE XI Expenses 36
ARTICLE XII Miscellaneous 36
12.1 No Third-Party Beneficiaries 36
12.2 Amendment or Waiver 36
12.3 Headings 36
12.4 Counterparts 36
12.5 Assignment 36
12.6 Notices 36
12.7 Entire Agreement 37
12.8 Severability 38
12.9 Schedules 38
12.10 Consent to Jurisdiction 38
12.11 Governing Law 38
Disclosure Schedules S-1
Schedule 1.1 Shares S-2
Schedule 2.2 No Conflicts; Consents S-3
Schedule 2.4 Capital Stock of Subsidiaries S-5
Schedule 2.5 Subsidiaries' Equity Interests S-6
Schedule 2.7 Certain Changes or Events S-7
Schedule 2.8 Litigation S-8
Schedule 2.9.1 State Income Tax Return Filings S-9
Schedule 2.9.2 Section 2.9. Paragraph (iv) - Miscellaneous Tax Matters S-10
Schedule 2.10 Benefit Plans S-11
Schedule 2.11 Employee Relations S-13
Schedule 2.12 Compliance with Applicable Laws S-14
Schedule 2.16 Contracts S-15
Schedule 2.18 Liens S-26
Schedule 2.19 Real Property S-27
Schedule 2.20 Leases S-28
Schedule 2.21 Guaranties S-29
Schedule 2.22 Computer Systems S-30
Schedule 2.23 Cardholders Agreement Forms S-31
Schedule 3.3 No Conflicts; Consents S-34
Schedule 4.2 Ordinary Conduct S-35
Schedule 4.7 Assets of Seller S-36
Schedule 5.2(i) Employees S-37
Schedule 5.2(ii) Additional Employees S-39
Schedule 5.2(iii) Definition of Cause S-40
Schedule 5.3(i) Benefit Plans not Adopted by Purchaser S-41
Schedule 5.3(ix) Stock Options S-42
Exhibit A Form of Voting Agreement A-1
Exhibit B Form of Assumption Agreement A-2
Exhibit C Form of Interim Servicing Agreement A-3
TABLE OF DEFINITIONS
Section
Account Documentation 2.23
Account Tape 2.23
Accounts 2.23
Affected Persons 2.10
Allocation 8.1(ii)
Allocation Notice 8.1(ii)
Audit 2.9(i)
Basket 10.4
Benefit Plans 2.10
Claims 10.2
Closing 1.3
Closing Date 1.3
Code 2.9(i)
Confidentiality Agreement 5.1
Cut-Off Date 2.23
Delaware Law 2.13
DOJ 6.3
Employee Pension Benefit Plan 5.2
Employee Welfare Benefit Plan 5.2
Exchange Act 2.6
ERISA 2.10
FTC 6.3
GAAP 2.6
Governmental Entity 2.2
Group Subsidiaries 2.9(ii)
Hired Employees 5.2
HSR Act 2.2
▇▇▇▇▇▇ State Bank 2.3(i)
Indemnified Party 10.3
Indemnifying Party 10.3
IRS 2.9(i)
Material Adverse Effect 2.2
Parent 7.3(iii)
Pre-Closing Tax Period 2.9(i)
Proportionate Interest 10.2
Proposed Allocation 8.1(ii)
Proxy Statement 3.4
Purchase Price 1.1
Purchaser Preamble
Reserves 2.9(iv)
Retention and Incentive Plans 5.3(vii)
SEC 2.2
Securities Act 2.6
Seller Preamble
Seller Liabilities 5.8
Seller SEC Reports 2.6
Shares 1.1
SPS Payment 2.3(i)
Stock Option Plans 5.3(ix)
Subsidiary or Subsidiaries 2.3(i)
Superior Acquisition 4.3
Tax or Taxes 2.9(i)
Tax Package 8.4
Tax Return 2.9(i)
Third Party Acquisition Offer 4.3
Third Party Claims 10.3
338 Elections 8.1(i)
Treasury Regulations 2.9(i)
WARN Act 5.4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of April 18, 1998 (this
"Agreement"), is by and between SPS Transaction Services, Inc., a Delaware
corporation ("Seller"), and Associates First Capital Corporation, a Delaware
corporation ("Purchaser").
RECITALS
A. Seller owns all of the issued and outstanding shares of capital stock of
each of its Subsidiaries (as such term is defined in Section 2.3(i) herein).
B. Purchaser desires to purchase from Seller, and Seller desires to sell to
Purchaser, all of the issued and outstanding shares of capital stock of each of
its Subsidiaries upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Shares
1.1 Purchase and Sale of Shares. (a) Upon the terms and subject to the
conditions contained herein, on the Closing Date (as hereinafter defined),
Seller will sell, convey, transfer, assign and deliver to Purchaser the
certificates representing all of the issued and outstanding shares of capital
stock of each of Seller's Subsidiaries as set forth on Schedule 1.1 hereto (the
"Shares") duly endorsed for transfer to Purchaser or accompanied by stock
powers duly executed in blank, the Shares to be free and clear of all security
interests, liens, adverse claims, charges and encumbrances, against payment to
Seller of $895,696,661 (the "Purchase Price").
(b) Upon the terms and subject to the conditions contained herein, on the
Closing Date and immediately prior to the sale of the Shares contemplated by
Section 1.1(a), the Subsidiaries shall pay to Seller all amounts necessary to
satisfy Section 7.2(iv) hereof.
1.2 Purchase Price and Additional Transactions. (a) On the Closing Date and
immediately prior to the sale of the Shares contemplated by Section 1.1(a),
Purchaser shall make a loan to, or contribute capital to or purchase stock of,
the Subsidiaries (on such terms and conditions as Purchaser and Seller shall
reasonably determine but in no event at any cost to Seller) in an amount equal
to the aggregate amount of the payments to be made by the Subsidiaries pursuant
to Section 1.1(b) by delivery of such amount in immediately available funds by
electronic wire transfer to such bank accounts as are designated in writing by
the Subsidiaries at least two business days prior to the Closing Date, and the
Subsidiaries shall effect the transactions set forth in Section 1.1(b).
(b) On the Closing Date promptly following the consummation of the
transactions set forth in Section 1.1(b), Purchaser shall pay the Purchase
Price by delivering to Seller by electronic wire transfer to a bank account
designated in writing by Seller at least two business days prior to the Closing
Date, immediately available funds in an amount equal to the Purchase Price.
1.3 Closing. Upon the terms and subject to the conditions hereof, the
closing of the transactions contemplated hereby (the "Closing") shall take
place at (i) the offices of ▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., local time, on the first business day after all
of the conditions set forth in Article VII have been, or are capable of being
satisfied, or (ii) such other place and/or time and/or on such other date as
Seller and the Purchaser may agree or as may be necessary to permit the
fulfillment or waiver of the conditions herein (in case of either clause (i) or
(ii), the "Closing Date").
1.4 Seller's Deliveries to Purchaser. At Closing, Seller shall deliver to
Purchaser the instruments and items set forth below:
(a) Stock certificates representing the Shares, registered in the name of
Seller, duly endorsed in blank or accompanied by duly executed stock powers;
(b) A certificate of Seller's Secretary or an Assistant Secretary
certifying resolutions adopted by the Board of Directors of Seller authorizing
and approving the execution, delivery and performance of this Agreement and the
transfer of the Shares to Purchaser pursuant to this Agreement;
(c) The written resignations of the directors of the Subsidiaries and their
subsidiaries (excluding the directors of certain subsidiaries that are
designated by certain parties pursuant to contractual arrangements with such
parties);
(d) The stock books, stock ledgers, minute books, and corporate seals of
the Subsidiaries and their subsidiaries;
(e) All Certificates of Seller's officers required under or in connection
with this Agreement;
(f) Certificates of status of compliance or good standing from each State
in which Seller or its Subsidiaries are qualified to transact business, dated
not more than thirty (30) days before the Closing Date;
(g) A certificate of Seller's Secretary or an Assistant Secretary
certifying that the stockholders of Seller have approved the transactions
contemplated by this Agreement;
(h) Any updates of Schedules or Exhibits dated the Closing Date and
certified by Seller's Secretary or an Assistant Secretary; and
(i) All other documents, certificates, instruments, agreements and writings
required to be delivered by Seller on or before the Closing Date pursuant to
this Agreement.
1.5 Purchaser's Deliveries to Seller. At Closing, the Purchaser shall pay
the amounts to Seller and the Subsidiaries and deliver to Seller the following
instruments and items:
(a) The amounts specified in Section 1.2;
(b) A certificate of Purchaser's Secretary or an Assistant Secretary
certifying resolutions of the Board of Directors of Purchaser authorizing and
approving the execution, delivery, and performance of this Agreement;
(c) All certificates of Purchaser's officers required under or in
connection with this Agreement; and
(d) All other documents, certificates, instruments, agreements and writings
required to be delivered by the Purchaser on or before the Closing Date
pursuant to this Agreement.
ARTICLE II
Representations and Warranties of Seller
Seller hereby represents and warrants to Purchaser as follows:
2.1 Authority. Seller has the corporate power and authority to execute
this Agreement and all documents, instruments and agreements required to be
executed by Seller pursuant hereto and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and all
documents, instruments and agreements required to be executed by Seller
pursuant hereto, and the performance by Seller of its obligations hereunder,
have been duly authorized by the Board of Directors of Seller and, except for
authorization of the transactions contemplated by this Agreement by the
stockholders of Seller as provided in Section 4.4 hereof, no further corporate
action is necessary on the part of Seller. This Agreement has been duly
executed and delivered by Seller and, assuming authorization by the
stockholders of Seller and the due execution and delivery by the Purchaser,
constitutes a valid and legally binding obligation of Seller, enforceable
against it in accordance with its terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium
(whether general or specific) and similar laws relating to creditors' rights
generally, and general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law)).
2.2 No Conflicts; Consents. Except as set forth on Schedule 2.2 hereto,
neither the execution and delivery of this Agreement by Seller, nor the
consummation of the transactions contemplated hereby will conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under any
provision of (i) the respective certificates of incorporation or by-laws of
Seller or the Subsidiaries, (ii) any note, bond, mortgage, indenture, deed of
trust, license, lease, contract, commitment, agreement or arrangement to which
Seller or the Subsidiaries is a party or by which any of them or any of their
respective properties or assets is bound or (iii) any judgment, order or
decree, or statute, law, ordinance, rule or regulation, applicable to Seller or
the Subsidiaries or any of their respective properties or assets, in each case
except for any such conflict, violation, default or right which would not
reasonably be expected to have a material adverse effect on the business,
assets, financial condition, or results of operations of the Subsidiaries taken
as a whole (a "Material Adverse Effect"). No consent, approval, license,
permit, order or authorization of, or registration, declaration or filing with,
any Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, or other regulatory or self-
regulatory body or association (each, a "Governmental Entity") is required to
be obtained or made by Seller or the Subsidiaries in connection with the
consummation of the transactions contemplated hereby other than (v) filings
with the South Dakota Division of Banks and the appropriate federal banking
agency(ies), the Securities and Exchange Commission (the "SEC") and the state
securities or "blue sky" commission or similar body in each state where such
filing may be necessary, (w) compliance with and filings under the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (x) as
set forth on Schedule 2.2 hereto, (y) as become applicable solely as a result
of the specific regulatory status of Purchaser and its affiliates and (z) those
the failure of which to make or obtain would not have a Material Adverse
Effect.
2.3 Organization and Standing; Subsidiaries
(i) Each of Seller, SPS Payment Systems, Inc. ("SPS Payment") and ▇▇▇▇▇▇
State Bank ("▇▇▇▇▇▇ State Bank"; each of SPS Payment and ▇▇▇▇▇▇ State Bank
being referred to herein as a "Subsidiary" and collectively as the
"Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Seller and each
of the Subsidiaries has all requisite corporate power and authority to carry on
its respective business as presently conducted and to own, lease and operate
its respective properties and assets as currently owned, leased and operated,
and each is duly qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it, or where
the nature of the business conducted by it, make such qualification necessary,
except where the failure to so qualify or be in good standing would not have a
Material Adverse Effect.
(ii) Seller owns the Shares of the Subsidiaries free and clear of all
security interests, liens, adverse claims, charges and encumbrances. Upon
delivery to Purchaser at the Closing of certificates representing the Shares,
duly endorsed by Seller for transfer to Purchaser, and upon Seller's receipt of
the Purchase Price, Purchaser will acquire title to the Shares, free and clear
of any "adverse claim" (as such term is defined in Section 8-102 of the New
York Uniform Commercial Code), other than those arising from acts of Purchaser
or its affiliates.
2.4 Capital Stock of the Subsidiaries. The authorized capital stock of SPS
Payment consists of 10,000 shares of common stock, par value $100 per share, of
which 100 shares are duly authorized and validly issued and outstanding, fully
paid and nonassessable and are owned by Seller free and clear of any liens,
charges and encumbrances. The authorized capital stock of ▇▇▇▇▇▇ State Bank
consists of 500 shares of capital stock, par value $100 per share, of which 500
shares are duly authorized and validly issued and outstanding, fully paid and
nonassessable and are owned by Seller free and clear of any liens, charges and
encumbrances. Except for the Shares, there are no shares of capital stock or
other equity securities of either Subsidiary outstanding. None of the Shares
have been issued in violation of, or are subject to, any purchase option, call,
right of first refusal or preemptive, subscription or similar right. Except as
set forth on Schedule 2.4 hereto, there are no outstanding warrants, options,
rights, agreements, convertible or exchangeable securities or other commitments
(other than this Agreement) (i) pursuant to which the Seller or either
Subsidiary, or any subsidiary of either Subsidiary, is or may become obligated
to issue, sell, purchase, return or redeem any shares of capital stock or other
securities of such Subsidiary or any of its subsidiaries or (ii) that give any
person the right to receive any benefits or rights similar to any rights
enjoyed by or accruing to the holders of shares of capital stock of such
Subsidiary or any of its subsidiaries.
2.5 Subsidiaries' Equity Interests. Except as set forth on Schedule 2.5
hereto, neither Seller nor the Subsidiaries own, directly or indirectly, any
capital stock of or other equity interests in any corporation, partnership or
other person. All of the issued and outstanding shares of capital stock of
each of the Subsidiaries' subsidiaries (as set forth on Schedule 2.5 hereto)
are duly authorized, have been validly issued, are fully paid and nonassessable
and, are owned by the Subsidiaries as set forth on Schedule 2.5, free and clear
of all liens, charges and encumbrances of any kind.
2.6 SEC Reports and Financial Statements. Each form, report, schedule,
registration statement and definitive proxy statement filed by Seller with the
SEC since December 31, 1997 (including Seller's Annual Report on Form 10-K for
the year ended December 31, 1997) (as such documents have since the time of
their filing been amended, the "Seller SEC Reports"), which include all the
documents (other than preliminary material) that Seller was required to file
with the SEC since such date, as of their respective dates, complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and regulations
of the SEC thereunder applicable to such Seller SEC Reports. None of Seller
SEC Reports contained any untrue statement of a material fact or omitted 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 by
subsequent filings prior to the date hereof. The financial statements of
Seller included in Seller SEC Reports comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles as in effect from time
to time in the United States ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q under the Exchange
Act) and fairly present in all material respects, the consolidated financial
position of Seller and its subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended, subject in the case of interim financial statements to normal year-end
adjustments and except that the interim financial statements do not contain all
of the footnote disclosures required by GAAP. Since December 31, 1997, neither
Seller nor any of its subsidiaries has incurred any liabilities or obligations,
whether absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise and whether due or to become due, except (i) as disclosed or
reflected in Seller SEC Reports filed after December 31, 1997 and prior to the
date hereof, (ii) as incurred in connection with the transactions contemplated
or as provided by this Agreement, (iii) as incurred after December 31, 1997 in
the ordinary course of business, or (iv) except as would not, individually or
in the aggregate, have a Material Adverse Effect.
