Exhibit 2
Amended & Restated
Stock Purchase Agreement
among
General Electric Capital Corporation
SAFECO Corporation
and
SAFECO Credit Company, Inc.
DATED AS OF JULY 23, 2001
CONTENTS
1. Definitions.........................................................................................1
2. Purchase and Sale of Shares........................................................................20
2.1 Purchase Price............................................................................21
2.2 Closing...................................................................................22
3. Representations and Warranties of the Company and Shareholder......................................22
3.1 Shareholder Organization; Corporate Authority; Enforceability; Consents...................22
3.2 Company Organization; Corporate Authority; Enforceability.................................24
3.3 Capitalization............................................................................24
3.4 Subsidiaries and Affiliates...............................................................25
3.5 No Conflicts; Consents....................................................................25
3.6 Financial Statements; Obligations.........................................................26
3.7 Absence of Certain Changes or Events......................................................27
3.8 Taxes.....................................................................................28
3.9 Property..................................................................................32
3.10 Contracts.................................................................................33
3.11 Claims and Legal Proceedings..............................................................34
3.12 Labor Matters.............................................................................35
3.13 Employee Benefit Plans....................................................................35
3.14 Intellectual Property.....................................................................38
3.15 Insurance.................................................................................39
3.16 Corporate Books and Records...............................................................39
3.17 Compliance With Laws......................................................................39
3.18 Brokers or Finders........................................................................40
3.19 Bank Accounts.............................................................................40
3.20 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇.........................................................................40
3.21 Financing Contracts and Portfolio Property................................................40
3.22 Conduct of Business.......................................................................43
3.23 Environmental Matters.....................................................................44
3.24 Vessels and Aircraft......................................................................45
3.25 Assets of Business........................................................................46
3.26 Bulk Sales Laws...........................................................................46
3.27 Limitation to Representations.............................................................46
4. Representations and Warranties of Buyer............................................................46
4.1 Organization..............................................................................46
4.2 Enforceability............................................................................47
4.3 No Approvals or Notices Required; No Conflicts With Instruments...........................47
4.4 Claims and Legal Proceedings..............................................................47
4.5 Brokers or Finders........................................................................47
5. Covenants..........................................................................................48
5.1 Conduct of Business by the Company Pending the Closing....................................48
5.2 Access to Information; Confidentiality....................................................51
5.3 Covenants to Satisfy Conditions...........................................................52
5.4 HSR Filings...............................................................................52
5.5 Intercompany Services and Loans...........................................................53
5.6 Guaranteed Debt...........................................................................53
5.7 Notification..............................................................................53
5.8 Actions to be Taken Prior to Closing......................................................54
5.9 Updating of Schedules.....................................................................55
5.10 Non-Performing Financing Contracts........................................................56
6. Certain Post-Closing Covenants.....................................................................56
6.1 Further Action............................................................................56
6.2 Employee Benefits.........................................................................57
6.3 Tax Matters and Section 338(h)(10) Election...............................................58
6.4 Transaction Costs.........................................................................68
6.5 [Intentionally Omitted]...................................................................68
6.6 Portfolio Tape and Documentation..........................................................68
6.7 Access to Books and Records after Closing.................................................69
6.8 Preparation of Reference Date Balance Sheet, Adjusted Reference Date Balance Sheet and Purchase
Price Certificate.........................................................................70
6.9 Accounts..................................................................................73
6.10 Confidentiality...........................................................................73
6.11 Name Change...............................................................................74
6.12 Repurchase Option.........................................................................74
7. Conditions Precedent to Obligations of Buyer.......................................................75
7.1 Accuracy of Representations and Warranties................................................75
7.2 Performance of Covenants..................................................................75
7.3 Consents..................................................................................76
7.4 Officer's Certificate.....................................................................76
7.5 Shareholder's Certificate.................................................................76
7.6 Secretary's Certificate...................................................................76
7.7 Director and Officer Resignations.........................................................76
7.8 Compliance With Laws......................................................................76
7.9 Legal Proceedings.........................................................................77
7.10 Delivery of Stock Certificates............................................................77
7.11 Opinion of Counsel........................................................................77
7.12 Transaction Documents.....................................................................77
7.13 Tax Certificate...........................................................................78
7.14 Benefit Transitioning.....................................................................78
8. Conditions Precedent to Obligations of the Company and Shareholder.................................78
8.1 Accuracy of Representations and Warranties................................................78
8.2 Performance of Covenants..................................................................78
8.3 Officers' Certificate.....................................................................78
8.4 Secretary's Certificate...................................................................78
8.5 Compliance With Laws......................................................................79
8.6 Legal Proceedings.........................................................................79
8.7 Opinion of Counsel........................................................................79
8.8 Transaction Documents.....................................................................80
9. Termination, Amendment and Waiver..................................................................80
9.1 Termination...............................................................................80
9.2 Effect of Termination.....................................................................80
10. Survival and Indemnification.......................................................................81
10.1 Survival..................................................................................81
10.2 Indemnification...........................................................................82
10.3 Limitations...............................................................................84
10.4 Procedure for Indemnification.............................................................85
10.5 Exclusive Remedy..........................................................................89
11. General............................................................................................89
11.1 Public Announcements......................................................................89
11.2 Assignment................................................................................90
11.3 Notices...................................................................................90
11.4 Governing Law; Jurisdiction; Venue........................................................91
11.5 Successors and Assigns....................................................................91
11.6 Severability..............................................................................91
11.7 Modification and Waiver...................................................................91
11.8 Entire Agreement..........................................................................92
11.9 Counterparts..............................................................................92
11.10 No Third Party Rights.....................................................................92
11.11 Captions..................................................................................92
11.12 Waiver of Subrogation; Contribution; Reimbursement and Other Rights.......................93
11.13 Waiver of Jury Trial......................................................................93
11.14 Original Purchase Agreement; Effectiveness................................................93
List of Exhibits, Annexes and Disclosure Schedules:
Exhibit A Special Adjustments
Exhibit B Form of CP Guaranty Agreement
Exhibit C Form of MTN Guaranty Agreement
Exhibit D Form of Non-Competition Agreement
Exhibit E Form of Transition Services Agreement
Annex 1.1 Accounting Principles
Annex 1.47.1 Definitional Annex
Annex 1.64 Certain Excluded Assets
Annex 1.65 Certain Excluded Employees
Annex 1.66 Excluded Liabilities
Annex 1.77 Certain Inactive Financing Contracts
Annex 1.82 Intercompany Debt
Annex 1.85(a) Knowledge - Shareholder individuals
Annex 1.85(b) Knowledge - Company individuals
Annex 1.122.3 Reference Date Portfolio Information
Annex 1.166 Transferred Assets
Annex 1.166(b) Assigned Leasehold Interests
Annex 3.2 Company Articles and Bylaws
Annex 5.6 Guaranteed Debt
Annex 7.3 Required Consents
Disclosure Schedule 3.1(f) Consents - Shareholder
Disclosure Schedule 3.2(a) List of Jurisdictions in Which Company is Qualified
to Conduct Business
Disclosure Schedule 3.5(a) No Conflicts - Company
Disclosure Schedule 3.5(b) Consents - Company
Disclosure Schedule 3.6(b) Financial Obligations
Disclosure Schedule 3.7(a) Absence of Changes - Business Operations
Disclosure Schedule 3.7(b) Absence of Changes - Other
Disclosure Schedule 3.8(a) Taxes - Payments
Disclosure Schedule 3.8(b) Taxes - Tax Return Status
Disclosure Schedule 3.9(a) Property - Leased Real Property
Disclosure Schedule 3.9(d)(i) Property - Personal Property Owned by the Company
Disclosure Schedule 3.9(d)(ii) Property - Personal Property Transferred to the Company
Disclosure Schedule 3.10(a) Contracts - Material Non-Financing Contracts
Disclosure Schedule 3.10(c) Contracts - Derivative Agreements
Disclosure Schedule 3.10(d) Contracts - Other
Disclosure Schedule 3.11(a) Claims and Legal Proceedings - Pending and Threatened
Disclosure Schedule 3.11(b) Claims and Legal Proceedings - Since January 1, 1998
Disclosure Schedule 3.12 Labor Matters
Disclosure Schedule 3.13(a) Employee Benefit Plans - List of Material Benefit Plans
Disclosure Schedule 3.13(e) Employee Benefit Plans - Title IV Plans
Disclosure Schedule 3.13(f) Employee Benefit Plans - Investigations/Audits
Disclosure Schedule 3.13(g) Employee Benefit Plans - Severance
Disclosure Schedule 3.13(h) Employee Benefit Plans - Retiree Benefits
Disclosure Schedule 3.14(a) Intellectual Property - Owned Marks
Disclosure Schedule 3.14(b) Intellectual Property - Marks Used but Owned by Shareholder
Disclosure Schedule 3.15(a) Insurance
Disclosure Schedule 3.17(a) Compliance with Laws - Violations
Disclosure Schedule 3.17(b) Compliance with Laws - Absence of Authorizations
Disclosure Schedule 3.17(c) Compliance with Laws - Authorizations in Effect
Disclosure Schedule 3.19 Bank Accounts
Disclosure Schedule 3.21(b) Financing Contracts - Exceptions to Enforceability
Disclosure Schedule 3.21(c) Financing Contracts - Non-Performing
Disclosure Schedule 3.21(f) Financing Contracts - Residual Sharing Agreements
Disclosure Schedule 3.21(h) Financing Contracts - Related Agreements
Disclosure Schedule 3.21(i) Foreign Obligor or Foreign Governing Law
Disclosure Schedule 3.21(k) Financing Contracts - Credit Enhancements
Disclosure Schedule 3.21(m) Financing Contracts - Compliance with Law
Disclosure Schedule 3.21(n) Financing Contracts - Public Sector Financing Contracts
Disclosure Schedule 3.21(o) Financing Contracts - Backlogs
Disclosure Schedule 3.21(q) Specified Financing Contracts
Disclosure Schedule 3.22(b) Conduct - Non Arms-Length Dealings
Disclosure Schedule 3.22(c) Conduct - Management Changes since December 31, 2000
Disclosure Schedule 3.23(a) Environmental Matters - Environmental Claims
Disclosure Schedule 3.23(b) Environmental Matters - Compliance with Environmental Laws
Disclosure Schedule 3.24(a) Vessels - Documentation
Disclosure Schedule 3.24(b) Aircraft - Documentation
AMENDED & RESTATED STOCK PURCHASE AGREEMENT
This Amended and Restated Stock Purchase Agreement (this "Agreement")
is entered into effective as of July 23, 2001 among General Electric Capital
Corporation, a Delaware corporation ("Buyer"), SAFECO Corporation, a Washington
corporation ("Shareholder"), and SAFECO Credit Company, Inc., a Washington
corporation (the "Company").
RECITALS
A. Shareholder owns the Shares (as defined below) and desires and intends
to sell the Shares to Buyer at the price and on the terms and subject to the
conditions set forth herein.
B. Buyer desires and intends to purchase the Shares from Shareholder at the
price and on the terms and subject to the conditions set forth herein.
C. Buyer, Shareholder and the Company entered into that certain Stock
Purchase Agreement dated as of July 23, 2001 (the "Original Purchase
Agreement").
D. Buyer, Shareholder and the Company desire to amend and restate the
Original Purchase Agreement to modify the terms and conditions of the purchase
and sale of the Shares, as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and agreements set
forth herein, the parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following capitalized terms shall have
the meanings set forth below:
1.1 "Accounting Principles": shall mean the accounting principles
(including accounting methods, practices and procedures) used by the Company in
preparation of its balance sheets included in the Financial Statements applied
consistently with the past practices and procedures of the Company, in each case
as set forth on Annex 1.1. When the accounting principles (including accounting
methods, practices and procedures) set forth on Annex 1.1 do not specifically
address a particular matter necessary to prepare the Reference Date Balance
Sheet, then the accounting principles (including accounting methods, practices
and procedures) set forth on Annex 1.1 shall be supplemented in accordance with
GAAP applied consistently with the past practices and procedures of the Company,
but only to the extent necessary to address such matter. To the extent that an
accounting principle, method, practice or procedure set forth on Annex 1.1 is
not in accordance with GAAP, such accounting principle, method, practice or
procedure set forth on Annex 1.1 shall be disregarded for purposes of preparing
the Reference Date Balance Sheet but shall be treated as a Special Adjustment
and set forth on Exhibit A attached hereto.
1.1.1 "Additional Amount": shall mean an amount agreed by Shareholder and
Buyer and set forth on a certificate signed by the parties as of the Closing.
1.2 "Adjusted Reference Date Balance Sheet": shall mean a balance sheet
adjusting the Reference Date Balance Sheet in accordance with the provisions of
Section 6.8(a)(viii).
1.3 [Intentionally Omitted]
1.4 "Adjusted Premium": as defined on the Definitional Annex.
1.5 "Adverse Environmental Event": shall mean any of the following: (a) the
existence, or the continuation of the existence, of a Release or threatened
Release (including sudden or non-sudden, accidental or non-accidental Releases),
into or onto the environment (including but not limited to the air, ground,
subsurface water or any surface soil or water) at, in, by, from or related to
the Transferred Assets or to the assets, Properties (other than the Excluded
Assets), business or operations of the Company; (b) damage or injury to the
environment in connection with the generation, handling, transportation,
storage, treatment or disposal of Hazardous Materials in connection with the
Transferred Assets or the assets, Properties (other than the Excluded Assets),
business or operations of the Company; or (c) any violation, or alleged
violation, under any Environmental Law, or any violation of permits or licenses
of, by or from any Governmental Entity relating to environmental matters
(including any penalties associated with any violations or any alleged
violations) related to the Transferred Assets or the assets, Properties (other
than the Excluded Assets), business or operations of the Company.
1.6 "Affiliates": of any Person (the "Subject") means any other Person
which, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Subject and, without limiting
the generality of the foregoing, includes, in any event, (a) any Person which
beneficially owns or holds twenty-five percent (25%) or more of any class of
voting securities of the Subject or twenty-five percent (25%) or more of the
legal or beneficial interest in the Subject and (b) any Person of which the
Subject beneficially owns or holds twenty-five percent (25%) or more of any
class of voting securities or twenty-five percent (25%) or more of the legal or
beneficial interest. "Control" (including, with correlative meanings, the terms
"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 and policies of such Person, whether
through the ownership of voting securities, by Contract or otherwise.
1.6.1 "Aggregate Amount": as defined on the Definitional Annex.
1.7 "Agreement": shall mean this Amended & Restated Stock Purchase
Agreement, including the Disclosure Schedules, Exhibits and Annexes attached
hereto and made a part hereof, as the same may be further amended, modified or
supplemented from time to time in accordance with the provisions hereof.
1.8 "Allocation Agreement ": as defined in Section 6.3(e)(iii).
1.9 "Annex": shall mean the Annexes (a) hereby incorporated into and made a
part of this Agreement for all purposes, and (b) furnished in advance of the
Closing.
1.10 "Audited Financing Contract": shall mean any Financing Contract that
is audited pursuant to the Tape Audit.
1.11 "Authorization": shall mean any domestic or foreign, federal, state,
local or other governmental or other quasi-governmental consent, license,
permit, grant, authorization or approval, including but not limited to any
consent, license, permit, grant, authorization or approval of any Governmental
Entity, which is necessary to (a) the ownership, operation or conduct of the
Company's business, or (b) permit the Company to own or lease its Properties and
to carry on the operations of its business as presently conducted.
1.12 "Backlog": shall mean (a) any commitment by the Company to enter into
a financing transaction, and (b) any financing transaction for which no
commitment has been issued to the proposed Obligor but for which internal credit
approval has been given by the Company and such approval has been communicated
to such Obligor where, in the case of (a) and (b) above, such financing
transaction (i) has not been entered into on or prior to the Closing and (ii)
would, had it been entered into prior to the Closing, have constituted a
Financing Contract.
1.13 "Bankruptcy Exception": shall mean, in respect of any agreement,
Contract or commitment, any limitation thereon imposed by any bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar Law
affecting creditors' rights and remedies generally and, with respect to the
enforceability of any agreement, Contract or commitment, by general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding at Law
or in equity).
1.14 "Books and Records": shall mean, with respect to any Person, all
Documents maintained by such Person relating to its business, operations,
Properties or obligations.
1.15 "Business Day": shall mean any day other than a Saturday, Sunday,
federal holiday or any other day on which banking institutions in the State of
New York or the State of Washington are authorized or obligated by Law or by
executive order to be closed.
1.16 "Buyer": as defined in the preamble of this Agreement.
1.17 "Buyer Adverse Effect": shall mean any adverse effect on the ability
of Buyer to consummate the transactions contemplated in, and perform its
obligations under, this Agreement and the other Transaction Documents, but shall
not be deemed to include the effect of any change (a) in general economic,
regulatory or political conditions, (b) affecting the commercial finance
industry generally (other than those changes that are materially more adverse as
to Buyer than the effect of such change on commercial finance companies
generally), or (c) resulting from the public announcement of the transactions
contemplated by this Agreement.
1.18 "Buyer Benefit Plans": as defined in Section 6.2(b).
1.19 "Buyer Indemnified Parties": as defined in Section 10.2(a).
1.20 "Buyer's Accountants": shall mean KPMG or at Buyer's election any
other public accounting firm with nationally recognized auditing expertise in
the financial services industry (other than Shareholder's Accountants), as
selected by Buyer.
1.21 "Buyer Survival Period": as defined in Section 10.1(c).
1.21.1 "Category A Indemnities": as defined on the Definitional Annex.
1.21.2 "Category B Indemnities": as defined on the Definitional Annex.
1.22 [Intentionally Omitted]
1.23 "Claim": shall mean any civil, criminal or administrative claim,
demand, cause of action, suit, proceeding, arbitration, hearing or
investigation.
1.24 "Claim Notice": as defined in Section 10.4(a).
1.25 "Closing": as defined in Section 2.2.
1.26 "Closing Date": shall mean the date on which the Closing occurs.
1.27 [Intentionally Omitted]
1.28 [Intentionally Omitted]
1.29 [Intentionally Omitted]
1.30 "COBRA": shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
1.31 "Code": shall mean the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
1.32 "Commitment": as defined in Section 5.1(b)(xx).
1.33 "Common Parent": shall mean Shareholder, as the common parent of the
affiliated group of corporations of which Shareholder and the Company are
members.
1.34 "Common Stock": as defined in Section 3.3(a).
1.35 "Company": as defined in the preamble of this Agreement.
1.36 "Company Benefit Plan": as defined in Section 3.13(a).
1.37 "Company Special Retention Arrangements": shall mean the letters from
the Company to certain Employees dated on or about January 18, 2001 and March
14, 2001, regarding continuing employment with the Company through the Closing.
1.38 "Company Special Severance Arrangements": shall mean (a) the letters
from the Company to certain Employees dated on or about January 18, 2001 and
March 14, 2001, and (b) the further communications to be issued by the Company
prior to the Closing related to the terms of such letters regarding separation
from the Company under certain circumstances.
1.39 "Computation": as defined in Section 6.3(e)(iii).
1.40 "Confidentiality Agreement": as defined in Section 5.2(a).
1.41 "Confidential Information": shall include, without limitation,
information, both written and oral, relating to trade secrets and other
proprietary information, technical data, products, services, finances, business
plans, marketing plans, legal affairs, suppliers, customers, prospects,
opportunities, contracts, assets and other information that has commercial
value, but shall not include information which is (a) known by the recipient
when received, (b) is or hereafter becomes obtainable from other sources other
than pursuant to a violation of Law or breach of any Contract, (c) is required
to be disclosed to a Governmental Entity having jurisdiction over such Person,
(d) is independently developed by the receiving Person, (e) is required to be
disclosed by Law, or (f) is disclosed pursuant to a written waiver from the
non-disclosing Person of the confidentiality requirements of Section 6.10.
1.42 "Contract": shall mean any contract, agreement, instrument or other
commitment or arrangement that is legally binding and enforceable under
applicable Law.
1.43 "Control": as defined in the definition of Affiliates.
1.44 "CP Guaranty Agreement": shall mean the agreement between Buyer and
Shareholder on reasonable, mutually agreed terms and conditions, in
substantially the form of Exhibit B, as the same may be amended, modified or
supplemented from time to time in accordance with its provisions.
1.44.1 "CP Program": shall mean the arrangements whereby the Company issues
commercial paper notes pursuant to the Corporate Commercial Paper Master Note,
dated June 14, 1996, among the Company, as issuer, Shareholder, as guarantor,
and Citibank, N.A., as paying agent.
1.45 "Credit Enhancement": shall mean any (a) security deposit, unapplied
advance rental payment or dealer investment, (b) investment certificate,
certificate of deposit, authorization to hold funds, hypothecation of account or
like instrument, (c) letter of credit, repurchase agreement, agreement of
indemnity, guaranty, lease guarantee bond or postponement agreement, (d)
recourse agreement, (e) security agreement, (f) Property, (g) certificate
representing shares or the right to purchase capital of or interests in any
Person, or (h) bond or debenture, in each case pledged, assigned, mortgaged,
made, delivered or transferred as security for the performance of any obligation
under or with respect to any Financing Contract.
1.46 "Credit Loss Event": shall mean, with respect to any Specified
Financing Contract, the occurrence of one or more of the following events: (a)
such Specified Financing Contract shall be reflected on the accounting system of
Buyer or its Affiliate as being ninety (90) days delinquent, (b) Buyer and
Shareholder shall have agreed in writing that a Credit Loss Event has occurred
with respect to such Specified Financing Contract, (c) any Obligor under such
Specified Financing Contract has liquidated, dissolved or ceased doing business,
or (d) a bankruptcy or insolvency event shall have occurred with respect to any
Obligor under such Specified Financing Contract.
1.47 "Damages": shall mean any and all losses, Claims, damages,
liabilities, obligations, judgments, settlements, awards (including back-pay
awards), Taxes, defenses, counterclaims, actions or proceedings, reasonable
out-of-pocket costs, expenses and attorneys' fees (including any such reasonable
costs, expenses and reasonable attorneys' fees incurred in enforcing any right
of indemnification against any Indemnitor or with respect to any appeal),
interest and penalties, if any; provided, however, that "Damages" shall not
include special, consequential, exemplary or punitive damages (other than any
special, consequential, exemplary or punitive damages required to be paid by the
Indemnified Party under this Agreement to any Person (other than to a party to
this Agreement or any of its Affiliates) arising out of an action or proceeding
by such Person, which damages shall be deemed to be direct damages to the party
required to pay such special, consequential, exemplary or punitive damages);
provided, further, that the failure of Buyer or any of its Affiliates to
receive, after the Closing, any amounts payable with respect to any Financing
Contract shall also be deemed to be direct damages, to the extent arising out of
any breach of a representation, warranty or covenant by Shareholder or the
Company hereunder.
1.47.1 "Definitional Annex": shall mean Annex 1.47.1.
1.48 "Derivative Agreements": shall mean all (a) interest rate swaps, caps,
floors, collars, option agreements, futures and forward Contracts and other
similar interest rate risk management arrangements and interest rate insurance,
and (b) foreign exchange Contracts, currency swap or option agreements, forward
Contracts, commodity swaps, purchase or option Contracts, "principal only" strip
swap Contracts and other similar Contracts or arrangements that, in each case,
are designed to alter the risks of any Person arising from fluctuations in
interest rates or currency values.
1.49 "Disclosure Schedules": shall mean the Disclosure Schedules (a) dated
July 23, 2001 delivered in connection with the execution of the Original
Purchase Agreement as amended and supplemented in accordance with Section 5.9
thereof and hereof, each of which (a) is hereby incorporated into and made a
part of this Agreement for all purposes, and (b) has been furnished to Buyer by
the Company and/or Shareholder, as applicable, in advance of the Closing.
1.50 "Disposition Agreement": shall mean any agreement, Contract or other
arrangement (other than this Agreement) pursuant to which any interest in any
Financing Contract or any payment due under any Financing Contract or Credit
Enhancement or with respect to any Portfolio Property has been sold, used as
collateral, transferred or otherwise disposed of to any Person or Persons by the
Company.
1.51 "Dispute Notice": as defined in Section 10.4(b).
1.52 "Document": shall mean any book, record, file, paper, computer tape,
computer disk, microfilm, information storage device of any type and any other
document.
1.53 "DOL": shall mean the United States Department of Labor.
1.54 "Dollars" or "$": shall mean United States dollars.
1.55 "Earning Asset Amount": shall mean an amount equal to (a) the
aggregate Net Receivable of the Financing Contracts that are reflected on the
Adjusted Reference Date Balance Sheet that are not Operating Leases, plus (b)
without duplication, the aggregate Operating Lease Book Value of all Operating
Leases that are reflected on the Adjusted Reference Date Balance Sheet, minus
(c) the Stipulated Reserve Amount.
1.56 "Employee Benefit Plan": as defined in Section 3.13(a).
1.57 "Employees": as defined in Section 3.12.
1.58 "Encumbrance": shall mean any lien, mortgage, deed of trust, pledge,
security interest, charge, covenant, title defect or other adverse Claim,
interest or encumbrance of any kind or nature, whether or not perfected.
1.59 "Environmental Claims": as defined in Section 3.23(a).
1.60 "Environmental Law": shall mean any domestic or foreign, federal,
state or local Laws, statutes, rules, regulations or other legal requirements
relating to the protection of human health and safety, pollution or protection
of the environment or natural resources, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 ▇.▇.▇.▇▇. 9601 et seq.; the Hazardous Material Transportation Act, 49
▇.▇.▇.▇▇. 1801 et seq.; the Clean Water Act, 33 ▇.▇.▇.▇▇. 1251 et seq.; the
Resource Conservation and Recovery Act, 42 ▇.▇.▇.▇▇. 6901 et seq.; the Clean Air
Act, 42 ▇.▇.▇.▇▇. 7401 et seq.; the Toxic Substances Control Act, 15 ▇.▇.▇.▇▇.
2601 et seq. and the Occupational Safety and Health Act, 29 ▇.▇.▇.▇▇. 651 et
seq., all as now or hereafter amended or supplemented, and the regulations
promulgated pursuant thereto, and judicial interpretations thereof as well as
common law rights of action under theories of nuisance, trespass and strict
liability.
1.61 "Environmental Loss": shall mean any loss, cost, Damage, liability,
deficiency, fine, penalty or expense that, in each case, results in incurred
out-of-pocket expenses (including but not limited to reasonable attorneys' fees,
engineering and other professional or expert fees) and the cost of any Remedial
Action (voluntary or involuntary) incurred arising out of, based on or related
to any Adverse Environmental Event which occurred on or prior to the Closing
Date.
1.62 "ERISA": shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.63 "ERISA Affiliate": as defined in Section 3.13(a).
1.63.1 "Estimated Shareholder's Equity": shall mean an amount agreed by
Shareholder and Buyer and set forth on a certificate signed by the parties as of
the Closing.
1.64 "Excluded Assets": shall mean (a) personal Property used primarily in
connection with the Company's agency and premium finance loan and mortgage
servicing lines of business, and all financing transactions and agreements
related to such lines of business, (b) financing transactions and agreements
between any employee of Shareholder or its Affiliates (including the Company,
prior to the Closing), on the one hand, and the Company, on the other hand, and
(c) those certain financing transactions, agreements and other assets identified
by Buyer on Annex 1.64.
1.65 "Excluded Employees": shall mean (a) those Employees listed on Annex
1.65 who work exclusively in the Company's agency and premium finance loan and
mortgage servicing lines of business, and (b) those Employees who are inactive
as of the Closing Date (other than those Employees who, as of the Closing Date,
are either (i) on short-term sick leave but are scheduled or reasonably expected
by the Company to return to work with the Company within ten (10) Business Days
after the Closing Date, or (ii) on vacation).
1.66 "Excluded Liabilities": shall mean any debts, Claims, liabilities,
obligations, Damages and expenses (whether known or unknown, contingent or
absolute, or arising before, on or after the Closing Date) to the extent
resulting from, arising out of or based on (a) any Excluded Asset, (b) the
Company Special Retention Arrangements, (c) any Excluded Employee, or (d) the
matters set forth on Annex 1.66.
1.67 "Exemption Certificate": shall mean a Document from an Obligor
indicating that the transaction covered by a Financing Contract is exempt from
any sales, use or similar Tax.
1.68 "Exhibit": shall mean any written exhibit to this Agreement designated
as such, each of which (a) is hereby incorporated into and made a part of this
Agreement for all purposes; and (b) has been furnished to Buyer and Shareholder
in advance of the Closing.
1.69 "Financial Statements": as defined in Section 3.6(a).
1.70 "Financing Contract ": shall mean any Contract (including any schedule
or amendment thereto or assignment, assumption, renewal or novation thereof) in
existence on or prior to the Closing Date (together with any ancillary
agreements relating thereto) in the form of (a) a lease of or rental agreement
with respect to Property, or (b) a sale Contract (including an installment sale
Contract or conditional sale agreement) arising out of the sale of Property, or
(c) a secured or unsecured financing of Property, or (d) a secured or unsecured
loan, and in each case, which with respect thereto: (i) the Company is the
lessor, seller, lender, secured party or obligee (whether initially or as an
assignee), or (ii) is between an Obligor, on the one hand, and a lessor, seller,
obligee, lender, secured party or assignee of any of the foregoing, on the other
hand, and (1) which would be a Financing Contract if the Company were the
lessor, seller, obligee, lender, secured party or assignee of any of the
foregoing thereunder and (2) with respect to which the Company is an assignee of
the revenues or claims with respect thereto; provided, however, that "Financing
Contracts" shall not include any Excluded Asset.
