Exhibit 10(p)
STOCK PURCHASE AGREEMENT
dated as of January 17, 1996
among
XEROX CORPORATION
XEROX FINANCIAL SERVICES, INC.
and
TRG ACQUISITION CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1 Defined Terms 1
1.2 Other Defined Terms 7
1.3 Other Definitional Provisions 8
ARTICLE II
PURCHASE AND SALE OF STOCK AND CLASS 2 STOCK
2.1 Transfer of Stock 8
2.2 Consideration for Stock 8
2.3 Adjustments 8
ARTICLE III
CLOSING
3.1 Closing 9
3.2 Documents to be Delivered 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
4.1 Organization of Seller and Parent 10
4.2 Organization of the Company 10
4.3 Capital Stock 10
4.4 Authorization 11
4.5 Subsidiaries 11
4.6 Ridge Re 13
4.7 Absence of Certain Changes or Events 13
4.8 Title to Assets, Etc. 17
4.9 Contracts and Commitments 17
4.10 No Conflict or Violation 18
4.11 Consents and Approvals 19
4.12 Financial Statements 20
4.13 Litigation 21
4.14 Liabilities 21
4.15 Investments 22
4.16 Reserves 22
4.17 Compliance with Law; Permits; Regulatory Matters 22
4.18 No Brokers 24
4.19 No Other Agreements to Sell the Assets or the Company 24
4.20 Proprietary Rights 24
4.21 Employee Benefit Plans 25
4.22 Employment-Related Matters 28
4.23 Transactions with Certain Persons 28
4.24 Taxes 29
4.25 Reinsurance and Retrocessions 30
4.26 1992/93 Restructuring 30
4.27 Capital Commitments 31
4.28 Environmental Laws 31
4.29 Acquisition for Investment 31
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization of Buyer 32
5.2 Authorization 32
5.3 No Conflict or Violation 32
5.4 No Brokers 33
5.5 Acquisition for Investment 33
5.6 Organizational Documents 33
5.7 Capitalization of Buyer 33
5.8 Consents and Approvals 34
5.9 Financial Obligations 34
5.10 Solvency 34
ARTICLE VI
ACTIONS BY PARENT, SELLER AND BUYER PRIOR TO THE CLOSING
6.1 Maintenance of Business and Preservation of Permits
and Services 34
6.2 Additional Financial Statements 35
6.3 Certain Prohibited Transactions 35
6.4 Investigation by Buyer 36
6.5 Consents 36
6.6 Notification of Certain Matters 37
6.7 No Solicitations 37
6. Cooperation; Accounting and Other Matters 38
6.9 Investment Portfolio 38
6.10 Reinsurance Agreements 38
6.11 Dividends 39
6.12 Seller Notes 39
6.13 Leesburg Training Facility 39
6.14 Cessions to Ridge Re 40
6.15 Restated Certificate of Incorporation 40
6.16 Certain Admitted Assets 40
6.17 Intercompany Accounts 40
6.18 Financing 41
6.19 Letter Agreement 41
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARENT AND SELLER
7.1 Representations, Warranties and Covenants 41
7.2 HSR Act 42
7.3 No Governmental or Other Proceeding; Illegality 42
7.4 Consents 42
7.5 Opinion of Counsel 42
7.6 Certificates 43
7.7 Corporate Documents 43
7.8 Talegen Closing 43
7.9 Restated Certificate of Incorporation 43
7.10 Solvency Matters 43
7.11 Capitalization 43
7.12 Company Certificates 43
7.13Subsidiary Releases 43
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
8.1 Representations, Warranties and Covenants 44
8.2 Consents 44
8.3 HSR Act 45
8.4 No Governmental or Other Proceeding; Illegality 45
8.5 Opinion of Counsel 45
8.6 Certificates 45
8.7 Corporate Documents 45
8.8 Talegen Closing 46
8.9 Financing 46
8.10 No Material Adverse Effect 46
8.11 Resignation of Officers and Directors 46
8.12 Transfer Taxes 46
8.13 Seller Notes 46
8.14 Leesburg Training Facility Amount 46
8.15 Guarantees 46
8.16 Management Investment 46
ARTICLE IX
ACTIONS BY PARENT, SELLER, AND BUYER AFTER THE CLOSING
9.1 Books and Records 47
9.2 Covenants Regarding the Securities 47
9.3 Crostex/Camfex Purchase Money Notes 48
9.4 Certain Employee Benefit Matters 48
9.5 Transfer Taxes 49
9.6 Ridge Re 49
9.7 Further Assurances 49
ARTICLE X
INDEMNIFICATION
10.1 Survival of Representations and Warranties 49
10.2 Indemnification 50
10.3 Indemnification Procedures 52
10.4 Insurance Proceeds and Tax Limitations 53
10.5 Tax Indemnification 54
ARTICLE XI
MISCELLANEOUS
11.1 Termination 54
11.2 Confidentiality 55
11.3 Parent Option 56
11.4 Assignment 56
11.5 Notices 57
11.6 Choice of Law 58
11.7 Entire Agreement; Amendments and Waivers 58
11.8 Counterparts 58
11.9 Invalidity 58
11.10 Headings 58
11.11 Expenses 58
11.12 [Intentionally Omitted]. 59
11.13 Joint and Several 59
11.14 No Third Party Beneficiaries 59
Exhibits
Exhibit A Investment Policy
Exhibit B Form of Restated Certificate of Incorporation of Buyer
Exhibit C Form of Letter Agreement
Exhibit D-1 Form of Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Exhibit D-2 Form of Opinion of King & Spalding
Exhibit E Form of Company Certificates
Exhibit F Form of Insurance Subsidiary Releases
Exhibit G-1 Form of Opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
Exhibit G-2 Form of Opinion of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Exhibit G-3 Form of Opinion of ▇▇▇▇▇ ▇▇▇▇▇▇
Exhibit G-4 Form of Opinion of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Exhibit G-5 Form of Opinion of LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
Exhibit H Form of Parent Guarantee
Exhibit I Form of Parent and Seller Guarantee
Exhibit J Term Sheet for Class 1 Stock
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 17, 1996 among Xerox Corporation,
a New York corporation ("Parent"), Xerox Financial Services, Inc., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Seller"), and TRG
Acquisition Corporation, a Delaware corporation ("Buyer").
RECITALS
Seller is the beneficial and record owner of 1,000 shares of common stock, par
value $1.00 per share, of The Resolution Group, Inc., a Delaware corporation
(the "Company"), constituting all of the issued and outstanding capital stock
(the "Stock") of the Company.
Buyer desires to purchase from Seller, and Seller desires to sell to Buyer,
all of the Stock subject to the terms and conditions of this Agreement.
Parent is the sole stockholder of Seller and desires that Seller sell to Buyer
all of the Stock, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the following
meanings:
"Affiliate" shall mean a Person that directly or indirectly through one or
more intermediaries controls, is controlled by or is under common control with
the Person specified. For purposes of this definition and the definition of
"Subsidiary" set forth below, the term "control" (including the terms
"controlling," "controlled by" and "under common control with") of a Person
means the possession, direct or indirect, of the power to (i) vote 50% or more
of the voting securities of such Person or (ii) direct or cause the direction
of the management and policies of such Person, whether by contract or
otherwise.
"Agreement" shall mean this Stock Purchase Agreement (together with all
schedules and exhibits referenced herein), as amended, modified or
supplemented from time to time.
"Ancillary Agreements" shall mean, collectively, the Guarantees and the Tax
Agreement.
"Balance Sheet Date" shall mean June 30, 1995.
"Cash Equivalents" shall mean (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the date
of acquisition and overnight bank deposits of any commercial bank having
capital and surplus in excess of $500,000,000, (c) repurchase obligations of
any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days with respect to securities
issued or fully guaranteed or insured by the United States government, (d)
commercial paper of a domestic issuer rated at least A-2 by S&P or P-2 by
Moody's, (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least
A by S&P or A by Moody's, (f) securities with maturities of one year or less
from the date of acquisition backed by standby letters of credit issued by any
commercial bank satisfying the requirements of clause (b) of this definition
or (g) shares of money market mutual or similar funds which invest exclusively
in assets satisfying the requirements of clauses (a) through (f) of this
definition.
"Class 1 Stock" shall mean the Class 1 Stock having the terms set forth in the
Restated Certificate of Incorporation.
"Class 2 Stock" shall mean the Class 2 Stock having the terms set forth in the
Restated Certificate of Incorporation.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall have the meaning ascribed in the Tax Agreement.
"Company GAAP Financial Statements" shall mean the audited Consolidated
Balance Sheets of the Company (or its predecessors) as of December 31, 1994
and 1993 and the Consolidated Statements of Operations, Consolidated
Statements of Shareholder's Equity and Consolidated Statements of Cash Flows
of the Company (or its predecessors) for each of the three fiscal years
included in the three-year period ended December 31, 1994, prepared in
accordance with GAAP, together with the notes thereon and the related reports
of KPMG Peat Marwick LLP.
"Company Interim Financial Statements" shall mean the unaudited Consolidated
Balance Sheets and the unaudited Consolidated Statements of Operations,
Consolidated Statements of Shareholder's Equity and Consolidated Statements of
Cash Flows of the Company for the nine-month periods ended September 30, 1994
and 1995, together with the notes thereon.
"Contracts" shall mean all agreements, contracts, commitments and undertakings
(other than contracts of insurance or reinsurance or retrocession agreements)
to which the Company or any of the Subsidiaries is a party, an obligor or a
beneficiary and (i) the performance or non-performance of which is
individually or, with respect to any related series of agreements, in the
aggregate, material to the Company and the Subsidiaries, taken as a whole, or
(ii) which provide for an aggregate purchase price or payments of more than
$1,000,000 under any agreement during any two-year period (or $1,000,000 in
the aggregate, during any two-year period, in the case of any related series
of agreements).
"Convention Statements" shall mean (i) the annual convention statements and
the quarterly statement of each Insurance Subsidiary as filed with the
insurance regulatory authorities in its jurisdiction of domicile for the years
ended December 31, 1992, 1993 and 1994 and for the quarterly period ended
September 30, 1995, and (ii) the annual convention statements of Ridge Re as
filed with the insurance regulatory authorities in Bermuda for the period from
December 14, 1992 to December 31, 1993 and for the year ended December 31,
1994.
"Crostex/Camfex Contracts" shall mean all contracts, agreements or
arrangements of the Company or any Subsidiary relating to the real property
and improvements located at (i) ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, (ii) ▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, (iii) ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, (iv) ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and (v) ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇,
including, without limitation, any notes held by the Company or any Subsidiary
(the "Crostex/Camfex Purchase Money Notes").
"Encumbrances" shall mean any claim, lien (statutory or other), pledge,
option, charge, easement, security interest, right-of-way, encroachment,
encumbrance, mortgage, or other rights of third parties.
"Environmental Laws" shall mean any and all applicable Federal, state or local
laws or regulations relating to the protection of the environment or of human
health as it may be affected by the environment.
"Environmental Permit" shall mean any license, permit, order, consent,
approval, registration, authorization, qualification or filing required under
any Environmental Law.
"Environmental Report" shall mean any report, study, assessment, audit, or
other similar document that addresses any issue of actual or potential
noncompliance with, or actual or potential liability under, any Environmental
Law that may in any way affect the Company or any Subsidiary other than to the
extent such document addresses any issue of actual or potential noncompliance
with, or actual or potential liability under, any Environmental Law by reason
of any policy of insurance, reinsurance, indemnity, guaranty or assumption of
liability of any party entered into by the Company or any Insurance
Subsidiary.
"Excluded Activities" shall mean, with respect to the Company and the
Subsidiaries, activities relating to insurance reserves, claims under, related
to or in respect of insurance policies or any disputes related thereto, loss
adjustments and loss adjustment expenses and reinsurance receivables,
provided, however, that "Excluded Activities" shall not be deemed to include
any (i) of the matters covered by the representations contained in Section
4.6, 4.9(c), 4.12 (to the extent it applies to Ridge Re) or 4.26 or other
representations regarding Ridge Re or the Ridge Re Treaty or (ii) actions,
suits, proceedings or claims pending by any governmental or regulatory
authority to the extent based upon a violation of any law, statute, ordinance,
rule or regulation.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"Guarantees" shall mean the guarantees referred to in Section 8.15.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
shall mean International Insurance Company, an Illinois corporation.
"Information Returns" shall have the meaning ascribed in the Tax Agreement.
"Insurance Subsidiaries" shall mean the Subsidiaries listed on Schedule 1.1A.
"Investment Policy" shall mean, with respect to certain Subsidiaries, the
policy for each such Subsidiary set forth on Exhibit A.
"KKR" shall mean Kohlberg Kravis ▇▇▇▇▇▇▇ & Co.
"Knowledge of Seller" shall mean (i) with respect to matters relating to
Parent or Seller, actual knowledge of any officer of Parent, Seller or Ridge
Re set forth in Schedule 1.1B, and (ii) with respect to any matters relating
to the Company or any Subsidiary, actual knowledge of any such officer of
Parent or Seller, or the actual knowledge of the persons set forth in Schedule
1.1C.
"Material Adverse Effect" with respect to any Person shall mean a material
adverse effect on the business, financial condition, assets or operations of
such Person, but shall exclude any effect resulting from general economic
conditions.
"Materials of Environmental Concern" shall mean any waste, pollutant, or
contaminant or substance (including, without limitation, petroleum or
petroleum products, asbestos or asbestos-containing materials, urea-
formaldehyde insulation, polychlorinated biphenyls, odors, radioactivity, and
electro-magnetic fields) regulated by or under, or which may otherwise give
rise to liability under, any Environmental Law.
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc.
Restructuring" shall mean the restructuring of Talegen and its subsidiaries
(including, without limitation, the Company and IIC) pursuant to the
Restructuring Agreement dated as of September 3, 1993 among Seller, Ridge Re,
Talegen and certain of its subsidiaries.
"Permits" shall mean all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings with and under all
Federal, state, local or foreign laws and governmental or regulatory bodies
and all industry or other non-governmental self-regulatory organizations
(including, without limitation, Environmental Permits).
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a business trust, a limited liability company, a trust, an
unincorporated organization, a government or any department or agency thereof
or any other entity.
"Qualified Transferee" shall mean a corporation (or the wholly-owned direct or
indirect subsidiary thereof) which, as of the date of the consummation of a
sale pursuant to Section 9.6, is an insurance company engaged in the business
of reinsurance and has at least $2 billion in assets and a rating of "A+" or
better by A.M. Best & Co.
"Restated Certificate of Incorporation" shall mean the restated certificate of
incorporation of Buyer in the form of Exhibit B, with such additional
ministerial changes as do not adversely affect the holders of Class 2 Stock.
"Ridge Re" shall mean Ridge Reinsurance Limited, a Bermuda corporation and a
wholly-owned subsidiary of Seller.
"Ridge Re GAAP Financial Statements" shall mean the audited Consolidated
Balance Sheets of Ridge Re as of December 31, 1994 and 1993 and the related
Statements of Operations and Retained Earnings and Cash Flows for the year
ended December 31, 1994 and the period from December 14, 1992 to December 31,
1993, prepared in accordance with GAAP, together with the notes thereon and
the related reports of KPMG Peat Marwick LLP.
"Ridge Re Interim Financial Statements" shall mean the unaudited Consolidated
Balance Sheet of Ridge Re as of September 30, 1995, and the related Statements
of Operations and Retained Earnings for the nine-month periods ended September
30, 1994 and September 30, 1995.
"Ridge Re Treaty" shall mean the agreement, as amended by Endorsement No. 1
thereto, contained in Schedule 1.1D.
shall mean Standard and Poor's Rating Group.
"Securities" shall mean (a) the Class 2 Stock and (b) any shares of Class 1
Stock purchased by Seller in accordance with Section 11.3.
"Statutory Accounting Principles" shall mean, as applied to any Subsidiary,
the statutory accounting practices prescribed or permitted by the jurisdiction
of domicile of such Subsidiary.
"Subsidiaries" shall mean all corporations, partnerships, joint ventures or
other entities which the Company controls, directly or indirectly through one
or more intermediaries. See definition of "Affiliate" in this Section 1.1 for
the meaning of "control."
"Talegen" shall mean Talegen Holdings, Inc., a Delaware corporation.
"Talegen Acquisition" shall mean Talegen Acquisition Corporation, a Delaware
corporation.