2.7 Absence of Certain Changes or Events. Since December 31, 1997, except
as contemplated hereby and except as disclosed on Schedule 2.7 or in Seller SEC
Reports filed since December 31, 1997 and prior to the date hereof, Seller and
its subsidiaries have conducted their respective businesses in the ordinary
course and there has not occurred or arisen any event or events which,
individually or in the aggregate, has had or is reasonably likely to (i) have a
Material Adverse Effect, (ii) require filings with the SEC under the Exchange
Act (except for any filings that will be filed under the Exchange Act after the
date hereof but prior to the Closing Date) or (iii) prevent or delay in any
material respect the consummation of any of the transactions contemplated by
this Agreement.
2.8 Litigation. Except as disclosed on Schedule 2.8 hereto, there is no
suit, action or proceeding pending or, to the knowledge of Seller, threatened
against Seller or its subsidiaries that, individually or in the aggregate, (i)
unless expressly indicated on Schedule 2.8, is not adequately reserved for,
(ii) is reasonably likely to have a Material Adverse Effect or (iii) is
reasonably likely to prevent or delay in any material respect Seller from
performing its obligations under, or consummating the transactions contemplated
by, this Agreement. There is no judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against Seller or any of its
subsidiaries which has had or is reasonably likely to have a Material Adverse
Effect.
2.9 Taxes.
(i) For purposes of this Agreement, (a) "Tax" or "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding,
social security, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, including estimated taxes,
imposed by the United States or any other taxing authority (domestic or
foreign), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect to any
such taxes, charges, fees, levies or other assessments; (b) "Tax Return" shall
mean any return, report or other document or information required to be
supplied to a taxing authority in connection with Taxes; (c) "IRS" shall mean
the United States Internal Revenue Service; (d) "Treasury Regulations" shall
mean the Treasury Regulations promulgated under the Code; (e) "Pre-Closing Tax
Period" shall mean all taxable periods ending on or before the Closing Date and
the portion ending on the Closing Date of any taxable period that includes (but
does not end on) such day; (f) "Audit" shall mean any audit, assessment of
Taxes, reassessment of Taxes, or other examination by any taxing authority or
any judicial or administrative proceedings or appeal of such proceedings; and
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(ii) Seller, the Subsidiaries and their wholly-owned subsidiaries
(collectively with the Subsidiaries, the "Group Subsidiaries") are each "C"
corporations as defined in the Code.
(iii) In the last five years, the only jurisdictions where the Group
Subsidiaries have filed (or had filed on their behalf) any income Tax Returns
are with the Federal government of the United States and with those States set
forth on Schedule 2.9.1 hereto.
(iv) Except as set forth on Schedule 2.9.2 hereto, (a) the Group
Subsidiaries have (x) duly filed (or had filed on their behalf) with the
appropriate Governmental Entities all Tax Returns required to be filed by them
on or prior to the date hereof, and such Tax Returns are true, correct and
complete in all material respects and (y) duly paid (or had paid on their
behalf) in full or made provision in accordance with GAAP ("Reserves") for the
payment of all Taxes for all periods ending through the date hereof, (b) there
are no liens for Taxes upon any shares of the stock or assets of the Group
Subsidiaries, except for statutory liens for current Taxes not yet due, (c) the
Group Subsidiaries have complied in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes, except
where the failure to so comply would not have a Material Adverse Effect; and
have, within the time and the manner prescribed by law, withheld from and paid
over to the proper Governmental Entities all amounts required to be so withheld
and paid over under applicable laws, (d) no Audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Tax Returns of the Group Subsidiaries, and neither Seller nor the Group
Subsidiaries have received notice of any pending Audits or proceedings, in each
case, except those which would not have a Material Adverse Effect, (e) there
are no outstanding written requests, agreements, consents or waivers to extend
the statutory period of limitations applicable to the assessment of any Taxes
or deficiencies against any of the Group Subsidiaries, (f) none of the Group
Subsidiaries is a party to any agreement providing for the allocation or
sharing of Taxes and (g) no power of attorney has been executed by any of the
Group Subsidiaries with respect to any matter relating to Taxes which is
currently in force.
2.10 Benefit Plans. Set forth on Schedule 2.10 is a list of each material
bonus, incentive, deferred compensation, pension, profit-sharing, retirement,
stock purchase, stock option or other stock-based compensation, severance
benefits, salary continuation, salary in lieu of notice, hospitalization or
other medical, life or other insurance plan relating to Seller's and the
Subsidiaries' businesses, employees, officers and directors, including any
policy, plan, program or agreement that provides for the payment of similar
benefits (collectively, the "Benefit Plans"), maintained, sponsored or
contributed to by Seller or its Subsidiaries or under which Seller or its
Subsidiaries have any present or future material obligations or material
liability on behalf of Seller's or its Subsidiaries' current or former
employees, officers or directors, or their dependents or beneficiaries
(collectively, the "Affected Persons"). To the knowledge of Seller, the
Benefit Plans are in compliance in all material respects with all applicable
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code and other applicable laws and have been administered in all
material respects in accordance with their terms and such laws, except where
the failure to so comply would not have a Material Adverse Effect.
There are no pending or, to the best knowledge of Seller, threatened claims
and no pending or, to the best knowledge of Seller, threatened litigation with
respect to any Benefit Plans other than ordinary and usual claims for benefits
by participants and beneficiaries.
All contributions made or required to be made under any Benefit Plan meet
the requirements for deductibility under the Code in all material respects, and
all contributions that are required to have been made or to be made prior to
the Closing have been made or will be made.
No Benefit Plan is a "multiemployer plan" (as defined in section 4001(a)(3)
of ERISA); and neither the Seller nor any of its Subsidiaries has sponsored or
contributed to any "multiemployer plan." No event or condition has occurred in
connection with which Seller or any of its Subsidiaries is or could be subject
to any material liability, encumbrance or lien with respect to any Benefit Plan
under ERISA, the Code or any other applicable law or under any agreement or
arrangement pursuant to or under which Seller or its Subsidiaries are required
to indemnify any person against such liability.
2.11 Employee Relations. (a) Except as set forth on Schedule 2.11(a)
hereto, (i) neither the Seller nor any of its Subsidiaries has engaged in any
"Unfair Labor Practice" (within the meaning of the National Labor Relations
Act), and no Unfair Labor Practice complaint against Seller or its Subsidiaries
is pending, or to the best knowledge of Seller, threatened before the National
Labor Relations Board; (ii) there is no labor strike, dispute, slowdown or
stoppage actually pending or, to the best knowledge of Seller, threatened
against or involving Seller or its subsidiaries; (iii) no employee grievance
which might have a Material Adverse Effect is pending and no claim therefor has
been asserted; (iv) no collective bargaining agreement is currently being
negotiated by Seller or its subsidiaries; (v) neither Seller nor its
subsidiaries has experienced any material labor dispute (including, without
limitation, any work stoppage) during the last three years; and (vi) no attempt
to organize any group or all of the employees of Seller or any of its
Subsidiaries has been made or, to the best knowledge of Seller, proposed.
(b) Neither Seller nor any of its Subsidiaries is now, and the consummation
of the transactions contemplated by this Agreement will not, to the best of
Seller's and its Subsidiaries' knowledge, cause Seller, any of its Subsidiaries
or Purchaser to become, bound by, obligated under or responsible for any labor
contract, collective bargaining agreement, consent decree or conciliation
agreement relating to employment (other than plans or arrangements described in
(c) below).
(c) Except as set forth on Schedule 2.11(c), neither Seller nor any of its
Subsidiaries is a party to or subject to, or directly or indirectly liable
under, any incentive, bonus or commission plan or similar arrangement or
understanding for the benefit of any current or former officer, director or
employee of Seller or its Subsidiaries or any deferred compensation, severance,
retention or employment contract or similar arrangement or understanding with
any such officer, director or employee (whether written or oral), that is not
terminable at will by Seller or its Subsidiaries and that in any event could
result in liability of or an obligation against Purchaser. Except as set forth
on Schedule 2.11(c) or as otherwise expressly provided in this Agreement, no
officer, director or employee of Seller or any of its Subsidiaries shall be
entitled to any severance pay or retention pay or bonus from Purchaser solely
as a result of the consummation of the transactions contemplated hereby.
(d) Except as set forth on Schedule 2.11(d), (i) the practices and policies
of Seller and its subsidiaries with respect to employment and termination of
employment have complied in all material respects with all applicable laws,
statutes, ordinances, regulations, rules, judgments, decrees and orders
("Employment Laws"), and (ii) there are no claims pending or, to the knowledge
of the Seller, threatened against the Group Subsidiaries with respect to
violations of any such Employment Laws.
2.12 Compliance, Licenses and Permits. Seller and its Subsidiaries each
has complied in all material respects with all laws, statutes, ordinances,
regulations, rules, judgements, decrees and orders applicable to its businesses
including, without limitation, all consumer protection laws and regulations.
Except as set forth on Schedule 2.12, Seller and its Subsidiaries each has all
licenses, permits and other governmental authorizations or approvals necessary
to permit Seller and its Subsidiaries to conduct their respective consumer
businesses as now being conducted, other than such licenses, permits,
authorizations or approvals which, individually or in the aggregate, if not
obtained, would not have a Material Adverse Effect. Except as set forth on
Schedule 2.12 hereto, each such permit, license authorization or approval is in
good standing and there is no proceeding pending or, to the Seller's knowledge,
threatened, to revoke or limit any of them.
2.13 Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States applicable to Seller or the
Subsidiaries is applicable to the transaction contemplated hereby (including,
without limitation, Section 203 of the General Corporation Law of the State of
Delaware ("Delaware Law")).
2.14 Vote Required. The affirmative vote of a majority of the outstanding
shares of common stock of Seller is the only vote of holders of capital stock
of Seller required to authorize the transactions contemplated by this
Agreement.
2.15 Brokers, Finders, etc. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated,
Seller is not subject to any valid claim of any broker, investment banker,
finder or other intermediary in connection with the transactions contemplated
by this Agreement.
2.16 Contracts. Schedule 2.16 lists the following agreements (which term
shall include any legally enforceable obligation) to which Seller or a
Subsidiary is a party as of the date hereof:
(a) any agreement for the lease of personal property from or to a third
party providing for lease payments in excess of $1,000,000 per annum;
(b) any agreement with a third party for the purchase or sale of supplies,
products or other personal property or for the furnishing or receipt of
services which involves payments in excess of $1,000,000 per annum;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement under which it has incurred, issued, assumed, or
guaranteed (or may incur, issue, assume, or guarantee) indebtedness for
borrowed money in excess of $1,000,000 (excluding any certificates of deposit
issued in the ordinary course of business);
(e) any agreement which contains a non-competition provision (excluding for
this purpose any provision concerning confidentiality, non-disclosure or
similar provisions) that restricts the business of Seller or either Subsidiary,
which agreement would continue to apply to Seller or such Subsidiary following
the Closing Date;
(f) any agreement between (i) the Subsidiaries and (ii) Seller or an
affiliate of Seller, which agreement would continue to apply to a Subsidiary
following the Closing Date;
(g) any agreement (excluding any Benefit Plans) with the directors,
officers, or employees of Seller or its Subsidiaries or their respective
affiliates outside the ordinary course of Seller's business;
(h) any agreement with employees in the nature of a collective bargaining
agreement, which agreement would continue to apply to a Subsidiary following
the Closing Date;
(i) any agreement with any merchant that has generated and represents more
than $10,000,000 in outstanding loan receivables of a Subsidiary;
(j) any agreement involving reinsurance or servicing of loan-related credit
insurance; and
(k) any agreement involving any contract of sale involving amounts in
excess of $10,000,000 annually, pursuant to which a Subsidiary may be obligated
to indemnify any other person following the Closing Date.
Upon request, Seller will make available to Purchaser a correct and complete
copy of each written agreement listed on Schedule 2.16 (as amended to date).
With respect to each agreement so listed, except as so indicated on Schedule
2.16, neither Seller nor the relevant Subsidiary is in material breach or
default thereunder, and no event has occurred which with notice would
constitute a material breach or default by the Seller or the relevant
Subsidiary of such agreement.
2.17 Insurance. Seller and/or its Subsidiaries are and, until Closing,
will be covered by the policies of insurance (including fidelity bonds) that,
in respect of amounts, types and risks insured, management reasonably believes
to be adequate for the business conducted by Seller and/or its Subsidiaries
(which policies are in full force and effect). Upon request, Seller shall
provide to Purchaser copies of such insurance policies.
2.18 Tangible Personal Property. Each Subsidiary owns, free and clear of
all liens and encumbrances (except liens for taxes not yet due and payable and
liens arising solely by operation of law or as listed on Schedule 2.18), or
leases, free and clear of all liens and encumbrances on its leasehold interest
(except as listed in Schedule 2.18), all tangible personal property necessary
for the conduct of its respective businesses as presently conducted except for
such liens and encumbrances which do not materially affect the value of such
property and do not materially interfere with the use made of such property.
Such tangible personal property has been maintained in such condition (ordinary
wear and tear excepted) as to permit each Subsidiary to conduct their
respective businesses as presently conducted.
2.19 Real Properties. Each Subsidiary does not own any real property other
than as described on Schedule 2.19. Except as disclosed on Schedule 2.19,
neither Seller nor any Subsidiary is in violation of any material environmental
laws or regulations applicable to the real property described on Schedule 2.19
and there has not been any discharge, release, disposal, or storage of any
hazardous materials at or on to the real property described in Schedule 2.19.
Assuming the due authorization, execution and delivery of the agreements set
forth on Schedule 2.19 by the other parties thereto, each such agreement is a
valid and binding agreement of the parties thereto and is enforceable by the
Subsidiary which is a party thereto in accordance with its terms except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights generally
and by general equity principles.
2.20 Office Leases. Schedule 2.20 hereto sets forth a list of all leases
of real property to which the Seller or the Subsidiaries are a party. Except
as described in Schedule 2.20 hereto, each such lease is in full force and
effect, all rents and other amount due thereunder have been paid, and no
Subsidiary is in default under any material term thereof. The leases have been
made available to Purchaser for its inspection. Certain leases have change in
control provisions and, while Seller will cooperate with Purchaser to obtain
any necessary landlord consent, no representation or warranty is made that the
consummation of the transactions contemplated hereunder would not trigger a
default, absent such consent, or that such consent will be obtained.
2.21 Guaranties. Except as disclosed on Schedule 2.21 hereto, no
Subsidiary is a guarantor or is otherwise liable for any liability or
obligation (including indebtedness) of any other person (other than liabilities
and obligations of its subsidiaries), excluding those guaranties that
individually or in the aggregate are not reasonably likely to result in any
such Subsidiary being subject to a material liability or obligation.
2.22 Computer Systems. Except as set forth on Schedule 2.22 hereto, Seller
and the Subsidiaries own or have the right to use all the computer software,
databases and compilations, including any and all data and connections of data,
necessary for the conduct of the business of Seller and the Subsidiaries as
currently conducted.