1.71 "GAAP": shall mean generally accepted accounting principles in the
United States.
1.72 "Governmental Entity": shall mean a federal, state, provincial, local,
county or municipal government, governmental, regulatory or administrative
agency, department, court, commission board, bureau or other authority or
instrumentality, domestic or foreign.
1.73 "Gross Receivable": shall mean, in the case of any Financing Contract
that is not an Operating Lease, as of any date, the sum of (a) all unpaid
scheduled periodic payments (whether or not due) under such Financing Contract
(excluding any amounts in respect of such Financing Contract that are not
financed or any other payments not associated with the financing of the
Portfolio Property as reflected on the Books and Records of the Company) as of
such date, plus (b) the Residual, if any, of the Portfolio Property subject to
or governed by such Financing Contract.
1.74 "Guaranteed Debt": as defined in Section 5.6.
1.75 "Hazardous Materials": shall mean any material, substance or waste
which is defined, characterized or otherwise classified as hazardous, toxic,
pollutant, contaminant or words of similar meaning or effect under any provision
of Environmental Law.
1.76 "HSR Act": shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
1.77 "Inactive Financing Contract": shall be measured as of the Closing
Date and shall mean (a) either (i) a Financing Contract which has been
completely written off (i.e. the Gross Receivable or Operating Lease Book Value
(as the case may be) of such Financing Contract is zero on the Books and Records
of the Company), or (ii) a Financing Contract which is set forth on Annex 1.77,
and (b) neither any Obligor under such Financing Contract, nor any Person
controlled by or under common control with such Obligor, is an Obligor under any
other Financing Contract that is not described in clause (a)(i) or (a)(ii) of
this definition.
1.78 "Indemnified Party": shall mean any Buyer Indemnified Party or any
Shareholder Indemnified Party, as applicable.
1.79 "Indemnified Proceeding": as defined in Section 6.3(d)(iii).
1.80 "Indemnitor": shall mean the indemnifying Person, in the case of any
obligation to indemnify pursuant to the terms of this Agreement.
1.81 "Initial Payment": shall mean an amount equal to the sum of (a)
Estimated Shareholder's Equity, plus (b) the Premium, plus (c) the
Additional Amount, plus (d) the Intercompany Amount.
1.81.1 "Intercompany Amount": shall mean an amount agreed by Shareholder
and Buyer and set forth on a certificate signed by the parties as of the
Closing.
1.82 "Intercompany Debt": shall mean, as of any particular date, the
difference between the outstanding principal amount of, and accrued and unpaid
interest on, the obligations for borrowed money of the Company incurred as of
such date pursuant to any of the agreements set forth on Annex 1.82 and the
fees, costs, premiums or other payments required to be paid in connection with
the repayment or prepayment of such obligations minus the outstanding principal
amount of, and accrued and unpaid interest on, the obligations for
borrowed money owed to the Company by any of its Affiliates as of such date
pursuant to any of the agreements set forth on Annex 1.82 and the fees, costs,
premiums or other payments required to be paid in connection with the repayment
or prepayment of such obligations.
1.83 "Investment Banker": as defined in Section 3.18.
1.84 "IRS": shall mean the United States Internal Revenue Service.
1.85 "Knowledge": shall mean when used in reference to (a) the Company, the
knowledge that (i) any officer or managerial employee of Shareholder whose
duties include the supervision of any of the operations or business of the
Company, (ii) any director or officer of the Company, and (iii) any individual
set forth on Annex 1.85(a), in the case of clauses (i), (ii) and (iii) above,
actually has in the exercise of that individual's duties, after due inquiry, and
(b) Shareholder, the actual knowledge, after due inquiry, of the individuals
referenced in (a)(i) above and any individual set forth on Annex 1.85(b).
1.86 "KPMG": shall mean the public accounting firm of KPMG Peat Marwick or
any successor organization to KPMG Peat Marwick.
1.87 "Law": shall mean any domestic or foreign constitutional provision,
statute or other law, rule, regulation or interpretation of any Governmental
Entity and any decision, decree, injunction, judgment, order, ruling or
assessment of any Governmental Entity or any arbitrator.
1.88 [Intentionally Omitted]
1.89 "Leasehold Interest": shall mean the Company interest in real Property
leased, subleased, operated or occupied by the Company as lessee, sublessee or
licensee or otherwise used to conduct the Company's business.
1.90 "Leased Property": as defined in Section 3.9(a).
1.91 "MADSP": as defined in Section 6.3(e)(iii).
1.92 "Marks": as defined in Section 3.14(b).
1.93 "Material Adverse Effect": shall mean a material adverse effect on the
assets, business, Properties, operations, or financial condition of the Company,
but shall not be deemed to include the effect of any change (a) in general
economic, regulatory, or political conditions, (b) affecting the commercial
finance industry generally (other than those changes that are materially more
adverse as to the Company than the effect of such change on commercial finance
companies generally), or (c) resulting from the public announcement of the
transactions contemplated by this Agreement.
1.94 "Material Contract": shall mean any Contract (other than a Financing
Contract) which calls for the payment by or on behalf of the Company of $100,000
or more, or the delivery by the Company of goods or services with a fair market
value of $100,000 or more, or provides for the Company to receive any payments
of, or any Property (other than Portfolio Property) with a fair market value of
$100,000 or more, or which otherwise is material to the assets, business,
Properties, operations, prospects or financial condition of the Company.
1.95 "MTN Guaranty Agreement": shall mean the agreement between Buyer and
Shareholder on reasonable, mutually agreed terms and conditions, in
substantially the form of Exhibit C, as the same may be amended, modified or
supplemented from time to time in accordance with its provisions.
1.96 "Multiemployer Plan": as defined in Section 3.13(e).
1.97 "Net Book Value": of any Specified Financing Contract at any date
shall be determined as follows (with each component of Net Book Value to be
determined, unless otherwise provided herein, in the same manner as such
components are determined on the Books and Records of Buyer or its Affiliate at
the relevant date, but without giving effect to any write-offs or write-downs of
any thereof):
(a) if such Specified Financing Contract is treated by Buyer
or its Affiliate at such date as a finance lease or as a loan for
accounting purposes, the Net Book Value of such Specified Financing
Contract at such date shall be equal to the Net Receivable of such
Specified Financing Contract at such date; or
(b) if such Specified Financing Contract is treated by Buyer
or its Affiliate at such date as an operating lease for accounting
purposes, the Net Book Value of such Specified Financing Contract at
such date shall be equal to Operating Lease Book Value of such
Specified Financing Contract at such date;
provided, however, that in no event shall the Net Book Value of any Specified
Financing Contract, as determined above, be less than zero.
1.98 "Net Receivable": shall mean, in the case of any Financing Contract
that is not an Operating Lease, as of any date, (a) the Gross Receivable with
respect to such Financing Contract as of such date, minus (b) the amount of any
unearned financing income attributed to such Financing Contract as of such date.
1.99 "Non-Assumable Claim": shall mean any third party Claim (a) in which a
Governmental Entity has instituted or asserted a Claim whether directly, or
indirectly (including without limitation by counterclaim, cross-claim, third
party claim, interpleader or otherwise), (b) seeking injunctive relief, (c)
asserted in either a class action or a proceeding or action which seeks redress
for the claimant and a class of other similarly situated persons, (d) alleging
violations of criminal Law, or (e) alleging violations of civil RICO or any
similar state or local Law; provided, however, that to the extent any such third
party Claim relates to (i) the matters described in Section 6.3(a)(i)(A) through
(J), (ii) the matters described in Section 10.2(a)(ix), (iii) Shareholder's
title to and ownership of the Shares, or (iv) any Excluded Assets, Excluded
Liabilities or Excluded Employees, such third party Claim shall not constitute a
Non-Assumable Claim.
1.100 "Non-Competition Agreement": shall mean an agreement relating to
non-competition by Shareholder and its Affiliates on the terms and conditions
therein, substantially in the form of Exhibit D, as the same may be amended,
modified or supplemented from time to time in accordance with its provisions.
1.101 "Notified Party": as defined in Section 6.3(d)(iv).
1.102 "Obligor": under any Financing Contract or Credit Enhancement shall
mean any Person that is an obligor or borrower under such Financing Contract or
Credit Enhancement.
1.103 "Operating Lease": shall mean any Financing Contract that, as of a
particular date, would be classified as an "operating lease" on the Books and
Records of the Company in accordance with the Accounting Principles.
1.104 "Operating Lease Book Value": shall mean in the case of any Financing
Contract that is an Operating Lease, as of any date, (a) the Company's original
cost of the Portfolio Property subject to or governed by such Operating Lease,
plus (b) all billed and unpaid scheduled contractual payments under such
Operating Leases as of such date, minus (c) the accumulated depreciation
attributed to such Operating Lease and any Portfolio Property subject to or
governed by such Operating Lease as of such date.
1.105 "Original Equipment Cost": shall mean, with respect to any item of
Portfolio Property, the original cost of such Portfolio Property as recorded in
the Books and Records of the Company in accordance with GAAP consistently
applied in accordance with past practices.
1.106 "Original Purchase Agreement": as defined in the Recitals of this
Agreement.
1.107 "Owned Marks": as defined in Section 3.14(a).
1.108 "Owned Portfolio Property": shall mean the Portfolio Property with
respect to which the Company is the lessor under a Financing Contract which has
been classified by the Company as a true lease (with the Company as the owner of
the Portfolio Property) for federal income Tax purposes.
1.109 "PBGC": as defined in Section 3.13(e)(i).
1.110 "Permitted Encumbrance": shall mean (a) any Encumbrance for Taxes not
yet due and payable, (b) any mechanic's or materialmen's lien, which an Obligor
under a Financing Contract is required to remove, and (c) any other Encumbrance
on the Obligor's interest in any Portfolio Property which is specifically
permitted in accordance with the terms of the related Financing Contract.
1.111 "Person": shall mean any individual, partnership, corporation,
trust, limited liability company, unincorporated organization, Governmental
Entity and any other entity.
1.112 "Portfolio Information": shall mean, with respect to any Financing
Contract, (a) the name of the Obligor under such Financing Contract; (b) the
contract or loan number of such Financing Contract; (c) a description of the
Portfolio Property relating to such Financing Contract; (d) the Original
Equipment Cost or the funds disbursed in the case of loans for the Portfolio
Property relating to such Financing Contract; (e) the stated contractual end of
term of such Financing Contract; (f) the date of the last scheduled payment
under such Financing Contract; (g) the due date and amount of each of the
following scheduled unpaid payments under such Financing Contract, whether
billed or unbilled: (i) all periodic unpaid payments in the case of fixed-rate
Financing Contracts, and (ii) the combined principal and interest payments
calculated at the rates in effect as of the date of the Portfolio Information,
in the case of variable-rate Financing Contracts; (h) the aggregate
amount of any scheduled payments under such Financing Contracts which have been
billed and are due and payable but are unpaid; (i) in the case of each
variable-rate Financing Contract, the current net rate calculated based on the
current index, the index float, the floor, the ceiling and the index
description; (j) the terms of any purchase options in favor of the Obligor or
any other Person under such Financing Contract; (k) the proper classification of
such Financing Contract on the Books and Records of the Company as a true lease,
lease purchase, conditional sale, rental lease, Operating Lease or loan; (l) the
tax depreciation method and the tax life elected by the Company in the case of
any Financing Contract under which the Company is treated as the owner of the
Portfolio Property subject to or governed by such Financing Contract for U.S.
federal income Tax purposes; (m) the Operating Lease undepreciated amount; (n)
the net investment (with respect to each Financing Contract that is a lease);
(o) the Operating Lease salvage value (with respect to each Financing Contract
that is an Operating Lease); (p) the principal amount outstanding (with respect
to each Financing Contract that is a loan); (q) the residual value of the
Portfolio Property (with respect to each Financing Contract that is neither an
Operating Lease nor a loan); (r) the Financing Contract balance remaining (with
respect to each Financing Contract that is a lease); (s) a fixed rate or index
indicator (identifying whether a Financing Contract carries a fixed interest
rate or variable interest rate); and (t) a "muni" indicator (identifying whether
a Financing Contract is a Public Sector Financing Contract).
1.113 "Portfolio Property": shall mean (a) Property with respect to which
the Company is the lessor, lender, seller or secured party, as the case may be,
pursuant to the terms of a Financing Contract (whether initially or as an
assignee), and (b) Property which is held by the Company for sale.
1.114 "Portfolio Tape": shall mean the computer disk, computer tape or
other computer format delivered to Buyer on or about May 17, 2001 and 18, 2001
setting forth, as of April 30, 2001, collectively, the Portfolio Information for
each Financing Contract.
1.115 "Post-Closing Period": as defined in Section 6.3(a)(v).
1.116 "Pre-Closing Period": as defined in Section 6.3(a)(v).
1.117 "Premium": shall mean an amount
agreed by Shareholder and Buyer and set forth on a certificate signed by the
parties as of the Closing..
1.118 "Property": shall mean all property and assets of whatsoever nature
including, but not limited to, personal property, whether tangible or
intangible.
1.119 "Public Sector Financing Contract": shall mean any Financing Contract
(including any amendment thereto or any renewal, assignment, assumption or
novation thereof) to which any Governmental Entity is a party.
1.120 "Purchase Price": as defined in Section 2.1(a).
1.121 "Purchase Price Certificate": as defined in Section 6.8(a)(vii).
1.122 "Qualified Settlement Offer": as defined in Section 10.4(c)(iii).
1.122.1 "Reference Date": shall mean July 31, 2001.
1.122.2 "Reference Date Balance Sheet": shall mean the balance sheet of the
Company prepared as of the Reference Time after giving effect to the
transactions contemplated by Section 2.1(e), the second sentence of Section
5.5(a) and the Restructuring, and the notes and schedules, if any, thereto,
prepared in accordance with Section 6.8(a).
1.122.3 "Reference Date Portfolio Information": shall mean the information
contained in the Reference Date Portfolio Tape data fields identified on Annex
1.122.3.
1.122.4 "Reference Date Portfolio Tape": shall mean the computer disk,
computer tape or other computer format delivered to Buyer setting forth as of
the Reference Date, the Reference Date Portfolio Information for each Financing
Contract.
1.122.5 "Reference Date Shareholder's Equity": shall mean the amount
reflected on the Adjusted Reference Date Balance Sheet as the shareholder's
equity of the Company.
1.122.6 "Reference Time": shall mean the close of the Company's business in
Redmond, Washington on July 31, 2001.
1.123 "Release": shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal or leaching into the
environment of, or exposure to, Hazardous Materials.
1.124 "Remedial Action": shall mean any action required by any Governmental
Entity or necessary to comply with any Environmental Law to (a) clean up,
remove, treat or in any other way address any Hazardous Material; (b) prevent
the Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment, or (c)
perform pre-remedial studies and investigations or post-remedial monitoring and
care.
1.125 "Repurchase Notice": shall mean a written notice signed by an
authorized representative of Buyer or its Affiliate and delivered to Shareholder
pursuant to which Buyer or its Affiliate elects to exercise a Repurchase Option
pursuant to Section 6.12(a).
1.126 "Repurchase Price": with respect to any Specified Financing Contract
at any date means the sum of (a) the Net Book Value of such Specified Financing
Contract at such date, plus (b) all reasonable collection expenses incurred by
Buyer or any of its Affiliates at or prior to such date in connection with such
Specified Financing Contract, plus (c) Buyer or its Affiliate's good faith
estimate as to the amount of personal property tax liabilities in respect of
periods prior to such date for which an Obligor under such Specified Financing
Contract is or would become obligated to reimburse Buyer.
1.127 "Repurchase Option": shall mean the option granted to Buyer or its
Affiliate to require Shareholder to repurchase, or cause to be repurchased by
any of its Affiliates, the Specified Financing Contracts pursuant to Section
6.12.
1.128 "Required Consents": as defined in Section 7.3.
1.129 "Residual": shall mean, with respect to any item of Portfolio
Property, its estimated value upon expiration of the Financing Contract to which
it is subject, as determined by the Company and established on its Books and
Records at the inception of such Financing Contract.
1.130 "Restructuring": as defined in Section 5.8(a).
1.131 "Safeline": shall mean the operations of the Company conducted by the
Company's Safeline division.
1.132 "Section 338(h)(10) Elections": as defined in Section 6.3(e).
1.133 "Section 338 Forms": as defined in Section 6.3(e)(ii).
1.134 "Selected Accounting Firm": shall mean a public accounting firm with
nationally recognized auditing expertise, which shall be selected by Buyer's
independent public accountants and Shareholder's independent public accountants
to resolve a dispute arising pursuant to Section 6.3 or 6.8(b).
1.135 "Settlement Date": shall mean the fifth (5th) Business Day following
the date of delivery to Buyer and Shareholder of the final Adjusted Reference
Date Balance Sheet and the final Purchase Price Certificate as provided in
Section 6.8(a)(viii).
1.136 "Settlement Rate": shall mean, on any date, the "target" federal
funds rate reported in the "Money Rates" section of the Eastern edition of The
Wall Street Journal published for such date. In the event The Wall Street
Journal ceases publication of the "target" federal funds rate or fails on any
particular date to publish the "target" federal funds rate, the "target" federal
funds rate shall refer to the rate for the last transaction in overnight federal
funds arranged prior to such date by The Chase Manhattan Bank.
1.137 "Shareholder": as defined in the preamble of this Agreement.
1.138 "Shareholder Adverse Effect": shall mean any adverse effect on the
ability of Shareholder to consummate the transactions contemplated in, and
perform its obligations under, this Agreement and any of the Transaction
Documents but shall not be deemed to include the effect of any changes (a) in
general economic, regulatory or political conditions, or (b) affecting similarly
situated entities generally (other than those changes that are materially more
adverse as to Shareholder than the effect of such changes on similarly situated
entities generally).
1.139 "Shareholder Indemnified Party": as defined Section 10.2(b).
1.140 "Shareholder Survival Period": as defined in Section 10.1(b).
1.141 "Shareholder's Accountants": shall mean Ernst & Young LLP (or its
successor organization) or at Shareholder's election, any other public
accounting firm with nationally recognized auditing expertise in the financial
services industry (other than Buyer's Accountants), as selected by Shareholder.
1.142 "Shareholder's Insurance Policies": as defined in Section 5.8(b)(ii).
1.143 "Shares": shall mean all of the Common Stock to be purchased by
Buyer.
1.144 "Special Adjustments": shall mean such adjustments to the Reference
Date Balance Sheet as shall be necessary to (a) reflect all assets or
liabilities, the existence of which are known on the date Buyer's Accountants
deliver the draft of the Reference Date Balance Sheet to Buyer, Shareholder and
Shareholder's Accountants pursuant to the provisions of Section 6.8(a) and
which, as of the Reference Date, were assets or liabilities (as the case may be)
of the Company of a type properly to have been reflected on the Reference Date
Balance Sheet, but which were not in fact reflected on the Reference Date
Balance Sheet, including, but not limited to, any asset or liability which was
not reflected on the Reference Date Balance Sheet because such asset or
liability was not deemed to be material, (b) remove any asset or liability which
should not have been reflected on the Reference Date Balance Sheet but was in
fact reflected thereon irrespective of whether such asset or liability is deemed
not to be material, (c) give effect to each accounting principle, method,
practice or procedure that is set forth on Annex 1.1 and each other accounting
principle, method, practice or procedure that is to be treated as a Special
Adjustment pursuant to the last sentence of the definition of "Accounting
Principles", (d) adjust the reserves reflected on the Reference Date Balance
Sheet in the manner provided on Exhibit A, (e) eliminate any Excluded Assets and
any Excluded Liabilities reflected on the Reference Date Balance Sheet, (f)
eliminate any deferred tax assets and any deferred tax liabilities and (g)
eliminate any receivable or payable relating to Taxes of the Company (other than
accrued receivables due from Obligors with respect to personal property Taxes to
the extent Shareholder has indemnified Buyer for such Taxes pursuant hereto or
such Taxes have otherwise been paid prior to the Reference Date).
1.145 "Special Representations": as defined on the Definitional Annex.
1.146 "Specified Financing Contract": shall mean each Financing Contract
entered into pursuant to the personal computer purchase program for SAFECO
insurance company agents originated by the Safeline division.
1.147 "Specified Settlement Date": shall mean, with respect to any
Specified Financing Contract, the date that is ten (10) days immediately
following the date of delivery by Buyer or its Affiliate of a Repurchase Notice
with respect to such Specified Financing Contract.
1.148 "Stipulated Reserve Amount": shall mean an amount equal to the
product of (a) the sum of the aggregate Net Receivable of all Financing
Contracts that are reflected on the Adjusted Reference Date Balance Sheet that
are not Operating Leases, plus (b) without duplication, the Operating Lease Book
Value of all Operating Leases that are reflected on the Adjusted Reference Date
Balance Sheet, multiplied by (c) 1.3959%.
1.149 "Straddle Period": shall mean any taxable year or period beginning on
or before and ending after the Closing Date.
1.150 "Subject Company Claims": as defined in Section 5.8(b)(ii).
1.151 "Subject Company Liabilities": as defined in Section 5.8(b)(ii).
1.152 "Subsidiary": when used in reference to any Person, shall mean (a) a
corporation in which such Person, a subsidiary of such Person, or such Person
and one or more subsidiaries of such Person, directly or indirectly, at the date
of determination, has either (i) a majority equity ownership interest, or (ii)
the power, under ordinary circumstances, to elect, or to direct the election of,
a majority of the board of directors, or (b) a partnership in which such Person,
a subsidiary of such Person, or such Person and one or more subsidiaries of such
Person, (i) is, at the date of determination, a general partner, or (ii) has a
majority equity ownership interest, or (c) any other Person (other than a
corporation or a partnership) in which such Person, a subsidiary of such Person,
or such Person and one or more subsidiaries of such Person has either (i) at
least a majority equity ownership interest, or (ii) the power to elect, or to
direct the election of, a majority of the directors, members or other governing
body.
1.153 "Tape Audit": as defined in Section 6.6(b).
1.154 "Tape Audit Engagement Letter": as defined in Section 6.6(b).
1.155 "Tape Auditors": shall mean the public accounting firm (with
nationally recognized auditing expertise in the financial services industry)
mutually agreed by Shareholder and Buyer.
1.156 "Tape Settlement Amount": as defined in Section 6.6(c).
1.157 "Tax" or "Taxes": shall mean any (a) domestic or foreign federal,
state or local taxes, charges, fees, levies, imposts, duties and governmental
fees or other like assessments or charges of any kind whatsoever (including but
not limited to any income, net income, gross income, receipts, windfall profit,
severance, property, production, sales, use, business and occupation, license,
excise, registration, franchise, employment, payroll, withholding, alternative
or add-on minimum, intangibles, ad valorem, transfer, gains, stamp, estimated,
transaction, title, capital, paid-up capital, profits, occupation, premium,
value-added, recording, real property, personal property, inventory and
merchandise, business privilege, federal highway use, commercial rent or
environmental tax), (b) interest, penalties, fines, additions to tax or
additional amounts imposed by any taxing authority in connection with (i) any
item described in clause (a), or (ii) the failure to comply with any requirement
imposed with respect to any Tax Return, and (c) liability in respect of any
items described in clause (a) and/or (b) payable by reason of Contract,
assumption, transferee liability, operation of Law, Treasury Regulation section
1.1502-6(a) (or any predecessor or successor thereof or any analogous or similar
provision under Law) or otherwise.
1.158 "Tax Exempt Financing Contract": shall mean a Financing Contract in
respect of which the interest income received by the Company is treated on the
Books and Records as exempt from U.S. federal income Tax pursuant to Section 103
of the Code or any predecessor thereof.
1.159 "Tax Proceeding ": as defined in Section 6.3(d)(i).
1.160 "Tax Return ": shall mean any return, report or statement required to
be filed with respect to any Tax (including any attachments thereto and any
amendment thereof) including, but not limited to, any information return, claim
for refund, amended return or declaration of estimated Tax, and including, where
permitted or required, consolidated, combined or unitary returns for any group
of entities that includes the Company (or Shareholder or any of its Affiliates,
with respect to the Transferred Assets).
1.161 "Tax Sharing Agreement ": shall mean any Tax allocation,
indemnity, sharing or similar Contract or arrangement (whether or not
written).
1.162 "Third Party Beneficiary": as defined in Section 11.10.
1.163 "Third Party Debt": shall mean, as of any particular date, the
outstanding principal amount of, and accrued and unpaid interest on, the
obligations for borrowed money incurred by the Company as of such date, other
than the Intercompany Debt but including, without limitation, the Guaranteed
Debt.
1.163.1 "Threshold Amount": as defined on the Definitional Annex.
1.164 "Title IV Plan": as defined in Section 3.13(e).
1.165 "Transaction Documents": shall mean this Agreement and each of the
agreements, certificates, instruments and documents executed or delivered
pursuant to the terms of this Agreement, including but not limited to the
Transition Services Agreement, the CP Guaranty Agreement, the MTN Guaranty
Agreement and the Non-Competition Agreement.
1.166 "Transferred Assets": shall mean, other than with respect to the
Excluded Assets: (a) fixed assets used in the operation of the Company's
business prior to Closing and located in the Company's offices set forth on
Annex 1.166, and any other personal computers used exclusively in the operation
of the business by Transferred Employees, (b) the Leasehold Interests set forth
on Annex 1.166(b), (c) assignment of rights to lockboxes or similar designated
locations for receipt of payments under applicable Financing Contracts, and (d)
such other assets as specifically agreed by Shareholder and Buyer.
1.167 "Transferred Employees": shall mean all individuals who are Employees
on the Closing Date, other than Excluded Employees.
1.168 "Transfer Taxes": shall mean any and all sales, use, stamp,
documentary, filing, recording, transfer, real estate transfer, stock transfer,
gross receipts, registration, duty, securities transactions or similar fees or
Taxes or governmental charges (together with any interest or penalty, addition
to Tax or additional amount imposed) as levied by any taxing authority in
connection with the transactions contemplated by this Agreement.
1.169 "Transition Services Agreement": shall mean the agreement
substantially in the form of Exhibit E, as the same may be amended, modified or
supplemented from time to time in accordance with its provisions.
1.170 "Treasury Regulations": shall mean the treasury regulations
promulgated under the Code.
1.171 "WARN": shall mean the Worker Adjustment and Retraining
Notification Act, 29 ▇.▇.▇.▇▇. 2101 et seq., and any comparable state or
local Laws and regulations.
2. Purchase and Sale of Shares
On the terms and subject to the conditions of this Agreement, Buyer
agrees to purchase the Shares from Shareholder, and Shareholder agrees to sell
the Shares to Buyer free and clear of all Encumbrances. Shareholder shall
deliver to Buyer the certificates representing the Shares (with any necessary
stock transfer Tax stamps attached or provided for), duly endorsed to Buyer so
as to transfer and assign to Buyer at the Closing good and valid title to the
Shares free and clear of all Encumbrances (other than restrictions imposed by
applicable securities Laws) and to constitute Buyer the sole beneficial and
record owner thereof.
2.1 Purchase Price
(a) As of the Closing, Shareholder shall sell and Buyer shall purchase the
Shares for an aggregate purchase price equal to the sum of (i) the Reference
Date Shareholder's Equity, plus (ii) the Adjusted Premium (the "Purchase
Price").
(b) On the Closing Date, Buyer shall pay the Initial Payment to Shareholder
by wire transfer of immediately available funds to an account in the United
States designated in writing by Shareholder to Buyer at least three (3) Business
Days prior to the Closing.
(c) On the Closing Date, pursuant to Section 5.6, Buyer shall guarantee
payment and performance of all Guaranteed Debt.
(d) On the Settlement Date, the following payments shall be paid by wire
transfer of immediately available funds to an account in the United States
designated in writing by the recipient thereof at least three (3) Business Days
prior to the Settlement Date:
(i) (x) if the Reference Date Shareholder's Equity
exceeds the Estimated Shareholder's Equity, Buyer shall pay to
Shareholder an amount equal to such excess, together with accrued
interest on such amount calculated at the Settlement Rate, as from time
to time in effect, for the period from the Closing Date to and
including the date upon which such payment is made (calculated on the
basis of the actual number of days elapsed in a year of three hundred
sixty-five (365) or three hundred sixty-six (366) days, as the case may
be); or
(y) if the Estimated Shareholder's Equity exceeds the
Reference Date Shareholder's Equity, Shareholder shall pay to Buyer an
amount equal to such excess, together with accrued interest on such
amount calculated at the Settlement Rate, as from time to time in
effect, for the period from the Closing Date to and including the date
upon which such payment is made (calculated on the basis of the actual
number of days elapsed in a year of three hundred sixty-five (365) or
three hundred sixty-six (366) days, as the case may be).
