STOCK PURCHASE AND INDEMNITY AGREEMENT
by and among
WHITE MOUNTAINS INSURANCE GROUP, LTD.,
WHITE MOUNTAINS HOLDINGS (BARBADOS) SRL
and
DEXIA CREDIT LOCAL DE FRANCE S.A.
for
all of the outstanding capital stock of
WHITE MOUNTAINS HOLDINGS, INC.
and
indirectly for certain of the outstanding capital stock of
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
dated as of
March 14, 2000
STOCK PURCHASE AND INDEMNITY AGREEMENT (the "AGREEMENT"),
dated as of March 14, 2000, by and among WHITE MOUNTAINS INSURANCE GROUP, LTD.,
a corporation organized under the laws of Bermuda ("WHITE MOUNTAINS"), WHITE
MOUNTAINS HOLDINGS (BARBADOS) SRL, a society with restricted liability organized
under the laws of Barbados ("SUB 1") (each a "SELLER" and, collectively, the
"SELLERS"), and DEXIA CREDIT LOCAL DE FRANCE S.A., a corporation organized under
the laws of France ("CLF") (each a "PARTY" and, collectively, the "PARTIES").
IN CONSIDERATION of the respective representations,
warranties, covenants, agreements, undertakings and obligations set forth
herein, and intending to be legally bound hereby, the Parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1 CERTAIN DEFINITIONS. The following terms are used
in this Agreement with the meanings set forth below and other terms are later
defined:
"BERKSHIRE HATHAWAY STOCK" has the meaning given to it in
Section 2.3(c).
"EFFECTIVE DATE" has the meaning given to it in the Merger
Agreement.
"EFFECTIVE TIME" has the meaning given to it in the Merger
Agreement.
"FSA" means Financial Security Assurance Holdings Ltd., a New
York corporation.
"FSA COMMON STOCK" has the meaning given to it in the
definition of FSA Shares.
"FSA SHARES" means 6,020,807 of issued and outstanding shares
of common stock of FSA, par value $0.01 per share (the "FSA COMMON STOCK"), and
2,000,000 of issued and outstanding shares of Series A Convertible Redeemable
Preferred Stock of FSA, par value $0.01 per share (the "FSA PREFERRED STOCK"),
subject in each case to adjustment to reflect the conversion of any shares of
FSA Preferred Stock into shares of FSA Common Stock. Any shares received
pursuant to such conversion shall be FSA Shares.
"FSA PREFERRED STOCK" has the meaning given to it in the
definition of FSA Shares.
"GOVERNMENTAL AUTHORIZATION" means any approval, franchise,
certificates of authority, order, consent, judgment, decree, license, permit,
waiver or other authorization issued, granted given or otherwise made available
under the authority of any Governmental Entity (as defined in Section 3.4) or
pursuant to any Law (as defined in Section 3.2(d)).
"HOLDINGS" means White Mountains Holdings, Inc, a Delaware
corporation, all of the issued and capital stock of which comprises the Holdings
Shares.
"HOLDINGS SHARES" means all of the issued and outstanding
shares of capital stock of Holdings, comprising common stock, par value $1.00
per share.
"LLC TRANSACTIONS" means (1) the contribution by Sub 1 to
Holdings of the Services Shares, (2) pursuant to Section 266 of the Delaware
General Corporation Law, the conversion of Services into a Delaware limited
liability company, (3) the distribution by Services to Holdings (the sole member
of Services) of the FSA Shares and (4) the transfer by Holdings to a wholly
owned subsidiary of White Mountains that is not owned, directly or indirectly,
by Holdings of all the membership interests in Services.
"MAJORITY SERVICES SHARES" means all of the issued and
outstanding shares of common stock of Services, par value $0.01 per share, owned
by Holdings as at the date of this Agreement, which shares comprise all of the
issued and outstanding shares of capital stock of Services (except for the
Services Shares).
"MATERIAL ADVERSE EFFECT" means, with respect to White
Mountains, Sub 1, Services or Holdings, as the case may be, any effect that (a)
is material and adverse to the financial position, results of operations (if
any) or business of White Mountains and its Subsidiaries taken as a whole, or
(b) would materially impair the ability of White Mountains or Sub 1 to perform
its obligations under this Agreement or the ability of White Mountains, Sub 1,
Services or Holdings to consummate the transactions contemplated herein.
"MERGER" has the meaning given to it in the Merger Agreement.
"MERGER AGREEMENT" means the Agreement and Plan of Merger,
dated as of March 14, 2000 by and among Dexia S.A., Dexia Credit Local de France
S.A., PAJY, Inc. and FSA, as it may be amended from time to time.
"MERGER CONSIDERATION" has the meaning given to it in the
Merger Agreement.
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"PERSON" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, Governmental Entity (as defined in Section 3.4), joint venture, estate,
trust, association, organization or other entity of any kind or nature.
"PRE-CLOSING BALANCE SHEET" means a balance sheet of Services
dated as of the last day of the month of the month immediately preceding the
month in which the Closing occurs prepared in accordance with U.S. generally
accepted accounting principles.
"PRE-CLOSING TAX PERIOD" means any taxable year or period that
ends on or before the Effective Date and, with respect to any taxable year or
period beginning before and ending after the Effective Date, the portion of such
taxable year or period ending on and including the Effective Date. For this
purpose, the Taxes of Holdings for the portion of the taxable year or period
ending on, and for the portion of a taxable year or period beginning after, the
Effective Date shall be determined by assuming that Holdings had a taxable year
or period which ended at the close of the Effective Date, except that
exemptions, allowances or deductions that are calculated on an annual basis
(such as the deduction for depreciation) shall be apportioned on a time basis.
"QUARTER DATE" shall mean each successive three month
anniversary date of the Effective Date occurring after the thirteenth month
after the Effective Date and prior to the eight and a half year anniversary of
the Effective Date.
"RELATED PERSON" means, with respect to any Person, (a) any
Person which, directly or indirectly, controls, is controlled by, or is under
common control with, such Person, (b) each Person that serves as a director,
officer, partner, executor, trustee or agent of such Person (or in any other
similar capacity), or (c) any Person with respect to which such Person serves as
a general partner or trustee (or in any other similar capacity).
"REPRESENTATIVES" means, with regard to any Person, such
Person's directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"REPURCHASE SECURITIES" means all Repurchase Shares, all U.S.
Treasury obligations sold to CLF by Sub 1 pursuant to Section 2.3 hereof and any
securities obtained by CLF pursuant to Section 2.3 hereof.
"REPURCHASE SHARES" shall mean all shares of Berkshire
Hathaway Stock sold to CLF by Sub 1 pursuant to Section 2.3 hereof (whether
pursuant to Section 2.3(c)(i) or 2.3(c)(vii)).
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"SECURITY PURCHASE PRICE" shall mean as of any date (i) with
respect to shares of Berkshire Hathaway Stock (A) purchased and sold pursuant to
Section 2.3(c)(i), the "ORIGINAL PRICE PER SHARE" (as defined in Section
2.3(c)(i)), and (B) purchased and sold pursuant to Section 2.3(c)(vii), the
"ADJUSTED PRICE PER SHARE" (as defined in Section 2.3(c)(vii)) and (ii) with
respect to any U.S. treasury obligations, the principal amount thereof.
"SEMI-ANNUAL DATE" shall mean each six month anniversary of
the Effective Date.
"SERVICES" means White Mountains Services Corporation, a
Delaware corporation, all of the issued and outstanding capital stock of which
comprises common stock.
"SERVICES SHARES" means all of the issued and outstanding
shares of common stock of Services, par value $0.01 per share, owned
beneficially by White Mountains.
"SUB 1 SHARES" means all of the issued and outstanding common
quotas of Sub 1.
"SUBSIDIARY" has the meaning given to it in Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission.
"TAXES" has the meaning given to it in Section 3.9(n).
"U.S. DOLLAR" OR "$" means the lawful currency of the United
States of America.
SECTION 1.2 MERGER AGREEMENT DEFINITIONS. Capitalized terms
used but not defined herein have the meanings ascribed to them in the Merger
Agreement.
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ARTICLE II
SALE AND PURCHASE OF SHARES
SECTION 2.1 SALE AND PURCHASE OF HOLDINGS SHARES.