2.23 Accounts and Receivables. (a) Compliance with Laws. (i) The
Accounts (as defined below), Cardholder Agreements, and all related documents,
and the interest rates, fees, and charges in connection therewith comply in all
material respects with all applicable laws, rules, regulations, and orders;
(ii) assuming (x) the requisite legal capacity of each cardholder and (y) that
each Cardholder Agreement has been duly executed and delivered by the
cardholder named therein, each Cardholder Agreement is the legal, valid, and
binding obligation of the cardholder and any guarantor named therein and is
enforceable in accordance with its terms except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equity
principles, and except for the rights of Cardholders under 12 CFR 226 12(c), 12
CFR 226 13(a) and any similar state or federal laws applicable thereto; (iii)
to the knowledge of Seller, the outstanding balance of each Account arises from
a bona fide sale or loan transaction, subject to cardholder billing inquiries
reflected in Account Documentation (defined below); (iv) all applications for
Accounts have been taken and evaluated and applicants notified in a manner
which is in compliance in all material respects with the Equal Credit
Opportunity Act and its implementing regulation, as amended; and (v) all
disclosures made in connection with the Accounts were in compliance in all
material respects with the provisions of law as of the time made. "Accounts"
shall mean the credit card accounts that are identified by name and account
number on Seller's Fathom processing system as of the date hereof.
(b) Cardholder Agreements. Schedule 2.23 attached hereto sets forth a list
of all Cardholder Agreement forms currently in use. The terms of Cardholder
Agreements have not been impaired, waived, altered or modified in any respect
except as may be reflected in the Account Documentation (as defined below).
"Account Documentation" shall mean all books and records in the possession of
Seller, relating to the Accounts, consisting of applications for Accounts,
acceptance certificates for prescreened offers, periodic statements, credit and
collection files, file maintenance data correspondence, whether in documentary
form or on microfilm, microfiche, magnetic tape, computer disk or other form.
(c) Account Data. The information contained in Seller's Fathom processing
system was accurate in all material respects as of the date hereof.
2.24 Voting Agreement. Parent has executed and delivered to Purchaser,
contemporaneously with the execution and delivery of this Agreement, a voting
agreement in the form attached hereto as Exhibit A.
2.25 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article II, neither Seller nor
any other person makes any other express or implied representation or warranty
on behalf of Seller.
ARTICLE III
Representations and Warranties of Purchaser
Purchaser hereby represents and warrants to Seller as follows:
3.1 Organization and Standing. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2 Authority. Purchaser has all requisite corporate power and authority
to execute this Agreement and all documents, instruments and agreements
required to be executed by Purchaser pursuant hereto and to consummate the
transactions contemplated hereby. The execution and delivery of the Agreement
and all documents, instruments and agreements required to be executed by
Purchaser hereto, and the performance by Purchaser of its obligations hereunder
have been duly authorized by all necessary action on the part of Purchaser
(including requisite stockholder approval, if necessary). This Agreement has
been duly executed and delivered by Purchaser and, assuming the due execution
and delivery hereof by Seller, constitutes a valid and legally binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms (subject, as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium (whether general or specific) and
similar laws relating to creditors' rights generally, and general principles of
equity (regardless of whether such enforcement is sought in a proceeding in
equity or at law)).
3.3 No Conflicts; Consents. Neither the execution and delivery of this
Agreement by Purchaser, nor the consummation of the transactions contemplated
hereby will conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under any provision of (i) the certificate of incorporation or
by-laws of Purchaser, (ii) any note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment, agreement or arrangement to which
Purchaser is a party or by which it or any of its properties or assets is bound
or (iii) any judgment, order or decree, or statute, law, ordinance, rule or
regulation, applicable to Purchaser or any of its properties or assets, in each
case except for any such conflict, violation, default or right which would not
reasonably be expected to have a material adverse effect on the business,
assets, financial condition, or results of operations of Purchaser and its
subsidiaries taken as a whole. No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made by Purchaser or in connection with
the consummation of the transactions contemplated hereby other than (v) filings
with the South Dakota Division of Banks and the appropriate federal banking
agency(ies), the SEC and the state securities or "blue sky" commission or
similar body in each state where such filing may be necessary, (x) compliance
with and filings under the HSR Act, (y) as set forth on Schedule 3.3 hereto and
(z) those the failure of which to make or obtain would effect the ability of
Purchaser to consummate the transactions contemplated hereby.
3.4 Information Supplied. The information supplied in writing or to be
supplied by Purchaser or its subsidiaries in writing for inclusion or
incorporation by reference in a proxy or information statement ("Proxy
Statement") to be filed by Seller in connection with the transactions
contemplated hereby, including any amendments and supplements thereto, will
not, either at the date mailed to stockholders or at the time of any meeting of
stockholders of Seller to be held in connection with the transactions
contemplated by this Agreement, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.5 Financial Ability to Perform. Purchaser has sufficient funds available
(through existing credit arrangements or otherwise) to purchase all the Shares
and to pay all of its fees and expenses related to the transactions
contemplated by this Agreement.
3.6 Absence of Certain Changes or Events. Since December 31, 1997, except
as contemplated hereby and except as disclosed in any form, report, schedule or
definitive proxy statement filed by Purchaser with the SEC since December 31,
1997 and prior to the date hereof, Purchaser and its subsidiaries have
conducted their respective businesses in the ordinary course and there has not
occurred or arisen any event or events which is reasonably likely to prevent or
delay in any material respect the consummation of any of the transactions
contemplated by this Agreement.
3.7 No Other Representations or Warranties. Except for the representations
and warranties contained in this Article III, neither Purchaser nor any other
person makes any other express or implied representation or warranty on behalf
of Purchaser.
ARTICLE IV
Covenants of Seller
Seller covenants and agrees with Purchaser as follows:
4.1 Access. Prior to the Closing, Seller shall cause the Subsidiaries to
give Purchaser and its officers, employees, representatives, counsel and
accountants full access, during normal business hours and upon reasonable
notice, to the assets, personnel, properties, financial statements, contracts,
books, records, working papers and other relevant information pertaining
thereto of the Subsidiaries. Prior to the Closing, Seller shall cause the
Subsidiaries to furnish to Purchaser and its officers, employees,
representatives, counsel and accountants such financial and operating data and
other information with respect to the assets and business of the Subsidiaries
as Purchaser shall from time to time reasonably request. From the date hereof
to the Closing Date, Seller shall provide reasonable accommodations during
normal business hours at each of its locations for up to three employees of
Purchaser, and shall allow such employees of Purchaser reasonable access to
facilities and personnel of Seller for purposes of monitoring the operation of
Seller's business; provided, however, that such access shall be in a manner
that does not unreasonably interfere with the normal operation of Seller's
business.
4.2 Ordinary Conduct. Except as set forth on Schedule 4.2 or otherwise
permitted by the terms of this Agreement, from the date hereof to the Closing,
Seller shall (i) cause the business of the Subsidiaries and their subsidiaries
to be conducted in the ordinary course in substantially the same manner as
presently conducted and shall make all reasonable efforts consistent with past
practices to preserve their relationships with customers and others with whom
the Subsidiaries deal and (ii) maintain in effect all insurance as to which the
Subsidiaries and their subsidiaries are beneficiaries, including any directors
and officer insurance. Except as set forth on Schedule 4.2 or otherwise
permitted by the terms of this Agreement, from the date hereof until the
Closing, neither of the Subsidiaries or their subsidiaries shall do any of the
following without the written consent of Purchaser (which consent will not be
unreasonably withheld):
(i) amend their certificate of incorporation or by-laws or similar
documents;
(ii) except for payments of all amounts necessary to satisfy Section
7.2(iv) hereof, declare or pay any dividend or make any other distribution to
their stockholders whether or not upon or in respect of any shares of their
capital stock except for dividends necessary to pay any required tax payments
by Seller or any required payments on the indebtedness of Seller;
(iii) redeem or otherwise acquire any shares of their capital stock or
issue any capital stock or any option, warrant or right relating thereto or any
securities convertible into or exchangeable for any shares of capital stock;
(iv) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire any assets that are material,
individually or in the aggregate, to the Subsidiaries or their subsidiaries;
(v) sell, lease or otherwise dispose of any of their assets that are
material, individually or in the aggregate, to the Subsidiaries or their
subsidiaries, except in the ordinary course of business;
(vi) enter into or amend any agreement, contract or other arrangement (or
series of related agreements, contracts or other arrangements) by which the
Subsidiaries or any of their properties or assets are bound which has an
aggregate future liability or receivable to any person in excess of $1,000,000
or is not terminable by the Subsidiaries, as the case may be, by notice of not
more than 60 days for an aggregate cost of less than $1,000,000;
(vii) purchase any private label credit card portfolio involving a purchase
price in excess of $10,000,000; or
(viii) agree, whether in writing or otherwise, to do any of the foregoing.
4.3 Other Transactions. (a) From the date hereof to the Closing, the
Seller shall not, and shall not permit its subsidiaries or any of their
respective directors, officers, stockholders or representatives to, directly or
indirectly, encourage, solicit, initiate or participate in discussions or
negotiations with, or provide any information or assistance to, any person or
group (other than Purchaser and its respective representatives) concerning any
merger, sale of securities, sale of substantial assets or similar transaction
involving Seller and its subsidiaries; provided, however, that if the officers
or directors of Seller shall be required by their fiduciary obligations under
applicable law, based upon the advice of outside counsel to Seller, to enter
into any such negotiations or discussions or to provide any such information or
assistance to any third party, Seller may do so only if (A) the Board of
Directors of Seller is advised by its financial advisor that the third party
has the financial resources to consummate a Superior Acquisition, as defined in
paragraph (c) below, and the Board of Directors of Seller determines that the
third party is likely to submit a bona fide offer to consummate a Superior
Acquisition (a "Third Party Acquisition Offer"); (B) Seller has provided
Purchaser, as soon as reasonably practicable and in any event prior to such
discussions, negotiations, disclosure or assistance, notice of Seller's intent
to enter into such discussions or negotiations or to provide such information
and/or assistance, the identity of such third party and, as soon as reasonably
practicable after such terms are known by Seller, the terms of the Third Party
Acquisition Offer; and (C) such third party has signed and delivered to Seller
a confidentiality agreement substantially in the form of the Confidentiality
Agreement referred to in Section 5.1. Seller will immediately cease or cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted with respect to any of the foregoing.
(b) Seller will orally notify Purchaser immediately, followed by prompt
written notice, of the receipt and the terms of any Third Party Acquisition
Offer from any person, entity or group (other than from Purchaser), or of any
request for information or access, with respect to any Third Party Acquisition
Offer, or any indication from any person, entity or group that it or another
person, entity or group is considering making a Third Party Acquisition Offer
or such a request, which notice shall include the identity of the third party.
(c) For purposes of this Agreement, a "Superior Acquisition" is a
transaction in which any person or group proposes to commence a tender offer to
acquire all of the outstanding company stock of Seller, or proposes a merger,
consolidation or a sale of substantially all of the assets of the Seller,
pursuant to which the per share tender offer price or the per share merger or
consolidation price or, in the case of an asset sale, the quotient obtained by
dividing the aggregate purchase price for the assets by the total number of
shares of Seller common stock outstanding, is higher than the quotient obtained
by dividing the Purchase Price by the total number of shares of Seller common
stock outstanding.
4.4 Stockholder Approval; Recommendation
(i) Seller will take, in accordance with applicable law and its certificate
of incorporation and by-laws, all action necessary to convene a meeting of
holders of shares of Seller's common stock (including, if required, the
preparation and filing with the SEC of a proxy or information statement
pursuant to the provisions of Regulation 14A or 14C, as applicable, under the
Exchange Act) to consider and vote upon the approval of this Agreement and
transactions contemplated hereby and any other proposals mutually agreed to
with Purchaser.
(ii) Subject to the fiduciary obligations of its directors under applicable
laws, Seller will take, in accordance with applicable law and its certificate
of incorporation and by-laws, all action necessary to obtain the affirmative
vote of a majority of the outstanding shares of common stock of Seller required
to approve this Agreement and authorize the transactions contemplated hereby,
whether by written consent or at a meeting.
4.5 Intercompany Debt. At or immediately prior to the Closing, each
Subsidiary shall discharge in full any and all amounts due from the
Subsidiaries (or the Subsidiaries' subsidiaries) to Seller or companies
affiliated with Seller (other than the Subsidiaries or their subsidiaries)
which are outstanding at the Closing Date.
4.6 Solicitation. For a period of two (2) years from and after the Closing
Date, neither Seller nor any of its affiliates will without Purchaser's prior
written consent solicit or employ the Hired Employees (other than Hired
Employees whose employment with the Subsidiaries (including their subsidiaries)
or Purchaser is thereafter terminated for any reason other than an offer or
anticipated offer of employment from Seller or its affiliates); provided,
however, that it shall not be a violation of this covenant to hire any
individual who responds to a general public solicitation or advertisement that
is not targeted specifically at the Hired Employees.
4.7 Contribution of Seller. Seller shall, at its sole cost and expense,
immediately prior to Closing, make all necessary and proper consolidation and
elimination entries between the Seller and Seller's Subsidiaries followed by a
capital contribution by the Seller to the Seller's Subsidiaries such that after
such contribution the assets obtained by the Purchaser from the purchase of the
Shares pursuant hereto shall have a net value to the Purchaser in accordance
with generally accepted accounting principles equal to the net assets
("Equity") of the Seller on a consolidated basis, reduced by amounts
attributable to the assets shown on Schedule 4.7. For purposes of reference,
the amount of the net assets of Seller on a consolidated basis was equal to
$263,035,000 at 12/31/97 (audited) and $274,076,000 at 3/31/98 (unaudited).
Therefore, the amount of net assets to be obtained by the Purchaser at Closing
shall be equal to $274,076,000 plus the amount of net income (or less the
amount of any loss, as the case may be) recognized by Seller on a consolidated
basis for the period beginning April 1, 1998 through the Closing Date, reduced
by amounts attributable to the assets shown on Schedule 4.7.
4.8 Maintain Corporate Existence. Seller shall preserve its corporate
existence for a period of two years after the Closing Date; Seller shall not
permit or suffer the imposition of any liens and encumbrances on its assets
(except liens for taxes not yet due and payable and liens arising solely by
operation of law); and Seller shall not incur indebtedness that is senior to
the obligations of Seller under Article X hereof; provided, however, that
Seller may cease its corporate existence if its obligations under Article X
hereof are assumed by an affiliate of Seller with a net worth at least equal to
that of Seller as of the Closing Date. This Section 4.8 shall survive the
Closing Date until the second anniversary of the Closing Date.
ARTICLE V
Covenants of Purchaser
Purchaser covenants and agrees with Seller as follows:
5.1 Confidentiality. Except to the extent that any of the provisions of
that certain confidentiality agreement dated January 9, 1998 between Purchaser
and Seller (the "Confidentiality Agreement") are inconsistent with this
Agreement, in which case the terms of this Agreement shall govern and supersede
such provisions, the parties hereto acknowledge and agree that the
Confidentiality Agreement remains in full force and effect and shall survive
any termination of this Agreement.