(ii) (x) if the Adjusted Premium exceeds the Premium,
Buyer shall pay to Shareholder an amount equal to such excess, together
with accrued interest on such amount calculated at the Settlement Rate,
as in effect from time to time, for the period from the Closing Date to
and including the date upon which such payment is made (calculated on
the basis of the actual number of days elapsed in a year of three
hundred sixty-five (365) or three hundred sixty-six (366) days, as the
case may be); or
(y) if the Premium exceeds the Adjusted Premium,
Shareholder shall pay to Buyer an amount equal to such excess, together
with accrued interest on such amount calculated at the Settlement Rate,
as in effect from time to time, for the period from the Closing Date to
and including the date upon which such payment is made (calculated on
the basis of the actual number of days elapsed in a year of three
hundred sixty-five (365) or three hundred sixty-six (366) days, as the
case may be).
(e) At the time of Closing, Shareholder shall be deemed, effective
immediately prior to the Reference Time, to have (i) made a contribution to the
capital of the Company of the obligation with respect to all Intercompany Debt
that would otherwise be included on the Company's balance sheet as a liability
in accordance with the Accounting Principles, and (ii) paid and discharged in
full (and shall be deemed to have caused each of its Affiliates (other than the
Company) to have paid and discharged in full) all Intercompany Debt that would
otherwise be included on the Company's balance sheet as an asset in accordance
with the Accounting Principles. Any such deemed capital contribution made by
Shareholder to recharacterize or reclassify any Intercompany Debt in accordance
with this Section 2.1(e) shall be treated as a cancellation, release and
discharge in full of any such Intercompany Debt.
2.2 Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall, subject to the satisfaction or waiver of the conditions set
forth in Articles 7 and 8, be held at the offices of ▇▇▇▇▇▇▇ Coie LLP, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, commencing at 7:00 a.m. local time (or such
other place and time as the parties shall mutually agree), on the third (3rd)
Business Day following the date that the conditions precedent set forth in
Articles 7 and 8 are satisfied or waived (or at such other date or time as the
parties may mutually agree). The Closing will be deemed to be effective, for all
purposes, as of the close of the Company's business in Redmond, Washington on
the day the Closing occurs.
3. Representations and Warranties of the Company and Shareholder
Shareholder, as to Sections 3.1, 3.2(b), 3.3(b), 3.3(c), 3.8(a), 3.8(b)(i),
3.8(b)(iii)-(v), 3.8(b)(vii), 3.8(b)(xii), 3.8(b)(xvi)-(xviii), 3.10(c), 3.13,
3.14(b), 3.15, 3.18, 3.20, 3.21(c), 3.25, 3.26 and 3.27, and the Company, as to
Sections 3.2 through 3.27, represent and warrant to Buyer, after taking into
account the Restructuring, as follows:
3.1 Shareholder Organization; Corporate Authority; Enforceability; Consents
(a) Organization. Shareholder is a corporation duly organized and validly
existing under the Laws of the State of Washington and has the power to own and
lease its Properties and carry on its business as it is now conducted.
(b) Good Title. Shareholder owns, beneficially and of record, all the
Shares, which represent all the issued and outstanding capital stock of the
Company. The Shares are owned by Shareholder free and clear of any Encumbrance
(other than restrictions imposed by applicable securities Laws), and, upon the
consummation of the sale of such Shares as contemplated hereby, Buyer will have
good title to such Shares, free and clear of any Encumbrance (other than
restrictions imposed by applicable securities Laws).
(c) Authority. Shareholder has all requisite power, right and authority to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party, to consummate the transactions contemplated hereby and thereby,
and to sell and transfer the Shares without the consent or approval of any other
Person. Shareholder has taken, or will take prior to the Closing, all actions
necessary for the due authorization, execution, delivery and performance of this
Agreement and the other Transaction Documents.
(d) Enforceability. This Agreement has been, and the other Transaction
Documents to which Shareholder is a party will be upon the Closing, duly
executed and delivered by Shareholder, and this Agreement is, and each of the
other Transaction Documents to which it is a party will be upon the Closing, the
legal, valid and binding obligation of Shareholder, enforceable against
Shareholder in accordance with its terms, except as enforcement thereof may be
limited by the Bankruptcy Exception.
(e) No Conflicts. The execution, delivery and performance of this Agreement
and the other Transaction Documents by Shareholder, and the consummation by
Shareholder of the transactions contemplated hereby and thereby, will not (i)
conflict with or result in a violation (with or without the giving of notice or
lapse of time, or both) of any provision of any Law or any judgment, decree,
order, regulation or rule of any Governmental Entity applicable to Shareholder,
(ii) result in a default (with or without the giving of notice or lapse of time,
or both) under, acceleration or termination of, restriction or Encumbrance on,
or the creation in any Person of the right to accelerate, terminate, modify or
cancel, any contract, lease or note to which Shareholder is a party or by which
it is bound or to which any material assets of Shareholder are subject, (iii)
result in the creation of any Encumbrance on the Shares, or (iv) conflict with
or result in a breach of or constitute a default under any provision of
Shareholder's articles of incorporation or bylaws, except, in the case of
clauses (i) and (ii) above, for such violations, defaults, Encumbrances or
conflicts which would not have a Shareholder Adverse Effect.
(f) Consents. Except for filing required under the HSR Act and the
Securities Exchange Act of 1934, as amended, and as set forth on Disclosure
Schedule 3.1(f), Shareholder is not required to obtain any consent, approval or
Authorization of, or to make any declaration, filing or registration with, any
Governmental Entity or Person with respect to the execution, delivery and
performance of this Agreement and the other Transaction Documents to which
Shareholder is a party or the consummation by Shareholder of the transactions
contemplated hereby and thereby.
3.2 Company Organization; Corporate Authority; Enforceability
(a) Organization. The Company is a corporation duly organized and validly
existing under the Laws of the State of Washington. The Company is duly
qualified to conduct business as a foreign corporation and is in good standing
under the Laws of each state or other jurisdiction where such qualification is
required due to (i) the character or location of Property owned by it or leased
for use in the operation of the Company's business, or (ii) the nature of the
business conducted by the Company, except where the failure to be so qualified
would not have a Material Adverse Effect on the Company. Disclosure Schedule
3.2(a) sets forth all jurisdictions in which the Company is qualified as a
foreign corporation to conduct business.
(b) Authority. The Company has all requisite power, right and authority to
(i) own, operate and lease its Properties and assets, and to carry on its
business as it is now conducted, and (ii) to execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents to which it
is a party, and to consummate the transactions contemplated hereby and thereby.
Annex 3.2 contains true and correct copies of the Company's articles of
incorporation and bylaws, including all amendments thereto through the date
hereof in effect on the date hereof. All actions on the part of the Company, its
officers and directors and Shareholder necessary for the due authorization,
execution, delivery and performance of this Agreement and the other Transaction
Documents, the consummation of the transactions contemplated hereby and thereby,
and the performance of all the Company's obligations under this Agreement and
the other Transaction Documents have been taken or will be taken prior to the
Closing.
(c) Enforceability. This Agreement has been and the other Transaction
Documents to which the Company is a party will be upon the Closing, duly
executed and delivered by the Company, and this Agreement and each of the other
Transaction Documents to which it is a party will be upon the Closing, the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by the Bankruptcy Exception.
3.3 Capitalization
(a) The authorized capital stock of the Company consists of ten thousand
(10,000) shares of common stock, $100 par value per share (the "Common Stock").
(b) The issued and outstanding capital stock of the Company consists solely
of the Common Stock, which is held of record and beneficially owned by
Shareholder free and clear of all Encumbrances. All shares of Common Stock are
duly authorized and validly issued, fully paid and nonassessable and free of
preemptive rights, and were issued in compliance with all applicable Laws.
(c) Other than pursuant to the transactions expressly contemplated by this
Agreement, there are no outstanding or authorized options, convertible or
exchangeable securities or instruments, warrants, rights, Contracts, calls,
puts, rights to subscribe, conversion rights or other agreements or commitments
to which either Shareholder or the Company is a party or which are binding on
either Shareholder or the Company for the issuance, disposition or acquisition
of any capital stock of the Company. There are no outstanding stock
appreciation, phantom stock or similar rights with respect to the Company. There
are no voting trusts, proxies or other agreements or understandings with respect
to the voting of any capital stock of the Company.
(d) The Company is not a party or subject to any Contract, agreement or
understanding, and there is no Contract, agreement or understanding between any
Persons, that affects or relates to the voting or giving of written consents
with respect to any securities of the Company or the voting by any director of
the Company.
3.4 Subsidiaries and Affiliates
The Company does not have any Subsidiaries and, except for Commercial
Equipment Leasing Company and Simlog Leasing Company (each of which was acquired
by the Company through the acquisition of all of the issued and outstanding
stock of such entity and each of which was subsequently merged with and into the
Company), has never had any Subsidiaries. The Company does not own, directly or
indirectly, any ownership, equity, profits or voting interest in, or otherwise
control, any corporation, partnership, limited liability company, joint venture
or other entity, and has no Contract, agreement or understanding to purchase any
such interest. Other than beneficial interests in "titling" trusts in respect of
certain Financing Contracts, the Company does not control, directly or
indirectly, or have any equity ownership of, or participation in, any Person or
the right, option or other agreement to acquire (whether by purchase, conversion
or exchange) any equity ownership of, or participation in, any Person.
3.5 No Conflicts; Consents
(a) No Conflicts. The execution, delivery and performance of this Agreement
and the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby, will not (i) conflict with or result in a
violation (with or without the giving of notice or lapse of time, or both) of
any provision of any Law or any judgment, decree, order, regulation or rule of
any Governmental Entity applicable to the Company, (ii) except as set forth on
Disclosure Schedule 3.5(a), conflict with or result in a violation of any
Material Contract or any Contracts required to be set forth on Disclosure
Schedule 3.10(d); nor will such execution, delivery and performance (A) result
in a default (with or without the giving of notice or lapse of time, or both)
under, acceleration or termination of, or the creation in any Person of the
right to accelerate, terminate, modify or cancel, any Material Contract or any
Contracts required to be set forth on Disclosure Schedule 3.10(d), to which the
Company is a party or by which it is bound or to which any assets of the Company
are subject, or (B) result in the creation of any Encumbrance on the assets of
the Company, or on the Shares or any other securities of the Company, or (C)
conflict with or result in a breach of or constitute a default under any
provision of the articles of incorporation or bylaws of the Company.
(b) Consents. Except for the filing of a notification pursuant to the HSR
Act and as set forth on Disclosure Schedule 3.5(b), the Company is not required
to obtain any consent, approval or Authorization of, or to make any declaration,
filing or registration with, any Governmental Entity or Person with respect to
the execution, delivery and performance of this Agreement and the other
Transaction Documents to which the Company is a party or the consummation by the
Company of the transactions contemplated hereby and thereby.
3.6 Financial Statements; Obligations
(a) The Company has delivered to Buyer (a) unaudited balance sheets and
statements of operations, shareholder's equity and cash flows of the Company at
and for the fiscal years ended December 31, 2000, 1999 and 1998, and (b)
unaudited balance sheets and statements of operations and cash flows of the
Company at and for the period ended April 30, 2001. All the foregoing financial
statements (including the notes thereto) are referred to as the "Financial
Statements." The Financial Statements have been prepared from the Books and
Records of the Company and in conformity with GAAP applied on a basis consistent
with the Accounting Principles throughout the periods covered (except as may be
indicated in the notes thereto), and present fairly in all material respects the
financial position of the Company at the dates and for the periods indicated,
and solely with respect to the April 30, 2001 Financial Statements, subject to
normal recurring period-end adjustments (which, from April 30, 2001, in the
aggregate, will not be material in amount or effect).
(b) Except as set forth on Disclosure Schedule 3.6(b), the Company has no
(i) indebtedness or (ii) material obligations or material liabilities of any
kind (whether accrued, absolute, contingent or otherwise, and whether due or to
become due) which are required to be reflected or reserved against in accordance
with GAAP, but are not reflected or reserved against on the balance sheet dated
as of April 30, 2001 included in the Financial Statements, other than such
indebtedness, obligations or liabilities as were incurred in the ordinary course
of business consistent with past practices since December 31, 2000 and which
either will be repaid or discharged prior to or at the Closing or reflected on
the Adjusted Reference Date Balance Sheet. The Company has not deposited or
pledged, and is not obligated upon the occurrence of any condition or event to
deposit or pledge, any collateral to any counterparty pursuant to any Contract.
(c) All of the Portfolio Information set forth in the Portfolio Tape is
true, correct, complete and accurate in all material respects.
(d) All of the Reference Date Portfolio Information set forth in the
Reference Date Portfolio Tape shall be true, correct, complete and accurate in
all respects as of the Reference Date.
3.7 Absence of Certain Changes or Events
(a) Since April 30, 2001, except as set forth on Disclosure Schedule
3.7(a), the Company has not (i) suffered any changes in its business, operations
or financial position which changes, in the aggregate, have had or are
reasonably likely to have a Material Adverse Effect, or (ii) conducted its
business in any material respect not in the ordinary and usual course consistent
with past practice.
(b) Except as set forth on Disclosure Schedule 3.7(b), the Company has not,
since April 30, 2001:
(i) declared, set aside, made or paid any dividend or
other distribution in respect of the capital stock of, or other equity interests
in, or repurchased, redeemed or otherwise acquired any of its capital stock or
other equity interests;
(ii) transferred, issued, sold or disposed of any of its
capital stock or other equity interests, or granted options, warrants, calls or
other rights to purchase or otherwise acquire its capital stock or other equity
interests;
(iii) effected any recapitalization, reclassification, stock
split or like change in the capitalization of the Company;
(iv) amended its articles of incorporation;
(v) made any change in the accounting principles (including
methods, practices or procedures) used in the preparation of the Financial
Statements;
(vi) effected any change in the Company's actuarial, reserving,
underwriting or credit administration policies, practices or principles;
(vii) made any changes in its credit policies or collateral
eligibility standards;
(viii) committed to make any capital expenditures in excess
of $50,000 per capital project;
(ix) waived or committed to waive any rights which would have a
Material Adverse Effect;
(x) purchased, leased, sold, exchanged or otherwise
disposed of or acquired any Property or assets (other than in the ordinary
course of business consistent with past practices) for which the aggregate
consideration paid or payable in any individual transaction was in excess of
$100,000;
(xi) suffered any Damage, destruction or casualty loss, whether
or not covered by insurance, in excess of $100,000 in the case of any
individual loss, or $250,000 with respect to the aggregate of all such
losses;
(xii) made or agreed to make any increase in the compensation
payable or to become payable to any Employee, except for regularly scheduled
increases in compensation payable or increases otherwise occurring in the
ordinary and usual course of business consistent with past practices;
(xiii) made or agreed to make any material
increase in any Employee Benefit Plan;
(xiv) made any upward adjustments to,
written up or otherwise increased the book value of any of its Properties;
(xv) reduced, written off or otherwise decreased the amount of
any of its obligations or liabilities (including without limitation any
Intercompany Debt) other than in the ordinary and usual course of business
consistent with past practices; or
(xvi) permitted any Encumbrance on any of the Property
(other than Excluded Assets) of the Company, other than Permitted
Encumbrances.
3.8 Taxes
(a) Disclosure Schedule 3.8(a) lists all (i) material types of Taxes paid
by or on behalf of, (ii) material types of Tax Returns filed by or on behalf of
and (iii) jurisdictions in which the Company pays or has paid a material amount
of income, franchise, or sales Taxes.
(b) Except as set forth on Disclosure Schedule 3.8(b):
1
(i) Each of the Company and each "affiliated group"
(within the meaning of Section 1504 of the Code) of which the Company is or has
been a member (A) has timely filed (or another has timely filed on its behalf)
with the appropriate Governmental Entities all income, franchise and other
material Tax Returns required to be filed, and all such Tax Returns are true and
correct in all material respects, and (B) has paid (or another has paid on its
behalf) all Taxes shown on such Tax Returns as owing;
(ii) The Company has previously delivered to Buyer true and
complete copies (or has made available to Buyer and permitted Buyer to make true
and complete copies) of (A) any audit reports issued in the five (5) years prior
to the date of this Agreement (or otherwise with respect to any audit or
investigation in progress) relating to Taxes due from or with respect to the
Company; (B) the United States federal income Tax Return, and those state,
local, and foreign Tax Returns showing Taxes due in excess of $10,000, for all
taxable periods ending in 1997, 1998, 1999 and 2000 which relate to the Company
(other than consolidated, combined or unitary Tax Returns which include members
other than the Company); and (C) the portions of all federal, state, local or
foreign consolidated, combined or unitary Tax Returns which relate to the
Company showing Taxes due attributable to the Company in excess of $10,000, for
all taxable periods ending in 1997, 1998, 1999 and 2000;
(iii) All deficiencies asserted or assessments made in writing
by any Governmental Entity in excess of $5,000 with respect to Taxes of the
Company have been paid, and there are no actions, suits, investigations, audits
or Claims in progress by any Governmental Entity relating to Taxes of the
Company in excess of $5,000. No issue has been raised by written inquiry of a
Governmental Entity in any current or prior examination which, by application of
the same principles, would reasonably be expected to result in a proposed
deficiency for any subsequent taxable period. To the Knowledge of the Company,
no Claim has been made by a Governmental Entity in a jurisdiction where the
Company does not file Tax Returns to the effect that the Company is or may be
subject to taxation by that jurisdiction;
(iv) There are no outstanding waivers in writing or
comparable consents regarding the application of any statute of limitations
in respect of Taxes of the Company;
(v) None of the Company, Shareholder or any of its Affiliates,
or any of their respective shareholders, directors or officers has received
any written notice from any Governmental Entity that it intends to conduct an
audit or investigation of the Company. The Company is not subject to any
private letter ruling of the IRS or any comparable rulings of another
Governmental Entity;
(vi) There are no liens for Taxes of the Company upon the
assets of the Company, except for liens arising as a matter of Law relating to
current Taxes not yet due;
(vii) All Taxes that the Company has been or is required by law
to withhold or to collect for payment and which are material in amount have
been duly withheld and collected, and have been paid over to the appropriate
Governmental Entities;
(viii) Neither the Company, nor any other Person on behalf
of the Company, has (A) agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code (or any predecessor provision) or
any similar provision of Law (nor, to the Knowledge of the Company, has the IRS
or any other Governmental Entity proposed any such adjustment), or has any
application pending with any Governmental Entity requesting permission for
any changes in accounting methods that relate to the Company, (B) within
the five (5) years prior to the date of this Agreement, executed or
entered into a closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar provision of Law, (C) filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a "subsection (f)
asset" (as such term is defined in Section 341(f)(4) of the Code),
(D) extended the time (1) within which to file any Tax Return, which Tax Return
has since not been filed or (2) for the assessment or collection of Taxes, which
Taxes have not since been paid or (E) granted to any Person any power of
attorney that is currently in force with respect to any Tax matter;
(ix) The unpaid Taxes of the Company did not, as of April 30,
2001, exceed the reserve or reserves for Tax liability set forth on the face of
the Company's balance sheet (but excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) included
with the Financial Statements;
(x) No Property owned by the Company is (A) property required
to be treated as being owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, (B)
"tax-exempt use property" within the meaning of Section 168(h)(1) of the Code,
(C) "tax-exempt bond financed property" within the meaning of Section 168(g) of
the Code, (D) subject to Section 168(g)(1)(A) of the Code, (E) "limited use
property" within the meaning of Rev. Proc. 76-30 or (F) subject to any provision
of Law comparable to any of the provisions listed above;
(xi) The Company has not made any payment or payments and is not
obligated to make any payment or payments that would, as a result of the
transactions contemplated by this Agreement, not be deductible by Buyer,
the Company or their respectiveAffiliates pursuant to Sections 280G or 162(m)
of the Code;
(xii) The Company (A) is not and has not been a member of any
"affiliated group" within the meaning of Section 1504 of the Code or any similar
group defined under a similar provision of Law that filed or was required to
file a consolidated combined or unitary Tax Return (other than a group the
Common Parent of which was Shareholder), and (B) has no liability for the Taxes
of any Person (other than Shareholder and any of Shareholder's Subsidiaries)
under Treasury Regulations Section 1.1502-6 (or any comparable provision of
Law).
(xiii) No asset of the Company is a debt instrument the
interest on which is, or purports to be, excludable, in whole or in part, from
gross income for federal income Tax purposes;
(xiv) The Company is not a party to, bound by or obligated
under, any Tax Sharing Agreement;
(xv) The Company has not constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (A) in the two (2) years prior
to the date of this Agreement or (B) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the transactions
contemplated by this Agreement;
(xvi) The Company does not constitute or own, directly or
indirectly, an interest in a "taxable mortgage pool" within the meaning of
Section 7701(i) of the Code".
(xvii) Shareholder and the Company are members of a "selling
consolidated group" within the meaning of Treasury Regulation Section
1.338(h)(10)-1T(c) of which Shareholder is the Common Parent;
(xviii) The Company is not an obligor on any indebtedness in
respect of which the interest is intended to be exempt from federal income Tax
to the holder of the debt obligation;
(xix) The Company has not participated in, or cooperated
with, an "international boycott" within the meaning of Section 999 of the Code;
(xx) The Company is not a "United States real property
holding corporation" within the meaning of Section 897 of the Code;
(xxi) None of the assets of the Company is a debt obligation
that (A) was issued with "original issue discount" as that term is defined in
Section 1273(a) of the Code; (B) is a "registration-required obligation" as
defined in Section 163(f)(2) of the Code; (C) is an "applicable high yield
discount obligation" as defined in Section 163(i)(1) of the Code; or (D) is a
"disqualified debt instrument" as defined in Section 163(l)(2) of the Code;
(xxii) No material asset of the Company is a debt
obligation that is a "U.S. real property interest" within the meaning of Section
897(c) of the Code;
(xxiii) No borrower on, co-lender under, or Person holding a
participation in an asset of the Company that is a debt obligation is other than
a "United States person" as such term is defined in Section 7701(a)(30) of the
Code;
(xxiv) No indebtedness of the Company is "corporate
acquisition indebtedness" within the meaning of Section 279(b) of the Code;
(xxv) None of the assets of the Company directly or
indirectly secures any debt, the interest on which is tax-exempt under
Section 103(a) of the Code;
(xxvi) The Company has
not engaged in any material "intercompany transactions" in respect of which gain
was and continues to be deferred pursuant to Treasury Regulation Section
1.1502-13 or any predecessor or successor thereof or analogous or similar
provision of Law;
(xxvii) No prior ownership change (within the meaning of
Section 382 of the Code) has occurred (A) that would result in the imposition of
a limitation upon the future deductibility of any Tax basis or built-in
deduction item of the Company, or (B) that resulted in a readjustment of the Tax
basis of the assets of the Company under Section 56(g)(4)(G) of the Code.
(xxviii) There is no taxable income of the Company that will
be reportable in the taxable period beginning after the Closing Date that is
attributable to an installment sale that occurred prior to the Closing; and
(xxix) (A) Except with regard to any Financing Contract
treated by the Company as a lease for Tax purposes (other an
Operating Lease) which as of July 13, 2001 are set forth on
Disclosure Schedule 3.8(b)(xxix), the classification for financial accounting
purposes of each Financing Contract reflected in the balance sheet of the
Company included with the Financial Statements is consistent with the manner in
which such Financing Contract has been classified for Tax purposes (as a loan or
as a lease for Tax purposes), (B) such classification (as a loan or as a lease
for Tax purposes) has not been challenged by the IRS or any other Governmental
Entity in a notice of proposed adjustments or a notice of deficiency and (C)
neither Shareholder and any of its Affiliates nor the Company has reported its
status under any Financing Contract as that of a partner or member of any other
association for Tax purposes.
(c) For purposes of this Section 3.8 and Section 6.3, any reference to the
Company therein shall be deemed to include any Person which merged with or was
liquidated into the Company.
3.9 Property
(a) The Company owns no real property. Disclosure Schedule 3.9(a) contains
a complete and accurate list of all real property that is (i) leased or rented
under an agreement (and identifies each corresponding lease) to which the
Company is a party (the "Leased Property"), or (ii) used by the Company in the
operation of its business but with respect to which the Company is not a party
to any lease or rental agreement. The Company has good and valid Leasehold
Interests in the Leased Property free and clear of all Encumbrances other than
Permitted Encumbrances which do not unreasonably restrict the use and enjoyment
thereof as they have been used and enjoyed historically by the Company.
(b) With respect to each Contract, lease, license, rental agreement or
Contract of sale to which the Leased Property is subject, (i) each such Contract
is valid, binding, enforceable and in full force and effect in accordance with
its terms against the parties thereto; (ii) the Company has performed all
material obligations imposed on it thereunder; (iii) the Company is not in
default thereunder (such that the Company would be required to pay or expend
more than $10,000 in the aggregate to cure any such default), nor to the
Knowledge of the Company, is there any event that with notice or lapse of time,
or both, would constitute such a default thereunder; and (iv) the Company has
not received notice that any party to any such Contract or lease intends to
cancel, terminate or refuse to renew the same or to exercise or decline to
exercise any option or other right thereunder.
(c) The execution, delivery and performance of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby, will not result in a breach or violation by the Company of
any lease of the Leased Property.
(d) The Company has good and valid title to all tangible personal property
identified on Disclosure Schedule 3.9(d)(i) and, at the Closing, will have good
and valid title to all tangible personal property identified on Disclosure
Schedule 3.9(d)(ii), free and clear of all Encumbrances other than Permitted
Encumbrances.
3.10 Contracts
(a) Disclosure Schedule 3.10(a) contains a complete and accurate list of
all Material Contracts (other than base compensation paid to any Employees in
the ordinary course and the employee benefits set forth on Disclosure Schedule
3.13(a)), including, without limitation, all security agreements, intellectual
property licenses and other license agreements, credit agreements, instruments
relating to the borrowing of money, purchase Contracts, sale Contracts, research
Contracts, scientific collaboration or cooperation agreements and software
license agreements. Each Material Contract and each Contract required to be set
forth on Disclosure Schedule 3.10(d) is valid, binding and enforceable in all
material respects in accordance with its terms against each party thereto and is
in full force and effect; and the Company is not in default thereunder.
Furthermore, to the Knowledge of the Company, no breach or default by any other
party to any such Material Contract or any Contract required to be set forth on
Disclosure Schedule 3.10(d) has occurred. The Company has not received notice,
and is not otherwise aware, that any party to any Material Contract or any
Contract required to be set forth on Disclosure Schedule 3.10(d) intends to
cancel, terminate or refuse to renew any such Contract or to exercise or decline
to exercise any option or right thereunder.
(b) To the Knowledge of the Company, the consummation of the transactions
contemplated by this Agreement and any other Transaction Document will not
result in, cause or permit the termination or cancellation of any Material
Contract or any Contract required to be set forth on Disclosure Schedule
3.10(d).
(c) Disclosure Schedule 3.10(c) sets forth all Derivative Agreements to
which the Company is a party and sets forth for each such Derivative Agreement
any credit enhancement provided by Shareholder in respect of the Company's
obligations thereunder.
(d) Except as described on Disclosure Schedule 3.10(d), the Company is not
a party to, bound by or subject to any Contracts of the following kinds: (i) any
employment or consulting Contract (other than base compensation paid to any
Employees in the ordinary course and the employee benefits set forth on
Disclosure Schedule 3.13(a)); (ii) any intercompany debt other than as described
on Annex 1.82; (iii) any Third Party Debt other than as set forth on Annex 5.6;
(iv) except as provided in any Financing Contract or commitment therefor, any
Contract relating to the disposition or acquisition of any of the stock or
assets of, or any interest in, any business enterprise; (v) any Contract
relating to capital expenditures and involving future payments which, together
with future payments under all other Contracts relating to the same capital
project, exceed $50,000; (vi) any guarantee or indemnification running to any
Person which involves, individually or in the aggregate, a contingent liability
of the Company of $100,000 or more; (vii) any Contract providing for the
collection, servicing or administration of Financing Contracts by the Company on
behalf of any other Person; (viii) any Contract providing for the administration
by any Person of any part of the Financing Contracts of the Company; (ix) any
Contract by any Person to purchase a Financing Contract or any interests or
participations therein, or any Contract to sell a Financing Contract or any
interests or participations therein (other than the Contracts entered into
through the Company's National Division); (x) any Contract containing any
covenant or provision limiting the freedom of the Company to engage in any line
of business or compete with any Person in any geographic area; (xi) any Contract
limiting the right of the Company to pay dividends or distributions to its
shareholders; (xii) any Contract or commitment in which the Company participates
as a general partner or joint venturer; (xiii) any Contract between the Company,
on the one hand, and Shareholder or any of its Affiliates (other than the
Company) or any director, officer or employee of Shareholder or the Company or
any of its Affiliates, on the other hand, except for (A) the Intercompany Debt,
(B) Contracts relating to the Excluded Assets and (C) intercompany expense
allocations, in each such case entered into in the ordinary course and
consistent with the Company's past practices since January 1, 2001; (xiv) any
commitment to do any of the foregoing; or (xv) any business relationships with
Shareholder or any of its Affiliates (other than the Company) that are outside
the ordinary and usual course of business and are on terms and conditions less
favorable to the Company than would be available in a comparable transaction
with a Person not an Affiliate of the Company or Shareholder.
