EXECUTION COPY
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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
UICI
AND
SLM CORPORATION
FOR
ALL ISSUED AND OUTSTANDING SHARES OF
ACADEMIC MANAGEMENT SERVICES CORP.
DATED AS OF OCTOBER 29, 2003
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TABLE OF CONTENTS
PAGE
Execution Copy i
Section 1. DEFINITIONS........................................... 1
1.1 Definitions........................................... 1
1.2 Cross Reference Table................................. 7
1.3 Certain Matters of Construction....................... 8
Section 2. PURCHASE AND SALE OF THE SHARES; CLOSING.............. 8
2.1 Purchase and Sale..................................... 8
2.2 Closing Transactions.................................. 9
2.3 Determination of Closing Date Net Worth............... 9
2.4 Additional Purchase Price Adjustments................. 11
Section 3. REPRESENTATIONS AND WARRANTIES CONCERNING THE
COMPANY AND THE SELLER................................ 11
3.1 Organization.......................................... 11
3.2 Capitalization and Ownership of the Company........... 11
3.3 Authorization of Transaction.......................... 12
3.4 Noncontravention...................................... 12
3.5 Title................................................. 13
3.6 Brokers' Fees......................................... 13
3.7 Title to Assets....................................... 13
3.8 Subsidiaries.......................................... 13
3.9 Financial Statements.................................. 14
3.10 Liabilities........................................... 14
3.11 Absence of Certain Changes and Events................. 15
3.12 Legal and Other Compliance............................ 15
3.13 Taxes................................................. 15
3.14 Property, Plant and Equipment......................... 17
3.15 Intellectual Property................................. 18
3.16 Contracts............................................. 19
3.17 Insurance and Risk Management......................... 20
3.18 Litigation............................................ 21
3.19 Employees............................................. 21
3.20 Employee Benefits..................................... 22
3.21 Environment, Health, and Safety....................... 23
TABLE OF CONTENTS
(continued)
3.22 Affiliated Transactions............................... 24
3.23 No Illegal Payments, Etc.............................. 24
3.24 Bank Accounts......................................... 24
3.25 All Assets Necessary to Conduct Business.............. 24
3.26 Disclosure............................................ 25
3.27 Tuition Payment Plans................................. 25
3.28 Private Loan Portfolio................................ 25
Section 4. REPRESENTATIONS AND WARRANTIES CONCERNING THE
PURCHASER............................................. 25
4.1 Organization of the Purchaser......................... 25
4.2 Authority for Agreement............................... 25
4.3 Noncontravention...................................... 26
4.4 Litigation............................................ 26
4.5 Brokers' Fees......................................... 26
4.6 Accredited Investor Status, Etc....................... 26
Section 5. PRE-CLOSING COVENANTS................................. 26
5.1 General............................................... 26
5.2 Notices and Consents.................................. 27
5.3 Operation of Business................................. 27
5.4 Preservation of Business.............................. 28
5.5 Full Access........................................... 29
5.6 Notice of Developments................................ 29
5.7 Financial Statements.................................. 29
5.8 Tax Elections......................................... 29
5.9 Payoff of Existing Financing Agreements............... 30
5.10 Payment of Employee Bonuses........................... 30
Section 6. CONDITIONS TO OBLIGATION TO CLOSE..................... 30
6.1 Conditions to Obligation of the Purchaser............. 30
6.2 Conditions to Obligations of the Seller............... 33
Section 7. INDEMNIFICATION....................................... 34
7.1 Survival of Representations and Warranties............ 34
7.2 Indemnity by the Seller............................... 35
7.3 Indemnity by the Purchaser............................ 36
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TABLE OF CONTENTS
(continued)
7.4 Payment............................................... 37
7.5 Matters Involving Third Parties....................... 37
7.6 Exclusive Remedy...................................... 38
7.7 No Offset............................................. 38
7.8 Certain Waivers....................................... 38
Section 8. TERMINATION........................................... 39
8.1 Termination of Agreement.............................. 39
8.2 Effect of Termination................................. 39
Section 9. MISCELLANEOUS......................................... 39
9.1 Press Releases and Public Announcements............... 39
9.2 Tax Matters........................................... 40
9.3 Non-Compete; Non-Solicitation; Confidentiality........ 44
9.4 Post-Closing Company Loan Purchase Obligations........ 45
9.5 Cooperation........................................... 46
9.6 Third Party Beneficiaries............................. 46
9.7 Entire Agreement...................................... 46
9.8 Succession and Assignment............................. 46
9.9 Counterparts.......................................... 46
9.10 Headings.............................................. 46
9.11 Limitation on Confidentiality......................... 46
9.12 Notices............................................... 47
9.13 Governing Law......................................... 48
9.14 Amendments and Waivers................................ 48
9.15 Severability.......................................... 48
9.16 Expenses.............................................. 48
9.17 Remedies.............................................. 49
9.18 Construction.......................................... 49
9.19 Generally Accepted Accounting Principles.............. 49
9.20 Delivery by Facsimile................................. 49
9.21 Payment Set Aside..................................... 49
9.22 Incorporation of Exhibits and Schedules............... 50
9.23 Specific Performance.................................. 50
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TABLE OF CONTENTS
(continued)
9.24 Further Assurances.................................... 50
9.25 Waiver of Jury Trial.................................. 50
9.26 Dispute Resolution.................................... 50
9.27 401(k) Plan Elections and Loans....................... 51
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
October 29, 2003, by and between UICI, a Delaware corporation (the "Seller") and
SLM Corporation, a Delaware corporation (the "Purchaser"). The Seller and the
Purchaser are referred to herein collectively as the "Parties" and individually
as a "Party."
WHEREAS, the Seller owns all of the issued and outstanding
capital stock (the "Shares") of Academic Management Services Corp., a Delaware
corporation (the "Company"); and
WHEREAS, pursuant to the terms and conditions set forth in
this Agreement, the Purchaser desires to acquire from the Seller, and the Seller
desires to sell the Purchaser, all of the Shares.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, agree as follows:
Section 1 DEFINITIONS.
1.1 Definitions. The following terms shall have the following
meanings:
"Action" means any action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand.
"Affiliate" shall mean, as to any specified Person at any time, any
other Person that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person (for the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with") as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise).
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a) or any analogous combined, consolidated or unitary group
defined under a similar provision of state, local, or foreign law.
"Cash" means cash and cash equivalents.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Intellectual Property" means all Intellectual Property that is
owned by, registered in the name of, licensed by, used or held for use by, or
controlled by, in whole or in part, the Company or any of it Subsidiaries.
"Confidential Information" means all information of a confidential or
proprietary nature (whether or not specifically labeled or identified as
"confidential"), in any form or medium, that relates to the Company or its
Subsidiaries or their business relations and their respective business
activities. Confidential Information includes, but is not limited to, the
following: (i) internal business information (including information relating to
strategic and staffing plans and practices, business, training, marketing,
promotional and sales plans and practices, cost, rate and pricing structures and
accounting and business methods); (ii) identities and individual requirements
of, and specific contractual arrangements with, the Company's and its
Subsidiaries' joint venture partners and other business relations and their
confidential
information; (iii) trade secrets, know-how, compilations of data and analyses,
techniques, systems, formulae, research, records, reports, manuals,
documentation, models, data and data bases relating thereto; and (iv)
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable).
"Contractual Obligation" shall mean, with respect to any Person, any
written or oral contract, agreement, deed, mortgage, lease, license, commitment,
guaranty, indenture, undertaking, arrangement or understanding or other document
or instrument including, without limitation, any document or instrument
evidencing or otherwise relating to any Indebtedness, but excluding the charter
and by-laws of such Person, to which or by which such Person is a party or
otherwise subject or bound, or to which or by which any property or right of
such Person is subject or bound.
"Derivative Obligations" means all obligations of any Person in respect
of any swap transaction (including any interest rate swap, currency swap, basis
swap, commodity swap or equity swap), any option transaction (including any
interest rate option, bond option or equity option), any foreign exchange
transaction, cap, collar or floor transaction, or any other similar transaction
or any combination of the foregoing.
"▇▇▇▇▇▇▇ Money Deposit" shall mean an ▇▇▇▇▇▇▇ money deposit in the
amount of Two Million Dollars ($2,000,000) deposited by the Purchaser with the
Seller in accordance with the Letter of Intent.
"Employee Benefit Plan" means any pension, profit sharing, retirement,
deferred compensation, stock purchase, stock option, stock appreciation, phantom
stock or other equity based arrangement, incentive, bonus, performance,
vacation, termination, retention, change of control, severance, golden
parachute, disability, hospitalization, medical, dental, vision, disability,
life insurance, cafeteria, flexible spending account, or other employee benefit
plan, program, policy, or arrangement, including without limitation, any
"employee benefit plan" (as defined under Section 3(3) of ERISA), which the
Company or any ERISA Affiliate maintains, or contributes to or with respect to
which the Company or ERISA Affiliate has any liability, whether or not such
plans, programs or arrangements are intended to be (1) covered or qualified
under the Code, ERISA or any other applicable law of any jurisdiction, (2)
written or oral, (3) funded or unfunded, (4) absolute or contingent, or (5)
generally available to any or all employees (including former employees) of the
relevant employer, or their beneficiaries or dependents.
"Encumbrance" means any lien, charge, claim, restriction, easement,
mortgage, pledge, security interest, encroachment or encumbrance of any kind.
"Environmental and Safety Requirements" shall mean, whenever enacted or
in effect, all federal, state, local and foreign statutes, regulations,
ordinances and other provisions having the force or effect of law, all judicial
and administrative orders and determinations, all contractual obligations and
all common law, in each case concerning public health and safety, worker health
and safety, pollution, or protection of the environment (including, without
limitation, all those relating to the presence, use, production, generation,
handling, transport, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control or cleanup
of any hazardous or otherwise regulated materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise, radiation or radon), each as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA Affiliate" means any entity that, together with the Company, is
or has within the preceding six calendar years been treated as a single employer
under Section 414 of the Code or Section 4001 of ERISA.
"Existing Financing Agreements" means all agreements entered into, and
currently in effect, between the Company and ▇▇▇▇▇▇.
"Fully Indemnified Reps" means the representations and warranties of
the Seller contained in Sections 3.1 (Organization), 3.2 (Capitalization;
Ownership of Company), 3.3 (Authorization of Transaction), 3.4
(Noncontravention) and 3.5 (Title).
"GAAP" means, with respect to any Person, United States generally
accepted accounting principles as in effect from time to time, applied by such
Person on a consistent basis in accordance with its past practice.
"Government or Governmental Authority" means any federal, state, local,
foreign, international, multinational or other government and any political
subdivision thereof or any entity exercising executive, legislative, judicial,
regulatory or administrative functions of government including, without
limitation, the Securities and Exchange Commission.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Income Tax" or "Income Taxes" shall mean any federal, state, local or
foreign income tax (or franchise or excise tax based on income), including a tax
assessed on a corporation by reference to its income, gains or profits, and in
each instance, any interest, penalties or additions to tax attributable to such
tax.
"Indebtedness" means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (including trade payable,
amounts owned to suppliers, year end bonuses, management and other fees and
other current liabilities incurred in the Ordinary Course of Business which are
past due) including any Liability (whether earn-outs, indemnity payments,
non-compete payments, consulting payments, retention bonuses, severance payments
or other similar payments, or otherwise), that may be payable as a result of or
in connection with any acquisition of, or investments in, or sale to another
Person or the consummation of any of the transactions contemplated hereby, (iv)
any commitment by which a Person assures a creditor against loss (including
contingent reimbursement obligations with respect to letters of credit), (v) any
indebtedness guaranteed in any manner by a Person (including guarantees in the
form of an agreement to repurchase or reimburse), (vi) any obligations under
capitalized leases with respect to which a Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or with respect to which
obligations a Person assures a creditor against loss, (vii) any indebtedness
secured by an Encumbrance on a Person's assets, (viii) all Liabilities created
or arising under any conditional sale or other retention agreement with respect
to property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), and (ix) any unsatisfied obligation for
"withdrawal liability" to a "multi-employer plan" as such terms are defined
under ERISA.
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"Intellectual Property" means patents, copyrights, Trademarks,
proprietary models, mask works, Internet domain names and trade secrets, and all
registrations or applications for registration of any of the foregoing.
"I.R.S." means the United States Internal Revenue Service.
"Knowledge" means (i) with respect to an individual, such individual's
actual knowledge and awareness; and (ii) with respect to a corporation,
partnership, limited liability company or other entity, the knowledge (as
defined in clause (i)) of its senior managers and key employees (which with
respect to Seller shall consist solely of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇).
"Legal Requirement" means any requirement arising under statute, rule,
regulation, by-law, ordinance, circular, code, order, demand, notice,
resolution, injunction, judgment, decree, ruling, constitution, ordinance,
treaty, order or other determination, direction or act of any arbitrator or
Government or Governmental Authority, including any Environmental and Safety
Requirements.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ Brothers Bank, FSB and its Affiliates.
"Letter of Intent" means the letter of intent from SLM Corporation and
accepted and agreed to by the Seller and the Company, dated as of September 29,
2003, as amended on October 15, 2003.
"Liability" means any liability, debt, deficiency, penalty, fine,
claim, cause of action, obligation to pay money or other loss, cost or expense
of any kind or nature whatsoever (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, whether incurred or consequential and
whether due or to become due and regardless of when asserted).
"Material Adverse Effect" means, with respect to any Person, a change
in, or effect on, the financial condition, results of operations, assets,
Liabilities that, individually or together with all other such changes or
effects has had or is reasonably likely to result in a material adverse effect
on, or a material adverse change in, such Person and its Subsidiaries taken as a
whole or has impaired or would impair the ability of a Person to consummate the
transactions contemplated by the Transaction Documents; provided that such an
effect shall not include the effect of general economic changes, or changes in
the U.S. financial markets generally, or legislative or regulatory changes that
generally affect the business of marketing, originating, funding, holding and
servicing student loans or providing tuition payment plans.
"Members of the Immediate Family" shall mean, with respect to any
individual, each parent, sibling, spouse or child or other descendants of such
individual, each trust created for the primary benefit of one or more of the
aforementioned Persons and their spouses and each custodian or guardian of any
property of one or more of the aforementioned Persons in its capacity as such
custodian or guardian.
"Most Recent Balance Sheet" means the balance sheet for the Most Recent
Interim Period.
"Most Recent Financial Statements" means the audited Financial
Statements for the Most Recent Fiscal Year End.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Operating Taxes" shall mean all Taxes other than Income Taxes.
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"Ordinary Course of Business" means with respect to any Person, the
ordinary course of business of such Person consistent with its past custom and
practice (including with respect to quantity and frequency).
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, Government or Governmental Authority or
other entity.
"Post-Closing Tax Period" shall mean all taxable periods (or portions
thereof) that begin after the Closing Date.
"Pre-Closing Tax Period" shall mean all taxable periods (or portions
thereof) ending on or before the Closing Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Securitization Entities" means the entities identified as such on
Section 3.8 of the Disclosure Schedule.
"Securitization Transactions" means any transaction or series of
transactions that have been or may be entered into by the Company, any of its
Subsidiaries or the Securitization Entities in connection with, or reasonably
related to, a transaction or series of transactions pursuant to which the
Company or any of its Subsidiaries may or did sell, convey or otherwise transfer
to (i) a bankruptcy remote Subsidiary or (ii) any other Person any student loans
(whether now existing or arising in the future) of the Company or any of its
Subsidiaries, and any assets related thereto, including, without limitation, all
collateral securing such student loans, all Contractual Obligations and rights
thereunder and all guarantees or other obligations in respect of such student
loans, proceeds of such student loans and other assets (including rights
pursuant to Contractual Obligations).
"Shared Facilities Servicing Agreement" means the Shared Facilities
Servicing Agreement to be entered into by and between the Seller and the Company
in a form mutually acceptable to each of the Parties at Closing, providing for
the continued provision by the Seller and its Affiliates of certain information
technology services to the Company.
"Straddle Period" shall mean any taxable period that includes (but does
not end on) the Closing Date. In the case of any real property, personal
property and other similar Taxes for a Straddle Period, the amount of such Taxes
to be allocated to the Pre-Closing Tax Period shall equal the amount of such
Taxes for the entire Straddle Period multiplied by a fraction, the numerator of
which is the number of days during the Straddle Period up to and including the
Closing Date and the denominator of which is the number of days in the Straddle
Period and the remainder of such Taxes for such Straddle Period shall be
allocated to the Post-Closing Tax Period. In the case of all other Taxes for a
Straddle Period, such Taxes shall be allocated to the Pre-Closing Tax Period as
if the Straddle Period ended at the close of business on the Closing Date and
shall be allocated to the Post-Closing Tax Period as if a new Tax period began
on the day after the Closing Date.
"Subsidiary" means with respect to any Person, (i) any corporation at
least a majority of whose outstanding voting stock is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
person and one or more of its Subsidiaries, (ii) any partnership, limited
liability company, trust, joint venture or similar entity, at least a majority
of whose outstanding partnership,
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membership or similar interests shall at the time be owned by such Person, or by
one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries and (iii) any limited partnership or limited liability company of
which such Person or any of its Subsidiaries is a general or limited partner or
managing member. For the purposes of this definition, "voting stock" means
shares, interests, participations or other equivalents in the equity interest
(however designated) in such Person having ordinary voting power for the
election of a majority of the directors (or the equivalent) of such Person,
other than shares, interests, participations or other equivalents having such
power only by reason of contingency. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a limited liability
company, partnership, trust, association or other business entity if such Person
or Persons shall be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses or shall be or
control any managing member or general partner of such limited liability
company, partnership, association or other business entity. (For avoidance of
doubt, the Securitization Entities are Subsidiaries of the Company.) Any
Subsidiary of Company may be referred to herein as a Company Subsidiary.
"Tax" or "Taxes" means any (A) federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other withholding, or
other tax, of any kind whatsoever, whether computed on a separate or
consolidated, unitary or combined basis or in any other manner, including any
interest, penalties or additions to tax or additional amounts in respect of the
foregoing; (B) liability of the Company for the payment of any amounts of the
type described in clause (A) arising as a result of being (or ceasing to be) a
member of any Affiliated Group (or being included (or required to be included)
in any Tax Return relating thereto); and (C) liability of the Company for the
payment of any amounts of the type described in clause (A) as a result of any
express or implied obligation to indemnify or otherwise assume or succeed to the
liability of any other person.
"Tax Benefit" means any refund, credit or reduction in otherwise
required Tax payments, including any interest payable thereon, actually realized
by a taxpayer.
"Tax Returns" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information, and amended returns) filed or required to
be filed in connection with the determination, assessment or collection of Taxes
of any party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Trademarks" means any trademarks, service marks, trade dress, and
logos, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith.