5.2 Employees.
Effective as of the Closing Date, Purchaser and the Group Subsidiaries shall
offer continued employment with Purchaser or the Group Subsidiaries to all
current employees of Seller and its subsidiaries, including any such employees
who are absent from active employment for any reason as of the Closing Date as
well as the persons listed on Schedule 5.2(i). Within thirty (30) days of the
date of this Agreement, Seller may identify up to fifteen (15) employees of
Seller's affiliates (other than the Group Subsidiaries) who perform all or
substantially all of their employment related duties or functions for the
conduct of the business of the Group Subsidiaries, and a list of such
individuals shall be set forth on Schedule 5.2(ii) which shall be made a part
hereof at such time, and Purchaser and the Group Subsidiaries shall offer
employment to such individuals effective at the Closing Date. All such
employees whose employment is continued with Purchaser or the Group
Subsidiaries, and all of the individuals set forth on Schedule 5.2(i) and
Schedule 5.2(ii), are referred to herein as the "Hired Employees". The
continued employment of the Hired Employees shall not be construed to limit the
ability of Purchaser to terminate the employment of any Hired Employee at any
time for any reason, and the employment of the Hired Employees shall be subject
to all of the Purchaser's practices and policies, including its policy of
employment-at-will, except to the extent such Hired Employees are otherwise
party to an employment agreement. Purchaser and the Group Subsidiaries shall
employ the Hired Employees at the same salary and wages and with benefits that
are, in the aggregate, substantially similar or superior to those provided by
Seller or the Subsidiaries, as the case may be, immediately prior to the
Closing Date. Subject to Section 5.3, nothing in this Agreement shall limit
Purchaser's right, at any time, to modify, amend or terminate any salary and
wages payable, or benefit provided, to any or all Hired Employees on or after
the Closing Date, including without limitation any Employee Welfare Benefit
Plan or any Employee Pension Benefit Plan to the extent permitted by law;
provided, however, that (i) for a period of at least 12 months following the
Closing Date, Purchaser and the Group Subsidiaries shall provide for the
payment of severance benefits, salary continuation, salary in lieu of notice
and similar benefits to any Hired Employee whose employment is terminated by
Purchaser or the Group Subsidiaries for any reason other than cause or long
term disability (for this purpose, the existence of cause shall be determined
in accordance with the definition set forth in Schedule 5.2(iii), and the
amount of such benefits shall be determined in accordance with Seller's
severance policies in effect on the date hereof, and such determinations shall
be made in good faith) and (ii) thereafter the Hired Employees shall be
entitled to such severance benefits, salary continuation, salary in lieu of
notice or similar benefits that Purchaser provides to its other employees.
Seller makes no representation as to whether any such employee will accept
employment with Purchaser. For the purposes hereof, "Employee Pension Benefit
Plan" means any employee pension benefit plan within the meaning of section
3(2) of ERISA, regardless of whether such plan is subject to ERISA, and
"Employee Welfare Benefit Plan" means any employee welfare benefit plan within
the meaning of section 3(1) of ERISA, regardless of whether such plan is
subject to ERISA. If necessary, Schedule 5.2(i) shall be amended to be current
as of the Closing Date. Subject to applicable law, Seller shall cause the
employment of each employee listed on Schedule 5.2(i) to be transferred to
Seller or one of its subsidiaries immediately prior to the Closing Date. If
the employment of any such employee is not or cannot be so transferred but the
employee nevertheless becomes a Hired Employee, Seller and Purchaser shall
transfer and assume all assets and liabilities, adjust all accruals and take
all other actions reasonably necessary to cause the provisions of this Section
and Section 5.3 to be applied as if the employment of the employee had been
transferred.
5.3 Benefit Plans for Hired Employees
(i) Except as otherwise provided herein (including, particularly, as
provided in Section 5.2), on and after the Closing Date, Purchaser shall
provide the Hired Employees with the employee benefits generally provided to
other employees of Purchaser, subject to the terms and conditions of
Purchaser's plans. Except as set forth on Schedule 5.3(i), effective as of the
Closing Date, all assets and all liabilities of each Benefit Plan shall be
transferred to, and adopted and assumed by, Purchaser.
(ii) Purchaser shall waive pre-existing condition requirements, evidence of
insurability provisions, waiting period requirements or any similar provisions
applicable as of the Closing Date under any Employee Welfare Benefit Plans
maintained, sponsored, assumed by or contributed to by Purchaser or any
Subsidiary for Hired Employees after the Closing Date; and Purchaser shall
apply toward any deductible requirements and out-of-pocket maximum limits under
such Employee Welfare Benefit Plans any amounts paid (or accrued) by each Hired
Employee under Seller's Employee Welfare Benefits Plans during the current plan
year; provided, however, that the foregoing shall apply only to the extent that
Seller provides Purchaser with such information as Purchaser reasonably
requires to administer such provisions.
(iii) Subject to Section 5.3(x), Purchaser and the Group Subsidiaries shall
recognize for all purposes (other than the accrual of benefits under any
defined benefit pension plan) under Purchaser's Employee Pension Benefit Plans,
Employee Welfare Benefit Plans, Severance Plans and Vacation Plans covering
Hired Employees the service of each Hired Employee with Seller or Seller's
affiliates prior to the Closing Date and the service of each Hired Employee
with all other prior employers to the extent such service is credited under the
Benefit Plans.
(iv) Seller shall be responsible for satisfying obligations under Section
601 et seq. of ERISA and Section 4980B of the Code, to provide continuation
coverage to or with respect to any employee of Seller or its Subsidiaries as of
the Closing Date in accordance with applicable law with respect to any
"qualifying event" occurring on or prior to the Closing Date, including any
"qualifying event" resulting from the Closing hereunder. Purchaser or the
applicable Group Subsidiary shall be responsible for satisfying obligations
under Section 601 et seq. of ERISA and Section 4980B of the Code, to provide
continuation coverage to or with respect to any Hired Employee in accordance
with applicable law with respect to any "qualifying event" which occurs after
the Closing Date.
(v) Effective as of the Closing Date, Purchaser shall assume from Seller all
liabilities and obligations arising with respect to all vacation earned but not
taken as of the Closing Date by the Hired Employees.
(vi) Purchaser shall assume and shall make all payments to the participants
under the Sail Senior Management Retention Plan (the "Retention Plan") when and
as the same become due and payable under such Retention Plan, a true and
correct copy of which has previously been made available to Purchaser.
(vii) Purchaser shall provide to each Hired Employee a benefit under
Purchaser's Associates Pension Plan equal to such Hired Employee's accrued
benefit as of the Closing Date under Seller's tax-qualified defined benefit
pension plan, provided that Seller transfers to Purchaser the assets
attributable to the aggregate of such frozen accrued benefits as of the Closing
Date (the amount of such assets and the value of such aggregate frozen accrued
benefits to be based upon Seller's most recent actuarial valuations. Seller
(a) shall provide Purchaser, as soon as reasonably practicable after the date
of this Agreement, with such information as Purchaser's actuaries reasonably
require to verify Seller's calculation of the amount of such assets and the
value of such aggregate frozen accrued benefits, and (b) shall provide
Purchaser within 90 days of the Closing Date such information as Purchaser
reasonably requires to administer the foregoing, including without limitation a
calculation of each Hired Employee's accrued benefit as of the Closing Date.
Notwithstanding any of the foregoing, (i) if the calculation by Purchaser's
actuaries of the amount of such assets and the value of such aggregate frozen
accrued benefits does not differ from Seller's calculation of such amounts and
value by more than 10%, Purchaser shall be deemed to have accepted and verified
Seller's calculation, (ii) if Purchaser's calculation differs from Seller's
calculation by more than 10%, Seller, in its sole discretion, may elect (A) to
retain an independent enrolled actuary (selected by mutual agreement of the
parties) to make such calculation, and such enrolled actuary's calculation
shall be binding upon Seller and Purchaser for purposes of this Section 5.3, or
(B) not to transfer any assets to Purchaser's Associates Pension Plan, in which
case Purchaser shall not be required to recognize the prior service of Hired
Employees for benefit accrual purposes under such plan, (iii) except as
expressly provided in this Section 5.3, Seller shall have no liability or
obligation to transfer any amounts to, or to satisfy any funding obligation
under, any Employee Pension Benefit Plan or Employee Welfare Benefit Plan of
Purchaser or its affiliates, and (iv) if Seller transfers such assets and
accrued benefits to Purchaser's Associates Pension Plan, then, notwithstanding
Section 5.3(iii), Purchaser shall recognize the prior benefit accrual service
of the Hired Employees solely with respect to such frozen accrued benefits and
shall cause Purchaser's Associates Pension Plan to preserve all Section
411(d)(6) protected benefits (within the meaning of Section 411 of the Code and
the Treasury Regulations thereunder) with respect to such accrued benefits.
(viii) Purchaser shall pay for a period of three months after the Closing
Date any account maintenance fees necessary to maintain individual accounts for
the Hired Employees at First Chicago Trust Company under Seller's Associate
Stock Award Program or Seller's Employee Stock Purchase Plan (collectively, the
"Stock Plans"), but only if and to the extent that such individual accounts
were established only for purposes of Seller's Associate Stock Award Program or
Seller's Employee Stock Purchase Plan and such account maintenance fees were
paid by Seller prior to the Closing Date. Notwithstanding any of the
foregoing, Purchaser shall not adopt or assume any other liabilities under the
Stock Plans, and Seller shall terminate such Stock Plans as soon as practicable
after the Closing Date.
(ix) Schedule 5.3(ix) sets forth all unexercised options to purchase
Seller's stock that have been granted under Seller's stock option plans (the
"Stock Option Plans") and the exercise price attributable to such options.
Purchaser acknowledges that it shall not be entitled to receive amounts
attributable to the payment of the exercise price of such options.
Notwithstanding any of the foregoing, Purchaser shall not adopt or assume any
liabilities under the Stock Option Plans, and Seller shall terminate each Stock
Option Plan as soon as practicable after the Closing Date.
(x) Notwithstanding any of the foregoing, Seller shall retain, and Purchaser
shall not assume, all obligations and liabilities with respect (A) to post-
employment medical or life insurance benefits provided immediately prior to the
Closing Date to former employees of Seller and its subsidiaries and (B) post-
employment life insurance benefits provided immediately prior to the Closing
Date to current employees of Seller and its subsidiaries. Seller shall not
retain, and Purchaser shall assume, all obligations and liabilities with
respect to post-employment medical benefits provided to Hired Employees.
Seller shall provide Purchaser, as soon as reasonably practicable after the
date of this Agreement, with such information as Purchaser's accountants
reasonably require to verify the financial statement accruals of Seller and the
Group Subsidiaries ("Seller's calculation") with respect to such obligations
and liabilities. If the calculation by Purchaser's accountants of such
accruals does not differ from Seller's calculation of such accruals by more
than 10%, Purchaser shall be deemed to have accepted and verified Seller's
calculation. If Purchaser's calculation differs from Seller's calculation by
more than 10%, Seller shall retain an independent accountant (selected by
mutual agreement of the parties) to calculate such accrual, and such
accountant's calculation shall be binding upon Seller and Purchaser for
purposes of this Section 5.3 and such accrual shall be adjusted accordingly.
5.4 WARN Act. Seller shall be responsible for providing notice for any
"plant closing" or "mass layoff," as defined in the Worker Adjustment and
Retraining Notification Act (the "WARN Act"), 29 U.S.C. Section 2101 et seq.,
up to and including the Closing Date. After the Closing Date, Purchaser shall
be responsible for providing notice for any "plant closing" or "mass layoff" in
accordance with the WARN Act.
5.5 Regulatory Conditions. To the extent required by any regulatory
authority as a condition to approval of the purchase and sale of the Shares or
the other transactions contemplated hereby, Purchaser shall take such
reasonable action as may be required in order to comply with any such
requirement.
5.6 Certain Understandings.
(i) Purchaser has received from Seller certain projections, forecasts and
information relating to the Subsidiaries. Purchaser acknowledges that (a)
there are uncertainties inherent in attempting to make such projections and
forecasts and in such information, (b) Purchaser is familiar with such
uncertainties and is taking full responsibility for making its own evaluation
of the adequacy and accuracy of all projections, forecasts and information so
furnished to it and (c) Purchaser shall not have any claim against Seller, its
affiliates or its agents with respect thereto. Accordingly, neither Seller nor
any other person makes any representation or warranty with respect to such
projections, forecasts and information.
(ii) Purchaser acknowledges that, except as expressly set forth herein,
neither Seller nor any other person has made any representation or warranty,
express or implied, as to the accuracy or completeness of any information
regarding the Subsidiaries, and neither Seller nor any other person will be
subject to any liability to Purchaser or any other person resulting from the
distribution to Purchaser, or the use of, any such information. Purchaser
acknowledges that, should the Closing occur, Purchaser will acquire the
Subsidiaries' businesses in an "as is" condition and on a "where is" basis,
without any representation or warranty of any kind, express or implied, except
such representations and warranties as are expressly set forth herein.
(iii) Purchaser acknowledges that, except as expressly set forth herein,
neither Seller nor any other person has made any representation or warranty,
express or implied, as to (a) the physical condition or state of repair of any
of the Subsidiaries' real property, the improvements constituting a part
thereof or the equipment and fixtures appurtenant thereto, (b) the gross or net
income derived therefrom, (c) the cost, book value or market value thereof, (d)
the use or potential use thereof, or (e) any other matter effecting, or
relating to, such property or the operation or management thereof.
5.7 Proxy Information. If Seller files a Proxy Statement in connection
with the transactions contemplated hereby, Purchaser agrees to supply
information for inclusion in the Proxy Statement upon the request of Seller.
The information supplied in writing or to be supplied by Purchaser or its
subsidiaries in writing for inclusion or incorporation by reference in the
Proxy Statement to be filed by Seller in connection with the transactions
contemplated hereby, including any amendments and supplements thereto, will
not, either at the date mailed to stockholders or at the time of any meeting of
stockholders of Seller to be held in connection with the transactions
contemplated by this Agreement, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
5.8 Assumption of Liabilities. On the Closing Date, Purchaser shall
execute and deliver an assumption agreement in the form attached hereto as
Exhibit B pursuant to which Purchaser shall, subject to the Purchaser's rights
to indemnification pursuant to Articles VIII and X hereof, assume and agree to
pay, perform and discharge when due any and all liabilities and obligations of
the Seller whether absolute, contingent, known or unknown, accrued or otherwise
that arise out of or relate to any period prior to the Closing; provided,
however, Purchaser shall not assume any fees and expenses incurred by Seller in
connection with the execution and delivery of this Agreement and the
consummation by Seller of the transaction contemplated hereby, including fees
payable to Seller's financial advisor and legal counsel, and expenses incurred
by Seller in connection with the meeting of its shareholders to approve this
Agreement (including expenses incurred in connection with the preparation of
the Proxy Statement) (such liabilities and obligations being referred to as the
"Seller Liabilities").
ARTICLE VI
Mutual Covenants
6.1 Consummation of the. Subject to the terms and conditions of this
Agreement, each party hereto shall use its best efforts consistent with
applicable legal requirements to cause the Closing to occur. Seller and its
subsidiaries and each of their respective directors, officers and
representatives shall file and agree to cooperate with Purchaser in filing, and
Purchaser and its directors, officers and representatives shall, file and agree
to cooperate with Seller and its subsidiaries in filing, any necessary
applications, reports or other documents with, giving any notices to, and
seeking any consents from, all Governmental Entities and all third parties as
may be required by Seller, on the one hand, and Purchaser, on the other hand,
in connection with the consummation of the transactions contemplated by this
Agreement and the performance by Seller and its subsidiaries of their
businesses after such consummation, and in seeking necessary consultation with
and prompt favorable action by any such Governmental Entity or third party.