3.11 Claims and Legal Proceedings
(a) Except as set forth on Disclosure Schedule 3.11(a), there are no Claims
(including counterclaims) pending or, to the Knowledge of the Company,
threatened against the Company before or by any Governmental Entity or
non-governmental department, commission, board, bureau, agency or
instrumentality, or any other Person. To the Knowledge of the Company, there is
no valid basis for any Claim involving amounts in excess of $100,000, or that
could reasonably be expected to have a Material Adverse Effect before any
Governmental Entity or non-governmental department, commission, board, bureau,
agency or instrumentality, or any other Person.
(b) Except as set forth on Disclosure Schedule 3.11(b), there are no, and
following the consummation of the transactions contemplated by the
Restructuring, there will not be any, obligations or liabilities, whether or not
accrued, contingent or otherwise, including but not limited to environmental and
occupational safety and health matters, or any other fact or circumstance, to
the Knowledge of Shareholder, in each case that is reasonably likely to result
in any valid Claim against, or obligation or liability of, the Company. Except
as set forth on Disclosure Schedule 3.11(b), the Company has not been the
subject of any proceeding, nor to Knowledge of Shareholder have there been any
investigations by or before any Governmental Entity, in either case relating to
the business practices of the Company from January 1, 1998 through the Closing
Date, nor to the Knowledge of Shareholder are there any facts or circumstances
that are reasonably likely to result in any such investigation.
3.12 Labor Matters
Except as set forth on the Disclosure Schedule 3.12, (a) none of the
employees of the Company (the "Employees") is represented in his or her capacity
as an Employee by any labor organization, the Company has not recognized any
labor organization and no labor organization has been elected as the collective
bargaining agent of any Employees; (b) there are no labor disputes, employee
grievances or disciplinary actions, strikes, picketing, lockouts or similar
actions pending or, to the Knowledge of the Company, threatened against the
Company; (c) the Company has complied in all material respects with all
provisions of Law relating to employment and employment practices, terms and
conditions of employment, wages and hours, including, without limitation, equal
opportunity, workplace safety, workers' compensation, WARN, discrimination,
civil rights and other similar Laws; (d) the Company does not have any Knowledge
of any organizational efforts presently being made or threatened by or on behalf
of any labor union with respect to Employees, and the Company has not been
requested by any group of Employees or others to enter into any collective
bargaining agreement or other agreement with any labor union or other employee
organization; and (e) there has been no "mass layoff" or "plant closing" as
defined by WARN with respect to the Company within the six (6) months prior to
Closing. To the Knowledge of the Company, there are no complaints, charges or
claims against the Company pending or threatened to be brought or filed with any
public or Governmental Entity or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment or failure to employ by the Company of any individual, which
individually or in the aggregate are reasonably likely to result in a material
liability to the Company.
3.13 Employee Benefit Plans
(a) Disclosure Schedule 3.13(a) contains a complete and accurate list of
all material employee benefit plans, policies, programs and arrangements
(including, without limitation, all "employee benefit plans," as defined in
Section 3(3) of ERISA, stock bonus, equity and equity-based plans, employment
and consulting agreements, and retention, change in control, termination and
severance pay plans and arrangements) sponsored, maintained or contributed to by
the Company or any ERISA Affiliate for the benefit of any current or former
Employee and for which the Company has or could have any material liability
(such plans, policies, programs and arrangements are hereinafter referred to
collectively as "Employee Benefit Plans", and each individually as an "Employee
Benefit Plan"). Neither the Company nor any ERISA Affiliate has any agreement,
arrangement, commitment or obligation to create, enter into or contribute to any
additional Employee Benefit Plan, or to modify or amend any existing Employee
Benefit Plan (except to the extent necessary to comply with applicable Law). For
purposes of this Agreement "ERISA Affiliate" means any corporation, trade,
business, partnership, limited liability company, sole proprietorship or other
entity that is, or at any relevant time, was treated as single employer with the
Company under Section 414(b), (c), (m) or (o) of the Code. Disclosure Schedule
3.13(a) separately identifies each Employee Benefit Plan sponsored by the
Company (each, a "Company Benefit Plan"). Shareholder or the Company has
provided or made available to Buyer a true, correct and complete copy of (i)
each Employee Benefit Plan as currently in effect (or, in the case of each
unwritten Employee Benefit Plan, a written description of such Employee Benefit
Plan), (ii) the most recent determination letter, if any, received from the IRS
with respect to each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code, and (iii) the most recent summary plan
description, if any, distributed to participants with respect to each Employee
Benefit Plan, that is subject to Section 102 of ERISA.
(b) Each Employee Benefit Plan has been maintained and administered in all
material respects in accordance with its terms and in compliance with all
applicable Laws, including, without limitation, ERISA and the Code. Neither the
Company nor, to the Knowledge of Shareholder, any other Person has engaged in a
nonexempt "prohibited transaction," as defined in Sections 406 through 408 of
ERISA or Section 4975 of the Code, with respect to any Employee Benefit Plan
which could reasonably be expected to subject the Company to a material
liability.
(c) Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code is the subject of an unrevoked favorable
determination letter from the IRS with respect to such Employee Benefit Plan's
qualified status under the Code. To the Knowledge of Shareholder, nothing has
occurred that could reasonably be expected to have an adverse effect on the
qualification of any such Employee Benefit Plan or the tax exemption of its
related trust.
(d) All contributions required to be paid by the Company to each Employee
Benefit Plan for periods ending prior to the date hereof have been timely paid,
or, if not yet due, have been accrued as a liability on the Financial
Statements.
(e) Except as set forth on Disclosure Schedule 3.13(e), during the last six
(6) years, neither the Company nor any ERISA Affiliate has maintained or
contributed to (or been obligated to maintain or contribute to), (i) a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA (each, a
"Multiemployer Plan"), (ii) a multiple employer plan within the meaning of
Section 4063 or 4064 of ERISA or Section 413(c) of the Code, or (iii) an
employee benefit plan, fund, program, contract or arrangement that is subject to
Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA (each, a
"Title IV Plan").
(i) Neither the Company nor any ERISA Affiliate has incurred
any liability (that will not be satisfied prior to the Closing Date) under Title
IV of ERISA as a result of the termination of any Title IV Plan. All premiums
due and owing to the Pension Benefit Guaranty Corporation (the "PBGC") with
respect to each Title IV Plan have been timely paid. No proceeding has been
initiated or, to the Knowledge of Shareholder, threatened by the PBGC or any
other Person under Title IV of ERISA to terminate (or to appoint a trustee or
administrator of) any Title IV Plan nor, to the Knowledge of Shareholder, is
there a reasonable basis for the commencement of any such proceeding by the
PBGC. No event has occurred or, to the Knowledge of Shareholder, is threatened
or about to occur (other than the transactions contemplated in or by this
Agreement or the other Transaction Documents) with respect to any Title IV Plan
that would constitute a "reportable event," as defined in Section 4043(c) of
ERISA for which the thirty (30) day notice requirement of Section 4043 of ERISA
has not been waived. The present value of the "benefit liabilities," as defined
in Section 4001(a)(16) of ERISA under each Title IV Plan (determined using the
actuarial methods and assumptions used for funding purposes in the most recent
actuarial report prepared for such Title IV Plan) as of the end of the most
recent plan year of such Title IV Plan do not exceed by a material amount the
assets available under such Title IV Plan to pay such benefits. The actuarial
assumptions contained in the most recent actuarial report prepared for each
Title IV Plan are, in the aggregate, reasonable.
(ii) No Employee Benefit Plan that is subject to the funding
requirements of Section 412 of the Code has an "accumulated funding deficiency,"
as defined in such section, whether or not waived.
(iii) Neither the Company nor any ERISA Affiliate has provided,
or is required to provide, security to any Employee Benefit Plan pursuant to
Section 401(a)(29) of the Code, nor has any lien been imposed against the
assets of the Company or any ERISA Affiliate under Section 412(n) of the
Code or Section 302(f) of ERISA.
(iv) None of Shareholder, the Company, any ERISA Affiliate or,
to the Knowledge of Shareholder, any organization to which any of them is a
successor or parent corporation (within the meaning of Section 4069(b) of ERISA)
has engaged in a transaction that could reasonably be expected to result in a
material liability to the Company under Section 4069 of ERISA.
(f) Except as set forth on Disclosure Schedule 3.13(f), there are no
actions, suits or claims (other than routine claims for benefits) pending or, to
the Knowledge of Shareholder and the Company, threatened with respect to (or
against the assets of) any Employee Benefit Plan, nor, to the Knowledge of
Shareholder or the Company, is there a reasonable basis for any such claim. To
the Knowledge of Shareholder or the Company, no Employee Benefit Plan is
currently under investigation, audit or review, directly or indirectly, by the
IRS, the DOL, the PBGC or any other Governmental Entity, and, to the Knowledge
of Shareholder or the Company, no such action is contemplated or under
consideration by the IRS, the DOL, the PBGC or any other Governmental Entity.
(g) Except as required by applicable Law or as set forth on Disclosure
Schedule 3.13(g), neither the execution and delivery of this Agreement and the
other Transaction Documents nor the consummation of the transactions
contemplated hereby and thereby, will (i) entitle any individual to severance
pay, unemployment compensation or any other payment from the Company, (ii)
otherwise increase the amount of compensation due to any individual or forgive
indebtedness owed by any individual, (iii) result in any benefit or right
becoming established or increased, or accelerate the time of payment or vesting
of any benefit, under any Employee Benefit Plan, or (iv) require the Company to
transfer or set aside any assets to fund or otherwise provide for any benefits
for any individual.
(h) Except as set forth on Disclosure Schedule 3.13(h), none of the
Employee Benefit Plans provides for post-employment life or health insurance,
benefits or coverage for any participant or any beneficiary of a participant,
except as may be required by applicable Law, including, without limitation,
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA. The
Company and each ERISA Affiliate that maintains a "group health plan," as
defined in Section 5000(b)(1) of the Code, is in good faith compliance in all
material respects with the notice and continuation requirements of Section 4980
of the Code and Part 6 of Subtitle B of Title I of ERISA.
(i) Any individual who performs services for the Company (other than
through a Contract with an organization other than such individual) and who is
not treated as an Employee for U.S. federal income Tax purposes by the Company
is not an employee for such purposes.
3.14 Intellectual Property
(a) Disclosure Schedule 3.14(a) lists all trademarks, trade names, brand
names, service marks, logos or other identifiers owned by the Company (the
"Owned Marks").
(b) Disclosure Schedule 3.14(b) lists all trademarks, trade names, brand
names, service marks, logos or other identifiers owned by Shareholder and used
by the Company in the operation of its business (together with the Owned Marks,
the "Marks"), and the Company has the present right (and subject to Section
5.5(b) will continue to have the right following the consummation of the
transactions contemplated hereby) to use all Marks.
(c) To the Knowledge of the Company, none of the Marks or the Company's
rights thereto are being infringed upon or otherwise violated by any Person.
(d) The use of the Marks by the Company does not infringe upon or otherwise
violate any rights of any Person, and there is no pending or, to the Knowledge
of the Company, threatened Claim alleging any such infringement or violation. In
addition, there is no pending or, to the Knowledge of the Company, threatened
Claim alleging any defect in or invalidity, misuse or unenforceability of, or
challenging the ownership or use of or the Company's rights with respect to, any
of the Marks and, to the Knowledge of the Company, there is no basis for any
such Claim.
(e) The software license agreements identified on Disclosure Schedule
3.10(a), together with the arrangements contemplated by the Transition Services
Agreement, represent all licenses of software and systems necessary to conduct
the Company's operations substantially as so conducted prior to the Closing.
(f) The Company owns no registered patents nor has it filed any patent
applications with the United States Patent and Trademark Office.
(g) The Company owns its customer list and has not sold, assigned,
transferred or otherwise granted any Person (other than as previously provided
to Affiliates of the Company) any right to use such list.
3.15 Insurance
(a) Set forth on Disclosure Schedule 3.15(a) is a list of all
occurrence-based policies of insurance that insure the assets, business,
Property, operations, prospects or affairs of the Company or relate to the
ownership, use or operations of any of the Property or assets of the Company as
of the date hereof. Insurance against loss or damage by fire or other casualty
(including extended coverage) on all Company Property, including Leased
Property, is maintained by Shareholder for the benefit of the Company; which
insurance shall terminate as of the Closing. All insurance policies maintained
for the benefit of the Company are in full force and effect, all premiums due
and owing up to and including the Closing Date have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
(b) With respect to each of the insurance policies set forth on Disclosure
Schedule 3.15(a), (i) Shareholder or the Company has not made any material
misstatements or omissions in connection with the application for placement of
insurance therefor, and (ii) Shareholder or the Company has not failed to give
notice to any insurer with respect to any incident regarding which Shareholder
or the Company had Knowledge and which was insured by such insurer and for which
the Company may be liable, under circumstances where the failure to give such
notice could result in the Company's loss of coverage in respect of such
incident.
3.16 Corporate Books and Records
The Company has made available to Buyer the corporate minute books of the
Company. The minute books of the Company are accurate and complete in all
material respects.
3.17 Compliance With Laws
(a) Except as set forth on Disclosure Schedule 3.17(a), the Company is, and
at all times has been, in compliance with all applicable Laws except where the
failure to comply would result in Damages to the Company of less than $100,000
in the aggregate. The Company is not subject to any judgment, writ, decree,
injunction or order of any Governmental Entity.
(b) Except as set forth on Disclosure Schedule 3.17(b), (i) neither the
billing and collection nor enforcement of any Financing Contract or Credit
Enhancement in accordance with the written terms thereof, will result in the
violation of any Laws, (ii) to the Knowledge of the Company, since January 1,
1998, the Company has had all Authorizations required to conduct its business
and operations and has conducted its business and operations and has owned and
operated its Properties at all times in compliance with all such Authorizations,
and (iii) since January 1, 1998, the Company has not received from any
Governmental Entity any notice alleging any violation of any Law.
(c) Disclosure Schedule 3.17(c) sets forth a list of all Authorizations
maintained by the Company. No proceeding is pending nor, to the Knowledge of the
Company, is any proceeding threatened in which any Person is seeking to revoke
or deny the renewal of any such Authorization and the Company has not been
advised by any Person that any such Authorization will not in the ordinary
course be renewed upon its expiration or that the transactions contemplated by
this Agreement and the other Transaction Documents will make it more difficult
to renew or obtain any such Authorization. Each such Authorization is in full
force and effect without any default thereunder by the Company where such
default would form the basis for the revocation or termination thereof. The
Company has not received written notice of any Claim or charge that the Company
has breached any Authorization.
3.18 Brokers or Finders
Except for ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. (the "Investment Banker"), whose fees shall
solely be the responsibility of Shareholder, neither the Company nor Shareholder
nor any Person acting on behalf of the Company, Shareholder or their respective
Affiliates, has directly or indirectly incurred, nor will incur as a result of
any action taken by or on behalf of the Company, Shareholder or their respective
Affiliates, any liability for brokerage or finders' fees or agents' commissions
or any similar fees and charges in connection with this Agreement and the other
Transaction Documents or any transaction contemplated hereby and thereby.
3.19 Bank Accounts
Disclosure Schedule 3.19 sets forth the names and locations of all banks,
trust companies, savings and loan associations and other financial institutions
at which the Company maintains safe deposit boxes or accounts of any nature and
the names of all Persons authorized to draw thereon, make withdrawals therefrom
or have access thereto.
3.20 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Shareholder is its own ultimate parent entity, and is the Company's
ultimate parent entity, as defined under the rules and regulations promulgated
under the HSR Act.
3.21 Financing Contracts and Portfolio Property
(a) Each Financing Contract and Credit Enhancement to which the Company is
a party (i) is valid, binding and enforceable by the Company against the Obligor
thereunder in accordance with its written terms, except as may be limited by the
Bankruptcy Exception, and (ii) constitutes and arose out of a bona fide business
transaction entered into in the ordinary and usual course of business of the
Company consistent with its past practices.
(b) Except as set forth on Disclosure Schedule 3.21(b), (i) each Financing
Contract and Credit Enhancement is, and as of the Closing Date will be, in full
force and effect, free and clear of Encumbrances other than Permitted
Encumbrances and not subject to any defense, offset, Claim, right of rescission
or counterclaim by the Obligor under such Financing Contract or, in the case of
a Credit Enhancement, any Person claiming under any such right, and (ii) the
Company is not in breach of or default under any Financing Contract or Credit
Enhancement, and to the Knowledge of Company, no other event has occurred which,
with notice and/or lapse of time, would constitute a default by the Company
thereunder. Except as set forth on Disclosure Schedule 3.21(b), the Company has,
with respect to each item of Portfolio Property, either (A) good and valid title
to such Portfolio Property, free and clear of all Encumbrances, other than
Permitted Encumbrances, as applicable, or (B) a valid first priority security
interest in such Portfolio Property that is governed by or subject to a
Financing Contract, which has been duly perfected (including but not limited
pursuant to all appropriate Uniform Commercial Code filings). The Company has
approved credit applications and otherwise entered into commitments with respect
to Financing Contracts in a manner consistent with the Company's credit
policies, collateral eligibility standards and credit quality classifications in
effect at the time and otherwise complied with standards of evaluating,
originating, underwriting and funding new business which are consistent with its
past practices.
(c) Disclosure Schedule 3.21(c) sets forth a list of all Financing
Contracts that as of June 30, 2001 (i) are more than thirty (30) days
delinquent, or (ii) have been classified by the Company as non-performing.
Neither Shareholder nor the Company has received any written notice from any
other Person indicating that the Company is presently in default under or in
breach of any Financing Contract or Credit Enhancement. Notwithstanding the
foregoing, it is understood that Buyer assumes the credit risk associated with
all Financing Contracts and Credit Enhancements from and after the Closing, and
the existence or occurrence of any defaults or non-performance as a result
thereof shall not constitute a breach of the representations set forth in this
Section 3.21.
(d) The Company is the owner and holder of all right, title and interest in
each Financing Contract and Credit Enhancement to the extent provided therein,
and all payments thereunder which are owed to the Company are to be made
directly to the Company. No Obligor under any Financing Contract is required
under any applicable Law to withhold from payments on any such Financing
Contract any interest or other withholdings for the payment of Taxes to any
Governmental Entity.
(e) The Company has in its possession (i) a fully executed original of any
lease or note (and an executed original or a true and correct copy of all other
Documents) comprising each Financing Contract and Credit Enhancement and all
other Documents required by the Company's credit or investment approval with
respect to each Financing Contract to be maintained, in each case, on a basis
consistent with the Company's past practices, and (ii) documentation sufficient
to establish the Original Equipment Cost of all Portfolio Property for purposes
of determining personal property Tax liability.
(f) Except as set forth on Disclosure Schedule 3.21(f), the Company is not
nor has been, nor is committed to become, a party to any agreement, Contract or
commitment with respect to the Residual as to any Portfolio Property. No Person
has an option to purchase any item of Portfolio Property for a fixed amount less
than the greater of (i) the Residual thereof, or (ii) the amount set forth in
the Financing Contract covering such Portfolio Property.
(g) To the Knowledge of the Company, no Obligor has acquired any interest
in Portfolio Property pursuant to a Financing Contract for personal, family or
agricultural purposes.
(h) Disclosure Schedule 3.21(h) sets forth each Financing Contract that is
subject to a participation agreement, residual sharing agreement, remarketing
agreement or vendor recourse agreement (that provides for any Person to
participate in or otherwise be entitled to claim any interest in any Residual
reflected on the Company's Books and Records) other than, in each case,
Financing Contracts held by the Company in the Safeline portfolio.
(i) Except as set forth on Disclosure Schedule 3.21(i), each Financing
Contract and Credit Enhancement is expressly governed by the Laws of a state of
the United States, and, to the Knowledge of the Company, each Obligor under a
Financing Contract was located in the United States when such Obligor entered
into such Financing Contract. Notwithstanding the foregoing, to the extent that
Portfolio Property is located outside of the United States, enforcement of the
corresponding Financing Contract may be subject to the Laws of the jurisdiction
in which such Portfolio Property is located.
(j) With respect to each Public Sector Financing Contract, (i) the Company
has complied with all applicable bidding requirements and with all requirements
of any applicable request for proposal, including without limitation those
applicable to the Portfolio Property and such Laws governing equal employment
opportunity and environmental protection; and (ii) the Company is the Person, or
assignee of the Person, named in and subject to the request for proposal. If
required by the terms of the Financing Contract, the Company has given (or
timely will give) notice to each applicable state or local Governmental Entity
of the transactions contemplated hereby and has obtained the consent (if
necessary) of such state or local Government Entity.
(k) Disclosure Schedule 3.21(k) sets forth a list of each Credit
Enhancement that is a letter of credit, certificate of deposit or stock
certificate.
(l) The average adjusted Tax basis of all Financing Contracts that, as of
the Closing Date, had not been repaid, discharged, written off by the Company or
otherwise satisfied in full, which are exempt from federal income Tax, does not
exceed two percent (2%) of the average total adjusted Tax basis of the Company's
assets.
(m) Except as set forth on Disclosure Schedule 3.21(m), (i) all Owned
Portfolio Property complies in all respects with all Laws applicable to such
Portfolio Property except that the Company makes no representation as to whether
the use of Owned Portfolio Property by the Obligor complies with such Laws, and
(ii) each Financing Contract requires the Obligor to either obtain, or reimburse
the Company for, insurance required thereunder against loss or Damages with
respect to the Portfolio Property subject to or governed by such Financing
Contract.
(n) All of the Public Sector Financing Contracts are set forth on
Disclosure Schedule 3.21(n).
(o) As of the date hereof, Disclosure Schedule 3.21(o) sets forth the
Backlog as of July 12, 2001, and, pursuant to Section 5.9(b), as of five (5)
Business Days prior to Closing, sets forth the Backlog added since July 12, 2001
through such date. The Company has approved credit applications and otherwise
entered into commitments with respect to such Backlog in a manner consistent
with the Company's credit policies, collateral eligibility standards and credit
quality classifications in effect at the time and otherwise complied with
standards of evaluating, originating, underwriting and funding new business
which are consistent with its past practices.
(p) The Company has no usage based Financing Contracts.
(q) Disclosure Schedule 3.21(q) sets forth all Specified Financing
Contracts.
3.22 Conduct of Business
(a) Since April 30, 2001, the Company has conducted its business (including
with respect to approval of credit applications and the execution of
commitments) in the ordinary course, consistent with its past practices and (i)
has used commercially reasonable efforts to preserve intact the business
organization of the Company, (ii) has not taken any affirmative action to
terminate the services of the current officers, Employees, and agents of the
Company and (iii) has taken commercially reasonable actions to maintain its
relationships with suppliers, customers, landlords, creditors, Employees,
agents, and others having business relationships with the Company.
(b) Except as set forth on Disclosure Schedule 3.22(b) or as expressly
required by this Agreement, since April 30, 2001, Shareholder and its Affiliates
(other than the Company) have conducted their respective business relationships
with the Company only in the ordinary and usual course and have not dealt with
or entered into any Contracts, commitments or arrangements with the Company on
terms and conditions less favorable to the Company than would be available in a
comparable transaction with a Person not an Affiliate of the Company or
Shareholder.
(c) Except as set forth on Disclosure Schedule 3.22(c), since December 31,
2000, Shareholder has not made any material changes in the management of any of
the offices of the Company.
3.23 Environmental Matters
(a) Disclosure Schedule 3.23(a) contains an accurate and complete
description of all notices, actions, proceedings and Claims of any nature
arising under any Environmental Law that are pending or, to the Knowledge of the
Company or Shareholder, threatened involving Property owned, operated, leased
for use or controlled, by or for the Company or involving any Portfolio Property
(other than Property included in the Excluded Assets) (collectively,
"Environmental Claims").
(b) Except as set forth on Disclosure Schedule 3.23(b), the Company and
each Property (excluding Property included in the Excluded Assets) owned,
operated or leased for use by or controlled, as of the Closing, by or for the
Company (and the facilities and operations thereon), is in material compliance
with applicable Environmental Laws, except where non-compliance would not result
in the Company incurring environmental Damages in excess of Fifty Thousand
Dollars ($50,000) individually or One Hundred Thousand Dollars ($100,000) in the
aggregate. The Company has not received written notice of non-compliance with
any Environmental Law involving such Property (excluding Property included in
the Excluded Assets) from any Governmental Entity, nor, to the Knowledge of the
Company, is there any existing fact or circumstance with respect to such
Property (excluding Property included in the Excluded Assets) that the Company
expects would give rise to any such non-compliance.
(c) To the Knowledge of the Company, no Adverse Environmental Event has
occurred relating to, arising from, associated with or attributable to, (i) the
Company (excluding Property included in the Excluded Assets), (ii) any Property
(excluding Property included in the Excluded Assets) owned, operated, leased for
use by or controlled by the Company, or (iii) any of the Portfolio Property that
could reasonably be expected to result in the Company incurring Environmental
Losses and Damages in the case of each of Sections 3.23(c)(i), 3.23(c)(ii), and
3.23(c)(iii) in excess of $50,000 individually or $100,000 in the aggregate.
(d) The Company has in its possession all environmental reports,
assessments or audits commissioned, obtained or otherwise acquired by it on or
prior to the Closing Date relating to any Property (including Portfolio Property
other than Portfolio Property included in the Excluded Assets) owned, operated,
leased for use by or controlled by the Company as of the Closing to the extent
possession thereof is required to be maintained by the Company's current
Document retention policy.
3.24 Vessels and Aircraft
(a) All documents required to be recorded or filed with the U.S. Coast
Guard or any other Governmental Entity with respect to any vessel comprising
Portfolio Property have been duly filed or recorded, and all filing fees and
Taxes, if any, payable in connection with such filings have been paid in full.
Except with respect to the "foreign flag vessels" described on Disclosure
Schedule 3.24(a), and subject to the effect, if any, on certain vessels of the
American Fisheries Act of 1998 and the regulations issued by MADRA implementing
such Act as disclosed on Disclosure Schedule 3.24(a), all security interests in
and to documented vessels comprising Portfolio Property constitute preferred
mortgages satisfying all applicable requirements of the Ship Mortgage Act (46
U.S.C. ss. 31301 et seq.) as security for all obligations purported to be
secured thereby. Except with respect to the foreign flag vessels described on
Disclosure Schedule 3.24(a), each vessel comprising Portfolio Property which is
eligible for documentation has been duly documented as a vessel of the United
States in compliance with applicable Laws and legal title to each such vessel is
vested in the respective registrant, with a ▇▇▇▇ of sale duly issued to each
such registrant pursuant to and in accordance with applicable Law. All security
interests in and to vessels comprising Portfolio Property which are not eligible
for documentation as a vessel of the United States have been duly and validly
perfected in compliance with all applicable Laws, including without limitation,
the Uniform Commercial Code, as amended, and legal title to each such vessel is
vested in the respective registrant, with a ▇▇▇▇ of sale duly issued to each
such registrant pursuant to and in accordance with applicable Law. Except as
disclosed on Disclosure Schedule 3.24(a), no foreign flag vessels constitute
part of Portfolio Property. With respect to such foreign flag vessels set forth
on Disclosure Schedule 3.24(a), all security interests in and to such vessels
constitute valid and effective preferred mortgage interests in compliance with
the Laws of the flag of such vessels as security for all obligations purported
to be secured thereby.
(b) Except as described on Disclosure Schedule 3.24(b) all documents
required to be recorded or filed with the Federal Aviation Administration or any
other Governmental Entity with respect to any aircraft, or aircraft propeller or
engine comprising Portfolio Property have been duly filed or recorded, and all
filing fees and Taxes, if any, payable in connection with such filings have been
paid in full. All security interests in and to aircraft, or aircraft propellers
and engines comprising Portfolio Property satisfy all applicable requirements of
the rules and regulations of the Federal Aviation Administration (including 49
U.S.C. ss. 44107 et seq. and the regulations applicable thereto), are perfected
in and to said property and secure the obligations purported to be secured
thereby. Each aircraft, propeller or engine comprising Portfolio Property has
been duly registered under Section 501 of the Federal Aviation Act, and legal
title to all such aircraft, or aircraft propellers or engines is vested in the
respective registrant, with a Certificate of Aircraft Registration or similar
certificate duly issued to each such registrant pursuant to and in accordance
with applicable Law. Except as set forth on Disclosure Schedule 3.24(b), no
foreign registered aircraft constitute part of Portfolio Property. With respect
to such foreign registered aircraft, aircraft propellers or engines set forth on
Disclosure Schedule 3.24(b), all security interests in and to such Portfolio
Property constitute valid and effective perfected security interests in
compliance with the Laws of the jurisdiction of registration of such Portfolio
Property as security for all obligations purported to be secured thereby.