(a) SALE AND PURCHASE OF HOLDINGS SHARES. Upon the terms and
subject to the conditions set forth in this Agreement and on the basis of the
representations, warranties, covenants, agreements, undertakings and obligations
contained herein, immediately prior to the Merger on the Effective Date, White
Mountains shall cause Sub 1 to sell to CLF, and Sub 1 shall sell to CLF, and CLF
shall purchase from Sub 1, all of the Holdings Shares, free and clear of any and
all Liens, for the consideration specified in this Article II. For purposes of
this Agreement, the term "LIENS" shall mean any charges, claims, community
property interests, covenants, encumbrances, equitable interests, exceptions,
liens, mortgages, options, pledges, reservations, rights of first refusal,
security interests, statutory liens, warrants, or restrictions of any kind,
including any restrictions on voting, transfer, receipt of income, or exercise
of any other attribute of ownership.
SECTION 2.2 PURCHASE PRICE.
(a) PURCHASE PRICE FOR HOLDINGS SHARES. The purchase price for
the Holdings Shares shall be an amount in cash in U.S. dollars equal to the sum
of (i) the product of (A) the number of shares of FSA Common Stock included in
the FSA Shares and being sold hereunder and (B) the per share Merger
Consideration and (ii) the product of (A) the number of shares of FSA Preferred
Stock included in the FSA Shares and being sold hereunder and (B) the per share
Preferred Merger Consideration (as defined in the Merger Agreement) (the
"PURCHASE PRICE"). The Purchase Price shall be paid in accordance with Section
2.3 hereof.
SECTION 2.3 PAYMENT OF PURCHASE PRICE, HOLDBACK AMOUNT AND
REPURCHASE SHARES.
(a) On the Effective Date and subject to the terms and
conditions set forth in this Agreement, in reliance on the representations,
warranties, covenants and agreements of the Parties contained herein and in
consideration of the sale, assignment, transfer and delivery of the Holdings
Shares to CLF, CLF shall pay the Purchase Price (less the Holdback Amount (as
defined in Section 2.3(b)(i)) for the Holdings Shares to White Mountains (for
Sub 1's account in respect of the Holdings Shares) by wire transfer of
immediately available funds to an account or accounts designated by White
Mountains.
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(b) HOLDBACK AMOUNT.
(i) Notwithstanding anything to the contrary
contained herein, CLF shall withhold an amount equal to $50,000,000 plus, if the
increase in the liabilities of Services from December 31, 1999 ($42,200,000) to
the date of the Pre-Closing Balance Sheet is greater than $2,000,000, an
additional amount equal to such increase, from the Purchase Price payable on the
Effective Date (as it may be reduced pursuant to Section 2.3, the "HOLDBACK
AMOUNT").
(ii) Except as set forth in Section 2.3(d), on each
date on which Sub 1 repurchases Repurchase Securities pursuant to clauses (ii),
(iii) and (iv) of Section 2.3(c), CLF shall pay to Sub 1 an amount equal to the
aggregate Security Purchase Price paid for all Repurchase Securities being
repurchased on such date less an amount attributable to the Security Purchase
Price paid for Repurchase Securities sold by CLF pursuant to Section 2.3(d) and
deemed sold pursuant to Section 2.3(c) and less any reductions in the Holdback
Amount pursuant to Section 2.3(d) not previously reduced against such a payment
and the Holdback Amount shall be reduced by such amount.
(c) SECURITY PURCHASES.
(i) At the Effective Time, Sub 1 shall sell to CLF,
and CLF shall purchase for an amount equal to the Holdback Amount from Sub 1, a
number of Class A shares of common stock (the "BERKSHIRE HATHAWAY STOCK") of
Berkshire Hathaway Inc. ("BERKSHIRE HATHAWAY"), equal to the Holdback Amount
divided by the average closing price per share of Berkshire Hathaway Stock
reported on the New York Stock Exchange for the ten trading days ending on and
including the second day prior to the Effective Date (the "ORIGINAL PRICE PER
SHARE"), and Sub 1 shall, at the Effective Time and to effectuate the foregoing
purchase and sale, deliver and transfer to CLF a certificate or certificates
evidencing the Berkshire Hathaway Stock duly endorsed in blank or accompanied by
stock powers duly executed in blank, in proper form for transfer, with all
signatures guaranteed and with any requisite stock transfer tax stamps properly
affixed thereto. Such stock shall not be subject to any restrictions on transfer
except as set forth herein.
(ii) On the thirteenth month anniversary of the
Effective Date, Sub 1 shall repurchase from CLF half the number or amount of
Repurchase Securities then held by CLF for a per security price equal to the
Security Purchase Price.
(iii) On each Quarter Date, Sub 1 shall repurchase
from CLF Repurchase Securities in an amount equal to the quotient of half the
number of Repurchase Securities then held by CLF divided by the number of
Quarter Dates then
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remaining (including the Quarter Date on which such determination is being made)
for a per security price equal to the relevant Security Purchase Price as of
such date.
(iv) On the eight and a half year anniversary of the
Effective Date, Sub 1 shall repurchase from CLF all Repurchase Securities then
held by CLF for a per security price equal to the Security Purchase Price in
effect on such date.
(v) On each Semi-Annual Date, if the average closing
price of Berkshire Hathaway Stock reported on the New York Stock Exchange for
the ten trading days ending on and including the sixth business day prior to
such Semi-Annual Date is less than 90% of the Security Purchase Price for any
Berkshire Hathaway Stock held by CLF pursuant to this Agreement, CLF may, by
giving written notice to Sub 1 at least five business days prior to the
Semi-Annual Date, require Sub 1 to repurchase all of such shares of Berkshire
Hathaway Stock held by CLF for a price per security equal to the Security
Purchase Price in effect with respect thereto.
(vi) On each Semi-Annual Date, if the average closing
price of Berkshire Hathaway Stock reported on the New York Stock Exchange for
the ten trading days ending on and including the sixth business day prior to
such Semi-Annual Date is greater than 110% of the Security Purchase Price for
any Berkshire Hathaway Stock held by CLF pursuant to this Agreement, then Sub 1
may, by giving written notice to CLF at least five business days prior to the
Semi-Annual Date, require CLF to sell to Sub 1 all of such shares of Berkshire
Hathaway Stock held by CLF for a price per security equal to the Security
Purchase Price then in effect with respect thereto.
(vii) Simultaneously with any sale and repurchase of
Repurchase Shares pursuant to clause (v) or (vi) above or under Section 2.3(e)
and in substitution therefor, Sub 1 shall sell to CLF, and CLF shall purchase
from Sub 1, at Sub 1's discretion, either (i) United States treasury obligations
with an aggregate principal value equal to the Holdback Amount as of the date of
such sale and repurchase (after giving effect to any reduction thereof on the
date of such sale and repurchase) or (ii) a number of shares of Berkshire
Hathaway Stock equal to the quotient of the Holdback Amount as of the date of
such sale and repurchase (after giving effect to any reduction thereof on the
date of such sale and repurchase) divided by the average closing price per share
(the "ADJUSTED PRICE PER SHARE") of Berkshire Hathaway Stock reported on the New
York Stock Exchange for the ten trading days ending on and including the second
day prior to the date of such sale and repurchase.
(d) CLF may, at its option, withhold an amount equal to the
amount of any unsatisfied claims (whether or not finally determined) made by CLF
against White Mountains or Sub 1, or a Related Person of White Mountains or Sub
1, under this Agreement, from the Holdback Amount on the due date for payment
thereof and may
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satisfy any such claim, in whole or in part as the case may be, from the amount
withheld. Additionally, or alternatively, CLF may, at its option, satisfy any
such claim by selling on the date such claim becomes payable that number of
Repurchase Securities yielding proceeds (after taxes, commissions and all other
related transaction expenses) in an amount closest in equivalent value to the
amount of such claim. In such case, the Holdback Amount shall be reduced by the
Security Purchase Price of the Repurchase Securities so sold, although for
purposes of the repurchase provisions herein payments shall be made by Sub 1 as
if it were purchasing the Repurchase Securities so sold, if CLF so satisfies any
such claim, Sub 1 shall have no right or claims, under this Agreement or
otherwise, in respect of the sold Repurchase Securities. If CLF has a
substantial reason to believe that there are other similar claims that will be
made, CLF may similarly withhold amounts from the Holdback Amount or sell
Repurchase Securities. Notwithstanding the foregoing, there shall be no
obligation on CLF to satisfy any such claims as are referred to in this Section
2.3(d) first from the Holdback Amount or any Repurchase Securities and in no
event shall the Holdback Amount or the value of the Repurchase Securities
represent a cap on the amount of any such claim. If CLF withholds any amount
pursuant to this Section 2.3(d) and the claim or potential claims which gave
rise to such withholding is withdrawn, settled, terminated by final judgment or
otherwise determined to be for less than the amount so withheld, CLF shall
promptly pay to Sub 1 an amount equal to the difference between the amount so
withheld and the actual final amount of the claim.