"Transaction Documents" means this Agreement, the Transition Services
Agreement, the Loan Servicing Agreement, the UICI Note Cancellation Agreement,
Shared Facilities Services Agreement, Loan Purchase Agreement, the documents
identified on Section 6 of the Disclosure Schedule and each other certificate,
instrument or document to be executed and delivered pursuant to this Agreement.
"UICI Advance" means any advance or advances made on or after July 24,
2003 by Seller to the Company or a Securitization Entity for the purpose of
funding disbursements on student loans not funded pursuant to the Existing
Financing Agreement.
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"UICI Note" means the promissory note, dated as of October 1, 2001 of
the Company made payable to the Seller and of which approximately $7.5 million
in principal is outstanding as of the date hereof.
"Waiver and Release Agreements" means (i) that certain Release
Agreement, dated as of July 24, 2003, by and among MBIA Insurance Corporation,
Fleet National Bank, Bank of America, N.A., Bank One, National Association, the
Seller and the Company, (ii) that certain Letter Agreement, dated July 24, 2003,
by and among the Seller, MBIA Insurance Corporation, Fleet National Bank, Bank
of America, N.A. and Bank One, National Association, (iii) that certain Waiver,
dated as of July 24, 2003, by and among MBIA Insurance Corporation, Bank One,
National Association, EFG-II, LP and the Company, (iv) that certain Waiver,
dated as of July 24, 2003, by and among MBIA Insurance Corporation, Fleet
National Bank, Bank of America, N.A., Bank One, National Association, EFG-III,
LP, the Seller and the Company, (v) that certain Waiver, dated as of July 24,
2003, by and among MBIA Insurance Corporation, Bank One, National Association,
EFG-IV, LP and the Company, as amended by Amendment No. 1 thereto, dated October
17, 2003, and (vi) that certain Waiver, dated as of July 24, 2003, by and among
MBIA Insurance Corporation, Bank One, National Association, AMS-1 2002 LP and
the Company, as amended by Amendment No. 1 thereto, dated October 17, 2003.
1.2 Cross Reference Table. The following terms defined elsewhere
in this Agreement in the Sections set forth shall have the respective meanings
therein defined:
TERM SECTION
---- -------
Accountant 2.3
Agreement Preamble
AMSI 5.8(b)
Business 9.3(a)
CERCLA 3.21(b)
Closing 2.2(a)
Closing Date 2.2(a)
Closing Date Net Worth 2.3
Closing Transactions 2.2(b)
Common Stock 3.2
Company Recitals
Company Loss 7.2(c)
Company Parties 7.8(a)
Consents 3.4
Disclosure Schedule Section 3
Dispute 9.26
Dispute Notice 2.3
DOJ 6.1(i)
Financial Statements 3.9
FTC 6.1(i)
Indemnified Party 7.5(a)
Indemnifying Party 7.5(a)
Indirect Loss 7.2(c)
Initial Net Worth Calculation 2.3
Insider 3.22
Leases 3.14(b)
Leased Real Property 3.14(b)
Losses 7.2(a)
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▇▇▇▇-to-Market Filings 5.8(b)
Most Recent Fiscal Year End 3.9
Most Recent Interim Period 3.9
Net Worth Shortfall 2.3
Owned Real Property 3.14(a)
Parties Preamble
Preferred Stock 3.2
Property Restrictions 3.14(a)
Purchase Price 2.1(b)
Purchase Tax Act 9.2(b)
Purchaser Preamble
Real Property 3.14(a)
Representatives 9.26(a)
Restrictive Covenants 9.3(d)
Seller Preamble
Seller Parties 7.8(a)
Seller's DC Plan 9.27
Shares Recitals
SWDA 3.2(b)
Tax Contest 9.2(e)
Third Party Claim 7.5(a)
Transaction Expenses 9.16
Waiver 3.13(g)
1.3 Certain Matters of Construction. In addition to the
definitions referred to as set forth above in this Section 1:
(a) The words "hereof," "herein," "hereunder" and words
of similar import shall refer to this Agreement as a whole and not to any
particular Section or provision of this Agreement, and reference to a particular
Section of this Agreement shall include all subsections thereof.
(b) Definitions shall be equally applicable to both the
singular and plural forms of the terms defined, and references to the masculine,
feminine or neuter gender shall include each other gender.
(c) Accounting terms used herein and not otherwise
defined herein are used herein as defined by GAAP in the United States in effect
as of the date hereof.
Section 2 PURCHASE AND SALE OF THE SHARES; CLOSING.
2.1 Purchase and Sale.
(a) Basic Transaction. On the basis of the
representations, warranties, covenants, and agreements herein, and subject to
the satisfaction or waiver of the conditions set forth herein and the terms
hereof, at the Closing, the Purchaser shall purchase from the Seller, and the
Seller shall sell, assign, transfer and deliver to the Purchaser, all issued and
outstanding Shares owned and/or held by the Seller, in each case free and clear
of any and all Encumbrances, for a purchase price as set forth in Section 2.1(b)
below.
8
(b) Purchase Price. The aggregate purchase price for the
Shares (the "Purchase Price") shall be Seventy Million Dollars ($70,000,000),
subject to adjustment as provided in Sections 2.3 and 2.4 hereof.
(c) Transition Services. The Company and the Seller shall
enter into the Transition Services Agreement in the form attached hereto as
Exhibit A.
(d) Shared Facilities Services. The Company and the
Seller shall enter into the Shared Facilities Services Agreement in a form
mutually acceptable to each of the Parties.
(e) Loan Purchase Agreement. The Company and EFG III, LP
shall enter into the Loan Purchase Agreement in the form attached hereto as
Exhibit G.
(f) Loan Servicing. The Company and the Seller shall
enter into the Loan Servicing Agreement in the form attached hereto as Exhibit
C.
2.2 Closing Transactions.
(a) Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, commencing at
10:00 a.m. local time on a date mutually agreed to by the Parties following the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing itself),
which shall be a business day between November 14, 2003 and November 20, 2003
(inclusive), or at such other place or on such other date as may be mutually
agreeable to the Purchaser and the Seller. The date and time of the Closing are
herein referred to as the "Closing Date."
(b) Closing Transactions. Subject to the conditions set
forth in this Agreement, the Parties shall consummate the following transactions
(the "Closing Transactions") on the Closing Date:
(i) the Purchaser shall deliver to the Seller
the Purchase Price less the ▇▇▇▇▇▇▇ Money Deposit by wire
transfer of immediately available funds to an account
designated by the Seller prior to the Closing;
(ii) the Seller shall deliver to the Purchaser
the certificates in the Seller's name representing the Shares,
free and clear of any and all Encumbrances, duly endorsed in
blank or accompanied by duly executed stock powers, with
appropriate transfer stamps (if any) affixed thereto;
(iii) the Seller and the Purchaser, as applicable,
shall deliver the opinions, certificates and other documents
and instruments required to be delivered by or on behalf of
such Party under Section 6 below; and
(iv) the Seller shall deliver to the Purchaser
all corporate books and records and other property of the
Company in its possession.
2.3 Determination of Closing Date Net Worth.
(a) If and to the extent the Closing Date Net Worth (as
defined below), is finally determined in accordance with this Section 2.3 to be
less than $13.5 million (the amount of such
9
deficiency being the "Net Worth Shortfall"), Seller shall pay to the Purchaser
the Net Worth Shortfall by wire transfer of immediately available funds within
three (3) business days of such final determination to an account specified by
Purchaser reasonably in advance of such payment date. Any such Net Worth
Shortfall shall be deemed an adjustment to the Purchase Price.
(b) Within seventy-five (75) days after the Closing Date,
Purchaser may provide to Seller a written calculation of the Closing Date Net
Worth (the "Initial Net Worth Calculation"). In the event that the Purchaser
does not provide the Initial Net Worth Calculation within seventy-five (75) days
of the Closing Date, no adjustment to the Purchase Price shall be made pursuant
to this Section 2.3. In the event the Initial Net Worth Calculation is timely
delivered by Purchaser to Seller under this Section 2.3, and Seller disagrees
with the calculation of the Closing Date Net Worth set forth in the Initial Net
Worth Calculation, Seller shall notify Purchaser in writing of its disagreement
(the "Dispute Notice") setting forth Seller's calculation of the Closing Date
Net Worth in reasonable detail. In the event Seller does not provide to
Purchaser a Dispute Notice within thirty (30) days after the date of receipt by
Seller of the Initial Net Worth Calculation, the Closing Date Net Worth as set
forth in the Initial Net Worth Calculation shall become final and conclusive for
purposes of this Section 2.3. Following delivery of the Initial Net Worth
Calculation, Purchaser shall, and shall cause the Company to, provide Seller and
Seller's representatives reasonable access to the Company's books, records and
employees as necessary to facilitate Seller's review of the Purchaser's
calculation of Closing Date Net Worth.
(c) Purchaser and Seller shall in good faith attempt to
resolve any dispute for which a Dispute Notice is timely delivered within ten
(10) days following the delivery of the Dispute Notice. If Purchaser and Seller
are unable to resolve any such dispute within such 10-day period, then the
parties shall promptly submit the matter to an independent, nationally
recognized accounting firm mutually acceptable to Purchaser and Seller (the
"Accountant"). Each Party shall as promptly as practicable furnish to the
Accountant such work papers and other documents and information relating to the
disputed calculation of the Closing Date Net Worth as the Accountant may
reasonably request and as are available to such Party and shall be afforded the
reasonable opportunity to present to the Accountant any material relating to the
Accountant's determination and to discuss the determination with the Accountant.
The Accountant shall determine the Closing Date Net Worth as promptly as
practicable, but in any event within forty-five (45) days after the date on
which the disputed issue is submitted to the Accountant. The determination of
the Closing Date Net Worth by the Accountant shall be set forth in a written
statement to the Parties and shall be final, binding and conclusive for all
purposes under this Agreement. The Party whose calculation of Closing Date Net
Worth is farthest from that determined by the Accountant shall be liable to pay
the Accountant's fees and expenses.
(d) For purposes of this Section 2.3, "Closing Date Net
Worth" shall mean the following calculation, determined as of the Closing Date
in accordance with GAAP (except as set forth below): the excess of the Company's
total assets over its total liabilities, (i) minus goodwill, deferred tax
assets, deferred loan origination costs, deferred financing costs, and (ii) plus
the outstanding balance of the UICI Note (including accrued interest thereon),
accrued dividends payable to the Seller, the deferred loan origination fee with
respect to the uninsured loans, and any intercompany Liabilities that would
otherwise have been accrued by the Company in the Ordinary Course of Business,
but were released by or paid or payable by the Seller pursuant to the terms of
this Agreement, and without taking into account (x) any reserve write-down of
uninsured loans or the TuitionGard loans, (y) the payment of the Four Million
Five Hundred Thousand Dollar ($4,500,000) liability payable to ▇▇▇▇▇▇ in
connection with the termination of the Existing Financing Agreements as provided
in Sections 6.1(o) and 6.2(h) of this Agreement and (z) any addition to the
accrued bonuses payable from the $257,000 that was carried on the Most Recent
Balance Sheet.
10
2.4 Additional Purchase Price Adjustments. The Purchase Price
shall be adjusted in accordance with the provisions of Section 2.4 of the
Disclosure Schedule, and the Parties shall make any of the payments as required
and in the manners set forth therein.
Section 3. REPRESENTATIONS AND WARRANTIES CONCERNING THE
COMPANY AND THE SELLER. Except as disclosed in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"), the Seller hereby
represents and warrants to the Purchaser the statements contained in this
Section 3. The Disclosure Schedule will be arranged in sections corresponding to
the lettered and numbered sections contained in this Section 3 (it being
understood that each Section of the Disclosure Schedule shall list all items
applicable to such Section, but the inadvertent omission of an item from a
Section shall not be a breach of this Agreement if such item is disclosed in
another Section of the Disclosure Schedule and its applicability to another
Section is reasonably apparent).
3.1 Organization. The Seller is a corporation duly organized,
validly existing, and in good standing under the laws of Delaware. The Company
is a Delaware corporation, duly organized, validly existing, and in good
standing under the laws of Delaware. Copies of the certificate of incorporation
and by-laws of the Company as amended to date have been heretofore delivered to
the Purchaser and are accurate and complete. The Company has delivered to the
Purchaser a complete and accurate copy of its minute books (containing the
records of meetings of stockholders, the board of directors and any committees
of the board of directors) and stock record books. The Company is qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction listed in Section 3.1 of the Disclosure Schedule, which such
jurisdictions are the only jurisdictions where the nature of the activities
conducted by it or the character of the property owned, leased or operated by it
make such qualification necessary or appropriate, unless the failure to be so
qualified will not have a Material Adverse Effect on the Company. The Company
and its Subsidiaries have full corporate power and authority and all licenses,
permits, authorizations and other Consents necessary to own and operate their
properties, to carry on their businesses as now conducted and presently proposed
to be conducted and to carry out the transactions contemplated by this
Agreement. Section 3.1 of the Disclosure Schedule sets forth a list of (a) each
of the Company's officers and directors, (b) each of the committees of the Board
of Directors and (c) each member on each such committee.
3.2 Capitalization and Ownership of the Company.
(a) The authorized capital stock of the Company consists
of 100,000 shares of common stock, $0.01 par value per share (the "Common
Stock") and 100,000 shares of Preferred Stock $0.01 par value per share (the
"Preferred Stock"). There are issued and outstanding (a) 20,543 shares of Common
Stock, of which no shares are held as treasury stock and (b) 10,000 shares of
Series A Preferred Stock and 17,500 shares of Series B Preferred Stock, of which
no shares are held as treasury stock, and all of such shares of Common Stock and
Preferred Stock are held of record and beneficially by the Seller, free and
clear of any and all Encumbrances. Immediately following the consummation of the
transactions contemplated hereby, all of such issued and outstanding shares
shall be held of record and beneficially by the Purchaser, free and clear of any
and all Encumbrances. All of the outstanding shares of capital stock of the
Company have been duly and validly issued, are fully paid and nonassessable.
There are no agreements restricting the transfer of, or affecting the rights of
any holder of, any shares of the Company's capital stock or any other securities
of the Company, there are no preemptive rights or other rights to be protected
from dilution on the part of any holder of any securities of the Company and
there are no rights requiring the Company or any of its Subsidiaries to
repurchase, redeem or acquire any of the securities of the Company.
11
(b) There are no outstanding options, warrants, rights,
or other agreements or commitments of any kind obligating the Company,
contingently or otherwise, to issue or sell any shares of its capital stock or
any securities or obligations convertible into, or exchangeable for, any shares
of its capital stock, and no authorization therefor has been given. There are no
outstanding stock appreciation, phantom stock, profit participation or similar
rights with respect to the Company. Section 3.2 of the Disclosure Schedule sets
forth the names of the record and beneficial holders of all outstanding options,
warrants or other rights to purchase, sell or otherwise dispose of, or rights to
exchange or convert into, any shares of the Company's capital stock and the
number of shares, exercise or conversion prices and expiration dates of such
options, warrants or other rights. There are no agreements with respect to the
voting or transfer of capital stock of the Company or with respect to any other
aspect of their affairs. None of the outstanding shares of capital stock or
other securities of the Company or its Subsidiaries was issued, sold or offered
in violation of the Securities Act or the securities or blue sky laws of any
state or jurisdiction, or any applicable securities laws in the relevant
jurisdictions outside of the United States. Neither the Company or its
Subsidiaries has any obligation to any direct or indirect holder of its
securities to effect a registration thereof for sale under the Securities Act.
3.3 Authorization of Transaction. The Seller has the legal
capacity, power and authority (including full corporate power and authority) to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party and to perform its respective obligations hereunder and
thereunder. All corporate and other actions or proceedings required to be taken
by or on the part of the Seller to authorize and permit the execution and
delivery by it of this Agreement and the other Transaction Documents to which it
is a party, the performance by it of its respective obligations hereunder and
thereunder, and the consummation by it of the transactions contemplated herein
and therein, have been duly and properly taken. This Agreement has been duly
executed and delivered by the Seller and constitutes the legal, valid and
binding obligation of the Seller, enforceable against the Seller in accordance
with its terms and conditions, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors' rights generally, by equitable
limitations on the availability of specific remedies, and by principles of
equity. At or prior to the Closing, the Seller shall have duly executed and
delivered each of the other Transaction Documents to which it is a party, and
upon such execution and delivery, each of such other Transaction Documents will
constitute the legal, valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms and conditions, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement of
creditors' rights generally, by equitable limitations on the availability of
specific remedies, and by principles of equity.
3.4 Noncontravention. Neither the execution and the delivery of
this Agreement or any of the other Transaction Documents to which the Company,
its Subsidiaries or the Seller is a party, nor the consummation of the
transactions contemplated hereby and thereby, will (i) violate any Legal
Requirement to which the Company, any of its Subsidiaries or the Seller or any
of the property of the Company, any of its Subsidiaries or the Seller is subject
or (ii) violate any provision of the charter or by-laws of the Company, any of
its Subsidiaries or the Seller or (iii) conflict with, result in a breach of,
constitute a default under (whether with or without the passage of time, the
giving of notice or both), result in the acceleration, increase, termination,
modification of existing benefits or burdens under or cancellation of, create in
any party the right to accelerate, terminate, modify, or cancel, result in any
payment or penalty under or require any notice under any Contractual Obligation
of the Company, any of its Subsidiaries or the Seller or result in the
imposition of any Encumbrance upon any of their respective assets or the Shares.
Except for filings and approvals pursuant to the HSR Act, none of the Company,
its Subsidiaries or the Seller or any of their respective Affiliates needs to
give any notice to, make any filing with, or obtain any authorization, consent,
permit, filing, accreditation, waiver, license or approval and
12
the like of, with or by any Government or Governmental Authority or any other
Person or pursuant to any Legal Requirement (collectively, the "Consents") in
order for the Parties to consummate the transactions contemplated by this
Agreement or any of the other Transaction Documents.
3.5 Title.
(a) The Seller is the sole owner of record and beneficial
owner of the Shares free and clear of any and all Encumbrances, and the Seller
has the full and unrestricted right, power and authority to sell and transfer
such Shares to the Purchaser. Upon delivery by the Seller of certificates
evidencing the Shares to the Purchaser duly endorsed for transfer, and delivery
at the Closing to the Seller of the consideration in respect of such Shares,
good and valid title to and complete ownership of such Shares, free and clear of
any Encumbrance (other than Encumbrances affirmatively created by Purchaser or
its pre-closing Affiliates), will be transferred, and Purchaser will acquire its
interests in the Shares free of any adverse claim within the meaning of Article
8 of the Uniform Commercial Code.