3.25 Assets of Business
Except for (a) the Excluded Assets, (b) the tangible personal property used
primarily by Excluded Employees (which shall be retained by Shareholder or its
Affiliates), (c) the insurance coverage provided prior to the Closing to the
Company by Shareholder, and (d) the automobiles used by Employees but not owned
by the Company (title to which shall be retained by Shareholder or its
Affiliates), the assets and rights owned by the Company, together with the
services and sub-leases to be provided by Shareholder or its Affiliates (other
than the Company) to the Company pursuant and subject to the terms of the
Transition Services Agreement, constitute all of the assets, Properties, and
rights used in the conduct of the Company's business prior to the Closing.
3.26 Bulk Sales Laws
Neither Shareholder nor the Company is required to comply with any
applicable "bulk sales" Law relating to transfers governed by Article 6 of the
Uniform Commercial Code or any other applicable Laws relating to bulk transfers
(other than Laws related to Tax) in connection with the consummation of the
transactions contemplated in this Agreement.
3.27 Limitation to Representations
Neither the Company nor Shareholder shall be deemed to have made to Buyer
any representation or warranty other than as expressly made by them in this
Agreement. Without limiting the generality of the foregoing, and notwithstanding
any representations made with respect to the Company in any other Documents
(including without limitation the Confidential Private Placement Memorandum
prepared and distributed by the Investment Banker), neither the Company nor
Shareholder make any representation or warranty to Buyer with respect to any
projections, estimates or budgets delivered to or made available to Buyer of
future revenues, expenses, expenditures or results of operations.
4. Representations and Warranties of Buyer
Buyer represents and warrants to the Company and Shareholder as follows:
4.1 Organization
Buyer is a corporation duly organized, validly existing and in good
standing under the Laws of the state of its incorporation. Buyer has all
requisite corporate power and authority to own, operate and lease its properties
and assets, to carry on its business as it is now conducted, to execute, deliver
and perform its obligations under this Agreement and the other Transaction
Documents to which it is a party, and to carry out the transactions contemplated
hereby and thereby.
4.2 Enforceability
All corporate action on the part of Buyer and its officers, directors and
shareholders necessary for the due authorization, execution, delivery and
performance of this Agreement and the other Transaction Documents to which it is
a party, the consummation of the transactions contemplated hereby and thereby,
and the performance of all of Buyer's obligations under this Agreement and the
other Transaction Documents to which it is a party has been taken or will be
taken prior to the Closing. This Agreement has been, and the other Transaction
Documents to which Buyer is a party on the Closing will be, duly executed and
delivered by Buyer, and this Agreement is, and each of the other Transaction
Documents to which Buyer is a party on the Closing will be, the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as enforcement thereof may be limited by the Bankruptcy Exception.
4.3 No Approvals or Notices Required; No Conflicts With Instruments
(a) The execution, delivery and performance by Buyer of this Agreement and
the other Transaction Documents to which it is a party, and the consummation by
Buyer of the transactions contemplated hereby and thereby, will not (i) conflict
with or result in a violation (with or without the giving of notice or lapse of
time, or both) of any provision of any Law or any judgment, decree, order,
regulation or rule of any Governmental Entity applicable to Buyer, or (ii)
constitute a violation of any provisions of Buyer's articles of incorporation or
by-laws, except for such violations or failure to obtain which would not have a
Buyer Adverse Effect.
(b) Except for the filing of a notification pursuant to the HSR Act, Buyer
is not required to obtain any consent, approval or authorization of, or to make
any declaration, filing or registration with, any Governmental Entity or Person
with respect to the execution, delivery and performance of this Agreement and
the other Transaction Documents to which Buyer is a party or the consummation by
Buyer of the transactions contemplated hereby and thereby, except where failure
to obtain would not have a Buyer Adverse Effect.
4.4 Claims and Legal Proceedings
As of the date hereof, (a) there is no Claim pending or involving or, to
Buyer's knowledge, threatened against Buyer before or by any Governmental Entity
or non-governmental department, commission, board, bureau, agency or
instrumentality, or any other Person, and (b) there are no outstanding or
unsatisfied judgments or stipulations to which Buyer is a party, which in the
case of clauses (a) and (b), would individually or in the aggregate result in a
Buyer Adverse Effect.
4.5 Brokers or Finders
Neither Buyer nor any Person acting on behalf of Buyer or its Affiliates
has incurred, or will incur, directly or indirectly, as a result of any action
taken by or on behalf of Buyer, any liability for brokerage or finders' fees or
agents' commissions or any similar fees or charges in connection with this
Agreement and the other Transaction Documents or any transaction contemplated
hereby and thereby.
5.Covenants
5.1 Conduct of Business by the Company Pending the Closing
(a) From the date of this Agreement until the Closing, except as expressly
contemplated by this Agreement and the other Transaction Documents, unless Buyer
shall otherwise agree in writing, (i) the business of the Company shall be
conducted only in, and the Company shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
(ii) the Company shall use commercially reasonable efforts to preserve
substantially intact the business organization of the Company, and to preserve
the current relationships of the Company with customers, suppliers and other
Persons with which the Company has significant business relations.
(b) From the date hereof until the Closing, except as otherwise expressly
required by this Agreement, Shareholder shall not permit the Company, without
prior written consent of Buyer, to:
(i) issue or commit to issue any shares of its capital stock;
(ii) grant or commit to grant any options, warrants or rights to
subscribe for or purchase or otherwise acquire any shares of its capital stock
or issue or commit to issue any securities convertible into or exchangeable for
shares of its capital stock;
(iii) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock;
(iv) directly or indirectly redeem, purchase or
otherwise acquire or commit to acquire any shares of its capital stock;
(v) effect a split, modification or reclassification of its
capital stock or a recapitalization;
(vi) change its certificate or articles of incorporation or
bylaws;
(vii) borrow or agree to borrow any funds including, without
limitation, Intercompany Debt; provided, however, that the Company may borrow
funds (i) in the ordinary course of its business consistent with past practices
(but only if such borrowing is made pursuant to the CP Program), or (ii) as
Intercompany Debt from the date hereof through the Reference Date in a
amount not to exceed $15,000,000;
(viii) make or commit to make any capital expenditure in excess
of $50,000 per capital project;
(ix) change its methods of accounting as in effect
at December 31, 2000, except as required by changes in GAAP and as disclosed to
Buyer in writing prior to the Closing;
(x) modify the collection policies or
practices with respect to, or, other than in the ordinary course of business
consistent with the Company's past practices, directly or indirectly extend or
otherwise restructure the payment schedule, payment terms or any other term or
condition of, any Financing Contract;
(xi) enter into any Contract which, if
entered into, created or established prior to the date of this Agreement, would
be required to be listed on Disclosure Schedule 3.10(d) to this Agreement or
modify any Contract, which, although not required to be listed on Disclosure
Schedule 3.10(d) as of the date of this Agreement, would be required to be so
listed as a result of such modification;
(xii) adopt, amend, modify or terminate
any bonus, profit-sharing, incentive, stock option, severance, or other plan,
Contract or commitment for the benefit of any of the Employees or the Company's
directors or officers (or take any such action with respect to any other
Employee Benefit Plan);
(xiii) grant or increase compensation paid to any
Employee other than in the ordinary course of business consistent with the
Company's past practice;
(xiv) mortgage, pledge or otherwise encumber any of its
Properties;
(xv) sell, lease (other than (A) leases or conditional sales of
Portfolio Property pursuant to Financing Contracts, in each case entered into in
the ordinary course of business consistent with the Company's past practice, or
(B) sales of Excluded Assets), transfer or otherwise dispose of any of its
Properties other than as a result of ordinary course obsolescence and use;
(xvi)take any action that would breach in a material respect any
of Shareholder's representations, warranties or covenants contained in this
Agreement if such representation, warranty or covenant were made at the time of
the action;
(xvii) change in any respect the credit policies or collateral
eligibility standards of the Company;
(xviii) make or change any material election concerning Taxes or
Tax Returns, change an annual accounting period, file any amended Tax Return,
enter into any closing agreement with respect to Taxes, settle any material Tax
Claim or assessment, surrender any material right to claim a refund of Taxes or
obtain or enter into any Tax ruling or other agreement with a Governmental
Entity with respect to Taxes (other than any such closing agreement, Claim,
assessment, surrender of right to claim a refund of Taxes, or agreement with a
Governmental Entity which is entered into by Shareholder with respect to the
audit of Shareholder's consolidated federal income tax return for taxable years
ending December 31, 1995, 1996 and 1997);
(xix) adopt, approve, ratify or enter
into any collective bargaining agreement, side letter, memorandum of
understanding or similar agreement with any labor union covering any of the
Employees, or enter into, amend or make any change to any employment, retention,
change in control, stay bonus, sale bonus, consulting, severance or similar
agreement or arrangement with any Employee;
(xx) enter into any Financing
Contract or Backlog or approve any credit application or enter into any
agreement that is anticipated or intended to result in the formation of a
Financing Contract or to constitute Backlog (in either case, a "Commitment")
unless such Financing Contract, Backlog or Commitment constitutes and arises out
of a bona fide business transaction entered into in the ordinary and usual
course of the Company's business and consistent with the Company's credit
policies, collateral eligibility standards and credit quality classifications as
in effect on the date hereof;
(xxi) enter into any Backlog or Commitment or any
Financing Contract (arising from such Backlog or Commitment), in respect of any
Portfolio Property that (A) is similar in character to the Portfolio Property
that is subject to or governed by the financing transactions set forth on Annex
1.64, (B) would require such Portfolio Property to be included on Disclosure
Schedule 3.23(b), or (C) from the date Annex 1.64 is supplemented or amended by
Buyer in accordance with Section 5.9(b) through the Closing, Buyer in its good
faith judgment reasonably believes could result in an Adverse Environmental
Event; provided, however that as to clause (A) above, the Company may enter into
any such Backlog or Commitment or any Financing Contract (arising from such
Backlog or Commitments) that involves Portfolio Property similar to the
Portfolio Property identified as trash compactors under the Financing Contracts
set forth on Annex 1.64 to the extent such Backlog or Commitment or any
Financing Contract shall be (1) entered into by the Company subject to clause
(xx) above, and (2) structured and documented as a loan on the Books and Records
of the Company at the time such Backlog or Commitment or any Financing Contract
is entered into by the Company; or
(xxii) enter into a Contract or commitment
(other than the Transaction Documents) to do anything set forth in Sections
5.1(b) (i) through (xxi).
(c) From the date of this Agreement until Closing, Shareholder will cause
the Company (i) to conduct the repossession or foreclosure of Portfolio Property
relating to any of the Financing Contracts owned by the Company in accordance
with all applicable Laws; and (ii) to notify Buyer promptly upon becoming aware
of an Adverse Environmental Event relating to the Company which is likely to
give rise to a right of indemnification against Shareholder under this
Agreement.
5.2 Access to Information; Confidentiality
(a) Without limitation of that certain Confidentiality Agreement dated
March 13, 2001 (the "Confidentiality Agreement") from the date hereof to the
time of the Closing, Shareholder and the Company shall afford Buyer and its
representatives and agents reasonable access during normal business hours, upon
reasonable notice and in such manner as will not unreasonably interfere with the
conduct of the Company's business, to the Company's senior management and
members of its integration team and Books and Records, as Buyer may from time to
time request, for the purposes of familiarizing itself with the Company's
operations and planning and implementing the efficient integration of the
Company with and into Buyer's business and operations; provided, however, that
under no circumstances shall Shareholder be required to provide Buyer access to,
nor shall Buyer have rights to make copies of, (i) income Tax Returns filed by
Shareholder or any of Shareholder's Affiliates, (ii) any information or
materials required to be kept confidential by Law, or (iii) any privileged
attorney-client communications or attorney work-product relating solely to the
Excluded Assets or Excluded Liabilities. Buyer and its representatives and
agents shall (A) request and coordinate such access through Shareholder's
designated integration representative, (B) limit such access so as to ensure
that it is not disruptive to the ongoing operations of the Company, and (C)
without the express written consent of Shareholder, not initiate discussions
with any Employee regarding his or her current or future employment status.
Shareholder and Buyer shall appoint and designate to the other party their
respective designated (1) integration representative as of the date hereof, and
(2) members of such party's integration team (the composition of which shall be
reasonably acceptable to the other party), and shall cooperate to accomplish the
purposes set forth in this Section 5.2(a), including without limitation, (x)
affording Buyer access to members of Shareholder's integration team at the
Company's regional and headquarter offices prior to the Closing on terms
mutually agreed by the parties, (y) describing to Buyer the business processes
and systems shared between the Company and its Affiliates as of the Closing, and
(z) otherwise causing their respective integration teams to complete the
integration as mutually agreed in a timely manner.
(b) All information obtained by each party in connection with the
preparation, negotiation and delivery of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
herein and therein shall be subject to the provisions of and kept confidential
in accordance with the Confidentiality Agreement.
(c) To the extent permitted by Law, the Company shall allow Buyer or its
Affiliates reasonable access to the employment records of the Employees (other
than the records of the Excluded Employees) following the date of this
Agreement. On the Closing Date, Shareholder shall transfer to Buyer any
employment records in its possession in respect of Transferred Employees.
(d) Following the date of this Agreement, the Company shall afford Buyer or
its Affiliates reasonable assistance in contacting the counterparties to the
Derivative Agreements and Credit Enhancements required to be set forth on
Disclosure Schedule 3.10(c) in order to allow Buyer to discuss with such
counterparties the treatment of such Derivative Agreements and Credit
Enhancements following the Closing Date.
5.3 Covenants to Satisfy Conditions
Each party shall proceed with all reasonable diligence and use its
reasonable efforts to satisfy or cause to be satisfied all of the conditions
precedent set forth in Articles 7 or 8, as the case may be, to the other party's
obligation to purchase or sell the Shares insofar as such matters are within the
control of such party. Notwithstanding anything to the contrary in this
Agreement or any other Transaction Document, neither Buyer nor any of its
Affiliates (including, after the Closing, the Company) shall have any obligation
to dispose of, hold separate or otherwise restrict its enjoyment of any of its
assets or Properties.
5.4 HSR Filings
(a) Each party shall make or cause to be made all filings and submissions
required to be made by such party under the HSR Act in connection with the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents, and shall request early termination of the waiting period
thereunder. Shareholder and Buyer shall each promptly furnish all information as
may be required by any Governmental Entity properly asserting jurisdiction in
order to obtain the requisite approval to consummate the transactions
contemplated by this Agreement and the other Transaction Documents, with respect
to any filings under the HSR Act, to cause any applicable waiting periods to
expire. Notwithstanding the foregoing, neither Buyer nor any of its Affiliates
(including, after the Closing, the Company) shall have any obligation to dispose
of, hold separate or otherwise restrict its enjoyment of any of its assets or
Properties.
(b) Each party shall pay its own filing fees associated with accomplishing
the purposes of Section 5.4(a). Each party shall furnish to the other party such
reasonable assistance as the other party may request in connection with its
preparation of such filings or submissions.
(c) Shareholder shall use all reasonable efforts (and Buyer shall cooperate
in good faith with such efforts) to obtain or make all necessary filings and
solicitations of necessary consents of third parties as are necessary to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents; provided, however, that Buyer shall not be required to
(i) incur any out-of-pocket expense in connection with obtaining such consents,
or (ii) waive or concede any rights or Claims in respect thereof.
5.5 Intercompany Services and Loans
(a) All intercompany services provided to the Company shall terminate as of
the Closing unless otherwise provided in this Agreement and the other
Transaction Documents. Subject to Section 2.1(e), all intercompany receivables
and payables outstanding as of the Reference Date shall be paid at or prior to
the Closing and all other intercompany receivables and payables shall be written
off as of the Closing by means of cancellation, capital contribution or
dividend, as the case may be; provided, however, that intercompany receivables
or payables that have been accrued on the Company's Books and Records since the
Reference Time (other than the Intercompany Debt) in an amount equal to the
Intercompany Amount shall be paid by Buyer to Shareholder at the Closing.
(b) The Company's right to use any Marks shall terminate as of the Closing;
provided, however, that Buyer shall have the right to use such Marks included in
Company materials including, without limitation, any business cards, schedules,
stationery, packaging materials, displays, signs, promotional materials,
manuals, invoices, forms, computer software and other materials for a reasonable
period, not to exceed six (6) months following the Closing Date.
5.6 Guaranteed Debt
Annex 5.6 sets forth all Third Party Debt, including, but not limited to,
commercial paper and medium term notes. All Third Party Debt set forth on Annex
5.6 is guaranteed by Shareholder (the "Guaranteed Debt"). At Closing, Buyer
shall provide to Shareholder an unconditional guarantee of payment and
performance of the Guaranteed Debt (on the terms set forth in the MTN Guaranty
Agreement and the CP Guaranty Agreement, as applicable).
5.7 Notification
(a) Between the date hereof and until the Closing, Shareholder and Buyer
shall inform each other, promptly upon obtaining knowledge of any pending or
threatened litigation which reasonably could be anticipated to (i) render
inaccurate in any material respect any representation or warranty made by
Shareholder or the Company, on the one hand, or Buyer, on the other, (as the
case may be), or (ii) prohibit or restrain or materially and adversely affect
the consummation of the transactions by such party contemplated hereby or the
performance of its obligations hereunder.
(b) Shareholder shall, and shall cause its Affiliates (other than the
Company) to, conduct their respective business relationships with the Company
only in the ordinary and usual course of business consistent with past
practices. Except as otherwise expressly provided in this Agreement or the other
Transaction Documents, without the prior written consent of Buyer, in no event
shall Shareholder or any of its Affiliates deal with, or enter into any
Contracts with, the Company other than on terms as favorable as those which
could be obtained by the Company with respect to similar dealings, Contracts, or
arrangements with third parties; provided, however, that the continuation of
intercompany services to the Company by Shareholder or its Affiliates on terms
consistent with past practices and similar to the terms on which such services
are provided to other subsidiaries of Shareholder, and the allocation of related
expenses to the Company, in each case consistent with the Company's past
practices since January 1, 2001, shall not be subject to Buyer's consent.
(c) Between the date hereof and until the Closing, Shareholder and Buyer
shall notify the other in writing if it becomes aware of any fact or condition
that causes or constitutes a breach of the representations and warranties made
by such party as of the date of this Agreement, or if such party becomes aware
of the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute a
breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition.
(d) Between the date hereof and until the Closing, Shareholder and Buyer
shall promptly notify the other of the occurrence of any breach of any covenant
of such party or of the occurrence of any event that any such party in its
reasonable judgement believes may make the satisfaction of the conditions of
such party to close pursuant to Articles 7 and 8, as applicable, impossible or
unlikely.
(e) Between the date hereof and until the Closing, Shareholder and the
Company shall promptly notify Buyer in the event that any Employee who is a
senior manager or sales representative tenders his or her resignation or ceases
to be employed by the Company for any reason.
5.8 Actions to be Taken Prior to Closing
(a) Transfer of Assets. Shareholder shall, and shall cause the Company to,
take the following actions (on terms and conditions reasonably acceptable to
Buyer), prior to the Closing, which actions shall be effective for all purposes
(other than for Tax purposes) immediately prior to the Reference Time (all
actions necessary in connection therewith being hereinafter collectively
referred to as the "Restructuring"):
(i) Shareholder shall transfer, or cause to
be transferred, to the Company on an "as is, where is" basis, without any
representation or warranty from Shareholder as to its condition or fitness for a
particular purpose, all of Shareholder's or its Affiliates' right, title and
interest in and to each of the Transferred Assets free and clear of all
Encumbrances.
(ii) Shareholder shall cause the Company to transfer on an "as is,
where is" basis, without any representation or warranty from the Company and
without recourse to the Company, all of the Company's right, title and interest
in and to each of the Excluded Assets to Shareholder or its designated
Affiliate, and Shareholder or such Affiliate (other than the Company) shall
assume and agree to pay and perform any and all of the Excluded Liabilities.
(iii) Each Transferred Asset shall be transferred to the
Company, and the Company's Books and Records shall reflect the value
(calculated in accordance with GAAP applied consistently with the past
practices and procedures of them Company and the Accounting Principles) of
each Transferred Asset as it is reflected on Shareholder's or its
Affiliate's, as applicable, Books and Records (which value shall not exceed
$250,000).
(iv) Shareholder shall cause the
Company to adjust the reserves reflected on the Company's balance sheet in the
manner provided in the Special Adjustments.
All costs or expenses related to the transfer of the Transferred Assets and
Excluded Assets, including any Transfer Taxes in respect thereof, shall be borne
by Shareholder.
(b) Insurance.
(i) Effective upon Closing, Shareholder shall terminate
coverage with respect to the Company under all insurance policies maintained by
Shareholder or its Affiliates; provided, however, that no "occurrence" liability
policies shall be terminated in such a manner as to prevent Buyer or the Company
from recovering under such policies for losses from events occurring prior to
the Closing; provided, further, that Shareholder, at Buyer's election and sole
expense, shall take commercially reasonable steps to extend the reporting period
with respect to pre-Closing events under any "claims-made" insurance policies
designated by Buyer in order to permit Buyer and the Company to recover under
such policies to the extent provided therein. After the Closing, Buyer or the
Company, as applicable, shall become solely responsible for all risk of loss
based on events occurring after the Closing with respect to the Company or its
business or Properties.
(ii) Notwithstanding Section 5.8(b)(i), to the extent
that (A) any insurance policies owned or controlled by Shareholder or any of its
Affiliates (other than the Company) ("Shareholder's Insurance Policies") cover
any loss, liability, Claim, damage or expense relating to the Company or its
business or Properties ("Subject Company Liabilities") and relating to or
arising out of occurrences prior to the Closing, (B) Shareholder's Insurance
Policies permit Claims with respect to Subject Company Liabilities relating to
or arising out of occurrences prior to the Closing ("Subject Company Claims")
and (C) either Shareholder or Buyer elects to submit or pursue a Subject Company
Claim, then Shareholder, Buyer and the Company shall, and shall cause their
Affiliates to, cooperate in submitting such Subject Company Claims (or pursuing
Subject Company Claims previously made) on behalf of Buyer or the Company, as
applicable, under Shareholder's Insurance Policies. The expenses with respect
thereto shall be borne by the party electing to submit or pursue such Subject
Company Claim.
5.9 Updating of Schedules
(a) Not later than three (3) Business Days prior to the Closing,
Shareholder and the Company will supplement or amend the Disclosure Schedules
relating to their respective representations and warranties in this Agreement
with respect to any matter, condition or occurrence hereafter arising which, if
existing or occurring at the effective date of this Agreement, would have been
required to have been set forth or described in such Disclosure Schedules or
would otherwise have been inconsistent with their representations or warranties
herein. No supplement or amendment by either party shall be deemed to cure (or
affect the rights of any party with respect to) any breach of any representation
or warranty made in this Agreement or have any effect for the purpose of
determining satisfaction of the conditions set forth in Articles 7 and 8.
(b) Five (5) Business Days prior to the Closing, the Company shall deliver
to Buyer a supplement to Disclosure Schedule 3.21(o) setting forth the Backlog
added since July 12, 2001 through such date.
(c) Not later than three (3) Business Days prior to the Closing, Buyer
shall have the right to supplement or amend Annex 1.64 to include on such Annex
any Backlog or Commitments entered into by the Company after July 12, 2001 or
any Financing Contract arising from such Backlog or Commitments (other than any
such Backlog, Commitments or Financing Contract that is entered into by the
Company with the consent of Buyer in accordance with Section 5.1(b)(xxi)).
5.10 Non-Performing Financing Contracts
Not later than five (5) Business Days prior to the Closing, the Company
shall deliver to Buyer a list of all Financing Contracts that as of ten (10)
Business Days prior to the Closing (a) are more than thirty (30) days
delinquent, or (b) have been classified by the Company as non-performing.
6. Certain Post-Closing Covenants
6.1 Further Action
(a) After the Closing Date, Shareholder shall from time to time at Buyer's
request and at Shareholder's expense execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, such further instruments of
conveyance, assignment and transfer or other Documents, and perform such further
acts and obtain such further consents, approvals and Authorizations, as Buyer
may reasonably request in order to comply with the provisions of this Agreement
and the other Transaction Documents and consummate the transactions contemplated
hereunder and thereunder, including, without limitation, the sale, transfer and
conveyance to the Company of the Transferred Assets.
(b) Subject to the terms of the Transition Services Agreement, (i) all
amounts received with respect to the Financing Contracts to which the Company is
entitled hereunder that are received by Shareholder following the Closing shall
be received by Shareholder as agent, in trust for and on behalf of the Company,
and Shareholder shall pay as soon as reasonably practicable all of such amounts
over to the Company, and shall provide to the Company information as to the
nature and source of such payments, including any invoice relating thereto, and
(ii) all amounts included in the Excluded Assets received by the Company
following the Closing shall be received by the Company as agent for Shareholder,
in trust for and on behalf of Shareholder, and Buyer shall cause the Company to
pay as soon as reasonably practicable all of such amounts over to Shareholder
and shall provide to Shareholder information as to the nature and source of such
payments, including any invoice relating thereto.
6.2 Employee Benefits
(a) On or prior to the Closing Date, Shareholder shall cause one or more of
its Affiliates (other than the Company), to hire the Excluded Employees. After
the Closing, Buyer or one of its Affiliates (which Affiliate may be the Company)
shall offer employment to any Excluded Employee who was inactive as of the
Closing Date in accordance with Buyer's or the Affiliate's standard hiring
procedures, subject to the following conditions: (i) if on medical or disability
leave, such individual is released by his or her physician to return to active
employment and (ii) such individual actually reports for active employment with
Buyer or one of its Affiliates (which Affiliate may be the Company) promptly
following such medical release or expiration of approved leave; provided,
however, that Buyer and its Affiliates shall not be required to offer employment
under this provision to any Excluded Employees who do not apply for such
employment prior to the later of (A) six (6) months after the Closing Date, and
(B) the expiration of the longest period provided under applicable Law.
Shareholder shall retain liability and responsibility for any Excluded Employee
until such employee becomes an employee of Buyer or one of its Affiliates or, if
earlier, until such employee's employment with Shareholder or its Affiliates
terminates.
(b) At Closing, and for a period of at least twelve (12) months thereafter,
Buyer shall provide to Transferred Employees at least the same level of
compensation as in effect immediately prior to the Closing and employee benefits
that are not less favorable, in the aggregate, than those provided to similarly
situated employees of Buyer. Buyer and its Affiliates shall recognize (or cause
to be recognized) each Transferred Employee's service with the Company and its
Affiliates prior to (and including) the Closing Date as service with Buyer and
its Affiliates in connection with any pension plan (as defined in Section 3(2)
of ERISA), welfare plan (as defined in Section 3(1) of ERISA), and any other
benefit plan, policy, program or arrangement (including vacations, sick leave
and holidays) maintained by Buyer or one of its Affiliates (collectively, "Buyer
Benefit Plans") in which such Transferred Employee becomes a participant (or
which covers such Transferred Employee) on or after the Closing Date for
purposes of any waiting period, vesting, eligibility and benefit entitlement;
provided, however, that with respect to any Buyer Benefit Plan which is a
defined benefit pension plan, as defined in Section 3(35) of ERISA, in which
such Transferred Employee participates following the Closing Date, such service
credit shall be measured from the earliest date that such Transferred Employee
commenced participation in a tax-qualified pension or savings plan maintained by
the Company or one of its Affiliates and shall not be taken into account under
such plan for purposes of calculating such Transferred Employee's benefit
accruals. Buyer and its Affiliates will waive, or cause to be waived, any and
all pre-existing condition limitations and exclusions and eligibility waiting
periods under each Buyer Benefit Plan that is an "employee welfare benefit
plan," as defined in Section 3(1) of ERISA, with respect to (i) each Transferred
Employee who, immediately prior to the Closing, participated in a similar plan
maintained or contributed to by the Company or any ERISA Affiliate, and (ii) the
spouse and eligible dependents of each such Transferred Employee (provided such
spouse and dependents were participating in a similar plan maintained or
contributed to by the Company or any ERISA Affiliate immediately prior to the
Closing) (once such plan is made available to Transferred Employees). Buyer and
its Affiliates will recognize, for purposes of any annual deductible and
out-of-pocket limits under each Buyer Benefit Plan that is a health plan
(including without limitation, Buyer's medical and dental plans), deductible and
out-of-pocket expenses paid by Transferred Employees and their spouses and
dependents during the calendar year in which the Closing Date occurs under the
health plans maintained or contributed to by the Company or any ERISA Affiliate.
For purposes of this Section 6.2(b), the term "Transferred Employees" shall
include (i) Transferred Employees, as defined in Section 1.167, and (ii)
Excluded Employees who are hired by Buyer or one of its Affiliates (including
the Company) pursuant to Section 6.2(a).
(c) Shareholder shall be solely responsible for all retention payments due
as of the Closing to Employees under the Company Special Retention Arrangements.
Buyer shall be solely responsible for all severance payments due to Employees
who are terminated by the Company at or after the Closing, including, but not
limited to, payments due under the Company Special Severance Arrangements.