"Talegen Agreement" shall mean the Stock Purchase Agreement dated as of the
date hereof among Parent, Seller, New Talegen Holdings Corporation, a Delaware
corporation, and Talegen Acquisition as amended, modified or supplemented from
time to time, which contemplates that Talegen Acquisition will purchase all of
the outstanding capital stock of Talegen from Seller, subject to the terms and
conditions thereof.
"Tax Agreement" shall mean the Tax Allocation and Indemnification Agreement
dated as of the date hereof among Parent, Seller, the Company and Buyer.
"Tax Returns" shall have the meaning ascribed in the Tax Agreement.
"Taxes" shall have the meaning ascribed in the Tax Agreement.
"Third Party Amount" shall mean any amount paid by the transferee (which may
be Seller or any of its Affiliates (other than the Company or any Subsidiary))
to the Company or the Subsidiaries of all or a portion of the Seller Notes or
Leesburg Training Facility, as the case may be, pursuant to Sections 6.12 or
6.13.
"Third Party Expenses" shall mean all expenses paid or payable by Buyer to
other Persons in connection with the transactions contemplated by this
Agreement, the Ancillary Agreements and the Financing Documents other than
expenses contingent upon a payment to Buyer or which are not payable unless
there has been a breach of this Agreement by Parent, Seller, the Company or
any Subsidiary, but shall in no event include any amount payable to KKR or its
Affiliates (other than to Am-Re Consultants, Inc. in connection with reserve
analyses) or any officer, director or employee of the Company or the
Subsidiaries.
"Transaction Expenses" shall mean (i) a $5 million transaction fee payable by
Buyer to an Affiliate of KKR, (ii) all fees and expenses of third party
advisors to Buyer and of Buyer's financing sources in connection with the
transactions contemplated by this Agreement, the Ancillary Agreements and the
Financing Documents and (iii) all fees and expenses incurred by Buyer in
connection with satisfying the conditions precedent in Article VIII, certified
in good faith by Buyer to Seller.
1.2 Other Defined Terms. The following terms shall have the meanings defined
for such terms in the Sections set forth below:
Term Section
"Actions" 4.13
"Assets" 4.18
"Closing" 3.1
"Company Plans" 4.21
"Confidentiality Agreement" 6.4
"Crostex/Camfex Purchase Money Notes" 1.1
"Damages" 10.2
"ERISA" 4.21
"ESOP" 9.4
"Exchange Act" 4.11
"Financing" 5.3
"Financing Documents" 5.3
"Indemnitor" 10.3
"Intellectual Property" 4.20
"Leesburg Training Facility Amount" 6.13
"Leesburg Training Facility" 6.13
"Liabilities" 4.14
"Long Term Incentive Program" 9.4
"Notice" 10.3
"Personnel" 4.13
"Section 4.5 Subsidiaries" 4.5
"Securities Act" 4.3
"Seller Notes" 4.23
"TRG Incentive Plans" 9.4
1.3 Other Definitional Provisions. (a) The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.
ARTICLE II
PURCHASE AND SALE OF STOCK AND CLASS 2 STOCK
2.1 Transfer of Stock. Upon the terms and subject to the conditions
contained herein, Seller will sell, convey, transfer, assign and deliver to
Buyer, and Buyer will acquire from Seller on the Closing Date, all of the
Stock for the consideration set forth in Section 2.2.
2.2 Consideration for Stock. Upon the terms and subject to the conditions
contained herein, as consideration for the purchase of the Stock, on the
Closing Date Buyer will (i) pay to Seller cash in an amount equal to
$150,000,000, payable by wire transfer in immediately available funds to an
account which Seller will designate in writing to Buyer no less than two
business days prior to the Closing Date, subject to adjustment as described in
Section 2.3, and (ii) issue and deliver to Seller Class 2 Stock with an
aggregate liquidation value of $462,000,000.
2.3 Adjustments. The amount of cash payable by Buyer pursuant to Section 2.2
will be reduced by an amount equal to the Transaction Expenses.
ARTICLE III
CLOSING
3.1 Closing. The closing of the transactions contemplated herein (the
"Closing") shall take place as soon as practicable but in no event later than
five business days after satisfaction or waiver of the conditions set forth in
Articles VII and VIII, and shall be held at 9:00 a.m. local time on the
Closing Date at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless the parties hereto otherwise agree.
The parties agree that the effective time of the Closing for Federal income
tax purposes shall be at the close of business on the Closing Date.
3.2 Documents to be Delivered. To effect the transfer referred to in Section
2.1 and the delivery of the consideration described in Section 2.2 hereof,
Seller and Buyer shall, on the Closing Date, deliver the following:
(a) Seller shall deliver to Buyer certificate(s) evidencing the Stock, free
and clear of any Encumbrances of any nature whatsoever (except Encumbrances
arising as a result of any action taken by Buyer or any of its Affiliates),
duly endorsed in blank for transfer or accompanied by stock powers duly
executed in blank.
(b) Buyer shall deliver to Seller immediately available funds as provided in
Section 2.2.
(c) Buyer shall deliver to Seller certificate(s) evidencing Class 2 Stock as
provided in Section 2.2, free and clear of any Encumbrances of any nature
whatsoever (except Encumbrances arising as a result of any action taken by
Seller or any of its Affiliates) in the form of one or more certificates in
the name of Seller or its designee as Seller may require.
(d) Seller and Buyer shall each deliver all documents required to be
delivered pursuant to Articles VII and VIII.
(e) All instruments and documents executed and delivered to Buyer pursuant
hereto shall be in form and substance, and shall be executed in a manner,
reasonably satisfactory to Buyer. All instruments and documents executed and
delivered to Seller pursuant hereto shall be in form and substance, and shall
be executed in a manner, reasonably satisfactory to Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Parent and Seller hereby represent and warrant to Buyer as follows:
4.1 Organization of Seller and Parent. Seller is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to conduct its business as it is presently
being conducted and to own the Stock. Parent is duly organized, validly
existing and in good standing under the laws of the State of New York and has
full corporate power and authority to conduct its business as it is presently
being conducted.
4.2 Organization of the Company. The Company is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to conduct its business as it is presently
being conducted and to own, lease and operate its properties and assets. The
Company is duly qualified or otherwise authorized as a foreign corporation to
conduct the business conducted by it and is in good standing in each
jurisdiction in which such qualification or authorization is necessary under
the applicable law and where the failure to be so qualified or otherwise
authorized, individually or in the aggregate, would have a Material Adverse
Effect on the Company and the Subsidiaries, taken as a whole. Seller has
provided to Buyer a complete and correct copy of the certificate of
incorporation, bylaws and other organizational documents of the Company and
the minute books of the Company. The Company's minute books include copies of
minutes of all meetings of the directors or shareholders of the Company held
on or after January 1, 1993 and complete and accurate copies of all
resolutions passed by the directors or actions by written consent of the
shareholders on or after January 1, 1993.
4.3 Capital Stock. The Company has authorized 1,000 shares of common stock,
$1.00 par value, 1,000 shares of which are issued and outstanding, and no
shares of any other class or series of capital stock are authorized, issued or
outstanding. All of the shares of the Stock have been duly and validly
authorized and issued, and are fully paid and nonassessable. Seller owns of
record and beneficially all of the Stock free and clear of all Encumbrances,
including without limitation, any agreement, understanding or restriction
affecting the voting rights or other incidents of record or beneficial
ownership pertaining to the Stock; provided that Parent and Seller make no
representation in this sentence regarding the ability of Seller to transfer or
otherwise dispose of such Stock without registration or qualification under,
or in compliance with, applicable Federal or state securities laws to a Person
who is not an "accredited investor" (as defined in Rule 501 of Regulation D
under the Securities Act of 1933, as amended (the "Securities Act")) or
without compliance with applicable insurance laws. There are no
subscriptions, options, warrants, calls, commitments, preemptive rights or
other rights of any kind outstanding for the purchase of, nor any securities
convertible or exchangeable for, any equity interests of the Company. There
are no restrictions upon the voting or transfer of any shares of the Stock
pursuant to the Company's Certificate of Incorporation or Bylaws or any
agreement or other instrument to which the Company, Talegen or Seller is a
party or by which the Company, Talegen or Seller is bound. Upon consummation
of the transactions contemplated by this Agreement, Buyer will acquire from
Seller good and marketable title to such Stock, free and clear of all
Encumbrances, except Encumbrances arising as a result of any action taken by
Buyer or any of its Affiliates; provided that Parent and Seller make no
representation regarding the ability of any Person other than Seller to
transfer or otherwise dispose of such Stock without registration or
qualification under, or in compliance with, applicable Federal securities or
state securities or insurance laws.
4.4 Authorization. Each of Parent and Seller has all necessary corporate
power and authority to enter into this Agreement and the Ancillary Agreements
to which it is or will be a party, and has taken all corporate action
necessary to consummate the transactions contemplated hereby and thereby and
to perform its obligations hereunder and thereunder. This Agreement and the
Tax Agreement have each been duly executed and delivered by each of Seller and
Parent. Assuming the due execution of this Agreement and the Tax Agreement by
Buyer, each of this Agreement and the Tax Agreement is a legal, valid and
binding obligation of each of Seller and Parent enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of
good faith and fair dealing. Subject to the occurrence of the Closing, the
Guarantees will be duly executed and delivered by Parent and Seller, as
applicable, on the Closing Date. Upon execution and delivery by Parent or
Seller, as the case may be, each Guarantee will be a legal, valid and binding
obligation of such Person enforceable in accordance with its terms, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
4.5 Subsidiaries. Schedule 4.5 sets forth a complete and accurate list of
all of the Subsidiaries, other than Subsidiaries which are not Insurance
Subsidiaries and which do not hold any assets (including capital stock) with a
fair market value in excess of $1,000 or insurance licenses (the "Section 4.5
Subsidiaries"). Schedule 4.5 also contains the jurisdiction of incorporation
or formation of each of the Section 4.5 Subsidiaries, each jurisdiction in
which such Subsidiary is licensed, qualified or otherwise authorized to
conduct insurance business, the number of shares of capital stock of any
Section 4.5 Subsidiary which is a corporation issued and outstanding and the
percentage ownership interest of the Company in each such Subsidiary. All
outstanding shares of capital stock of such Subsidiaries have been duly and
validly authorized and are fully paid and nonassessable. All such outstanding
shares are owned by the Company and/or one or more of its Subsidiaries free
and clear of any Encumbrances, including, without limitation, any agreement,
understanding or restriction affecting the voting rights or other incidents of
record or beneficial ownership pertaining to such shares; provided that Parent
and Seller make no representation in this sentence regarding the ability of
Seller to transfer or otherwise dispose of such shares without registration or
qualification under, or in compliance with, applicable Federal securities or
state securities laws to a Person who is not an "accredited investor" (as
defined in Rule 501 under the Securities Act) or without compliance with
applicable insurance laws. There are no subscriptions, options, warrants,
calls, commitments, preemptive rights or other rights of any kind outstanding
for the purchase of, nor any securities convertible or exchangeable for, any
equity interests of any of the Section 4.5 Subsidiaries. Schedule 4.5
contains true and complete copies of all agreements and other instruments
pursuant to which the Company or any Section 4.5 Subsidiary is obligated or
required, under any circumstance, to make contributions to the capital of any
Subsidiary. Each of the Insurance Subsidiaries is a corporation duly
licensed, organized, validly existing and in good standing under the
jurisdiction of its organization and each of the other Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
jurisdiction of its organization, in each case, with corporate power to own
its properties and conduct its business as now being conducted and is duly
licensed (in the case of the Insurance Subsidiaries), qualified and in good
standing to transact business in each jurisdiction (as listed in Schedule 4.5)
where, by virtue of its business carried on or properties owned, it is
required to be so licensed (in the case of the Insurance Subsidiaries) or
qualified and where the failure to be so licensed (in the case of the
Insurance Subsidiaries) or qualified, individually or in the aggregate, would
have a Material Adverse Effect on the Company and the Subsidiaries, taken as a
whole. To the extent requested of Seller by Buyer, Seller has made available
to Buyer a complete and correct copy of the certificates of incorporation,
bylaws and other organizational documents of each Section 4.5 Subsidiary and
the minute books of each such Subsidiary. The minute books include copies of
minutes of all meetings of the directors or shareholders of each such
Subsidiary held on or after January 1, 1993 and complete and accurate copies
of all resolutions passed by the directors or actions by written consent of
the shareholders on or after January 1, 1993.
4.6 Ridge Re. (a) Ridge Re is duly organized, validly existing and in good
standing under the laws of Bermuda and has full corporate power and authority
to conduct its business as it is presently being conducted and to own, lease
and operate its properties and assets. Ridge Re is duly licensed, qualified
or otherwise authorized as an alien corporation to conduct the reinsurance
business conducted by it and is in good standing in each jurisdiction in which
such license, qualification or authorization is necessary under the applicable
law and where the failure to be so licensed, qualified or otherwise
authorized, individually or in the aggregate, would have a Material Adverse
Effect on the Company and the Subsidiaries, taken as a whole.
(b) Seller owns of record and beneficially all of the outstanding capital
stock of Ridge Re free and clear of all Encumbrances, including without
limitation, any agreement, understanding or restriction affecting the voting
rights or other incidents of record or beneficial ownership pertaining to such
shares; provided that Parent and Seller make no representation in this
sentence regarding the ability of Seller to transfer or otherwise dispose of
such shares without registration or qualification under, or in compliance
with, applicable Federal or state securities laws to a Person who is not an
"accredited investor" (as defined in Rule 501 of Regulation D under the
Securities Act) or without compliance with applicable insurance laws. There
are no subscriptions, options, warrants, calls, commitments, preemptive rights
or other rights of any kind outstanding to which Parent, Seller, Ridge Re or
any of their respective Affiliates is a party for the purchase of, nor any
securities convertible or exchangeable for, any equity interests of Ridge Re,
except as set forth in Schedule 4.6. Schedule 4.6 contains a true and
complete list of all agreements and other instruments pursuant to which
Parent, Seller or any Affiliate is obligated or required, under any
circumstance, to make contributions to the capital of Ridge Re.