(b) After giving effect to the consummation of the
transactions contemplated by this Agreement, the Seller shall not (directly or
indirectly) (i) have any right, title or interest in any debt or equity
securities of the Company or its Subsidiaries or securities convertible into or
exchangeable for, directly or indirectly, equity securities of the Company or
its Subsidiaries; and/or (ii) be a party to or bound by any agreement, document,
instrument or arrangement with the Company or any Affiliate thereof, other than
this Agreement or any other Transaction Documents.
3.6 Brokers' Fees. None of the Company, any of its Subsidiaries or
the Seller or any of its respective Affiliates has any Liability to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
3.7 Title to Assets. The Company and its Subsidiaries have good
and marketable title to, or a valid and existing leasehold interest in, the
properties and assets used by them, located on their premises, or reflected on
the Most Recent Balance Sheet or acquired after the date thereof, free and clear
of any and all Encumbrances.
3.8 Subsidiaries. Section 3.8 of the Disclosure Schedule sets
forth each of the Company's Subsidiaries and as to each of them, its (i)
jurisdiction of organization, (ii) the number of shares of authorized capital
stock of each class of its capital stock or other equity interests, including
partnership interests, (iii) the number of issued and outstanding shares of each
class of its capital stock or other equity interests, including partnership
interests, the names of the record and beneficial holders thereof, and the
number of shares or other equity interests, including partnership interests,
held by each such holder, (iv) the number of shares of its capital stock or
other equity interests, including partnership interests, held in treasury and
(v) its directors and officers. Each Company Subsidiary is duly organized and is
a validly existing legal entity, and in good standing, or the local equivalent,
under the laws of the jurisdiction of its organization. Section 3.8 of the
Disclosure Schedule also sets forth separately a chart of the Company's
Subsidiaries that are special purpose entities that are parties to the
Securitization Transactions. Each Company Subsidiary is duly authorized to
conduct business and is in good standing, or the local equivalent, in each
jurisdiction listed opposite its name in Section 3.8 of the Disclosure Schedule,
which such jurisdictions are the only jurisdictions where the nature of the
activities conducted by it or the character of the property owned, leased or
operated by it make such qualification necessary or appropriate, unless the
failure to be so qualified will not have a Material Adverse Effect on the
Company or the Company Subsidiary. Each Company Subsidiary has full corporate
power and authority and all licenses, permits, and authorizations necessary to
carry on the businesses in which it is engaged and in which it presently
proposes to engage and to own and use the properties owned and used by it. All
of the issued and outstanding shares of capital stock or other equity interests,
including partnership interests, of
13
each Company Subsidiary have been duly authorized and are validly issued, fully
paid, and nonassessable, or the local law equivalent. The Company owns
beneficially the outstanding shares or other equity interests, including
partnership interests, of each Company Subsidiary that it holds of record, free
and clear of any and all Encumbrances. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Company or any of its Subsidiaries to sell, transfer, or otherwise dispose of
any capital stock or other equity interests, including partnership interests, of
any of the Company's Subsidiaries or that could require any Company Subsidiary
to issue, sell, or otherwise cause to become outstanding any of its own capital
stock or other equity interests, including partnership interests. No Person has
any right, redemption right, option or other contractual or statutory right or
option to require the Company or any of its Subsidiaries, now or at any time in
the future, to purchase or redeem, or make distributions with respect to any
shares or other equity interests, including partnership interests, in the
Company or any of its Subsidiaries. There are no outstanding stock appreciation,
phantom stock, profit participation, or similar rights with respect to any
Company Subsidiary. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock or other equity
interests, including partnership interests, of any Company Subsidiary. The
Company has caused to be delivered to Purchaser complete and accurate copies of
the minute books (containing the records of meetings, consents, actions and
proceedings of stockholders or other equityholders, the board of directors or
similar governing body, and any committees of the board of directors or similar
governing body) and the stock and other equity ownership register or ledger of
each Company Subsidiary. None of the Company Subsidiaries is in default under or
in violation of any provision of its articles, certificate of incorporation,
by-laws and other charter documents. Neither the Company nor any of its
Subsidiaries controls directly or indirectly or has any direct or indirect
equity, debt or other participation or interest in any Person which is not a
Subsidiary of the Company. None of the Company Subsidiaries has any employees.
3.9 Financial Statements. The following financial statements are
attached hereto as Exhibit D (collectively, the "Financial Statements"): (i)
audited consolidated and unaudited consolidating balance sheets and statements
of income, changes in stockholders' equity, and cash flow as of and for the
fiscal years ended December 31, 2002 (the "Most Recent Fiscal Year End"),
December 31, 2001 and December 31, 2000 for the Company and its Subsidiaries,
and (ii) unaudited consolidated and unaudited consolidating balance sheets and
statements of income, changes in stockholders' equity and cash flows for nine
months ended September 30, 2003 for the Company and its Subsidiaries (such
nine-month period being referred to herein as the "Most Recent Interim Period").
The Financial Statements (including, with respect to the audited financial
statements only, the notes thereto) have been prepared in accordance with GAAP,
and present fairly the financial condition of the Company and its Subsidiaries
as of such dates and the consolidated results of operations and cash flows of
the Company and its Subsidiaries for such periods and are consistent with the
books and records of the Company and each of its Subsidiaries, subject only, in
the case of the unaudited Financial Statements, to (a) normal and recurring year
end adjustments, which (except for any adjustment for federal income tax benefit
or expense) are not material and are of the same magnitude and type as the
year-end adjustments reflected in the Most Recent Fiscal Year End financial
statements and (b) the absence of certain notes, which are of the same type and
scope as those contained in the Most Recent Fiscal Year End financial
statements.
3.10 Liabilities. Except as set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and none of the Company
or its Subsidiaries has any Liability. None of the Company or its Subsidiaries
is a guarantor or otherwise liable for any Liability of any other Person. There
shall be no fees, expenses, prepayment penalties or other charges owed by the
Company or its Subsidiaries as of the Closing Date with respect to their
Indebtedness for borrowed money, including the
14
Securitization Transactions, other than amounts that accrue under the
Securitization Transactions in the Ordinary Course of Business but have not yet
become due.
3.11 Absence of Certain Changes and Events. Since the last day of
the Most Recent Interim Period, the Company and its Subsidiaries have conducted
their businesses in the Ordinary Course of Business in all material respects and
there has not been or occurred:
(a) any Material Adverse Effect on the Company and its
Subsidiaries taken as a whole;
(b) any damage, destruction or loss to any of their
assets or properties (whether or not covered by insurance) which has not been
repaired and which has had a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole;
(c) any material changes in their accounting systems,
policies, principles or practices;
(d) any material transaction with any of their Affiliates
other than the Transaction Documents;
(e) any imposition of any Encumbrance on any of their
assets;
(f) (i) any creation, amendment, or termination of an
Employee Benefit Plan (except as and to the extent necessary to satisfy Legal
Requirements) or (ii) any increase in the compensation, bonus, or fee
arrangements payable or to become payable by the Company to any of its officers,
directors, employees, or agents except in the Ordinary Course of Business; or
(g) any action committing to any of the foregoing.
3.12 Legal and Other Compliance. Except as disclosed in Seller's
public filings made pursuant to the Securities Act or the Securities Exchange
Act, each of the Company, its Subsidiaries and their predecessors is and has
since December 31, 2001 been in compliance with all applicable Legal
Requirements relating to the operation and conduct of its businesses and its
properties or facilities, including all Legal Requirements relating to
employment or labor, and no Action or notice has been filed or commenced against
any of them alleging any failure so to comply.
3.13 Taxes.
(a) The Company and each of its Subsidiaries has timely
filed or caused to be filed all Tax Returns relating to Income Taxes and all
material Tax Returns relating to Operating Taxes that it was required to file,
either separately or as a member of an Affiliated Group, under applicable Legal
Requirements. Subject to (i) the making of the filings (described in 5.8(b))and
(ii) the receipt of the Waiver described in Section 3.13(g), all Tax Returns of
the Company and each of its Subsidiaries that have been filed are correct and
complete in all respects and have been prepared in compliance with all
applicable Legal Requirements. All Income Taxes and all material Operating Taxes
required to be paid by the Company or its Subsidiaries have been paid. Neither
the Company nor any of its Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax Return. Section 3.13 of the
Disclosure Schedules contains a list of all jurisdictions (whether foreign or
domestic) to which any Tax is properly payable by the Company or any of its
Subsidiaries. No claim has been made by an authority in a jurisdiction where the
Company or any of its Subsidiaries does not file Tax Returns that it is
15
or may be subject to taxation by that jurisdiction. There are no Encumbrances
for Taxes (other than Taxes not yet due and payable) upon any of the assets of
the Company or any of its Subsidiaries.
(b) The Company and each of its Subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in connection with
any amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and all Forms W-2 and 1099 required with
respect thereto have been properly completed and timely filed.
(c) No material foreign, federal, state, or local tax
audits or administrative or judicial Tax proceedings are pending or being
conducted with respect to the Company or any of its Subsidiaries, and there is
no claim or dispute concerning any material Tax liability of the Company or any
of its Subsidiaries as to which the Company, any of its Subsidiaries, or any of
their respective directors, officers or employees who has responsibility for Tax
matters has knowledge. Neither the Company nor any of its Subsidiaries has
received from any foreign, federal, state, or local taxing authority (including
jurisdictions where neither the Company nor any of its Subsidiaries has filed
Tax Returns) any (i) notice indicating an intent to open an audit or other
review, (ii) request for information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any taxing authority against the Company or any of its Subsidiaries.
The Seller has made available to the Purchaser correct and complete copies of
all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company or any of its
Subsidiaries filed or received since December 31, 1998. All material
deficiencies and assessments asserted as a result of such examinations or other
audits by foreign, federal, state or local Taxing authorities have been paid,
fully settled or adequately provided for in the Financial Statements.
(d) Neither the Company nor any of its Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency and neither the Company
nor any of its Subsidiaries is a party to any agreement, contract, arrangement
or plan that has resulted or would result, separately or in the aggregate, in
the payment of (i) any "excess parachute payment" within the meaning of Code
Section 280G (or any corresponding provision of state, local or foreign Tax law)
or (ii) any amount that will not be fully deductible as a result of Code Section
162(m) (or any corresponding provision of state, local or foreign Tax law). The
Seller is a United States person as defined in Code Section 7701(a)(30). The
Company and each of its Subsidiaries has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal Income Tax within the meaning of Code Section 6662,
and neither the Company nor any of its Subsidiaries has been required to make
any disclosure in respect of any "reportable transaction" as defined in Section
1.6011-4(b) of the Treasury Regulations. Neither the Company nor any of its
Subsidiaries is a party to or bound by any Tax allocation, sharing, or similar
agreement. Neither the Company nor any of its Subsidiaries (A) has been a member
of an Affiliated Group filing a combined, consolidated, or unitary Tax Return
(other than a group the common parent of which was the Seller as described in
Section 3.13 of the Disclosure Schedules) or (B) has any Liability for the Taxes
of any Person (other than the Company or any of its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise. Neither
the Company nor any Subsidiaries has ever been, nor will they be at the Closing,
a United States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii).
(e) Neither the Company nor any of its Subsidiaries will
be required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any: (A) change in method of accounting for a
taxable period ending on or prior to the Closing Date; (B) "closing agreement"
as described in Code Section 7121 (or any corresponding or similar provision of
state, local or foreign income Tax law) executed on
16
or prior to the Closing Date; (C) intercompany transactions occurring at or
prior to the Closing or any excess loss account in existence at Closing
described in Treasury Regulations under Code Section 1502 (or any corresponding
or similar provision of state, local or foreign income Tax law); (D) installment
sale or open transaction disposition made on or prior to the Closing Date; or
(E) prepaid amount received on or prior to the Closing Date. No Tax asset of the
Company or any of its Subsidiaries is currently subject to a limitation under
Code Sections 382 or 383.
(f) During the two-year period ending on the Closing
Date, neither the Company nor any of its Subsidiaries has distributed stock of
another Person, or has had its stock distributed by another Person, in a
transaction that was purported or intended to be governed in whole or in part by
Code Section 355 or Section 361.
(g) The Seller has submitted a ruling request, dated
August 22, 2003, to the Internal Revenue Service seeking the waiver of the
application of Section 1504(a)(3)(A) of the Code to the Company (the "Waiver").
(h) Seller's adjusted basis in the UICI Note equals the
adjusted issue price of the UICI Note.
3.14 Property, Plant and Equipment.
(a) Section 3.14(a) of the Disclosure Schedule lists all
real property that any of the Company or its Subsidiaries owns. With respect to
each such parcel of owned real property (the "Owned Real Property"): (i) the
Company or its Subsidiaries have good and marketable title to the parcel of real
property, free and clear of any Encumbrance, and the current use of such Owned
Real Property and the operation of the Company's and its Subsidiaries' business
does not violate any instrument of record or Contractual Obligation affecting
such Owned Real Property or any applicable Legal Requirements except for (A) any
Legal Requirements affecting building use or occupancy, or reservations of an
interest in title (collectively, "Property Restrictions"), imposed or
promulgated by Legal Requirements or any governmental body or authority with
respect to real property, including zoning regulations, that do not materially
adversely affect the current use of the property, materially detract from the
value of or materially interfere with the present use of the property, (B)
Encumbrances and Property Restrictions disclosed on existing title reports (in
either case copies of which title reports have been delivered or made available
to Purchaser and are listed in Section 3.14(a) of the Disclosure Schedule) and
(C) other Encumbrances or Property Restrictions, if any, which, individually or
in the aggregate, are not material in amount, do not materially detract from the
value of or materially interfere with the present use of any of the Owned Real
Property subject thereto or affected thereby, and do not otherwise materially
impair business operations conducted by the Company and any of its Subsidiaries;
(ii) there are no pending, or to the Seller's Knowledge, threatened,
condemnation proceedings, lawsuits, or administrative actions relating to the
Owned Real Property or other matters which would adversely affect the use,
occupancy, or value thereof; and (iii) the buildings and improvements on the
Owned Real Property are located within the boundary lines of such parcels of
land, are not in violation of applicable setback requirements, zoning laws, and
ordinances (and none of the properties or buildings or improvements thereon are
subject to "permitted non-conforming use" or "permitted non-conforming
structure" classifications), and do not encroach on any easement.
(b) Section 3.14(b) of the Disclosure Schedule lists all
real property leased or subleased to the Company or any of its Subsidiaries (the
"Leased Real Property"). The Company has delivered to the Purchaser correct and
complete copies of the leases and subleases (the "Leases") listed in Section
3.14(b) of the Disclosure Schedule (as amended to date) which such Leases have
not been amended or modified since the date thereof. With respect to each Lease:
(i) the lease or sublease is legal,
17
valid, binding, enforceable, and in full force and effect and will continue to
be legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally, by equitable limitations on the
availability of specific remedies, and by principles of equity; (ii) neither the
Company's nor any of its Subsidiaries' possession and quiet enjoyment of the
Leased Real Property under such Lease has been disturbed and there are no
disputes with respect to such Lease; (iii) none of the Company or any of its
Subsidiaries, nor, to the Seller's Knowledge, any other party to such Lease, is
in breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination, modification,
or acceleration thereunder; (iv) no security deposit, or portion thereof,
deposited with respect to such Lease has been applied in respect of a breach or
default under such Lease which has not been redeposited in full; and (v) none of
the Company or its Subsidiaries has assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or subleasehold.
(c) The Owned Real Property and the Leased Real Property
(collectively, the "Real Property") comprise all of the real property used by
the Company or its Subsidiaries in the operation of their businesses.
3.15 Intellectual Property.
(a) Except as disclosed in Section 3.15(a) of the
Disclosure Schedule, none of the Company or its Subsidiaries has interfered
with, infringed upon or misappropriated any Intellectual Property rights of
third parties (including the Intellectual Property rights of the Seller), and
the continued operation of the Company's and its Subsidiaries' businesses after
Closing as conducted prior to the Closing will not interfere with, infringe upon
or misappropriate any such Intellectual Property rights. To the Knowledge of the
Seller, no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any rights of the Company or its Subsidiaries
in the Company Intellectual Property.
(b) Section 3.15(b) of the Disclosure Schedule identifies
each U.S. and foreign patent, trademark registration, copyright registration,
domain name registration, pending applications to register any of the foregoing,
and all other Company Intellectual Property that is registered with, issued by
or subject to a pending application for registration, in each case in the name
of the Company or any of its Subsidiaries, with any Governmental Authority
anywhere in the world. Section 3.15(b) of the Disclosure Schedule also
identifies any Company Intellectual Property that is material to the operation
of the business of the Company or any of its Subsidiaries that is not otherwise
described above in this paragraph. With respect to each item of Company
Intellectual Property required to be identified in Section 3.15(b) of the
Disclosure Schedule, except as disclosed on Section 3.15(b) of the Disclosure
Schedule, all of the foregoing items of Company Intellectual Property are free
and clear of any Encumbrance, and are owned solely by the Company or its
Subsidiaries without restriction on use.
(c) Neither the Company nor its Subsidiaries have any
obligation to compensate any Person for the use of any Company Intellectual
Property. Neither the Company nor any of its Subsidiaries has granted to any
Person any license, option or other rights to use in any manner any of the
Company Intellectual Property, whether requiring the payment of royalties or
not.
(d) No Action is pending or, to the Knowledge of the
Seller, is threatened, which challenges the legality, validity, enforceability,
use, or ownership of any Company Intellectual Property.