6.2 Publicity. The parties hereto agree that, from the date of the
execution and delivery of this Agreement through the Closing, no public release
or announcement concerning the transactions contemplated hereby shall be issued
by any party hereto without the prior consent of (i) Purchaser in the case of a
release or an announcement by Seller or any of its subsidiaries or (ii) Seller
in the case of a release or an announcement by Purchaser (in each case which
consent shall not be unreasonably withheld), except as such release or
announcement may be required by law or the rules or regulations of any United
States or foreign securities exchange, in which case the party required to make
the release or announcement shall allow the other party reasonable time to
comment on such release or announcement in advance of such issuance. After the
date hereof, the parties hereto shall not make any comments or statements with
respect to the transactions contemplated hereby to any third party (including,
without limitation, members of the news media, securities analysts and
employees of Seller, any of its subsidiaries, or Purchaser or any of its
subsidiaries) without the prior consent of Purchaser, on the one hand, or
Seller, on the other hand, as the case may be; provided, however, that the
provisions of this Section 6.2 shall not apply to communications by Seller or
Purchaser to any Governmental Entity in connection with obtaining any consents
or approvals required for the consummation of the transactions contemplated
hereby.
6.3 Antitrust Notification. Seller shall, and Purchaser shall, as promptly
as practicable, file with the United States Federal Trade Commission (the
"FTC") and the United States Department of Justice (the "DOJ") the notification
and report form, if any, required for the transactions contemplated hereby and
any supplemental information requested in connection therewith pursuant to the
HSR Act. Any such notification and report form and supplemental information
shall be in substantial compliance with the requirements of the HSR Act.
Seller shall furnish to Purchaser, and Purchaser shall furnish to Seller, such
necessary information and reasonable assistance as may be requested in
connection with the preparation of any filing or submission which is necessary
under the HSR Act. Seller shall keep Purchaser reasonably informed, and
Purchaser shall keep Seller reasonably informed, of the status of any
communications with, and any inquiries or requests for additional information
from, the FTC and the DOJ and shall comply promptly with any such inquiry or
request.
6.4 Further Assurances. From time to time, as and when reasonably
requested by another party hereto, a party hereto shall execute and deliver, or
cause to be executed and delivered, all such documents and instruments and
shall take, or cause to be taken, all such further acts or other actions as
such other party may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement.
ARTICLE VII
Conditions to Closing
7.1 Each Party's Obligations. The respective obligations of each party
hereto to effect the transactions contemplated hereby is subject to the
satisfaction or waiver as of the Closing of the following conditions:
(i) No statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order shall
have been enacted, entered, promulgated, enforced or issued by any Governmental
Entity and no other legal restraint or prohibition preventing any of the
transactions contemplated by this Agreement shall be in effect;
(ii) The waiting period under the HSR Act, if applicable to the transactions
contemplated hereunder, shall have expired or been terminated;
(iii) The parties hereto shall have filed all material applications, reports
or other documents, given all material notices, met all material requirements,
received all material consents and approvals, satisfied any and all conditions
of approval and all applicable waiting periods shall have expired in connection
with the consummation of the transactions contemplated hereby;
(iv) This Agreement and the transactions contemplated hereby shall have
been authorized by the stockholders of Seller as required by the Delaware
Law; and
(v) If required, this Agreement and the transactions contemplated hereby
shall be authorized by the affirmative vote of the requisite number of the
outstanding shares of capital stock of Purchaser.
7.2 Seller's Obligations. The obligations of Seller to effect the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Seller) as of the Closing of the following additional conditions:
(i) Accuracy of Representations and Warranties, Compliance with Covenants.
The representations and warranties of Purchaser made in this Agreement
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, as of the date
hereof and as of the time of the Closing as though made as of such time, except
to the extent such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, on and as of such earlier date).
Purchaser shall have duly performed, complied with and satisfied in all
material respects all covenants, agreements and conditions required by this
Agreement to be performed, complied with or satisfied by it by the time of the
Closing. Purchaser shall have delivered to Seller a certificate dated the
Closing Date and signed by an officer of Purchaser confirming the foregoing.
(ii) Absence of Litigation, Injunction. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting an order, judgment or decree
(except those in which Seller is a plaintiff directly or derivatively) which,
in the reasonable judgment of Seller, would, if issued, be reasonably likely to
restrain or prohibit the consummation of the transactions contemplated hereby
or require rescission of this Agreement or such transactions or result in
material damages to Seller, and there shall not be in effect any injunction,
writ, preliminary restraining order or any order of any nature issued by a
court or governmental agency of competent jurisdiction directing that the
transactions contemplated hereby not be consummated as so provided or any
statute, rule or regulation enacted or promulgated that makes consummation of
the transactions contemplated hereby illegal.
(iii) Specified Items. Purchaser shall have delivered the items to be
delivered and made the payments to Seller and the Subsidiaries, as applicable,
pursuant to Section 1.5.
(iv) Intercompany Debt. At or immediately prior to the Closing, each
Subsidiary shall have discharged in full any and all amounts due from such
Subsidiary (or such Subsidiary's subsidiaries) to Seller or companies
affiliated with Seller (other than the Subsidiaries or their subsidiaries) that
are outstanding at the Closing Date.
7.3 Purchaser's Obligations. The obligations of Purchaser to effect the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser) as of the Closing of the following additional conditions:
(i) Accuracy of Representations and Warranties, Compliance with Covenants.
The representations and warranties of Seller made in this Agreement qualified
as to materiality shall be true and correct, and those not so qualified shall
be true and correct in all material respects, as of the date hereof and as of
the time of the Closing as though made as of such time, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties qualified as to materiality
shall be true and correct, and those not so qualified shall be true and correct
in all material respects, on and as of such earlier date). Seller shall have
duly performed, complied with and satisfied in all material respects all
covenants, agreements and conditions required by this Agreement to be
performed, complied with or satisfied by Seller by the time of the Closing.
Seller shall have delivered to Purchaser a certificate dated the Closing Date
and signed by an officer of Seller confirming the foregoing.
(ii) Absence of Litigation, Injunctions. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting an order, judgment or decree
(except those in which Purchaser is a plaintiff directly or derivatively)
which, in the reasonable judgment of Purchaser would, if issued, be reasonably
likely to restrain or prohibit the consummation of the transactions
contemplated hereby or require rescission of this Agreement or such
transactions or result in material damages to Purchaser, if the transactions
contemplated hereby are consummated, and there shall not be in effect any
injunction, writ, preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions contemplated hereby not be consummated as so provided or
any statute, rule or regulation enacted or promulgated that makes consummation
of the transactions contemplated hereby illegal.
(iii) Interim Servicing Agreement. NOVUS Credit Services Inc. ("Parent")
shall have executed and delivered the Interim Servicing Agreement, which
agreement shall be in the form attached hereto as Exhibit C.
(iv) Specified Items. Seller shall have delivered the items to be
delivered to Purchaser pursuant to Section 1.4.
7.4 Frustration of Closing Conditions. No party to this Agreement may rely
on the failure of any condition set forth in this Article VII if such failure
was caused by such party's failure to act in good faith or to use its best
efforts to cause the Closing to occur.
ARTICLE VIII
Tax Matters
8.1 Section 338.
(i) Elections. Seller, the Subsidiaries and Purchaser shall make joint
elections under Sections 338(g) and 338(h)(10) of the Code (the "338
Elections") with respect to the purchase of the Shares and under any similar
provisions of state law. Seller represents that its sale of the Shares is
eligible for, and Purchaser represents that it is qualified to make, such
elections. Seller and Purchaser agree to prepare and file IRS Form 8023,
required schedules thereto, and any similar state forms in a timely fashion in
accordance with the rules under Section 338 of the Code or under a similar
provision of state law, as the case may be. If any changes are required in
these forms subsequent to their filing, the parties will promptly agree on such
changes.
(ii) Allocation of Purchase Price. For purposes of the 338 Elections,
Seller and Purchaser shall mutually agree to a purchase price and allocation of
that price among the assets of the Group Subsidiaries that are deemed to have
been acquired pursuant to Section 338 of the Code or state law equivalent. The
purchase price shall be allocated among the assets of the Group Subsidiaries
that are deemed to have been acquired pursuant to Section 338 of the Code in
the manner required by Treasury Regulations Section 1.338(b)-2T. Purchaser
will submit to Seller a proposed purchase price and allocation thereof (the
"Proposed Allocation") within 90 days from the date hereof. If Seller does not
notify Purchaser within fifteen (15) days of receipt of the Proposed Allocation
of any disagreement with the Proposed Allocation then the Proposed Allocation
shall become the final allocation (the "Allocation"). If Seller notifies
Purchaser within such fifteen (15) day period (the "Allocation Notice") of its
disagreement with the Proposed Allocation then Seller and Purchaser shall in
good faith attempt to resolve their disagreement. In the event the allocation
is determined after delivery of the Allocation Notice by discussions between
Seller and Purchaser, then such allocation shall become the Allocation.
Purchaser and Seller agree that except as otherwise required by law the
Allocation shall be binding on Purchaser and Seller for all federal, state and
local tax purposes. If such disagreement is not resolved within thirty (30)
days from the delivery of the Allocation Notice, then Seller and Purchaser
shall be permitted to allocate the purchase price, in the manner required by
Treasury Regulations Section 1.338(b) -2T, among the assets of the Group
Subsidiaries that are deemed to have been acquired pursuant to Section 338 of
the Code independently (the "Independent Allocations"). The parties hereto
acknowledge that the purchase price and the allocation of the purchase price
provided for in the Allocation or the Independent Allocations, as the case may
be, will be reasonable.
8.2 Liability for Taxes and Related Matters
(i) Seller's Indemnification of Purchaser. Seller shall be liable for and
indemnify Purchaser for all Taxes (including, without limitation, any
obligation to contribute to the payment of a tax determined on a consolidated,
combined or unitary basis with respect to a group of corporations that includes
or included the Group Subsidiaries and Taxes resulting from the Group
Subsidiaries ceasing to be a member of the Seller's affiliated group, or
attributable to the 338 Elections and any state law equivalent), other than
Taxes for which there are Reserves as of the Closing Date, imposed on the Group
Subsidiaries or for which the Group Subsidiaries may otherwise be liable for
any taxable year or period that ends on or before the Closing Date and, with
respect to any taxable year or period beginning before and ending after the
Closing Date, the portion of such taxable year ending on and including the
Closing Date. Seller shall also indemnify, defend and hold harmless Purchaser
from all costs and expenses incurred by Purchaser (including reasonable
attorneys' fees and expenses) in connection with any liability to, or claim by,
any taxing authority, for Taxes for which Seller is required to indemnify
Purchaser under this Article VIII. Except as otherwise set forth in Section
8.2(v) or in this Section 8.2(i), the amount or economic benefit of any
refunds, credits or offsets in respect of Taxes of the Group Subsidiaries for
such periods shall be for the account of the Seller. Notwithstanding the
foregoing, the amount or economic benefit of any refunds, credits or offsets in
respect of Taxes of the Group Subsidiaries for such periods attributable to any
Group Subsidiary's treatment of finance charges related to credit card
receivables (i.e., grace period interest) shall be for the account of
Purchaser; provided, however, that Purchaser shall bear all costs and expenses
incurred, and shall indemnify Seller for all costs and expenses incurred by
Seller (including reasonable attorneys fees and expenses), in connection with
the pursuit of such refunds, credits or offsets.
(ii) Purchaser's Indemnification of Seller. Purchaser shall be liable for
and indemnify Seller for the Taxes of the Group Subsidiaries for any taxable
year or period that begins after the Closing Date and, with respect to any
taxable year or period beginning before and ending after the Closing Date, the
portion of such taxable year beginning after the Closing Date. Purchaser shall
also indemnify, defend and hold harmless Seller from all costs and expenses
incurred by Seller (including reasonable attorneys' fees and expenses) in
connection with any liability to, or claim by, any taxing authority, for Taxes
for which Purchaser is required to indemnify Seller under this Article VIII.
The amount or economic benefit of any refunds, credits or offsets in respect of
Taxes of the Group Subsidiaries for such periods shall be for the account of
Purchaser.
(iii) Taxes for Short Taxable Year. For purposes of paragraphs (i) and
(ii) above, whenever it is necessary to determine the liability for Taxes of
the Group Subsidiaries for a portion of a taxable year or period that begins
before and ends after the Closing Date, the determination of the Taxes of the
Group Subsidiaries for the portion of the year or period ending on, and the
portion of the year or period beginning after, the Closing Date shall be
determined by assuming that the Group Subsidiaries had a taxable year or period
which ended at the close of the Closing Date, except that exemptions,
allowances or deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a ratable time basis.
(iv) Adjustment to Purchase Price. Seller and Purchaser shall treat any
payment by Purchaser or Seller under this Article VIII as an adjustment to the
Purchase Price unless a final determination (which shall include the execution
of a Form 870-AD or successor form) causes any such payment not to be treated
as an adjustment to the Purchase Price for United States Federal income tax
purposes.
(v) Refunds from Carrybacks. If Seller becomes entitled to the amount or
economic benefit of any refunds, credits or offsets in respect of Taxes for any
period for which it is liable under Section 8.2(i) to indemnify Purchaser and
such Taxes are attributable solely to the carryback of losses, deductions,
credits or similar items attributable to the Group Subsidiaries and from a
taxable year or period that begins after the Closing Date, the amount or
economic benefit of any such refunds, credits or offsets in respect of Taxes
shall be for the account of Purchaser. Each of Seller and Purchaser shall
forward, and cause its affiliates to forward, to the party entitled pursuant to
Section 8.2(i), 8.2(ii) or this Section 8.2(v) to receive the amount or
economic benefit of a refund, credit or offset in respect of Taxes the amount
of such refund, or the economic benefit of such credit or offset, within 30
days after such refund is received or after such credit or offset is allowed or
applied against other Tax liability, as the case may be; provided, however,
that any such amounts payable shall be net of any Tax cost or Tax benefit to
the party making payment and its affiliates attributable to the receipt of such
refund, credit or offset and/or the payments of amounts pursuant to this
Section 8.2(v). In the event that any refund, credit or offset in respect of
Taxes for which a payment has been made by Seller to Purchaser is subsequently
reduced or disallowed, Purchaser shall indemnify and hold harmless Seller for
any tax liability, including interest and penalties, assessed against Seller by
reason of the reduction or disallowance.
(vi) Tax Returns. Seller shall file or cause to be filed when due all Tax
Returns that are required to be filed by or with respect to the Group
Subsidiaries for taxable years or periods ending on or before the Closing Date
and shall pay any Taxes due in respect of such Tax Returns, and Purchaser shall
file or cause to be filed when due all Tax Returns that are required to be
filed by or with respect to the Group Subsidiaries for taxable years or periods
ending after the Closing Date and shall remit any Taxes due in respect of such
Tax Returns. Seller shall pay Purchaser any Taxes, including interest and
penalties attributable to any underpayment, for which Seller is liable pursuant
to Section 8.2(i) but which are payable with Tax Returns to be filed by
Purchaser pursuant to the previous sentence within 10 days prior to the due
date for the filing of such Tax Returns.