(c) The Ridge Re Treaty is a legal, valid and binding obligation of Ridge Re,
enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
4.7 Absence of Certain Changes or Events. To the Knowledge of Seller, except
as expressly contemplated by this Agreement or as described on Schedule 4.7 or
reflected in the Company Interim Financial Statements, since June 30, 1995,
there has not been any:
(a) change in the business, condition (financial or otherwise), Permits,
assets, Liabilities, working capital, earnings or operations of the Company or
any Subsidiary, except for changes which have not, individually or in the
aggregate, had or are not reasonably likely to have a Material Adverse Effect
on the Company and the Subsidiaries, taken as a whole;
(b) acquisition of material assets or properties or of securities or business
of any other Person by the Company or any Subsidiary (in each case, other than
acquisitions in the ordinary course of business consistent with past practice)
or any merger, consolidation or amalgamation involving the Company or any
Subsidiary, except the acquisition of Cash Equivalents as part of the process
of converting substantially all of the Company and the Subsidiaries'
investment portfolio into cash and Cash Equivalents prior to the date of this
Agreement and the reinvestment thereof in accordance with the Investment
Policy after the date of this Agreement;
(c) sale, assignment, lease or transfer of (i) the Crostex/Camfex Contracts,
the Seller Notes (except transfers in accordance with, and to the extent
Parent and Seller comply with, Section 6.12) or any interest in the Leesburg
Training Facility (except transfers in accordance with, and to the extent
Parent and Seller comply with, Section 6.13) or (ii) any other material assets
(including any portion of the investment portfolio) of the Company or any
Subsidiary, other than in the case of (ii) (W) in the ordinary course of
business consistent with past practices and (X) converting substantially all
of the Company and the Subsidiaries' investment portfolio into cash and Cash
Equivalents prior to the date of this Agreement and dispositions of securities
in accordance with the Investment Policy after the date of this Agreement;
(d) incurrence by the Company or any Subsidiary of any indebtedness for
borrowed money or incurrence, assumption or guarantee of, or any other act to
become responsible for, any obligations of any other Person, or making of
loans or advances by the Company or any Subsidiary to any Person (including,
without limitation, any broker or agent), except (i) loans to employees made
in the ordinary course of business consistent with past practice for
relocation expenses and (ii) the issuance of insurance policies in the
ordinary course of business consistent with past practice;
(e) cancellation of any indebtedness or waiver or compromise of any rights
(including agent balances) having a value to the Company or any Subsidiary of
$500,000 or more, including the Seller Notes and the Crostex/Camfex Purchase
Money Notes, whether or not in the ordinary course of business (other than
settlements in the ordinary course of business of claims and salvage and
subrogation arising under contracts of insurance underwritten, assumed or
ceded by the Company or any Subsidiary which settlements have not had nor
would be reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on the Company and the Subsidiaries, taken as a whole
and the terminations, modifications and commutations permitted by clause (j)
below);
(f) failure of the Company or any Subsidiary to pay any creditor any amount
owed to such creditor (in excess of $1,000,000 in the aggregate for all such
creditors) when due (after the expiration of any applicable grace periods)
except for failures to pay in the ordinary course of business or if the
Company or any Subsidiary is disputing the amount due in good faith;
(g) payment by the Company or any Subsidiary of any material Liability before
the same became due in accordance with its terms other than in the ordinary
course of business consistent with past practice;
(h) material change in the reinsurance, claim processing and payment,
financial or accounting practices or policies of the Company or any
Subsidiary, except as required by law, generally accepted accounting
principles or Statutory Accounting Principles;
(i) except to the extent required under employee and director benefit plans
or policies, agreements or arrangements as in effect on the Balance Sheet
Date, (1) increase in the compensation or fringe benefits of any of the
directors, officers or employees of the Company or any Subsidiary (except for
increases in salary or wages of employees of the Company or any Subsidiary who
are not officers of the Company in the ordinary course of business in
accordance with past practice), (2) grant of any severance or termination pay
or entrance into any employment, consulting or severance agreement or
arrangement with any present or former director, officer or employee of the
Company or any Subsidiary or amendment of any such arrangement or agreement or
(3) establishment, adoption, entrance into, amendment of or termination of any
(X) collective bargaining agreement or (Y) plan or agreement to provide
bonuses, profit sharing, stock options, restricted stock, pensions, retirement
benefits, deferred compensation, employment or benefits upon termination for
the benefit of any directors, officers or any group of other employees of the
Company or any Subsidiary;
(j) (i) entry into or modification of any reinsurance or retrocession
agreement by the Company or any Subsidiary other than in the ordinary course
of business consistent with past practice, except for those which have not had
nor are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on the Company and the Subsidiaries, taken as a whole
or (ii) termination or commutation of any reinsurance or retrocession
agreement legally carried on the books of the Subsidiaries at the time of such
termination or commutation at $5,000,000 or more;
(k) entry into, termination or modification by the Company or any Subsidiary
of any Contract, agreement, commitment, transaction, or instrument (including,
without limitation, relating to any borrowing, lending, capital expenditure,
capital contribution or capital financing), except entering into, terminating
or modifying contracts, agreements, commitments, transactions, or instruments
(i) in the ordinary course of business and (ii) as permitted by clauses (i)
and (j) above; provided that except as disclosed on Schedule 4.7, no
modifications shall have been made to the Crostex/Camfex Contracts or the
Ridge Re Treaty;
(l) entry into a material joint venture, partnership or similar arrangement
by the Company or any Subsidiary with any Person;
(m) any capital expenditure or execution of any lease or commitment for the
foregoing by the Company or any Subsidiary involving annual payments in excess
of $100,000;
(n) lapse or termination or failure to renew any Permit of the Company or any
Subsidiary, in each case other than with respect to Permits the failure of
which to be in effect would not have, individually or in the aggregate, a
Material Adverse Effect on the Company and the Subsidiaries, taken as a whole;
(o) (i) declaration, setting aside or payment of any dividends or
distributions (whether in cash, stock or property) in respect of any capital
stock of the Company or (ii) any redemption, purchase or other acquisition of
any of the capital stock of the Company or any Subsidiary (other than a wholly
owned Subsidiary), except for payments permitted under the Tax Agreement;
(p) issuance by the Company or any Subsidiary of, or commitment of the
Company or any Subsidiary to issue, any shares of capital stock or obligations
or securities convertible into or exchangeable for shares of capital stock
except for issuances or commitments by any Subsidiary to issue any such
securities to the Company or any wholly owned Subsidiary;
(q) amendment of the certificate of incorporation or bylaws of the Company or
any Subsidiary; or
(r) agreement by the Company or any Subsidiary to do any of the foregoing.
4.8 Title to Assets, Etc. The Company and the Subsidiaries have good title to
or valid and subsisting leasehold interests in all real and material personal
property and other material assets on their books and reflected on the balance
sheets included in the Company Interim Financial Statements or acquired in the
ordinary course of business since September 30, 1995 which would have been
required to be reflected on such balance sheets if acquired on or prior to
September 30, 1995, other than (i) assets which have been disposed of in the
ordinary course of business and (ii) assets which were disposed in connection
with the conversion of the Company and the Subsidiaries' investment portfolio
into cash and Cash Equivalents (the "Assets"). None of the Assets is subject
to any Encumbrance, except for Encumbrances reflected in the financial
statements contained in Schedule 4.12, as applicable, or which in the
aggregate are not substantial in amount and do not materially detract from the
value of the property or assets subject thereto or interfere with the present
use.
4.9 Contracts and Commitments. (a) None of the Company or any Subsidiary is
a party to any written or oral:
(i) Contracts not otherwise listed in Schedule 4.9;
(ii) except as listed on Schedule 4.9, treaties and agreements with, and
undertakings or commitments to, any governmental or regulatory authority
materially affecting the business of the Company and the Subsidiaries taken as
a whole and not made in the ordinary course of business;
(iii) except as described in Schedule 4.9, contracts or agreements
containing covenants limiting the freedom of the Company or any Subsidiary to
engage in any line of business in any geographic area or to compete with any
Person or to incur indebtedness for borrowed money;
(iv) except as described in Schedule 4.9 and for reinsurance and
retrocession agreements, contracts or agreements containing "change in
control" or similar provisions;
(v) except as listed on Schedule 4.9, employment contracts or agreements,
including without limitation contracts to employ executive officers and other
contracts with officers or directors of the Company or any Subsidiary which
cannot be terminated by the Company or the Subsidiary upon notice of sixty
days or less without penalty or premium and involve annual compensation in
excess of $100,000 individually; or
(vi) contracts or agreements providing for the indemnification by the
Company or any Subsidiary of any Person except for contracts entered into in
the ordinary course of business consistent with past practice.
(b) None of the Company or any Subsidiary is (and, to the Knowledge of the
Seller, no other party is) (i) in material breach of or materially in default
under, any of the Contracts (or with or without notice or lapse of time or
both, would be in material breach of or materially in default under any of the
Contracts) or (ii) in breach or default under any of the Contracts (with or
without notice or lapse of time or both) if such breach or default would
permit a party other than the Company or a Subsidiary to terminate such
Contract. None of Parent, Seller, the Company or any Subsidiary has delivered
or received notice of termination or written notice of an intention to
terminate to or from any other party to any Contract except as described on
Schedule 4.9.
(c) Other than the Ridge Re Treaty and the other treaties referenced in the
first sentence of Section 4.9(c) of the Talegen Agreement, Ridge Re is not a
party to any reinsurance or retrocession agreement or treaty, and, except in
connection with such treaties, does not engage in any business. Set forth in
Schedule 4.9 is the amount of cover as of the date of this Agreement available
under the Ridge Re Treaty. A true and complete copy of the Ridge Re Treaty is
contained in Schedule 1.1D. The Ridge Re Treaty is in full force and effect
and constitutes a legal, valid and binding obligation of the parties thereto,
enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing. None of
Parent, Seller, Talegen, the Company or any Subsidiary has received any notice
from Ridge Re or any governmental or regulatory authority (i) that the Ridge
Re Treaty is not enforceable against any party thereto or (ii) regarding the
availability or enforceability of the cover under the Ridge Re Treaty. No
party to the Ridge Re Treaty has received notice of termination of, or written
notice of an intention to terminate, the Ridge Re Treaty. No party to the
Ridge Re Treaty is in breach of or violation of or default under the Ridge Re
Treaty (or with or without notice or lapse of time or both, would be in breach
of or violation of or default under the Ridge Re Treaty), except for breaches,
violations or defaults by IIC which would not permit Ridge Re to terminate the
Ridge Re Treaty or which would not provide Ridge Re with a defense to any
payment obligation of Ridge Re thereunder.
4.10 No Conflict or Violation. Except as set forth in Schedule 4.10, neither
the execution, delivery and performance of this Agreement or any of the
Ancillary Agreements nor the consummation of the transactions contemplated
hereby or thereby will result in (a) a violation of or a conflict with any
provision of the certificate of incorporation or bylaws of Parent, Seller,
Talegen, Ridge Re, the Company or any Section 4.5 Subsidiary, (b) a breach of,
or a default under, any term or provision of any contract, agreement,
indebtedness, lease, Encumbrance, commitment, license, franchise, Permit,
authorization or concession to which (i) Parent, Seller, Talegen or Ridge Re
is a party or is subject or by which any assets (including investments) of any
of them are bound or (ii) the Company or any Subsidiary is a party or is
subject or by which any assets (including investments) of any of them are
bound, which breach or default in the case of clause (ii) would have,
individually or in the aggregate, a Material Adverse Effect on the Company and
the Subsidiaries, taken as a whole, or in the case of clauses (i) and (ii)
would interfere in any material way with the ability of Parent or Seller to
consummate the transactions contemplated by this Agreement or any of the
Ancillary Agreements or the Ridge Re Treaty, (c) subject to obtaining the
approvals referred to in Section 4.11, a violation by Parent, Seller, Talegen,
Ridge Re, the Company or any Subsidiary of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award, which
violation would have, individually or in the aggregate, a Material Adverse
Effect on the Company and the Subsidiaries, taken as a whole, or interfere in
any material way with the ability of Parent, Seller or Ridge Re to consummate
the transactions contemplated by this Agreement or any of the Ancillary
Agreements, (d) the imposition of any Encumbrance, restriction or charge on
the business of the Company or any Subsidiary or on any material assets of the
Company or the Subsidiaries, (e) the creation or exercisability of any right
of termination, cancellation or acceleration under any Contract or (f) result
in the breach of any of the terms or conditions of, constitute a default
under, or otherwise cause any impairment of, any Permit, which breach, default
or impairment would result, individually or in the aggregate, in a Material
Adverse Effect on the Company and the Subsidiaries, taken as a whole.
4.11 Consents and Approvals. Except for (i) the approval of this Agreement,
the Ancillary Agreements and the transactions contemplated hereby and thereby
(including, without limitation, the Financing), and the new intercompany tax
agreements among the Company and the Subsidiaries which shall be effective as
of the Closing, by each of the governmental and regulatory authorities listed
on Schedule 4.11, (ii) the approval of this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby (including,
without limitation, the Financing), and the new intercompany tax agreements
among the Company and the Subsidiaries which shall be effective as of the
Closing, by any other governmental or regulatory authorities, the failure of
which to obtain would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and the Subsidiaries, taken as a whole, (iii)
filings in respect of the transactions contemplated hereby required to be made
for compliance with the applicable provisions of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder, (iv) the filing of premerger notification reports
under the HSR Act and (v) consents, approvals, authorizations, declarations,
filings and registrations required (x) by the nature of the business or
ownership of Buyer or (y) solely by reason of the Financing (excluding any
consents, approvals, authorizations, declarations, filings or registrations
otherwise required in connection with this Agreement, the Ancillary Agreements
or the transactions contemplated hereby or thereby), no consent, approval or
authorization of, or declaration, filing or registration with, any
governmental or regulatory authority, or any other Person, is required to be
made or obtained by Parent, Seller, Talegen, Ridge Re, the Company, any
Subsidiary or Buyer on or prior to the Closing Date in connection with the
execution or delivery of this Agreement or any of the Ancillary Agreements,
the performance of this Agreement, the Guarantees, the Tax Agreement, or the
Ridge Re Treaty or the consummation of the transactions contemplated hereby
and thereby.
4.12 Financial Statements. (a) Seller has heretofore delivered to Buyer the
Company GAAP Financial Statements, the Ridge Re GAAP Financial Statements, the
Company Interim Financial Statements, the Ridge Re Interim Financial
Statements and the Convention Statements. A copy of each of the foregoing
financial statements is included in Schedule 4.12.
(b) Except as otherwise set forth therein, (i) the Company GAAP Financial
Statements are based on the books and records of the Company and its
Subsidiaries, fairly present in all material respects the financial condition
and consolidated results of operations of the Company and its Subsidiaries, as
of the dates and for the periods indicated therein, have been prepared in
accordance with GAAP (as in effect at the time of the respective financial
statements) consistently applied, and have been audited by KPMG Peat Marwick
LLP and (ii) the Ridge Re GAAP Financial Statements are based on the books and
records of Ridge Re, fairly present in all material respects the financial
condition and results of operation of Ridge Re, as of the dates and for the
periods indicated therein, have been prepared in accordance with GAAP (as in
effect at the time of the respective financial statements) consistently
applied, and have been audited by KPMG Peat Marwick LLP.
(c) The Company Interim Financial Statements and the Ridge Re Interim
Financial Statements were prepared in the ordinary course of business and have
been prepared on a consistent basis through the periods indicated and in a
manner consistent with that employed in the Company GAAP Financial Statements
and the Ridge Re GAAP Financial Statements, as the case may be. The Company
Interim Financial Statements and the Ridge Re Interim Financial Statements do
not contain full footnote disclosures in accordance with United States
generally accepted accounting principles and are subject to normal recurring
year-end adjustments, but otherwise fairly present in all material respects
the financial condition and results of operations of the Company and Ridge Re,
as the case may be, as of the dates and for the periods indicated therein
except as otherwise set forth therein.
(d) Except as otherwise set forth therein, the Convention Statements and the
statutory balance sheets and income statements included in such Convention
Statements fairly present in all material respects the statutory financial
condition and results of operations of the respective Insurance Subsidiaries
and Ridge Re, as the case may be, as of the dates and for the periods
indicated therein and have been prepared in accordance with Statutory
Accounting Principles (as in effect at the time of the respective financial
statements) consistently applied throughout the periods indicated, except as
expressly set forth therein. The statutory balance sheets and income
statements included in the Convention Statements for the years ended December
31, 1993 and 1994 have been audited by KPMG Peat Marwick LLP.
4.13 Litigation. To the Knowledge of Seller, except as set forth on
Schedule 4.13, there is no action, order, writ, injunction, judgment, fine or
decree outstanding or suit, litigation, proceeding, labor dispute (other than
routine grievance procedures or routine, uncontested claims for benefits under
any benefit plans for any officers, employees or agents of the Company or any
Subsidiary (collectively, "Personnel")), arbitral action, investigation or
reported claim, in each case including, without limitation, those involving
any governmental or regulatory authority and excluding those relating to
insurance and reinsurance policies (collectively, "Actions") pending or
threatened by or against or relating to (i) the Company or any Subsidiary,
(ii) any benefit plan for Personnel or any fiduciary or administrator thereof
or (iii) the transactions contemplated by this Agreement and the Ancillary
Agreements. None of the Company or any Subsidiary is in default with respect
to any order, writ, injunction, judgment, fine or decree of any court or
governmental or regulatory agency, and there are no unsatisfied judgments
against the Company or any Subsidiary which would have, individually or in the
aggregate, a Material Adverse Effect on the Company and the Subsidiaries,
taken as a whole.
4.14 Liabilities. Except as set forth in Schedule 4.14, the Company and the
Subsidiaries do not have any direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, obligation or responsibility, fixed or
unfixed, ▇▇▇▇▇▇ or inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise ("Liabilities"), other than (i)
Liabilities fully and adequately reflected (including by reducing any
numerical amount set forth) in one or more line items on, reserved on, or
disclosed in the footnotes to, the balance sheets included in the Company
Interim Financial Statements, or disclosed in the footnotes to the Company
GAAP Financial Statements, (ii) Liabilities incurred in the ordinary course of
business, consistent with past practice and the provisions of this Agreement
and the Ancillary Agreements, (iii) Liabilities relating to future benefits,
losses, claims and expenses arising under insurance and reinsurance policies
of the Insurance Subsidiaries, (iv) Liabilities disclosed in response to any
other representation, (v) Liabilities of a type that are subject to any other
representation (without regard to any specific exclusions from such
representation, including any specific exclusions from the definitions used
therein) and (vi) Liabilities which have, or are reasonably likely to have a
net ultimate cost of $25,000 or less, on an individual basis or in the
aggregate to the extent such Liabilities arise out of a related series of
events.