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3.16 Contracts. Section 3.16 of the Disclosure Schedule sets forth
a true, accurate and complete list of Contractual Obligations of the following
types to which the Company or any of its Subsidiaries is bound:
(a) any Contractual Obligation of any kind with (i) any
director or officer of the Seller or any of its Affiliates (including the
Company or any of its Subsidiaries) (other than those Contractual Obligations
set forth in Section 3.20 of the Disclosure Schedule), (ii) any Member of the
Immediate Family of any individual described in clause (i), or (iii) any
Affiliate of any individual described in clauses (i) and (ii). For the avoidance
of doubt, Richland State Bank shall be deemed an Affiliate of ▇▇▇▇▇▇ ▇▇▇▇▇▇, who
is a director of the Seller;
(b) any Contractual Obligation pursuant to which the
Company or any of its Subsidiaries grants or is granted any license or other
rights to use any of the assets of the Company or any of its Subsidiaries or any
rights of joint use with respect to any of the assets (other than any
Intellectual Property licenses set forth in Section 3.15 of the Disclosure
Schedule);
(c) any Contractual Obligation (other than those entered
into in the Ordinary Course of Business) that either: (i) requires a payment by
any party in excess of, or a series of payments that in aggregate exceed,
$100,000 during the course of one year, or provides for the delivery of goods or
performance of services, or any combination thereof, having a value in excess of
$100,000 during the course of one year; or (ii) has a term, or requires the
performance of any obligations by the Company or any of its Subsidiaries over a
period, in excess of one (1) year;
(d) any Contractual Obligation (other than with respect
to student loans originated or held by the Company or any of its Subsidiaries)
pursuant to which the Company or any of its Subsidiaries has made or will make
loans or advances, or have or will have incurred debts or become a guarantor or
surety or pledged its credit, or otherwise become responsible with respect to
any undertaking of another Person, other than under the Securitization
Transactions or the Existing Financing Agreements;
(e) any indenture, credit agreement, loan agreement,
note, mortgage, security agreement, loan commitment or other material
Contractual Obligation relating to the borrowing of funds, an extension of
credit or financing (other than those entered into in the Ordinary Course of
Business), and any documents or instruments that are material to the
Securitization Transactions or the Existing Financing Agreements;
(f) any Contractual Obligation involving an investment by
the Company or any of its Subsidiaries in any partnership, limited liability
company or joint venture;
(g) any Contractual Obligation involving noncompetition
or any other restriction with respect to the geographical area of operations or
scope or type of business of the Company or any of its Subsidiaries;
(h) any Contractual Obligation (other than with respect
to student loans originated or held by the Company or any of its Subsidiaries)
between the Company or any of its Subsidiaries, on the one hand, and Seller or
any Affiliate of Seller (excluding the Company and its Subsidiaries), on the
other hand;
(i) any Contractual Obligation relating to any
acquisition or disposition of any capital stock or equity interest (including
partnership interest) of, or any material portion of the assets of, the Company
or any of its Subsidiaries;
19
(j) any Contractual Obligation that constitutes a
Derivative Obligation; and
(k) any Contractual Obligation involving: (1) eligible
lender trustee agreements, (2) school recourse agreements, or (3) third-party
loan servicing agreements (including sub-servicing agreements).
The Company has made available to the Purchaser a correct and complete copy of
each written Contractual Obligation required to be listed in Section 3.16 of the
Disclosure Schedule and a written summary setting forth the terms and conditions
of each oral Contractual Obligation required to be referred to in Section 3.16
of the Disclosure Schedule. With respect to each such Contractual Obligation:
(i) such Contractual Obligation is legal, valid, binding, and enforceable
against the Company or its Subsidiary in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally, by equitable limitations on the
availability of specific remedies, and by principles of equity; and (ii) the
Company and its Subsidiaries are not, and to the Knowledge of the Seller, no
other party is, in breach or default in any material respect, and no event has
occurred which with notice or lapse of time would constitute a breach or default
in any material respect, or permit termination, modification, or acceleration,
under such Contractual Obligation, including without limitation the
Securitization Transactions and the Existing Financing Agreements. The Company
and its Subsidiaries are in compliance with all requirements of the Waiver and
Release Agreements, and, based on the waivers and releases set forth therein,
there is no un-waived default under the Securitization Transactions.
3.17 Insurance and Risk Management. Section 3.17 of the Disclosure
Schedule sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the operations
of the Company or any of its Subsidiaries is currently a party, a named insured,
or otherwise the beneficiary of coverage:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(c) the policy number, the period and amount of coverage
and premium; and
(d) a description of any retrospective premium
adjustments or other loss-sensitive premium arrangements.
With respect to each such insurance policy: (i) the policy is legal, valid,
binding, enforceable, and in full force and effect, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement of
creditors' rights generally, by equitable limitations on the availability of
specific remedies, and by principles of equity; (ii) the transactions
contemplated hereby will not result in the cancellation or modification of such
policies; (iii) neither the Company, nor any of its Subsidiaries, nor, to the
Seller's Knowledge, any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices) in
any material respect, and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default in any material respect, or
permit termination, modification, or acceleration, under the policy; (iv) the
Company has made available true and complete copies of all policies and related
indemnity or premium payment agreements to the Purchaser; (v) the policy has not
been amended or modified and no riders not included in the copies delivered to
the Purchaser have been
20
issued in respect of such policies; and (vi) no party to the policy has
repudiated any provision thereof. Neither the Company nor any of its
Subsidiaries has any self-insurance or co-insurance programs.
3.18 Litigation. There are no Actions pending, or to the Knowledge
of the Seller, threatened, against the Company or any of its Subsidiaries, the
Shares or any of the Company's or its Subsidiaries' business, properties or
facilities (or pending or, to the Seller's knowledge, threatened against the
Seller, any of the present or former officers, directors or employees of the
Seller, the Company or any of its Subsidiaries with respect to the Company's or
such Subsidiaries' businesses or proposed business activities), or pending or
threatened by the Company or any of its Subsidiaries against any third party, at
law or in equity, or before or by any Government or Governmental Authority; and,
to the Knowledge of the Seller, there is no valid basis for any of the
foregoing. Neither the Company nor any of its Subsidiaries are subject to any
judgment, order or decree of any court or other Government or Governmental
Authority which has had or may have a Material Adverse Effect upon the Company
or its Subsidiaries.
3.19 Employees. Section 3.19 of the Disclosure Schedule lists (i)
each employee and consultant of the Company and each of its Subsidiaries whose
annual compensation is in excess of $75,000, as well as each such employee's or
consultant's annual compensation (including any potential cash bonuses or other
compensation which relates to employment through the last day of the Most Recent
Interim Period and indicating the amounts attributable to salary, wages, bonus
and other compensation respectively) and totals accrued for vacation, sick
leave, paid-time-off, or comparable arrangements, (ii) the bonuses paid and
reasonably expected to be paid to the Company's and its Subsidiaries' officers
and employees for the fiscal year ended December 31, 2002 and during fiscal year
2003, and (iii) all employment and severance agreements covering such persons.
To the Knowledge of the Seller, none of the individuals identified on Section
3.20 of the Disclosure Schedule as having a change of control agreement has any
plans to terminate employment with the Company or its Subsidiaries. The Company
and its Subsidiaries have not experienced any labor disputes or work stoppage
due to labor disagreements. The Company and each Subsidiary comply and have
complied in all material respects with all applicable domestic and foreign Legal
Requirements respecting employment and employment practices, terms and
conditions of employment and wages and hours, including any such Legal
Requirements respecting employment discrimination, employee classification,
workers' compensation, family and medical leave, the Immigration Reform and
Control Act, and occupational safety and health requirements, and have complied
with all employment agreements, and no claims, controversies, investigations or
suits are pending or, to the Company's Knowledge, threatened, with respect to
such Legal Requirements or agreements, either by private individuals or by
Governmental Authorities; and all employees are at-will. Neither the Company nor
any Subsidiary is or has been engaged in an unfair labor practice and there is
no unfair labor practice charge, complaint, investigation or hearing against any
of the Company and its Subsidiaries pending or threatened before the National
Labor Relations Board or any Government or Governmental Authorities outside of
the United States. No labor union represents, or has at any time during the
three years preceding the date of this Agreement represented, the employees of
the Company or any Subsidiary and no collective bargaining agreement is or has
been binding against the Company or any Subsidiary. No grievance or arbitration
proceeding arising out of or under collective bargaining agreements or
employment relationships is pending, and no claims therefore exist or have, to
the Company's knowledge, been threatened; no labor strike, lock-out, slowdown,
or work stoppage is been pending or, to the Seller's Knowledge, threatened
against or directly affecting the Company. All persons who have performed
services for the Company or any Subsidiary while classified as independent
contractors have satisfied the Legal Requirements to be so classified, and the
Company or applicable Subsidiary has fully and accurately reported their
compensation on IRS Forms 1099 or other applicable tax forms for independent
contractors when required to do so. The Company has not effectuated (i) a plant
closing as defined in the Worker Adjustment and Retraining Notification Act of
1988, as amended
21
from time to time (the "WARN Act") affecting any site of employment or one or
more operating units within any site of employment of the Company or (ii) a mass
layoff as defined in the WARN Act, nor has the Company been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local Legal Requirements.
All costs and expenses related in any way to the termination of employment (for
any reason or no reason, and whether initiated by the Company or the employee)
of any employee of the Company prior to the Closing, whether such costs and
expenses have been incurred or are to be incurred in the future, are (unless
fully paid and discharged prior the Closing) reflected in full as Liabilities on
the Most Recent Balance Sheet. Seller shall assume or retain all Liability and
shall pay directly or reimburse the Company for any salary, fees, and expenses
paid with respect to certain individuals as indicated on Section 3.19 of the
Disclosure Schedule.
3.20 Employee Benefits.
(a) Section 3.20 of the Disclosure Schedule lists each
Employee Benefit Plan.
(i) Each Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all material respects with its terms and the
applicable requirements of ERISA, the Code and other
applicable Legal Requirements.
(ii) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each
such Employee Benefit Plan or accrued in accordance with GAAP.
All premiums or other payments for all periods ending on or
before the Closing Date have been paid timely with respect to
each such Employee Benefit Plan.
(iii) All group health plans of the Company and
its ERISA Affiliates materially comply with the requirements
of Part 6 of Title I of ERISA ("COBRA"), Code Section 5000,
the Health Insurance Portability and Accountability Act, and
any other comparable domestic or foreign Legal Requirements;
neither the Company nor any Subsidiary has any Liability under
or with respect to COBRA for its own actions or omissions or
those of any predecessor.
(iv) Each such Employee Benefit Plan that is
intended to be qualified under Code Section 401(a) is the
subject of a favorable determination letter issued by the
Internal Revenue Service, and the Company is not aware of any
facts or circumstances that could jeopardize such qualified
status. The Company or applicable ERISA Affiliate has made all
amendments to such Employee Benefit Plans necessary for
compliance with Legal Requirements that are required to be
made as of the date of this Agreement.
(v) To the extent applicable, the Company has
made available to the Purchaser correct and complete copies of
the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 annual report, and all
related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit
Plan.
22
(b) Neither of the Company nor any ERISA Affiliate
contributes to, has contributed to, or has any Liability with respect to any
Employee Benefit Plan that is a "defined benefit plan" or has any Liability
(including withdrawal Liability) under any Multiemployer Plan.
(c) There are no pending claims (other than routine
benefit claims) or lawsuits that have been instituted by, against, or relating
to, any Employee Benefit Plan by any current or former employee of the Company.
No Employee Benefit Plans are under audit or examination (nor has notice been
received of a potential audit or examination) by any domestic or foreign
Governmental Authority (including the IRS and Department of Labor); and no
matters are pending under the IRS's Employee Plans Compliance Resolutions System
or any successor or predecessor program.
(d) None of the Employee Benefit Plans nor any other
agreement covering current or former employees of the Company or any Subsidiary
provides medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Section 4980B or the applicable
provision of state law) and any coverage set forth on the Disclosure Schedule
complies with the terms of the Company's insurance arrangements and has been
approved by the applicable insurance carriers.
(e) No promise or commitment to adopt, amend or improve
any Employee Benefit Plan for the benefit of any current or former director,
officer or employee of the Company or any of the Subsidiaries has been made.
(f) The transactions contemplated by this Agreement shall
not alone or upon the occurrence of any additional or subsequent event, result
in any payment or the acceleration of, the vesting of or increase in benefits
under any Employee Benefit Plan for the benefit of any current or former
director, officer, or employee of the Company or any of the Subsidiaries. No
employee, officer, or director of the Company or any Subsidiary has been
promised or paid any bonus or incentive compensation related to the transactions
contemplated pursuant to this Agreement.
3.21 Environment, Health, and Safety.
(a) To the knowledge of the Seller, each of the Company
and its Subsidiaries are in compliance with all Environmental and Safety
Requirements (including all permits and licenses required thereunder). Neither
the Company nor any of its Subsidiaries has received any oral or written notice
of any actual or alleged violation of, or any Liability under or potential
Liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
relating to them or their facilities (including, without limitation, the Real
Property) under, any Environmental and Safety Requirements. Neither this
Agreement nor the consummation of the transactions contemplated hereby will
result in any obligations for site investigation or cleanup, or notification to
or consent of any government agencies or third parties pursuant to any of the so
called "transaction-triggered" or "responsible property transfer" Environmental
and Safety Requirements.
(b) To the knowledge of the Seller, neither the Company
nor any of its Subsidiaries has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any substance,
including, without limitation, any hazardous or toxic substance, material or
waste or owned, occupied or operated any facility or property (and no such
property or facility is contaminated by any substance) so as would give rise to
any Liabilities of the Company or its Subsidiaries pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA") or the Solid Waste Disposal Act, as amended ("SWDA") or any other
Environmental and Safety Requirements.
23
(c) The Company and its Subsidiaries have made available
to the Purchaser all environmental, and all occupational health and safety,
audits, assessments, reports and other documents relating to the Company or its
Subsidiaries, and any of their properties or facilities (including properties or
facilities that they intend to acquire and properties or facilities that they
have sold or vacated), that are in the possession, custody, or control of the
Company or its Subsidiaries.
(d) No circumstances with respect to the past or current
operations or facilities of the Company or any of its Subsidiaries or any
predecessor or Affiliate (including any onsite or offsite disposal or release
of, or contamination by, hazardous or toxic substances, materials or wastes)
will hinder or prevent continued compliance with, or give rise to any Liability
(including any corrective or remedial obligation) under any Environmental and
Safety Requirements.
(e) To the knowledge of the Seller, neither the Company
nor any of its Subsidiaries has assumed (either contractually or by operation of
law), undertaken, retained, or otherwise become subject to any Liability of any
other Person relating to Environmental and Safety Requirements.
3.22 Affiliated Transactions. None of the Company or its
Subsidiaries is a party to or bound by any written Contractual Obligation, or to
the Seller's knowledge, any oral Contractual Obligation, with (i) the Seller or
its Affiliates (other than the Company and its Subsidiaries), (ii) their
respective directors or officers, (iii) the directors or officers of the Company
or its Subsidiaries, (iv) any Members of the Immediate Family of the individuals
described in clauses (ii) and (iii), or (v) any Affiliate of any individual
described in clause (ii), (iii) or (iv) (each, an "Insider") and no Insider owns
or otherwise has any rights to or interests in any asset, tangible or
intangible, which is used in any business of any of the Company or any of its
Subsidiaries. The Company has no Indebtedness to Seller or its Affiliates except
for the Indebtedness represented by the UICI Note and the UICI Advances. Section
3.22 of the Disclosure Schedule describes all services provided to or for the
benefit of the Company or any of its Subsidiaries by any Insider and the costs
and expenses charged to the Company or any of its Subsidiaries in respect
thereof.
3.23 No Illegal Payments, Etc. Neither the Company nor its
Subsidiaries, nor, to the Seller's Knowledge, any of the directors, officers,
employees or agents or other Person acting on behalf of the Company or any of
its Subsidiaries, has (a) directly or indirectly given or agreed to give or
receive or agreed to receive any illegal gift, contribution, payment, bribe,
kick-back, entertainment, expenditure or similar benefit to any supplier,
customer, governmental official or employee or other person who was, is or may
be in a position to help or hinder the Company or any of its Subsidiaries (or
assist in connection with any actual or proposed transaction) or made or agreed
to make any illegal contribution, or reimbursed any illegal political gift or
contribution made by any other person, to any candidate for federal, state,
local or foreign public office or (b) established or maintained any unrecorded
fund or asset or made any false entries on any books or records for any purpose
in each cash, which would have been illegal under the Foreign Corrupt Practices
Act or any other Legal Requirement.
3.24 Bank Accounts. Section 3.24 of the Disclosure Schedule sets
forth: (a) the name of each bank in which the Company and its Subsidiaries have
an account or safe deposit box used in their respective businesses and the names
of all persons authorized to draw thereon or to have access thereto; and (b) the
name of each person, corporation, firm, association or business organization,
entity or enterprise holding a general or special power of attorney from the
Company and its Subsidiaries with respect to such accounts and safe deposits
boxes.
3.25 All Assets Necessary to Conduct Business. Except as expressly
contemplated by the Shared Facilities Services Agreement, the assets,
properties, and rights of the Company and its Subsidiaries comprise in all
material respects all of the assets, properties, and rights, real, personal,
24
tangible and intangible (including Intellectual Property) used by the Company or
any of its Subsidiaries in, and reasonably necessary to, the conduct of the
businesses of the Company and its Subsidiaries as currently conducted.
3.26 Disclosure. Seller has made available, and has delivered, to
Purchaser true and complete copies of each instrument, agreement, contract,
commitment, certificate, report, writing and other document (or summaries of
same) that is referred to in the Disclosure Schedule. All agreements, lists,
Schedules, instruments, exhibits, documents, certificates, reports, statements,
writings and other information furnished by or on behalf of Seller pursuant to
this Agreement are complete and accurate in all material respects.
3.27 Tuition Payment Plans. All funds received by the Company or
its Subsidiaries pursuant to the Company's tuition payment plan business have
been applied, disbursed and/or retained, in all material respects, in accordance
with the terms of the applicable agreements with customers and schools and in
accordance with GAAP.
3.28 Private Loan Portfolio. The Company has, in its possession or
control, original executed promissory notes evidencing all loans in the
Company's private loan portfolio and the other program required documentation
with respect thereto , which shall include any and all loans originated or held
by the Company or its Subsidiaries other than loans originated under the Family
Federal Education Loan Program ("FFELP Loans"). Neither the Company nor any of
its Subsidiaries has agreed with any third party to guarantee any private loans.
Section 4.REPRESENTATIONS AND WARRANTIES CONCERNING THE
PURCHASER.
The Purchaser hereby represents and warrants to the Seller the
statements contained in this Section 4.
4.1 Organization of the Purchaser. The Purchaser is duly
organized, validly existing, and in good standing under the State of Delaware,
with all requisite corporate power and authority to own, lease and operate its
properties and to carry on its respective businesses as now owned, leased and
operated. Purchaser is licensed or qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the nature of the
properties owned, leased or operated by it and the businesses transacted by it
require such licensing or qualification, unless the failure to be so qualified
will not have a Material Adverse Effect on the Purchaser.
4.2 Authority for Agreement. The Purchaser has the legal capacity,
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party and to perform its obligations hereunder and thereunder. All corporate and
other actions or proceedings required to be taken by or on the part of the
Purchaser to authorize and permit the execution and delivery by it of this
Agreement and the other Transaction Documents, the performance by it of its
respective obligations hereunder and thereunder, and the consummation by it of
the transactions contemplated herein and therein, have been duly and properly
taken. This Agreement has been duly executed and delivered by the Purchaser and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against it in accordance with its terms and conditions, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally, by equitable limitations on the
availability of specific remedies, and by principles of equity. At or prior to
the Closing, the Purchaser shall have duly executed and delivered each of the
other Transaction Documents to which the Purchaser is a party, and upon such
execution and delivery, each of such other
25
Transaction Documents will constitute the valid and legally binding obligation
of the Purchaser, enforceable against the Purchaser in accordance with its terms
and conditions, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
which affect the enforcement of creditors' rights generally, by equitable
limitations on the availability of specific remedies, and by principles of
equity.