(e) CLF shall pass through to Sub 1 all interest, dividends
and distributions paid on the Repurchase Securities. If an extraordinary
distribution or dividend is made on the Repurchase Shares, CLF may, by giving
written notice to Sub 1 at least five business days prior to the date of payment
of such dividend or such distribution, require Sub 1 to repurchase, on the date
of payment of such dividend or such distribution, all of the Repurchase Shares
then held by CLF for a price per security equal to the relevant Security
Purchase Price. Concurrently with such repurchase and in substitution therefor,
Sub 1 shall sell to CLF, and CLF shall purchase from Sub 1, new Repurchase
Securities as set forth in Section 2.3(c)(vii) hereof. CLF shall vote the
Repurchase Shares at each annual or special meeting of Berkshire Hathaway
shareholders in person or by proxy as instructed by Sub 1 so long as CLF
receives reasonable advance written notice of such instructions. If there shall
be a liquidation, merger, consolidation, sale of the assets, or other
combination or similar transaction with respect to Berkshire Hathaway such that
the Repurchase Shares are no longer outstanding or are not exchanged for
outstanding common stock of the acquiring or successor corporation, the proceeds
of such transaction shall be distributed to Sub 1 as consideration therefor and
Sub 1 and CLF shall enter into a similar repurchase arrangement with respect to
such other publicly traded securities as the parties hereto otherwise agree or,
if the parties cannot so agree, Sub 1 shall replace such securities with U.S.
treasury obligations, and all such securities shall be deemed to be "Repurchase
Securities" hereunder.
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SECTION 2.4 CLOSING. The sale and delivery of the Holdings
Shares by White Mountains and Sub 1 and the payment of the Purchase Price (less
the Holdback Amount) to White Mountains (the "CLOSING") shall take place on the
Effective Date; provided that for the purposes of the Merger and this Agreement,
the Closing shall be deemed to be effective immediately before the Effective
Time.
SECTION 2.5 SUBSTITUTE BUYER. CLF may at any time prior to the
Closing substitute as buyer under this Agreement any other Person; provided,
however, that such other Person shall be a Subsidiary of CLF and CLF shall
remain fully responsible for the obligations set forth herein and, provided
further, that CLF shall provide White Mountains with written notice of such
substitution.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLERS
Except as may be set forth on a schedule delivered by White
Mountains to CLF ("DISCLOSURE SCHEDULE") prior to the execution hereof that sets
forth, among other things, items the disclosure of which is necessary or
appropriate in response to an express disclosure requirement contained in a
provision hereof or as an exception to one or more representations and
warranties in Article III or to one or more of the covenants in Article V (the
disclosure of any such item in the Disclosure Schedule shall be disclosure for
the purposes of only that particular Section of this Agreement identified and
not for any other Section), each Seller hereby jointly and severally represents
and warrants to CLF as follows:
SECTION 3.1 ORGANIZATION AND GOOD STANDING.
(a) Each of Holdings, Services, White Mountains and Sub 1 is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with full power and authority to conduct its
business as it is now being conducted, to own or use the properties (except for
Holdings and Services, which do not own any properties) or assets that it
purports to own or use, and to perform all of its respective obligations under
this Agreement.
(b) White Mountains has made available or delivered to CLF a
true, complete and correct copy of the certificate of incorporation and by-laws
(or equivalent documents including memorandum and articles of association, a
certificate of organization or articles of organization), each as amended to
date, of White Mountains,
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Sub 1, Services and Holdings (collectively, the "ORGANIZATIONAL DOCUMENTS") .
The Organizational Documents so delivered are in full force and effect.
SECTION 3.2 CAPITALIZATION AND OWNERSHIP OF SHARES.
(a) The authorized capital stock of Holdings consists solely
of 200,000 shares of common stock, par value $1.00 per share, of which only
106,552 shares of common stock are issued and outstanding. As of the date
hereof, the authorized capital stock of Services consists solely of 5,000,000
shares of common stock, par value $0.01 per share, of which only 3,211,481
shares of common stock are issued and outstanding. All of the issued and
outstanding shares of capital stock of Holdings and all of the shares of
authorized capital stock of Services referred to in this paragraph (a) have been
duly authorized and is validly issued, fully paid and nonassessable.
(b) White Mountains is the indirect and beneficial owner of
the Sub 1 Shares and (at the date hereof) of the Services Shares, free and clear
of all Liens. Sub 1 is the sole record and beneficial owner and holder of the
Holdings Shares, free and clear of all Liens. Holdings shall, at the Closing and
pursuant solely to the LLC Transactions, be the sole record and beneficial owner
and holder of the FSA Shares, free and clear of all Liens and shall not own,
directly or indirectly, any shares of capital stock of Services. Services is, at
the date hereof, the sole record and beneficial owner and holder of the FSA
Shares, free and clear of all Liens. Sub 1 shall, immediately before the
transfer and delivery to CLF of the Repurchase Shares or other Repurchase
Securities (as the case may be), be the sole record and beneficial owner and
holder of the Repurchase Shares or other Repurchase Securities (as the case may
be), free and clear of all Liens.
(c) There are no shares of capital stock or other securities
of Holdings (i) reserved for issuance or (ii) subject to preemptive rights or
any outstanding subscrip tions, options, warrants, calls, rights, convertible
securities or other agreements or other instruments outstanding or in effect
giving any Person the right to acquire any shares of capital stock or other
securities of Holdings or any commitments of any character relating to the
issued or unissued capital stock or other securities of Holdings. Holdings does
not have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders Holdings on any
matter.
(d) No legend or other reference to any purported Lien appears
upon any certificate representing the Holdings Shares or the FSA shares. The
Holdings Shares were not issued in violation of (i) the Securities Act of 1933,
as amended (the "SECURITIES ACT"), the securities laws of any state, or any
other federal, state, local, municipal, foreign, international, multinational,
or other constitution, law, rule, standard, requirement, administrative ruling,
order, ordinance, principle of common law, legal
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doctrine, code, regulation, statute, treaty or process ("LAW") or (ii) any
award, decision, injunction, judgment, decree, settlement, order, process,
ruling, subpoena or verdict (whether temporary, preliminary or permanent)
entered, issued, made or rendered by any court, administrative agency,
arbitrator, Governmental Entity (as defined in Section 3.4) or other tribunal of
competent jurisdiction ("ORDER").
(e) Assuming CLF has the requisite corporate power and
authority to be the lawful owner of the Holdings Shares, upon delivery to CLF at
the Effective Time of certificates representing the Holdings Shares, duly
endorsed by Sub 1 for transfer to CLF, and upon the payment of the Purchase
Price (less the Holdback Amount) by CLF to White Mountains, good title in the
Holdings Shares shall pass to CLF, free and clear of all Liens, other than those
arising from acts of CLF or its affiliates. Assuming CLF has the requisite
corporate power and authority to be the lawful owner of the Repurchase Shares or
other Repurchase Securities, upon delivery to CLF at the Effective Time of
certificates representing the Repurchase Shares or other Repurchase Securities
(as the case may be), duly endorsed by White Mountains for transfer to CLF, good
title in the Repurchase Shares or Repurchase Securities (as the case may be)
shall pass to CLF, free and clear of all Liens, other than those arising from
acts of each of CLF or its affiliates and other than from the arrangements set
out in Section 2.3. The Repurchase Shares and the Repurchase Securities shall be
registered under the Securities Act and shall be freely transferable and
tradeable without transfer restrictions of any sort, other than for restrictions
on transfer resulting from the circumstances of CLF.
SECTION 3.3 AUTHORITY. Each of White Mountains and Sub 1 has
the full legal right, requisite power and authority (corporate or otherwise) and
has taken all action (including corporate action) necessary in order to execute,
deliver and perform fully its obligations under this Agreement and to consummate
the transactions contem plated hereby and each of White Mountains, Sub 1,
Holdings and Services has such authority to consummate fully the LLC
Transactions. This Agreement has been duly executed and delivered by each of
White Mountains and Sub 1 and constitutes, assuming the due authorization,
execution and delivery of this Agreement by CLF, a valid and binding agreement
of each of White Mountains and Sub 1, enforceable against each of White
Mountains and Sub 1 in accordance with its terms.