(d) Buyer shall be solely responsible for making COBRA continuation
coverage available with respect to all Transferred Employees (and any qualified
beneficiaries related thereto) who experience a qualifying event at or after the
Closing, including, without limitation, any Transferred Employee terminated by
Buyer or any of its Affiliates (including the Company) at or after Closing
(regardless of whether such Transferred Employee or qualified beneficiary has
been formally extended group health plan coverage by Buyer under a Buyer Benefit
Plan at the time of the qualifying event).
6.3 Tax Matters and Section 338(h)(10) Election
(a) Taxes.
(i) Except as otherwise provided in this Section 6.3(a),
Shareholder shall be liable for, shall promptly defend and shall indemnify and
hold Buyer Indemnified Parties harmless from and against, any and all Damages
resulting from, arising out of or based on the following:
(A) any and all Taxes imposed on any member (other than the
Company) of a consolidated, combined or unitary group of which the
Company (or any predecessor thereof) is or was a member on or prior to
the Closing Date, by reason of the liability of the Company (or any
predecessor thereof), pursuant to Treasury Regulations Section
1.1502-6(a) (or any predecessor or successor thereof or any similar
provision of Law), including without limitation any liability for Taxes
resulting from an "intercompany transaction" in respect of which gain
was deferred pursuant to Treasury Regulations Section 1.1502-13(a)(2)
(or any predecessor or successor thereof or any analogous or similar
provision of Law), that occurred on or before the Closing Date;
(B) any and all Taxes imposed on the Company (or any
predecessor thereof), or for which the Company (or any predecessor
thereof) may otherwise be liable (by reason of transferee liability,
assumption, Contract, operation of Law or otherwise):
(1) for any taxable year or period that ends on
or before the Closing Date; and
(2) subject to clause (C) of Section 6.3(a)(iv),
for the Pre-Closing Period;
(C) any and all Taxes resulting from, arising out of or based
on the Section 338(h)(10) Elections made pursuant to this Agreement;
provided, however, that Shareholder shall not be responsible for any
Damages resulting from or arising out of (i) any late filing, failure
to file or other defect of any kind with respect to any Section
338(h)(10) Election or Section 338 Form, or (ii) any adverse
determination of a Governmental Entity with respect to any portion of a
338(h)(10) Election, Section 338 Form or the Allocation Agreement,
other than to the extent such Damages result from or arise out of
Shareholder's failure to comply with the provisions of Section 6.3(e)
hereof;
(D) any liability for sales, use or other similar Taxes
assessed in respect of any Financing Contract after the Closing Date to
the extent such Taxes were erroneously paid at the inception of such
Financing Contract;
(E) any and all sales, use or other similar Taxes required to
be collected in respect of any Financing Contract during the twelve
(12) months following the Closing Date if (1) such Taxes are not being
collected by Buyer or the Company in respect of the Financing Contract
pursuant to its reliance on an applicable exemption from such Taxes,
and (2) such exemption from Taxes is dependent upon receipt of a
properly executed Exemption Certificate;
(F) any Claim by any party to a Financing Contract in respect
of a sales, use or other similar Tax paid on or prior to the Closing
Date where such Claim is based upon the provision of an Exemption
Certificate; provided, however, that, if Shareholder is unable to
obtain a refund of the entire amount of such Tax from the relevant
Governmental Entity due to the invalidity of such Exemption Certificate
(other than as a result of the expiration of the applicable statute of
limitations), then any Buyer Indemnified Party who was paid any Damages
pursuant to this Section 6.3(a)(i)(F) shall refund the amount of such
Damages less the amount of refund obtained by Shareholder from the
relevant Governmental Entity to Shareholder within fifteen (15) days of
Shareholder's request therefor;
(G) any breach or inaccuracy of any of the representations
contained in Section 3.8 of this Agreement, provided that for purposes
of indemnification pursuant to this Section 6.3, any breach or
inaccuracy of any representation shall be determined without regard to
any qualification related to materiality;
(H) any and all Taxes resulting from, arising out of or based on
the transactions contemplated by Section 2.1(e) and Section 5.8(a) of
this Agreement; and
(I) any and all Taxes that relate to the Transferred Assets
for periods (or portions thereof) up to and including the Closing Date,
and any and all Taxes that relate to the Excluded Assets and Excluded
Liabilities;
(J) for a period that ends ninety (90) days after the issuance
of a Revenue Agent Report to Buyer (whether agreed, unagreed, or
excepted agreed) with respect to Buyer's first taxable year in which
the Company (or any successor thereto) is includible as a member of
Buyer's "affiliated group" within the meaning of Section 1504 of the
Code, which does not include as an adjustment the treatment by the
Company (or any successor thereto) of any Financing Contract as a true
lease for federal income tax purposes (other than Company proposed
adjustments or isolated IRS adjustments with respect to Financing
Contracts that are not in compliance with the Company's true leasing
guidelines, provided that the number of Financing Contracts with
respect to which such IRS adjustments relate does not exceed
eighty-five (85), in the case of Financing Contracts included in the
Safeline portfolio, and eight (8), in the case of all other Financing
Contracts, in the aggregate for such taxable year), any determination
(as defined in Section 1313(a) of the Code) that a Financing Contract
to which the Company is, as of the Closing Date, a party (or which is a
Transferred Asset), and that has been treated by the Company as a true
lease for federal income tax purposes, fails to qualify as a true lease
for federal income tax purposes; provided, however, that, for purposes
of this Section 6.3(a)(i)(J), the term "Damages" shall be limited to an
amount (if any), calculated by Buyer, that would cause the Company's
after Tax cash flows attributable to taxable periods beginning on or
after the Closing Date, computed based on the regular federal and state
Tax rate then in effect for such time period, to equal the after Tax
cash flows attributable to taxable periods beginning after the Closing
Date that would have been realized by the Company had such
determination not occurred. Buyer shall prepare a statement setting
forth the calculation of any Damages and submit it to Shareholder for
Shareholder's review and comment. If, within thirty (30) days of
Shareholder's receipt of such statement, Shareholder objects in writing
to Buyer's calculation, Shareholder and Buyer shall engage the Selected
Accounting Firm to resolve the dispute in accordance with the
provisions of Section 6.8(b) hereof;
(ii) For purposes of Sections 6.3(a)(i)(E) and (J) hereof,(A) no
Buyer Indemnified Party shall be entitled to any indemnification pursuant
thereto unless and until the Company (or any successor thereto) has exhausted
any right to indemnification or reimbursement (or any similar right) for such
Taxes which gave rise to Shareholder's obligation to indemnify such Buyer
Indemnified Party pursuant to the terms of the Financing Contract to which such
Taxes relate from any other party thereto with respect to which the Company may
reasonably be expected to recover such Taxes, and (B) the term "Damages" shall
be reduced by any amount so indemnified, reimbursed or otherwise paid to the
Company (or any successor thereto).
(iii) For purposes of Section 6.3(a)(i)(J), no Buyer
Indemnified Party shall be entitled to any indemnification pursuant thereto with
respect to any Damages relating to, arising out of or resulting from (A) any
Financing Contract which is renewed, refinanced or the terms of which are
materially changed, altered or modified in any way by the Company (or any
successor thereto) at any time after the Closing; provided, however, that this
clause (A) shall only apply to the extent such Damages were incurred in, or
relate to, taxable periods (or portions thereof) beginning on or after the
occurrence of such renewal, refinancing, change, alteration or modification, (B)
any Financing Contract with respect to which the underlying assets are
transferred to any Person as part of a sale or sale/leaseback transaction after
the Closing; provided, however, that this clause (B) shall only apply to the
extent such Damages were incurred in, or relate to, taxable periods (or portions
thereof) beginning on or after the occurrence of such sale or sale/leaseback,
(C) any change in regulatory, statutory or administrative Tax Law; provided,
however, that for purposes of this clause (C), the term "administrative Tax Law"
only shall include administrative authorities that may be used or cited as
precedent within the meaning of Section 6110(k)(3) of the Code; provided,
further, that this clause (C) shall only apply to the extent such Damages were
incurred in, or relate to, taxable periods (or portions thereof) beginning on or
after the effective date of such change, (D) the filing of a disclosure
statement under Section 6662 of the Code (or any similar provision of Law) or
registration under Section 6111 of the Code (or any similar provision of Law)
with respect to any Financing Contract; provided, however, that in the event
Buyer determines that it may reasonably be required to file a disclosure
statement under Section 6662 of the Code to avoid penalties thereunder or may
reasonably be required to file a registration under Section 6111 of the Code,
and provided Buyer delivers written notice to Shareholder of such determination
forty-five (45) days prior to the due date (including extensions) of such
filing, Buyer shall be permitted to file such disclosure statement or
registration and this clause (D) shall not apply, unless Shareholder provides to
Buyer no later than fifteen (15) days prior to the due date (including
extensions) of such filing a written opinion addressed to Buyer from tax counsel
reasonably acceptable to Buyer that failure to provide such statement should not
result in imposition of penalties under Section 6662 of the Code (or any similar
provision of Law) or that Buyer should not be required to register under Section
6111 of the Code (or any similar provision of Law), as the case may be, or (E)
any Financing Contract any interest in which has been transferred by the Company
(including, without limitation, pursuant to the merger, liquidation or other
transfer of all or substantially all of the Company's assets) to any Person
(other than the Buyer or Affiliates of Buyer); provided, however, that this
clause (E) shall only apply to the extent such Damages were incurred in, or
relate to, taxable periods (or portions thereof) beginning on or after the
occurrence of such transfer.
(iv) Buyer shall be liable for, shall promptly defend and shall
indemnify and hold Shareholder Indemnified Parties harmless from and against,
any and all Damages resulting from, arising out of or based on (A) Taxes impose
on the Company for any taxable year or period that begins after the Closing
Date; (B)Taxes imposed on the Company for the Post-Closing Period; and (C) any
Taxes imposed on the Company not incurred in the ordinary course of business
attributable to acts of the Buyer after the Closing but on the Closing Date
(other than any such acts contemplated by this Agreement).
(v) To the extent permitted by Law or administrative practice,
the taxable year of the Company that includes the Closing Date shall be treated
as closing at the close of business on the Closing Date. Subject to clause (C)
of Section 6.3(a)(iv), for purposes of Sections 6.3(a)(i)(B)(2) and clause (B)
of Section 6.3(a)(iv), where it is necessary to apportion between Shareholder
and Buyer the Tax liability for a Straddle Period (which is not treated under
the immediately preceding sentence as closing at the close of business on the
Closing Date), such liability shall be apportioned between the period deemed to
end at the close of business on the Closing Date (the "Pre-Closing Period") and
the period deemed to begin at the beginning of the day following the Closing
Date(the "Post-Closing Period") on the basis of an interim closing of the books;
provided, however, that property Taxes whose lien date is in the Pre-Closing
Period shall be allocated to the Pre-Closing Period and property Taxes whose
lien date is in the Post-Closing Period shall be allocated to the Post-Closing
Period.
(vi) The Tax Sharing Agreement shall be terminated as of the
Reference Date as to the Company and Shareholder. All amounts due as of the
Reference Date from or to the Company under the Tax Sharing Agreement shall be
finally determined by Shareholder and paid by or to the Company, as the case may
be, on or prior to the Closing Date and shall be reflected in the Reference Date
Balance Sheet, and no additional amounts shall be due from or due to the Company
thereafter. Shareholder shall assume, shall promptly defend and shall indemnify
and hold Buyer Indemnified Parties harmless from and against any and all Damages
resulting from, arising out of or based on any liability under the Tax Sharing
Agreement to the extent that such liability has not been or will not be included
in the determination of the Purchase Price pursuant to Section 2.1 of this
Agreement.
(vii) Notwithstanding anything herein to the contrary,
Shareholder shall be responsible for the payment of all Transfer Taxes resulting
from, arising out of, based on or relating to the transactions contemplated by
this Agreement (including any such Taxes resulting from, arising out of or based
on the Section 338(h)(10) Elections or the transactions contemplated by Section
2.1(e) and Section 5.8(a)). Shareholder shall be liable for, shall promptly
defend and shall indemnify and hold Buyer Indemnified Parties harmless from and
against, any and all Damages resulting from, arising out of or based on any
failure by Shareholder to timely pay any and all such Transfer Taxes.
(viii) Any refund of Taxes that is received by the Company,
Buyer or any Buyer Affiliate, and any amount credited against Tax to which the
Company, Buyer or any Buyer Affiliate become entitled, to the extent such
Taxes or amount credited relate to any tax period that ends on or before the
Closing Date or to the Pre-Closing Period, and to the extent that such
Taxes or such amount
credited have not been reflected in the reserve or reserves for Tax liability
set forth on the face of the final audited Reference Date Balance Sheet (but
excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income), shall be for the account of
Shareholder, and the Company, Buyer or Buyer's Affiliate, as the case may be,
shall pay over to Shareholder any such refund or amount credited (net of any
Taxes, costs or expenses with respect thereto) within fifteen (15) days after
the Company's, Buyer's or Buyer's Affiliate's receipt thereof or entitlement
thereto. In the event there is a final determination that the Company, Buyer or
such Buyer Affiliate was not entitled to any such amounts paid over to
Shareholder, Shareholder shall return such amounts within fifteen (15) days
after the Company's, Buyer's or such Buyer Affiliate's request therefor.
(b) Tax Returns.
(i) Shareholder shall, in accordance with the Company's
past practice (except as otherwise required by applicable Law), prepare or cause
to be prepared and file or cause to be filed when due all Tax Returns of or
including the Company for all periods ending on or prior to the Closing Date
that are filed after the Closing Date, and Shareholder shall remit (or cause to
be remitted) all Taxes due with respect to such Tax Returns. Shareholder shall
permit Buyer to review and comment on each such Tax Return (to the extent
related to the Company) no later than thirty (30) days prior to the filing of
such Tax Return. The Company shall provide Shareholder with the Company's Tax
information for each Tax Return no later than thirty (30) days prior to the
original due date for such Tax Return. Shareholder shall not file any Tax Return
relating solely to Taxes of the Company without Buyer's prior written consent,
which consent shall not be unreasonably withheld.
(ii) Buyer shall, in accordance with the Company's past
practice (except as otherwise required by applicable Law), prepare or cause to
be prepared and file or cause to be filed all Tax Returns of the Company for the
Straddle Periods and Buyer shall remit (or cause to be remitted) any Taxes due
with respect to such Tax Returns. Buyer shall permit Shareholder to review and
comment on each Tax Return with respect to which Shareholder's liability under
Section 6.3(a)(i)(B)(2) hereof exceeds ($5,000) no later than thirty (30) days
prior to the filing date of such Tax Return. Buyer shall not file any such Tax
Return without Shareholder's prior written consent, which consent shall not be
unreasonably withheld. Not later than five (5) days before the due date for
payment of Taxes with respect to any such Tax Returns, Shareholder shall pay to
Buyer an amount equal to the amount of Tax shown to be due on such Tax Returns
which are properly allocated to Shareholder under Sections 6.3(a)(i) and
6.3(a)(iii). In the event that (A) Shareholder fails to comply with the
preceding sentence and (B) Buyer pays or causes to be paid the Tax allocable to
Shareholder shown on any such Tax Return described therein, the parties to this
Agreement expressly agree that Shareholder shall be required to pay Buyer
interest at the applicable statutory rate for underpayment of Taxes, with
respect to the amount of such Tax from the date the payment was required to be
made pursuant to the preceding sentence until the date Shareholder actually pays
such Tax to Buyer.
(c) Assistance and Cooperation.
(i) Buyer, the Company and Shareholder shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section 6.3 and any audit, litigation
or other proceeding with respect to Taxes of the Company (or Shareholder or any
of its Affiliates with respect to the Transferred Assets) and shall make
available to one another and to any Governmental Entity, as reasonably requested
in connection with any Tax Return described in Section 6.3(b) or any Tax
Proceeding described in Section 6.3(d), all information relating to any Taxes or
Tax Returns of the Company (or Shareholder or any of its Affiliates with respect
to the Transferred Assets). Such cooperation shall also include, without
limitation, the retention and (upon the other party's reasonable request) the
provision of records and information that are reasonably relevant to any such
Tax Return, audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any materials provided hereunder. The Company and Shareholder agree to (A)
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
the expiration of the statute of limitations (and, to the extent notified by
Buyer or Shareholder, any extensions thereof) of the respective taxable periods,
and abide by all record retention agreements entered into with any Taxing
authority, and (B) 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 Shareholder, as the case may be, shall
allow the other party to take possession of such Books and Records.
(ii) Buyer and Shareholder further agree, upon request, to use
reasonable efforts to obtain any certificate or other document from any
governmental body or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed; provided that obtaining such
certificate or other document may not reasonably be expected to adversely affect
Shareholder, the Company, Buyer or any Buyer Affiliate.
(d) Tax Contests.
(i) With respect to periods ending on or
prior to the Closing Date, Shareholder shall have the exclusive authority and
obligation to (A) represent the Company before any Governmental Entity or any
court in any audit, contest, Claim, proceeding or inquiry regarding the Tax
consequences of the operations of the Company or which relate to the Transferred
Assets (a "Tax Proceeding"), and (B) settle or contest, in its sole discretion,
any such Tax Proceeding; provided, however, that Shareholder shall allow Buyer
and its counsel to participate in, but not control, any such Tax Proceeding at
Buyer's sole expense; provided, further, that Shareholder shall keep Buyer fully
and timely informed with respect to the commencement, status and nature of any
Tax Proceedings involving any Tax liability of the Company for such taxable
periods; provided, further, that if the results of any such Tax Proceeding
involve an issue that recurs in any taxable period of Buyer or the Company
ending after the Closing Date or otherwise may reasonably be expected to
materially and adversely affect Buyer, the Company, or any of their respective
Affiliates for any taxable period including or ending after the Closing Date,
then there shall be no settlement, closing or other agreement with respect
thereto without the consent of such affected party, which consent shall not be
unreasonably withheld.
(ii) With respect to Straddle Periods (and, subject to
Section 6.3(d)(iv) hereof, periods beginning after the Closing Date with respect
to which Shareholder may reasonably be expected to be required to indemnify any
Buyer Indemnified Party pursuant to Sections 6.3(a)(i)(D), (E), (F) or (J)
hereof), Buyer shall have the exclusive authority and obligation to (A)
represent the Company in any Tax Proceeding and (B) settle or contest, in its
sole discretion, any such Tax Proceeding; provided, however, that Buyer shall
allow Shareholder and its counsel to participate in, but not control, such Tax
Proceeding with respect to which the audit adjustment, in the case of a Tax
Proceeding with respect to which Shareholder may reasonably be expected to be
required to indemnify any Buyer Indemnified Party pursuant to Section
6.3(a)(i)(J) equals or exceeds $1,000,000, or the tax adjustment, in the case of
a Tax Proceeding with respect to which Shareholder may reasonably be expected to
be required to indemnify any Buyer Indemnified Party pursuant to Sections
6.3(a)(i)(D), (E) or (F) equals or exceeds $25,000, at Shareholder's sole
expense; provided, further, that Buyer shall keep Shareholder fully and timely
informed with respect to the commencement, status and nature of any such Tax
Proceeding; provided, further, that there shall be no settlement, closing or
other agreement with respect to such Tax Proceeding with respect to which the
audit adjustment, in the case of a Tax Proceeding with respect to which
Shareholder may reasonably be expected to be required to indemnify any Buyer
Indemnified Party pursuant to Section 6.3(a)(i)(J) equals or exceeds $1,000,000,
or the tax adjustment, in the case of a Tax Proceeding with respect to which
Shareholder may reasonably be expected to be required to indemnify any Buyer
Indemnified Party pursuant to Sections 6.3(a)(i)(D), (E) or (F) equals or
exceeds $10,000, without the consent of Shareholder, which consent shall not be
unreasonably withheld; provided, further, that, in no event, shall Shareholder
be permitted access to Tax information of the Company relating to periods
beginning after the Closing Date (other than with respect to an audited
Financing Contract) or any Tax information of Buyer or any of its Affiliates.
(iii) Except as provided in Section 6.3(d)(ii), with
respect to periods beginning after the Closing Date and Taxes described in
clause (C) of Section 6.3(a)(iv), Buyer shall have the exclusive authority and
obligation to (A) represent the Company in any Tax Proceeding and (B) settle or
contest, in its sole discretion, any such Tax Proceeding; provided, however,
that, with respect to any such Tax Proceeding regarding any Tax for which
Shareholder may reasonably be expected to be required to indemnify any Buyer
Indemnified Party (an "Indemnified Proceeding"), Buyer shall keep Shareholder
fully and timely informed with respect to the commencement, status and nature of
any such Indemnified Proceeding; provided, further, that there shall be no
settlement, closing or other agreement with respect to such Indemnified
Proceeding without the consent of Shareholder, which consent shall not be
unreasonably withheld.
(iv) If a notice of a Tax Proceeding shall be delivered,
sent, commenced or initiated, in writing, to or against any party, any of its
Affiliates, or the Company (a "Notified Party") by any Governmental Entity with
respect to Taxes for which the other party may reasonably be expected to be
liable pursuant to Section 6.3(a), the Notified Party shall, if informed thereof
promptly, notify the other party in writing of such Tax Proceeding; provided,
however, that the failure of a party to give the other party prompt notice as
provided herein shall not relieve such other party of its obligations under this
Section 6.3 except to the extent that such other party is actually and
materially prejudiced thereby.
(e) Section 338(h)(10) Elections. At Buyer's option, Shareholder shall join
with Buyer to take all actions necessary and appropriate (including timely
filing such forms, Tax Returns, elections, schedules and other documents as may
be required), at each party's cost and expense, to effect and preserve a timely
election under Section 338(h)(10) of the Code in accordance with the
requirements of Section 338 of the Code and any elections under corresponding or
similar provisions of Law as specified by Buyer in writing at or prior to the
Closing or pursuant to the notice provisions of Section 11.3 hereof (the
"Section 338(h)(10) Elections") with respect to the purchase and sale of the
Shares hereunder. In the event Buyer elects to make any Section 338(h)(10)
Election:
(i) Shareholder, the Company and Buyer shall report the
transactions contemplated herein consistent with the Section 338(h)(10)
Elections and shall take no position in any Tax Return, any discussion with or
proceeding before any taxing authority, or otherwise, or take any action,
contrary thereto unless and to the extent required to do so pursuant to a
determination (as defined in Section 1313(a) of the Code or any similar
provision of Law).
(ii) The Company and Buyer shall execute at the Closing any and
all forms necessary to effectuate the Section 338(h)(10) Elections (including,
without limitation, IRS Form 8023 and any similar forms under applicable Tax
Laws, along with, in each case, all required statements or schedules thereto and
any amendments thereof (the "Section 338 Forms")). Shareholder, the Company and
Buyer shall each cause the Section 338 Forms to be duly executed by an
authorized person for Shareholder, the Company and Buyer in each case, and shall
duly and timely file the Section 338 Forms in accordance with applicable Tax
Laws and the terms of this Agreement. Shareholder and Buyer shall cooperate
fully with each other and make available to each other such Tax data and other
information as may be reasonably required by Shareholder and Buyer in order to
timely file any Section 338(h)(10) Election and any other required statements or
schedules.
(iii) Shareholder and Buyer agree to use their best efforts
to enter into an agreement (the "Allocation Agreement") as soon as practicable
after the Closing Date to address the computation of the modified aggregate
deemed sale price (as defined under applicable Treasury Regulations) ("MADSP")
of the assets of the Company. Buyer shall initially prepare a statement setting
forth a proposed computation and allocation of MADSP (the "Computation") and
submit it to Shareholder no later than forty-five (45) days after the completion
of the Adjusted Reference Date Balance Sheet. If, within thirty (30) days of
Shareholder's receipt of the Computation, Shareholder shall not have objected in
writing to the Computation, the Computation shall become the Allocation
Agreement and Buyer, Shareholder and the Company shall file the Section 338
Forms in a manner consistent with such Allocation Agreement and Buyer, the
Company and Shareholder shall file all Tax Returns consistent therewith. If any
aspects of the Allocation Agreement are in dispute as of the date which is sixty
(60) days prior to the date any of the Section 338 Forms are required to be
filed, Shareholder and Buyer shall then engage the Selected Accounting Firm in
accordance with the provisions of Section 6.8(b) hereof. To the extent the
Selected Accounting Firm has not resolved such dispute within (30) days prior to
the date such Section 338 Forms are required to be filed, Buyer, Shareholder and
the Company shall file such Section 338 Forms, and all Tax Returns, in a manner
consistent with the Computation (together with any changes thereto mutually
agreed to by Buyer and Shareholder at such time). Thereafter, the Allocation
Agreement shall be revised in accordance with the determination of the Selected
Accounting Firm and Buyer, the Company and Shareholder shall promptly execute
any amendments subsequent to the filing of the Section 338(h)(10) Elections to
the Section 338 Forms to reflect such determination that are permitted to be
filed under applicable Law; provided, however, to the extent such amendments to
the Section 338 Forms are not permitted to be filed under applicable Law, Buyer
shall pay to Shareholder and Shareholder shall pay to Buyer, as the case may be,
amounts necessary to place the parties in the same position they would have been
in had such amendments been permitted to be filed. Buyer and Shareholder shall
not take a position before any Governmental Entity or otherwise (including in
any Tax Return) inconsistent with the Allocation Agreement unless and to the
extent required to do so pursuant to a determination (as defined in Section
1313(a) of the Code or any similar provision of state, local or foreign law).
(f) Tax Carryovers. The Company shall elect, where permitted by law, to
carry forward any Tax Attribute (as defined below) of the Company arising in any
taxable period that begins on or after the Closing Date that, absent such
election, would be carried back to a taxable period ending on or before the
Closing Date. If, despite the preceding sentence, the Company carries back to a
taxable period ending on or before the Closing Date any Tax Attribute of the
Company arising in a taxable period beginning on or after the Closing Date,
Buyer shall pay to Shareholder, or Shareholder shall retain, as the case may be,
the amount of any Tax benefit resulting from the use of such Tax Attribute.
Buyer and the Company further agree that, unless required pursuant to a
determination (as defined in Section 1313(a) of the Code or any similar
provision of Law), neither Buyer nor the Company shall claim any Tax benefit
resulting from the use of any Tax Attribute of the Company which arises from or
relates to a taxable period which ends on or before the Closing Date. If,
despite the preceding sentence, Buyer or the Company claims or receives any such
Tax benefit, Buyer shall pay to Shareholder an amount equal to such Tax benefit
claimed or received by Buyer or the Company from the use of such Tax Attribute.
For purposes of this Section 6.3(f), the term "Tax Attribute" means any net
operating loss, net capital loss, investment tax credit, foreign tax credit,
charitable deduction or any other credit or tax attribute that could be carried
forward or back to reduce Taxes (including, without limitation, deductions and
credits related to alternative minimum Taxes).
(g) Dispute Procedures. If the parties disagree as to any matter arising
out of this Section 6.3, the parties shall resolve such disputes in accordance
with Section 6.8(b).
6.4 Transaction Costs
Except as otherwise specifically provided in this Agreement, Shareholder
and Buyer shall be responsible for payment of their own respective costs and
expenses incurred in connection with the preparation, negotiation and delivery
of this Agreement and the other Transaction Documents, including, but not
limited to, attorneys' and accountants' fees and expenses.
6.5 [Intentionally Omitted]
6.6 Portfolio Tape and Documentation
(a) Within ten (10) Business Days following the Closing Date, Shareholder
shall deliver to Buyer the Reference Date Portfolio Tape.
(b) As soon as practicable following the delivery by Shareholder to Buyer
of the Reference Date Portfolio Tape, Buyer and Shareholder shall endeavor in
good faith to engage Tape Auditors for the review and reconciliation of the
Reference Date Portfolio Information in accordance with the terms of the
engagement letter (the "Tape Audit Engagement Letter"). The Tape Audit
Engagement Letter shall detail (i) the scope of the audit by the Tape Auditors
of the Reference Date Portfolio Information, (ii) the Financing Contracts
subject to such audit, (iii) the time frame for the delivery by the Tape
Auditors to Shareholder and Buyer of the final audit results in respect of each
Audited Financing Contract, and (iv) a methodology for the valuation of all
discrepancies between the Reference Date Portfolio Information and the Tape
Audit with respect to each Audited Financing Contract. Following execution of
the Tape Audit Engagement Letter, Shareholder shall have the option of directing
the Tape Auditors to audit any Financing Contract specified in the Tape Audit
Engagement Letter. Pursuant to the terms of the Tape Audit Engagement Letter,
the Tape Auditors shall determine in respect of each Audited Financing Contract
whether or not the Reference Date Portfolio Information is true, correct and
accurate in all respects as of the Reference Date (the "Tape Audit"). Buyer and
the Company shall afford Shareholder and the Tape Auditors reasonable assistance
with the Tape Audit, including access during normal business hours and upon
reasonable notice to such relevant accounting, financial and other Books and
Records of the Company reasonably requested by the Tape Auditors in connection
with the Tape Audit; provided, however, that such assistance or access does not
unreasonably interfere with Buyer's or the Company's business. Shareholder shall
(x) pay all of the fees of the Tape Auditors and all expenses incurred by such
firm, and (y) provide any indemnification required by the Tape Auditors in
connection with the Tape Audit.