4.3 Noncontravention. Neither the execution and the delivery of
this Agreement or any of the other Transaction Documents to which the Purchaser
is a party, nor the consummation of the transactions contemplated hereby and
thereby, will (i) violate any Legal Requirement to which the Purchaser or any of
the property of the Purchaser is subject or any provision of the charter or
by-laws of the Purchaser or (ii) conflict with, result in a breach of,
constitute a default under (whether with or without the passage of time, the
giving of notice or both), result in the acceleration, increase, termination,
modification of existing benefits or burdens under or cancellation of, create in
any party the right to accelerate, terminate, modify, or cancel, result in any
payment or penalty under or require any notice under any Contractual Obligation
of the Purchaser or result in the imposition of any Encumbrance upon any of its
assets. Except for filings and approvals pursuant to the HSR Act, and notice to
the Office of ▇▇▇▇▇▇ ▇▇▇ Oversight of the U.S. Department of Treasury, none of
the Purchaser or any of its Affiliates need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any Government
or Governmental Authority or pursuant to any Legal Requirement in order for the
Parties to consummate the transactions contemplated by this Agreement or any of
the other Transaction Documents.
4.4 Litigation. There are no Actions pending, or to the knowledge
of the Purchaser, threatened against or affecting the Purchaser in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with the transactions contemplated hereby.
4.5 Brokers' Fees. The Purchaser has no Liability to pay any fees
or commissions to any broker, finder or agent not Affiliated with the Purchaser
with respect to the transactions contemplated by this Agreement for which the
Company could become liable or obligated.
4.6 Accredited Investor Status, Etc. The Purchaser is an
"accredited investor" as such term is defined under Rule 501 under the
Securities Act. Purchaser acknowledges that the Shares are not registered or
qualified for sale under federal or any state securities law and cannot be
resold without registration under, or an exemption from, federal and any
applicable state securities law. Purchaser is acquiring the Shares for its own
account for investment and not with a view toward the sale or distribution of
the Shares.
Section 5. PRE-CLOSING COVENANTS. Each of the covenants
contained in this Section 5 shall be in effect in the period from the date of
this Agreement until the consummation of the Closing (unless waived by each of
the Seller and the Purchaser); provided, however, that any Party shall remain
liable following the Closing for any failure of such Party to comply with any of
such covenants while such covenants are in effect.
5.1 General. Subject to the terms and conditions contained herein,
and without waiving any rights or increasing its obligations, the Purchaser and
the Seller shall each (and the Seller shall cause the Company and its
Subsidiaries to) use its commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper,
or advisable to cause the other Party's conditions to Closing set forth in
Section 6 below to be satisfied (not waived) and shall reasonably cooperate with
such other Party to satisfy all such conditions. At the Closing, the applicable
Parties shall execute and deliver the Transaction Documents to be executed and
delivered at the Closing.
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5.2 Notices and Consents.
(a) The Seller shall give, or shall cause the Company and
each of its Subsidiaries to have given, any notices or filings to third parties
(including, without limitation, any filings or notices with any Government or
Governmental Authorities and, in particular, any filings pursuant to the HSR
Act), and will use its commercially reasonable efforts to obtain and to
cooperate with the other Party to obtain any approvals, consents, permits,
licenses, accreditations, waivers or authorizations, whether from a Government
or Governmental Authority or from any other Person (including, without
limitation, the Consents), that are required in connection with the consummation
of transactions contemplated by this Agreement or the other Transaction
Documents or that are required as a result of the transactions contemplated
hereby in order to prevent a breach of or default under, a termination or
modification of, or acceleration of the terms of, any contract, agreement
(credit or otherwise), lease, document or other Contractual Obligation to which
the Seller, the Company or any of its Subsidiaries is a party or by which its
assets are bound, or that are set forth in Section 3.4 of the Disclosure
Schedule. The Seller agrees to provide the Purchaser with a copy of any such
notice, filing or any document requesting consent, approval, permit, license,
accreditation, waiver or authorization prior to submitting such notice, filing
or other document and to obtain the prior consent of the Purchaser with respect
to the issuance of such notice, filing or other document.
(b) The Purchaser shall give any notices or filings to
third parties (including, without limitation, any filings or notices with any
Government or Governmental Authorities and, in particular, any filings pursuant
to the HSR Act), and will use its commercially reasonable efforts to obtain, and
to cooperate with the Seller and the Company to obtain, any approvals, consents,
permits, licenses, accreditations, waivers or authorizations, whether from a
Government or Governmental Authority or from any other Person (including,
without limitation, the Consents), that are required in connection with the
consummation of transactions contemplated by this Agreement or the other
Transaction Documents or that are required as a result of the transactions
contemplated hereby in order to prevent a breach of or default under, a
termination or modification of, or acceleration of the terms of, any contract,
agreement (credit or otherwise), lease, document or other Contractual Obligation
to which the Purchaser is a party or by which its assets are bound. The
Purchaser agrees to provide the Seller with a copy of any such notice, filing or
any document requesting consent, approval, permit, license, accreditation,
waiver or authorization prior to submitting such notice, filing or other
document and to obtain the prior consent of the Purchaser with respect to the
issuance of such notice, filing or other document.
5.3 Operation of Business. Except as set forth in Section 5.3 of
the Disclosure Schedule, the Seller shall use its commercially reasonable
efforts to cause the Company and each of its Subsidiaries to carry on its
business in the Ordinary Course of Business and to maintain the value of its
business as a going concern and the Company will not (and will not cause or
permit any of its Subsidiaries to) engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business. All of the
Cash received by the Company on and after the date of this Agreement (including,
without limitation, Cash from the sale of student loans sold by the Company)
shall be used by the Company to pay Liabilities of the Company or retained as
working capital in the Ordinary Course of Business, and, except as provided
below, shall not be distributed to the Seller. Without limiting the generality
of the foregoing, since the last day of the Most Recent Interim Period, the
Company and its Subsidiaries have not, and on or after the date of this
Agreement, the Seller will not permit the Company (and will not cause or permit
any of the Company's Subsidiaries) to:
(a) issue, sell or otherwise dispose of any of its
capital stock (or other equity interests or grant any options, warrants or other
rights to purchase or obtain (including upon conversion, exchange or exercise)
any of its capital stock or other equity interests, declare, set aside, or pay
any
27
dividend or make any distribution with respect to its capital stock or other
equity interests or redeem, purchase, or otherwise acquire any of its capital
stock or other equity interests;
(b) effect any recapitalization, reclassification, stock
dividend, stock split or like change in its capitalization;
(c) amend any term or provision of its charter or
by-laws;
(d) incur any additional Indebtedness (including
Derivative Obligations) other than Indebtedness to fund student loans pursuant
to the Existing Financing Agreements or pay any amount to any third party with
respect to any Liability outside the Ordinary Course of Business; provided, that
the Company may pay all or any part of the Department of Education accrued loan
and guaranty fees due and payable by the Company from time to time;
(e) sell any student loans unless the Company or the
Seller is required to sell such student loans pursuant to the Existing Financing
Agreements;
(f) hire or terminate the employment of any officer or
employee outside the Ordinary Course of Business;
(g) grant any increase in compensation or benefits
(whether contingent or otherwise), create, amend, or terminate any Employee
Benefit Plan (other than as necessary to satisfy Legal Requirements) or make any
payment to any director, officer or employee, whether now or hereafter payable,
other than increases of base compensation to employees in the Ordinary Course of
Business and currently in effect or other than as set forth in Section 5.3 of
the Disclosure Schedule;
(h) except as contemplated by the delivery and acceptance
of the UICI Note Cancellation Agreement, extend, modify, terminate or enter into
any inter-company loans;
(i) make any payments to or for the benefit of any
Insider, except for payments in the Ordinary Course of Business with respect to
(i) that certain Loan Origination and Sale Agreement, dated January 20, 1998, by
and among Richland State Bank, the Company and the Seller and (ii) that certain
Shared Processing Facilities Agreement, dated January 15, 2003, between the
Company and The Insurance Center (a division of a wholly-owned subsidiary of
UICI);
(j) enter into or perform any transaction with its
Affiliates, or enter or perform any other transaction other than on an
arms-length basis except as may be required by the Waiver and Release
Agreements;
(k) otherwise engage in any practice, take any action, or
enter into any transaction of the sort described in Section 3.11(c) through (f)
above; or
(l) enter into any agreement or understanding that would
be inconsistent with the foregoing.
5.4 Preservation of Business. The Seller shall cause the Company
and each of its Subsidiaries, respectively, to maintain its books and records,
pay expenses and payables, ▇▇▇▇ customers, collect receivables, keep its
business and properties substantially intact, including its present operations,
physical facilities, working conditions, and relationships with secondary,
college, graduate and other schools, lessors, licensors, suppliers, customers
and employees and other business relations, replace inoperable, worn out or
obsolete assets with assets of comparable quality, maintain an appropriate level
of
28
insurance, continue to make investments and purchases in amounts sufficient to
support the Company and each Subsidiary's ongoing business operations and
otherwise conduct its business, in each case in the Ordinary Course of Business.
The Seller shall cause, and will cause, Company and its Subsidiaries to comply
with all Legal Requirements and Contractual Obligations applicable to its
operations and business, and pay all applicable Taxes.
5.5 Full Access. The Seller shall and shall cause the Company to
permit (and will cause each of its Subsidiaries to permit) employees and
advisors of the Purchaser (including, without limitation, its authorized
financial, legal and accounting advisors) to have full access at all times
during normal business hours and upon reasonable notice to all of the Seller's
and the Company's and its Subsidiaries' advisors and other representatives and
all premises, properties, personnel, books, records (including Tax records),
invoices, Contractual Obligations, leases and documents of or pertaining to each
of the Company and its Subsidiaries, wherever located, and will use commercially
reasonable efforts to afford such representatives of the Purchaser with full
access to each secondary, college, graduate or other applicable school's student
loan, financial aid, bursar's or similar office and other business relations
with which the Company or any of its Subsidiaries has interaction. The Seller
shall transfer to the Company copies of all personnel records under the Seller's
control relating to current or former employees of the Company or any Subsidiary
that are not presently maintained by the Company.
5.6 Notice of Developments. Each Party will give prompt written
notice to the other Party of any development causing a breach of any of its own
representations and warranties in Section 3 and Section 4 above or any of its
covenants or agreements set forth herein. No disclosure by any Party pursuant to
this Section 5.6, however, shall be deemed to amend or supplement the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty or
breach of covenant.
5.7 Financial Statements. The Seller shall cause the Company to
provide to the Purchaser no later than thirty (30) days after the end of each
calendar month, unaudited balance sheets of the Company and its Subsidiaries as
of the last day of such month as well as unaudited statements of income and cash
flows for the Company and its Subsidiaries for such month, each of which shall
fairly present the financial condition, results of operation and cash flows of
the Company and its Subsidiaries as of the dates and for the periods set forth
therein, subject to the absence of footnote disclosures and to changes resulting
from normal year-end adjustments (none of which would, alone or in the
aggregate, be material).
5.8 Tax Elections.
(a) Except as otherwise provided in Section 5.8 or
Section 9.2 below, the Seller, without the consent of the Purchaser, will not
make or change, or cause or permit the Company to make or change, any material
election, change an annual accounting period, adopt or change any accounting
method, file any amended Tax Return, enter into any closing agreement, settle
any Tax claim or assessment, surrender any right to claim a refund of Taxes,
consent to any extension or waiver of the limitation period applicable to any
Tax claim or assessment, or take any other similar action, or omit to take any
action relating to the filing of any Tax Return or the payment of any Tax, if
such election, adoption, change, amendment, agreement, settlement, surrender,
consent or other action or omission would have the effect of materially
increasing the present or future Tax liability or decreasing any present or
future Tax asset of the Company or any of their respective Affiliates.
(b) Seller shall cause, prior to the Closing Date, the
Company and Academic Management Services, Inc., a Maryland corporation ("AMSI"),
to ▇▇▇▇ their portfolios of loans to market, as required by Section 475 of the
Code, by causing the Company and AMSI to file I.R.S. Form 3115 with the I.R.S.,
effective for the Company's and AMSI's taxable year ending on the Closing Date
(the "▇▇▇▇-to-Market Filings"). In the ▇▇▇▇-to-Market Filings, Seller shall
cause each of the Company
29
and AMSI to elect to take any Code Section 481(a) adjustment into account in the
taxable year ending on the Closing Date. For the avoidance of doubt, any Code
Section 481(a) adjustments in connection with the ▇▇▇▇-to-Market Filings shall
be considered Taxes of the Company and its Subsidiaries for the Pre-Closing Tax
Period.
(c) Prior to the Closing, Seller shall withdraw the
ruling request described in Section 3.13(g).
5.9 Payoff of Existing Financing Agreements. On or before Closing,
the Purchaser shall provide the Company with funds in an amount sufficient to
fund (i) the Company's obligation to repurchase the loans under the Existing
Financing Agreements in full, (including the payment of the liability to ▇▇▇▇▇▇
thereunder in the amount of Four Million Five Hundred Thousand Dollars
($4,500,000) as it may be adjusted pursuant to the terms of the Existing
Financing Agreements) and (ii) the Company's repayment of the UICI Advances.
Upon the deposit of such funds by the Purchaser with the Company, the Purchaser
and the Seller shall immediately cause the Company to pay the Company's
obligations in full under the Existing Financing Agreements (including the
payment of liability to ▇▇▇▇▇▇ thereunder in the amount of Four Million Five
Hundred Thousand Dollar ($4,500,000) as it may be adjusted pursuant to the terms
of the Existing Financing Agreements) and to repurchase the loans thereunder,
subject to the receipt of a release from ▇▇▇▇▇▇ as described in Section 6.1(o).
5.10 Payment of Employee Bonuses. On or before Closing, Seller
shall pay, or shall convey funds to the Company sufficient to pay, all bonuses
owed to employees pursuant to the letter agreements identified on Section 3.22
of the Disclosure Schedule.
Section 6. CONDITIONS TO OBLIGATION TO CLOSE.
6.1 Conditions to Obligation of the Purchaser. The obligation of
the Purchaser to purchase and pay for the Shares at the Closing and consummate
the transactions to be performed by it in connection with the Closing is subject
to satisfaction of the following conditions:
(a) Representations and Warranties. The representations
and warranties set forth in Section 3 above shall be true and correct when made
and shall be deemed to have been made again at and as of the Closing Date
(except to the extent any representation or warranty is by its terms made as of
a date specified therein, in which case such representation or warranty shall be
true and correct as of such date) and shall then be true and correct, except in
each instance where the failure to be so true and correct, would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole.
(b) Performance of Covenants. Each of the Seller, the
Company and each of its Subsidiaries shall have performed and complied with all
of its covenants, agreements and obligations hereunder through the Closing in
all material respects.
(c) Notices and Consents. Each of the Seller, the Company
and each of its Subsidiaries shall have provided all notices to third parties in
accordance with Section 5.2 above and shall have procured all of the Consents
which each of the Seller, the Company or such Subsidiary is required to obtain
in accordance with Section 3.4 above.
30
(d) Certificates. The Seller shall have delivered to the
Purchaser each of the following:
(i) a certificate dated the Closing Date to the
effect that each of the conditions specified in this Section
6.1 are satisfied in all respects;
(ii) a certificate from the secretary of the
Company confirming the existence, incorporation and good
standing of the Company on the Closing Date, and attaching
copies of the certificate of incorporation and by-laws, and
resolutions authorizing the execution, delivery and
performance of any Transaction Documents to which it is a
party and all other documents and the taking of all action
required thereunder or in connection therewith on behalf of
the Company and its Subsidiaries;
(iii) a certificate from the secretary of each of
the Company's Subsidiaries confirming the existence,
incorporation and good standing of such Company's Subsidiary
on the Closing Date, and attaching copies of the certificate
of incorporation and by-laws of such Subsidiary;
(iv) a certificate from the secretary of the
Seller confirming the existence, incorporation and good
standing of the Seller on the Closing Date, and attaching
copies of the certificate of incorporation and by-laws and
resolutions duly adopted by the Seller's board of directors
and, to the extent required, shareholders, authorizing such
Seller's execution delivery and performance of this Agreement
and the transactions contemplated by the Transaction
Documents;
(v) good standing certificates for each of the
Seller, the Company and its Subsidiaries from their respective
jurisdictions of incorporation and each jurisdiction in which
the Seller, the Company and its Subsidiaries is qualified to
do business as a foreign corporation, in each case dated as of
a recent date prior to the Closing Date; and
(vi) such other documents or instruments as the
Purchaser may reasonably request to effect the transactions
contemplated hereby.
(e) Absence of Litigation. No action, suit, or proceeding
shall be pending or threatened before any court, quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (i) prevent consummation of any of the
transactions contemplated by this Agreement or any of the other Transaction
Documents, (ii) cause any of the transactions contemplated by this Agreement or
any of the other Transaction Documents to be rescinded following consummation,
(iii) affect adversely the right of the Purchaser to own the Shares and to
control the Company and its Subsidiaries in any material respect, or (iv) affect
adversely the right of any of the Company or its Subsidiaries to own its assets
and to operate its businesses (and no such injunction, judgment, order, decree,
ruling or charge shall be in effect) in any material respect.
(f) Resignation of Board of Directors and Officers. The
Company and each Subsidiary, as applicable, shall have received a resignation
from each member of the Board of Directors (including any committee thereof) and
each officer who is not going to serve as a director, committee member or
officer, as the case may be, immediately following the Closing Date, in form and
substance reasonably acceptable to the Purchaser and each such resignation shall
be in full force and effect upon Closing.
31
(g) Transition Services Agreement. The Company and the
Seller shall have executed and delivered the Transition Services Agreement on
the terms set forth in such agreement and such Transition Services Agreement
shall be in full force and effect as of the Closing and shall not have been
amended or modified.
(h) Shared Facilities Services Agreement. The Company and
the Seller shall have executed and delivered the Shared Facilities Services
Agreement in a form mutually acceptable to each of the Parties and on the terms
set forth in such agreement and such Shared Facilities Services Agreement shall
be in full force and effect as of the Closing and shall not have been amended or
modified.
(i) HSR Waiting Period. The applicable waiting period
under the HSR Act shall have expired or been earlier terminated without action
by the United States Department of Justice ("DOJ") or the United States Federal
Trade Commission ("FTC") to prevent consummation of the transactions
contemplated by this Agreement.
(j) No Material Adverse Change. There shall not have been
any event or circumstance which has resulted in a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole and no event has occurred or
circumstance exists that would reasonably be expected to result in such a
Material Adverse Effect.
(k) Opinion. The Purchaser shall have received from
counsel(s) to the Seller and the Company an opinion in form and substance as set
forth in Exhibit E attached hereto, addressed to the Purchaser, and dated as of
the Closing Date.