4.15 Investments. (a) As of the date of this Agreement, at least 83% of the
investment portfolio for the Company and the Subsidiaries consists of cash and
Cash Equivalents and at least 87% of the investment portfolio (excluding cash
and Cash Equivalents) for the Company and the Subsidiaries consists of fixed
income securities rated at least AA by ▇▇▇▇▇'▇ or by S&P. As of the date
hereof, at least 87% of the fixed income portfolio (excluding cash and Cash
Equivalents) has a maturity of one year or less.
(b) To the Knowledge of Seller, as of the Closing Date, the Company and the
Subsidiaries have good and marketable title to the investments in their
investment portfolios, provided that no representation is made as to the
transferability thereof.
4.16 Reserves. Seller has delivered to Buyer true and complete copies of all
actuarial reports or actuarial certificates in the possession or control of
Parent, Seller, Talegen, the Company or any of the Subsidiaries relating to
the adequacy of the claims reserves of any of the Subsidiaries for any period
ended on or after December 31, 1993. Notwithstanding the foregoing
representations contained in this Section or anything contained in Section
4.12, 4.14 or 6.2, Buyer acknowledges that Parent and Seller are not making
any representations, express or implied in or pursuant to this Agreement,
concerning the loss reserves or loss adjustment expense reserves of the
Company or any of the Subsidiaries including, without limitation, (i) whether
such reserves are adequate or sufficient, or (ii) whether such reserves were
determined in accordance with any actuarial, statutory or other standard, or
concerning any other "line item" or asset, liability or equity amount which
would be affected thereby.
4.17 Compliance with Law; Permits; Regulatory. (a) Except as set forth on
Schedule 4.17, the Company and the Subsidiaries are in compliance with all
applicable laws, statutes, ordinances and regulations, whether Federal,
foreign, state or local, except where the failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company and the Subsidiaries, taken as a whole. Since January 1, 1993, none
of the Company or any Subsidiary has received any written notice to the effect
that, or otherwise been advised that, it is not in compliance with any such
statute, regulation, order, ordinance or other law where the failure to comply
would, prior to June 30, 1998, individually or in the aggregate, have a
Material Adverse Effect on the Company and the Subsidiaries, taken as a whole.
(b) Except as set forth on Schedule 4.17, the Company and the Subsidiaries
hold all Permits necessary for the ownership and conduct of the respective
businesses of the Company and the Subsidiaries in each of the jurisdictions in
which the Company and the Subsidiaries conduct or operate their respective
businesses in the manner now conducted, and such Permits are in full force and
effect except where the failure to hold any Permit or the failure of any
Permit to be in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and the Subsidiaries,
taken as a whole. The consummation of the transactions contemplated by this
Agreement will not result in any revocation, cancellation or suspension of any
such Permit except as a result of the status of Buyer and its Affiliates, and,
there are no pending or threatened suits, proceedings or investigations with
respect to revocation, cancellation, suspension or nonrenewal thereof, and,
there has occurred no event which (whether with notice or lapse of time or
both) will result in such a revocation, cancellation, suspension or nonrenewal
thereof, in any such case except where such a revocation, cancellation,
suspension or non-renewal would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and the Subsidiaries, taken as a whole.
(c) All insurance policies issued by the Insurance Subsidiaries, as now in
force are, to the extent required under applicable law, are in a form
acceptable to applicable regulatory authorities or have been filed and not
objected to (or such objection has been withdrawn or resolved) by such
authorities within the period provided for objection, except where such
failure or objection would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and the Subsidiaries, taken as a whole.
Neither the Company nor any Subsidiary which is not an Insurance Subsidiary
has issued any insurance policies. Except as set forth on Schedule 4.17, (i)
all material reports, statements, documents, registrations, filings and
submissions to state insurance regulatory authorities complied in all material
respects with applicable law in effect when filed and (ii) no material
deficiencies have been asserted by any such regulatory authority with respect
to such reports, statements, documents, registrations, filings or submissions
that have not been satisfied or that would, individually or in the aggregate,
have a Material Adverse Effect on the Company and the Subsidiaries, taken as a
whole. Except as set forth on Schedule 4.17, all premium rates established by
the Insurance Subsidiaries that are required to be filed with or approved by
insurance regulatory authorities have been so filed or approved, the premiums
charged conform to the premiums so filed or approved and comply (or complied
at the relevant time) with the insurance laws applicable thereto except where
such failures to comply, individually or in the aggregate, would not have a
Material Adverse Effect on the Company and the Subsidiaries, taken as a whole.
4.18 No Brokers. Except as previously disclosed in writing to Buyer, neither
Parent, Seller, Talegen nor the Company has employed, or is subject to any
valid claim of, any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement who will be
entitled to a fee or commission in connection with such transactions. Parent
is solely responsible for any such payment, fee or commission that may be due
to any Person so previously disclosed to Buyer in connection with the
transactions contemplated hereby.
4.19 No Other Agreements to Sell the Assets or the. Except as set forth in
Schedule 4.19, none of Parent, Seller, Talegen, the Company or any Subsidiary
has any agreement, absolute or contingent, with any other Person to sell the
capital stock, assets (other than sales of assets that would not be prohibited
under Section 4.7(c)) or business of the Company or any Subsidiary or to
effect any merger, consolidation or other reorganization of the Company or any
Subsidiary or to enter into any agreement with respect thereto.
4.20 Proprietary Rights. (a) Except as set forth in Schedule 4.20, Parent,
Seller and their Affiliates (other than the Company and the Subsidiaries) have
no right or title to or interest in the trademarks, service marks, copyrights,
trade names and the applications and registrations therefor and the trade
secrets, software and other proprietary rights used in and material to the
business of the Company or any of its Subsidiaries (collectively,
"Intellectual Property").
(b) Schedule 4.20 sets forth a complete and correct list and brief
description of all Intellectual Property that is material to the Company or
any Subsidiary. With respect to intellectual property owned by the Company or
a Subsidiary, such entity has the sole and exclusive right to use and is the
sole and exclusive registered owner of all right, title and interest in and to
the Intellectual Property. The Intellectual Property which is not owned by
the Company or a Subsidiary is being used by the Company or a Subsidiary only
with the consent of or license from the rightful owner thereof, and all such
licenses are in full force and effect.
(c) To the Knowledge of Seller no activity in which the Company or a
Subsidiary is engaged or any product which the Company or a Subsidiary sells,
or any advertising that they employ, or the use of any of the Intellectual
Property, breaches, violates, infringes or interferes with any rights of any
third party or, except for the payment of computer software licensing fees,
requires payment for the use of any patent, trade-name, trade secret, trade-
▇▇▇▇, copyright or other intellectual property right or technology of another.
4.21 Employee Benefit Plans. (a) Schedule 4.21 contains a true and complete
list of each "employee benefit plan" (within the meaning of section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, without limitation, multiemployer plans within the meaning of ERISA
section 3(37)), stock purchase, stock option, severance, employment, change-
in-control, fringe benefit, collective bargaining, bonus, incentive, deferred
compensation and all other employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA (including any
funding mechanism therefor now in effect or required in the future as a result
of the transactions contemplated by this Agreement or otherwise), whether
formal or informal, oral or written, legally binding or not, under which any
employee or former employee of the Company or any Subsidiary has any present
or future right to benefits or under which the Company or any Subsidiary has
any present or future liability. All such plans, agreements, programs,
policies and arrangements shall be collectively referred to as the "Company
Plans".
(b) With respect to each Company Plan, the Company has delivered to the Buyer
a current, accurate and complete copy (or, to the extent no such copy exists,
an accurate description) thereof and, to the extent applicable, (i) any
related trust agreement, annuity contract or other funding instrument; (ii)
the most recent determination letter; (iii) any summary plan description and
other written communications (or a description of any oral communications) by
the Company or any Subsidiary to their employees concerning the extent of the
benefits provided under a Company Plan; and (iv) for the three most recent
years (A) the Form 5500 and attached schedules; (B) audited financial
statements; (C) actuarial valuation reports; and (D) attorney's response to an
auditor's request for information.
(c) (i) Each Company Plan, in all material respects, has been established and
administered in accordance with its terms and in compliance with the
applicable provisions of ERISA, the Code and other applicable laws, rules and
regulations; (ii) each Company Plan which is intended to be qualified within
the meaning of Code section 401(a) is so qualified and has received a
favorable determination letter as to its qualification and nothing has
occurred, whether by action or failure to act, which would cause the loss of
such qualification; (iii) except as listed on Schedule 4.21, with respect to
any Company Plan, no actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or threatened, no facts or
circumstances exist which could give rise to any such actions, suits or
claims, and the Company will promptly notify Buyer in writing of any pending
or threatened claims arising between the date hereof and the Closing Date;
(iv) neither the Company, any Subsidiary nor any other party has engaged in a
prohibited transaction, as such term is defined under Code section 4975 or
ERISA section 406, which would subject the Company, any Subsidiary or the
Buyer to any material taxes, penalties or other liabilities under Code section
4975 or ERISA sections 409 or 502(i); (v) no event has occurred and no
condition exists that would subject the Company, either directly or by reason
of its affiliation with any member of its "Controlled Group" (defined as any
organization which is a member of a controlled group of organizations within
the meaning of Code sections 414(b), (c), (m) or (o)), or any Subsidiary to
any material tax, fine or penalty imposed by ERISA, the Code or other
applicable laws, rules and regulations including, but not limited to the taxes
imposed by Code sections 4971, 4972, 4977, 4979, 4980B, 4976(a) or the fine
imposed by ERISA section 502(c); (vi) all insurance premiums required to be
paid with respect to Company Plans as of the Closing Date have been or will be
paid prior thereto and adequate reserves have been provided for on the
Company's Interim Financial Statements as of September 30, 1995, to the extent
required by GAAP, for any premiums (or portions thereof) attributable to
service on or prior to the Closing Date; (vii) for each Company Plan with
respect to which a Form 5500 has been filed, no material change has occurred
with respect to the matters covered by the most recent Form since the date
thereof; (viii) all contributions required to be made prior to the Closing
Date under the terms of any Company Plan, the Code, ERISA or other applicable
laws, rules and regulations have been or will be timely made and adequate
reserves have been provided for on the Company's Interim Financial Statements
as of September 30, 1995, to the extent required by GAAP, for all benefits
attributable to service on or prior to the Closing Date; (ix) no Company Plan
provides for an increase in benefits on or after the Closing Date; and (x) no
Company Plan (excluding any agreement between the Company and individual
employees) contains any contractual language which limits the Company's
ability to amend or terminate such Company Plan without obligation or
liability (other than those obligations and liabilities for which specific
assets have been set aside in a trust or other funding vehicle or reserved for
on the Company's Interim Financial Statements as of September 30, 1995).
(d) (i) No Company Plan has incurred any "accumulated funding deficiency" as
such term is defined in ERISA section 302 and Code section 412 (whether or not
waived); (ii) no event or condition exists which would be deemed a reportable
event within the meaning of ERISA section 4043 which could result in a
material liability to the Company, any member of its Controlled Group or any
Subsidiary, and no condition exists which could subject the Company, any
member of its Controlled Group or any Subsidiary to a material fine under
ERISA section 4071; (iii) as of the Closing Date, the Company, each member of
its Controlled Group and each Subsidiary will have made all premium payments
required to be made prior to the Closing Date to the PBGC; (iv) neither the
Company, any member of its Controlled Group nor any Subsidiary is subject to
any liability to the PBGC for any plan termination occurring on or prior to
the Closing Date; (v) no amendment has occurred which has required or would
require the Company, any member of its Controlled Group or any Subsidiary to
provide security pursuant to Code section 401(a)(29); and (vi) neither the
Company, any member of its Controlled Group nor any Subsidiary has engaged in
a transaction which could subject it to material liability under ERISA section
4069
(e) With respect to each of the Company Plans which is not a multiemployer
plan within the meaning of section 4001(a)(3) of ERISA but is subject to
Title IV of ERISA, the funded status of each such Company Plan, as of January
1, 1995, is as reported in the actuarial valuation reports dated as of January
1, 1995. To the Knowledge of Seller, no material adverse change in the funded
status of such Company Plans has occurred since January 1, 1995, and no
material defects or omissions existed in the data provided to the preparers of
the actuarial valuation reports discussed in the preceding sentence.
(f) There are no multiemployer plans (within the meaning of section 4001(a)(3)
of ERISA) to which the Company, any member of its Controlled Group or any
Subsidiary has or had any liability or contributes (or has at any time
contributed or had an obligation to contribute).
(g) (i) Each Company Plan which is intended to meet the requirements for tax-
favored treatment under Subchapter B of Chapter 1 of Subtitle A of the Code
meets such requirements; and (ii) the Company and the Subsidiaries have no
trusts intended to be qualified within the meaning of Code section 501(c)(9),
and, except as listed on Schedule 4.21, had no such trusts in the past.
(h) Schedule 4.21 sets forth, on a plan-by-plan basis, the present value of
any benefits payable presently or in the future to present or former employees
of the Company or any Subsidiary under any Company Plan (excluding any
agreements between the Company and individual employees which were not entered
into as part of any plan or program) that is not fully funded and not subject
to the reporting requirements of ERISA (if such amounts are not reflected in
the financial statements included in Schedule 4.12) which present value is as
reported in the most recent actuarial valuation or other reports done with
respect to each such plan. To the Knowledge of Seller, no material adverse
increase in the amount of such present values has occurred since the date of
the most recent report, and no material defects or omissions existed in the
reports, or, if applicable, in the data provided to the preparers of the
reports.
(i) Except as set forth on Schedule 4.21 or referenced in Section 9.4, no
Company Plan exists which could result in the payment to any Company employee
or Subsidiary employee of any money or other property or accelerate or provide
any other rights or benefits to any Company employee or Subsidiary employee as
a result of the transactions contemplated by this Agreement, whether or not
such payment would constitute a parachute payment within the meaning of Code
section 280G. There is no cost to the Company and its Subsidiaries in the
event that all Company Plans set forth in Schedule 4.21 are triggered.
(j) Neither the Company nor any Subsidiary is obligated or otherwise required
to pay any bonuses (annual or otherwise) to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., or to any
managing director of the Company on or after the date of the Closing.
(k) No Company Plan operates within or is subject to the jurisdiction of any
foreign country, other than as described on Schedule 4.21.
(l) None of the amounts payable to any Company employee or any Subsidiary
employee as a result of the transactions contemplated by this Agreement will
be non-deductible under Section 280G of the Code.
4.22 Employment-Related Matters. Except as set forth in Schedule 4.22, (a)
none of the Company or the Subsidiaries is a party to, or otherwise bound by,
any consent decree with, or citation by, any government agency relating to
employees or employment practices, (b) none of the Company or any of the
Subsidiaries has closed any plant or facility, or effectuated any layoffs of
employees within the past six months, nor have the Company or the Subsidiaries
planned or announced any such action or programs for the future, and (c) the
Company and the Subsidiaries are in compliance with their respective
obligations pursuant to the Worker Adjustment and Retraining Notification Act
of 1988 and any similar state notification law.
4.23 Transactions with Certain Persons. (a) To the Knowledge of Seller,
neither any officer, director or employee of Parent, Seller, the Company or
any Subsidiary nor any member of any such Person's immediate family is
presently a party to any material transaction with the Company or any
Subsidiary, including, without limitation, any Contract, or other binding
arrangement (i) providing for the furnishing of material services (except in
such Person's capacity as an officer, director, employee or consultant) by,
(ii) providing for the rental of material real or personal property from, or
(iii) otherwise requiring material payments to (other than for services as
officers, directors or employees of Parent, Seller, the Company or any
Subsidiary) any such Person.
(b) Schedule 4.23 sets forth all contracts, agreements and arrangements in
effect on or after January 1, 1995, and all transactions (including, without
limitation, the provision of any services or the sale of any goods) since
January 1, 1994 between the Company or any Subsidiary, on the one hand, and
Parent or any Affiliate of Parent (excluding the Company and the Subsidiaries,
but including Talegen and its subsidiaries), on the other, excluding
contracts, agreements and arrangements (i) relating to the use or purchase of
products leased or sold by Parent in the ordinary course of Parent's document
processing business, (ii) involving payments by or to the Company or any
Subsidiary that do not exceed $100,000 in the aggregate or (iii) specifically
referred to in the financial statements contained in Schedule 4.12. Certain
Subsidiaries hold $25,000,000 aggregate principal amount of promissory notes
issued by Seller and unconditionally guaranteed by Parent (such notes,
collectively, the "Seller Notes"). Schedule 4.23 identifies the current
holders of each of the Seller Notes.