SECTION 3.4 CONSENTS AND APPROVALS. Except for the
notification and report form required to be filed under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR ACT") with the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "ANTITRUST DIVISION") (such filings, the "HSR FILING"), and except
as set forth in Schedule 3.4 of the Disclosure Schedule, no notices, reports or
other filings are required to be made by White Mountains, Sub 1, Services or
Holdings with, nor are any consents, registrations, approvals, declarations,
permits, expiration of any applicable waiting periods or
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authorizations required to be obtained by White Mountains, Sub 1, Services or
Holdings from, any foreign, federal, state, local, municipal, county or other
governmental, quasi-governmental, administrative or regulatory authority, body,
agency, court, tribunal, commission or other similar entity (including any
branch, department or official thereof) ("GOVERNMENTAL ENTITY"), in connection
with the execution or delivery of this Agreement by White Mountains or Sub 1,
the performance by each of White Mountains or Sub 1 of its obligations hereunder
and the consummation by White Mountains, Sub 1, Services or Holdings of the
transactions contemplated herein (including the LLC Transactions) other than
those the failure of which to obtain would not prevent or materially delay the
Closing or the consummation of the transactions contemplated herein.
SECTION 3.5 NO VIOLATIONS. The execution and delivery of this
Agreement by White Mountains or Sub 1 does not, and the performance and
consummation of any of the transactions contemplated herein (including the LLC
Transactions), shall not with respect to each of White Mountains, Sub 1,
Services and Holdings, directly or indirectly (with or without the giving of
notice or the lapse of time or both):
(a) violate the Organizational Documents;
(b) conflict with or result in a default (or give rise to any
right of reimbursement, termination, cancellation, modification or acceleration)
under any of the provisions of any contract, note, bond, lease, mortgage,
indenture, license, franchise, permit, agreement or other instrument or
obligation ("CONTRACT") to which White Mountains, Sub 1, any of White Mountains'
Subsidiaries is a party, or by which White Mountains, Sub 1, any of White
Mountains' Subsidiaries or the properties or assets of White Mountains, Sub 1 or
any of White Mountains' Subsidiaries may be bound or affected other than any
such conflict, breach, default or other occurrence that, individually or in the
aggregate, would not have a Material Adverse Effect or would not adversely
affect the ability to transfer good title to the Holdings Shares to CLF free and
clear of all Liens or the ability to cause Holdings to become the owner with
good title of the FSA Shares free and clear of all Liens or result in the
creation or imposition of any Lien on the Holdings Shares or FSA Shares or any
property or assets owned or used by Holdings.
(c) violate any Law (as defined in Section 3.2(d)), Order (as
defined in Section 3.2(d)) or Governmental Authorization (as defined in Section
1.1) applicable to White Mountains, Sub 1, Services or Holdings or the
properties or assets of White Mountains, Sub 1, Services or Holdings or result
in the creation or imposition of any Lien upon any of the properties or assets
owned or used by White Mountains, Sub 1, Services or Holdings, other than any
such violation or other occurrence that, individually or in the aggregate, would
not have a Material Adverse Effect or would not adversely affect the ability to
transfer good title to the Holdings Shares to CLF free and clear of all Liens or
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the ability to cause Holdings to become the owner with good title of the FSA
Shares free and clear of all Liens or result in the creation or imposition of
any Lien on the Holdings Shares or FSA Shares or any property or assets owned or
used by Holdings.
SECTION 3.6 FINANCIAL STATEMENTS, FINANCIAL REPORTS, SEC
DOCUMENTS AND SAP STATEMENTS.
(a) Schedule 3.6 of the Disclosure Schedule contains the
following financial statements (collectively, the "FINANCIAL STATEMENTS"): (i)
an unaudited balance sheet of Holdings as at December 31, 1999, and the related
statement of income, (ii) an unaudited balance sheet of Services as at December
31, 1999, and the related statement of income, and (iii) an unaudited
consolidated balance sheet of White Mountains as at December 31, 1999, and the
related statements of income and comprehensive income and statement of
shareholders' equity.
(b) The Financial Statements present the financial condition
and the results of operations, of each of Holdings, Services and White Mountains
(and the changes in stockholders' equity and cash flow of White Mountains) as at
the respective dates of and for the periods referred to in such Financial
Statements, all in accordance with generally accepted U.S. accounting principles
consistently applied, subject, in the case of unaudited financial statements, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be material in amount or effect) and the
absence of notes (that, if presented, would not differ materially from those
included in audited financial statements). The Financial Statements reflect the
consistent application of such accounting principles throughout the periods
involved.
(c) White Mountains's Annual Reports on Form 10-K for the
fiscal years ended December 31, 1997 and 1998 and all other reports,
registration statements, definitive proxy statements or information statements
filed by White Mountains or any of its Subsidiaries subsequent to December 31,
1998 under the Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of the
Securities and Exchange Act of 1934 (the "EXCHANGE ACT"), in the form filed
(collectively, "SEC DOCUMENTS") with the Securities and Exchange Commission, as
of the date filed, (A) complied in all material respects as to form with the
applicable requirements under the Securities Act or the Exchange Act, as the
case may be, and (B) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and each of the balance sheets contained in or
incorporated by reference into any such SEC Document (including the related
notes and schedules thereto) fairly presents the financial position of White
Mountains and its Subsidiaries as of its date, and each of the statements of
income and changes in shareholders' equity and cash flows or equivalent
statements in such SEC Documents (including any related notes and schedules
thereto)
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fairly presents the results of operations, changes in shareholders' equity and
changes in cash flows, as the case may be, of White Mountains and its
Subsidiaries for the periods to which they relate, in each case in accordance
with generally accepted U.S. accounting principles consistently applied during
the periods involved, except in each case as may be noted therein and subject to
normal year-end audit adjustments.
(d) The Pre-Closing Balance Sheet shall, when delivered in
accordance with the terms hereof, present the financial condition of Services as
at its date, in accordance with generally accepted U.S. accounting principles
consistently applied, subject to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be material in
amount or effect) and the absence of notes (that, if presented, would not differ
materially from those included in audited financial statements).
SECTION 3.7 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since
December 31, 1999 to the date of this Agreement, there has not been any event or
circumstance that, individually, or taken together with other facts,
circumstances and events has had or is reasonably likely to have a Material
Adverse Effect with respect to White Mountains and its Subsidiaries taken as a
whole.
SECTION 3.8 ASSETS AND LIABILITIES.
(a) Except as set forth in Schedule 3.8(a), Holdings has no
Liabilities. For purposes of this Agreement, the term "LIABILITY" shall mean any
debt, liability, commitment or obligation of any kind, character or nature
whatsoever, whether known or unknown, ▇▇▇▇▇▇ or inchoate, secured or unsecured,
accrued, fixed, absolute, contingent or otherwise, and whether due or to become
due.
(b) Except as set forth in Schedule 3.8(b) and except for
Holdings' ownership of the Majority Services Shares, Holdings does not own any
property or assets including any real property, leaseholds or other interest in
land or any tangible or intangible personal property. At Closing, Holdings shall
have no assets or Liabilities except for the FSA Shares.
SECTION 3.9 TAXES
(a) All material Tax Returns (as defined in paragraph (n)
below) that are required to be filed on or before the Effective Date by or with
respect to Holdings, have been or will be timely filed on or before the
Effective Date, and all such Tax Returns are or will be true and complete in all
material respects.
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(b) All Taxes as (defined in paragraph (n) below) shown to be
due on the Tax Returns referred to in paragraph (a) above have been or will be
timely paid in full.
(c) Except as set forth in Schedule 3.9(c), the Tax Returns
referred to in paragraph (a) above have been examined by the Internal Revenue
Service or the appropriate state, local or foreign taxing authority or the
period for assessment of the Taxes in respect of which such Tax Returns were
required to be filed has expired.
(d) All material deficiencies asserted or assessments made as
a result of such examinations have been paid in full.
(e) Except as set forth in Schedule 3.9(e), no issues that
have been raised by the relevant taxing authority in connection with the
examination of any of the Tax Returns referred to in paragraph (a) above are
currently pending.
(f) Except as set forth in Schedule 3.9(f), no waivers of
statutes of limitation have been given by or requested with respect to any Taxes
of Services or Holdings.
(g) Holdings will not be required, as a result of (A) a change
in accounting method for a Tax period beginning on or before the Effective Date,
to include any adjustment under Section 481(c) of the Code (as defined in
paragraph (n) below) (or any similar provision of state, local or foreign law)
in taxable income for any Tax period beginning on or after the Effective Date,
or (B) any "closing agreement" as described in Section 7121 of the Code (or any
similar provision of state, local or foreign Tax law), to include any item of
income in or exclude any item of deduction from any Tax period beginning on or
after the Effective Date.