(c) Following completion of the Tape Audit, the Tape Auditors shall deliver
to Shareholder, Buyer and the Company in accordance with the Tape Audit
Engagement Letter, a final audit report detailing (i) all discrepancies between
the Reference Date Portfolio Information and the Tape Audit with respect to each
Audited Financing Contract, and (ii) a valuation of each such discrepancy,
calculated in accordance with the terms of the Tape Audit Engagement Letter.
Buyer and Shareholder shall have thirty (30) days following the receipt of the
final audit report to review such report and use their commercially reasonable
efforts to resolve any disputes with the Tape Auditors in respect of such
report. Notwithstanding the foregoing, any disputes in respect of the final
audit report that are not resolved as provided in the foregoing sentence where
the net amount of which, in the aggregate, is less than $100,000, shall be
resolved as follows: (i) fifty percent (50%) of the aggregate of all such
disputed amounts shall be deemed to have been resolved in Shareholder's favor,
and (ii) fifty percent (50%) of the aggregate of all such disputed amounts shall
be deemed to have been resolved in Buyer's favor.
(d) Buyer and Shareholder shall pay to the other, as applicable, a
settlement payment in respect of the net amount of all valuation discrepancies
with respect to each Audited Financing Contract (the "Tape Settlement Amount").
Any payment of a Tape Settlement Amount required to be paid pursuant hereto
shall be (i) made on the Business Day following the thirty (30) day review
period set forth above, and (ii) paid by wire transfer of immediately available
funds to an account in the United States (designated in writing by the recipient
thereof at least three (3) Business Days prior to such payment date).
6.7 Access to Books and Records after Closing
(a) For a period of seven (7) years after the Closing Date, Buyer and its
representatives shall have reasonable access to all of the Books and Records
relating to the Company's business (other than the Excluded Assets) that are in
Shareholder's possession or control following the Closing, to the extent that
such access may reasonably be required by Buyer in connection with matters
relating to the Company or the operations and conduct of the business of the
Company prior to the Closing Date.
(b) Without limiting Section 6.7(a), Shareholder, Buyer and the Company
shall provide the other parties with such nonprivileged information in respect
of the Company or the business of the Company as is reasonably necessary to
enable such party to satisfy its reporting obligations to Governmental Entities.
(c) If the Company shall desire to dispose of any of its Books and Records
relating to the Company's business as conducted prior to Closing prior to the
expiration of such seven (7) year period, the Company shall, prior to such
disposition, give Shareholder a reasonable opportunity, at Shareholder's
expense, to segregate and remove such Books and Records as Shareholder may
select.
(d) If Shareholder shall desire to dispose of any of its Books and Records
relating to the Company's business prior to the expiration of such seven (7)
year period, Shareholder shall, prior to such disposition, give Buyer a
reasonable opportunity, at Buyer's expense, to segregate and remove such Books
and Records as Buyer may select.
6.8 Preparation of Reference Date Balance Sheet, Adjusted Reference Date
Balance Sheet and Purchase Price Certificate
(a) Preparation.
(i) As soon as practicable following the Closing, Buyer
shall cause the Company to prepare (with the cooperation and assistance of
Shareholder) a draft of the Reference Date Balance Sheet. The draft Reference
Date Balance Sheet shall be prepared in accordance with the Accounting
Principles as of the Reference Time (and after the consummation of the
transactions contemplated by Section 2.1(e), the second sentence of Section
5.5(a) and the Restructuring). Buyer and Shareholder shall use their respective
reasonable efforts to cause the draft Reference Date Balance Sheet to be
completed within ninety (90) days following the Closing Date and, upon
completion, such draft Reference Date Balance Sheet shall promptly be provided
to Buyer, Buyer's Accountants, Shareholder and Shareholder's Accountants.
(ii) Following the distribution of the draft Reference
Date Balance Sheet in accordance with Section 6.8(a)(i), Shareholder's
Accountants shall be entitled to perform all procedures and take any other steps
that Shareholder's Accountants, in the exercise of their professional judgment,
deem appropriate to confirm that each item of the draft Reference Date Balance
Sheet has been prepared in conformity with the standards set forth in Section
6.8(a)(i).
(iii) Immediately following the preparation and distribution
of the draft Reference Date Balance Sheet, Buyer shall cause Buyer's Accountants
to audit the draft Reference Date Balance Sheet, and such audit shall be
conducted in accordance with United States generally accepted auditing standards
and shall be sufficient to permit Buyer's Accountants to render their opinion to
the effect that the Reference Date Balance Sheet fairly presents the financial
position of the Company as of the Reference Time in accordance with the
Accounting Principles as of the Reference Time (and after the consummation of
the transactions contemplated by Section 2.1(e), the second sentence of Section
5.5(a) and the Restructuring).
(iv) Buyer shall use reasonable efforts to cause Buyer's
Accountants to deliver the draft audited Reference Date Balance Sheet, in
accordance with Section 6.8(a)(iii) above, to each of Buyer, Shareholder and
Shareholder's Accountants within ninety (90) days following the date of Buyer's
Accountants' receipt of the draft Reference Date Balance Sheet.
(v) During the sixty (60) days following their receipt of the
draft audited Reference Date Balance Sheet, both Buyer and Shareholder (in
consultation with Shareholder's Accountants) shall have the opportunity to
review the draft audited Reference Date Balance Sheet (together with Buyer's
Accountants' working papers, including any portion thereof pertaining to any
proposed adjustment) and, during such sixty (60) day period, Shareholder,
Shareholder's Accountants and Buyer shall have the right to propose to Buyer's
Accountants those changes to the draft audited Reference Date Balance Sheet that
Shareholder, Shareholder's Accountants or Buyer determine to be appropriate to
cause the draft audited Reference Date Balance Sheet to conform, in all
respects, to the standards set forth in Section 6.8(a)(i).
(vi) Within the same ninety (90)day period set forth in Section
6.8(a)(iv), Buyer and Shareholder shall also provide one another and Buyer's
Accountants with notices of any asset or liability which such Person proposes to
ask Buyer's Accountants to reflect on, adjust or eliminate from the draft
audited Reference Date Balance Sheet in order to prepare the Adjusted Reference
Date Balance Sheet as contemplated by the definition of Special Adjustments.
(vii) Concurrent with the delivery to Buyer and Shareholder of
the draft audited Reference Date Balance Sheet, Buyer shall cause Buyer's
Accountants to prepare (after consultation with Buyer and Shareholder), and to
deliver, within ten (10) days after the end of the ninety (90) day period
referred to in Section 6.8(a)(vi), to Buyer, Shareholder and Shareholder's
Accountants' drafts of (A) the Adjusted Reference Date Balance Sheet which shall
reflect the Special Adjustments as well as such other adjustments as Buyer's
Accountants may deem appropriate and requested to be made by Shareholder or
Buyer in the notices referred to in Section 6.8(a)(vi), and (B) a certificate
(the "Purchase Price Certificate") showing the calculation of the Purchase
Price, describing in reasonable detail (1) the adjustments made to the audited
Reference Date Balance Sheet in order to derive the Adjusted Reference Date
Balance Sheet and stating that such adjustments have been made in accordance
with the provisions of this Agreement, and (2) the calculations used to derive
the Purchase Price. Both Buyer and Shareholder shall have the opportunity to
review the draft Adjusted Reference Date Balance Sheet and the Purchase Price
Certificate during the sixty (60) days following their receipt thereof.
(viii) In the event of any dispute between Shareholder and
Shareholder's Accountants, on the one hand, and Buyer and Buyer's Accountants,
on the other hand, regarding any of the adjustments proposed by Shareholder or
Shareholder's Accountants, on the one hand, or Buyer or Buyer's Accountants, on
the other hand, with respect to any item of the draft Reference Date Balance
Sheet, the draft Adjusted Reference Date Balance Sheet, or the draft Purchase
Price Certificate, which Shareholder and Shareholder's Accountants, on the one
hand, and Buyer and Buyer's Accountants, on the other hand, cannot resolve
within sixty (60) days after the receipt thereof, as the case may be, either
Shareholder or Buyer shall have the right, upon delivery of written notice to
the other party, to require that such dispute be resolved in accordance with the
provisions set forth in Section 6.8(b). Promptly following the resolution of any
and all disputes with respect to any proposed adjustments to the draft Reference
Date Balance Sheet, the draft Adjusted Reference Date Balance Sheet or the draft
Purchase Price Certificate, Buyer shall cause Buyer's Accountants to prepare and
deliver to Buyer and Shareholder the final audited Reference Date Balance Sheet,
the final Adjusted Reference Date Balance Sheet and the final Purchase Price
Certificate, each of which shall reflect all adjustments thereto which have been
agreed upon by Shareholder and Shareholder's Accountants, on the one hand, and
Buyer and Buyer's Accountants, on the other hand, or which have been resolved
pursuant to Section 6.8(b), together with Buyer's Accountants' opinion on the
Reference Date Balance Sheet.
(ix) Shareholder shall cooperate and comply with all
reasonable requests of Buyer, the Company and Buyer's Accountants to assist such
Persons in accomplishing the preparation of the Reference Date Balance Sheet,
the Adjusted Reference Date Balance Sheet and the Purchase Price Certificate.
Without limiting the foregoing, (A) each of Buyer, Shareholder, Buyer's
Accountants and Shareholder's Accountants shall have full access to all relevant
accounting, financial and other Books and Records reasonably requested by it in
connection with the preparation, confirmation or review of the Reference Date
Balance Sheet, the Adjusted Reference Date Balance Sheet and the Purchase Price
Certificate as well as to Buyer's Accountants' working papers with respect
thereto and draft opinion thereon, and (B) each party shall make available to
the other party and its accountants such personnel as they may reasonably
request in connection with the preparation or confirmation of the Reference Date
Balance Sheet, the Adjusted Reference Date Balance Sheet and the Purchase Price
Certificate or the review of Buyer's Accountants' draft opinion.
(b) Disputes. Any dispute involving any of the adjustments to the draft
Reference Date Balance Sheet, the draft Adjusted Reference Date Balance Sheet or
the draft Purchase Price Certificate proposed by Shareholder or Buyer including,
without limitation, any interpretation or application of any provision of this
Agreement affecting the preparation of the Reference Date Balance Sheet, the
Adjusted Reference Date Balance Sheet or the Purchase Price Certificate, not
resolved by Shareholder and Buyer within forty-five (45) days of the relevant
date of receipt thereof, upon the election of Shareholder or Buyer, shall be
resolved by the Selected Accounting Firm. The Selected Accounting Firm shall
resolve only issues upon which Buyer and Shareholder have been unable to agree.
The decision of such Selected Accounting Firm shall be rendered within twenty
(20) Business Days after its appointment. The decision of the Selected
Accounting Firm shall be final and binding upon the parties. Notwithstanding the
foregoing, if the aggregate of all amounts in dispute with respect to all
disputes referred to in this Section 6.8(b) shall be less than $100,000, such
disputes shall not be resolved by the Selected Accounting Firm, but shall
instead be resolved as follows: (i) fifty percent (50%) of the aggregate of all
amounts in dispute shall be deemed to have been resolved in Shareholder's favor,
and (ii) fifty percent (50%) of the aggregate of all amounts in dispute shall be
deemed to have been resolved in Buyer's favor.
(c) Expenses. Buyer shall pay all of the fees of Buyer's Accountants and
all expenses incurred by such firm in connection with the tasks outlined in this
Section 6.8, and Shareholder shall pay all fees of Shareholder's Accountants and
all expenses incurred by such firm in connection with the tasks outlined in this
Section 6.8. Buyer and Shareholder shall each pay one-half of the fees and
expenses incurred in connection with any disputes that are resolved by the
Selected Accounting Firm pursuant to Section 6.8(b).
(d) Cooperation. Each of Shareholder and Buyer shall use its best efforts
to cause Buyer's Accountants and Shareholder's Accountants to cooperate with
each other in connection with all of their activities undertaken in connection
with this Section 6.8. Prior to the commencement of the audit of the Reference
Date Balance Sheet, Shareholder shall cause Shareholder's Accountants to make
available to Buyer's Accountants their work papers from the audits of the
financial statements of Shareholder to the extent that the same relate to the
Company or the Transferred Assets.
6.9 Accounts
From and after the Closing, Shareholder shall cooperate with Buyer and the
Company to take all steps necessary to remove all Persons who are not Employees
of the Company after the Closing and who are signatories or holders of
powers-of-attorney in respect of any accounts and safe-deposit boxes maintained
by the Company prior to the Closing, from the list of such authorized
signatories and holders and otherwise extinguish their signing authority with
respect to such accounts.
6.10 Confidentiality
(a) The Confidentiality Agreement shall terminate upon Closing and shall be
of no further force and effect. For a period of two (2) years following the
Closing, (i) Shareholder shall, and shall cause its Affiliates to, keep secret
and retain in strictest confidence, and shall not (other than as expressly
permitted by this Agreement and the other Transaction Documents) use for the
benefit of itself or others any Confidential Information relating to (A) Buyer
or its business to the extent such Confidential Information was disclosed by
Buyer, its Affiliates, or its representatives or agents in the preparation,
negotiation and delivery of this Agreement and the other Transaction Documents
and the transactions contemplated hereby and thereby, or (B) the Company or the
Company's business (other than Confidential Information relating solely to the
Excluded Assets, Excluded Employees and Excluded Liabilities), and (ii) the
Company and Buyer shall keep secret and retain in strictest confidence, and
shall not use for the benefit of itself or others any Confidential Information
relating to Shareholder or Shareholder's business (other than, following the
Closing, the Company or the Company's business) disclosed by Shareholder, its
Affiliates, or its representatives and agents in the preparation, negotiation
and delivery of this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby (including, but not limited to,
Confidential Information relating to the Shareholder or its business (other
than, following the Closing, the Company or the Company's business) that was
reviewed or received during Buyer's due diligence review of the Company).
(b) If this Agreement is terminated in accordance with its terms, each of
Shareholder and the Company, on the one hand, and Buyer, on the other hand,
shall return all Documents containing Confidential Information relating to the
other party (as set forth in Section 6.10(a)) received by it, its Affiliates, or
its representatives or agents from the other party and all reproductions thereof
made by the receiving party, unless the recipient provides written assurances
that any such Document and reproductions thereof that have not been returned
have been destroyed.
6.11 Name Change
Buyer shall cause the Company, at the Company's sole expense, to (a) change
its legal name within thirty (30) days following the Closing Date so as to
eliminate all reference in the name of the Company to "SAFECO" by making the
necessary filings with the Secretary of State of the State of Washington, and
(b) within a reasonable period after the Closing Date, make such filings as may
be necessary to change the Company's name of record with each jurisdiction in
which the Company is qualified to do business as a foreign corporation.
6.12 Repurchase Option
(a) At any time following the occurrence of a Credit Loss Event with
respect to any Specified Financing Contract (or with respect to any Person that
has issued or provided any Credit Enhancement relating to a Specified Financing
Contract), Buyer or any of its Affiliates shall have the right, exercisable by
delivering to Shareholder a Repurchase Notice with respect to such Specified
Financing Contract, to require Shareholder to purchase, on the Specified
Settlement Date, any such Specified Financing Contract for a price equal to the
Repurchase Price set forth in the Repurchase Notice.
(b) The closing of each repurchase of a Specified Financing Contract
pursuant to Section 6.12(a) shall take place on the related Specified Settlement
Date. Upon each repurchase of a Specified Financing Contract pursuant to Section
6.12(a), (i) the Shareholder shall pay, or shall cause any of its Affiliates to
pay, to Buyer or its Affiliates, by wire transfer of immediately available funds
to an account designated in writing by Buyer, the aggregate Repurchase Price
with respect to such Specified Financing Contract to be sold at such closing,
and (ii) Buyer shall assign, or shall cause any of its Affiliates to assign, to
Shareholder or any of its Affiliates on an "AS-IS, WHERE IS" basis without
representation or warranty or recourse of any kind, all of Buyer or its
Affiliate's right, title and interest in (x) the Specified Financing Contract
described in the related Repurchase Notice and for which the Shareholder or its
Affiliates had paid the Repurchase Price as provided in the foregoing clause
(i), and (y) the Portfolio Property, if any, that is subject to or governed by
such Specified Financing Contract to the extent that such Portfolio Property
shall not theretofore have been (1) transferred or sold to an Obligor under such
Specified Financing Contract (or its Affiliate or assignee), (2) foreclosed upon
or repossessed and remarketed, or (3) sold or re-leased following termination of
such Specified Financing Contract.
(c) Each Repurchase Notice shall specify the Specified Financing Contract
as to which Buyer or its Affiliate is exercising a Repurchase Option, a
description of the Credit Loss Event pursuant to which such Repurchase Option is
being exercised and the Repurchase Price in respect of such Specified Financing
Contract (together with a summary showing in reasonable detail the manner in
which such Repurchase Price was calculated). Delivery of a Repurchase Notice by
Buyer or its Affiliate shall be irrevocable and, upon delivery thereof to
Shareholder, the Shareholder shall be bound to pay to Buyer, on the related
Specified Settlement Date, the Repurchase Price with respect to the Specified
Financing Contract identified in such Repurchase Notice, subject only to the
condition that Buyer or its Affiliate assign such Specified Financing Contract
at the closing of such repurchase on the terms described above in Section
6.12(b).
7. Conditions Precedent to Obligations of Buyer
The obligations of Buyer to perform and observe the covenants, agreements
and conditions to be performed and observed by it at the Closing shall be
subject to the satisfaction of the following conditions, which may be expressly
waived only in writing signed by Buyer.
7.1 Accuracy of Representations and Warranties
Each of the representations and warranties of the Company and Shareholder
contained in this Agreement (other than the representations and warranties
contained in Section 3.7) and the other Transaction Documents to which each is a
party shall be true and correct, in all material respects, as of the date hereof
and at and as of the Closing Date, in each case with the same effect as though
made at and as of such date; except to the extent such representations and
warranties are made at and as of a specified date, in which case such
representations and warranties (other than the representations and warranties
contained in Section 3.7) shall be true and correct, in all material respects,
as of the specified date. Notwithstanding the foregoing, the representations and
warranties contained in Section 3.7 shall be true and correct in all respects as
of the Closing Date.
7.2 Performance of Covenants
The Company and Shareholder shall have performed and complied in all
material respects with all covenants and conditions contained in this Agreement
and any other Transaction Document to which they are a party to be performed and
complied with by them at or prior to the Closing.
7.3 Consents
The Company shall have obtained and shall have delivered to Buyer all
consents and waivers set forth on Annex 7.3 (the "Required Consents") or
otherwise necessary pursuant to the Assignment Agreements.
7.4 Officer's Certificate
Buyer shall have received a certificate of an authorized officer of the
Company (signed in such officer's representative capacity, and not
individually), dated the Closing Date, certifying that, as to the Company, the
conditions set forth in Sections 7.1, 7.2 and 7.3 have been fulfilled.
7.5 Shareholder's Certificate
Buyer shall have received a certificate of Shareholder, executed on behalf
of Shareholder by one of its authorized officers (signed in such officer's
representative capacity, and not individually), dated the Closing Date,
certifying that, as to Shareholder, the conditions set forth in Sections 7.1,
7.2 and 7.3 have been fulfilled.
7.6 Secretary's Certificate
(a) Buyer shall have received a certificate of the Secretary of the Company
(signed in such officer's representative capacity, and not individually) as to
the authenticity and effectiveness of the corporate actions of the Company
authorizing the transactions contemplated by this Agreement and the other
Transaction Documents to which the Company is a party.
(b) Buyer shall have received a certificate of the Secretary of Shareholder
(signed in such officer's representative capacity, and not individually) as to
the authenticity and effectiveness of the corporate actions of Shareholder
authorizing the sale of the Shares and the other transactions contemplated by
this Agreement and the other Transaction Documents to which Shareholder is a
party.
7.7 Director and Officer Resignations
Buyer shall have received copies of resignations for all directors, and for
each officer of the Company as requested by Buyer in writing at least five (5)
Business Days prior to the Closing, in each case effective as of the Closing
Date.
7.8 Compliance With Laws
The consummation of the transactions contemplated by this Agreement shall
be legally permitted by all Laws and regulations to which Buyer is subject.
7.9 Legal Proceedings
(a) On the Closing Date, no injunction, writ, preliminary restraining order
or other order of any Governmental Entity of competent jurisdiction shall be in
effect that enjoins, restrains, conditions or prohibits consummation of the
transactions contemplated by this Agreement and the other Transaction Documents.
(b) No action or proceeding shall have been instituted and, at what would
otherwise have been the Closing Date, remain pending before a Governmental
Entity to restrain, prohibit or otherwise challenge the consummation of the
transactions contemplated in this Agreement and the other Transaction Documents
or the performance of the material obligations of the parties hereto and thereto
(or seeking substantial damages from Buyer or any of its Affiliates as a result
thereof), nor shall any Governmental Entity have notified any party to this
Agreement and the other Transaction Documents that the consummation of the
transactions contemplated hereby or thereby would constitute a violation of Laws
of the United States or the Laws of the jurisdiction to which such Governmental
Entity is subject and that it intends to commence proceedings to restrain the
consummation of such transactions, to force divestiture if the same are
consummated or to materially modify the terms or results of such transactions
unless such Governmental Entity shall have withdrawn such notice, or has
otherwise indicated in writing that it will not take any action, prior to what
would otherwise have been the Closing Date.
(c) All waiting periods, including those specified in the HSR Act,
including any extensions thereof, shall have expired or been terminated with
respect to the transactions contemplated in this Agreement and the other
Transaction Documents.
7.10 Delivery of Stock Certificates
Buyer shall have received certificates representing the Shares, duly
endorsed for transfer on the Company's books.
7.11 Opinion of Counsel
Buyer shall have received from ▇▇▇▇▇▇▇ Coie LLP and in-house counsel to
Shareholder, opinions, dated the Closing Date, in form and substance reasonably
acceptable to Buyer.
7.12 Transaction Documents
Each of Shareholder and its Affiliates shall have executed and delivered
each of the following Documents to which it is a party: this Agreement, the
Transition Services Agreement, the Non-Competition Agreement, the CP Guaranty
Agreement and the MTN Guaranty Agreement.
7.13 Tax Certificate
(a) Each of Shareholder and the Company shall have provided to Buyer an
affidavit of non-foreign status that complies with Section 1445 of the Code.
(b) Shareholder shall have provided to Buyer five (5) executed copies of
IRS Form 8023 (and any other Section 338 Forms provided by Buyer to Shareholder
prior to the Closing Date) in accordance with Section 6.3(e).
7.14 Benefit Transitioning
Shareholder and Buyer shall have taken all actions reasonably necessary for
the transfer of the Transferred Employees to Buyer's payroll and employee
benefit systems.
8. Conditions Precedent to Obligations of the Company and Shareholder
The obligations of the Company and Shareholder to perform and observe the
covenants, agreements and conditions to be performed and observed by each of
them at the Closing and to sell the Shares shall be subject to the satisfaction
of the following conditions, which may be expressly waived only in writing
signed by Shareholder.
8.1 Accuracy of Representations and Warranties
Each of the representations and warranties of Buyer contained in this
Agreement and the other Transaction Documents to which it is a party shall be
true and correct, in all material respects, as of the date hereof and at and as
of the Closing Date, in each case with the same effect as though made at and as
of such date, except to the extent such representations and warranties are made
at and as of a specified date, in which case such representations and warranties
shall be true and correct, in all material respects, as of the specified date.
8.2 Performance of Covenants
Buyer shall have performed and complied in all material respects with all
covenants and conditions contained in this Agreement and any other Transaction
Documents to which it is a party to be performed and complied with by Buyer at
or prior to the Closing.
8.3 Officers' Certificate
The Company shall have received a certificate of an authorized
representative of Buyer (signed in such Person's representative capacity, and
not individually), dated the Closing Date, certifying that the conditions in
Sections 8.1 and 8.2 have been fulfilled.
8.4 Secretary's Certificate
Shareholder shall have received a certificate of the Attesting Secretary of
Buyer (signed in such Attesting Secretary's representative capacity, and not
individually) as to the authenticity and effectiveness of the corporate actions
of Buyer authorizing the purchase of the Shares and the other transactions
contemplated by this Agreement and the other Transaction Documents to which
Buyer is a party.
8.5 Compliance With Laws
The consummation of the transactions contemplated by this Agreement shall
be legally permitted by all Laws and regulations to which the Company and
Shareholder are subject.
8.6 Legal Proceedings
(a) On the Closing Date, no injunction, writ, preliminary restraining order
or other order of any Governmental Entity of competent jurisdiction shall be in
effect that enjoins, restrains, conditions or prohibits consummation of the
transactions contemplated by this Agreement and the other Transaction Documents.
(b) No action or proceeding shall have been instituted and, at what would
otherwise have been the Closing Date, remain pending before a Governmental
Entity to restrain, prohibit or otherwise challenge the consummation of the
transactions contemplated in this Agreement and the other Transaction Documents
or the performance of the material obligations of the parties hereto and thereto
(or seeking substantial damages from Shareholder or any of its Affiliates as a
result thereof), nor shall any Governmental Entity have notified any party to
this Agreement and the other Transaction Documents that the consummation of the
transactions contemplated hereby and thereby would constitute a violation of
Laws of the United States or the Laws of the jurisdiction to which such
Governmental Entity is subject and that it intends to commence proceedings to
restrain the consummation of such transactions, to force divestiture if the same
are consummated or to materially modify the terms or results of such
transactions unless such Governmental Entity shall have withdrawn such notice,
or has otherwise indicated in writing that it will not take any action, prior to
what would otherwise have been the Closing Date.
(c) All waiting periods, including those specified in the HSR Act,
including any extensions thereof, shall have expired or been terminated, with
respect to the transactions contemplated in this Agreement and the other
Transaction Documents.
8.7 Opinion of Counsel
Shareholder and the Company shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP and in-house counsel to Buyer, opinions, dated the Closing Date, in form and
substance reasonably acceptable to Shareholder.
8.8 Transaction Documents
Buyer shall have executed and delivered each of the following documents to
which it is a party: this Agreement, the Transition Services Agreement, the
Non-Competition Agreement, the CP Guaranty Agreement and MTN Guaranty Agreement.
9. Termination, Amendment and Waiver
9.1 Termination
Anything herein to the contrary notwithstanding, this Agreement and the
transactions contemplated hereby may be terminated in any of the following
manners at any time prior to the Closing and in no other manner:
(a) By mutual written consent of Shareholder and Buyer; or
(b) By either Shareholder or Buyer by written notice to the other if events
have occurred (other than those events set forth in Section 9.1(c)) which have
made it impossible to satisfy a condition precedent to the terminating party's
obligations to consummate the transactions contemplated hereby; or
(c) By either Shareholder or Buyer if there has been a material
misrepresentation or material breach of a warranty or covenant on the part of
the other party which has not been cured within ten (10) days of notice thereof;
or
(d) By either Shareholder or Buyer by written notice if the Closing
hereunder has not been consummated on or prior to September 30, 2001.
9.2 Effect of Termination
(a) In the event of the termination of this Agreement pursuant to Sections
9.1(a), 9.1(b) or 9.1(d), there shall be no further obligation or liability on
the part of any party, except that Sections 5.2(b) and 6.10 and Article 11 shall
survive any such termination and nothing shall relieve any party from liability
for any breach. Termination of this Agreement pursuant to Section 9.1(c) hereof
shall be without prejudice to the rights and remedies available to the
respective parties under applicable Law, including the right to recover
expenses, costs and other Damages, as a result of any breach by any party hereto
of its representations, warranties or obligations under this Agreement, except
that Sections 5.2(b) and 6.10 and Article 11 shall survive any such termination.
(b) If any of the conditions specified in Article 7 have not been
satisfied, Buyer may nevertheless at its election waive such conditions and
proceed with the transactions contemplated hereby, and if any of the conditions
specified in Article 8 have not been satisfied, Shareholder may nevertheless at
its election waive such conditions and proceed with the transactions
contemplated hereby. Any such election to proceed shall be evidenced by a
certificate executed on behalf of the electing party by its authorized
representative (signed in such authorized Person's representative capacity, and
not individually).
10. Survival and Indemnification
10.1 Survival
(a) Except as otherwise provided in Sections 10.1(e) and 10.1(g), the
Special Representations and indemnification with respect to the breach thereof
shall survive to the expiration of the applicable statute of limitations which
relates to such Special Representations, and thereafter, solely with respect to
any Claim relating thereto that is asserted in writing by a Buyer Indemnified
Party to Shareholder prior to the expiration of such time, until the final
resolution thereof.
(b) The representations and warranties of Shareholder and the Company
contained in this Agreement, other than Special Representations and as otherwise
provided in Section 10.1(e) and Section 10.1(g), shall survive for a period of
twenty-four (24) months following the Closing (the "Shareholder Survival
Period"); provided, however, that any such representation or warranty which is
the subject of a Claim by a Buyer Indemnified Party that is asserted in writing
to Shareholder prior to the end of the Shareholder Survival Period shall
survive, solely with respect to such Claim, until the final resolution thereof.