(l) FIRPTA Affidavit. The Company shall deliver to the
Purchaser an affidavit, under penalties of perjury, stating that the Company is
not and has not been a United States real property holding corporation, dated as
of the Closing Date and in form and substance satisfactory to the Purchaser.
(m) UICI Note Cancellation. The Seller shall have
executed and delivered to the Purchaser and the Company the UICI Note
Cancellation Agreement in the form attached hereto as Exhibit F, together with
the UICI Note for cancellation by the Company.
(n) Purchase of Uninsured Loans. The Seller and EFG-III,
LP shall have entered into the Loan Purchase Agreement in the form attached
hereto as Exhibit G providing for Seller's acquisition immediately after the
Closing of all of the student loans owned by EFG-III, LP that are not federally
or otherwise privately insured.
(o) Existing Financing Agreements. The Existing Financing
Agreements shall have been paid in-full and terminated and the Company and its
Subsidiaries shall have no further obligations thereunder, and a release from
▇▇▇▇▇▇ to this effect in a form mutually acceptable to each of the Parties shall
have been obtained by the Company and the Seller.
(p) Securitization Transactions. The Waiver and Release
Agreements shall remain in full force and effect and any waivers of defaults
contained therein shall have been extended until December 15, 2003 or later.
(q) Eligible Lender Trustee. Fleet Bank, N.A. shall have
agreed to continue to serve as the Company's Eligible Lender Trustee pursuant to
the Company's existing Eligible Lender Trustee Agreement with Fleet Bank, N.A.,
accepting applications through at least January 31, 2004 and, with respect to
secondary disbursements, through at least June 30, 2004.
32
(r) Additional Documents. The Seller and the Company
shall have executed and delivered to the Purchaser the documents identified on
Section 6 of the Disclosure Schedule.
(s) All Necessary Actions. All actions to be taken by the
Seller, the Company and its Subsidiaries in connection with the consummation of
the transactions contemplated hereby and all certificates, opinions, instruments
and other documents required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the Purchaser.
The Purchaser may waive any condition specified in this Section 6.1 if
the Purchaser executes a writing so stating at or prior to the Closing. Such
waiver shall not be considered a waiver of any other provision in this Agreement
unless the writing specifically so states.
6.2 Conditions to Obligations of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(a) Representations and Warranties. The representations
and warranties set forth in Section 4 above shall be true and correct in all
material respects when made and shall be deemed to be made again at and as of
the Closing Date (except to the extent any representation or warranty is by its
terms made as of a date specified therein, in which case such representation or
warranty shall be true and correct as of such date) and shall then be true and
correct in all material respects.
(b) Performance by the Purchaser. The Purchaser shall
have performed and complied with all of their covenants hereunder through the
Closing, including without limitation payment of the Purchase Price at Closing.
(c) Absence of Litigation. No action, suit, or proceeding
shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (i) prevent consummation of any of the transactions contemplated by this
Agreement or any of the other Transaction Documents or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect).
(d) Opinion. The Seller shall have received from counsel
to Purchaser an opinion in form and substance as set forth in Exhibit H attached
hereto, addressed to the Seller, and dated as of the Closing Date.
(e) Certificates. The Purchaser shall have delivered to
the Seller each of the following:
(i) a certificate dated the Closing Date to the
effect that each of the conditions specified in this Section
6.2 are satisfied in all respects;
(ii) a certificate from the secretary of the
Purchaser confirming the existence, incorporation and good
standing of such corporation on the Closing Date, and
attaching copies of the certificate of incorporation and
by-laws, and resolutions authorizing the execution, delivery
and performance of this Agreement and all other documents and
the taking of all action required thereunder or in connection
therewith on behalf of the Purchaser; and
33
(iii) such other documents or instruments as the
Seller may reasonably request to effect the transactions
contemplated hereby.
(f) Loan Servicing Agreement. The Company shall have
executed and delivered the Loan Servicing Agreement on the terms set forth in
such agreement and such Loan Servicing Agreement shall be in full force and
effect as of the Closing and shall not have been amended or modified.
(g) HSR Waiting Period. The applicable waiting period
under the HSR Act shall have expired or been earlier terminated without action
by the DOJ or the FTC to prevent consummation of the transactions contemplated
by this Agreement.
(h) Existing Financing Agreements. The Existing Financing
Agreements shall have been paid in-full and terminated and the Seller and the
Company and its Subsidiaries shall have no further obligations thereunder, and a
release from ▇▇▇▇▇▇ to this effect in a form mutually acceptable to each of the
Parties shall have been obtained by the Company and the Seller.
(i) Additional Documents. The Purchaser and the Company
shall have executed and delivered to the Seller the documents identified on
Section 6 of the Disclosure Schedule.
(j) All Necessary Actions. All actions to be taken by the
Purchaser in connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to the Seller.
The Seller may waive any condition specified in this Section 6.2 if it
executes a writing so stating at or prior to the Closing. Such waiver shall not
be considered a waiver of any other provision in this Agreement unless the
writing specifically so states.
Section 7. INDEMNIFICATION.
7.1 Survival of Representations and Warranties. All of the
representations and warranties of the Seller (except for those contained in
Sections 3.1 (Organization), 3.2 (Capitalization; Ownership of Company), 3.3
(Authorization of Transaction), 3.4 (Noncontravention), 3.5 (Title), 3.13
(Taxes) and 3.20 (Employee Benefits)) contained herein or in any document,
certificate or other instrument required to be delivered hereunder shall survive
the Closing and continue in full force and effect until the first anniversary of
the Closing Date. The representations and warranties of the Seller contained in
Sections 3.1 (Organization), 3.2 (Capitalization; Ownership of Company), 3.3
(Authorization of Transaction), 3.4 (Noncontravention), 3.5 (Title), 3.13
(Taxes) and 3.20 (Employee Benefits) shall survive the Closing and shall
continue in full force and effect until ninety (90) days after the expiration of
the applicable statute of limitations. All of the representations and warranties
of the Purchaser contained in Section 4 shall survive the Closing and shall
continue in full force and effect until six (6) months after the expiration of
the applicable statute of limitations. All covenants and indemnities of the
Parties in this Agreement or in any document or certificate delivered hereunder
shall, unless otherwise specifically provided therein, remain in full force and
effect until six (6) months after the expiration of the applicable statute of
limitations or until the final resolution of claims or demands asserted by a
party pursuant to such indemnity that are pending as of the relevant dates
described in this Section 7.1. Any representation, warranty, covenant or
agreement in respect of which indemnity may be sought hereunder, and the
indemnity with respect thereto, shall survive the time at which it would
otherwise terminate pursuant to this Section 7, if notice of the inaccuracy or
breach or potential inaccuracy or breach thereof giving rise to such right or
potential right of indemnity shall have been given to the Party against whom
such indemnity may be sought prior to such time.
34
7.2 Indemnity by the Seller.
(a) Subject to Section 7.2(b), the Seller hereby agrees
to indemnify, defend and hold harmless the Purchaser and its Affiliates
(including, without limitation, the Company and its Subsidiaries following the
Closing) and each of its and their respective directors, officers, stockholders,
employees, agents, representatives and successors and assigns against and in
respect of any and all Liabilities, obligations, judgments, Encumbrances,
injunctions, charges, orders, decrees, rulings, damages (including loss of value
of any securities), dues, assessments, losses, fines, penalties, expenses, fees,
costs and amounts paid in settlement (including reasonable attorneys' and expert
witness fees and disbursements in connection with investigating, defending or
settling any Action or threatened Action) (collectively, "Losses") that are
incurred, suffered or sustained as a result of, in connection with, related to,
incidental to or by virtue of:
(i) the inaccuracy of any representation or
warranty made by the Seller in this Agreement or in any
certificate required to be delivered hereunder;
(ii) the nonfulfillment of any agreement or
covenant of the Company or the Seller contained herein
required to be performed or complied with by the Company or
the Seller on or prior to the Closing or in any certificate
required to be delivered hereunder;
(iii) any Action brought against the Company, its
Subsidiaries or its or their respective current or former
directors, officers, stockholders, employees, agents,
representatives and successors and assigns by Seller's
shareholders, including derivative suits by such shareholders
in the name of Seller, following the Closing;
(iv) any Action brought against the Company, its
Subsidiaries or its or their respective directors, officers,
stockholders, employees, agents, representatives and
successors and assigns, by any of the individuals identified
in Section 7.2(a)(iv) of the Disclosure Schedule, following
the Closing;
(v) any investigation of the Company, its
Subsidiaries or its or their respective current or former
directors, officers, employees or agents by the Securities and
Exchange Commission, the New York Stock Exchange or any state
securities agency with respect to any acts or omissions of the
Company, its Subsidiaries or its or their respective current
or former directors, officers, employees or agents that
occurred prior to the Closing; and
(vi) (a) any rent that may have been due in
excess of the rent otherwise payable by a non-hold over tenant
under the lease for the premises at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ for periods prior to the Closing
Date and (b) Losses arising from the termination or
cancellation of such lease by the landlord for such premises
on or prior to the Closing Date, in each of cases (a) and (b)
only to the extent that the Company and its Subsidiaries have
taken reasonable actions to mitigate any such Loss.
provided, however, that any such Losses shall be reduced by any Tax Benefit
actually realized by the Purchaser related to the events or transactions giving
rise to such Losses.
(b) Limitation on Seller Indemnification. The
indemnification provided for in Section 7.2(a)(i) above (other than with respect
to the Fully Indemnified Reps) is subject to the following limitations (with it
being understood, however, that nothing in this Agreement (including this
Section
35
7.2(b)) shall limit or restrict the Purchaser's right to maintain or recover any
amounts in connection with any Action based upon fraudulent misrepresentation or
deceit):
(i) The Seller shall not be liable for any
Losses under Section 7.2(a)(i) (other than with respect to the
Fully Indemnified Reps) unless the aggregate of all such
Losses relating thereto for which the Seller would, but for
this proviso, be liable exceeds on a cumulative basis an
amount equal to Seven Hundred Thousand Dollars ($700,000), in
which case the Seller shall be liable only for such Losses in
excess of such amount; and
(ii) The aggregate amount of all payments made by
the Seller in satisfaction of claims for indemnification
pursuant to Section 7.2(a)(i) (other than with respect to the
Fully Indemnified Reps) (as the same relates to
representations and warranties) above, shall in no event
exceed the Thirty-Five Million ($35,000,000).
For the avoidance of doubt and notwithstanding anything herein to the contrary,
the limitations set forth in Section 7.2(b) shall not apply to the
indemnification provided for in Sections 7.2(a)(ii), (iii), (iv), (v) and (vi)
or Section 9.2(a) and shall not apply to the purchase price adjustments or
indemnification provided for in Section 2.3 or Section 2.4.
(c) General Indemnification Provisions. For purposes of
this Section 7.2 and Section 9.2, any event or circumstance which results in a
Loss to the Company or any of its Subsidiaries (a "Company Loss") shall also be
deemed to result in a Loss (an "Indirect Loss") to the Purchaser. The Purchaser
shall be deemed to have an Indirect Loss in the amount of any Company Loss.
Except as otherwise required by law or by a "determination" as defined in
Section 1313 of the Code, all indemnification payments for the benefit of the
Purchaser under this Section 7.2 or Section 9.2 or the Seller under Section 7.3
shall be deemed to be adjustments to the Purchase Price set forth in Section
2.1(b) above. In no event shall the Seller's obligations in respect of the
indemnification provided for in this Section 7.2 (or otherwise), or any expense
reimbursement obligation of the Company provided for herein, be treated as
subordinated indebtedness of the Company or as a restricted payment pursuant to
any agreement to which the Company is a party or be otherwise restricted or
deferred. If and to the extent any provision of this Section 7.2 or Section 9.2
is unenforceable for any reason (other than the end of any survival period), the
Seller hereby agrees to make the maximum contribution to the payment and
satisfaction of any Loss for which indemnification is provided for in this
Section 7.2 or Section 9.2 that is permissible under applicable Legal
Requirements. If and to the extent any provision of Section 7.3 is unenforceable
for any reason, the Purchaser hereby agrees to make the maximum contribution to
the payment and satisfaction of any Loss for which indemnification is provided
for in this Section 7.2 that is permissible under applicable Legal Requirements.
7.3 Indemnity by the Purchaser. The Purchaser hereby agrees to
indemnify, defend and hold harmless the Seller and its directors, officers,
stockholders, employees, agents, representatives, Affiliates and successors and
assigns against and in respect of any and all Losses that are incurred, suffered
or sustained as a result of, in connection with, related to, incidental to or by
virtue of:
(i) the material inaccuracy of any
representation or warranty made by the Purchaser in this
Agreement or in any certificate required to be delivered
hereunder;
(ii) the material nonfulfillment of any agreement
or covenant of the Purchaser contained herein required to be
performed or complied with by the Purchaser on or prior to the
Closing or in any certificate required to be delivered
hereunder; or
36
(iii) any and all liabilities, Indebtedness
claims, causes of action, judgments, damages or penalties
whatsoever incurred or arising out of activities engaged in by
the Company after the Closing Date and based solely on the
acts or omissions of the Company or any of its Subsidiaries
after the Closing.
7.4 Payment. The Indemnifying Party shall pay the Indemnified
Party in, except as otherwise provided pursuant to Section 7.6 below,
immediately available funds on an as-incurred basis promptly after the
Indemnified Party provides the Indemnifying Party with written notice of a claim
hereunder. All indemnification payments shall be made in United States Dollars
unless otherwise specified herein.
7.5 Matters Involving Third Parties.
(a) If any third party shall notify any Person entitled
to indemnification under this Section 7 or Section 9.2 (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification pursuant to this Section 7 or Section 9.2 against any
other Person required to provide such indemnification (the "Indemnifying
Party"), then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within fifteen (15) days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against any
Losses the Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim (whether or not
otherwise required hereunder and with no reservation of rights), (ii) the Third
Party Claim involves only money damages and does not seek an injunction or other
equitable relief, (iii) the Claim for indemnification does not relate to or
arise in connection with any criminal proceeding, action, indictment, allegation
or investigation, (iv) the Indemnified Party has not been advised in writing by
counsel reasonably acceptable to the Indemnifying Party that a reasonable
likelihood exists of a conflict of interest between the Indemnified Party and
the Indemnifying Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently. If the Indemnifying Party assumes
control of the defense of the Third Party Claim, it shall at all times keep the
Indemnified Party reasonably informed of the status of such matter, including,
but not limited to, providing copies of all pleadings to the Indemnified Party.
(c) If the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 7.5(b) above, the
Indemnified Party may, at its election, retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party Claim.
(d) In the event any of the conditions in Section 7.5(b)
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against the Third Party Claim with separate counsel reasonably acceptable to the
Indemnifying Party, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the reasonable costs of defending against
the Third Party Claim (including attorneys' fees and expenses), and (iii) the
Indemnifying Party will remain responsible for any Losses the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Section
7.
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(e) Notwithstanding any of the foregoing provisions, (i)
the Indemnified Party will not consent to the entry of any judgment, enter into
any settlement with respect to the Third Party Claim or cease to defend such
claim without the prior written consent of the Indemnifying Party (which consent
shall not unreasonably be withheld), and (ii) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim unless either the Indemnifying Party obtains a written
agreement releasing the Indemnified Party from all liability thereunder or the
consent of the Indemnified Party (which consent shall not be unreasonably
withheld).
7.6 Exclusive Remedy. Following the Closing, the indemnification
provisions set forth in this Agreement shall constitute the sole and exclusive
recourse and remedy for Losses incurred by the Parties with respect to any
breach of representation, warranty or covenant which is to be performed before
or at the Closing Date under this Agreement; provided, however, that the
foregoing shall in no way limit any equitable remedies which may be available to
the Parties after the Closing Date.
7.7 No Offset. Any Losses which either Party suffers, sustains or
becomes subject to and with respect to which such Party is entitled to
indemnification from the other Party pursuant to this Section 7 may not be
satisfied in any respect by setting off any portion of such Losses against any
amounts which such Party owes to the other Party or any of the other Party's
Affiliates at such time.
7.8 Certain Waivers.
(a) Effective upon the Closing, except as may be provided
explicitly in this Agreement or any Transaction Document, the Seller, on of its
behalf and on behalf of each of its Affiliates and each of their respective
representatives, agents, successors, assigns, officers, directors, shareholders,
members, partners, employees, attorneys, principals and each of them,
(collectively, the "Seller Parties") hereby irrevocably waives, releases and
discharges, absolutely and forever the Company and each of its Subsidiaries,
representatives, agents, successors, assigns, officers, directors, shareholders,
members, managers, principals, partners, employees, attorneys and principals,
past and present and their respective heirs, successors and assigns
(collectively, the "Company Parties"), from any and all Liabilities to the
Seller or the other Seller Parties of any kind and nature whatsoever, whether in
its or his capacity as a stockholder, officer or director of the Company or
otherwise (including in respect of any rights of contribution or
indemnification, other than compensation as an employee of the Company) in
respect of facts, events, circumstances or conditions occurring or arising prior
to the Closing, in each case whether absolute or contingent, liquidated or
unliquidated, and whether arising under any agreement or understanding or
otherwise at law or equity, whether in administrative proceedings or in
arbitration and whether known or unknown, suspected or unsuspected, material or
immaterial, absolute or contingent, direct or indirect or nominally or
beneficially claimed or possessed and each of the Seller Parties shall not seek
to recover and hereby covenants not to seek to recover any amounts in connection
therewith or thereunder from the Company Parties. Effective upon the Closing, in
no event shall the Company Parties have any Liability to any of the Seller
Parties whatsoever for any breaches of the representations, warranties,
agreements or covenants of the Company or the Seller hereunder, and none of the
Seller Parties shall in any event seek contribution from the Company Parties for
any breaches of the Seller's obligation to the Purchaser or in respect of any
other payments required to be made by the Seller Parties pursuant to this
Agreement.
(b) Effective upon the Closing, except as may be
explicitly provided in this Agreement or any Transaction Document, each of the
Company Parties hereby irrevocably waives, releases and discharges, absolutely
and forever, the Seller Parties, from any and all Liabilities to the Company or
the other Company Parties of any kind and nature whatsoever, whether in its or
his capacity as a stockholder, officer or director of the Company or otherwise
(including in respect of any rights of contribution or indemnification) in
respect of facts, events, circumstances or conditions occurring or
38
arising prior to the Closing, in each case whether absolute or contingent,
liquidated or unliquidated, and whether arising under any agreement or
understanding or otherwise at law or equity, whether in administrative
proceedings or in arbitration and whether known or unknown, suspected or
unsuspected, material or immaterial, absolute or contingent, direct or indirect
or nominally or beneficially claimed or possessed and each of the Company
Parties shall not seek to recover and hereby covenants not to seek to recover
any amounts in connection therewith or thereunder from the Seller Parties.