(c) Except in the ordinary course of business consistent with past practice,
since the Balance Sheet Date, Seller and the Company and/or any Subsidiary
have not settled any intercompany trade receivables and payables.
4.24 Taxes. (a) Filing of Tax Returns. Seller and the Company (and any
affiliated group of which the Company is now or has been a member) have timely
filed with the appropriate taxing authorities all Federal, and to the
Knowledge of Seller, state and local Tax Returns and Information Returns
required to be filed through the date hereof. All such Federal, and to the
Knowledge of Seller, state and local Tax Returns and Information Returns are
complete and accurate in all material respects. The Company is a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, that includes Seller and Parent, and Parent is the common parent of the
affiliated group.
(b) Payment of Taxes. All Taxes shown in the Tax Returns referred to in
Section 4.24(a) above that are due and payable by the Company and its
Subsidiaries before the date hereof have been paid.
(c) Liens for Taxes. There are no liens or other Encumbrances on any of the
assets of the Company or any Subsidiary that arose in connection with any
failure (or alleged failure) to pay any Tax.
(d) Audit History. Except as set forth in Schedule 4.24, there is no action,
suit, proceeding, investigation, audit or claim now pending or, to the
Knowledge of Seller, proposed against or with respect to the Company or any of
its Subsidiaries or any affiliated group of which the Company and its
Subsidiaries is or has been a member that relates to Tax liabilities
attributable to items of income, gain, deduction, loss or credits of the
Company or any of its Subsidiaries.
(e) Prior Affiliated Groups. Except as set forth in Schedule 4.24 and except
for the affiliated group of corporations of which the Company and the
Subsidiaries is currently a member and of which Parent is the common parent,
the Company and the Subsidiaries have never been members of an affiliated
group of corporations, within the meaning of Section 1504 of the Code.
(f) Withholding. The Company and the Subsidiaries have withheld and paid all
Federal, and to the Knowledge of Seller, state and local Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party.
(g) FIRPTA. Neither the Company nor any of the Subsidiaries have been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the five-year period ending on the date hereof.
(h) Material Adverse Effect. A representation with respect to Taxes
contained in this Section 4.24 shall be deemed to be accurate unless an
inaccuracy contained therein has a Material Adverse Effect on the Company and
the Subsidiaries.
4.25 Reinsurance and Retrocessions. Schedule 4.25 contains a list as of the
date of this Agreement of all treaty reinsurance or retrocession treaties and
agreements in force to which any Subsidiary is a party (including any
terminated or expired treaty or agreement under which there remains any
outstanding liability with respect to paid or unpaid case reserves in excess
of $500,000), any terminated or expired treaty or agreement under which there
remains any outstanding liability from one reinsurer with respect to paid or
unpaid case reserves in excess of $100,000 and any treaty or agreement with
any Affiliate of such Subsidiary, the effective date of each such treaty or
agreement, and the termination date of any treaty or agreement which has a
definite termination date. To the Knowledge of Seller, no Subsidiary is in
default in any respect as to any provision of any reinsurance or retrocession
treaty or agreement or has failed to meet the underwriting standards required
for any business reinsured thereunder except for defaults which, individually
or in the aggregate, would not have a Material Adverse Effect on the Company
and the Subsidiaries, taken as a whole.
4.26 1992/93 Restructuring. All novations made pursuant to the 1992/93
Restructuring and any amendments to the Ridge Re Treaty made prior to the date
hereof, were made in accordance with all applicable laws, rules and
regulations at the time such novations or amendments were completed except
where the failure to do so (i) would not, individually or in the aggregate,
have a Material Adverse Effect on the Company and the Subsidiaries, taken as a
whole, or (ii) was a result of the failure by the Company or any Subsidiary to
obtain the consent of any insured or policyholder to the novation or
assumption of the relevant insurance policy. Notwithstanding the foregoing,
Buyer acknowledges that Seller and Parent shall have no liability to Buyer for
breach of this representation with respect to any novation or assumption, or
any amendment to the Ridge Re Treaty, which results in any liability for the
Company or any of its Subsidiaries, if there is a corresponding benefit
realized (or any liability avoided) by the Company or any other Subsidiary or
Talegen or any of its subsidiaries.
4.27 Capital Commitments. Schedule 4.27 contains a list of all capital
commitments as of the date of this Agreement of the Company or any Subsidiary
in excess of $100,000.
4.28 Environmental Laws. (a) Each of the Company and each Subsidiary
complies and has complied with all applicable Environmental Laws, and
possesses and complies with and has possessed and complied with all
Environmental Permits required under such laws except where the failure to be
in possession of or to comply with such Environmental Permits, or where the
failure to be in compliance with any Environmental Law, would not have,
individually or in the aggregate, a Material Adverse Effect on the Company and
the Subsidiaries, taken as a whole. There are no past, present, or
anticipated future events, conditions, circumstances, practices, plans or
legal requirements that could reasonably be expected to prevent, or materially
increase the burden on the Company or any Subsidiary of their complying with
applicable Environmental Laws or of their obtaining, renewing, or complying
with all Environmental Permits required under such laws. There are and have
been no Materials of Environmental Concern or other conditions at any property
owned, operated or otherwise used by the Company or any Subsidiary now or in
the past, or at any other location, that could reasonably be expected to give
rise to liability of the Company or any Subsidiary under any Environmental
Law. Parent, Seller and the Company have provided to Buyer true and complete
copies of all Environmental Reports prepared within the last five years in
their possession or control.
(b) Notwithstanding the representations contained in this Section, Buyer
acknowledges that Parent and Seller are not making any representations
(express or implied in or pursuant to this Agreement) with respect to any
violation of or noncompliance with Environmental Law or Environmental Permits,
or failure to obtain Environmental Permits, in each case by reason of any
policy of insurance, reinsurance, indemnity, guaranty or assumption of
liability of any party, entered into by the Company or any Insurance
Subsidiary.
4.29 Acquisition for Investment. Each of Seller and Parent acknowledges that
the Securities have not been registered under the Securities Act, or under any
state securities laws. Each of Seller and Parent (to the extent Parent
acquires Securities pursuant to Section 11.3) is acquiring the Securities
solely for its own account and not with a view to any distribution or other
disposition of such Securities or any part thereof, or interest therein,
except in accordance with the Securities Act. Each of Seller and Parent is an
"accredited investor" (as defined in Rule 501 of Regulation D under the
Securities Act).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and Parent as follows:
5.1 Organization of Buyer. Buyer is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full corporate
power and authority to conduct its business and to own and lease its
properties.
5.2 Authorization. Buyer has all necessary corporate authority to enter into
this Agreement the Tax Agreement and has taken all necessary corporate action
to consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement and the Tax Agreement have been duly
executed and delivered by Buyer. Assuming the due execution of this Agreement
by Parent and Seller, this Agreement is a legal, valid and binding obligation
of Buyer enforceable against it in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
5.3 No Conflict or Violation. Neither the execution, delivery and
performance of this Agreement or the Tax Agreement by Buyer nor the issuance
of the Class 2 Stock by Buyer, nor the issuance, if issued, of Class 1 Stock
by Buyer pursuant to the provisions of Section 11.3, nor the consummation by
Buyer of the transactions contemplated hereby or thereby will result in (a) a
violation of or a conflict with any provision of the certificate of
incorporation or bylaws of Buyer, (b) a breach of, or a default under, any
term or provision of any contract, agreement, indebtedness, lease,
Encumbrance, commitment, license, franchise, Permit, authorization or
concession (including any agreements, documents or instruments (the "Financing
Documents") constituting part of the financing required to consummate the
transactions contemplated by this Agreement (the "Financing")) to which Buyer
is a party or is subject or by which any assets of Buyer are bound, which
breach or default is in a Financing Document or would, individually or in the
aggregate, have a Material Adverse Effect on Buyer or interfere in any
material way with the ability of Buyer to consummate the transactions
contemplated by this Agreement and the Tax Agreement, or (c) subject to
obtaining the approvals referred to in Section 4.11, a violation by Buyer of
any statute, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree or award, which violation would, individually or in the
aggregate, have a Material Adverse Effect on Buyer or its ability to
consummate the transactions contemplated by this Agreement and the Tax
Agreement.
5.4 No Brokers. Except for the services of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., Buyer has
not employed, and is not subject to the valid claim of, any broker, finder,
consultant or other intermediary in connection with the transactions
contemplated by this Agreement who will be entitled to a fee or commission in
connection with such transactions. Buyer is solely responsible for any such
payment, fee or commission that may be due to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. in
connection with the transactions contemplated by this Agreement.
5.5 Acquisition for Investment. Buyer acknowledges that the Stock has not
been registered under the Securities Act or under any state securities laws.
Buyer is acquiring the Stock solely for its own account and not with a view to
any distribution or other disposition of the Stock or any part thereof, or
interest therein, except in accordance with the Securities Act. Buyer is an
"accredited investor" (as defined in Rule 501 of Regulation D under the
Securities Act).
5.6 Organizational Documents. Copies of the certificate of incorporation and
bylaws of Buyer have heretofore been delivered to Seller and such copies are
true, accurate and complete, without any amendment, modification or
supplement, as of the date of this Agreement and, after giving effect to the
filing of the Restated Certificate of Incorporation prior to Closing, the
Closing Date (except such amendments, modifications or supplements which would
not have a Material Adverse Effect on Seller or which change the amount of
authorized capital stock).
5.7 Capitalization of Buyer. (a) As of the Closing Date, investment
partnerships affiliated with KKR shall own, directly or indirectly, no less
than 70% of the Class 1 Stock, which percentage shall be reduced to reflect
any investment made by Parent and/or Seller pursuant to Section 11.3.
(b) In the event that Seller acquires any of the Class 1 Stock as provided in
Section 11.3 hereof, such shares will be duly authorized, validly issued,
fully paid and nonassessable, and free of preemptive rights.
(c) Upon consummation of the transactions contemplated by this Agreement, the
Class 2 Stock to be issued by Buyer pursuant hereto, when delivered by Buyer
for the consideration specified herein, will be duly and validly authorized
and issued by Buyer, fully paid, nonassessable and free of preemptive rights
and Seller will acquire good and marketable title thereto, free and clear of
all Encumbrances, except Encumbrances arising as a result of any action taken
by Seller or any of its Affiliates; provided that Buyer makes no
representations regarding the ability of any Person other than Buyer to
transfer or otherwise dispose of such Class 2 Stock without registration or
qualification under, or in compliance with, applicable Federal securities or
state securities or insurance laws.
5.8 Consents and Approvals. Except for (i) consents, approvals,
authorizations, declarations, filings and registrations required by the nature
of the business or ownership of Parent, Seller, the Company and the
Subsidiaries, (ii) filings in respect of the transactions contemplated hereby
required to be made for compliance with the applicable provisions of the
Exchange Act and the rules and regulations promulgated thereunder and (iii)
the filing of premerger notification reports under the HSR Act, no consents,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority, or any other Person, is required to be
made or obtained by Buyer or any of its Affiliates in connection with the
execution, delivery and performance of this Agreement, the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby.
5.9 Financial Obligations. Buyer has received and delivered copies to Seller
of (i) a commitment letter from senior lenders regarding the transactions
contemplated by this Agreement, (ii) a letter with respect to equity Financing
(other than that to be provided by management of the Company), which letter is
addressed to Seller and (iii) an agreement in principal between Buyer and
management of the Company with respect to the investment by management
referred to in Section 8.16.
5.10 Solvency. At the Closing (after and giving effect to the acquisition of
the Stock and the Financing), neither Buyer nor the Company will (i) be
insolvent (either because its financial condition is such that the sum of its
debts is greater than the fair value of its assets or because the present fair
saleable value of its assets will be less than the amount required to pay its
probable liability on its debts as they become absolute and matured), (ii) has
unreasonably small capital with which to engage in its business or (iii) has
incurred or plan to incur debts beyond its ability to pay as they become
absolute and matured.
ARTICLE VI
ACTIONS BY PARENT, SELLER AND BUYER PRIOR TO THE CLOSING
Parent, Seller and Buyer covenant as follows for the period from the date
hereof to the Closing Date (except, in the case of Section 6.16, for the
period specified in such Section):
6.1 Maintenance of Business and Preservation of Permits and Services. Except
as expressly contemplated by this Agreement, Seller shall cause the Company
and each Subsidiary to carry on its business, in the ordinary course
consistent with past practice. Neither Parent nor Seller shall cause the
Company or any Subsidiary to terminate an officer thereof or to diminish the
duties or responsibilities of such officer.
6.2 Additional Financial Statements. As soon as reasonably practicable after
the end of the applicable period, Seller shall furnish to Buyer (a) the
quarterly convention statements of the Subsidiaries for all interim quarterly
periods subsequent to September 30, 1995, which shall have been prepared on a
basis consistent with the Convention Statements and, with respect to the
financial statements included therein, in accordance with Statutory Accounting
Principles, (b) the quarterly financial statements of the Company and Ridge Re
for all quarterly periods subsequent to September 30, 1995, which shall have
been prepared in accordance with generally accepted accounting principles and
on a basis consistent with the Company GAAP Financial Statements and the Ridge
Re GAAP Financial Statements, as the case may be, subject to normal year-end
adjustments and the absence of footnote disclosure, (c) the consolidated
financial statements for the Company and Ridge Re for the year ended December
31, 1995, which shall have been prepared in accordance with generally accepted
accounting principles and on a basis consistent with the Company GAAP
Financial Statements and the Ridge Re GAAP Financial Statements, as the case
may be, and (d) (to the extent ordinarily prepared) all monthly financial
statements of the Company, the Subsidiaries and Ridge Re (for months
subsequent to June 1995), which shall have been prepared in a manner
consistent with past practice.
6.3 Certain Prohibited Transactions. Parent and Seller agree to cause the
Company and each Subsidiary not to, without the prior written approval of
Buyer or except as expressly contemplated by this Agreement:
(a) terminate, cancel or amend any insurance coverage maintained by the
Company or any of its Subsidiaries with respect to any material assets of the
Company or any Subsidiary which is not replaced by an adequate amount of
insurance coverage or is not deemed unnecessary in the reasonable judgment of
the Company;
(b) settle any pending or threatened Action relating to an insurance claim in
an amount in excess of $5,000,000 above the policy limit relating to such
claim or settle any other pending or threatened Action in an amount in excess
of $1,000,000; or
(c) take any action which causes any representation or warranty (other than
Section 4.7(a)) of Parent or Seller in this Agreement to be or become untrue
at Closing or results in a material breach of any covenant made by Parent or
Seller in this Agreement.
6.4 Investigation by Buyer. Parent and Seller shall, and shall use their
reasonable efforts to cause the Company and the Subsidiaries to, allow Buyer
during regular business hours through Buyer's employees, agents and
representatives, to make such investigation of the business, properties, books
and records of the Company and the Subsidiaries, and to conduct such
examination of the condition of the Company and the Subsidiaries, as Buyer
reasonably deems necessary or advisable to familiarize itself with such
business, properties, books, records, condition and other matters, and to
verify the representations and warranties of Seller hereunder; provided,
however, that any information obtained from Seller or the Company shall be
deemed to be Evaluation Material for purposes of the Confidentiality Agreement
dated August 3, 1995, between Seller and Kohlberg Kravis ▇▇▇▇▇▇▇ Co., L.P.
(the "Confidentiality Agreement") and shall be subject to the Confidentiality
Agreement.
6.5 Consents. (a) As soon as practicable after execution and delivery of
this Agreement, Buyer and Seller shall make all filings required under the HSR
Act. Buyer and Seller will each furnish all information as may be required by
any other state regulatory agency properly asserting jurisdiction or by the
Federal Trade Commission and the United States Department of Justice under the
HSR Act in order that the requisite approvals for the purchase and sale of the
Stock pursuant hereto, and the transactions contemplated hereby, be obtained
or to cause any applicable waiting periods to expire.