(c) The representations and warranties of Buyer contained in this Agreement
shall survive for a period of twenty-four (24) months following the Closing (the
"Buyer Survival Period"); provided, however, that any such representation or
warranty which is the subject of a Claim by a Shareholder Indemnified Party that
is asserted in writing to Buyer prior to the end of the Buyer Survival Period
shall survive, solely with respect to such Claim, until the final resolution
thereof.
(d) The indemnification obligation set forth in Section 10.2(a)(v) shall
survive until the expiration of the Shareholder Survival Period; provided,
however, that with respect to any Claim by a Buyer Indemnified Party that is
asserted in writing to Shareholder prior to such date, such obligation shall
survive, solely with respect to such Claim, until the final resolution thereof.
(e) The indemnification obligation set forth in Section 10.2(a)(vii) as it
relates to any Portfolio Property that is subject, as of the Closing Date, to a
Financing Contract shall survive until the expiration of twenty-four (24) months
following the earlier of such Financing Contract's (A) discharge, (B) repayment
in full, (C) complete write-off by the Company, (D) other satisfaction in full,
or (E) scheduled maturity date as in effect on the Closing Date; provided,
however, that with respect any Claim by a Buyer Indemnified Party pursuant to
Section 10.2(a)(vii) as it relates to any such Portfolio Property that is
asserted in writing to Shareholder prior to such date, such obligation shall
survive, solely with respect to such Claim, until the final resolution thereof.
(f) The covenants and agreements contained in this Agreement that
contemplate performance after the Closing shall survive the Closing and shall
continue until all obligations with respect thereto shall have been performed or
satisfied or shall have been terminated in accordance with their terms.
(g) The representation and warranty of Shareholder and the Company
contained in Section 3.6(d) shall survive the Closing and shall continue with
respect to (i) any Audited Financing Contract, until the payment in full of the
Tape Settlement Amount, and (ii) any Financing Contract that is not an Audited
Financing Contract until six (6) months following the earlier of such Financing
Contract's (A) discharge, (B) repayment in full, (C) complete write-off by the
Company, (D) other satisfaction in full, or (E) scheduled maturity date as in
effect on the Closing Date.
10.2 Indemnification
(a) Indemnification by Shareholder. Except as otherwise provided in Section
6.3 with respect to Taxes, subject to the limitations set forth in Sections 10.1
and 10.3, from and after the Closing Date, Shareholder shall indemnify and hold
harmless Buyer and its Affiliates (including, following the Closing, the
Company), and in each such case their respective directors, officers, employees
and agents (collectively, the "Buyer Indemnified Parties") from and against, and
in respect of, and shall reimburse any Buyer Indemnified Parties for, any and
all Damages, suffered or incurred by any Buyer Indemnified Party resulting from,
arising out of or in connection with:
(i) any inaccuracy in or other breach of
any representation or warranty made by the Company and/or Shareholder in this
Agreement; or
(ii) any failure by Shareholder or, prior to the Closing, the
Company, to duly perform or comply, in whole or in part, with any covenant,
agreement or undertaking on the part of Shareholder or the Company, as
applicable, contained in this Agreement; or
(iii) any Excluded Assets or the ownership, operation,
servicing, lease or use thereof, or any action taken with respect thereto, by
Shareholder or any of its Affiliates (including, prior to the Closing, the
Company); or
(iv) any Excluded Liabilities; or
(v) any actual or asserted Claims against the Company
(whether for indemnification or otherwise) under any Disposition Agreement
entered into prior to the Closing related to the sale prior to Closing of any
securities, assets, Financing Contracts, Property, operations or business of the
Company (other than any obligation arising after the Closing Date under any such
Disposition Agreement, solely to the extent any such obligation is required to
be performed by theCompany after the Closing Date); or
(vi) any violation by the Company on or
prior to the Closing Date of any applicable Law; or
(vii) any Environmental Loss (including compensatory, punitive
and consequential Damages required to be paid by the Company) resulting from,
arising out of, based on or relating to any (A) Property (including any
Portfolio Property but excluding the Excluded Assets) owned, operated, leased
for use or controlled by the Company or (B) operations or business of the
Company or (C) Transferred Asset, in each case, existing as of the Closing or at
any time prior to the Closing (regardless of whether such Environmental Loss is
known or unknown or asserted or unasserted as of the Closing); or
(viii)any civil, criminal or administrative Claim (including but
not limited to any counterclaims or crossclaims), relating to the Company, any
of the Transferred Assets or any of the Excluded Assets arising out of or based
on or with respect to any circumstance existing or any action or event occurring
prior to the Closing, whether or not pending or threatened on the date hereof or
at the Closing, and whether brought, made or instigated by any Governmental
Entity or any other Person, including without limitation Claims (A) relating to
the employment or termination of employment, including a constructive
termination, by the Company of, or failure of the Company to hire, any
individual (including, but not limited to, any Employee) attributable to any
actions or inactions prior to the Closing, and (B) by any Employee for workers'
compensation and/or related medical benefits incurred after the Closing which
relate to an injury or illness originating prior to the Closing; or
(ix) except as provided in Section 6.2, any Employee Benefit
Plan (other than a Company Benefit Plan) and any Title IV Plan, including any
Multiemployer Plan, that Shareholder, the Company or any ERISA Affiliate
maintains, contributes to or is obligated to contribute to, at any time (prior
to the Closing), including any liability (A) to the PBGC under Title IV of
ERISA; (B) relating to a Multiemployer Plan; (C) with respect to non-compliance
with the notice and benefit continuation requirements of COBRA; (D) with respect
to any non-compliance with ERISA or any other applicable Laws; or (E) with
respect to any suit, proceeding or Claim which is brought against Buyer or the
Company, any Employee Benefit Plan (other than a Company Benefit Plan), Title IV
Plan, any fiduciary or former fiduciary of any such Employee Benefit Plan (other
than a Company Benefit Plan) or Title IV Plan; or
(x) except as provided in Section 6.2, WARN or any other Law or
civil law notice, termination pay in lieu thereof or Damages relating to the
termination or dismissal (including constructive termination or dismissal) by
the Company of any or all Employees (whether or not constituting Transferred
Employees) prior to the Closing.
(b) Indemnification by Buyer. Expect as otherwise provided in Section 6.3
with respect to Taxes, subject to the limitations set forth in Sections 10.1
and10.3, from and after the Closing Date, Buyer shall indemnify and hold
harmless Shareholder and its Affiliates, and in each such case their respective
directors, officers, employees and agents (collectively, the "Shareholder
Indemnified Party") from and against, and in respect of, and shall reimburse any
Shareholder Indemnified Party for, any and all Damages suffered or incurred by
any Shareholder Indemnified Party resulting from, arising out of or in
connection with:
(i) any inaccuracy in or other breach of any representation or
warranty made by Buyer in this Agreement; or
(ii) any failure by Buyer or, following the Closing, the
Company, to duly perform or comply, in whole or in part, with any covenant,
agreement or undertaking on the part of Buyer or, following the Closing, the
Company, contained in this Agreement; or
(iii) any Claims arising out of the operation and conduct of the
Company's business after the Closing.
(c) Materiality. For purposes of this Section 10.2, any inaccuracy or other
breach of a representation or warranty contained in this Agreement shall be
deemed to exist either if such representation or warranty is actually inaccurate
or breached or if such representation or warranty would have been breached or
been inaccurate if such representation or warranty had not contained any
limitation or qualification as to materiality, Shareholder Adverse Effect,
Material Adverse Effect, Buyer Adverse Effect, Knowledge as to Shareholder or
the Company or knowledge as to Buyer, it being the intention of the parties
hereto that an Indemnified Party shall be indemnified and held harmless from and
against any and all Damages suffered or incurred by it resulting from, arising
out of, based on or relating to the failure of any such representation or
warranty to be true, correct and complete in any respect, determined in each
case without regard to any qualification as to materiality, Shareholder Adverse
Effect, Material Adverse Effect, Buyer Adverse Effect, Knowledge as to
Shareholder or the Company or knowledge as to Buyer contained therein.
10.3 Limitations
(a) The Buyer Indemnified Parties shall not be entitled to recover from
Shareholder any indemnification (i) for any inaccuracy in or other breach of any
representation or warranty in this Agreement (other than an inaccuracy in or
other breach of the Special Representations) or (ii) pursuant to the Category A
Indemnities, unless and until the total amount of all Damages in respect of such
inaccuracies or other breaches in the case of Section 10.3(a)(i) or pursuant to
the Category A Indemnities in case of Section 10.3(a)(ii), exceeds the Threshold
Amount in the aggregate, in which event the Buyer Indemnified Parties shall be
entitled to indemnification only to the extent such Damages exceed the Threshold
Amount in the aggregate. The aggregate liability of Shareholder for
indemnification for the matters described in Sections 10.3(a)(i) and 10.3(a)(ii)
shall not exceed the Aggregate Amount.
(b) The Buyer Indemnified Parties shall not be entitled to recover from
Shareholder any indemnification for any inaccuracy or other breach of any
representation or warranty in Section 3.17 unless and until the total amount of
all Damages in respect of such inaccuracies or other breaches exceeds $100,000
in the aggregate, in which event the Buyer Indemnified Parties shall be entitled
to indemnification only to the extent such Damages exceed $100,000 in the
aggregate.
(c) Notwithstanding anything herein to the contrary, the Buyer Indemnified
Parties shall not be entitled to recover from Shareholder any Damages suffered
or incurred by them resulting from, arising out of or in connection with any
attempt by Buyer or the Company to collect, realize upon or otherwise recover
any amounts owed in respect of, or any action by Buyer or the Company to
enforce, any Inactive Financing Contract (other than any attempt by Buyer or the
Company to collect, realize upon or otherwise recover any amounts owed in
respect of, or any other action taken by Buyer or the Company to enforce an
Inactive Financing Contract that is brought or asserted as a defense, set off or
counterclaim to any action or Claim raised or asserted by any other Person).
(d) In calculating any amounts payable by any Indemnitor pursuant to
Section 10.2 in respect of any Damages incurred by any Indemnified Party, such
Indemnitor shall receive credit for (and the amount of Damages subject to
indemnification pursuant to Section 10.2 shall be reduced by) any insurance
proceeds actually received by any Indemnified Party in respect thereof (and, if
any such insurance proceeds are received after payment by the indemnifying party
of such indemnification, the indemnified party shall remit such insurance
proceeds to the indemnifying party up to the amount of such indemnification paid
by the Indemnitor).
(e) Each Buyer Indemnified Party entitled to indemnification for any
Damages (i) suffered or incurred by such Person resulting from, arising out of,
based on or relating to any inaccuracy or other breach of any Special
Representation (except as specifically set forth in Section 10.3(a)(ii)), or
(ii) pursuant to the Category B Indemnities shall be entitled to such
indemnification for the full amount of such Damages regardless of the amount of
the Damages.
(f) Each Shareholder Indemnified Party entitled to indemnification for any
Damages pursuant to Section 10.2(b) shall be entitled to such indemnification
for the full amount of such Damages regardless of the amount of the Damages.
10.4 Procedure for Indemnification
(a) Claim Notice. Promptly after the occurrence of any event, action,
proceeding or Claim for which an Indemnified Party has a right to be indemnified
pursuant to this Agreement, such Indemnified Party may assert a Claim for
indemnification by giving written notice (the "Claim Notice") to the
indemnifying party, which will describe in reasonable detail, to the extent
known to such Indemnified Party, the facts and circumstances on which the
asserted Claim for indemnification is based. The failure to give notice as
required by this Section 10.4(a) in a timely fashion shall not result in a
waiver of any right to indemnification hereunder except to the extent that the
indemnifying party's ability to defend against the event with respect to which
indemnification is sought is materially and adversely affected by the failure of
the Indemnified Party to give notice in a timely fashion as required by this
Section 10.4(a). Unless the Claim described in the Claim Notice is contested by
the indemnifying party by written notice to the Indemnified Party of the amount
of the Claim that is contested, given within thirty (30) days of the receipt of
the Claim Notice, the Indemnified Party shall be entitled to recover such
undisputed amount of the Claim described in the Claim Notice.
(b) Dispute Notice. If, within thirty (30) days of the receipt by the
indemnifying party of the Claim Notice, the indemnifying party contests in
writing to the Indemnified Party that such loss constitutes an indemnifiable
Claim (the "Dispute Notice"), then the Indemnified Party and the indemnifying
party, acting in good faith, shall attempt to reach agreement with respect to
such Claim and, failing such agreement, the Indemnified Party shall have the
right to pursue any remedies at Law or equity that may be available to such
Person.
(c) Third Party Claims.
(i) Subject to 10.4(d), the indemnifying party shall be
entitled (but not obligated) to assume the defense or settlement of any third
party Claim, or to participate in any negotiations or proceedings to settle or
otherwise eliminate any such Claim, if it shall provide the Indemnified Parties
a written acknowledgement of its liability for the indemnity against Damages
relating to such Claim.
(ii) Notwithstanding anything in Section 10.4(d) to the
contrary, if a third party Claim relates to both the pre-Closing period and the
post-Closing period, is asserted against both Shareholder, on the one hand, and
Buyer and/or the Company, on the other hand, and both Shareholder and Buyer have
the right to assume the defense of such Claim, Shareholder and Buyer shall work
together in good faith to arrange joint representation reasonably acceptable to
both parties.
(iii) To the extent an indemnifying party assumes the defense
or settlement of a third party Claim, such indemnifying party shall select
counsel reasonably acceptable to the Indemnified Party in connection therewith,
and such indemnifying party shall conduct the defense diligently, in good faith
and in consultation with the Indemnified Party, and shall keep the Indemnified
Party timely apprised of the status of such third party Claim. No indemnifying
party shall be entitled to settle or compromise any third party Claim without
the consent or agreement of the applicable Indemnified Party (which consent will
not be unreasonably withheld or delayed); provided, however, that consent by the
Indemnified Party shall be deemed to be reasonably withheld if, in the
Indemnified Party's judgment, the proposed settlement would adversely impact the
business of the Indemnified Party or any of its Affiliates or if the settlement
requires the Indemnified Party or any of its Affiliates to admit liability or
wrongdoing; provided, further, that if an offer of compromise is received by the
indemnifying party with respect to any indemnified Claim and such offer to
compromise (A) includes an unconditional release of the Indemnified Party, and
(B) involves only the payment of money (which the indemnifying party has
unconditionally agreed with the Indemnified Party, in writing, to pay, subject
only to receipt of the Indemnified Party's consent) (a "Qualified Settlement
Offer"), the indemnifying party may notify the Indemnified Party in writing of
such indemnifying party's willingness to compromise or settle such Claim on the
basis set forth in such Qualified Settlement Offer and if (but only if) such
Indemnified Party fails to timely consent to such Qualified Settlement Offer,
the indemnifying party's liability shall be limited to the lesser of (1) the
settlement amount set forth in such Qualified Settlement Offer, or (2) the
actual out-of-pocket amount such Indemnified Party is ultimately obligated to
pay as a result of such indemnified Claim, and the Indemnified Party shall be
responsible for the costs and attorneys' fees in respect of such Claim
thereafter.
(iv) In the event that an indemnifying party fails to elect to
assume the defense of a third party Claim within ten (10) Business Days of the
receipt of a Claim Notice, the Indemnified Party may assume the defense of such
third party Claim. To the extent an Indemnified Party assumes the defense or
settlement of a third party Claim, such Indemnified Party shall select counsel
reasonably acceptable to the indemnifying party in connection therewith, and
such Indemnified Party shall conduct the defense diligently, in good faith and
in consultation with the indemnifying party, and shall keep the indemnifying
party timely apprised of the status of such third party Claim. No Indemnified
Party shall be entitled to settle or compromise any third party Claim without
the consent or agreement of the applicable indemnifying party (which consent
will not be unreasonably withheld or delayed); provided, however, that consent
by the indemnifying party shall be deemed to be reasonably withheld if, in the
indemnifying party's judgment, the proposed settlement would adversely impact
the business of the indemnifying party or any of its Affiliates or if the
settlement requires the indemnifying party or any of its Affiliates to admit
liability or wrongdoing.
(d) Non-Assumable Claims.
(i) Notwithstanding anything in this Agreement to the
contrary, Buyer and the Company shall have the sole right, with counsel
reasonably acceptable to Shareholder, to defend any Claim that is a
Non-Assumable Claim and Shareholder shall not be entitled to assume the defense
thereof. Buyer and the Company shall conduct the defense of Non-Assumable Claims
diligently and in good faith, and shall keep Shareholder timely apprised of the
status of all Non-Assumable Claims. Buyer and the Company shall not be entitled
to settle or compromise any Non-Assumable Claim for which Shareholder has
acknowledged sole liability to Buyer without the prior consent or agreement of
Shareholder (which consent will not be unreasonably withheld or delayed). Buyer
shall consult with Shareholder prior to proffering any offer of compromise to a
third party claimant in respect of a Non-Assumable Claim for which Shareholder
has acknowledged sole liability to Buyer. Notwithstanding the foregoing, in the
event (x) Buyer and the Company proffer any offer of compromise to a third party
claimant in respect of a Non-Assumable Claim for which Shareholder has
acknowledged sole liability to Buyer and Shareholder has not approved such
offer, or (y) Buyer and the Company settle or compromise a Non-Assumable Claim
for which Shareholder has acknowledged sole liability to Buyer and Shareholder
has not approved such settlement or compromise, Shareholder shall not be bound,
in each case, by any prior acknowledgement of liability to Buyer in respect of
such Non-Assumable Claim or the amount of the resultant Damages.
(ii) Upon the receipt by Buyer or the Company of an offer of
compromise relating to a Non-Assumable Claim that includes an unconditional
release of Buyer or the Company and requires only (A) the payment of money for
which Shareholder has sole liability (a "Monetary Settlement") or (B) a Monetary
Settlement and (1) any action by Shareholder or any of its Affiliates (other
than the Company) or (2) any action by Buyer or the Company that, in Buyer's
judgment, does not adversely impact the ongoing business of Buyer or any of its
Affiliates (including the Company) and does not require any admission of
liability or wrongdoing on the part of Buyer or its Affiliates (including the
Company) (collectively, a "Non-Assumable Claim Offer"), Buyer shall promptly
inform Shareholder of such Non-Assumable Claim Offer together with a description
of the material terms thereof. Shareholder shall have the right to terminate its
liability for Damages in respect of any Non-Assumable Claim that is subject to a
Non-Assumable Claim Offer upon Shareholder's irrevocable agreement to pay the
amount contained in such Non-Assumable Claim Offer and to take any action
required to be taken by Shareholder or any of its Affiliates by the terms of
such Non-Assumable Claim Offer. Upon receipt by Buyer of (x) the amount
contained in such Non-Assumable Claim Offer and payment by Shareholder of all
other Damages suffered or incurred by any Indemnified Party in respect of such
Non-Assumable Claim, and (y) an executed agreement of Shareholder and the
third-party claimant agreeing to the non-cash terms of such Non-Assumable Claim
Offer, if any, Shareholder shall have no further liability to Buyer or the
Company in respect of such Non-Assumable Claim.
(iii) At any time during the defense by Buyer and the Company
of a Non-Assumable Claim, Shareholder shall have the right to require Buyer and
the Company (A) to proffer to any third party claimant under such Non-Assumable
Claim a Non-Assumable Claim Offer, and (B) if such Non-Assumable Claim Offer is
accepted by a such third party claimant, to settle such Non-Assumable Claim on
the terms of such Non-Assumable Claim Offer.
(e) Tax Treatment. Any payments under Sections 6.3(a), 6.6(c) or 10 of this
Agreement shall be treated by the parties hereto for federal, state and local
income Tax purposes (whether foreign or domestic) as a non-taxable reimbursement
or purchase price adjustment, except to the extent that a contrary treatment is
required by Law. If, notwithstanding such treatment by the parties, any payment
made under Sections 6.3(a), 6.6(c) or 10 is required to be treated as taxable to
a Buyer Indemnified Party pursuant to a determination (as defined in Section
1313(a) of the Code or any similar provision of Law) of any Governmental Entity,
Shareholder shall indemnify such Buyer Indemnified Party for any Taxes payable
by reason of the receipt of such indemnity payment (including any payments under
this Section 10.4(e)).
(f) Access. The Person conducting the defense of any third party Claim, its
representatives and agents shall have access to the premises and Books and
Records of the Indemnified Party or indemnifying party (as applicable) and its
Affiliates to the extent reasonably necessary to assist in defending or settling
any action, proceeding or Claim; provided, however, that such access shall be
conducted in such manner as not to interfere unreasonably with the operation of
the business of such Person or its Affiliates. The Indemnified Party or
indemnifying party (as applicable) shall be required to disclose any
nonprivileged information with respect to itself or any of its Affiliates (or
former Affiliates) as is reasonably necessary to assist it in defending or
settling such action, proceeding or Claim. The Indemnified Party or indemnifying
party (as applicable) shall (at the other party's expense) be required to
participate in the defense of any Claim to be indemnified hereunder solely to
the extent otherwise required hereunder or as is reasonably necessary in the
defense of any Claim to be indemnified hereunder.
(g) Costs. Notwithstanding anything to the contrary in this Section 10.4,
the indemnifying party shall continue to pay the attorneys' fees and
disbursements and other costs each Indemnified Party may incur (whether or not
the indemnifying party shall have assumed the defense of such indemnified Claim)
to the extent such participation relates to (i) a Claim or defense as to which
the indemnifying party may have a conflict of interest, or (ii) discovery
against or testimony of such Indemnified Party and for participation of such
Indemnified Party's own counsel in such discovery and testimony.
(h) Taxes. Notwithstanding anything in this Section 10.4 to the contrary,
in the event of a discrepancy between the procedures set forth in this
Section 10.4 and Section 6.3 with respect to Taxes, the provisions of Section
6.3 shall control.
10.5 Exclusive Remedy
Except with respect to Claims based on fraud and/or claims seeking
equitable remedies, the indemnification remedies set forth in this Agreement
shall constitute the sole and exclusive remedies of the parties hereto with
respect to any breach of representation, warranty or obligation under this
Agreement.
11. General
11.1 Public Announcements
Each party agrees not to make any press release or public announcement in
regard to the transactions contemplated by this Agreement and the other
Transaction Documents without prior consultation with, and the prior consent of,
the other parties (which consent shall not be unreasonably withheld or delayed),
except as may be required by Law or under any listing agreement with any
securities exchange or stock exchange regulations, in which case the parties
shall use reasonable efforts to coordinate with each other with respect to the
timing, form and content of such required disclosures.
11.2 Assignment
Neither Shareholder nor Buyer may assign any of its rights or
obligations hereunder except by operation of Law without the prior written
consent of the other party; provided, however, that (a) Shareholder may assign
its rights and obligations hereunder to an Affiliate of Shareholder, and (b)
Buyer may assign its rights hereunder to an Affiliate of Buyer. Notwithstanding
the foregoing, however, no assignment otherwise permitted hereunder shall,
without the written consent of the non-assigning party, relieve the assigning
party from any of its obligations hereunder.
11.3 Notices
All notices and other communications required or permitted to be given
under this Agreement shall be in writing and shall be sent by facsimile
transmission, or mailed postage prepaid by first-class certified mail, or mailed
by a nationally recognized express courier service, or hand-delivered, addressed
as follows:
If to Buyer or to the Company General Electric Capital Corporation
after the Closing, to: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Legal Department
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: General Electric Capital Corporation
Commercial Equipment Finance
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Legal Department
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to: Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Shareholder or, prior to Closing, to the SAFECO Corporation
Company, to: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ Coie LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the Persons or addresses to which any notices or other
communications to it should be addressed by notifying the other parties as
provided above. Any notice or other communication, if addressed and sent, mailed
or delivered as provided above, shall be deemed given or received three (3) days
after the date of mailing as indicated on the certified or registered mail
receipt, or on the next Business Day if mailed by express courier service, or on
the date of delivery or transmission if hand-delivered or sent by facsimile
transmission.
11.4 Governing Law; Jurisdiction; Venue
This Agreement shall be governed by, construed under and enforced in
accordance with, and all disputes arising with respect to this Agreement shall
be governed by, the Laws of the State of Washington without regard to principles
of conflict of Laws. The parties irrevocably consent to the nonexclusive
jurisdiction and venue of the state and federal courts located in (a) King
County, Washington, and (b) New York City, New York, in connection with any
action relating to this Agreement.
11.5 Successors and Assigns
The terms, covenants and conditions of this Agreement shall inure to the
benefit of and be binding on the respective successors and permitted assigns of
the parties.
11.6 Severability
If any court of competent jurisdiction determines that any part or
provision of this Agreement is illegal, void, invalid or unenforceable, the
remainder of this Agreement shall not be affected thereby and shall be given
full force and effect and remain binding upon the parties.
11.7 Modification and Waiver
This Agreement may not be amended or modified or superseded and any of its
terms and conditions may not be waived in any manner, except by an instrument in
writing signed by each of the parties hereto, or in the case of a waiver, by or
on behalf of the party waiving such compliance. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, or in any way affect the right
of such party thereafter to enforce each and every such provision. No waiver by
any party of any condition or of any breach of any terms, covenants,
representations, warranties or agreements contained in this Agreement shall be
deemed to be a further or continuing waiver of any such condition or breach in
other instances or a waiver of any other condition or any breach of any other
terms, covenants, representations, warranties or agreements.
11.8 Entire Agreement
This Agreement constitutes the entire agreement and understanding among the
parties with respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, among the parties with
respect to such subject matter.
11.9 Counterparts
This Agreement may be executed in one or more counterparts, which together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts have been signed by each party hereto and delivered to the
other parties hereto.
11.10 No Third Party Rights
Nothing in this Agreement is intended, nor shall be construed, to
confer upon any Person other than the Company, Shareholder or Buyer (and only to
the extent expressly provided herein, their respective Affiliates) any right or
remedy under or by reason of this Agreement; provided, however, that the parties
hereto agree and acknowledge that the agreements and covenants contained in
Section 10 are, subject to Section 9, intended for the benefit of the
Indemnified Parties referred to therein (each such Person, a "Third Party
Beneficiary"), and that, subject to Section 9, each such Indemnified Party,
although not a party to this Agreement, shall be and is hereby constituted a
direct and irrevocable Third Party Beneficiary of the agreements and covenants
contained in Section 10 and shall have the right to enforce such agreements and
covenants against the applicable party thereto in all respects fully and to the
same extent as if such Third Party Beneficiary were a party hereto.
Notwithstanding the foregoing, this Agreement (including but not limited to
Section 10) may be amended or waived by Buyer, Shareholder and the Company at
any time and from time to time in accordance with Section 11.7 hereof and any
such amendment or waiver shall be fully effective with respect to the rights of
the Third Party Beneficiaries under Section 10.
11.11 Captions
The captions and headings used in this Agreement have been inserted for
convenience of reference only and shall not be considered part of this Agreement
or be used in the interpretation thereof.
11.12 Waiver of Subrogation; Contribution; Reimbursement and Other Rights
(a) Shareholder hereby acknowledges and agrees that it shall not raise as a
defense or bar, and hereby waives, as to any Claim by a Buyer Indemnified Party
under this Agreement, that on or prior to the Closing, the Company had or should
have had knowledge of any fact, condition, event or circumstance that (i) caused
any representation or warranty made by Shareholder and/or the Company to be
inaccurate or untrue or (ii) could form the basis of any Claim by a Buyer
Indemnified Party against Shareholder pursuant to this Agreement.
(b) Shareholder hereby agrees that if, following the Closing, any payment
is required to be made by it pursuant to the terms of Section 6.6, Section 6.8
or otherwise in respect of any Damages suffered or incurred by any Person,
Shareholder shall have no rights against the Company, whether by reason of
subrogation, contribution, reimbursement or otherwise, in respect of any such
payments or liabilities, and shall not take any action against the Company with
respect thereto. Any such rights which Shareholder may, by operation of Law or
otherwise, have against the Company shall, effective at the time of the Closing,
be deemed to be hereby expressly and knowingly waived. Nothing in this Section
11.12 shall, however, in any way limit any and all rights Shareholder may have
against Buyer.
11.13 Waiver of Jury Trial
EACH PARTY HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY EXHIBIT,
ANNEX OR SCHEDULE HERETO, OR ANY COURSE OF CONDUCT, COURSE OF DEALING OR
STATEMENT (WHETHER VERBAL OR WRITTEN) RELATING TO THE FOREGOING. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT.
11.14 Original Purchase Agreement; Effectiveness
Upon due execution and delivery of this Agreement by all parties hereto
(a) the Original Purchase Agreement shall be deemed to be amended and restated
in its entirety and shall be of no further force and effect, and (b) this
Agreement shall be deemed to be effective for all purposes as of July 23, 2001.
(The remainder of this page has been left blank intentionally.)
IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Amended & Restated Stock Purchase Agreement as of the date and year first
above written.
GENERAL ELECTRIC CAPITAL CORPORATION:
By: /s/▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title:
-------------------------------------
SAFECO CREDIT COMPANY, INC.:
By: /s/▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President, Secretary
and Treasurer
SAFECO CORPORATION:
By: /s/▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President,
Chief Financial Officer
and Secretary