(h) There are no material Liens on any of the assets of
Holdings that arose in connection with any failure (or alleged failure) to pay
any Tax.
(i) Holdings has never been a member of an affiliated,
combined, consolidated or unitary Tax group for purposes of filing any Tax
Return, other than, for purposes of filing consolidated U.S. Federal income tax
returns, a group of which White Mountains was the common parent.
(j) No closing agreements, private letter rulings, technical
advance memoranda or similar agreement or rulings have been entered into or
issued by any taxing authority with respect to Holdings.
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(k) None of White Mountains, Sub 1, any of White Mountains or
Sub 1's affiliates, Holdings or any predecessor to Holdings has made with
respect to any Seller, Holdings, or any predecessor of Holdings any consent
under Section 341 of the Code.
(l) No Tax is required to be withheld pursuant to Section 1445
of the Code as a result of the transfer contemplated by this Agreement.
(m) As a result of CLF's purchase of the Holdings Shares,
neither Holdings nor CLF will be obligated to make a payment to an individual
that would be a "parachute payment" to a "disqualified individual" as those
terms are defined in Section 280G of the Code without regard to whether such
payment is reasonable compensation for personal services performed or to be
performed in the future.
(n) For the purposes of this Agreement, (i) "CODE" shall mean
the Internal Revenue Code of 1986, as amended, (ii) "TAX RETURNS" shall mean all
reports and returns required to be filed with respect to the Taxes and (iii)
"TAXES" shall mean all federal, state, local or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, license, excise,
franchise, employment, withholding or similar taxes together with any interest,
additions or penalties with respect thereto and any interest in respect of such
additions or penalties.
SECTION 3.10 EMPLOYEE BENEFITS; ERISA.
(a) Holdings does not maintain and has never maintained any
benefit or compensation plans, contracts, policies, arrangements, or "employee
benefit plans" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
(b) Except as set forth in Schedule 3.10(b), each of Services
and Holdings has not incurred and does not expect to incur any liability under
Subtitle IV of ERISA with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by an entity which is considered one employer
with Services or Holdings under Section 4001 of ERISA or Section 414 of the
Code.
SECTION 3.11 CONTRACTS. White Mountains has delivered or made
available to CLF a true, complete and correct copy of each Contract to which
Services or Holdings is bound.
SECTION 3.12 BUSINESS OF SERVICES AND RUNOFF. Except for the
runoff of its previous business (the "RUNOFF BUSINESS"), Services has no
business or operations and
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the Runoff Business is conducted in accordance with the Runoff Business Plan
disclosed in Schedule 3.12 of the Disclosure Schedule.
SECTION 3.13 HOLDINGS ACTIVITIES. Except as set forth in
Schedule 3.13, Holdings has no business or operations, and has had no business
or operations, and its activities are limited, and have always been limited,
solely to its being a holding company engaged in holding and owning shares of
subsidiaries and other public companies.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CLF
Except as may be set forth on a schedule delivered by CLF to
White Mountains prior to the execution hereof that sets forth ("CLF'S DISCLOSURE
SCHEDULE"), among other things, items the disclosure of which is necessary or
appropriate in response to an express disclosure requirement contained in a
provision hereof or an exception to one or more representations and warranties
in Article IV or to one or more of the covenants in Article V (the disclosure of
any such item in CLF's Disclosure Schedule shall be disclosure for the purposes
of only that particular Section of this Agreement identified and not for any
other Section). CLF hereby represents and warrants to the Sellers as follows:
SECTION 4.1 ORGANIZATION AND GOOD STANDING. CLF is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization.
SECTION 4.2 CORPORATE AUTHORITY. CLF has the full legal right,
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform fully, its obligations under
this Agreement and to consummate the transactions contemplated herein. This
Agreement has been duly executed and delivered by CLF and constitutes a valid
and binding agreement of CLF, enforceable against CLF in accordance with its
terms.
SECTION 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Except for the HSR Filing and except as set forth in
Schedule 4.3 of CLF's Disclosure Schedule, no material notices, reports or other
filings are required to be made by CLF with, nor are any material consents,
registrations, approvals, declarations, permits, expiration of any applicable
waiting periods or authorizations required to be obtained by CLF from any
Governmental Entity in connection with the execution or delivery of this
Agreement by CLF, the performance by CLF of its obliga tions hereunder or the
consummation by CLF of the transactions contemplated herein.
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(b) Assuming the making of the HSR Filing and the making of
the other filings and the receipt of the necessary clearances or approvals set
forth in Schedule 4.3 of CLF's Disclosure Schedule, the execution and delivery
of this Agreement by CLF does not, and the performance and consummation by CLF
of any of the transactions contemplated herein will not, with respect to CLF,
directly or indirectly (with or without the giving of notice or the lapse of
time or both):
(i) violate (A) any provision of the certificate of
incorporation or by-laws (or equivalent documents) of CLF or (B) any
resolution adopted by the Board of Directors (or similar governing
body) of CLF;
(ii) require CLF to obtain the consent, waiver, authorization
or approval of, or give notice to, any Person under any Contract
binding upon CLF; or
(iii) contravene, conflict with, or constitute or result in a
breach or violation of, any material Law or material Order.
SECTION 4.4 SECURITIES ACT. CLF is acquiring the Holdings
Shares for its own account and not with a view to their distribution within the
meaning of the Securities Act in any manner that would be in violation of the
Securities Act.
ARTICLE V
COVENANTS
SECTION 5.1 LLC TRANSACTIONS.
(a) Each Seller shall cause, and each jointly and severally
covenants and agrees to cause, the outright sale, conveyance, transfer and
assignment of all of the assets and Liabilities of Holdings (except for the FSA
Shares) prior to the Closing.
(b) Each Seller shall cause, and each jointly and severally
covenants and agrees to cause, the LLC Transactions to be fully consummated
prior to the Closing and shall cause Holdings to limit its activities from the
date hereof until the Closing solely to the holding and ownership of shares
which holding and ownership shall, as a result of the LLC Transactions, be
limited to the FSA Shares. Each Seller shall ensure that at the time of the LLC
Transactions and the Closing, Services is adequately capitalized in light of its
obligations and that it has equity capital of not less than $15,000,000 and that
it has the capacity to pay its debts as they become due.
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SECTION 5.2 NO SALE. Each Seller agrees that it will not, and
White Mountains agrees that it will cause each of Sub 1, Services and Holdings
not to, directly or indirectly, sell, transfer, pledge, assign or otherwise
dispose of, or enter into any contract, option, commitment or other arrangement
or understanding with respect to the sale, transfer, pledge, assignment or other
disposition of, any of the Services Shares, the Sub 1 Shares, the Holdings
Shares, the Majority Services Shares or the FSA Shares (except for this
Agreement or pursuant to the LLC Transactions).
SECTION 5.3 REASONABLE BEST EFFORTS. Subject to the terms and
conditions of this Agreement, the Parties agree to use their reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit the sale and purchase of the Holdings Shares as
promptly as practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other Parties hereto to
that end.
SECTION 5.4 PRESS RELEASES. White Mountains and CLF agree that
they will not (and White Mountains agrees that it will cause its Subsidiaries
not to), without the prior approval of the other, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable Law or NYSE
rules.
SECTION 5.5 ACCESS; INFORMATION; CONFIDENTIALITY.
(a) White Mountains agrees that upon reasonable notice and
subject to applicable Laws relating to the exchange of information, it shall
afford CLF and its officers, employees, counsel, accountants and other
authorized Representatives, reasonable access during normal business hours
throughout the period prior to the Effective Date to White Mountains', Services'
and Holdings' books, records (including, without limitation, tax returns and
work papers of independent auditors), properties, personnel and to such other
information as CLF may reasonably request and, during such period, White
Mountains shall furnish promptly to CLF such other information concerning its
business as CLF may reasonably request.
(b) Each Party agrees that it will not, and will cause its
Representatives not to, use any information obtained pursuant to this Section
5.5 (as well as any other information obtained prior to the date hereof in
connection with the entering into of this Agreement) for any purpose unrelated
to the consummation of the transactions contemplated by this Agreement. Subject
to the requirements of Law, each Party will keep confidential, and will cause
its Representatives to keep confidential, all information and documents obtained
pursuant to this Section 5.5 (as well as any other information obtained prior to
the date hereof in connection with the entering into of this Agreement)
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unless such information (i) was already known to such Party, (ii) becomes
available to such Party from other sources not known by such Party to be bound
by a confidentiality obligation, (iii) is disclosed with the prior written
approval of the Party to which such information pertains, (iv) is or becomes
readily ascertainable from published information or trade sources or (v) must,
in the opinion of such Party, upon written advice of counsel, be disclosed in
order to avoid violating any applicable Law. In the event that this Agreement is
terminated or the transactions contemplated by this Agreement shall otherwise
fail to be consummated, each Party shall promptly cause all copies of documents
or extracts thereof containing information and data as to another Party hereto
to be returned to the Party which furnished the same or to be destroyed. No
investigation by either Party of the business and affairs of the other shall
affect or be deemed to modify or waive any representation, warranty, covenant or
agreement in this Agreement, or the conditions to either Party's obligation to
consummate the transactions contemplated by this Agreement.