(b) Buyer shall use its best efforts to file Form A change of control
applications with the applicable state insurance regulators referred to in
Schedule 4.11 within 45 days from the date hereof. Buyer will use its
reasonable efforts to obtain insurance regulatory approvals as soon as
possible following the Form A change of control filings. Parent and Seller
shall cooperate with Buyer to obtain such approvals.
(c) Seller and Buyer will, as soon as practicable, commence to take all other
action required to obtain as promptly as practicable all necessary consents,
approvals, authorizations and agreements of, and to give all notices and make
all other filings with, any third parties, including governmental authorities,
necessary to authorize, approve or permit the consummation of the transactions
contemplated hereby and by the Ancillary Agreements, including all consents,
approvals and waivers referred to in Sections 7.4 and 8.2 hereof, and Buyer,
Parent and Seller shall cooperate with each other with respect thereto.
(d) Notwithstanding the foregoing, however, none of Parent, Seller, Buyer,
the Company or the Subsidiaries shall be required to agree to any limitations,
requirements or conditions of, any third party including, but not limited to,
any insurance regulatory body, or make any payment to any party including the
Company or any Subsidiary in order to obtain consents referred to in Sections
7.4 and 8.2. Parent and Seller shall be entitled to have a representative or
representatives present at all meetings that may be held by Buyer with
insurance regulators.
6.6 Notification of Certain Matters. Parent and Seller, to the extent within
the actual knowledge of an officer of Parent or Seller listed on Schedule
1.1B, shall give prompt notice to Buyer, and Buyer, to the extent within the
knowledge of Buyer, shall give prompt notice to Seller, of (i) the occurrence,
or failure to occur, of any event which occurrence or failure would be likely
to cause any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect any time from the date hereof to
the Closing Date, (ii) any material failure of Parent, Seller or Buyer, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder (and each party shall use all
reasonable efforts to remedy such failure), (iii) any notice or other
communication from any Person alleging that the consent of such Person is or
may be required in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements, (iv) any notice or other communication
from any governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements, (v)
any Actions that, if pending or threatened on the date hereof, would have been
required to have been disclosed pursuant to Section 4.13 and (vi) any Actions
that relate to the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements.
6.7 No Solicitations. (a) Parent, Seller and each of their respective
Affiliates, including the Company and the Subsidiaries, will not, directly or
indirectly, solicit any inquiries or proposals or enter into or continue any
discussions, negotiations, understandings, arrangements or agreements relating
to the sale or exchange of any Stock, the merger or amalgamation of the
Company or any of its Subsidiaries with, or the direct or indirect disposition
of a significant amount of the Company's assets or any Subsidiary's assets or
business to any Person other than Buyer or its Affiliates or provide any
assistance or any information to or otherwise cooperate with any Person in
connection with any such inquiry, proposal or transaction (except that the
Company may direct inquiries to Buyer, which shall not disclose confidential
information about the Company or any of its Subsidiaries in connection with
responding to such inquiries). In the event that Parent, Seller or any of
their Affiliates, including the Company and the Subsidiaries receives a
solicited or unsolicited inquiry, proposal or offer for such a transaction or
obtains information that such an offer is likely to be made, Parent and Seller
will provide Buyer with notice thereof as soon as practical after receipt
thereof, including the identity of the prospective purchaser or soliciting
party. Buyer agrees that to the extent it engages in any discussions
regarding the Company or the Subsidiaries with potential purchasers of the
capital stock or businesses thereof, Buyer shall not include officers or
employees of the Company or the Subsidiaries in such discussions.
(b) The parties acknowledge that there may be no adequate remedy at law for a
breach of Section 6.7(a) and that money damages may not be an adequate remedy
for breach of such Section. Therefore, the parties agree that Buyer shall
have the right, in addition to any other rights it may have, to injunctive
relief and specific performance of Section 6.7(a) in the event of any breach
of such Section. The remedy set forth in the preceding two sentences is
cumulative and shall in no way limit any other remedy any party hereto has at
law, in equity or pursuant hereto.
6.8 Cooperation; Accounting and Other Matters. Seller shall, and Seller
shall use its reasonable efforts to cause the Company to, cooperate with Buyer
in respect of any proposed public offering or private placement of securities,
and arrangements of other financing by Buyer, the proceeds of which are to be
used to finance a portion of the purchase of the Stock by Buyer (provided,
however, that Seller shall not be obligated to participate in such financing
or the marketing thereof and shall not be obligated to be a party to any
underwriting, private placement or other agreement with respect thereto), and
shall, without limitation of the foregoing, cause such Company financial
statements to be prepared as may be required by the rules and regulations of
the Securities and Exchange Commission promulgated under the Securities Act.
6.9 Investment Portfolio. (a) Parent and Seller shall cause the Company and
the Subsidiaries to manage the investment portfolio for the Company and the
Subsidiaries in accordance with the Investment Policy.
(b) Five days prior to the Closing Date, Parent and Seller shall cause the
Company to deliver to Buyer a list of all Investments in the investment
portfolio for the Company and the Subsidiaries as of such date.
6.10 Reinsurance Agreements. Seller shall cause the Company and each
Subsidiary not to, without the prior written approval of Buyer (which approval
shall not be unreasonably withheld), except in the ordinary course of business
consistent with past practice (i) amend any reinsurance or retrocession
agreement, (ii) enter into or commit to enter into any loss portfolio transfer
or other similar transaction, agreement or arrangement or series of related
transactions, agreements or arrangements involving any ceded reinsurance of
the Company or any Subsidiary, (iii) enter into or commit to enter into any
reinsurance or retrocession contract or treaty except to replace, renew or
extend existing reinsurance and retrocession agreements and treaties on terms
which are not different in any material respect from the terms of the
agreement or treaty being replaced, renewed or extended, as the case may be,
or (iv) commute or terminate any contract of reinsurance, provided that Seller
shall cause the Company and each Subsidiary not to commute or terminate any
such contract which at the time of commutation or termination is legally
carried on the books of the Company and the Subsidiaries in an amount of
$5,000,000 or more. All reinsurance or retrocession agreements or treaties
permitted by this Section shall not have a change of control or similar
provision which would require the Company or any Subsidiary to obtain a
consent to consummate the transactions contemplated hereby (unless such
provisions shall have been waived prior to Closing).
6.11 Dividends. Seller and Parent shall cause the Company not to (i)
declare, set aside or pay any dividends or distributions (whether in cash,
stock or property) in respect of any capital stock of the Company, (ii) make
any other payment or distribution to Parent, Seller or any Affiliate of Parent
(excluding the Company and the Subsidiaries, but including Talegen and its
subsidiaries), or (iii) redeem, purchase or otherwise acquire any of the
capital stock of the Company or any Subsidiary, except for (A) payments
permitted under the Tax Agreement, (B) payments under the contracts,
agreements or arrangements referred to in Schedule 4.23 or described in
clauses (i), (ii) or (iii) of Section 4.23(b) and (C) dividends from TRG in an
amount not to exceed the TRG Dividend Replacement Amount (as defined in the
Talegen Agreement).
6.12 Seller Notes. The Company and the Subsidiaries shall not dispose of the
Seller Notes to a Person other than a Subsidiary, except that the Company and
the Subsidiaries may dispose of all or a portion of the Seller Notes prior to
Closing to a Person other than a Subsidiary if upon such disposition Seller
shall pay to the Company the excess of (i) the aggregate principal amount of
the Seller Notes so disposed plus accrued but unpaid interest through the date
of such disposition over (ii) the Third Party Amount. To the extent not
already disposed of, immediately prior to Closing, Seller shall repay the
outstanding principal amounts and any accrued but unpaid interest thereon
under the Seller Notes issued by it and held at that time by the Company or
any Subsidiary.
6.13 Leesburg Training Facility. The Company and the Subsidiaries shall not
dispose of any of their interests in the ground lease agreement among Parent
and certain of the Subsidiaries or the lease agreement among Seller and such
Subsidiaries, each dated as of December 1, 1985 and each relating to
approximately six acres of land in Loudon County, Virginia and a training
facility located thereon or their fee interests in such facility (the
"Leesburg Training Facility"), to a Person other than a Subsidiary, except
that the Company and the Subsidiaries may dispose of their interests (in whole
or in part) in the Leesburg Training Facility prior to Closing to a Person
other than a Subsidiary if upon such disposition Seller pays to the Company
the excess of (i) the greater of $6,200,000 and the statutory carrying value
of the Leesburg Training Facility as of December 31, 1995 over (ii) the Third
Party Amount. If no Third Party Amount has been received by the Company or
any Subsidiary prior to the Closing, immediately prior to Closing, Parent and
Seller agree to cause an amount equal to the greater of (i) the statutory
carrying value of the Leesburg Training Facility as of December 31, 1995 and
(ii) $6,200,000, to be contributed to such Subsidiaries, allocated to such
Subsidiaries in accordance with Schedule 6.13 (such contributed amount, the
"Leesburg Training Facility Amount"). At Closing, the Company shall cause to
be transferred to Seller or an Affiliate of Seller any remaining interests the
Company or any of the Subsidiaries has in the Leesburg Training Facility.
Upon any transfer of the Leesburg Training Facility in accordance with this
Section 6.13, the Company and the Subsidiaries shall have no further rights or
obligations relating to the Leesburg Training Facility.
6.14 Cessions to Ridge Re. The Insurance Subsidiaries shall make cessions to
Ridge Re under the Ridge Re Treaty in the ordinary course of business, which
cessions shall be actuarially supported.
6.15 Restated Certificate of Incorporation. Prior to the Closing Date, Buyer
shall file the Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware.
6.16 Certain Admitted Assets. Parent and Seller shall indemnify, guaranty or
otherwise post credit support to the extent that as of the Closing Date the
Insurance Subsidiaries shall not have received credit for statutory purposes
for the Crostex/Camfex Purchase Money Notes in an amount equal to at least $35
million. Such indemnity, guaranty or credit support shall continue until
final maturity of such notes but only in the amount provided in the preceding
sentence.
6.17 Intercompany Accounts. (a) Except as provided in Sections 6.12 and
6.13, all intercompany accounts (other than those relating to Taxes and those
under or relating to reinsurance contracts and arrangements) between the
Company and any Subsidiary, on the one hand, and Parent and any of its
Affiliates (other than the Company and its Subsidiaries), on the other hand,
as of the Closing shall be settled at fair value (irrespective of the terms of
payment of such intercompany accounts) in the manner provided in this Section.
At least five business days prior to the Closing, Seller shall prepare and
deliver to Buyer a statement setting out in reasonable detail the calculation
of all such intercompany account balances based upon the latest available
financial information as of such date and, to the extent reasonably requested
by Buyer, provide Buyer with supporting documentation to verify the underlying
intercompany charges and transactions. All such intercompany account balances
shall be paid in full in cash prior to the Closing. All intercompany
reinsurance agreements shall remain in effect and shall be settled in the
ordinary course of business. All intercompany accounts relating to Taxes will
be governed by the Tax Agreement.
(b) As promptly as practicable, but no later than 60 days after the Closing
Date, Seller shall cause to be prepared and delivered to Buyer a statement
setting out in reasonable detail the calculation of such intercompany account
balances as of the Closing Date (giving effect to any settlement under
subsection (a) and any other payments). Buyer and Seller shall cooperate in
the preparation of any such calculation including the provision of supporting
documentation to verify the underlying intercompany charges, transactions and
payments. If Buyer disagrees with Seller's calculation of such intercompany
balances Buyer may, within 30 days after delivery of such statement, deliver a
notice to Seller disagreeing with such calculation and setting forth Buyer's
calculation of such amount. If Buyer and Seller are unable to resolve such
disagreement within 30 days thereafter, such disagreement shall be resolved by
independent accountants of nationally recognized standing reasonably
satisfactory to Buyer and Seller. The net amount of any such intercompany
balance shall be paid in cash promptly thereafter, together with interest
thereon from and including the Closing Date to but excluding the date of
payment at a rate equal to 5% per annum. Such interest shall be payable at
the same time as the payable to which it relates and shall be calculated daily
on the basis of a year of 365 days and the actual number of days elapsed. All
amounts owing to Buyer under this Section 6.17 shall be paid directly to the
Company.
6.18 Financing. Buyer shall use its reasonable efforts to obtain financing
that will satisfy the condition in Section 8.9 hereof.
6.19 Letter Agreement. The Letter Agreement substantially in the form of
Exhibit C shall be executed and delivered at the Closing.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARENT AND SELLER
The obligations of Parent and Seller to consummate the transactions
contemplated hereby on the Closing Date are subject, in the discretion of
Parent and Seller, to the satisfaction or waiver, on or prior to the Closing
Date, of each of the following conditions:
7.1 Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in this Agreement and the Ancillary Documents to
which Buyer is a party shall be true and correct in all material respects
(except that such representations and warranties specifically qualified by
materiality shall be read for purposes of this Section so as not to require an
additional degree of materiality) as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as if such representations and warranties were made on
and as of the Closing Date, any breaches of such representations and
warranties as of the Closing Date (determined for purposes of this clause
without regard to any materiality qualifications in such representations and
warranties) taken together shall not have a Material Adverse Effect on Buyer,
the Company and the Subsidiaries, taken as a whole (assuming that the Closing
shall have occurred), or on Parent or Seller, and Buyer shall have performed
in all material respects all agreements and covenants required hereby to be
performed by it prior to or at the Closing Date. There shall be delivered to
Seller a certificate (signed by the President of Buyer) to the foregoing
effect.
7.2 HSR Act. The applicable waiting period, including any extension thereof,
under the HSR Act shall have expired.
7.3 No Governmental or Other Proceeding; Illegality. (a) No Action shall be
pending or threatened which seeks to enjoin, restrain or prohibit the
consummation of the transactions contemplated by this Agreement (including,
without limitation, the execution, delivery and performance of any Ancillary
Agreement by the parties thereto) which either Parent or Seller reasonably
believes presents a material risk that it or its Affiliates would suffer
substantial monetary damage (whether or not indemnified under this Agreement).
(b) There shall not be in effect any statute, rule, regulation or order of
any court, governmental or regulatory body which prohibits or makes illegal
the transactions contemplated hereby, including, without limitation, the
execution or delivery of any of the Ancillary Agreements or the performance of
any of the Guarantees, the Tax Agreement or the Ridge Re Treaty.
7.4 Consents. All consents, approvals and waivers from governmental
authorities and other parties necessary to permit Seller and Parent to
consummate the transactions contemplated hereby shall have been obtained,
unless the failure to obtain any such consent, approval or waiver would not
have a Material Adverse Effect on Seller or Parent, as the case may be,
provided, however, that no such consent, approval or waiver shall contain any
limitations, requirements or conditions on Parent or Seller or require Parent
or Seller to make any payment to any party including the Company or any
Subsidiary.
7.5 Opinion of Counsel. Buyer shall have delivered to Seller an opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, substantially in the form of Exhibit D-1, and an
opinion of King & Spalding, special tax counsel to Buyer, substantially in the
form of Exhibit D-2.
7.6 Certificates. Buyer will furnish Seller with such certificates of its
officers, directors and others to evidence compliance with the conditions set
forth in this Article VII as may be reasonably requested by Seller.
7.7 Corporate Documents. Seller shall have received from Buyer resolutions
adopted by the Board of Directors of Buyer approving this Agreement and the
Tax Agreement and the transactions contemplated hereby and thereby, certified
by the corporate secretary or assistant secretary of Buyer.
7.8 Talegen Closing. Talegen Acquisition shall have simultaneously purchased
all of the outstanding shares of Talegen's capital stock pursuant to the
Talegen Agreement.
7.9 Reated Certificate of Incorporation. The Restated Certificate of
Incorporation shall have been duly filed with the Secretary of State of the
State of Delaware.
7.10 Solvency Matters. Buyer shall have provided to Seller, any solvency
letters or similar opinions or certificates relating to the solvency and
adequate capitalization of Buyer or the Company and/or the ability of Buyer or
the Company to pay its debts that are given to any banks or other lenders in
connection with the acquisition of the Stock at the same time as such letters,
opinions or certificates are provided to such banks or other lenders.
7.11 Capitalization. Buyer shall have received no less than $50,000,000 in
equity and the amount of indebtedness for borrowed money of Buyer shall be no
more than $110,000,000.
7.12 Company Certificates. Seller shall have received (i) a certificate
signed by each of the persons listed on Schedule 1.1C dated as of the date of
this Agreement, and (ii) a certificate signed by each of such persons dated as
of the Closing Date, in each case substantially in the form of Exhibit E.