Section 8. TERMINATION.
8.1 Termination of Agreement. This Agreement may be terminated as
provided below:
(a) the Seller and the Purchaser may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) the Purchaser may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing in the event the
Seller has breached any representation, warranty, or covenant contained in this
Agreement, in any material respect, the Purchaser has notified the Seller of the
breach, and the breach has continued without cure for a period of 30 days after
the notice of such breach or for such longer period (but in no case longer than
90 days) so long as such breach is curable by the Seller or the Company through
the exercise of their reasonable efforts, and the Seller and the Company
continues to exercise such reasonable efforts;
(c) the Seller may terminate this Agreement by giving
written notice to the Purchaser at any time prior to the Closing in the event
the Purchaser has breached any representation, warranty, or covenant contained
in this Agreement, in any material respect, the Seller has notified the
Purchaser of the breach, and the breach has continued without cure for a period
of 30 days after the notice of such breach or for such longer period (but in no
case longer than 90 days) so long as such breach is curable by the Purchaser
through the exercise of its reasonable efforts, and the Purchaser continues to
exercise such reasonable efforts; and
(d) if the Closing shall not have occurred on or before
November 20, 2003, by reason of the failure of any condition precedent under
Section 6 hereof (except that no Party may seek to terminate the Agreement
pursuant to this Section 8.1(d) if the failure of any such conditions results
primarily from the breach by such Party of any representation, warranty or
covenant hereunder).
8.2 Effect of Termination. If this Agreement terminates pursuant
to Section 8.1 above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach); provided, however, (a) the provisions of
Section 9 shall survive any such termination, and (b) nothing in Section 8.1 or
this Section 8.2 shall be deemed to release any Party from any liability for any
breach by such party of the terms and provisions of this Agreement or to impair
the right of any Party to compel specific performance by another Party of its
obligations under this Agreement; provided, that in the event this Agreement is
terminated in accordance with Sections 8.1(a), (b) or (d) (other than as a
result of the failure of any condition resulting primarily from the breach of
any representation, warranty or covenant by the Seller), the ▇▇▇▇▇▇▇ Money
Deposit shall be retained by the Seller.
Section 9. MISCELLANEOUS.
9.1 Press Releases and Public Announcements. From the date hereof
through and including the Closing Date, the Parties will consult with each other
and will mutually agree upon any press release or public announcement pertaining
to this Agreement or the other transactions contemplated by this
39
Agreement and shall not issue any such press release or make any such public
announcement unless the text and time of the release of such statement has been
approved by the other Party, except to the extent required by any Legal
Requirement or by obligations pursuant to any listing agreement with any
national securities exchange or national automated quotation system, in which
case the party proposing to issue such press release or make such public
announcement shall use its best efforts to consult in good faith with the other
Party and obtain the consent of the other Party, which consent shall not
unreasonably be withheld, before issuing any such press release or making any
such public announcement.
9.2 Tax Matters. The following provisions shall govern the
allocation of responsibility as between the Purchaser and the Seller for certain
Tax matters following the Closing Date:
(a) Seller Tax Indemnification. The Seller shall
indemnify, defend and hold harmless the Purchaser and its Affiliates (including,
without limitation, the Company and its Subsidiaries following the Closing) and
each of its and their respective directors, officers, stockholders, employees,
agents, representatives and successors and assigns against and in respect of any
and all Losses, that are incurred, suffered or sustained as a result of, in
connection with, related to, incidental to or by virtue of:
(i) the inaccuracy of any representation or
warranty with respect to Taxes made by the Seller in this
Agreement or in any certificate required to be delivered
hereunder;
(ii) the nonfulfillment of any agreement or
covenant of the Company or the Seller with respect to Taxes
contained herein required to be performed or complied with by
the Company or the Seller on or prior to the Closing or in any
certificate required to be delivered hereunder;
(iii) all Taxes of the Company and its
Subsidiaries for the Pre-Closing Tax Period and for the
portion of any Straddle Period allocated to the Pre-Closing
Tax Period;
(iv) all Taxes of any member of an Affiliated
Group of which the Company or any Subsidiary (or any
predecessor of the foregoing) is or was a member on or prior
to the Closing Date, including pursuant to Treasury Regulation
Section 1.1502-6 (or any analogous or similar state, local, or
foreign law or regulation);
(v) any and all Taxes of any Person imposed on
the Company or any Subsidiary as a transferee or successor, by
contract or pursuant to any law, rule, or regulation; and
(vi) any liability of the Purchaser for Taxes as
a result of the sale of the uninsured loans pursuant to
Section 6.1(n).
(b) Allocation of Pre- and Post-Closing Tax Liability.
Notwithstanding the provisions of Section 9.2(a), the Seller shall not be
obligated to pay any amount to Purchaser in respect of (i) any liability for
Taxes (x) attributable to (1) any transaction after the Closing that is not in
the ordinary course of business of the Company or any Subsidiary as carried on
at the Closing Date or (2) any item on any Tax Return filed, in each case by
Purchaser, any of its affiliates (including the Company and the Subsidiaries
following the Closing), or any transferee of Purchaser or any of its affiliates
that could reasonably be expected to adversely and materially affect Seller
(other than any such action expressly required by applicable Law or by this
Agreement) (either clause (1) or (2), a "Purchaser Tax Act") or (y) attributable
to a breach by Purchaser of its obligations under this Agreement, (ii) any Taxes
that arise as a result of any change in Tax rates made after the Closing Date
that would have retroactive effect to
40
income, profits or gains earned during the Pre-Closing Tax Period, (iii) any
Taxes that arise as a result of a change after the Closing Date in any
accounting policy, any tax reporting practice or the length of any accounting
period for Tax purposes of any of the Company or any of the Subsidiaries, other
than a change that is necessary to comply with the law or generally accepted
accounting principles applicable to the Company or such Subsidiaries, or (iv)
any liability for Taxes attributable to any action taken prior to the Closing
Date by Seller, or by the Company or any of its Subsidiaries, to the extent that
such action was taken at the express written request of Purchaser or any of its
affiliates.
(c) Purchaser Tax Indemnification. From and after the
Closing, Purchaser shall be liable for, and shall indemnify the Seller against
and hold Seller harmless from:
(i) all liability for Income Taxes of the
Company and its Subsidiaries for the Post-Closing Tax Period
and for the portion of the Straddle Period allocated to the
Post-Closing Tax Period;
(ii) all liability for Income Taxes of the
Company and its Subsidiaries attributable to a Purchaser Tax
Act or to a breach by any Purchaser of its obligations under
this Agreement;
(iii) all liability for Income Taxes of any
Purchaser or its affiliates (including the Company and its
Subsidiaries for the Post-Closing Tax Period and for the
portion of the Straddle Period allocated to the Post-Closing
Tax Period) that are assessed on Seller or any affiliate of
Seller; and
(iv) any liability for Operating Taxes of the
Company and its Subsidiaries for the Post-Closing Tax Period
and for the portion of any Straddle Period allocated to the
Post-Closing Tax Period.
(d) Tax Return Filing. To the extent the Waiver described
in Section 3.13(g) has been granted, the Seller shall (i) include the income of
the Company and its Subsidiaries (including any deferred items triggered into
income by Treasury Regulation Section 1.1502-13 and any excess loss account
taken into income under Treasury Regulation Section 1.1502-19) on the Seller's
consolidated federal income Tax Returns for all periods through the end of the
Closing Date and pay any federal income Taxes attributable to such income, and
(ii) for all taxable periods ending on or before the Closing Date, cause the
Company and its Subsidiaries to join in the Seller's consolidated federal income
tax return, and, in jurisdictions requiring separate reporting from the Seller,
to file separate company state and local income tax returns for the Company and
its Subsidiaries. To the extent the Waiver described in Section 3.13(g) has not
been granted, for all taxable periods ending on or before the Closing Date,
Seller shall cause the Company and its Subsidiaries to file consolidated federal
income Tax Returns with the Company as the common parent, and, in jurisdictions
requiring separate reporting from the Seller, to file separate company state and
local income tax returns for the Company and its Subsidiaries. All such Tax
Returns shall be prepared and filed in a manner consistent with prior practice,
except as required by a change in applicable law. The Purchaser shall have the
right to review and comment on any such Tax Returns prepared by the Seller. The
Purchaser shall timely prepare and file (or cause to be timely prepared and
filed) all Tax Returns, required to be filed in respect of the Company and its
Subsidiaries for the Post-Closing Tax Period and the Straddle Period, and for
the Pre-Closing Tax Period (x) for which the Company and its Subsidiaries are
not joined with Seller in a consolidated, unitary, combined or other
multi-member Tax Return and (y) which have not been filed on or before the
Closing Date, and shall pay (or cause to be paid) all Taxes shown as due with
respect to such Tax Returns; provided, however, that Seller shall reimburse
Purchaser (in accordance with Section 9.2(a) and Section 9.2(b)) for any amount
owed by Seller pursuant thereto with respect to the taxable periods covered by
such Tax Returns, and
41
provided, further, that in the case of Tax Returns for the Pre-Closing Tax
Period or the Straddle Period (i) at least sixty (60) days prior to the due date
for filing any such Tax Return (taking into account any applicable extensions),
Purchaser shall furnish Seller with a completed copy of such Tax Return for
Seller's review and comment, (ii) Purchaser shall incorporate Seller's
reasonable comments and (iii) no such Tax Return shall be filed with any Taxing
authority without Seller's prior written consent, such consent not to be
unreasonably withheld or delayed. Any Tax Return described in the preceding
sentence shall be prepared on a basis consistent with the past practices of the
Company and its Subsidiaries. Seller shall timely prepare and file (or cause to
be prepared and filed) with the appropriate authorities all Tax Returns required
to be filed in respect of the Company and its Subsidiaries for the Pre-Closing
Tax Period not otherwise provided for in this Section 9.2(d), and shall pay all
Taxes shown as due with respect to such Tax Returns; provided, however, that (i)
at least sixty (60) days prior to the due date for filing any such Tax Return
(taking into account any applicable extensions), Seller shall furnish Purchaser
with a completed copy of such Tax Return for Purchaser's review and comment,
(ii) Seller shall incorporate Purchaser's reasonable comments and (iii) no such
Tax Return shall be filed with any Taxing Authority without Purchaser's prior
written consent, such consent not to be unreasonably withheld or delayed. Any
Tax Return described in the preceding sentence shall be prepared on a basis
consistent with the past practices of the Companies and the Subsidiaries. Any
liability of Seller under Section 9.2(a) shall be extinguished to the extent
that prior to the Closing, any Seller or a Company or a Subsidiary makes any
payment to the relevant Taxing Authority under or in connection with this
Section 9.2(d).
(e) Tax Contests. Each of the Purchaser and the Seller
shall promptly notify the other in writing within five business days of
receiving notice of any pending or threatened audit, assessment, or other
proceeding with respect to Taxes of the Company or any Subsidiary for which the
Purchaser may be entitled to claim indemnification from the Seller hereunder
("Tax Contest"); provided that the failure of one party to timely notify the
other party of any such Tax Contest pursuant to this sentence shall not affect
the indemnity right or obligation of either party, so long as such failure does
not materially prejudice such other party. Upon giving written notice to the
Purchaser, the Seller shall have the right to and shall represent the interests
of the Company and its Subsidiaries and control the conduct and disposition of
any Tax Contest for the Pre-Closing Tax Period; provided that the Seller shall
not dispose of any such Tax Contest in a manner that would purport to bind or
would affect the Tax liability or Tax attributes of the Purchaser, the Company
or any Subsidiary for Taxable periods (or portions thereof) ending after the
Closing Date without the prior written consent of the Purchaser, which consent
shall not be unreasonably withheld. The Seller shall, at the Purchaser's
expense, afford the Purchaser and its Tax advisors a reasonable opportunity to
keep informed as to the conduct and status of such Tax Contest and to consult
with the Seller and its Tax advisors, including, without limitation, the right
to attend conferences with taxing authorities and to submit pertinent material
to the Seller in support of the Purchaser's position. The Purchaser shall
control any Tax Contest for a Straddle Period or for any the Pre-Closing Tax
Period which the Seller does not assume control of within a reasonable period of
time by notice as described above, and the Purchaser shall, at the Seller's
expense, afford the Seller and its Tax advisors a reasonable opportunity to keep
informed as to the conduct and status of such Tax Contest and to consult with
the Purchaser and its Tax advisors, including, without limitation, the right to
attend conferences with taxing authorities and to submit pertinent material to
the Purchaser in support of the Seller's position. The Seller and the Purchaser
agree, at their own expense to cooperate fully, and cause their Affiliates to
cooperate fully, with the other party and its representatives in connection with
such Tax Contest, including timely furnishing all work papers and other
documents requested by any relevant taxing authority and making relevant
employees and officers reasonably available in connection with such Tax Contest.
(f) Refunds and Credits. Any refund or credit of Taxes of
the Company or any Subsidiary for the Pre-Closing Tax Period shall be for the
account of Seller, provided, however, that no
42
refund or credit shall be for the account of Seller to the extent that such
refund or credit is taken into account as an asset on the Most Recent Balance
Sheet. Any refund or credit of Taxes of the Company or any Subsidiary for the
Post-Closing Tax Period shall be for the account of Purchaser. Any refund or
credit of Taxes of the Company or any Subsidiary for the Straddle Period shall
be equitably apportioned in accordance with the principles set forth in the
definition of "Straddle Period"; provided, however, that no refund or credit
shall be for the account of Seller to the extent that such refund or credit is
taken into account as an asset of the Company or such Subsidiary on the Most
Recent Balance Sheet. Purchaser shall, if Seller so requests and at the expense
of Seller, cause the Company and the Subsidiaries to file for and obtain any
refunds or credits to which Seller is entitled under this Section 9.2(f);
provided that (i) Purchaser shall be reasonably satisfied that the position set
forth in any such filing is supported by "substantial authority" as defined in
Treasury Regulations Section 1.6662-4(d) or better, and if Purchaser is not
reasonably satisfied, Purchaser may require Seller to provide an opinion of
counsel, reasonably satisfactory to Purchaser, demonstrating that such standard
is met, and (ii) Purchaser shall not be required to file, or cause the Company
or any Subsidiary to make any such filing if any position taken in such filing
could reasonably be expected materially to increase the Tax liability of
Purchaser or any of its Affiliates (including the Company or any Subsidiary
following the Closing) for any Taxable period or portion thereof beginning after
the Closing Date. Purchaser shall, and shall cause the Company and the
Subsidiaries to, permit Seller to control the prosecution of any such refund
claim and to conduct any negotiations, disputes, audits or other transactions
with any relevant Tax authority on behalf of the Company or the Subsidiaries
(for purposes of this Section, each a "Claim") and, where deemed appropriate by
Seller, shall authorize by appropriate powers of attorney such persons as Seller
shall designate to represent the Company or such Subsidiary with respect to such
Claim. Each party shall, or shall cause its affiliates to, forward to any other
party entitled under this Section 9.2(f) to any refund or credit of Taxes any
such refund within ten (10) days after such refund is received or reimburse such
other party for any such credit within ten (10) days after the credit is allowed
or applied against other Tax liability; provided, however, that any such amounts
shall be net of any Tax cost (including any applicable withholding tax) or
benefit (including any allowable relief connected to the relevant amount) to the
payor party attributable to the receipt of such refund or credit and/or the
payment of such amounts to the payee party.
(g) Purchase Price Adjustment. Except as otherwise
required by law or by a "determination" as defined in Section 1313 of the Code,
the parties shall treat any payment under this Section 9.2 as an adjustment to
the Purchase Price.
(h) Other Claims and Elections. Purchaser shall permit
Seller to make any necessary claims or elections or take any other action to
facilitate reducing Taxes of the Company or its Subsidiaries for which Seller is
liable under Section 9.2. In addition, Purchaser will cause the Company and its
Subsidiaries to take any action reasonably required by Seller in connection with
such claims, elections or other action taken by Seller in connection with this
Section 9.2.
(i) Cooperation on Tax Matters. The Purchaser, the
Company and the Seller shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information reasonably relevant to any such audit,
litigation, or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company, the Seller, and the Purchaser agree
(A) to retain all books and records with respect to Tax matters pertinent to the
Company relating to any taxable period beginning before the Closing Date until
expiration of the statute of limitations (and, to the extent notified by the
Purchaser or the Seller, any extensions thereof) of the respective taxable
periods, and to abide by all record retention
43
agreements entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Company or
the Seller, as the case may be, shall allow the other party to take possession
of such books and records.
(j) Tax Sharing Agreements. All Tax sharing agreements or
similar agreements with respect to or involving the Company or any Subsidiary
shall be terminated as of the Closing Date and, after the Closing Date, the
Purchaser, the Company and its Subsidiaries shall not be bound thereby or have
any liability thereunder.
(k) Transfer Taxes and Fees. All transfer, documentary,
sales, use, stamp, registration and other such Taxes, and all conveyance fees,
recording charges and other fees and charges (including any penalties and
interest) incurred in connection with consummation of the transactions
contemplated by this Agreement shall be paid one-half by Purchaser and one-half
by Seller when due, and the Seller will file all necessary Tax Returns and other
documentation with respect to all such Taxes, fees and charges (the cost of such
filings to be paid one-half by Purchaser), and, if required by applicable law,
the Purchaser will, and will cause its Affiliates to, join in the execution of
any such Tax Returns and other documentation.
(l) Coordination with General Indemnity. Indemnification
with respect to any Tax matter shall be governed exclusively by Sections 9.2(a)
through 9.2(c), and shall not be governed by Section 7 (except for Sections 7.1
and 7.2(c)). For the avoidance of doubt, the limitations set forth in Section
7.2(b) shall not apply to the indemnification provided for in Sections 9.2(a) or
elsewhere in this Agreement. To the extent of any conflict between the
provisions of this Section 9.2 and the provisions of Section 7, the provisions
of this Section 9.2 shall govern.
9.3 Non-Compete; Non-Solicitation; Confidentiality.
(a) The Seller acknowledges and agrees that the covenants
and agreements set forth in this Section 9.3(a) were a material inducement to
the Purchaser to enter into this Agreement and to perform its obligations
hereunder, and that the Purchaser would not obtain the benefit of the bargain
set forth in this Agreement as specifically negotiated by the Parties if any of
the Seller or its controlled Affiliates breached the provisions of this Section
9.3(a). Therefore, in further consideration of the Purchase Price to be paid to
the Seller for the Shares and the goodwill of the Company and its Affiliates
that the Purchaser is purchasing (including, without limitation, its goodwill,
trade secrets, and other Confidential Information), the Seller agrees that until
the one year anniversary of the Closing Date that the Seller shall not (and
shall cause each of its controlled Affiliates not to), directly or indirectly,
own any interest in, manage, control, participate in (whether as an officer,
director, employee, partner, agent, representative or otherwise), consult with,
render services for, permit his name to be used, or in any other manner engage
in the businesses of marketing, originating, funding or servicing guaranteed
student loans or private or alternative student loans for higher education or
private school tuition or providing student tuition installments plans for
secondary, college and graduate students (the "Business") anywhere in the United
States and such other countries as the Company and its Affiliates may from time
to time do business or actively propose to do business except as set forth in
Section 9.3 of the Disclosure Schedule; provided that nothing herein shall
prohibit the Seller or its controlled Affiliates from being a passive owner of
not more than 5% of the outstanding stock of any class of a corporation which is
publicly traded or in the over-the-counter market so long as none of such
Persons has any active participation in the business of such corporation.