(vii) Contest Provisions. Purchaser shall promptly notify Seller in writing
upon receipt by Purchaser, any of its affiliates or the Group Subsidiaries of
notice of any pending or threatened federal, state, local or foreign income or
franchise tax audits or assessments which may materially affect the tax
liabilities of the Group Subsidiaries for which Seller would be required to
indemnify Purchaser pursuant to Section 8.2(i), provided that failure to comply
with this provision shall not affect Purchaser's right to indemnification
hereunder. Seller shall have the sole right to represent the Group
Subsidiaries' interests in any tax audit or administrative or court proceeding
relating to taxable periods ending on or before the Closing Date, and to employ
counsel of its choice at its expense. Notwithstanding the foregoing, Seller
shall not be entitled to settle, either administratively or after the
commencement of litigation, any claim for Taxes which would adversely affect
the liability for Taxes of Purchaser or the Group Subsidiaries for any period
after the Closing Date to any extent (including, but not limited to, the
imposition of income tax deficiencies, the reduction of asset basis or cost
adjustments, the lengthening of any amortization or depreciation periods, the
denial of amortization or depreciation deductions, or the reduction of loss or
credit carryforwards) without the prior written consent of Purchaser. Such
consent shall not be unreasonably withheld.
Seller shall be entitled to participate at its expense in the defense of
any claim for Taxes for a year or period ending after the Closing Date which
may be the subject of indemnification by Seller pursuant to Section 8.2(i).
Purchaser may not agree to settle any tax claim for the portion of the year
or period ending on or prior to the Closing Date which may be the subject of
indemnification by Seller under Section 8.2(i) without the prior written
consent of Seller, which consent shall not be unreasonably withheld.
8.3 Transfer Taxes. All transfer taxes which may be imposed or assessed as
a result of Purchaser's acquisition of the Shares shall be borne by Purchaser.
8.4 Information to be Provided by Purchaser. With respect to the taxable
period in 1998 ending on the Closing Date, Purchaser shall promptly cause the
Group Subsidiaries to prepare and provide to Seller a package of tax
information materials (the "Tax Package"), which shall be completed in
accordance with such practice as is mutually agreed upon by Purchaser and
Seller including such practice as to providing the information, schedules and
work papers and as to the method of computation of separate taxable income or
other relevant measure of income as is mutually agreed upon by Purchaser and
Seller. Purchaser shall cause the Tax Package for the portion of the taxable
period ending on the Closing Date to be delivered to Seller within one hundred
twenty (120) days after the Closing Date.
8.5 Assistance and Cooperation. After the Closing Date, each of Seller and
Purchaser shall:
(i) assist (and cause their respective affiliates to assist) the other
party in preparing any Tax Returns or reports which such other party is
responsible for preparing and filing in accordance with this Article VIII;
(ii) cooperate fully in preparing for any Audits of, or disputes with taxing
authorities regarding, any Tax Returns of the Group Subsidiaries;
(iii) make available to the other and to any taxing authority as reasonably
requested all information, records, and documents relating to Taxes of the
Group Subsidiaries;
(iv) provide written notice to the other within ten (10) days of its
receipt of notice in writing of any pending or threatened tax audits or
assessments of the Group Subsidiaries for taxable periods for which the other
may have a liability under this Article VIII, provided, that failure to
comply with this provision shall not affect the other party's rights to
indemnification hereunder; and
(v) furnish the other with copies of all correspondence received from any
taxing authority in connection with any tax audit or information request with
respect to any such taxable period within ten (10) days of its receipt thereof.
8.6 Survival of Obligations. The obligations of the parties set forth in
this Article VIII shall be unconditional and absolute and shall remain in
effect without limitation as to time.
ARTICLE IX
Termination
9.1 Termination Events. Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(i) by mutual written consent of the parties hereto;
(ii) by either of the parties hereto, if the Closing does not occur on or
prior to February 28, 1999; provided, however, that the right to terminate this
Agreement pursuant to this Section 9.1(ii) shall not be available to any party
hereto, if it has failed to perform any of its obligations under this
Agreement, which failure has resulted in a failure of any of the conditions of
Article VII hereto;
(iii) by either of the parties hereto, if any Governmental Entity shall have
issued a judgment, order or decree or taken any other action permanently
enjoining, restraining or otherwise prohibiting any of the transactions
contemplated by this Agreement, and such judgment, order or decree or other
action shall have become final and nonappealable; or
(iv) by Purchaser, if any required approval of the stockholders of the
Seller shall not have been obtained by reason of Seller's failure to call a
stockholder's meeting or the failure to obtain the required vote upon a vote
held at the duly held meeting of stockholders or at any adjournment thereof
contemplated by Section 4.4; provided, however, that unless Purchaser shall
otherwise notify the Seller within ten business days after the stockholders
meeting contemplated by Section 4.4 is held and the required vote has not been
obtained, this Agreement shall automatically terminate without any further
action by any of the parties hereto.
9.2 Information and Confidentiality. In the event of any termination
pursuant to this Article IX, written notice thereof setting forth the reasons
therefor shall promptly be given to the other parties and the transactions
contemplated by this Agreement shall be terminated, without further action by
any party. If the transactions contemplated by this Agreement are terminated
as provided herein: (i) Purchaser shall return all documents and other
materials received from Seller and its Subsidiaries relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to Seller; and (ii) all confidential information received by
Purchaser with respect to the business of Seller and its subsidiaries shall be
treated in accordance with the Confidentiality Agreement, which shall remain in
full force and effect notwithstanding the termination of this Agreement.
9.3 Termination Fees. If (x) this Agreement is terminated by Purchaser or
Seller pursuant to Section 9.1(ii) or (iii), (y) such termination arises out of
any bank regulatory proceeding or action relating to the conduct of Purchaser's
business, including, without limitation, Purchaser's compliance or alleged non-
compliance with the Community Reinvestment Act of 1977, as amended and (z)
Seller at the time of termination of this Agreement is not then subject to any
injunction, order, writ or decree issued by any Governmental Entity which would
restrain or prohibit the consummation of the transactions contemplated hereby
on the basis of a regulatory impediment arising out of the conduct of Seller's
business, Purchaser shall pay by wire transfer of immediate available funds to
an account designated by Seller ten million dollars ($10,000,000.00) within two
business days of receipt of Seller's notice of termination delivered pursuant
to Section 9.2 hereof.
9.4 Abandonment. If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Article IX, this
Agreement shall become void and of no further force or effect, except for the
provisions of (i) Section 5.1 relating to the obligation of Purchaser to keep
confidential certain information and data obtained by them, (ii) Section 6.2
relating to publicity, (iii) this Article IX and (iv) Article XI relating to
certain expenses. Nothing in this Article IX shall be deemed to release any
party from any liability for any breach by such party of the terms and
provisions of this Agreement or to impair the right of any party to compel
specific performance by any other party of its obligations under this
Agreement.
ARTICLE X
Indemnification
10.1 Nonsurvival of Representations, Warranties and Agreements. Except as
otherwise set forth herein, all representations, warranties and agreements in
this Agreement and in any certificate delivered pursuant hereto shall not
survive beyond the Closing Date. The representations and warranties included
herein are exclusive, and the parties hereto confirm that they have not relied
upon any representations or warranties not contained herein or in the Schedules
hereto as an inducement to enter into this Agreement. Following the Closing,
the remedies provided in this Article X shall be the sole recourse of all
parties hereto for all claims, liabilities, losses, damages, costs and
expenses, other than those relating to or arising from (i) Taxes, for which the
sole recourse shall be as provided in Article VIII; and (ii) the willful
misconduct of the Purchaser or Seller related to or arising, directly or
indirectly, out of this Agreement or the transactions contemplated hereby.
10.2 Agreement to Indemnify. (a) Upon the terms and subject to the
conditions of this Article X, for a period ending the first business day that
is eighteen (18) months after the Closing Date, Seller shall, in the proportion
that the number of shares of common stock of Seller issued and outstanding in
the name of Parent immediately prior to the Closing Date bears to the total
number of shares of common stock of Seller issued and outstanding immediately
prior to the Closing Date (the "Proportionate Interest"), indemnify, defend and
hold harmless the Purchaser from any losses, liabilities, claims, damages or
expenses (including reasonable legal fees and expenses) (collectively,
"Claims") which arise out of, are based upon or result from any breach of the
representations made by Seller in Sections 2.8 (as well as any Claims relating
to any of the matters set forth on Schedule 2.8), 2.10, 2.11, 2.12, 2.19 or
2.23 of this Agreement, in each case to the extent, and only for the amount by
which, any such Claim results in losses (i) in excess of a general or
identified reserve established for such matters and reflected in the financial
statements of Seller or its Subsidiaries as of the Closing Date consistent with
past practices and (ii) in the case of a Claim relating to a breach of Section
2.19, in excess of any amounts (in addition to those amounts referred to in
clause (i) above) which Purchaser recovers pursuant to the agreements set forth
on Schedule 2.19; and Purchaser covenants to exercise its reasonable best
efforts to satisfy any Claims for a breach of Section 2.19 by enforcing its
rights under such agreements before seeking indemnification under this Section
10.2(a). A claim for indemnification for which notice was given pursuant to
Section 10.3(a) hereof prior to the end of such eighteen (18) month period
shall survive until such claim is fully and finally determined.
(b) Upon the terms and subject to the conditions of this Article X, for a
period ending on the first business day that is eighteen (18) months after the
Closing Date, Purchaser shall indemnify, defend and hold harmless Seller from
any Claims relating to or arising out of the Seller Liabilities; provided, that
a claim for indemnification for which notice was given pursuant to Section
10.3(a) hereof prior to the end of such period shall survive until such claim
is fully and finally determined.
10.3 Conditions of Indemnification. Subject to the provisions of Section
10.4, the obligations and liabilities of Seller, in the case of Section
10.2(a), and the Purchaser, in the case of Section 10.2(b), with respect to
Claims made by or against third parties ("Third Party Claims") shall be subject
to the following terms and conditions:
(a) The person to whom such Third Party Claim relates (the "Indemnified
Party") will give the party from which indemnity is sought hereunder (the
"Indemnifying Party") prompt notice of such Third Party Claim, (which notice in
any event shall be given to the Indemnifying Party within 10 days of the
Indemnified Party first becoming aware of the facts and circumstances that form
the basis of such Third Party Claim) and the Indemnifying Party will (except as
otherwise contemplated by the proviso to Section 10.3(b) hereof) assume solely
the defense thereof by representatives chosen by it; provided, that the
Indemnified Party shall be entitled to participate in such action and to employ
counsel at its own expense to assist in the handling of such Third Party Claim.
(b) If the Indemnifying Party, within a reasonable time after notice of any
such Third Party Claim, fails to assume the defense thereof, the Indemnified
Party shall (upon a subsequent 10 days' notice to the Indemnifying Party) have
the right to undertake the defense or, with the consent of the Indemnifying
Party, to undertake a compromise or settlement of such Third Party Claim on
behalf of and for the account and risk of the Indemnifying Party, subject to
the right of the Indemnifying Party to assume the defense of such Third Party
Claim at any time prior to the settlement, compromise or final determination
thereof. The Indemnifying Party shall not be liable for any compromise or
settlement of a Third Party Claim effected without its written consent. During
any period when the Indemnifying Party is contesting any such Third Party Claim
in good faith, the Indemnified Party shall not pay, compromise or settle such
Third Party Claim without the Indemnifying Party's consent; provided, that the
Indemnified Party may nonetheless pay, compromise or settle such Third Party
Claim without such consent during such period, in which event it shall,
automatically and without any further action on its part, waive any right
(whether or not pursuant to this Agreement) to indemnity in respect of all
losses, liabilities, damages or expenses relating to such Third Party Claim.
If the Indemnifying Party shall defend any such Third Party Claim until such
Third Party Claim shall be adjudicated by order, decree, ruling or other
action, then the Indemnified Party shall have the right, in the exercise of its
exclusive discretion, to determine whether or not to appeal such adjudication.
(c) Anything in this Section 10.3 to the contrary notwithstanding, the
Indemnifying Party shall not, without the written consent of the Indemnified
Party (which consent shall not be withheld unreasonably or delayed), settle or
compromise any Third Party Claim or consent to the entry of any judgment which
imposes any future obligation on the Indemnified Party or which does not
include as an unconditional term thereof the giving by the claimant and or
plaintiff to the Indemnified Party a release from all liabilities in respect of
such Third Party Claim.
(d) The Indemnified Party shall, and shall cause its affiliates to, provide
the Indemnifying Party with such assistance (without charge) as may reasonably
be requested by the Indemnifying Party in connection with any indemnification
or defense provided for herein, including, without limitation, providing the
Indemnifying Party with such information, documents and records and reasonable
access to the services of and consultations with such personnel of the
Indemnified Party or its Affiliates as the Indemnifying Party shall deem
necessary (provided that such access shall not unreasonably interfere with the
performance of the duties performed by or responsibilities of such personnel).
10.4 Limitation of Indemnification. Any Claim brought under Section
10.2(a) is subject in each case to the following limitations and restrictions:
(a) Claims may not be asserted at any time after the close of business on
the first business day that is eighteen (18) months after the Closing Date,
other than Claims under Article VIII.
(b) Claims made pursuant to Section 10.2(a) will be paid only to the extent
that the aggregate amount of Seller's Proportionate Interest of all such Claims
exceeds $10,000,000 (the "Basket"), in which event only amounts in excess of
the Basket shall be recoverable; provided, however, that the aggregate amount
recoverable pursuant to Section 10.2(a) shall in no event exceed $150,000,000.
(c) Each Claim shall be reduced by the amount of any insurance proceeds
actually received in connection with such Claim; Purchaser covenants to
exercise its reasonable best efforts to collect insurance proceeds under
applicable insurance policies that are then in force if and to the extent that
such Claim relates to an event covered by such insurance policies before
Purchaser may recover for any Claim pursuant to this Article X.
(d) The representations and warranties of Seller specifically enumerated in
Section 10.2(a) for purposes of determining whether a breach thereof has
occurred that may entitle Purchaser to recover for (i) any Claim under Section
10.2(a) shall not be deemed qualified by any references to materiality (or
variations thereof) contained therein and any breaches thereof shall be
determined without regard to whether such breach constitutes a Material Adverse
Effect, (ii) any Claim under Section 10.2(a) based on a breach of Section
2.23(a)(ii) shall be determined without regard to clauses (x) and (y) thereof,
and (iii) any Claim under Section 10.2(a) based on a breach of Section
2.23(a)(iii) shall be determined without regard to the knowledge qualifier set
forth therein.
(e) In addition to the limitations and restrictions set forth in clause (i)
of Section 10.2(a) and the other provisions of this Section 10.4, in no event
shall Purchaser be entitled to recover for any Claim arising out of (i) a
breach of Section 2.23(a)(iii) until the aggregate Claims for breaches of such
representation regarding individual Accounts exceeds $330,000, in which event
only amounts in excess of $330,000 shall be recoverable in connection therewith
(to the extent the amount of Seller's Proportionate Interest of all Claims has
theretofore exceeded the Basket and such Claims have theretofore exceeded any
reserves referred to in clause (i) of Section 10.2(a)) and no amount of such
Claims aggregating less than $330,000 shall be given effect for the purpose of
exceeding the Basket; provided, however, that in no event shall Purchaser be
entitled to recover for any Claims to the extent Purchaser is entitled to seek
reimbursement therefor pursuant to charge-backs to a merchant or otherwise; and
(ii) any Third Party Claim relating to any breach of the representations
enumerated in Section 10.2(a) (other than Section 2.23(a)(iii)) until the
aggregate amount of Third Party Claims for such breaches exceeds $200,000, in
which event only amounts in excess of $200,000 shall be recoverable in
connection therewith (to the extent the amount of Seller's Proportionate
Interest of all Claims has theretofore exceeded the Basket and such Claims have
theretofore exceeded any reserves referred to in clause (i) of Section 10.2(a))
and no amount of such Claims aggregating less than $200,000 shall be given
effect for the purpose of exceeding the Basket.