7.13 Subsidiary Releases. All of the domestic U.S. Subsidiaries included in
the consolidated federal income tax return of Parent which are Subsidiaries as
of Closing shall have executed and delivered to Parent and Seller the releases
of any and all obligations under existing tax sharing agreements substantially
in the form of Exhibit F.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated hereby
are subject, in the discretion of Buyer, to the satisfaction or waiver, on or
prior to the Closing Date, of each of the following conditions:
8.1 Representations, Warranties and Covenants. All representations and
warranties of Parent and Seller contained in this Agreement and the Ancillary
Agreements to which Parent or Seller is a party shall be true and correct in
all material respects (except that such representations and warranties
specifically qualified by materiality shall be read for purposes of this
Section so as not to require an additional degree of materiality) as of the
date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as if such
representations and warranties were made on and as of the Closing Date, any
breaches of such representations and warranties as of the Closing Date
(determined for purposes of this clause without regard to any materiality
qualifications in such representations and warranties) taken together shall
not have a Material Adverse Effect on the Company and the Subsidiaries, taken
as a whole, and Parent and Seller shall have performed in all material
respects all agreements and covenants (other than those contained in Section
6.3(c) and clauses (i), (ii) and (v) of Section 6.6) required hereby to be
performed by them, respectively, prior to or at the Closing Date. There shall
be delivered to Buyer a certificate of each of Parent and Seller (signed by an
Executive Vice President of Parent and the President of Seller) to the
foregoing effect.
8.2 Consents. All consents, approvals and waivers (a) referred to in clauses
(i) and (ii) of Section 4.11 or on Schedule 5.8, (b) referred to on Schedule
4.10, (c) under reinsurance and retrocession agreements for the accident year
in which the Closing occurs that would be terminable as a result of
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, (d) under all other reinsurance and retrocession
agreements that would be terminable as a result of consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements and
(e) under the reinsurance agreement described in clause (e) of Section 8.2 of
the Talegen Agreement shall have been obtained in form and substance
satisfactory to Buyer, acting reasonably, and shall be in full force and
effect, except, in the case of consents, approvals and waivers referred to in
clauses (b), (c) and (d), consents, approvals or waivers the failure of which
to obtain would not, individually or in the aggregate, result in a Material
Adverse Effect on the Company and the Subsidiaries, taken as a whole,
provided, however, that in the case of clauses (a), (b), (c), (d) and (e) no
such consent, approval or waiver shall contain any limitations, requirements
or conditions on Buyer, the Company or a Subsidiary or require Buyer, the
Company or a Subsidiary to make any payment to any party including in the case
of Buyer, to the Company or, in the case of Buyer or the Company, to any
Subsidiary, provided further, that the approval of any intercompany tax
agreements referred to in either Section 4.11(i) or (ii) for a period after
Closing shall not be a condition to the obligations of Buyer hereunder, and
provided still further, that with respect to any intercompany tax agreement
among the Company and the Subsidiaries for the period January 1, 1995 through
Closing, the obligations of Buyer hereunder shall be conditioned only on the
approval of an agreement that is reasonably consistent with those provisions
of the Tax Agreement that provide for the amount and time for payments
attributable to Taxes.
8.3 HSR Act. The applicable waiting period, including any extension thereof,
under the HSR Act shall have expired.
8.4 No Governmental or Other Proceeding; Illegality. (a) No Action shall be
pending or threatened which seeks to enjoin, restrain or prohibit the
consummation of the transactions contemplated by this Agreement (including,
without limitation, the execution, delivery and performance of any Ancillary
Agreement by the parties thereto) or to impose limitations on the ability of
Buyer to exercise full rights of ownership of the Stock or to require the
divestiture by Buyer of the Stock or by the Company, Buyer or any of their
Affiliates of any assets or businesses, which Buyer reasonably believes
presents a material risk that it or its Affiliates (including the Company and
the Subsidiaries after the Closing Date) would not realize substantially all
of the benefits of the transactions contemplated by this Agreement or would
suffer substantial monetary damages (whether or not indemnified under this
Agreement).
(b) There shall not be in effect any statute, rule, regulation or order of
any court, governmental or regulatory body which prohibits or makes illegal
the transactions contemplated hereby, including, without limitation, the
execution or delivery of any of the Ancillary Agreements or the performance of
any of the Guarantees, the Tax Agreement or the Ridge Re Treaty.
8.5 Opinion of Counsel. Seller shall have delivered to Buyer an opinion of
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇, substantially in the form of Exhibit G-
1, an opinion of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Senior Vice President and General Counsel of
Seller, substantially in the form of Exhibit G-2, an opinion of ▇▇▇▇▇ ▇▇▇▇▇▇,
General Counsel of IIC, substantially in the form of Exhibit G-3, an opinion
of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, General Counsel of the Company, substantially in the
form of Exhibit G-4, and an opinion of LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, special
tax counsel to Parent and Seller, substantially in the form of Exhibit G-5.
8.6 Certificates. Parent and Seller shall furnish Buyer with such
certificates of the respective officers of Parent and Seller and others to
evidence compliance with the conditions set forth in this Article VIII as may
be reasonably requested by Buyer.
8.7 Corporate Documents. Buyer shall have received from Parent and Seller
resolutions adopted by the respective boards of directors of Parent and Seller
approving this Agreement and the other Ancillary Agreements to which Parent or
Seller is or will be a party and the transactions contemplated hereby and
thereby, certified by the corporate secretary or assistant secretary of Parent
and Seller, as applicable.
8.8 Talegen Closing. Talegen Acquisition shall have simultaneously purchased
all of the outstanding shares of Talegen's capital stock pursuant to the
Talegen Agreement.
8.9 Financing. Buyer shall have obtained proceeds from financing sources on
terms and conditions consistent with the senior bank commitment letter
provided by Buyer to Seller prior to the date hereof, and otherwise reasonably
satisfactory to Buyer.
8.10 No Material Adverse Effect. Since June 30, 1995, there shall not have
occurred any event, change or development (including, without limitation, the
suspension, revocation or other termination of any Permit) which individually
or in the aggregate, has had or is reasonably likely to have a Material
Adverse Effect on the Company and the Subsidiaries, taken as a whole.
8.11 Resignation of Officers and Directors. All Persons who are directors
and/or officers of the Company and/or any of the Subsidiaries whose principal
employment is as an officer and/or employee of Seller and/or Parent, shall
have resigned such directorships and/or such offices.
8.12 Transfer Taxes. Seller shall have caused all appropriate stock transfer
tax stamps to be affixed to the certificate or certificates representing the
Stock.
8.13 Seller Notes. Seller shall have made the payments contemplated by
Section 6.12 and repaid all amounts outstanding under any Seller Notes that
are still held by the Company and any Subsidiary together with any accrued but
unpaid interest thereon.
8.14 Leesburg Training Facility Amount. The Leesburg Training Facility
Amount shall have been paid, as provided in Section 6.13.
8.15 Guarantees. Parent shall have executed and delivered to Buyer a
guarantee for the benefit of IIC substantially in the form of Exhibit H and
Parent and Seller shall have executed and delivered to Buyer a guarantee for
the benefit of IIC substantially in the form of Exhibit I.
8.16 Management Investment. Members of the management of the Company and the
Subsidiaries designated by Buyer shall have invested in the capital stock of
Buyer on terms substantially consistent with the agreements in principle
delivered to Seller prior to the date hereof or otherwise satisfactory to
Buyer.
ARTICLE IX
ACTIONS BY PARENT, SELLER, AND BUYER AFTER THE CLOSING
9.1 Books and Records. Parent, Seller and Buyer agree that so long as any
books, records and files relating to the business, properties, assets or
operations of the Company or the Subsidiaries, to the extent that they pertain
to the operations of the Company or the Subsidiaries prior to the Closing
Date, remain in existence and available, each party (at its expense) shall
have the right to inspect and to make copies of the same at any time during
normal business hours for any proper purpose. Parent and Seller further agree
that, to the extent such records have not otherwise been delivered to the
Company or Buyer, Parent and Seller will not destroy or dispose of any
material books, records or files relating to the investment portfolio existing
as of the Closing Date without first offering to provide such books, records
or files to Buyer and that, in any event, Buyer shall have the right to
inspect and to make copies of the same at any time during normal business
hours for any proper purpose, to the extent reasonably requested by Buyer.
9.2 Covenants Regarding the Securities. In connection with any sale,
transfer or other disposition of all or any part of the Securities under an
exemption from registration under the Securities Act, if requested by Buyer,
Seller (or Parent, if such Securities are held by Parent) will deliver to
Buyer an opinion of counsel (which may be the General Counsel of Parent or, if
such Securities are held by Seller, of Seller), reasonably satisfactory in
form and substance to Buyer, that such exemption is available; provided,
however, that in case of any sale or other transfer of Securities to any
Person who is a qualified institutional buyer as defined in Rule 144A under
the Securities Act, no opinion of counsel shall be required if Seller (or
Parent, if such Securities are held by Parent) provides to Buyer an officer's
certificate to the effect that such Person is a qualified institutional buyer
as defined in Rule 144A under the Securities Act. Parent and Seller hereby
agree and acknowledge that upon original issuance thereof, and until such time
as the same is no longer required under the applicable requirements of the
Securities Act, the Securities (and all securities issued in exchange therefor
or substitution thereof) shall bear, until such restrictions are no longer
applicable, the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THEY MAY NOT BE SOLD
OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE
1933 ACT AND ANY APPLICABLE STATE BLUE SKY LAWS OR SECURITY LAWS OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM SUCH PROVISIONS."
Parent and Seller further agree and acknowledge that any Class 1 Stock
acquired in accordance with Section 11.3 shall also bear (until such time as
such restrictions are no longer applicable) the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL AND CERTAIN OTHER RESTRICTIONS ON TRANSFER AS SET FORTH IN THAT
CERTAIN STOCKHOLDERS AGREEMENT, BETWEEN TRG ACQUISITION CORPORATION AND XEROX
FINANCIAL SERVICES, INC., A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY
OF TRG ACQUISITION CORPORATION."
9.3 Crostex/Camfex Purchase Money Notes. Seller and Parent shall indemnify,
guaranty or otherwise post credit support pursuant to the covenant set forth
in Section 6.16 from and after the Closing.
9.4 Certain Employee Benefit Matters. (a) Parent and its Affiliates (other
than the Company, the Subsidiaries, Talegen and its subsidiaries) shall retain
all liabilities and obligations under the employee stock ownership plan
("ESOP") in which employees of the Company and the Subsidiaries participated
prior to January 1, 1993. All awards made to such participants under the ESOP
shall fully vest as of the Closing Date.
(b) Parent and its Affiliates (other than the Company, the Subsidiaries,
Talegen and its subsidiaries) shall retain all liabilities and obligations
under the Long Term Incentive Program attached as Attachment A and the Stock
Option Agreement attached as Exhibit A to the Employment Agreement among
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Parent and the Company and the five related agreements
with management of the Company or TRG (collectively, the "Long Term Incentive
Program") for the benefit of the participants listed on Schedule 9.4. All
payments due to such participants under the Long Term Incentive Program shall
be made at Closing.
(c) All payments due, at or before the Closing, under the Senior Management
Group Compensation Plan of the Company and IIC, any related agreements
thereto, the Plan Termination Agreement and General Release for the Senior
Management Group, the Plan Termination Agreement and General Release for
Banded Associates, the TRG Senior Management Long Term Incentive Compensation
Plan, the IIC Annual Compensation Plan for Banded Associates, the IIC Annual
Compensation Plan for the Senior Management Group and any related termination
agreements (collectively, the "TRG Incentive Plans") shall be made at or prior
to the Closing. After the Closing, Parent and its Affiliates shall retain all
remaining liabilities and obligations arising under the TRG Incentive Plans.
9.5 Transfer Taxes. Seller shall pay, or cause to be paid, all stock
transfer and other transfer taxes required to be paid in connection with the
sale and delivery to Buyer of the Stock.
9.6 Ridge Re. On and after the Closing Date, Parent and Seller shall cause
Ridge Re to refrain from (i) entering into any reinsurance or retrocession
agreement or treaty and (ii) engaging in any business other than in connection
with the Ridge Re Treaty and the other treaties referenced in the first
sentence of Section 4.9(c) of the Talegen Agreement as in effect on the date
hereof, provided that the obligations contained in this Section 9.6 shall
terminate upon consummation of the sale of Ridge Re to a Qualified Transferee.
9.7 Further Assurances. On and after the Closing Date, Parent, Seller, the
Company and Buyer will take all appropriate action and execute all documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the provisions hereof, including without
limitation, putting Buyer in possession and operating control of the business
of the Company.
ARTICLE X
INDEMNIFICATION
10.1 Survival of Representations and Warranties. Buyer has the right to rely
fully upon the representations, warranties, covenants and agreements of Parent
and Seller contained in this Agreement and the Ancillary Agreements. Parent
and Seller have the right to rely fully upon the representations, warranties,
covenants and agreements of Buyer contained in this Agreement and the
Ancillary Agreements. All such representations and warranties (including the
Schedules hereto and the certificates delivered in accordance with Sections
7.1 and 8.1 hereof, insofar as the Schedules and such certificates relate to
such representations and warranties) shall be deemed to be repeated at Closing
for purposes of this Article X and, except as set forth in the last sentence
of this Section, shall survive the execution and delivery hereof and the
Closing, and thereafter (i) in the case of the representations and warranties
contained in Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 and 4.18 hereof, such
representations and warranties shall survive without limitation as to time,
(ii) in the case of the representations and warranties contained in Sections
4.21, 4.24 and 4.28 hereof, such representations and warranties shall survive
until 90 days after the expiration of the applicable statute of limitations
with respect to the subject matter thereof and (iii) in the case of all other
representations and warranties, such representations and warranties shall
expire on the date two years following the Closing Date; provided, however,
that any representation or warranty shall survive the time it would otherwise
terminate pursuant to this Section to the extent that notice of a breach
thereof giving rise to a right of indemnification shall have been given by a
party hereto in accordance with Section 10.3 hereof prior to such time. All
of the covenants and agreements of the parties contained in this Agreement and
the Ancillary Agreements to be performed on or after the date of this
Agreement shall survive the Closing without limitation as to time.
Notwithstanding the foregoing, none of the following representations and
warranties (including the Schedules hereto and the certificates delivered in
accordance with Sections 7.1 and 8.1 hereof, insofar as the Schedules and such
certificates relate to such representations and warranties) shall survive the
Closing: (i) representations and warranties contained in Sections 4.16,
4.21(e), 4.21(h) and Article V; and (ii) representations and warranties
contained in any Section of Article IV and which relate to Excluded
Activities.
10.2 Indemnification. (a) Parent and Seller shall jointly and severally
defend, indemnify and hold harmless Buyer, the Company and their Affiliates
and each director and officer of such Persons against any loss, damage, claim,
liability, judgment or settlement of any nature or kind, including all costs
and expenses relating thereto, including without limitation, interest,
penalties and reasonable attorneys' fees (collectively "Damages"), arising out
of, resulting from or relating to:
(i) subject to Section 10.1, the breach of any representation or warranty
of Parent or Seller contained in this Agreement (other than in Section 4.18),
any Ancillary Agreement or any certificate delivered pursuant hereto or
thereto; provided, however, that such Persons shall be entitled to
indemnification hereunder only when the aggregate of all such Damages exceeds
$10,000,000 (in which event such Persons shall be entitled to indemnification
for all such Damages); provided, further, that Seller shall not be liable
under this clause (i) for an amount of Damages in excess of (x) $150,000,000
less an amount equal to Transaction Expenses plus (y) amounts received in cash
dividends on, and in respect of cash redemptions of, the Class 2 Stock;
(ii) the breach of any covenant or agreement (whether to be performed prior
to or after Closing) of Parent or Seller contained in this Agreement, any
Ancillary Agreement or any certificate delivered pursuant hereto or thereto;
(iii) any facts, circumstances, conditions, events or actions existing or
occurring at any time with respect to Constitution Re, First Quadrant and
Viking (as such terms are defined in the Talegen Agreement) and any subsidiary
of any of the foregoing (other than liabilities related to the business
represented by the First Quadrant Asset Sale (as defined in the Talegen
Agreement));
(iv) any Action brought by a security holder or creditor of Seller or
Parent in their capacity as such;
(v) long term incentive payments (including payments arising out of the
sale of the Company or the Excluded Business) payable to the Persons listed on
Schedule 10.2;
(vi) the breach of the representations and warranties contained in Section
4.18; and
(vii) any facts, circumstances, conditions, events or actions existing or
occurring after the Closing Date with respect to the Leesburg Training
Facility.