SECTION 5.6 TAX MATTERS.
(a) ADJUSTMENT TO PURCHASE PRICE. Any payment by the Sellers
under Section 8.1(d) will be an adjustment to the Purchase Price.
(b) TAX RETURNS. CLF shall file or cause to be filed when due
all Tax Returns that are required to be filed by or with respect to Holdings and
that are due to be filed after the Effective Date and shall remit any Taxes due
in respect of such Tax Returns. The Sellers shall pay CLF the Taxes for which
the Sellers are liable pursuant to Section 8.1(d) but which are payable with Tax
Returns to be filed by CLF pursuant to the previous sentence within 10 days
prior to the due date for the filing of such Tax Returns.
(c) TERMINATION OF TAX ALLOCATION AGREEMENTS. Any tax
allocation or sharing agreement or arrangement, whether or not written, that may
have been entered into by any Seller or any affiliate of any Seller and Holdings
shall be terminated as to Holdings as of the Effective Date, and no payments
which are owed by or to Holdings pursuant thereto shall be made thereunder.
(d) TRANSFER TAXES. The Sellers shall be liable for all
transfer taxes arising from the sale of the Holdings Shares.
(e) SERVICES REORGANIZATION OR CONTRIBUTION. Sellers shall
ensure that Services is not re-organized as a corporation and is not otherwise
treated as an association taxable as a corporation for U.S. Federal tax
purposes, and that it shall not contribute substantially all of its assets to
any corporation or association taxable as a corporation for U.S. Federal tax
purposes.
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(f) FIRPTA CERTIFICATE. The Sellers shall deliver at Closing a
FIRPTA Certificate as required by Section 1445 of the Code in form and substance
reasonably satisfactory to CLF.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 CONDITIONS TO OBLIGATIONS OF CLF. The obligations
of CLF to consummate the sale and purchase of the Holdings Shares and to take
the other actions to be taken by CLF at the Closing is subject to the
satisfaction, at or prior to the Closing (except for Section 6.1(c) which shall
have to be satisfied at all times up to and including the Effective Date), of
each of the following conditions (any of which may be waived in whole or in part
by CLF):
(a) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of each of White Mountains and Sub 1 set forth in this Agreement
shall be true and correct in all material respects (except for Sections 3.1(a),
3.2, 3.3, 3.4, 3.5, 3.7 and 3.13 as to which in all material respects shall not
apply) as of the date of this Agreement. The representations and warranties of
each of White Mountains and Sub 1 set forth in Sections 3.1(a), 3.2, 3.3, 3.4,
3.5, and 3.13 of this Agreement shall be true and correct as of the Effective
Date.
(b) COVENANTS. All of the covenants, agreements, undertakings
and obligations that each of White Mountains and Sub 1 is required to perform or
to comply with pursuant to this Agreement at or prior to the Closing, and each
of these covenants, agreements, undertakings and obligations, shall have been
duly performed and complied with in all material respects.
(c) NO MATERIAL IMPAIRMENT. Since December 31, 1999, there
shall not have occurred any event or circumstance (other than any event or
circumstance that has resulted in an increase in the liabilities of Services
from December 31, 1999 to the date of the Pre-Closing Balance Sheet) that,
individually, or taken together with other facts, circumstances and events, has
resulted in, or would be reasonably likely to result in, (i) White Mountains'
credit rating (x) by Standard & Poor's Ratings Service ("S&P") falling below the
lowest investment grade rating awarded by S&P (which at the date hereof is BBB-)
or (y) by ▇▇▇▇▇'▇ Investors Service ("▇▇▇▇▇'▇") falling below the lowest
investment grade rating awarded by ▇▇▇▇▇'▇ (which at the time hereof is Baa3),
or (ii) a decrease in White Mountains consolidated stockholders' equity,
determined in accordance with U.S. generally accepted accounting principles, to
less than $500,000,000 (the calculation of which shall include the gain on a
sale of the FSA Shares at the per share Merger Consideration less applicable
taxes as computed under U.S. generally
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accepted accounting principles per share (each such event or circumstance a
"DOWNGRADE CONDITION")).
(d) OFFICER'S CERTIFICATES. Each of White Mountains and Sub 1
shall have delivered to CLF a certificate, dated as of the Effective Date and
signed by a senior executive officer or officers of White Mountains (in the case
of the officer's certificate to be delivered by White Mountains) or Sub 1 (in
the case of the officer's certificate to be delivered by Sub 1), representing
that the conditions referred to in Sections 6.1(a), 6.1(b) 6.1(c) and 6.1(i) as
it relates to the LLC Transactions have been satisfied.
(e) SECRETARY'S CERTIFICATE. CLF shall have received copies of
the resolutions of the Board of Directors (or other similar governing body) of
each of White Mountains, Sub 1, and Holdings, authorizing the execution,
delivery and performance of this Agreement and certificates of the secretaries
or assistant secretaries of such corporations dated as of the Effective Date, to
the effect that such resolutions were duly adopted and are in full force and
effect, together with copies of the articles or certificate of incorporation and
by-laws (or equivalent documents) of each such corporation certified by such
officers, and certifying the status, authority and signature of each of their
respective officers who executed and delivered this Agreement.
(f) NO PROHIBITION. No applicable Law or Order preventing or
impairing the purchase and sale of the Holding Shares by Sub 1 to CLF on the
terms and conditions of this Agreement or preventing or impairing in a material
way the performance by White Mountains or Sub 1 of their obligations hereunder
shall be in effect.
(g) RECEIPT OF SHARES. CLF shall have received from Sub 1 a
certificate or certificates evidencing all of the then issued and outstanding
Holdings Shares, duly endorsed in blank or accompanied by stock powers duly
executed in blank, in proper form of transfer, with all signatures guaranteed
and with any requisite stock transfer tax stamps properly affixed thereto. CLF
shall have received from Sub 1 certificates or certificates evidencing the FSA
Shares registered in the name of Holdings. There shall not have been made or
threatened by any Person any claim having a material likelihood of success
asserting that such Person (i) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, Holdings, or (ii) is entitled to
all or any portion of the Purchase Price payable for the Holdings Shares.
(h) HSR ACT. The waiting period required by the HSR Act, and
any extensions thereof obtained by request or other action by the FTC and/or the
Antitrust Division, shall have expired or been terminated by the FTC and the
Antitrust Division.
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(i) LLC TRANSACTIONS, REPURCHASE SHARES AND PRE-CLOSING
BALANCE SHEET. The LLC Transactions shall have been consummated and White
Mountains shall have delivered and transferred the Repurchase Shares to CLF by
delivery and transfer of a certificate or certificates evidencing the same
registered in the name of CLF and shall have delivered to CLF the Pre-Closing
Balance Sheet.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF SELLERS. The
obligations of each Seller to consummate the sale and purchase of the Holdings
Shares and to take the other actions to be taken by each Seller at the Closing
is subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived in whole or in part by White
Mountains):
(a) NO PROHIBITION. No applicable Law or Order preventing the
sale of the Holdings Shares by the Sellers to CLF shall be in effect.
(b) RECEIPT OF PURCHASE PRICE. White Mountains shall have
received from CLF the payments required to be made on the Effective Date
pursuant to Section 2.3 hereof.
(c) HSR ACT. The waiting period required by the HSR Act, and
any extensions thereof obtained by request or other action by the FTC and/or the
Antitrust Division, shall have expired or been terminated by the FTC and the
Antitrust Division.
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF SELLERS AND CLF. The
obligations of CLF and each Seller to consummate the sale and purchase of the
Holdings Shares and to take the other action to be taken by them at Closing is
subject to all conditions to the consummation of Merger set forth in the Merger
Agreement (excluding the conditions set forth in Section 7.02(c) and Section
7.03(f) thereof) having been satisfied or waived, it being understood that the
Merger shall become effective immediately after the Closing.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. With the exception of the Excepted
Provisions (as defined below), which shall survive the termination of this
Agreement, this Agreement shall terminate simultaneously with the termination of
the Merger Agreement and the abandonment of the Merger; provided that
termination of this Agreement will not relieve a breaching party from liability
for any willful breach of this Agreement.