(f) Seller shall not be responsible for the amount of any Claim in excess
of Seller's Proportionate Interest with respect to any such Claim.
10.5 Claims Adjusted for Taxes. The amount of any Claim for which
indemnification is provided under this Article X shall be (i) if the indemnity
payment is not treated as an adjustment to the Purchase Price for Tax purposes
pursuant to the second succeeding sentence, increased to take account of any
net Tax cost incurred by the Indemnified Party arising from the receipt or
accrual of indemnity payments hereunder (grossed up for such increase) and (ii)
reduced to take account of any net Tax benefit realized by the Indemnified
Party as a result of the deductibility for Tax purposes of such Claim. In
computing the amount of any such Tax cost or Tax benefit, the Indemnified Party
shall be deemed to recognize all other items of income, gain, loss, deduction
or credit before recognizing any item arising from the receipt of any indemnity
payment hereunder or the incurrence of payment of such Claim. Any indemnity
payment under this Agreement shall be treated as an adjustment to the Purchase
Price for Tax purposes, unless a final determination (which shall include the
execution of a Form 870-AD or successor form) with respect to the Indemnified
Party or any or its Affiliates causes any such payment not to be treated as an
adjustment to the Purchase Price for United States Federal income Tax purposes.
ARTICLE XI
Expenses
Except as otherwise provided by Section 9.3, whether or not the
transactions contemplated hereby are consummated, and except as otherwise
specifically provided in this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby by
Seller shall be paid by Seller and all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby by
Purchaser shall be paid by Purchaser.
ARTICLE XII
Miscellaneous
12.1 No Third-Party Beneficiaries. Except as otherwise provided in Section
5.3(vii), which are for the benefit of, and enforceable by, the persons
referred to in the Retention Plan, this Agreement is for the sole benefit of
the parties hereto and their permitted assigns, and nothing herein expressed or
implied shall give or be construed to give to any person, other than the
parties hereto and such assigns, any legal or equitable rights hereunder.
12.2 Amendment or Waiver. No amendment, modification or waiver in respect
of this Agreement shall be effective unless it shall be in writing and signed
by the parties hereto.
12.3 Headings. The headings contained in this Agreement, or in any exhibit
or schedule hereto and in the table of contents to this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
12.5 Assignment. This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by any party hereto (including by
operation of law in connection with a merger, or sale of substantially all the
assets, or any dissolution, of any party hereto) without the prior written
consent of the other parties hereto; provided, however, that the Purchaser may
assign its rights hereunder to an affiliate of the Purchaser without the prior
written consent of any party hereto; provided further, however, that no
assignment shall limit or affect the assignor's obligations hereunder. Any
attempted assignment in violation of this Section 12.5 shall be void.
12.6 Notices. All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be delivered by hand or sent
by telecopy or sent, postage prepaid, by registered, certified or express mail
or overnight courier service and shall be deemed given when so delivered by
hand, or telecopied, or if mailed, three days after mailing (one business day
in the case of express mail or overnight courier service), as follows:
if to Seller,
SPS Transaction Services, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President and CEO
with a copy to:
▇▇▇▇▇ & Wood LLP
One World Trade ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
if to Purchaser,
Associates First Capital Corporation
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with copies to:
Associates Credit Card Services Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Private Label General Manager
or such other address as any party may from time to time specify by written
notice to the other parties hereto.
12.7 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, and the Confidentiality Agreement contain the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter. The parties hereto shall not be liable or bound to any other
party in any manner by any representations, warranties or covenants relating to
such subject matter except as specifically set forth herein or in the
Confidentiality Agreement. Without limiting the generality of the foregoing,
and notwithstanding any otherwise express representations and warranties made
herein, Seller makes no representation or warranty to Purchaser with respect
to: (i) any projections, estimates or budgets heretofore delivered to or made
available to Purchaser of future revenues, expenses or expenditures or future
results of operations of Seller or its subsidiaries; or (ii) except as
expressly covered by a representation and warranty contained in Article II
hereof, any other information or documents (financial or otherwise) made
available to Purchaser or their counsel, accountants or advisers with respect
to Seller and its subsidiaries.
12.8 Severability. If any provision of this Agreement (or any portion
thereof) or the application of any such provision (or any portion thereof) to
any person or circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, (i) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (ii) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability.
12.9 Schedules. The inclusion of any matter in any schedule to this
Agreement shall be deemed to be an inclusion for all purposes of this
Agreement, including each representation and warranty to which it may relate,
but inclusion therein shall expressly not be deemed to constitute an admission
by Seller, or otherwise imply, that any such matter is material or creates a
measure for materiality for the purposes of this Agreement.
12.10 Consent to Jurisdiction. The parties hereto irrevocably submit to
the exclusive jurisdiction of (a) the courts of the State of New York and (b)
the federal court sitting in the Southern District of New York for the purposes
of any suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby. The parties hereto agree to commence any
action, suit or proceeding relating hereto either in the federal court sitting
in the Southern District of New York or if such suit, action or other
proceeding may not be brought in such court for jurisdictional reasons, in the
courts of the state of New York. The parties hereto further agree that service
of any process, summons, notice or document by United States registered mail to
such party's respective address set forth above shall be effective service of
process for any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction in this Section 12.10. The
parties hereto irrevocably and unconditionally waive any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (i) the courts of the State of New
York or (ii) the federal court sitting in the Southern District of New York,
and hereby further irrevocably and unconditionally waive and agree not to plead
or claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
12.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on their respective behalf, by their respective officers, thereunto
duly authorized, as of the day and year first above written.
SPS TRANSACTION SERVICES, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
ASSOCIATES FIRST CAPITAL CORPORATION
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
EXHIBIT A
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of April 18, 1998, by
Associates First Capital Corporation, a Delaware corporation ("Purchaser"), and
NOVUS Credit Services Inc. (the "Parent"), a stockholder of SPS Transaction
Services, Inc., a Delaware corporation (the "Company").
RECITALS
A. Purchaser and the Company are concurrently herewith entering into a Stock
Purchase Agreement dated as of the date hereof (a copy of which has been
provided to the Parent) (the "Stock Purchase Agreement"), pursuant to which
Purchaser shall acquire all of the issued and outstanding shares of capital
stock of each of the Subsidiaries (as defined in the Stock Purchase Agreement).
B. The Parent is a significant stockholder of the Company.
C. The execution and delivery of this Agreement is a condition to Purchaser
entering into the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereby agree as
follows:
1. Voting. At the meeting of the Company's stockholders convened to
consider and vote upon the authorization of the transactions contemplated by
the Stock Purchase Agreement (the "Stock Sale"), the Parent shall vote or
cause to be voted all of the shares of common stock of the Company, par value
$0.01 per share (the "Company Common Stock"), owned of record by it at the
record date for such vote (a) in favor of the authorization of the
transactions contemplated by the Stock Purchase Agreement and (b) against (i)
approval of any proposal made in opposition to or in competition with the
Stock Sale or any of the other transactions contemplated by the Stock
Purchase Agreement, (ii) any merger, consolidation, sale of assets, business
combination, share exchange, reorganization or recapitalization of the
Company or any of its subsidiaries, with or involving any party other than
the Purchaser or one of its subsidiaries, (iii) any liquidation or winding
up of the Company, and (iv) any other action that may reasonably be expected
to impede, interfere with, delay, postpone or attempt to discourage the Stock
Sale or the other transactions contemplated by the Stock Purchase Agreement
or result in a breach of any of the covenants, representations, warranties or
other obligations or agreements of the Company under the Stock Purchase
Agreement which would materially and adversely affect the Company or its
ability to consummate the transactions contemplated by the Stock Purchase
Agreement.
2. No Solicitation. The Parent shall not, directly or indirectly: (i) take
any action to seek, initiate or solicit any offer from any person, entity or
group to acquire any shares of capital stock of the Company or its
subsidiaries, to merge or consolidate with the Company or its subsidiaries, or
to otherwise acquire any significant portion of the assets of the Company or
its subsidiaries except for acquisitions solely of inventory in the ordinary
course of business (a "Third Party Acquisition Offer"), or (ii) engage in
negotiations or discussions concerning a Third Party Acquisition Offer or the
business or assets of the Company or its subsidiaries with, or disclose
financial information relating to the Company or its subsidiaries, or any
confidential or proprietary trade or business information relating to the
business of the Company or its subsidiaries to, or afford access to the
properties, books or records of the Company or its subsidiaries to, any third
party that may be considering a Third Party Acquisition Offer. The Parent
shall immediately cease and cause to be terminated all existing discussions and
negotiations, if any, with any parties conducted heretofore with respect to any
Third Party Acquisition Offer.
3. No Transfer. The Parent shall not sell, pledge, assign or otherwise
transfer or dispose of, or authorize, propose or agree to the sale, pledge,
assignment or other transfer or disposition of, any of its shares of Company
Common Stock.
4. Best Efforts; Additional Agreements and Provisions. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees to use its,
his or her best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things reasonably necessary, proper, or advisable in
accordance with applicable law to consummate and make effective the
transactions contemplated by this Agreement and the Stock Purchase Agreement.
If any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or the Stock Purchase Agreement, each party to this
Agreement shall take all such action.
5. Representations and Warranties. The Parent represents and warrants to
Purchaser as follows:
(a) Organization. The Parent is a corporation duly organized and validly
existing under the laws of the State of Delaware.
(b) Corporate Power. The Parent has the requisite power and authority to
enter into this Agreement, and to perform its obligations hereunder and to
consummate the transactions contemplated hereby.
(c) Validity. This Agreement has been duly and validly executed and
delivered by the Parent and constitutes a valid and legally binding obligation
thereof, enforceable in accordance with its terms. The Parent has full legal
power, authority and right to vote all shares of Company Common Stock in favor
of the authorization of the transactions contemplated by the Stock Purchase
Agreement without the consent or approval of, or any other action on the part
of, any other person or entity.
(d) Authority to Vote Shares. The Parent owns of record a total of
20,000,000 shares of Company Common Stock. The Parent has full legal power,
authority and right to vote all shares of Company Common Stock in favor of the
authorization of the transactions contemplated by the Stock Purchase Agreement
without the consent or approval of, or any other action on the part of, any
other person or entity.
(e) Noncontravention. Neither the execution and delivery of this
Agreement, nor the consummation of any of the transactions contemplated hereby
or by the Stock Purchase Agreement, nor compliance with any of the provisions
hereof or thereof, will violate, conflict with, or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination or suspension of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien upon any of the properties or assets of the Parent under,
any of the terms, conditions or provision of any agreement or instrument to
which the Parent is a party or any statute, rule, regulation, judgment, order,
decree or other legal requirement applicable to the Parent; except for any such
breach, violation, conflict or default which, individually or in the aggregate,
would not prevent the Parent from casting all votes necessary to authorize the
transactions contemplated by the Stock Purchase Agreement.
(f) Litigation. There is no claim, action, proceeding or investigation
pending or, to the knowledge of the Parent, threatened against or relating to
the Parent before any court or governmental or regulatory authority or body and
the Parent is not subject to any outstanding order, writ, injunction or decree
which, if determined adversely, individually or in the aggregate, could
reasonably be expected to prevent the Parent from performing its obligations
hereunder.
6. Termination. This Agreement may be terminated upon the earliest to
occur of (i) the termination of the Stock Purchase Agreement pursuant to
Article IX thereof; (ii) the consummation of the Stock Sale; and (iii) the
date which is 9 months after the date hereof. In the event of a termination
of this Agreement pursuant to this Section 6, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of any
party hereto; provided, however, that nothing herein shall release any party
hereto from any liability for any breach of this Agreement.
7.Miscellaneous.
(a) Notices. All notices and other communications hereunder shall be in
writing (including telex or similar writing) and shall be deemed given if
delivered in person or by messenger, cable, telegram or telex or facsimile
transmission or by a reputable overnight delivery service which provides for
evidence of receipt to the parties at the following addresses or telecopier
numbers (or at such other address, or telecopy number for a party as shall be
specified by like notice):
if to the Parent at:
NOVUS Credit Services Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel, Credit Services
if to Purchaser at:
Associates First Capital Corporation
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
(b) Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
(d) Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all prior and contemporaneous agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof.
(e) Severability; Savings. The invalidity or unenforceability or any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
principles of conflicts of law of such state.
(g) Assignment. Neither this Agreement nor any of the rights, interest or
obligations hereunder shall be assigned by any party hereto, whether by
operation of law or otherwise, without the express prior written consent of
each of the other parties hereto. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors, heirs, legal representatives and
permitted assigns.
(h) Remedies. In addition to all other remedies available, the parties
agree that, in the event of a breach by a party of any of its obligations
hereunder, the non-breaching party shall be entitled to specific performance
or injunctive relief.
(i) Defined Terms. All capitalized terms used herein and not defined
herein shall have the meaning set forth in the Stock Purchase Agreement.
IN WITNESS WHEREOF, each of the parties hereto have signed this Agreement as
of the date first above written.
ASSOCIATES FIRST CAPITAL CORPORATION
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
NOVUS CREDIT SERVICES INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
EXHIBIT B
ASSUMPTION AGREEMENT
This Assumption Agreement (this "Agreement") is made and entered into as of
[ ] [ ], 1998, by and between SPS Transaction Services, Inc., a
Delaware corporation ("Seller"), and Associates First Capital Corporation, a
Delaware corporation ("Purchaser").
RECITALS
A. Seller and Purchaser are parties to a certain Stock Purchase Agreement
dated April 18, 1998 (the "Purchase Agreement"), pursuant to which, subject to
the terms and conditions therein contained, Seller has agreed to sell to
Purchaser, and Purchaser has agreed to purchase from Seller, all of the issued
and outstanding shares of SPS Payment Systems, Inc. and ▇▇▇▇▇▇ State Bank, each
a wholly owned subsidiary of Seller (collectively, the "Subsidiaries").
B. Pursuant to the Purchase Agreement, it is a condition precedent to
Purchaser's obligations thereunder that Seller shall have transferred to the
Subsidiaries all of its assets not specifically excluded in Schedule 4.7 to the
Purchase Agreement (the "Seller's Assets"), and it is a condition precedent to
Seller's obligations thereunder that Purchaser shall have assumed all of
Seller's obligations arising prior to the Closing (as defined therein).
C. Simultaneously with the execution hereof, Seller has transferred to the
Subsidiaries the Seller's Assets in form satisfactory to Purchaser.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
Section 1. Purchaser hereby irrevocably and unconditionally assumes and agrees
to pay, perform and discharge when due any and all Seller Liabilities (as
defined in the Purchase Agreement).
Section 2. This Agreement may be executed in two counterparts, each of which
shall be deemed to be an original and both of which, taken together, shall
constitute one and the same instrument.
Section 3. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns, and shall inure to the benefit of Seller and
its affiliates and their respective successors and assigns.
Section 4. This Agreement shall be governed and construed by the internal laws
of the State of New York.
IN WITNESS WHEREOF, each of the parties hereto have duly entered into this
Assumption Agreement as of the day and year first above written.
ASSOCIATES FIRST CAPITAL CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
SPS TRANSACTION SERVICES, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
EXHIBIT C
INTERIM SERVICING AGREEMENT
This Interim Servicing Agreement (the "Agreement") is entered into as of [ ]
[ ], 1998, by NOVUS Credit Services Inc., a corporation organized under the
laws of Delaware ("NOVUS"), and Associates First Capital Corporation, a
corporation organized under the laws of Delaware ("Purchaser").