The foregoing provisions of this Section 10.2(a) shall not apply with respect
to any Damages arising out of (and no indemnification hereunder shall be
available with respect to) any (i) breach of any representation or warranty of
Parent or Seller that is terminated as provided in Section 10.1 (subject,
however, to the proviso contained in Section 10.1), (ii) breaches of the
representations and warranties of Parent and Seller contained in this
Agreement and the Ancillary Agreements which would result in the failure of
any of the conditions in Section 8.1 to be satisfied if Buyer had actual
knowledge of such breaches (or received notice thereof pursuant to Section
6.6) prior to the Closing Date, (iii) breach of any representation or warranty
contained in Section 4.21(h), (iv) breach of any representation or warranty to
the extent it relates to Excluded Activities, (v) action that breaches Section
6.3(c) to the extent such action relates to Excluded Activities (except if
such action is directed by Parent or Seller or, prior to or at the time taken,
an officer listed on Schedule 1.1B knew that such action was to be taken),
(vi) breach of any covenant to be performed prior to Closing to the extent it
relates to Excluded Activities, other than a breach of Section 6.1, 6.3(a),
6.3(b), 6.10 or 6.14, (vii) action that breaches Section 6.2 or Section 6.9
(except in each case if such action is directed by Parent or Seller or, prior
to or at the time taken, an officer listed on Schedule 1.1B knew that such
action was to be taken) or (viii) underfunding of Company Plans (including
fines and penalties assessed by governmental authorities relating thereto).
(b) For purposes of clause (i) of Section 10.2(a), (X) a "Material Adverse
Effect" (as such term is used in any representation or warranty contained in
Article IV other than the representations and warranties contained in Section
4.7(a)) shall be deemed to have occurred if the aggregate of all Damages
related to any such representation or warranty shall exceed $1 and (Y) the
representations and warranties contained in Sections 4.7, 4.13 and 4.15(b)
shall be read as if such representations and warranties do not include the
words "Knowledge of Seller".
(c) The term "Damages" as used in this Article X is not limited to matters
asserted by third parties against any Person entitled to be indemnified under
this Article X, but includes Damages incurred or sustained by any such Person
in the absence of third party claims.
(d) No claim for Damages under this Article X may be asserted or pursued by
any former Subsidiary against Parent or Seller, unless, prior to the date that
such former Subsidiary shall have ceased to be a "Subsidiary", such former
Subsidiary shall have delivered a Notice to Parent or Seller relating to such
claim.
10.3 Indemnification Procedures. (a) In the event that any Person shall
incur or suffer any Damages in respect of which indemnification may be sought
hereunder, such Person (the "Indemnitee") may assert a claim for
indemnification by written notice (the "Notice") to the party from whom
indemnification is being sought (the "Indemnitor"), stating the amount of
Damages, if known, and the nature and basis of such claim. In the case of
Damages arising or which may arise by reason of any third-party claim,
promptly after receipt by an Indemnitee of written notice of the assertion or
the commencement of any Action with respect to any matter in respect of which
indemnification may be sought hereunder, the Indemnitee shall give Notice to
the Indemnitor and shall thereafter keep the Indemnitor reasonably informed
with respect thereto, provided that failure of the Indemnitee to give the
Indemnitor prompt notice as provided herein shall not relieve the Indemnitor
of any of its obligations hereunder, except to the extent that the Indemnitor
is materially prejudiced by such failure. In case any such Action is brought
against any Indemnitee, the Indemnitor shall be entitled to assume the defense
thereof, by written notice of its intention to do so to the Indemnitee within
30 days after receipt of the Notice. If the Indemnitor shall assume the
defense of such Action, it shall not settle such Action without the prior
written consent of the Indemnitee, which consent shall not be unreasonably
withheld, provided that an Indemnitee shall not be required to consent to any
settlement that (i) does not include as an unconditional term thereof the
giving by the claimant or the plaintiff of a release of the Indemnitee from
all liability with respect to such Action or (ii) involves the imposition of
equitable remedies or the imposition of any material obligations on such
Indemnitee other than financial obligations for which such Indemnitee will be
indemnified hereunder. As long as the Indemnitor is contesting any such
Action in good faith and on a timely basis, the Indemnitee shall not pay or
settle any claims brought under such Action. Notwithstanding the assumption
by the Indemnitor of the defense of any Action as provided in this Section,
the Indemnitee shall be permitted to participate in the defense of such Action
and to employ counsel at its own expense; provided, however, that if the
defendants in any Action shall include both an Indemnitor and any Indemnitee
and such Indemnitee shall have reasonably concluded that counsel selected by
Indemnitor has a conflict of interest because of the availability of different
or additional defenses to such Indemnitee, such Indemnitee shall have the
right to select separate counsel to participate in the defense of such Action
on its behalf, at the expense of the Indemnitor; provided that the Indemnitor
shall not be obligated to pay the expenses of more than one separate counsel
for all Indemnitees, taken together.
(b) If the Indemnitor shall fail to notify the Indemnitee of its desire to
assume the defense of any such Action within the prescribed period of time, or
shall notify the Indemnitee that it will not assume the defense of any such
Action, then the Indemnitee may assume the defense of any such Action, in
which event it may do so acting in good faith in such manner as it may deem
appropriate, and the Indemnitor shall be bound by any determination made in
such Action, provided, however, that the Indemnitee shall not be permitted to
settle such action without the consent of the Indemnitor. No such
determination or settlement shall affect the right of the Indemnitor to
dispute the Indemnitee's claim for indemnification. The Indemnitor shall be
permitted to join in the defense of such Action and to employ counsel at its
own expense.
(c) Amounts payable by the Indemnitor to the Indemnitee in respect of any
Damages for which such party is entitled to indemnification hereunder shall be
payable by the Indemnitor as incurred by the Indemnitee.
(d) In the event of any dispute between the parties regarding the
applicability of the indemnification provisions of this Agreement, the
prevailing party shall be entitled to recover all Damages incurred by such
party arising out of, resulting from or relating to such dispute.
10.4 Insurance Proceeds and Tax Limitations. The amount of any Damages or
other liability for which indemnification is provided under this Agreement
shall be net of any amounts recovered or recoverable by the Indemnitee under
insurance policies with respect to such Damages or other liability and shall
be (i) increased to take account of any Tax cost incurred (grossed up for such
increase) by the Indemnitee arising from the receipt of indemnity payments
hereunder (unless such indemnity payment is treated as an adjustment to the
purchase price hereunder for tax purposes) and (ii) reduced to take account of
any Tax benefit realized by the Indemnitee arising from the incurrence or
payment of any such Damages or other liability. Such Tax cost or Tax benefit,
as the case may be, shall be computed for any year using the Indemnitee's
actual tax liability with and without (i) the incurrence or payment of any
Damages or other liability for which indemnification is provided under this
Agreement or (ii) the payment of any indemnification payments made pursuant to
this Agreement in such year. In the event that the Indemnitee will actually
realize a Tax cost or Tax benefit for a year(s) subsequent to the year in
which the indemnity payment is made, a payment in respect of such Tax cost or
Tax benefit shall be made in such subsequent year(s). Any indemnity payment
made pursuant to this Agreement will be treated as an adjustment to the
purchase price hereunder for Tax purposes, unless a determination (as defined
in Section 1313 of the Code) with respect to the Indemnitee causes any such
payment not to constitute an adjustment to the purchase price for United
States Federal income tax purposes.
10.5 Tax Indemnification. Notwithstanding anything to the contrary in this
Agreement, the rights and obligations of the parties with respect to
indemnification for any and all Tax matters (other than with respect to any
representations and warranties contained herein relating to Tax matters,
except to the extent Buyer is indemnified under the provisions of the Tax
Agreement) shall be governed by the Tax Agreement and shall not be subject to
this Article X, including any calculation pursuant to clause (i) of Section
10.2(a).
ARTICLE XI
MISCELLANEOUS
11.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned:
(a) by mutual consent of the parties; or
(b) by Parent and Seller, on the one hand, or Buyer, on the other hand, on
June 17, 1996 if it can be reasonably anticipated that the approvals referred
to in Section 4.11(i) cannot be obtained without the applicable regulatory
authorities imposing an additional material economic burden on Parent or
Seller, on the one hand, or Buyer, the Company and the Subsidiaries, taken as
a whole, on the other hand; or
(c) by Parent and Seller, on the one hand, or Buyer, on the other hand, if
the conditions to such parties' obligations set forth in Articles VII and
VIII, as the case may be, have not been satisfied (or waived by the party
entitled to the benefit thereof) on or before August 17, 1996; provided that
if the approvals referred to in Section 4.11(i) have not been obtained by
August 17, 1996, this Agreement shall not be terminated prior to October 17,
1996 if it can be reasonably anticipated that such approvals can be obtained
by October 17, 1996; or
(d) by Parent and Seller, on the one hand, or Buyer, on the other hand, if
the Talegen Agreement is terminated in accordance with its terms.
Upon termination of this Agreement pursuant to this Section 11.1, this
Agreement shall be void and of no further force and effect (except as provided
in the last sentence of this paragraph) and no party shall have any liability
to any other party under this Agreement unless such party has (a) willfully
failed to have performed its obligations hereunder or (b) knowingly made a
misrepresentation of any matter set forth herein. For purposes of the
immediately preceding sentence, with respect to obligations of the Company or
any Subsidiary to take or refrain from taking any action under this Agreement
or obligations of Parent or Seller to cause the Company or any Subsidiary to
take or refrain from taking any action under this Agreement, neither Parent
nor Seller shall be deemed to have "willfully failed" unless, in each case,
such action or failure to act is directed by Parent or Seller or occurs with
knowledge of an officer listed on Schedule 1.1B or 1.1C; provided that if such
action or failure is (X) not directed by Parent or Seller, (Y) occurs with the
knowledge of an officer listed on Schedule 1.1C and (Z) occurs without the
knowledge of an officer listed on Schedule 1.1B, Buyer shall recover only its
Third Party Expenses and Seller and Parent shall have no further liability
under this Agreement. For purposes of the second preceding sentence, neither
Parent nor Seller shall be deemed to have "knowingly" made a misrepresentation
unless an officer listed on Schedule 1.1B or 1.1C knows such representation is
untrue when made; provided that if a representation is known to be untrue when
this Agreement is executed by the parties hereto by an officer listed on
Schedule 1.1C but not by an officer listed on Schedule 1.1B, Buyer shall
recover only its Third Party Expenses and Seller and Parent shall have no
further liability under this Agreement. Notwithstanding a termination of this
Agreement, the provisions of Sections 11.2(b) and 11.11, the last sentences of
Sections 4.18 and 5.4 and the confidentiality provision of the proviso to
Section 6.4 hereof shall continue in full force and effect.
11.2 Confidentiality. (a) Parent and Seller shall assign to the Company at
or prior to, and with effect from and after the Closing, all of their
respective rights under the Confidentiality Agreement and under any other
confidentiality agreements with third Persons relating to the business of the
Company or any of the Subsidiaries.
(b) Except as otherwise required by law (including if required by any stock
exchange on which any of the securities of any party or their respective
Affiliates are listed or by any securities commission or similar regulatory
authority having jurisdiction over any such party or any of its Affiliates),
Buyer, Seller and Parent shall keep confidential all aspects of the
transactions contemplated hereby, including the fact that this Agreement has
been executed. Notwithstanding the foregoing or the terms of the
Confidentiality Agreement, Buyer and its Affiliates and Seller, Parent and
their respective Affiliates may disclose information concerning the
transactions contemplated hereby in connection with the financing of such
transactions by Buyer, to potential equity investors in Buyer or any of its
Affiliates, as necessary to obtain any consents referenced in Section 8.2 and,
in the case of Parent, as it, in its sole discretion, deems appropriate in
light of its status as a Person with public stockholders. The parties will
use their reasonable efforts to make the release to be issued announcing the
Closing a mutually acceptable joint release. Before issuing any other press
release with respect to the transactions contemplated by this Agreement, the
parties will use reasonable efforts to provide each other with a reasonable
opportunity to review and comment on any such announcement.
11.3 Parent Option. (a) Parent and/or Seller shall have the right to
purchase up to an aggregate of 19.9% of the Class 1 Stock immediately prior to
the Closing for a per share purchase price equal to the per share purchase
price paid or payable by other stockholders of Buyer on or prior to the
Closing Date. Parent and/or Seller shall pay the aggregate purchase price for
any shares to be purchased pursuant to this Section in cash, payable by wire
transfer in immediately available funds to an account which Buyer shall
designate in writing to Parent no less than two business days prior to the
Closing Date. To exercise such right, Parent and/or Seller must deliver
irrevocable written notice to Buyer within 45 days from the date hereof which
indicates the percentage interest (after giving effect to its purchase) of
Class 1 Stock that Parent and/or Seller desire to purchase hereunder, but not
to exceed an aggregate of 19.9% (which irrevocable notice shall bind Parent,
subject to the last sentence of this Section, to make such purchase on the
Closing Date). No such notice shall be effective unless Parent and/or Seller
concurrently delivers a notice under Section 11.3 of the Talegen Agreement
which indicates Parent's and/or Seller's election to purchase the same
aggregate percentage interest in the securities covered by the election
thereunder that Parent and/or Seller elect to purchase hereunder.
Notwithstanding the foregoing, if this Agreement is terminated pursuant to
Section 11.1, Parent and Seller shall cease to have the right to purchase
Class 1 Stock hereunder, whether or not their rights had been previously
exercised, and any notice which shall have been delivered pursuant to this
Section shall be void and of no effect.
(b) Any Class 1 Stock purchased by Parent and/or Seller pursuant to paragraph
(a) above shall be subject to the terms and conditions set forth in Exhibit J.
11.4 Assignment. Neither this Agreement nor any of the rights or obligations
hereunder may be assigned by Parent or Seller without the prior written
consent of Buyer, or by Buyer without the prior written consent of Parent or
Seller. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, and no other Person shall have any right, benefit or obligation
hereunder.
11.5 Notices. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the others
shall be in writing and delivered in Person or by courier or facsimile
transmission or mailed by certified mail, postage prepaid, return receipt
requested (such mailed notice to be effective on the date such receipt is
acknowledged), as follows:
If to Parent or Seller:
Xerox Financial Services, Inc.
First Stamford Place
Stamford, Connecticut 06904-2347
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Chairman & Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
Xerox Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇, Esq. and
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer:
TRG Acquisition Corporation
▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Talegen Holdings, Inc.
Waterfront Center ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other place and with such other copies as either party may
designate as to itself by written notice to the others.
11.6 Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the internal laws of the
State of New York, without regard to the conflict of law principles thereof.
11.7 Entire Agreement; Amendments and Waivers. This
Agreement, together with the Ancillary Agreements and the Confidentiality
Agreement (except to the extent superseded hereby), constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No supplement, modification or
waiver of this Agreement (including, without limitation, any Schedule hereto)
shall be binding unless executed in writing by all parties. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
With respect to breaches of any representation, warranty or covenant contained
herein, unless this Agreement shall have been terminated pursuant to Section
11.1, the sole remedy of the parties against each other shall be the
indemnification rights set forth in Section 10.2.
11.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.9 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
11.10 Headings. The headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.11 Expenses. Subject to Section 11.1, Seller and Buyer will each be
liable for its own costs and expenses incurred in connection with the
negotiation, preparation, execution or performance of this Agreement.
11.12 [Intentionally Omitted].
11.13 Joint and Several. All covenants, representations and warranties made
by Parent or Seller in this Agreement shall be deemed to be joint and several
covenants, representations and warranties of Parent and Seller.
11.14 No Third Party Beneficiaries. This Agreement shall inure exclusively
to the benefit of and be binding upon the parties hereto and their respective
successors, assigns, executors and legal representatives. Except as expressly
provided in Section 10.2, nothing in this Agreement, express or implied, is
intended to confer on any Person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or 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.
XEROX CORPORATION
▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
XEROX FINANCIAL SERVICES, INC.
▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman, President and Chief Executive Officer
TRG ACQUISITION CORPORATION
▇▇▇▇ ▇. ▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇
Title: President and Chief Executive Officer