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"EXCEPTED PROVISIONS" means Article V, Article VII, Article VIII , and Article
IX of this Agreement.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION AND REIMBURSEMENT BY SELLERS. Each
Seller, jointly and severally, shall indemnify and hold harmless CLF and its
affiliates, Holdings, and their respective successors, permitted assigns,
stockholders, controlling persons, Related Persons and Representatives (each, a
"CLF INDEMNIFIED PARTY") from and against, and shall reimburse the CLF
Indemnified Parties for, any and all losses, liabilities, claims, damages,
advances to be made, repurchase obligations and expenses (including costs of
investigation and defense and attorneys' and accountants' fees and all costs of
any in-house personnel and resources) of any kind or nature whatsoever, whether
or not involving a third-party claim (all of the foregoing, collectively,
"DAMAGES"), as incurred, arising out of, due to or directly or indirectly in
connection with:
(a) any (i) breach of or inaccuracy in any representation made
by a Seller in this Agreement, including the Disclosure Schedule, or
any other certificate or document delivered in connection with this
Agreement, or (ii) breach or violation of or failure to perform any
covenant, agreement, undertaking or obli gation of White Mountains or
Sub 1, whether or not in relation to Holdings or Services, set forth in
this Agreement or any other certificate or document delivered in
connection with this Agreement;
(b) any sale or disposition of any assets, shares or business
prior to the Effective Time by, or on behalf of, White Mountains, Sub
1, Services, Holdings or any of their respective Related Persons and
any obligations of Services or Holdings or any of their respective
Related Persons to indemnify or hold harmless, or make any advances or
repurchases in respect of any obligation (in the case of Holdings,
prior to the Effective Time) owed to, any Person, including in
connection with the Asset Purchase Agreement, dated as of March 23,
1999, by and among Source One Mortgage Services Corporation, as Seller,
Fund American Enterprises Holdings, Inc., as Parent, and Citicorp
Mortgage, Inc. as Purchaser;
(c) any conduct, activity, business, acts, omissions,
liabilities or obligations of White Mountains, Sub 1, Services or
Holdings occurring or incurred prior to the Effective Time, including
the LLC Transactions, or any Damages sought (directly or indirectly)
from Services or Holdings by any Person in connection therewith
(whether based on any agency, express or implied
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partnership or joint venture, respondent superior, vicarious liability,
piercing the corporate veil, conspiracy or other legal theory whereby
liability is asserted on one Person for or on account of the actions or
omissions of any other Person) whether or not known by CLF or disclosed
to CLF prior to the Closing (other than Damages relating to Taxes,
which are dealt with in paragraph (d) below); and
(d) any Taxes (including any obligation to contribute to the
payment of a Tax determined on a consolidated, combined or unitary
basis with respect to a group of corporations that includes or included
Holdings) (i) imposed on any Seller for any taxable year or (ii)
imposed on Holdings or Services or for which Holdings or Services may
otherwise be liable for any Pre-Closing Tax Period or in respect of
events arising on or before the Effective Date.
It is understood and agreed that the foregoing indemnity does
not relate to changes in value of the FSA Shares.
SECTION 8.2 NO EXPIRATION OF INDEMNIFICATION. The rights of
any CLF Indemnified Party pursuant to Article VIII hereof shall survive the
execution and delivery of this Agreement and the Closing indefinitely as shall
all the representations and warranties and the covenants, undertakings or
obligations set forth in this Agreement. The provisions of this Article VIII are
(a) intended to be for the benefit of, and will be enforceable by, each CLF
Indemnified Party, and (b) are not in addition to or substitution for any other
right to indemnification or contribution that any such Person may have by
contract or otherwise.
SECTION 8.3 COMPUTATION OF LOSSES SUBJECT TO INDEMNIFICATION.
Damages for which a CLF Indemnified Party would be entitled to indemnification
hereunder shall be quantified on an after-tax basis grossed-up for any
withholding taxes deducted from the indemnity payment and for any taxes incurred
by the CLF Indemnified Party on the indemnity payment.
SECTION 8.4 NOTICE AND PAYMENT OF CLAIMS.
(a) NOTICE. A CLF Indemnified Party shall notify White
Mountains in writing as soon as practicable, but not later than twenty (20)
days, after acquiring actual knowledge of, and shall provide to White Mountains
as soon as practicable thereafter reasonable information and documentation
necessary to support and verify, any Damages that the CLF Indemnified Party
shall have determined to have given, or is reasonably likely to give rise to, a
claim for indemnification hereunder (including by virtue of any Third Party
Claim (as defined in Section 8.5)). Notwithstanding the foregoing, the failure
to so notify White Mountains shall not relieve White Mountains or Sub 1 of any
liability that it may have to any CLF Indemnified Party, except to the extent
that White Mountains
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demonstrates that it is materially prejudiced by the CLF Indemnified Party's
failure to give such notice (unless White Mountains or any of its Subsidiaries
knew of such liability).
(b) PAYMENT. Upon receipt of the notice referred to in Section
8.4(a), White Mountains (without prejudice to each Seller's joint and several
liability hereunder) shall promptly pay any Damages as shall have been claimed
by the CLF Indemnified Party in immediately available funds in U.S. dollars.
(c) INTEREST. Any amounts not paid when due pursuant to this
Article VIII shall bear interest from the date thereof until the date paid at a
rate equal to 5% above the "prime rate" as published in The Wall Street Journal.
SECTION 8.5 PROCEDURE FOR CONDUCT OF THIRD PARTY CLAIMS.
(a) Upon receipt by a CLF Indemnified Party of notice of the
commencement of any Action by a third party (a "THIRD PARTY CLAIM") against it,
such CLF Indemnified Party shall, if a claim is to be made under this Article
VIII, give notice to White Mountains in writing of the commencement of such
Third Party Claim as soon as practicable, but in no event later than twenty (20)
days after the CLF Indemnified Party shall have been served; PROVIDED that the
failure to so notify White Mountains shall not relieve White Mountains of any
liability that it or Sub 1 may have to any CLF Indemnified Party, except to the
extent that White Mountains demonstrates that the defense of such Third Party
Claim is materially prejudiced by the CLF Indemnified Party's failure to give
such notice (unless White Mountains or any of its Subsidiaries knew of such
Third Party Claim). Thereafter, the CLF Indemnified Party shall deliver to White
Mountains, promptly following the CLF Indemnified Party's receipt thereof,
copies of all notices and documents (including court papers) received by the CLF
Indemnified Party relating to the Third Party Claim.
(b) If a Third Party Claim is brought against a CLF
Indemnified Party and the CLF Indemnified Party gives notice to White Mountains
of the commencement of such Third Party Claim in accordance with paragraph (a)
above, White Mountains shall promptly and in a timely manner and at its sole
expense, assume all aspects of the defense of such Third Party Claim (on behalf
of itself or the relevant Person) with counsel selected by White Mountains that
is reasonably satisfactory to the CLF Indemnified Party. White Mountains shall
not be liable to the CLF Indemnified Party for any legal expenses incurred by
the CLF Indemnified Party in connection with the defense of a Third Party Claim
subsequent to White Mountains's assumption of the defense thereof. The CLF
Indemnified Party shall have the right to participate in the defense thereof and
to employ counsel (not reasonably objected to by White Mountains), at its own
expense, separate from the counsel employed by White Mountains, it being
understood that White
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Mountains shall control such defense. No CLF Indemnified Party shall admit any
liability with respect to, or settle, compromise or discharge, any such Third
Party Claim without White Mountains's prior written consent. No compromise,
discharge or settlement of, or admission of liability in connection with, such
claims may be effected by White Mountains (or the relevant Person) without the
CLF Indemnified Party's written consent in its sole discretion unless (A) there
is no finding or admission of any violation of Law or any violation of the
rights of any Person and no effect on any other claims that may be made against
the CLF Indemnified Party and (B) the sole relief provided is monetary damages
that are paid in full by White Mountains. The CLF Indemnified Party shall
cooperate (at White Mountains's sole expense) in all reasonable respects with
White Mountains in connection with such defense.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 WAIVER; AMENDMENT. Prior to the Closing, any
provision of this Agreement may be (a) waived by the Party benefitted by the
provision or (b) amended or modified at any time, by an agreement in writing
between the Parties hereto executed in the same manner as this Agreement.