(b) The Seller shall not (and the Seller shall cause all
of its Affiliates not to) directly, or indirectly through another Person, for
the period ending on the one year anniversary of the Closing
44
Date, (a) solicit (i.e., initiate discussions with) or hire any of the present
officers or present employees of the Company (other than persons who no longer
are officers or employees of the Company at the time discussions are initiated);
provided, however, that this provision shall not prohibit Seller or any of its
Affiliates from hiring any person who contacts them in response to an
advertisement published in a newspaper or magazine of general circulation or who
is contacted by an executive recruiting firm to which such person was not
identified by the Seller or any of its Affiliates; or (b) call on, solicit or
service any customer, supplier, licensee, licensor or other business relation of
the Company or any of its Subsidiaries in order to induce or attempt to induce
such Person to cease doing business with the Company or any of its Subsidiaries
(including making any negative statements or communications about the Company or
any of its Subsidiaries).
(c) The Seller shall treat and hold as confidential (and
shall cause its Affiliates to treat and hold as confidential) any Confidential
Information, refrain from using any of the Confidential Information except in
connection with this Agreement, and deliver promptly to the Company or the
Purchaser, at the request and option of the Company or the Purchaser, all
tangible embodiments (and all copies) of the Confidential Information which are
in its possession or under its control. In the event that the Seller is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process or other Legal Requirement) to disclose any Confidential
Information, the Seller shall notify Company and the Purchaser promptly of the
request or requirement so that the Company or Purchaser may seek an appropriate
protective order or waive compliance with the provisions of this Section 9.3(c).
If, in the absence of a protective order or the receipt of a waiver hereunder,
the Seller is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or otherwise in accordance with such Legal
Requirement, the Seller may disclose the Confidential Information to the
tribunal or otherwise in accordance with such Legal Requirement; provided that
the Seller shall reasonably cooperate with the Company and the Purchaser in
their efforts to obtain, at the expense of the Company or the Purchaser, an
order or other assurance that confidential treatment shall be accorded to such
portion of the Confidential Information required to be disclosed as the Company
or the Purchaser shall designate.
(d) If, at the time of enforcement of the covenants
contained in this Section 9.3 (the "Restrictive Covenants"), a court shall hold
that the duration, scope or area restrictions stated herein are unreasonable
under circumstances then existing, the Parties agree that the maximum duration,
scope or area reasonable under such circumstances shall be substituted for the
stated duration, scope or area and that the court shall be allowed and directed
to revise the restrictions contained herein to cover the maximum period, scope
and area permitted by law.
(e) If the Seller breaches, or threatens to commit a
breach of, any of the Restrictive Covenants, the Company, its Affiliates and the
Purchaser shall have, in addition to any other remedy at law or in equity, the
right and remedy to have the Restrictive Covenants specifically enforced by any
court of competent jurisdiction, it being agreed that any breach or threatened
breach of the Restrictive Covenants would cause irreparable injury to the
Company, its Affiliates and the Purchaser and that money damages would not
provide an adequate remedy to the Company, its Affiliates or the Purchaser.
9.4 Post-Closing Company Loan Purchase Obligations. Following the
Closing Date, Purchaser agrees to reimburse Seller, as promptly as practicable,
to the extent that any post-Closing breach by the Company of its obligations
under the Loan Origination and Sale Agreement, dated January 20, 1998, by and
among Richland State Bank, a South Dakota state bank, the Company and the Seller
(the "Loan Origination Agreement") causes Seller to be contractually obligated
to make payment to Richland State Bank pursuant the guarantee Seller has
provided pursuant to the Loan Origination Agreement.
45
9.5 Cooperation. The Parties shall cooperate with each other with
respect to the defense of any Claims asserted, made or commenced by third
parties following the Closing Date which are not subject to indemnification
provisions contained herein, provided that the Party requesting cooperation
shall reimburse the other Party for the other Party's reasonable out-of-pocket
costs and expenses of furnishing such cooperation.
9.6 Third Party Beneficiaries. Except as set forth in Section 7
and Section 9.2(a) hereof, nothing herein expressed or implied shall be
construed to give any Person other than the Parties hereto (and their successors
and assigns permitted by Section 9.8) any legal or equitable rights hereunder.
9.7 Entire Agreement. This Agreement, that certain Confidentiality
Agreement, dated as of September 19, 2003, by and between the Seller and the
▇▇▇▇▇▇ ▇▇▇ Corporation, as amended by that amendment thereto dated October 3,
2003, and the other Transaction Documents constitute the entire agreement
between the Parties and supersede any prior understandings, agreements, or
representations by or among the Parties or any of their Affiliates, written or
oral, to the extent they relate in any way to the subject matter hereof.
9.8 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Purchaser may, (i)
assign, in whole or in part, its rights and interests hereunder, to one or more
of its Affiliates and designate one or more of its Affiliates or co-investors to
perform its obligations hereunder, and (ii) the Purchaser may assign its rights
under this Agreement for collateral security purposes to any lender providing
financing to the Purchaser or any of its Affiliates and any such lender may
exercise, without duplication and subject to the limitations contained herein,
all of the rights and remedies of the Purchaser hereunder, in the case of each
such proviso so long as the Purchaser remains liable for its Obligations of such
assignee hereunder.
9.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
9.10 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.11 Limitation on Confidentiality. Notwithstanding anything in
this Agreement to the contrary, the Purchaser, the Company, and the Seller (and
each employee representative, or other agent of the taxpayer) may disclose to
any and all Persons, without limitation of any kind, the tax treatment and tax
structure of the transaction and all materials of any kind (including opinions
or other tax analyses) that are provided to the Purchaser or the Seller relating
to such tax treatment and tax structure except to the extent necessary to comply
with any applicable federal or state securities laws; provided, however, that
such disclosure may not be made until the earlier of date of the public
announcement of discussions relating to the transaction, the date of the public
announcement of the transaction, or the date of the execution of an agreement to
enter into the transaction. This authorization is not intended to permit
disclosure of any other information that is otherwise confidential including, to
the extent confidential, (i) any portion of any materials to the extent not
related to the Tax treatment or Tax structure of the transaction, (ii) the
identities of participants or potential participants in the transaction, (iii)
the existence or status of any negotiations, (iv) any pricing or financial
information (except to the extent such pricing or financial information is
related to the Tax treatment or Tax structure of the transaction), or (v) any
other term or detail not relevant to the Tax treatment or the Tax structure of
the transaction.
46
9.12 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) upon receipt if
sent by personal delivery, (ii) upon transmission if sent by fax (provided that
sender has received an electronic confirmation of receipt of the transmission),
(ii) one business day following the date sent when sent by overnight delivery
and (iii) five business days following the date mailed when mailed by registered
or certified mail return receipt requested and postage prepaid at the following
address:
If to the Seller or the Company:
UICI
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Copy to:
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ & Maw LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
If to the Purchaser:
SLM Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Vice President, Corporate Business Development
Copy to:
▇▇▇▇▇▇ Mae
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
and to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
47
9.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware. SUBJECT TO
SECTION 9.26, EACH OF THE PARTIES HEREBY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS, AND OF ANY ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS, OVER ANY
LAWSUIT UNDER THIS AGREEMENT AND WAIVES ANY OBJECTION BASED ON VENUE OR FORUM
NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN. EACH OF THE
PARTIES HEREBY WAIVES THE NECESSITY FOR PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL (RETURN RECEIPT REQUESTED), WITH A COPY ALSO BEING SENT BY
FACSIMILE (WITH RECEIPT CONFIRMED), IN EACH CASE DIRECTED TO THE COMPANY OR THE
PURCHASER AT ITS ADDRESS SET FORTH IN, AND WITH COPIES SENT AS PROVIDED BY
SECTION 9.12 ABOVE, AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED ON THE
DATE OF ACTUAL RECEIPT. EACH OF THE PARTIES HEREBY CONSENTS TO SERVICE OF
PROCESS AS AFORESAID. NOTHING IN THIS SECTION 9.13 WILL PROHIBIT PERSONAL
SERVICE IN LIEU OF THE SERVICE BY MAIL CONTEMPLATED HEREIN.
9.14 Amendments and Waivers. For the purposes of this Agreement,
except as otherwise specifically set forth herein, no course of dealing between
the Seller and the Purchaser and no delay on the part of any Party in exercising
any rights hereunder shall operate as a waiver of the rights hereof and thereof.
No provision hereof may be amended or waived unless such amendment or waiver is
in writing and signed by each Party to be bound thereby. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
9.15 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.16 Expenses. Except as otherwise provided herein or therein, the
Purchaser shall pay its own and the Seller shall pay its own and the Company's
and its Subsidiaries', expenses (including fees and expenses of legal counsel,
investment bankers, brokers or other representatives and consultants and
appraisal fees and expenses) incurred in connection with or related to the sales
process, the preparation, execution, interpretation, administration, and
monitoring of, and enforcement of its rights of this Agreement and the other
Transaction Documents, the performance of its (and in the case of the Seller's,
the Company's and its Subsidiaries') obligations hereunder and thereunder, and
the consummation of the transactions contemplated hereby and thereby
(collectively, the "Transaction Expenses"); provided that the fees and expenses
incurred in connection with any filing under the HSR Act shall be paid by
Purchaser; provided, further, that the Seller shall be solely responsible for
all its own and the Company's costs, expenses and payments related to the
preparation and negotiation of the Waiver and Release Agreements (including, but
not limited to, reimbursement payments thereunder, penalties and payments to
investment banks, legal fees and accounting fees) and for all salary, fees and
expenses paid to any employee, board member, agent and/or representative of the
Seller that has performed services for or on behalf of the business and
operations of the Company and its Subsidiaries.
48
9.17 Remedies. Each Party shall have all rights and remedies set
forth in this Agreement and all rights and remedies which such Party has been
granted at any time under any other agreement or Contractual Obligation and all
of the rights which such Party has under any law. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
9.18 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The phrase
"transactions contemplated hereby" shall mean the transactions contemplated by
this Agreement or any of the Transaction Documents. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
9.19 Generally Accepted Accounting Principles. Where any accounting
determination or calculation is required to be made under this Agreement or the
exhibits hereto, such determination or calculation (unless otherwise provided)
shall be made in accordance with GAAP, consistently applied, except that if
because of a change in GAAP the Company would have to alter a previously
utilized accounting method or policy in order to remain in compliance with GAAP,
such determination or calculation shall continue to be made in accordance with
the Company's previous accounting methods and policies. All numbers set forth
herein which refer to share prices or numbers or amount will be appropriately
adjusted to reflect stock splits, stock dividends, combinations of classes and
other recapitalizations affecting the subject class of stock.
9.20 Delivery by Facsimile. This Agreement, the agreements referred
to herein, and each other agreement or instrument entered into in connection
herewith or therewith or contemplated hereby or thereby, and any amendments
hereto or thereto, to the extent signed and delivered by means of a facsimile
machine, shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such agreement or instrument, each other party
hereto or thereto shall reexecute original forms thereof and deliver them to all
other parties. No Party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or communicated through the
use of a facsimile machine as a defense to the formation or enforceability of a
contract and each such party forever waives any such defense.
9.21 Payment Set Aside. To the extent that any Party makes a
payment or payments to the other Party hereunder or under other agreements
contemplated hereby, and such payment or payments or the proceeds of such
enforcement or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the payor, a trustee,
receiver or any other Person under any law (including any bankruptcy law, state
or federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and shall
49
continue in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
9.22 Incorporation of Exhibits and Schedules. The Exhibits and the
Disclosure Schedule identified in this Agreement are incorporated herein by
reference and made a part hereof.
9.23 Specific Performance. Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any court of the United States
or any state thereof having jurisdiction over the Parties and the matter
(subject to below), in addition to any other remedy to which they may be
entitled, at law or equity).
9.24 Further Assurances. At any time and from time to time after
the Closing, at the request of either Party and without further consideration,
the other Party and any Affiliate thereof will execute and deliver, or cause to
be executed and delivered, such other instruments and documents and take such
action as the requesting Party may reasonably request in order to confirm,
complete or better consummate the transactions contemplated by this Agreement
(including, without limitation, the transfer and conveyance of the Shares) or
any of the other Transaction Documents.
9.25 Waiver of Jury Trial. SUBJECT TO SECTION 9.26, TO THE EXTENT
NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HEREBY
WAIVES, AND COVENANTS THAT NEITHER THE SELLER NOR THE PURCHASER WILL ASSERT, ANY
RIGHT TO TRIAL BY JURY ON ANY ISSUE IN ANY PROCEEDING, WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE, IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, ANY OTHER TRANSACTION
DOCUMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR IN ANY WAY CONNECTED WITH,
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PURCHASER AND THE SELLER HEREUNDER
OR THEREUNDER, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND
WHETHER IN TORT OR CONTRACT OR OTHERWISE. Each Party acknowledges that it has
been informed by the other Party that the provisions of this Section 9.25
constitute a material inducement upon which such Party is relying and will rely
in entering into this Agreement and consummating the transactions contemplated
hereby. The Purchaser or the Seller may file an original counterpart or a copy
of this Section 9.25 with any court as written evidence of the consent of the
other Party to the waiver of its right to trial by jury.
9.26 Dispute Resolution.
(a) Except for any disagreement that is to be submitted
to the Accountant as contemplated by Section 2.3, in the event of any dispute,
disagreement, difference, controversy or claim (whether based on contract, tort,
statutory concepts, or any other legal doctrine) between the Parties arising out
of, connected with, or relating to any of the Transaction Documents (including
without limitation the existence, validity, interpretation, performance,
amendment, breach, or termination of any Transaction Document) or the subject
matter of any Transaction Document (each, a "Dispute"), upon the written request
of any Party which shall set forth in a short statement the factual basis for
the Dispute and the remedy sought, representatives of the Parties (the
"Representatives") shall promptly meet, either in person or by telephone, in a
good faith effort to resolve the Dispute. If the Representatives do not resolve
the Dispute (including due to any failure by the Representatives to meet) within
thirty (30) calendar days after reference of the matter to them, each of the
Parties shall be free to refer the Dispute to arbitration in accordance with the
provisions in paragraph (b) below.
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(b) Subject to paragraph (a) above having been complied
with, any and all Disputes shall be referred to and finally resolved by
arbitration in accordance with the then current rules of the American
Arbitration Association ("AAA Rules"), conducted in accordance with the
remainder of this Section 9.26(b). The place of the arbitration shall be
Chicago, Illinois. The arbitration shall be conducted before one (1) arbitrator
who shall be selected in accordance with the AAA Rules. The fees and expenses of
the American Arbitration Association and the arbitrator shall be shared equally
by the Purchaser on the one hand and the Seller, on the other hand and advanced
by them from time to time as required; provided that at the conclusion of the
arbitration, the costs and expenses of the arbitrator and all other costs and
expenses incurred in the arbitration (including the costs of the arbitration
previously advanced and the reasonable fees and expenses of attorneys,
accountants and other experts) shall be borne as specified in the arbitration
award and in the absence of any such specification each Party shall bear its own
expenses. The Parties shall keep confidential (i) the existence of the
arbitration proceedings, (ii) documents prepared for the proceedings, and (iii)
other documents made available during the proceedings, except as required by
Legal Requirements or as required for recognition and enforcement of the
arbitral decision and award. The arbitrator shall permit and facilitate such
discovery as the either of the Parties initiating such claim shall reasonably
request. The arbitrator shall render the decision and award within ninety (90)
days of the conclusion of the arbitration hearing, and such decision and award
shall be in writing and copies thereof shall be delivered to each of the
Parties. In rendering such decision and award, the arbitrator shall not add to,
subtract from or otherwise modify the provisions of the Transaction Documents
and shall make its determinations in accordance therewith. The arbitrator shall
be expressly empowered to determine the amount of any Losses subject to
indemnification hereunder in accordance with the terms and provisions of this
Agreement. The arbitral award may include both pre- and post-award interest, at
a rate to be determined by the arbitrator. Notwithstanding anything to the
contrary provided in this Section 9.26 and without prejudice to the above
procedures, any Party may apply to any court of competent jurisdiction for
temporary injunctive or other provisional judicial relief (i) to enforce the
arbitration provisions of this Agreement or (ii) if such action is necessary to
avoid irreparable damage or to preserve the status quo until such time as the
arbitrator is selected and available to hear such Party's request for temporary
relief. The award rendered by the arbitrator shall be final and binding upon the
Parties and not subject to judicial review (absent manifest error), and judgment
thereon may be entered in any court of competent jurisdiction.
9.27 401(k) Plan Elections and Loans.
(a) Seller shall cause each employee of the Company who
is an active employee of the Company as of the Closing Date and who is
participating in Seller's defined contribution plan ("Seller's DC Plan") to
become fully vested in any benefits earned under such plan as of the Closing
Date. Employees of the Company who are active employees as of the Closing Date
with account balances under Seller's DC Plan shall be entitled to request a lump
sum distribution of such account balances and, if requested by any such
employee, Purchaser shall cause a defined contribution plan sponsored and
maintained by Purchaser to accept a direct rollover contribution of such account
balances provided, however, that such rollover is made in the form of cash or a
cash equivalent.
(b) Seller and the fiduciaries of the Seller's DC Plan
will apply the terms of that plan's participant loan procedures in the manner
they consider appropriate with respect to Employees of the Company who have
outstanding participant loans under Seller's DC Plan. Seller agrees that the
Company and Purchaser will have no duties or obligations with respect to such
loans and will indemnify and hold the Company and Purchaser harmless for any
Liabilities related to such loans or the implementation of the loan procedures.
Notwithstanding the forgoing, Purchaser agrees that, if and to the extent a
participant with an outstanding loan rolls over his or her 401(k) account to
Purchaser's 401(k) plan, Purchaser and its plan's fiduciaries will apply their
loan procedures to such participants, and Seller shall not be required to
indemnify the Company and Purchaser with respect to any handling of the loans
after such rollover.
* * * * *
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IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase
Agreement as a sealed instrument as of the day and year first above written.
SELLER: UICI
By:_______________________________________
Name:
Title:
PURCHASER: SLM CORPORATION
By:_______________________________________
Name:
Title:
S-1