RECITALS
1. Pursuant to the terms of a certain Stock Purchase Agreement dated as of
April 18, 1998 (as amended from time to time, the "Purchase Agreement"), SPS
Transaction Services, Inc., a Delaware corporation having its principal
executive offices in Illinois ("Seller"), has agreed to sell to Purchaser, and
Purchaser has agreed to purchase from Seller, all of the issued and outstanding
shares of stock of SPS Payment Systems, Inc., a Delaware corporation, and
▇▇▇▇▇▇ State Bank, a South Dakota state chartered bank (each an "Acquired
Company" and collectively, the "Acquired Companies").
2. In order for Purchaser to operate the business of each Acquired Company
immediately following the consummation of the transactions contemplated by the
Purchase Agreement, Purchaser desires to enter into certain interim
arrangements with NOVUS with respect to the provision of certain services with
respect to the Acquired Companies.
3. NOVUS is willing to enter into such interim arrangements and to provide
such services subject to the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, intending to be
legally bound the parties hereto agree as follows:
1. Certain Services.
a. Commencing at the Closing (as such term is defined in the Purchase
Agreement), during the term of this Agreement NOVUS shall, directly or through
one or more of its affiliates, provide to each Acquired Company such services
as may be requested by Purchaser from time to time; provided, however, that in
no event shall NOVUS be required to provide to an Acquired Company, directly or
through one or more of NOVUS's affiliates, any service which prior to the
Closing has not been provided to such Acquired Company by NOVUS nor shall NOVUS
be required to provide any legal advice or any other service the rendering of
which would violate any law or regulation; and provided, further, that any
services requested by Purchaser hereunder shall be provided by NOVUS, directly
or through one or more of its affiliates, to any of the Acquired Companies only
to the extent that such service has, prior to the Closing, been provided by
NOVUS to such Acquired Company.
b. The receipt by an Acquired Company of any services rendered hereunder
shall be an unqualified acceptance of, and a waiver by Purchaser and each
Acquired Company of all claims with respect to, such services, unless Purchaser
gives NOVUS written notice of claim within 30 days from the date the services
were rendered by NOVUS or any of NOVUS's affiliates.
2. Term.
The term of this Agreement shall commence at the Closing Date (as defined in
the Stock Purchase Agreement) and shall continue for a period of seven and one-
half months. Purchaser agrees to use its best efforts to establish as soon as
practicable after the Closing Date its own internal capabilities to provide the
services which are the subject of this Agreement. Purchaser agrees to
immediately notify NOVUS when it has established the internal capability to
provide any of such services and upon such notification the term of this
Agreement shall expire for the service for which notification has been given.
Notwithstanding any termination of this Agreement, the provisions of Sections
3.d, 6 and 8.i hereof shall survive any such termination and remain in full
force and effect.
3. Payments by Purchaser.
a. Fees. Purchaser shall pay NOVUS compensation for each service provided
hereunder at the rate or under the formula charged to each Acquired Company for
such service by NOVUS or its affiliate. NOVUS shall invoice Purchaser for the
value of services rendered hereunder on a monthly basis. Payment for such
services shall be due 10 days following the date the corresponding invoice was
mailed to Purchaser.
b. Payment of Expenses Reimbursement. Purchaser shall be responsible for,
and shall provide NOVUS with all funds required in connection with, any
expenses incurred in connection with services to be rendered hereunder
including, but not limited to, any license fees and other third party charges
necessary in order to enable NOVUS to use any software for the benefit of
Purchaser or an Acquired Company. NOVUS shall not be required to advance
Purchaser or any of the Acquired Companies any funds required for the
performance of services owed hereunder. Should NOVUS elect to advance any such
funds, however, they shall be reimbursed by Purchaser immediately upon demand.
c. Taxes. In addition to any other amounts payable to NOVUS hereunder,
Purchaser shall promptly reimburse NOVUS for any taxes, excises, imposts,
duties, levies, withholdings or other similar taxes (excepting any charges
based on net income) that NOVUS or its affiliates may be required to pay on
account of Purchaser or any of the Acquired Companies in connection with the
performance of services hereunder or with respect to payments made by Purchaser
for such services pursuant to this Agreement.
d. Disputed Charges. In the event Purchaser disputes any charges invoiced
by NOVUS pursuant to this Agreement, whether for services rendered or for funds
advanced hereunder, Purchaser shall deliver to NOVUS, within 10 days from the
date of the corresponding invoice, a written statement identifying the charges
so disputed and providing a detailed explanation of Purchaser's objections.
Any charges not objected to by Purchaser pursuant to the provisions of this
Section shall be deemed accepted. If the parties cannot resolve the dispute in
a mutually satisfactory manner within 20 days from the date of receipt by NOVUS
of Purchaser's statement of objections, the controversy shall be finally
adjudicated by Deloitte & Touche LLP or its successor or another independent
public accountant mutually acceptable to the parties. The independent public
accountant will review the books and records of NOVUS, or any of its affiliates
that performed the services or advanced the funds subject of the dispute, as
well as those of Purchaser, the Acquired Companies and any other affiliate of
the parties which may be relevant to its decision, and shall make such other
investigations as it may deem necessary in order to ascertain the accuracy of
the amounts invoiced by NOVUS. The fees of the independent public accountant
shall be paid by Purchaser if the invoice is determined to be substantially
correct and by NOVUS if the invoice is determined to be substantially
incorrect. Pending any such final determination, Purchaser agrees to pay the
amounts in dispute to NOVUS, subject to adjustment as required in order to give
effect to the public accountant's final determination.
4. Disclaimer of Warranties.
NOVUS makes no representations and gives no warranties whatsoever, either
express or implied, to Purchaser, the Acquired Companies or any of their
respective affiliates or any other person or entity that any services provided
hereunder are or will be adequate and sufficient (as to quality or type) to
meet the needs (or any specifically identified needs) or any objectives of any
such person or entity with respect to the conduct of its business.
5. Non-Exclusivity.
Nothing in this Agreement shall preclude NOVUS, or any of its affiliates, from
providing services comparable to those rendered hereunder to any other person
or entity at any time.
6. Indemnification; Limitation of Liability.
a. Indemnification. Purchaser agrees to indemnify and hold NOVUS and its
affiliates harmless from and against any and all liabilities, penalties,
demands, claims, actions and causes of action, suits, obligations,
encumbrances, losses, damages, costs and expenses including, but not limited
to, attorneys' fees and expenses (all of the foregoing, collectively, "Losses")
to which NOVUS or any of its affiliates may be subjected arising out of or
attributable, directly or indirectly, to (i) the performance or nonperformance
of any services hereunder or otherwise arising under this Agreement, except for
any such Losses arising out of or attributable, directly or indirectly, to
NOVUS's gross negligence, bad faith or willful misconduct or (ii) any acts or
omissions of Purchaser or any of the Acquired Companies not specifically
authorized by this Agreement.
b. Procedure. If any claim is made or asserted by a third party against
NOVUS for which NOVUS is entitled to indemnification under this Section 6,
NOVUS shall, with reasonable promptness, give to Purchaser written notice of
the claim or assertion of liability and request Purchaser to defend against the
claim. Failure to so notify Purchaser shall not relieve Purchaser of any
liability which Purchaser might have to NOVUS, unless such failure materially
prejudices Purchaser's position. Purchaser shall have the right to defend
against the claim, in which event Purchaser shall give written notice to NOVUS
of acceptance of the defense of such claim and the identity of counsel selected
by Purchaser with respect to such matters which shall be reasonably acceptable
to NOVUS. In the event Purchaser does not accept the defense of the claim as
provided above or in the event that Purchaser or its counsel fails to use
reasonable care in maintaining such defense or such defense is having a
materially adverse effect on NOVUS's business, NOVUS, upon written notice to
Purchaser, shall have the right to employ counsel for such defense at the
expense of Purchaser. NOVUS and Purchaser shall cooperate with one another in
the defense of any such action and the relevant records and personnel of each
shall be available to the other with respect to such defense.
c. Limitation of Liability. i. Under no circumstances will NOVUS or its
affiliates be liable (in contract, tort or otherwise) to Purchaser, the
Acquired Companies or any of their respective affiliates for any Losses
suffered by Purchaser, the Acquired Companies or any of their respective
affiliates arising out of or attributable, directly or indirectly, to the
performance or nonperformance of any services hereunder or otherwise arising
under this Agreement, except for any such Losses arising out of or attributable
to the bad faith, gross negligence or willful misconduct of NOVUS or its
affiliates.
ii. Any liability of NOVUS or its affiliates to Purchaser, the Acquired
Companies or any of their respective affiliates arising with respect to any
matters arising out of or attributable to, directly or indirectly, this
Agreement, regardless of the form of the claim or cause of action (whether
based in contract, infringement, negligence, strict liability, other tort or
otherwise), shall be limited to actual damages. In no event shall NOVUS or its
affiliates be liable to Purchaser, the Acquired Companies or any of their
respective affiliates for any indirect, consequential, incidental or punitive
damages, whether arising under contract, in tort, at law, or in equity.
"Consequential damages" shall include, but not be limited to, loss of
anticipated profits, loss of use, loss of revenue, cost of capital and loss or
damage of other property or equipment.
7. Ownership of Work Product.
a. Except for the data provided by Purchaser to NOVUS and the reports
produced by NOVUS for Purchaser pursuant to this Agreement, all proprietary
tools and methodologies and all written material including programs, card
decks, tapes, listing and other programming documentation which were
preexisting or originated and prepared by NOVUS pursuant to this Agreement
shall belong to NOVUS, except to the extent acquired by Purchaser or any of the
Acquired Companies pursuant to a separate written agreement signed by
authorized representatives of each party.
b. No license under any trade secrets, copyrights, or other rights is
granted by this Agreement or any disclosure hereunder.
c. Purchaser shall have reasonable access to all data, records, files,
statements, invoices, ▇▇▇▇▇▇▇▇, and other information generated by or in
custody of NOVUS relating to the services provided pursuant to this Agreement.
8. Miscellaneous.
a. Notices. All notices, requests and other communications to either party
hereunder shall be in writing (including facsimile transmission) and shall be
given,
If to Purchaser, to:
Associates First Capital Corporation
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
If to NOVUS, to:
Novus Credit Services, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel, Credit Services
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to
have been received until the next succeeding business day in the place of
receipt.
b. Amendments and Waivers. i. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and
is signed, in the case of an amendment, by each party to this Agreement, or in
the case of a waiver, by the party against whom the waiver is to be effective.
ii. Except as otherwise provided in Sections 1.b and 3.d hereof, no failure
or delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
c. Force Majeure. The parties shall be relieved of their obligations
hereunder (except for the payment of money), if and to the extent that any of
the following events hinder, limit or make commercially impracticable the
performance by either party of any of its obligations hereunder: act of God,
war, civil commotion, riot, acts of public enemies, blockade or embargo, fire,
explosion, lightning, casualty, accident, flood, sabotage, national defense
requirements, labor trouble, strike, lockout or injunction; governmental
requests, laws, regulations, orders or actions whether valid or invalid
(including without limitation import or export prohibitions or priorities,
requisitions, allocations and price adjustment restrictions); breakage or
failure of machinery or apparatus; inability to obtain power, materials,
facilities, equipment, communication or transportation; or any other event,
whether or not of the class or kind enumerated herein, beyond the control of
either party such as cannot be circumvented by reasonable diligence and without
unusual expense. The party claiming relief hereunder shall notify the other
party in writing of the events causing delay or default in performance. The
party failing to fulfill its obligations shall, however, take reasonable steps
to remove or otherwise address the impediment to action.
d. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other party hereto, except that NOVUS may, without
the consent of Purchaser, assign, delegate or transfer its rights or
obligations under this Agreement to one or more of NOVUS's affiliates.
e. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
f. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
g. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by either party hereto. Neither
this Agreement nor any provision hereof is intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
h. Independent Contractors. The parties hereto are independent
contractors. Nothing in this Agreement is intended or shall be deemed to
constitute a partnership, agency, franchise or joint venture relationship
between the parties. Neither party shall incur any debts or make any
commitments for the other, except to the extent, if at all, specifically
provided herein.
i. Confidentiality. Each party and its affiliates will hold, and will use
their best efforts to cause their respective partners, officers, directors,
employees and other agents to hold, in confidence, all confidential documents
and information concerning the other party furnished to such party or its
affiliates in connection with the transactions contemplated by this Agreement,
except to the extent that such information can be shown to have been (x)
previously known by such party on a nonconfidential basis, (y) in the public
domain through no fault of such party, or (z) later lawfully acquired by such
party on a nonconfidential basis from sources other than the other party or any
of its affiliates; provided that such party may disclose such information in
connection with the transactions contemplated by this Agreement to the
partners, officers, directors, employees and other agents of such party or its
affiliates so long as such persons are informed by such party of the
confidential nature of such information and are directed by such party to keep
such information confidential and not to use it for any purpose other than its
intended use; and provided, further, that if any person described in the
immediately preceding proviso breaches its confidentiality obligations, the
party to whom the disclosure is attributable will inform the other party and
will take reasonable steps at the request of such other party to enforce such
obligation. Notwithstanding the foregoing, each party may disclose such
information if (i) compelled to disclose by judicial or administrative process
or by other requirements of law, or (ii) necessary to establish such party's
position in any litigation or any arbitration or other proceeding based upon or
in connection with the subject matter of this Agreement. Prior to any
disclosure pursuant to the preceding sentence, the disclosing party shall give
reasonable prior notice to the other party to this Agreement of such intended
disclosure and, if requested by such party, shall use all reasonable efforts to
obtain a protective order or similar protection for such information or data
and shall otherwise disclose such information and data to the extent and only
to the extent necessary to comply with any applicable rule, regulation or
policy of a governmental entity or securities exchange. The obligation of a
party hereto to hold any such information in confidence shall be satisfied if
it exercises the same care with respect to such information as it would take to
preserve the confidentiality of its own similar information. If all or any
part of the services rendered hereunder are terminated, each party and its
affiliates will, and will use their best efforts to cause their respective
partners, officers, directors, employees, accountants, counsel, consultants,
advisors and agents to, destroy or deliver to the other party, upon request,
all documents and other materials, and all copies thereof, obtained by such
party or its affiliates or on their behalf from the other party in connection
with the services so terminated that are subject to such confidence.
j. Records. NOVUS shall maintain the business records pertaining to the
services rendered hereunder and will retain the records pertaining to each such
service for a period of 12 months after the cessation of such service. At the
Purchaser's request, NOVUS shall provide to Purchaser copies of records
pertaining to the services rendered hereunder.
k. Severability. If any provision hereof is or becomes illegal, invalid,
or unenforceable under the laws of a particular jurisdiction, such provision
shall be fully severable with respect to such laws; this Agreement shall be
construed and enforced in such jurisdiction as if such provision had never
comprised a part hereof; the remaining provisions hereof shall remain in full
force and effect in such jurisdiction and shall not be affected by such
provision or by its severance herefrom; and all of the provisions hereof shall
remain in full force and effect in all other jurisdictions and shall not be
affected by the severance of such provision under the laws of such
jurisdiction. Furthermore, in lieu of such provision there shall be added
automatically for purposes of such jurisdiction as part of this Agreement a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and enforceable in such
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on their respective behalf, by their respective officers, thereunto
duly authorized, as of the date first above written.
NOVUS CREDIT SERVICES, INC.
By:
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Name:
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Title:
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ASSOCIATES FIRST CAPITAL CORPORATION
By:
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Name:
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Title:
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