SECTION 9.2 COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to constitute an
original.
SECTION 9.3 GOVERNING LAW. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within such State.
SECTION 9.4 WAIVER OF JURY TRIAL. Each Party hereto
acknowledges and agrees that any controversy which may arise under this
Agreement is likely to involve complicated and difficult issues, and therefore
each such Party hereby irrevocably and unconditionally waives any right such
Party may have to a trial by jury in respect of any litigation directly or
indirectly arising out of or relating to this agreement, or the transactions
contemplated by this Agreement. Each Party certifies and acknowledges that (a)
no representative, agent or attorney of any other Party has represented,
expressly or otherwise, that such other Party would not, in the event of
litigation, seek to enforce the foregoing waiver, (b) each Party understands and
has considered the implications of this waiver, (c) each Party makes this waiver
voluntarily, and (d) each Party has been induced to enter into this agreement
by, among other things, the mutual waivers and certifications in this Section
9.4.
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SECTION 9.5 NOTICES. All notices, requests and other
communications hereunder to a Party shall be in writing and shall be deemed
given if personally delivered, telecopied (with confirmation) or mailed by
registered or certified mail (return receipt requested) to such Party at its
address set forth below or such other address as such Party may specify by
notice to the parties hereto.
If to White Mountains or Sub 1, to:
[ ]
With a copy (which shall not constitute notice) to:
[ ]
With a copy (which shall not constitute notice) to:
[ ]
If to CLF, to:
[ ]
With a copy to:
[ ]
With a copy (which shall not constitute notice) to:
[ ]
SECTION 9.6 ENTIRE UNDERSTANDING; NO THIRD PARTY
BENEFICIARIES. This Agreement represents the entire understanding of the Parties
hereto with reference to the transactions contemplated hereby and this Agreement
supersedes any and all other oral or written agreements heretofore made. Except
as set forth in Article VIII, nothing in this Agreement expressed or implied, is
intended to confer upon any Person, other than the Parties hereto or their
respective successors, any rights, remedies, obligations or liabilities under or
by reason of this Agreement. All CLF Indemnified Parties are express third party
beneficiaries of Article VIII and are entitled to directly enforce the
provisions thereof.
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SECTION 9.7 EXPENSES. Except as otherwise expressly provided
herein, whether or not the transactions contemplated herein are consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated herein shall be paid by the Party incurring such
expense. Without limiting the generality of the foregoing, each Party shall pay
all legal, accounting and investment banking fees, and other fees to consultants
and advisors incurred by it, relating to this Agreement and the transactions
contemplated herein. White Mountains shall cause Holdings not to incur any
out-of-pocket expenses in connection with this Agreement. In the event of
termination of this Agreement, the obligation of each Party to pay its own
expenses will be subject to any rights of such Party arising from a breach of
this Agreement by another Party. White Mountains shall be liable for, and shall
pay prior to Closing, all transfer taxes arising from the sale of the Holdings
Shares and the Repurchase Shares or other Repurchase Securities.
SECTION 9.8 SPECIFIC PERFORMANCE. Each Seller agrees that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed by it in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that CLF shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement by any Seller
to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which it is entitled at law or in equity and each Seller waives
the posting of any bond or security in connection with any proceeding related
thereto.
SECTION 9.9 PURPOSE. It is the intention of White Mountains
and Sub 1, jointly and severally, to convey Holdings without any liabilities and
obligations, whether fixed or contingent. To the extent that Holdings is
conveyed with any such liabilities or obligations, White Mountains and Sub 1
shall, in addition to being responsible and liable for all such liabilities and
obligations in accordance with Article VIII, also be responsible for any and all
acts required with respect to such liabilities and obligations and shall
discharge such liabilities and obligations as if they were their own with a view
towards minimizing the acts required on the part of CLF and its affiliates. This
Agreement shall at all times be interpreted in a manner consistent with, and in
direct furtherance of this purpose.
SECTION 9.10 INTERPRETATION; EFFECT. When a reference is made
in this Agreement to Sections, or Schedules, such reference shall be to a
Section of, or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
SECTION 9.11 CERTAIN EVENTS. Prior to entering into any
agreement or arrangement with respect to, or effecting, any proposed sale,
exchange, dividend or other distribution or liquidation of all or a significant
portion of its assets in one or a series of
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transactions or if any significant recapitalization or reclassification of its
outstanding securities as a result of which either White Mountains or a person
that becomes the successor to White Mountains' obligations hereunder suffers, or
is reasonably likely to suffer, a Downgrade Condition, White Mountains shall
notify CLF in writing thereof (if not previously so notified) and, if requested
by CLF, shall arrange in connection therewith alternative means of providing for
the obligations of White Mountains set forth in this Agreement, including the
assumption of such obligations by another party, insurance, surety bonds or the
creation of an escrow, in each case in an amount and upon terms and conditions
reasonably satisfactory to CLF.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers duly authorized as of the date first
written above.
WHITE MOUNTAINS INSURANCE
GROUP, LTD.
By:________________________
Name:
Title:
WHITE MOUNTAINS HOLDINGS
(BARBADOS) SRL
By:________________________
Name:
Title:
DEXIA CREDIT LOCAL DE FRANCE S.A.
By:________________________
Name:
Title:
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TABLE OF CONTENTS
PAGE
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1 Certain Definitions........................................................................1
SECTION 1.2 Merger Agreement Definitions...............................................................4
ARTICLE II
SALE AND PURCHASE OF SHARES
SECTION 2.1 Sale and Purchase of Holdings Shares........................................................5
SECTION 2.2 Purchase Price..............................................................................5
SECTION 2.3 Payment of Purchase Price, Holdback Amount and Repurchase Shares............................5
SECTION 2.4 Closing.....................................................................................8
SECTION 2.5 Substitute Buyer............................................................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLERS
SECTION 3.1 Organization and Good Standing..............................................................9
SECTION 3.2 Capitalization and Ownership of Shares.....................................................10
SECTION 3.3 Authority..................................................................................11
SECTION 3.4 Consents and Approvals ....................................................................11
SECTION 3.5 No Violations..............................................................................12
SECTION 3.6 Financial Statements, Financial Reports, SEC Documents and SAP
Statements...................................................................12
SECTION 3.7 Absence of Certain Changes and Events......................................................14
SECTION 3.8 Assets and Liabilities ....................................................................14
SECTION 3.9 Taxes......................................................................................14
SECTION 3.10 Employee Benefits; ERISA...................................................................16
SECTION 3.11 Contracts..................................................................................16
SECTION 3.12 Business of Services and Runoff............................................................16
SECTION 3.13 Holdings Activities........................................................................16
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PAGE
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CLF
SECTION 4.1 Organization and Good Standing.............................................................17
SECTION 4.2 Corporate Authority........................................................................17
SECTION 4.3 Consents and Approvals; No Violations......................................................17
SECTION 4.4 Securities Act.............................................................................18
ARTICLE V
COVENANTS
SECTION 5.1 LLC Transactions..........................................................................18
SECTION 5.2 No Sale...................................................................................18
SECTION 5.3 Reasonable Best Efforts...................................................................19
SECTION 5.4 Press Releases............................................................................19
SECTION 5.5 Access; Information; Confidentiality......................................................19
SECTION 5.6 Tax Matters...............................................................................20
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 Conditions to Obligations of CLF...........................................................21
SECTION 6.2 Conditions to Obligations of Sellers.......................................................23
SECTION 6.3 Conditions to Obligations of Sellers and CLF...............................................23
ARTICLE VII
TERMINATION
SECTION 7.1 Termination................................................................................23
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Indemnification and Reimbursement by Sellers...............................................24
SECTION 8.2 No Expiration of Indemnification. The right...............................................25
SECTION 8.3 Computation of Losses Subject to Indemnification...........................................25
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SECTION 8.4 Notice and Payment of Claims...............................................................25
SECTION 8.5 Procedure for Conduct of Third Party Claims................................................26
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Waiver; Amendment..........................................................................27
SECTION 9.2 Counterparts...............................................................................27
SECTION 9.3 Governing Law..............................................................................27
SECTION 9.4 Waiver of Jury Trial.......................................................................27
SECTION 9.5 Notices....................................................................................27
SECTION 9.6 Entire Understanding; No Third Party Beneficiaries.........................................29
SECTION 9.7 Expenses...................................................................................30
SECTION 9.8 Specific Performance.......................................................................30
SECTION 9.9 Purpose....................................................................................30
SECTION 9.10 Interpretation; Effect.....................................................................30
SECTION 9.11 Certain Events.............................................................................31